##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549





FORM 10-Q







|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
|- | ----------------------------------------------------------------------------------------

For the quarterly period ended December 31, 2009



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
|- | -----------------------------------------------------------------------------------------

For the transition period from

Commission File Number

000-51931





AmStem
Corporation

(Exact Name of Registrant as Specified in Charter)







|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Nevada                                                         |  | 88-0374180                             
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification Number)

13046 Racetrack Rd. #233,
Tampa, Florida 33626

(Address of Principal Executive Offices)

(813) 283-2556

(Registrants Telephone Number)

Stem Cell Therapy International, Inc.

(Former Name)





Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.    Yes  x    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).    Yes   ̈    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of accelerated filer, large
accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                        |  |   |  |                           |  |  
|----------------------- |  | - |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈ |  | Accelerated filer         |  |  ̈
|                        |  |   | 
|Non-accelerated filer   |  |  ̈ |  | Smaller reporting company |  | x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ̈    No  x

State the
number of shares outstanding of each of the issuers classes of common equity, as of the last practicable date: 62,446,080 as of February 15, 2010.









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##### Table of Contents

AmStem Corporation

(a development stage enterprise)

Table of Contents



|                               |  |                                                                                                                                                                                                                      |  |   
|------------------------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --
|                               | 
|Part I  Financial Information |  | 1                                                                                                                                                                                                                   
|                               |  |                                                                                                                                                                                                                     
|Item 1.                        |  | Financial Statements                                                                                                                                                                                                 |  | 1 
|                               |  |                                                                                                                                                                                                                     
|                               |  | Consolidated Balance Sheets as of December 31, 2009 (unaudited) and March 31, 2009 (audited)                                                                                                                         |  | 2 
|                               |  |                                                                                                                                                                                                                     
|                               |  | Consolidated Statements of Operations for the three and nine months ended December 31, 2009 and 2008 (unaudited)
 and for the period from December 2, 2004 (Date of Inception) through December 31, 2009 (unaudited) |  | 3 
|                               |  |                                                                                                                                                                                                                     
|                               |  | Consolidated Statements of Changes in Stockholders Deficit for the period from December 2, 2004 (Date
 of Inception) through December 31, 2009 (unaudited)                                                          |  | 4 
|                               |  |                                                                                                                                                                                                                     
|                               |  | Consolidated Statements of Cash Flows for the nine months ended December 31, 2009 and 2008 (unaudited), and
 for the period from December 2, 2004 (Date of Inception) through December 31, 2009 (unaudited)          |  | 8 
|                               |  |                                                                                                                                                                                                                     
|                               |  | Notes to Consolidated Financial Statements                                                                                                                                                                           |  | 9 
|                               |  |                                                                                                                                                                                                                     
|Item 2.                        |  | Managements Discussion and Analysis of Financial Condition and Results of Operation                                                                                                                                 |  | 15
|                               |  |                                                                                                                                                                                                                     
|Item 3.                        |  | Quantitative and Qualitative Disclosures About Market Risk                                                                                                                                                           |  | 20
|                               |  |                                                                                                                                                                                                                     
|Item 4T.                       |  | Controls and Procedures                                                                                                                                                                                              |  | 20
|                               | 
|Part II  Other Information    |  | 21                                                                                                                                                                                                                  
|                               |  |                                                                                                                                                                                                                     
|Item 1.                        |  | Legal Proceedings                                                                                                                                                                                                    |  | 21
|                               |  |                                                                                                                                                                                                                     
|Item 2.                        |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                                                                                                          |  | 21
|                               |  |                                                                                                                                                                                                                     
|Item 3.                        |  | Defaults Upon Senior Securities                                                                                                                                                                                      |  | 21
|                               |  |                                                                                                                                                                                                                     
|Item 4.                        |  | Submission of Matters to a Vote of Security Holders                                                                                                                                                                  |  | 21
|                               |  |                                                                                                                                                                                                                     
|Item 5.                        |  | Other Information                                                                                                                                                                                                    |  | 21
|                               |  |                                                                                                                                                                                                                     
|Item 6.                        |  | Exhibits and Reports on Form 8-K                                                                                                                                                                                     |  | 21
|                               | 
|Signatures                     |  | 22                                                                                                                                                                                                                  



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##### Table of Contents

PART I. FINANCIAL INFORMATION



|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------

The accompanying
unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been
included. All such adjustments are of a normal recurring nature. Operating results for the three and nine month periods ended December 31, 2009 are not necessarily indicative of the results that may be expected for the year ending
March 31, 2010. For further information refer to the consolidated financial statements and footnotes thereto included in the Companys Form 10-K for the year ended March 31, 2009, as filed with the Securities and Exchange Commission
on July 10, 2009.



1



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##### Table of Contents

AmStem Corporation

(a development stage enterprise)

Consolidated Balance Sheets



|                                                                                                                                 |  |                  |            |   |               |   |            |  
|-------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ---------- | - | ------------- | - | ---------- | -
|                                                                                                                                 |  | December 31,2009 |            |   | March 31,2009 |  
|                                                                                                                                 |  | (unaudited)      |            |   | (audited)     |  
|Assets                                                                                                                           |  |                  |            |   |               |   |            |  
|Current assets:                                                                                                                  |  |                  |            |   |               |   |            |  
|Cash                                                                                                                             |  | $                | 48,130     |   |               | $ | 32,657     |  
|Deferred loan costs, net                                                                                                         |  |                  | 270,000    |   |               |   | 33,326     |  
|Prepaid expenses                                                                                                                 |  |                  | 495,000    |   |               |   | 135,000    |  
|                                                                                                                                 |  |                  |            |   |               |   |            |  
|Total current assets                                                                                                             |  |                  | 813,130    |   |               |   | 200,983    |  
|                                                                                                                                 |  |                 
|Deposits                                                                                                                         |  |                  | 8,000      |   |               |   | 5,000      |  
|                                                                                                                                 |  |                  |            |   |               |   |            |  
|Total assets                                                                                                                     |  | $                | 821,130    |   |               | $ | 205,983    |  
|                                                                                                                                 |  |                  |            |   |               |   |            |  
|Liabilities and stockholders deficit                                                                                            |  |                  |            |   |               |   |            |  
|Current liabilities:                                                                                                             |  |                  |            |   |               |   |            |  
|Accounts payable                                                                                                                 |  | $                | 36,969     |   |               | $ | 163,521    |  
|Accrued expenses                                                                                                                 |  |                  | 251,883    |   |               |   | 151,191    |  
|Accrued compensation                                                                                                             |  |                  | 300,000    |   |               |   | 749,096    |  
|Notes payable, net of unamortized discount of $52,699 and $84,437, respectively                                                  |  |                  | 9,801      |   |               |   | 103,063    |  
|Notes payable, related party                                                                                                     |  |                  | 331,121    |   |               |   |           |  
|Due to related party                                                                                                             |  |                  |           |   |               |   | 231,121    |  
|                                                                                                                                 |  |                  |            |   |               |   |            |  
|Total current liabilities                                                                                                        |  |                  | 929,774    |   |               |   | 1,397,992  |  
|                                                                                                                                 |  |                 
|Commitments and contingencies (Note 9)                                                                                           |  |                  |           |   |               |   |           |  
|Stockholders deficit:                                                                                                           |  |                  |            |   |               |   |            |  
|Series A Preferred stock; $0.001 par value; 1,000 shares authorized and 0 issued and outstanding, respectively                   |  |                  |           |   |               |   |           |  
|Preferred stock B; $0.001 par value; 10,000,000 shares authorized and 0 issued and outstanding, respectively                     |  |                  |           |   |               |   |           |  
|Common stock; $0.001 par value; 500,000,000 shares authorized and 61,170,052 and 47,134,258 issued and outstanding, respectively |  |                  | 61,170     |   |               |   | 47,134     |  
|Additional paid-in capital                                                                                                       |  |                  | 4,365,269  |   |               |   | 2,789,715  |  
|Stock subscription receivable                                                                                                    |  |                  | (200       | ) |               |   | (200       | )
|Deficit accumulated during development stage                                                                                     |  |                  | (4,534,883 | ) |               |   | (4,028,658 | )
|                                                                                                                                 |  |                  |            |   |               |   |            |  
|Total stockholders deficit                                                                                                      |  |                  | (108,644   | ) |               |   | (1,192,009 | )
|                                                                                                                                 |  |                  |            |   |               |   |            |  
|Total liabilities and stockholders deficit                                                                                      |  | $                | 821,130    |   |               | $ | 205,983    |  
|                                                                                                                                 |  |                  |            |   |               |   |            |  

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



2



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##### Table of Contents

AmStem Corporation

(a development stage enterprise)

Consolidated Statements of Operations

(Unaudited)



|                                                                        |  |                                |            |   |                               |   |            |                                                                     |  |   |            |   |  |      |            |   |  |   |            |  
|----------------------------------------------------------------------- |  | ------------------------------ | ---------- | - | ----------------------------- | - | ---------- | ------------------------------------------------------------------- |  | - | ---------- | - |  | ---- | ---------- | - |  | - | ---------- | -
|                                                                        |  | Three Months EndedDecember 31, |            |   | Nine Months EndedDecember 31, |   |            | Period from December 2, 2004
(Date ofInception) throughDecember 31, | 
|                                                                        |  | 2009                           |            |   | 2008                          |   |            | 2009                                                                |  |   | 2008       |   |  | 2009 |           
|Revenue                                                                 |  | $                              |           |   |                               | $ |           |                                                                     |  | $ |           |   |  | $    |           |   |  | $ | 559,404    |  
|Cost of goods sold:                                                     |  |                                |            |   |                               |   |            |                                                                     |  |   |            |   |  |      |            |   |  |   |            |  
|General                                                                 |  |                                |           |   |                               |   |           |                                                                     |  |   |           |   |  |      |           |   |  |   | 278,361    |  
|Loss on firm purchase commitment                                        |  |                                |           |   |                               |   |           |                                                                     |  |   |           |   |  |      |           |   |  |   | 116,000    |  
|                                                                        |  |                                |            |   |                               |   |            |                                                                     |  |   |            |   |  |      |            |   |  |   |            |  
|Gross margin                                                            |  |                                |            |   |                               |   |           |                                                                     |  |   |           |   |  |      |           |   |  |   | 165,043    |  
|                                                                        |  |                                |            |   |                              
|Operating expenses:                                                     |  |                                |            |   |                               |   |            |                                                                     |  |   |            |   |  |      |            |   |  |   |            |  
|Legal expenses                                                          |  |                                | 42,745     |   |                               |   | 63,879     |                                                                     |  |   | 93,180     |   |  |      | 233,725    |   |  |   | 801,848    |  
|Consulting expenses                                                     |  |                                | 29,329     |   |                               |   | 40,225     |                                                                     |  |   | 43,567     |   |  |      | 346,611    |   |  |   | 1,297,163  |  
|Accounting expenses                                                     |  |                                | 16,153     |   |                               |   | 6,383      |                                                                     |  |   | 63,451     |   |  |      | 62,060     |   |  |   | 321,741    |  
|Compensation expenses                                                   |  |                                | 60,000     |   |                               |   | 86,250     |                                                                     |  |   | 218,824    |   |  |      | 275,455    |   |  |   | 1,074,139  |  
|Stock based compensation                                                |  |                                | 25,704     |   |                               |   | 8,777      |                                                                     |  |   | 120,224    |   |  |      | 26,331     |   |  |   | 727,752    |  
|Settlement expense                                                      |  |                                | 111,000    |   |                               |   | (90,000    | )                                                                   |  |   | 111,000    |   |  |      | 98,850     |   |  |   | 209,850    |  
|Selling, general and administrative                                     |  |                                | 26,716     |   |                               |   | 921        |                                                                     |  |   | 33,287     |   |  |      | 16,999     |   |  |   | 432,243    |  
|                                                                        |  |                                |            |   |                               |   |            |                                                                     |  |   |            |   |  |      |            |   |  |   |            |  
|                                                                        |  |                                | 311,647    |   |                               |   | 116,435    |                                                                     |  |   | 683,533    |   |  |      | 1,060,031  |   |  |   | (4,864,736 | )
|                                                                        |  |                                |            |   |                               |   |            |                                                                     |  |   |            |   |  |      |            |   |  |   |            |  
|Loss from operations                                                    |  |                                | (311,647   | ) |                               |   | (116,435   | )                                                                   |  |   | (683,533   | ) |  |      | (1,060,031 | ) |  |   | (4,699,693 | )
|Other income (expenses):                                                |  |                                |            |   |                               |   |            |                                                                     |  |   |            |   |  |      |            |   |  |   |            |  
|Gain on settlement of liabilities                                       |  |                                | 400,000    |   |                               |   |           |                                                                     |  |   | 729,636    |   |  |      |           |   |  |   | 729,636    |  
|Interest expense, net                                                   |  |                                | (183,428   | ) |                               |   | (353       | )                                                                   |  |   | (552,328   | ) |  |      | (1,545     | ) |  |   | (564,826   | )
|                                                                        |  |                                |            |   |                               |   |            |                                                                     |  |   |            |   |  |      |            |   |  |   |            |  
|Net loss before taxes                                                   |  |                                | (95,075    | ) |                               |   | (116,788   | )                                                                   |  |   | (506,225   | ) |  |      | (1,061,576 | ) |  |   | (4,534,883 | )
|                                                                        |  |                                |            |   |                               |   |            |                                                                     |  |   |            |   |  |      |            |   |  |   |            |  
|Income tax expense                                                      |  |                                |           |   |                               |   |           |                                                                     |  |   |           |   |  |      |           |   |  |   |           |  
|                                                                        |  |                                |            |   |                               |   |            |                                                                     |  |   |            |   |  |      |            |   |  |   |            |  
|Net loss                                                                |  |                                | (95,075    | ) |                               |   | (116,788   | )                                                                   |  |   | (506,225   | ) |  |      | (1,061,576 | ) |  |   | (4,534,883 | )
|                                                                        |  |                                |            |   |                              
|Less: Dividends on preferred stock                                      |  |                                |           |   |                               |   |           |                                                                     |  |   |           |   |  |      |           |   |  |   | (10,000    | )
|                                                                        |  |                                |            |   |                               |   |            |                                                                     |  |   |            |   |  |      |            |   |  |   |            |  
|Loss attributable to common shareholders                                |  | $                              | (95,075    | ) |                               | $ | (116,788   | )                                                                   |  | $ | (506,225   | ) |  | $    | (1,061,576 | ) |  | $ | (4,544,883 | )
|                                                                        |  |                                |            |   |                               |   |            |                                                                     |  |   |            |   |  |      |            |   |  |   |            |  
|Loss per share, basic and diluted                                       |  | $                              | (0.00      | ) |                               | $ | (0.00      | )                                                                   |  | $ | (0.01      | ) |  | $    | (0.02      | ) |  | $ | (0.12      | )
|                                                                        |  |                                |            |   |                               |   |            |                                                                     |  |   |            |   |  |      |            |   |  |   |            |  
|Weighted average number of common shares outstanding, basic and diluted |  |                                | 64,452,888 |   |                               |   | 47,134,258 |                                                                     |  |   | 54,471,687 |   |  |      | 44,293,179 |   |  |   | 37,353,893 |  
|                                                                        |  |                                |            |   |                               |   |            |                                                                     |  |   |            |   |  |      |            |   |  |   |            |  

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



3



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##### Table of Contents

AmStem Corporation

(A Development Stage Enterprise)

Consolidated Statement of Changes in Stockholders Deficit

From
December 2, 2004 (Date of Inception) through December 31, 2009 (unaudited)



|                                                                                  |  |              |   |  |                 |        |                          |        |         |                              |   |                                          |  |   |         |   |  |   |   |  |   |         |   |  |   |         |  
|--------------------------------------------------------------------------------- |  | ------------ | - |  | --------------- | ------ | ------------------------ | ------ | ------- | ---------------------------- | - | ---------------------------------------- |  | - | ------- | - |  | - | - |  | - | ------- | - |  | - | ------- | -
|                                                                                  |  | Common Stock |   |  | Preferred Stock |        | AdditionalPaid-InCapital |        |         | StockSubscriptionsReceivable |   | DeficitAccumulatedDuringDevelopmentStage |  |   | Total   |  
|                                                                                  |  | Shares       |   |  | Amount          |        |                          | Shares |         | Amount                       |   |                                          |  |  
|Issuance of common stock for cash (December 2004)                                 |  | 11,600,000   |   |  | $               | 11,600 |                          |        |        |                              | $ |                                         |  | $ |        |   |  | $ |  |  | $ |        |   |  | $ | 11,600  |  
|Exercise of stock options for services (December 2004)                            |  | 500,000      |   |  |                 | 500    |                          |        |        |                              |   |                                         |  |   |        |   |  |   |  |  |   |        |   |  |   | 500     |  
|Issuance of common stock and options for acquisition deposit (December 2004)      |  | 5,000,000    |   |  |                 | 5,000  |                          |        |        |                              |   |                                         |  |   | 2,749   |   |  |   |  |  |   |        |   |  |   | 7,749   |  
|Stock options issued for services                                                 |  |             |   |  |                 |       |                          |        |        |                              |   |                                         |  |   | 906     |   |  |   |  |  |   |        |   |  |   | 906     |  
|Issuance of common stock for services (January 2005)                              |  | 2,170,000    |   |  |                 | 2,170  |                          |        |        |                              |   |                                         |  |   |        |   |  |   |  |  |   |        |   |  |   | 2,170   |  
|Issuance of common stock for cash (January 2005)                                  |  | 200,000      |   |  |                 | 200    |                          |        |        |                              |   |                                         |  |   |        |   |  |   |  |  |   |        |   |  |   | 200     |  
|Issuance of common stock for cash (February 2005)                                 |  | 1,100,000    |   |  |                 | 1,100  |                          |        |        |                              |   |                                         |  |   |        |   |  |   |  |  |   |        |   |  |   | 1,100   |  
|Issuance of common stock for cash (March 2005)                                    |  | 650,000      |   |  |                 | 650    |                          |        |        |                              |   |                                         |  |   |        |   |  |   |  |  |   |        |   |  |   | 650     |  
|Net loss for the period                                                           |  |             |   |  |                 |       |                          |        |        |                              |   |                                         |  |   |        |   |  |   |  |  |   | (26,241 | ) |  |   | (26,241 | )
|                                                                                  |  |              |   |  |                 |        |                          |        |         |                              |   |                                          |  |   |         |   |  |   |   |  |   |         |   |  |   |         |  
|Balance, March 31, 2005                                                           |  | 21,220,000   |   |  |                 | 21,220 |                          |        |        |                              |   |                                         |  |   | 3,655   |   |  |   |  |  |   | (26,241 | ) |  |   | (1,366  | )
|                                                                                  |  |              |   |  |                 |        |                          |       
|Cancellation of common stock issued and options awarded for services (May 2005)   |  | (5,600,000   | ) |  |                 | (5,600 | )                        |        |        |                              |   |                                         |  |   | (2,749  | ) |  |   |  |  |   |        |   |  |   | (8,349  | )
|Issuance of common stock for services (September 2005)                            |  | 379,000      |   |  |                 | 379    |                          |        |        |                              |   |                                         |  |   |        |   |  |   |  |  |   |        |   |  |   | 379     |  
|Issuance of common stock for intangible asset                                     |  | 5,000,000    |   |  |                 | 5,000  |                          |        |        |                              |   |                                         |  |   |        |   |  |   |  |  |   |        |   |  |   | 5,000   |  
|Reverse acquisition, September 1, 2005                                            |  | 6,310,678    |   |  |                 | 6,311  |                          |        |        |                              |   |                                         |  |   | (906    | ) |  |   |  |  |   |        |   |  |   | 5,405   |  
|Issuance of common stock for a reduction in stockholder advances (September 2005) |  | 3,000,000    |   |  |                 | 3,000  |                          |        |        |                              |   |                                         |  |   |        |   |  |   |  |  |   |        |   |  |   | 3,000   |  
|Issuance of common stock for services (September 2005)                            |  | 3,030,000    |   |  |                 | 3,030  |                          |        |        |                              |   |                                         |  |   |        |   |  |   |  |  |   |        |   |  |   | 3,030   |  
|Issuance of preferred stock for cash (September 2005)                             |  |             |   |  |                 |       |                          |        | 500,000 |                              |   | 500                                      |  |   | 34,500  |   |  |   |  |  |   |        |   |  |   | 35,000  |  
|Dividend on preferred stock                                                       |  |             |   |  |                 |       |                          |        |        |                              |   |                                         |  |   | (10,000 | ) |  |   |  |  |   |        |   |  |   | (10,000 | )
|Issuance of common stock for services (September 2005)                            |  | 6,400        |   |  |                 | 6      |                          |        |        |                              |   |                                         |  |   | 11,994  |   |  |   |  |  |   |        |   |  |   | 12,000  |  
|Issuance of common stock for services (October 2005)                              |  | 11,882       |   |  |                 | 12     |                          |        |        |                              |   |                                         |  |   | 11,988  |   |  |   |  |  |   |        |   |  |   | 12,000  |  
|Issuance of common stock for services (October 2005)                              |  | 20,000       |   |  |                 | 20     |                          |        |        |                              |   |                                         |  |   | 20,980  |   |  |   |  |  |   |        |   |  |   | 21,000  |  
|Issuance of common stock for services (October 2005)                              |  | 10,000       |   |  |                 | 10     |                          |        |        |                              |   |                                         |  |   | 17,490  |   |  |   |  |  |   |        |   |  |   | 17,500  |  
|Issuance of common stock for services (October 2005)                              |  | 10,000       |   |  |                 | 10     |                          |        |        |                              |   |                                         |  |   | 14,490  |   |  |   |  |  |   |        |   |  |   | 14,500  |  
|Issuance of common stock for services (November 2005)                             |  | 13,953       |   |  |                 | 14     |                          |        |        |                              |   |                                         |  |   | 11,986  |   |  |   |  |  |   |        |   |  |   | 12,000  |  
|Issuance of common stock for services (December 2005)                             |  | 30,000       |   |  |                 | 30     |                          |        |        |                              |   |                                         |  |   | 29,070  |   |  |   |  |  |   |        |   |  |   | 29,100  |  
|Issuance of common stock for services (December 2005)                             |  | 12,000       |   |  |                 | 12     |                          |        |        |                              |   |                                         |  |   | 11,988  |   |  |   |  |  |   |        |   |  |   | 12,000  |  
|Issuance of common stock for services (January 2006)                              |  | 10,000       |   |  |                 | 10     |                          |        |        |                              |   |                                         |  |   | 7,555   |   |  |   |  |  |   |        |   |  |   | 7,565   |  

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



4



---

##### Table of Contents

AmStem Corporation

(A Development Stage Enterprise)

Consolidated
Statement of Changes in Stockholders Deficit (continued)

From December 2, 2004 (Date of Inception) through
December 31, 2009 (unaudited)



|                                                      |  |              |  |                 |  |                          |  |                              |  |                                          |  |   |       |            |   |  |          |  
|----------------------------------------------------- |  | ------------ |  | --------------- |  | ------------------------ |  | ---------------------------- |  | ---------------------------------------- |  | - | ----- | ---------- | - |  | -------- | -
|                                                      |  | Common Stock |  | Preferred Stock |  | AdditionalPaid-InCapital |  | StockSubscriptionsReceivable |  | DeficitAccumulatedDuringDevelopmentStage |  |   | Total |           
|                                                      |  | Shares       |  | Amount          |  | Shares                   |  | Amount                       |  |                                          |  |  
|Issuance of common stock for services (January 2006)  |  | 10,000       |  | 10              |  |                         |  |                             |  | 7,555                                    |  |  |       |           |   |  | 7,565    |  
|Issuance of common stock for services (January 2006)  |  | 14,118       |  | 14              |  |                         |  |                             |  | 11,986                                   |  |  |       |           |   |  | 12,000   |  
|Issuance of common stock for services (January 2006)  |  | 20,000       |  | 20              |  |                         |  |                             |  | 16,980                                   |  |  |       |           |   |  | 17,000   |  
|Issuance of common stock for services (February 2006) |  | 14,118       |  | 14              |  |                         |  |                             |  | 11,986                                   |  |  |       |           |   |  | 12,000   |  
|Issuance of common stock for services (February 2006) |  | 24,000       |  | 24              |  |                         |  |                             |  | 20,376                                   |  |  |       |           |   |  | 20,400   |  
|Issuance of common stock for services (February 2006) |  | 48,000       |  | 48              |  |                         |  |                             |  | 40,752                                   |  |  |       |           |   |  | 40,800   |  
|Issuance of common stock for services (February 2006) |  | 48,000       |  | 48              |  |                         |  |                             |  | 40,752                                   |  |  |       |           |   |  | 40,800   |  
|Issuance of common stock for services (March 2006)    |  | 30,361       |  | 30              |  |                         |  |                             |  | 11,970                                   |  |  |       |           |   |  | 12,000   |  
|                                                      |  |              |  |                 |  |                          |  |                             
|Net loss for the year ended March 31, 2006            |  |             |  |                |  |                         |  |                             |  |                                         |  |  |       | (506,161   | ) |  | (506,161 | )
|                                                      |  |              |  |                 |  |                          |  |                              |  |                                          |  |   |       |            |   |  |          |  
|Balance, March 31, 2006                               |  | 33,672,510   |  | 33,672          |  | 500,000                  |  | 500                          |  | 324,398                                  |  |  |       | (532,402   | ) |  | (173,832 | )
|                                                      |  |              |  |                 |  |                          |  |                             
|Issuance of common stock for services (April 2006)    |  | 25,276       |  | 26              |  |                         |  |                             |  | 21,974                                   |  |  |       |           |   |  | 22,000   |  
|Issuance of common stock for services (May 2006)      |  | 16,484       |  | 16              |  |                         |  |                             |  | 11,984                                   |  |  |       |           |   |  | 12,000   |  
|Issuance of common stock for services (June 2006)     |  | 422,599      |  | 423             |  |                         |  |                             |  | 167,577                                  |  |  |       |           |   |  | 168,000  |  
|Issuance of common stock for services (July 2006)     |  | 330,265      |  | 330             |  |                         |  |                             |  | 122,670                                  |  |  |       |           |   |  | 123,000  |  
|Issuance of common stock for services (August 2006)   |  | 28,235       |  | 28              |  |                         |  |                             |  | 11,972                                   |  |  |       |           |   |  | 12,000   |  
|                                                      |  |              |  |                 |  |                          |  |                             
|Net loss for the year ended March 31, 2007            |  |             |  |                |  |                         |  |                             |  |                                         |  |  |       | (657,046   | ) |  | (657,046 | )
|                                                      |  |              |  |                 |  |                          |  |                              |  |                                          |  |   |       |            |   |  |          |  
|Balance, March 31, 2007                               |  | 34,495,369   |  | 34,495          |  | 500,000                  |  | 500                          |  | 660,575                                  |  |  |       | (1,189,448 | ) |  | (493,878 | )

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



5



---

##### Table of Contents

AmStem Corporation

(A Development Stage Enterprise)

Consolidated
Statement of Changes in Stockholders Deficit (continued)

From December 2, 2004 (Date of Inception) through
December 31, 2009 (unaudited)



|                                                                     |  |              |  |                 |  |          |                          |  |        |                              |  |           |                                          |  |        |       |  |            |   |  |            |  
|-------------------------------------------------------------------- |  | ------------ |  | --------------- |  | -------- | ------------------------ |  | ------ | ---------------------------- |  | --------- | ---------------------------------------- |  | ------ | ----- |  | ---------- | - |  | ---------- | -
|                                                                     |  | Common Stock |  | Preferred Stock |  |          | AdditionalPaid-InCapital |  |        | StockSubscriptionsReceivable |  |           | DeficitAccumulatedDuringDevelopmentStage |  |        | Total | 
|                                                                     |  | Shares       |  | Amount          |  | Shares   |                          |  | Amount |                              |  |           |                                          | 
|Issuance of common stock for services (May 2007)                     |  | 250,000      |  | 250             |  |         |                          |  |       |                              |  | 44,750    |                                          |  |       |       |  |           |   |  | 45,000     |  
|Issuance of common stock for services (June 2007)                    |  | 300,000      |  | 300             |  |         |                          |  |       |                              |  | 116,700   |                                          |  |       |       |  |           |   |  | 117,000    |  
|Issuance of common stock for cash, net of offering costs (July 2007) |  | 2,000,000    |  | 2,000           |  |         |                          |  |       |                              |  | 204,024   |                                          |  |       |       |  |           |   |  | 206,024    |  
|Issuance of warrants for consulting services (September 2007)        |  |             |  |                |  |         |                          |  |       |                              |  | 23,750    |                                          |  |       |       |  |           |   |  | 23,750     |  
|Exercise of warrants (September 2007)                                |  | 125,000      |  | 125             |  |         |                          |  |       |                              |  | (125      | )                                        |  | (125   | )     |  |           |   |  | (125       | )
|Share-based compensation to employees                                |  |             |  |                |  |         |                          |  |       |                              |  | 505,716   |                                          |  |       |       |  |           |   |  | 505,716    |  
|Issuance of warrants for consulting services (October 2007)          |  |             |  |                |  |         |                          |  |       |                              |  | 419,864   |                                          |  |       |       |  |           |   |  | 419,864    |  
|Issuance of warrants for consulting services (December 2007)         |  |             |  |                |  |         |                          |  |       |                              |  | 10,000    |                                          |  |       |       |  |           |   |  | 10,000     |  
|Exercise of warrants (December 2007)                                 |  | 125,000      |  | 125             |  |         |                          |  |       |                              |  | (125      | )                                        |  | (125   | )     |  |           |   |  | (125       | )
|Exercise of options (January 2008)                                   |  | 2,000,000    |  | 2,000           |  |         |                          |  |       |                              |  |          |                                          |  |       |       |  |           |   |  | 2,000      |  
|Issuance of common stock for services (February 2008)                |  | 500,000      |  | 500             |  |         |                          |  |       |                              |  | 62,000    |                                          |  |       |       |  |           |   |  | 62,500     |  
|Issuance of common stock for services (March 2008)                   |  | 750,000      |  | 750             |  |         |                          |  |       |                              |  | 176,750   |                                          |  |       |       |  |           |   |  | 177,500    |  
|Share-based compensation to employees (March 2008)                   |  | 250,000      |  | 250             |  |          |                          |  |        |                              |  | 54,750    |                                          |  |       |       |  |           |   |  | 55,000     |  
|Issuance of warrants for consulting services (March 2008)            |  |             |  |                |  |         |                          |  |       |                              |  | 28,700    |                                          |  |       |       |  |           |   |  | 28,700     |  
|Exercise of warrants (March 2008)                                    |  | 125,000      |  | 125             |  |         |                          |  |       |                              |  | (125      | )                                        |  | (125   | )     |  |           |   |  | (125       | )
|Share-based compensation to employees (March 2008)                   |  |             |  |                |  |         |                          |  |       |                              |  | 2,926     |                                          |  |       |       |  |           |   |  | 2,926      |  
|Net loss for the year ended March 31, 2008                           |  |             |  |                |  |         |                          |  |       |                              |  |          |                                          |  |       |       |  | (1,579,717 | ) |  | (1,579,717 | )
|                                                                     |  |              |  |                 |  |          |                          |  |        |                              |  |           |                                          |  |        |       |  |            |   |  |            |  
|Balance, March 31, 2008                                              |  | 40,920,369   |  | 40,920          |  | 500,000  |                          |  | 500    |                              |  | 2,310,130 |                                          |  | (375   | )     |  | (2,769,165 | ) |  | (417,990   | )
|Issuance of common stock for services (April 2008)                   |  | 1,200,000    |  | 1,200           |  |         |                          |  |       |                              |  | 123,800   |                                          |  | (200   | )     |  |           |   |  | 124,800    |  
|Amortization of options issued to employees (June 2008)              |  |             |  |                |  |         |                          |  |       |                              |  | 8,777     |                                          |  |       |       |  |           |   |  | 8,777      |  
|Issuance of common stock for exercise of warrants (June 2008)        |  | 125,000      |  | 125             |  |         |                          |  |       |                              |  | 14,340    |                                          |  | (4,625 | )     |  |           |   |  | 9,840      |  
|Issuance of common stock for cash (June 2008)                        |  | 388,889      |  | 389             |  |         |                          |  |       |                              |  | 34,611    |                                          |  |       |       |  |           |   |  | 35,000     |  
|Conversion of preferred stock (June 2008)                            |  | 500,000      |  | 500             |  | (500,000 | )                        |  | (500   | )                            |  |          |                                          |  |       |       |  |           |   |  |           |  
|Amortization of options issued to employees (August 2008)            |  |             |  |                |  |         |                          |  |       |                              |  | 8,778     |                                          |  |       |       |  |           |   |  | 8,778      |  
|Issuance of common stock for cash (August 2008)                      |  | 500,000      |  | 500             |  |         |                          |  |       |                              |  | 24,500    |                                          |  |       |       |  |           |   |  | 25,000     |  
|Issuance of common stock for legal settlement (August 2008)          |  | 500,000      |  | 500             |  |         |                          |  |       |                              |  | 38,350    |                                          |  |       |       |  |           |   |  | 38,850     |  
|Issuance of common stock for legal settlement (June 2008)            |  | 3,000,000    |  | 3,000           |  |         |                          |  |       |                              |  | 87,000    |                                          |  |       |       |  |           |   |  | 90,000     |  

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



6



---

##### Table of Contents

AmStem Corporation

(A Development Stage Enterprise)

Consolidated
Statement of Changes in Stockholders Deficit (continued)

From December 2, 2004 (Date of Inception) through
December 31, 2009 (unaudited)



|                                                                                                |  |              |   |  |                 |        |                          |        |   |                              |   |   |                                          |   |           |       |  |   |       |   |  |   |            |   |  |   |            |  
|----------------------------------------------------------------------------------------------- |  | ------------ | - |  | --------------- | ------ | ------------------------ | ------ | - | ---------------------------- | - | - | ---------------------------------------- | - | --------- | ----- |  | - | ----- | - |  | - | ---------- | - |  | - | ---------- | -
|                                                                                                |  | Common Stock |   |  | Preferred Stock |        | AdditionalPaid-InCapital |        |   | StockSubscriptionsReceivable |   |   | DeficitAccumulatedDuringDevelopmentStage |   |           | Total | 
|                                                                                                |  | Shares       |   |  | Amount          |        |                          | Shares |   | Amount                       |   |   |                                          |  
|Issuance of common stock for services (December 2008)                                           |  | 1,000,000    |   |  |                 | 1,000  |                          |        |  |                              |   |  |                                          |   | 39,000    |       |  |   |      |   |  |   |           |   |  |   | 40,000     |  
|Reduction of accounts payable in lieu of cash payment on subscription (December 2008)           |  |             |   |  |                 |       |                          |        |  |                              |   |  |                                          |   |          |       |  |   | 5,000 |   |  |   |           |   |  |   | 5,000      |  
|Amortization of options issued to employees (December 2008)                                     |  |             |   |  |                 |       |                          |        |  |                              |   |  |                                          |   | 8,777     |       |  |   |      |   |  |   |           |   |  |   | 8,777      |  
|Issuance of common stock for services (December 2008)                                           |  | 2,000,000    |   |  |                 | 2,000  |                          |        |  |                              |   |  |                                          |   | 78,000    |       |  |   |      |   |  |   |           |   |  |   | 80,000     |  
|Cancellation of common stock for legal settlement (December 2008)                               |  | (3,000,000   | ) |  |                 | (3,000 | )                        |        |  |                              |   |  |                                          |   | (87,000   | )     |  |   |      |   |  |   |           |   |  |   | (90,000    | )
|Issuance of warrants with convertible notes payable                                             |  |             |   |  |                 |       |                          |        |  |                              |   |  |                                          |   | 63,750    |       |  |   |      |   |  |   |           |   |  |   | 63,750     |  
|Amortization of options issued to employees (March 2009)                                        |  |             |   |  |                 |       |                          |        |  |                              |   |  |                                          |   | 8,777     |       |  |   |      |   |  |   |           |   |  |   | 8,777      |  
|Value of the beneficial conversion feature related to the issuance of convertible notes payable |  |             |   |  |                 |       |                          |        |  |                              |   |  |                                          |   | 28,125    |       |  |   |      |   |  |   |           |   |  |   | 28,125     |  
|Net loss for year ended March 31, 2009                                                          |  |             |   |  |                 |       |                          |        |  |                              |   |  |                                          |   |          |       |  |   |      |   |  |   | (1,259,493 | ) |  |   | (1,259,493 | )
|                                                                                                |  |              |   |  |                 |        |                          |        |   |                              |   |   |                                          |   |           |       |  |   |       |   |  |   |            |   |  |   |            |  
|Balance, March 31, 2009                                                                         |  | 47,134,258   |   |  |                 | 47,134 |                          |        |  |                              |   |  |                                          |   | 2,789,715 |       |  |   | (200  | ) |  |   | (4,028,658 | ) |  |   | (1,192,009 | )
|Issuance of common stock in settlement of liabilities (June 2009) (unaudited)                   |  | 500,000      |   |  |                 | 500    |                          |        |  |                              |   |  |                                          |   | 29,000    |       |  |   |      |   |  |   |           |   |  |   | 29,500     |  
|Issuance of common stock for accrued payroll liabilities (June 2009) (unaudited)                |  | 2,250,000    |   |  |                 | 2,250  |                          |        |  |                              |   |  |                                          |   | 130,500   |       |  |   |      |   |  |   |           |   |  |   | 132,750    |  
|Issuance of common stock for services (June 2009) (unaudited)                                   |  | 200,000      |   |  |                 | 200    |                          |        |  |                              |   |  |                                          |   | 11,600    |       |  |   |      |   |  |   |           |   |  |   | 11,800     |  
|Amortization of options issued to employees (June 2009) (unaudited)                             |  |             |   |  |                 |       |                          |        |  |                              |   |  |                                          |   | 8,778     |       |  |   |      |   |  |   |           |   |  |   | 8,778      |  
|Issuance of common stock for convertible notes payable (September 2009) (unaudited)             |  | 8,937,500    |   |  |                 | 8,938  |                          |        |  |                              |   |  |                                          |   | 437,937   |       |  |   |      |   |  |   |           |   |  |   | 446,875    |  
|Exercise of warrants (September 2009) (unaudited)                                               |  | 233,334      |   |  |                 | 233    |                          |        |  |                              |   |  |                                          |   | (233      | )     |  |   |      |   |  |   |           |   |  |   |           |  
|Issuance of common stock for merger costs (September 2009) (unaudited)                          |  | 2,000,000    |   |  |                 | 2,000  |                          |        |  |                              |   |  |                                          |   | 488,000   |       |  |   |      |   |  |   |           |   |  |   | 490,000    |  
|Discount on convertible notes payable (September 2009) (unaudited)                              |  |             |   |  |                 |       |                          |        |  |                              |   |  |                                          |   | 207,318   |       |  |   |      |   |  |   |           |   |  |   | 207,318    |  
|Amortization of options issued to employees (September 2009) (unaudited)                        |  |             |   |  |                 |       |                          |        |  |                              |   |  |                                          |   | 8,777     |       |  |   |      |   |  |   |           |   |  |   | 8,777      |  
|Issuance of warrant for legal services (September 2009) (unaudited)                             |  |             |   |  |                 |       |                          |        |  |                              |   |  |                                          |   | 17,494    |       |  |   |      |   |  |   |           |   |  |   | 17,494     |  
|Share-based compensation to employees (September 2009) (unaudited)                              |  |             |   |  |                 |       |                          |        |  |                              |   |  |                                          |   | 76,965    |       |  |   |      |   |  |   |           |   |  |   | 76,965     |  
|Issuance of common stock for convertible notes payable (October 2009) (unaudited)               |  | 3,764,960    |   |  |                 | 3,765  |                          |        |  |                              |   |  |                                          |   | 184,483   |       |  |   |      |   |  |   |           |   |  |   | 188,248    |  
|Discount on convertible notes payable (October 2009) (unaudited)                                |  |             |   |  |                 |       |                          |        |  |                              |   |  |                                          |   | 170,131   |       |  |   |      |   |  |   |           |   |  |   | 170,131    |  
|Cancellation of common stock issued for license agreement (December 2009) (unaudited)           |  | (5,000,000   | ) |  |                 | (5,000 | )                        |        |  |                              |   |  |                                          |   | (395,000  | )     |  |   |      |   |  |   |           |   |  |   | (400,000   | )
|Issuance of common stock for services (November 2009) (unaudited)                               |  | 150,000      |   |  |                 | 150    |                          |        |  |                              |   |  |                                          |   | 14,100    |       |  |   |      |   |  |   |           |   |  |   | 14,250     |  
|Issuance of common stock in settlement of lawsuit (October 2009) (unaudited)                    |  | 1,000,000    |   |  |                 | 1,000  |                          |        |  |                              |   |  |                                          |   | 160,000   |       |  |   |      |   |  |   |           |   |  |   | 161,000    |  
|Share-based compensation to employees (December 2009) (unaudited)                               |  |             |   |  |                 |       |                          |        |  |                              |   |  |                                          |   | 25,704    |       |  |   |      |   |  |   |           |   |  |   | 25,704     |  
|Net loss for the nine months ended December 31, 2009 (unaudited)                                |  |             |   |  |                 |       |                          |        |  |                              |   |  |                                          |   |          |       |  |   |      |   |  |   | (506,225   | ) |  |   | (506,225   | )
|                                                                                                |  |              |   |  |                 |        |                          |        |   |                              |   |   |                                          |   |           |       |  |   |       |   |  |   |            |   |  |   |            |  
|Balance, December 31, 2009 (unaudited)                                                          |  | 61,170,052   |   |  | $               | 61,170 |                          |        |  |                              | $ |  |                                          | $ | 4,365,269 |       |  | $ | (200  | ) |  | $ | (4,534,883 | ) |  | $ | (108,644   | )
|                                                                                                |  |              |   |  |                 |        |                          |        |   |                              |   |   |                                          |   |           |       |  |   |       |   |  |   |            |   |  |   |            |  

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



7



---

##### Table of Contents

AmStem Corporation

(a development stage enterprise)

Consolidated Statements of Cash Flows

(unaudited)



|                                                                                                                         |  |                               |          |   |                                                                  |   |            |      |  |   |            |  
|------------------------------------------------------------------------------------------------------------------------ |  | ----------------------------- | -------- | - | ---------------------------------------------------------------- | - | ---------- | ---- |  | - | ---------- | -
|                                                                                                                         |  | Nine Months EndedDecember 31, |          |   | Period fromDecember 2,2004 (Date
ofInception)throughDecember 31, |  
|                                                                                                                         |  | 2009                          |          |   | 2008                                                             |   |            | 2009 | 
|Operating activities:                                                                                                    |  |                               |          |   |                                                                  |   |            |      |  |   |            |  
|                                                                                                                         |  |                               |         
|Net loss                                                                                                                 |  | $                             | (506,225 | ) |                                                                  | $ | (1,061,576 | )    |  | $ | (4,534,883 | )
|Adjustments to reconcile net loss to net cash provided (used) by operating activities:                                   |  |                               |          |   |                                                                  |   |            |      |  |   |            |  
|Share-based compensation to non-employees                                                                                |  |                               | 60,471   |   |                                                                  |   | 517,495    |      |  |   | 1,864,160  |  
|Share-based compensation to employees                                                                                    |  |                               |         |   |                                                                  |   |           |      |  |   | 563,642    |  
|Amortization of options                                                                                                  |  |                               | 26,332   |   |                                                                  |   | 26,332     |      |  |   | 61,441     |  
|Amortization of warrants issued with notes payable                                                                       |  |                               | 509,187  |   |                                                                  |   |           |      |  |   | 517,373    |  
|Settlement of lawsuit with common stock                                                                                  |  |                               | 161,000  |   |                                                                  |   | 38,850     |      |  |   | 289,850    |  
|Cancellation of common stock issued for license agreement and settlement of liabilities                                  |  |                               | (400,000 | ) |                                                                  |   |           |      |  |   | (490,000   | )
|Gain on settlement of accrued payroll and assumption of liabilities                                                      |  |                               | (329,636 | ) |                                                                  |   |           |      |  |   | (329,636   | )
|Issuance of common stock and warrants in relief of accrued payroll                                                       |  |                               | 154,549  |   |                                                                  |   |           |      |  |   | 154,549    |  
|Amortization of deferred loan costs                                                                                      |  |                               | 33,326   |   |                                                                  |   |           |      |  |   | 37,620     |  
|Investment income reinvested                                                                                             |  |                               |         |   |                                                                  |   |           |      |  |   | (2,943     | )
|Amortization                                                                                                             |  |                               |         |   |                                                                  |   |           |      |  |   | 667        |  
|Write off of intangible asset                                                                                            |  |                               |         |   |                                                                  |   |           |      |  |   | 4,333      |  
|(Increase) decrease in:                                                                                                  |  |                               |          |   |                                                                  |   |            |      |  |   |            |  
|                                                                                                                         |  |                               |         
|Deferred loan costs                                                                                                      |  |                               | (20,000  | ) |                                                                  |   |           |      |  |   | (20,000    | )
|Prepaid expenses                                                                                                         |  |                               | 40,000   |   |                                                                  |   | 6,300      |      |  |   | (86,090    | )
|Deposits                                                                                                                 |  |                               | (3,000   | ) |                                                                  |   | 2,169      |      |  |   | (8,000     | )
|Increase (decrease) in:                                                                                                  |  |                               |          |   |                                                                  |   |            |      |  |   |            |  
|                                                                                                                         |  |                               |         
|Accounts payable                                                                                                         |  |                               | (81,586  | ) |                                                                  |   | 39,586     |      |  |   | 63,935     |  
|Accrued payroll                                                                                                          |  |                               | 31,240   |   |                                                                  |   | 274,005    |      |  |   | 780,336    |  
|Accrued expenses                                                                                                         |  |                               | (60,185  | ) |                                                                  |   | 50,824     |      |  |   | 90,258     |  
|                                                                                                                         |  |                               |          |   |                                                                  |   |            |      |  |   |            |  
|Net cash used by operating activities                                                                                    |  |                               | (384,527 | ) |                                                                  |   | (106,015   | )    |  |   | (1,043,388 | )
|                                                                                                                         |  |                               |          |   |                                                                  |   |            |      |  |   |            |  
|Investing activities:                                                                                                    |  |                               |          |   |                                                                  |   |            |      |  |   |            |  
|                                                                                                                         |  |                               |         
|Proceeds from certificate of deposit, restricted                                                                         |  |                               |         |   |                                                                  |   |           |      |  |   | 2,943      |  
|                                                                                                                         |  |                               |          |   |                                                                  |   |            |      |  |   |            |  
|Net cash provided by investing activities                                                                                |  |                               |         |   |                                                                  |   |           |      |  |   | 2,943      |  
|                                                                                                                         |  |                               |          |   |                                                                  |   |            |      |  |   |            |  
|Financing activities:                                                                                                    |  |                               |          |   |                                                                  |   |            |      |  |   |            |  
|                                                                                                                         |  |                               |         
|Proceeds from advances from stockholder                                                                                  |  |                               |         |   |                                                                  |   |           |      |  |   | 52,528     |  
|Repayment of stockholder advances                                                                                        |  |                               |         |   |                                                                  |   |           |      |  |   | (49,528    | )
|Proceeds from issuance of notes payable                                                                                  |  |                               | 400,000  |   |                                                                  |   | 45,000     |      |  |   | 594,880    |  
|Repayment of notes payable                                                                                               |  |                               |         |   |                                                                  |   | (25,000    | )    |  |   | (45,000    | )
|Advances from related party                                                                                              |  |                               |         |   |                                                                  |   |           |      |  |   | 284,521    |  
|Repayment from related party                                                                                             |  |                               |         |   |                                                                  |   | 23,940     |      |  |   | (53,400    | )
|Payment of stock offering costs                                                                                          |  |                               |         |   |                                                                  |   |           |      |  |   | (43,976    | )
|Proceeds from sale of stock                                                                                              |  |                               |         |   |                                                                  |   | 60,000     |      |  |   | 348,550    |  
|                                                                                                                         |  |                               |          |   |                                                                  |   |            |      |  |   |            |  
|Net cash provided by financing activities                                                                                |  |                               | 400,000  |   |                                                                  |   | 103,940    |      |  |   | 1,088,575  |  
|                                                                                                                         |  |                               |          |   |                                                                  |   |            |      |  |   |            |  
|Net increase (decrease) in cash                                                                                          |  |                               | 15,473   |   |                                                                  |   | (2,075     | )    |  |   | 48,130     |  
|Cash at beginning of period                                                                                              |  |                               | 32,657   |   |                                                                  |   | 2,387      |      |  |   |           |  
|                                                                                                                         |  |                               |          |   |                                                                  |   |            |      |  |   |            |  
|Cash at end of period                                                                                                    |  | $                             | 48,130   |   |                                                                  | $ | 312        |      |  | $ | 48,130     |  
|                                                                                                                         |  |                               |          |   |                                                                  |   |            |      |  |   |            |  
|Supplemental disclosure of cash flow information and non-cash financing activities:                                      |  |                               |          |   |                                                                  |   |            |      |  |   |            |  
|                                                                                                                         |  |                               |         
|Cash paid for income taxes                                                                                               |  | $                             |         |   |                                                                  | $ |           |      |  | $ |           |  
|                                                                                                                         |  |                               |          |   |                                                                  |   |            |      |  |   |            |  
|Cash paid for interest                                                                                                   |  | $                             |         |   |                                                                  | $ |           |      |  | $ | 3,308      |  
|                                                                                                                         |  |                               |          |   |                                                                  |   |            |      |  |   |            |  
|Issuance of convertible notes payable with a discount equivalent to the relative fair value of the accompanying
warrants |  | $                             | 157,296  |   |                                                                  | $ |           |      |  | $ | 221,046    |  
|                                                                                                                         |  |                               |          |   |                                                                  |   |            |      |  |   |            |  
|Issuance of convertible notes payable with a beneficial conversion feature                                               |  | $                             | 159,404  |   |                                                                  | $ |           |      |  | $ | 187,529    |  
|                                                                                                                         |  |                               |          |   |                                                                  |   |            |      |  |   |            |  
|Issuance of common stock for conversion of notes payable and related accrued interest                                    |  | $                             | 635,123  |   |                                                                  | $ |           |      |  | $ | 635,123    |  
|                                                                                                                         |  |                               |          |   |                                                                  |   |            |      |  |   |            |  
|Issuance of common stock for exercise of warrants                                                                        |  | $                             | 233      |   |                                                                  | $ |           |      |  | $ | 233        |  
|                                                                                                                         |  |                               |          |   |                                                                  |   |            |      |  |   |            |  
|Reduction in stock subscription receivable in exchange for a reduction in accounts payable                               |  | $                             |         |   |                                                                  | $ | 5,000      |      |  | $ | 5,000      |  
|                                                                                                                         |  |                               |          |   |                                                                  |   |            |      |  |   |            |  
|Common stock issued for a reduction in advance from stockholder                                                          |  | $                             |         |   |                                                                  | $ |           |      |  | $ | 3,000      |  
|                                                                                                                         |  |                               |          |   |                                                                  |   |            |      |  |   |            |  
|Common stock issued for a reduction in accounts payable                                                                  |  | $                             |         |   |                                                                  | $ |           |      |  | $ | 2,000      |  
|                                                                                                                         |  |                               |          |   |                                                                  |   |            |      |  |   |            |  
|Common stock issued for purchase of intangible asset                                                                     |  | $                             |         |   |                                                                  | $ |           |      |  | $ | 5,000      |  
|                                                                                                                         |  |                               |          |   |                                                                  |   |            |      |  |   |            |  
|Common stock and note payable issued for accrued payroll and assumption of liabilities                                   |  | $                             | 659,312  |   |                                                                  | $ |           |      |  | $ | 659,312    |  
|                                                                                                                         |  |                               |          |   |                                                                  |   |            |      |  |   |            |  

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



8



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##### Table of Contents

AmStem Corporation

(a development stage enterprise)

Notes to Consolidated Financial Statements

1. Background Information and Basis of
Presentation

Company Background:

The Company was originally incorporated in Nevada on December 28, 1992 as Arklow Associates, Inc. On September 1, 2005, R Capital, Stem Cell Florida, and the Company (then Altadyne, Inc.)
entered into a Reorganization and Stock Purchase Agreement. At that point, the Company had no assets, liabilities or ongoing operations. Pursuant to the agreement, Altadyne acquired 100% of the issued and outstanding shares of common stock of Stem
Cell Florida in a non-cash transaction and Stem Cell Florida became a wholly-owned subsidiary of Altadyne, and the shareholders of Stem Cell Florida became shareholders of the Company. The Company assumed operation of the business of Stem Cell
Florida, which was to establish stem cell therapy clinics and stem cell marketing. On October 5, 2005, the Company changed its name to Stem Cell Therapy International, Inc. to reflect the new business of the Company. On November 2, 2009,
the Company changed its name to AmStem Corporation in order to reflect the subsequent merged operations with Histostem Co., Ltd.

Merger with Histostem:

The Company entered into a Reorganization and Stock Purchase Agreement with Histostem Co., Ltd.,
a Korean company (Histostem) on March 10, 2008, as amended on September 23, 2009 (the SPA), pursuant to which we have agreed to acquire 90% of the issued and outstanding shares of Histostem in consideration for the
issuance of 60% of our issued and outstanding stock. The closing of the transaction was subject to a number of conditions, including, but not limited to, (i) increasing the size of the Board of Directors to seven members; (ii) effectuating
an increase in the Companys authorized shares of common stock from 100 million shares to 500 million shares and to change the Companys name to AmStem Corporation. The Company received a majority of the shareholders
consent for number i and ii); and (iii) the Company will also issue a total of 4,000,000 shares to certain parties that have assisted with the completion of the SPA. The Company has filed a Form 14C with the SEC as notice of the name change and
increase to the authorized number of shares. The Company closed the merger in the fourth quarter of fiscal year end March 31, 2010, with the Company issuing 102,597,040 shares of common stock to Histostem.

Since the Company entered into the Stock Purchase Agreement with Histostem our substantive business operations have focused primarily on positioning the
Company to leverage Histostems platform throughout the United States and the world and to obtain the necessary financing to complete the transaction. We have incorporated a wholly owned subsidiary, AmStem International, Inc., a Nevada
Corporation, to use for distribution of stem cell related products.

Basis of Presentation:

In the opinion of management, the accompanying consolidated financial statements include all adjustments, consisting only of normal recurring items,
necessary for their fair presentation in conformity with generally accepted accounting principles. The results of operations for the three and nine months ended December 31, 2009 are not necessarily indicative of the results for a full year.

The consolidated financial statements for the three and nine month periods ended December 31, 2009 and notes thereto should be read in
conjunction with the consolidated financial statements and notes thereto for the year ended March 31, 2009 as filed in the Form 10-K, filed with the Securities and Exchange Commission on July 10, 2009.

Principles of Consolidation:

The accompanying consolidated financial statements include the accounts of AmStem Corporation and its wholly-owned subsidiaries, Stem Cell Therapy International Corp and AmStem International, Inc. All intercompany accounts and transactions
have been eliminated.

2. Liquidity and Managements Plans

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. For the nine months ended December 31, 2009 and the period since
December 2, 2004 (date of inception) through December 31, 2009, the Company has had net losses of $506,225 and $4,534,883, respectively, and cash used in operations of $384,527 and $1,043,388, respectively, and has negative working capital
of $116,644 at December 31, 2009. As of December 31, 2009, the Company has not emerged from the development stage. In view of these matters, the ability of the Company to continue as a going concern raises substantial doubt and is
dependent upon the Companys ability to generate additional financing and ultimately increase operations and to achieve a level of profitability. Since inception, the Company has financed its activities principally from the use of equity
securities to pay for services and related party advances. The Company intends on financing its future development activities and its working capital needs largely from the sale of equity securities and debt financing, until such time that funds
provided by operations are sufficient to fund working capital requirements. There can be no assurance that the Company will be successful at achieving its financing goals at reasonably commercial terms, if at all.

On November 2, 2009, the Company entered into a Preferred Stock Purchase Agreement (the Agreement) with Socius Capital Group, LLC, a
Delaware limited liability company (the Investor). Pursuant to the terms of the Agreement, the Company has the right, over a term of two years, subject to certain conditions, to demand through one or more tranche notices that the
Investor purchase up to a total $5 million of the Companys Series A Preferred Stock (Preferred Stock) at $10,000 per share. The Preferred Stock pays a dividend of 10% per annum, payable in additional shares of Preferred Stock,
and is redeemable at the Companys option at any time after the one year anniversary of initial issuance.

At closing, the Company issued
the Investor a warrant to purchase up to approximately 42 million shares of the Companys common stock at an exercise price of $0.159 per share. The warrant vests with each tranche closing, with respect to an amount of shares equal to 135%
of the dollar amount of the tranche in question, and the exercise price with respect to the shares vested adjusts to the closing price the trading day before the tranche notice date. The Company cannot draw on the facility until a registration
statement covering the resale of the warrant shares is effective and certain other conditions are satisfied. On December 17, 2009, the Company filed a Form S-1 with the Securities and Exchange Commission registering 10,560,000 shares of common
stock, which became effective on January 12, 2010.

In addition, the Company paid the Investor $20,000 at closing to cover the
Investors legal fees and will pay a commitment fee in the amount of $250,000, in cash or shares of the Companys common stock, at the closing of the first tranche. As of the date of this filing, the Company has not closed on the first
tranche of funding.

The Company intends on financing its future development activities and its working capital needs largely from the sale of
equity securities, debt financing and loans, until such time that funds provided by operations are sufficient to fund working capital requirements. There can be no assurance that the Company will be successful at achieving its financing goals at
reasonably commercial terms, if at all.



9



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##### Table of Contents

AmStem Corporation

(a development stage enterprise)

Notes to
Consolidated Financial Statements(Continued)



3. Significant Accounting Policies

Use of estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Concentration of credit risk:

Cash balances are maintained with a major financial institution in the United States. Deposits with this bank may exceed the amount of insurance provided on such deposits. Generally, these deposits may be
redeemed upon demand and, therefore, bear minimal risk.

Impairment of long-lived assets:

The Company evaluates the recoverability of its long-lived assets or asset groups whenever adverse events or changes in business climate indicate that the
expected undiscounted future cash flows from the related assets may be less than previously anticipated. If the net book value of the related assets exceeds the undiscounted future cash flows of the assets, the carrying amount would be reduced to
the present value of their expected future cash flows and an impairment loss would be recognized.

Income taxes:

Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the
financial statements carrying amounts of existing assets and liabilities and their respective income tax bases. 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 as income in the period that included the enactment date. Due to the Companys continued
losses, the Company has placed a full valuation allowance against the deferred tax asset.

Loss per common share:

Basic and diluted loss per share are computed based on the weighted average number of common shares outstanding during the period.
Common stock equivalents are not considered in the calculation of diluted earnings per share for the periods presented if their effect would be anti-dilutive.

Stock-based compensation:

The Company uses the fair-value based method to determine
compensation for all arrangements under which employees and others receive shares of stock or equity instruments (warrants and options).

Reclassifications:

Certain reclassifications have been made to the accompanying
December 31, 2008 consolidated statements of operations to conform to the December 31, 2009 presentation. Such reclassifications had no impact on net loss as previously reported.

New Accounting Guidance:

In October 2009, the Financial Accounting Standards Board (FASB) issued, Multiple Deliverable Revenue Arrangements, which modifies accounting for multiple element arrangements by requiring that the separation of the
arrangements be based on estimated selling prices based on entity specific assumptions rather than fair value, eliminating the residual method of allocation and requiring additional disclosures related to such arrangements. The standard is effective
prospectively for arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. The Company has not yet evaluated the impact the adoption of the standard will have on its consolidated financial
statements.

On September 30, 2009, the Company adopted changes issued by the FASB to the authoritative hierarchy of
GAAP. These changes establish the FASB Accounting Standards CodificationTM(Codification) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP.
Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The FASB will no longer issue new standards in the form of
Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts; instead the FASB will issue Accounting Standards Updates. Accounting Standards Updates will not be authoritative in their own right as they will only serve to update the
Codification. These changes and the Codification itself do not change GAAP. Other than the manner in which new accounting guidance is referenced, the adoption of these changes had no impact on the financial statements.

In August 2009, the FASB issued changes to fair value accounting for liabilities. These changes clarify existing guidance that in circumstances in which a
quoted price in an active market for the identical liability is not available, an entity is required to measure fair value using either a valuation technique that uses a quoted price of either a similar liability or a quoted price of an identical or
similar liability when traded as an asset, or another valuation technique that is consistent with the principles of fair value measurements, such as an income approach (e.g., present value technique). This guidance also states that both a quoted
price in an active market for the identical liability and a quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements.
These changes became effective for the Company on October 1, 2009. Management has determined that the adoption of these changes did not have an impact on the financial statements.

In June 2009, the FASB issued changes to the accounting for variable interest entities. These changes require an enterprise to perform an analysis to determine whether the enterprises variable
interest or interests give it a controlling financial interest in a variable interest entity; to require ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity; to eliminate the quantitative approach
previously required for determining the primary beneficiary of a variable interest entity; to add an additional reconsideration event for determining whether an entity is a variable interest entity when any changes in facts and circumstances occur
such that holders of the equity investment at risk, as a group, lose the power from voting rights or similar rights of those investments to direct the activities of the entity that most significantly impact the entitys economic performance;
and to require enhanced disclosures that will provide users of financial statements with more transparent information about an enterprises involvement in a variable interest entity. These changes become effective on April 1, 2010.
Management does not believe that these changes will have a material impact on the financial statements.

On June 30, 2009, the Company
adopted changes issued by the FASB to accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued, otherwise known as subsequent events.
Specifically, these changes set forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements,
the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the
balance sheet date. The Company evaluated for subsequent events through February 16, 2010, the issuance date of the Companys financial statements.



10



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##### Table of Contents

AmStem Corporation

(a development stage enterprise)

Notes to
Consolidated Financial Statements(Continued)



4. Notes Payable

During the nine months ended December 31, 2009, the Company negotiated a settlement with a related party of $292,420 of accrued payroll and the assumption of $77,000 of liabilities in exchange for
500,000 shares of common stock valued at $29,500 and a non-interest bearing $100,000 note payable. The note is due at the earlier of demand by the holder, the closing of any subsequent funding received by the Company with minimum gross proceeds of
3 million dollars or February 1, 2011. In the event the Company is unable to repay the note on or before the maturity date, the Company will pay to the note holder 1.5% simple monthly interest on all amounts outstanding. As a result of
this transaction, the Company has recorded a gain on the settlement of liabilities of $239,920 in the accompanying Consolidated Statements of Operations.

During the nine months ended December 31, 2009, the Company issued a promissory note to a related party, which effectively converted the total amount of $231,121 included in Due to Related Party into
a formalized debt agreement. The promissory note is non-interest bearing and is due the earlier of demand by the holder, the closing of any subsequent funding received by the Company with minimum gross proceeds of 3 million dollars, or
January 1, 2011. In the event the Company is unable to repay the note on or before the maturity date, the Company will pay to the note holder 1.5% simple monthly interest on all amounts outstanding.

During the nine months ended December 31, 2009, the Company issued 2,625,000 shares of common stock for the conversion of a $125,000 note payable and
related accrued interest of $6,250.

During the nine months ended December 31, 2009, the Company received $400,000 and agreed to repay to
the lenders $500,000 (Convertible Notes) at the earlier of either six months or when the Company is able to obtain subsequent financing with minimum gross proceeds of $1,000,000. The interest rate is a simple 10% per annum. At the holders
choice the note can be converted into common shares at a rate of $0.04 per common share. The holder of the note can also convert the note, pursuant to the terms of the subsequent financing at a rate of 125% of the amount due at the closing of
subsequent financing.

The Convertible Notes contain an embedded conversion feature. The difference between the conversion price and the
Companys estimated fair market value of its stock price on the commitment date of the notes was calculated to be $193,064 for notes issued during the nine months ended December 31, 2009. The Company amortized the beneficial conversion
feature over the life of the convertible debt.

The Company also issued 6,000,000 warrants in connection with the Convertible Notes. The
warrants are exercisable at $0.04 per share, vest immediately and expire in August and September 2014. The Company valued the warrants at their relative fair value of $184,384 and recorded a discount on the Convertible Notes. The discount is
amortized as interest expense over the term of the Convertible Notes. During the three and nine months ended December 31, 2009, the Company recognized interest expense of $150,730 and $358,048 from the amortization of the discount and the
beneficial conversion feature.

During the nine months ended December 31, 2009, the note holders converted the Convertible Notes into
12,702,460 shares of common stock for $635,123 of convertible debt and related accrued interest.

5. Equity

During the nine months ended December 31, 2009, the Company issued 200,000 shares of common stock valued at $11,800 for consulting services.

During the nine months ended December 31, 2009, the Company issued 2,250,000 shares of common stock valued at $132,750 in exchange for a portion of
accrued compensation.

During the nine months ended December 31, 2009, the Company issued 500,000 shares of common stock valued at
$29,500 in settlement of payroll obligations and other liabilities as more fully described in Note 4.

During the nine months ended
December 31, 2009, the Company issued 2,000,000 shares of common stock valued at $490,000 to a consultant as part of the costs of the merger, as more fully discussed in Note 10.

During the nine months ended December 31, 2009, the Company issued 233,334 shares of common stock for the exercise of 400,000 warrants.

During the nine months ended December 31, 2009, the Company issued 150,000 shares of common stock valued at $14,250 to a consultant for investor relation services.

During the nine months ended December 31, 2009, the Company issued 1,000,000 shares of common stock valued at $161,000 in settlement of a lawsuit.

On November 2, 2009, the Company entered into a Preferred Stock Purchase Agreement (the Agreement) with Socius Capital
Group, LLC, a Delaware limited liability company (the Investor). Pursuant to the terms of the Agreement, the Company has the right, over a term of two years, subject to certain conditions, to demand through one or more tranche notices
that the Investor purchase up to a total $5 million of the Companys Series A Preferred Stock (Preferred Stock) at $10,000 per share. The Preferred Stock pays a dividend of 10% per annum, payable in additional shares of
Preferred Stock, and is redeemable at the Companys option at any time after the one year anniversary of initial issuance.

At closing,
the Company issued the Investor a warrant to purchase up to approximately 42 million shares of the Companys common stock at an exercise price of $0.159 per share. The warrant vests with each tranche closing, with respect to an amount of
shares equal to 135% of the dollar amount of the tranche in question, and the exercise price with respect to the shares vested adjusts to the closing price the trading day before the tranche notice date. The Company cannot draw on the facility until
a registration statement covering the resale of the warrant shares is effective and certain other conditions are satisfied.

In addition, the
Company paid the Investor $20,000 at closing to cover the Investors legal fees and will pay a commitment fee in the amount of $250,000, in cash or shares of the Companys common stock, at the closing of the first tranche. As of the date
of this filing, the Company has not closed on the first tranche of funding.

On November 2, 2009, the Company filed an Amended and
Restated Certificate of Designations of Preferences, Rights and Limitations of Series A Preferred Stock (the Designation), with the Nevada Secretary of State.



11



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##### Table of Contents

AmStem Corporation

(a development stage enterprise)

Notes to
Consolidated Financial Statements(Continued)



6. Stock Options and Warrants

During the nine months ended December 31, 2009, the Company did not issue any stock options.



|                                 |  |           |  |                 |             |                              |   |                                       |  | 
|-------------------------------- |  | --------- |  | --------------- | ----------- | ---------------------------- | - | ------------------------------------- |  | 
|                                 |  | Shares    |  | Exercise Prices |             | WeightedAverageExercisePrice |   | Weighted AverageGrant Date Fair Value
|Outstanding and Exercisable      |  |           |  |                 |             |                              |   |                                       |  | 
|Outstanding at March 31, 2009    |  | 3,650,000 |  | $               | 0.19 - 0.25 |                              | $ | 0.20                                  |  | 
|Options granted                  |  |          |  |                 |            |                              |   |                                      |  | 
|Options exercised                |  |          |  |                 |            |                              |   |                                      |  | 
|Options cancelled or expired     |  |          |  |                 |            |                              |   |                                      |  | 
|                                 |  |           |  |                 |             |                              |   |                                       |  | 
|Outstanding at December 31, 2009 |  | 3,650,000 |  | $               | 0.19 - 0.25 |                              | $ | 0.20                                  |  | 
|                                 |  |           |  |                 |             |                              |   |                                       |  | 
|Exercisable at December 31, 2009 |  | 3,587,500 |  | $               | 0.19 - 0.25 |                              | $ | 0.20                                  |  | 
|                                 |  |           |  |                 |             |                              |   |                                       |  | 

The following table summarizes information about options outstanding and exercisable as of December 31, 2009:



|                       |  |                     |  |                              |  |                      |      |                               |            |                   |           |                      |   |     
|---------------------- |  | ------------------- |  | ---------------------------- |  | -------------------- | ---- | ----------------------------- | ---------- | ----------------- | --------- | -------------------- | - | ----
|                       |  | Outstanding Options |  | Exercisable Options         
|Range ofExercise Price |  | NumberOutstanding   |  | WeightedAverageRemainingLife |  | WeightedAveragePrice |      | WeightedAverageRemaining Life |            | NumberExercisable |           | WeightedAveragePrice
|$ 0.19 - $ 0.25        |  | 3,650,000           |  | 6.62 Years                   |  | $                    | 0.20 |                               | 6.69 Years |                   | 3,587,500 |                      | $ | 0.20

The aggregate intrinsic value of
options outstanding at December 31, 2009, was $0 based on the Companys closing stock price of $0.13. Intrinsic value is the amount by which the fair value of the underlying stock exceeds the exercise price of the options.

The fair value of each warrant was estimated on the date of grant using the Black Scholes model that uses assumptions noted in the following table. Expected
volatility is based on the weekly trading of two similar companys underlying common stock (as the Company does not have an adequate trading history for an accurate calculation) and other factors.



|                        |  |              
|----------------------- |  | -------------
|Expected volatility     |  | 88% - 163.2% 
|Expected dividends      |  | 0            
|Expected term           |  | 1 - 10 years 
|Risk-free interest rate |  | 1.99% - 4.71%

The
following table summarizes information about warrants outstanding and exercisable as of December 31, 2009:



|                                 |  |           |   |  |                 |              |                              |   |                                       |  |   |     
|-------------------------------- |  | --------- | - |  | --------------- | ------------ | ---------------------------- | - | ------------------------------------- |  | - | ----
|                                 |  | Shares    |   |  | Exercise Prices |              | WeightedAverageExercisePrice |   | Weighted AverageGrant Date Fair Value
|Outstanding and Exercisable      |  |           |   |  |                 |              |                              |   |                                       |  |   |     
|Outstanding at March 31, 2009    |  | 1,525,000 |   |  | $               | 0.03 - $0.15 |                              | $ | 0.06                                  |  |   |     
|Warrants granted                 |  | 8,750,000 |   |  | $               | 0.04 - $0.15 |                              | $ | 0.08                                  |  | $ | 0.05
|Warrants exercised               |  | (400,000  | ) |  | $               | 0.15         |                              | $ | 0.15                                  |  |   |     
|Warrants cancelled or expired    |  |          |   |  |                 |             |                              |   |                                      |  |   |    
|                                 |  |           |   |  |                 |              |                              |   |                                       |  |   |     
|Outstanding at December 31, 2009 |  | 9,875,000 |   |  | $               | 0.03 - $0.15 |                              | $ | 0.07                                  |  |   |     
|                                 |  |           |   |  |                 |              |                              |   |                                       |  |   |     
|Exercisable at December 31, 2009 |  | 9,875,000 |   |  | $               | 0.03 - $0.15 |                              | $ | 0.07                                  |  |   |     
|                                 |  |           |   |  |                 |              |                              |   |                                       |  |   |     



|                       |  |                      |  |                              |  |                      |      |                               |            |                   |           |                      |   |     
|---------------------- |  | -------------------- |  | ---------------------------- |  | -------------------- | ---- | ----------------------------- | ---------- | ----------------- | --------- | -------------------- | - | ----
|                       |  | Outstanding Warrants |  | Exercisable Warrants        
|Range ofExercise Price |  | NumberOutstanding    |  | WeightedAverageRemainingLife |  | WeightedAveragePrice |      | WeightedAverageRemaining Life |            | NumberExercisable |           | WeightedAveragePrice
|$ 0.03 - $0.15         |  | 9,875,000            |  | 5.93 Years                   |  | $                    | 0.07 |                               | 5.93 Years |                   | 9,875,000 |                      | $ | 0.07

The aggregate intrinsic value of
warrants outstanding at December 31, 2009, was $660,500, based on the Companys closing stock price of $0.13. Intrinsic value is the amount by which the fair value of the underlying stock exceeds the exercise price of the warrants.



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##### Table of Contents

AmStem Corporation

(a development stage enterprise)

Notes to
Consolidated Financial Statements(Continued)



7. Earnings per Share

Basic earnings per common share amounts are computed by dividing earnings, after the deduction of preferred stock dividends and undistributed earnings allocated to participating securities, by the average
number of common shares outstanding. Diluted earnings per share amounts assume the issuance of common stock for all potentially dilutive share equivalents outstanding. The basic and diluted weighted average number of shares was 64,452,888,
54,471,687, 47,134,258, 44,293,179 and 37,353,893 for the three and nine months ended December 31, 2009 and 2008 and the period from December 2, 2004 (Date of Inception) through December 31, 2009, respectively.

Common stock equivalents for the nine months ended December 31, 2009 was anti-dilutive due to the net losses sustained by the Company during that
period. Therefore, the diluted weighted average common shares outstanding for the dilutive weighted average share calculation in the nine month period ended December 31, 2009 excludes approximately 1,645,700 shares that could dilute earnings
per share in future periods, respectively.

8. Income Taxes

Deferred income tax assets and liabilities are recognized for the expected future tax consequences of events that have been reflected in the consolidated financial statements. Deferred tax assets and
liabilities are determined based on the differences between the book values and the tax bases of particular assets and liabilities and the tax effects of net operating loss and capital loss carry forwards. 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 the tax rate is
recognized as income or expense in the period that included the enactment date.

The Company has incurred operating losses since its inception
and, therefore, no tax liabilities have been incurred for the periods presented. The amount of unused tax losses available to carry forward and apply against taxable income in future years totaled approximately $3,750,000 at December 31, 2009.
The loss carry forwards expire beginning in 2025. Internal Revenue Code Sec. 382 places limitations on the utilization of net operating losses. Due to the limitation and the Companys historical losses, the Company has placed a full
valuation allowance against that asset of approximately $1,412,000.

9. Commitments and Contingencies

Consulting Agreements:

The Company has entered into several consulting agreements with other companies and individuals to provide consulting and advisory services to the Company. The agreements provide for terms ranging from one to three years. Additionally, the
consulting agreements required the issuance of 5,989,000 shares of the Companys common stock valued at $669,209 on the date of the agreement as the shares are non-forfeitable and non-cancelable. As of December 31, 2009, the Company has
issued these shares of common stock.

Employment Agreements:

In September 2007, the Company entered into employment agreements with the Chief Financial Officer and Chief Operating Officer. The Chief Financial Officer
and Chief Operating Officer each have employment agreements for a term of two years, with an annual base salary of $60,000. Additional performance-based bonuses are provided for, and the employees were granted options to purchase 900,000 shares of
Company stock. Benefits under the agreement are accelerated on a change of control, and the employee is subject to certain non-competition covenants. The Chief Operating Officers employment agreement was not renewed at December 2009.

In March 2008, the Company entered into an employment agreement with the Companys President. The employment agreement is for a term of
one year and provides for payments of $8,500 per month for the first 90 days, and subsequently, an annual base salary of $225,000. Additional performance-based bonuses are provided for, and the employee was granted options to purchase 750,000 shares
of the Companys common stock at $0.25 per share. Benefits under the agreement are accelerated on a change of control, and the



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AmStem Corporation

(a development stage enterprise)

Notes to
Consolidated Financial Statements(Continued)



employee is subject to certain non-competition covenants. Upon execution of the employment agreement, the Company issued 250,000 shares of the Companys common stock valued at $55,000.

In June 2009, the officers agreed to reduce their overall compensation by approximately $242,750 for the issuance of common stock and the
agreement to pay a cash portion upon the Company obtaining the necessary financing or cash flow from operations. The Board of Directors also agreed to make a one-time payment of $25,000 to each the President and the Chief Financial Officer for
services rendered in December 2009. It was also agreed that the President and Chief Financial Officer were each to be paid $10,000 per month beginning in October 2009 until new employment agreements are executed.

In November 2009, the Company entered into employment agreements with the Chief Executive Officer and Chief Financial Officer for a term of four years
beginning January 1, 2010, with an annual base salary of $225,000. Additional performance-based bonuses are provided for, and the employees will each be granted options to purchase 500,000 shares of the Companys common stock subsequent to
December 31, 2009. Benefits under the agreements are accelerated on a change of control and the employees are subject to certain non-compete covenants.

Contingencies:

On August 22, 2008, the Company entered into a Settlement and
Release Agreement (the Agreement) with Princeton Healthcare, Inc. Princeton Healthcare, Inc. and the Company agreed to release and discharge each other, their successors, assigns, directors, officers, employees, shareholders, former
directors and officers, from any and all claims, demands, causes of action, fees, costs, interest, attorneys fees and damages that each ever had against the other for a payment of $60,000 and the issuance of 500,000 shares of common stock. As
of September 30, 2009, the Company has paid $10,000 and issued 500,000 shares of common stock valued at $38,850. During the three months ended December 31, 2009, the Company and Princeton Healthcare, Inc. agreed to a full release of all
liabilities in exchange for the issuance of 1,000,000 shares of the Companys common stock.

On September 10, 2009, the Company
agreed to be a party to the settlement between Histostem, Inc., a Delaware Corporation (Histostem USA) and Histostem Corporation, a Korean Corporation (Histostem Korea). The agreement is contingent upon the close of the SPA
and that at the close of the merger, the Company will acquire no less than 90% of the total fully diluted equity of Histostem Korea.

For the
consideration provided by Histostem USA, including, but not limited to, a waiver of claims and a general release, Histostem Korea and the Company have agreed to the following considerations:



| | a. | $100,000 in cash, which will be divided into three equal payments over a two year period; and
| | -- | ---------------------------------------------------------------------------------------------



| | b. | Seven and one-half percent (7.50%) of the fully diluted total outstanding shares of the Companys common stock following the close of the merger between
Histostem Korea and the Company.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Subsequent to December 31, 2009, the Company closed the merger with Histostem Korea and
therefore is now obligated to issue a cashless warrant to purchase 13,903,943 shares of common stock at $0.001per share for five years.

10. Merger and Reorganization Agreement

The Company entered into a Reorganization and Stock Purchase Agreement with Histostem
Co., Ltd., a Korean company (Histostem) on March 10, 2008, as amended on September 23, 2009 (the SPA), pursuant to which we have agreed to acquire 90% of the issued and outstanding shares of Histostem in
consideration for the issuance of 60% of our issued and outstanding stock. The closing of the transaction was subject to a number of conditions, including, but not limited to, (i) increasing the size of the Board of Directors to seven members;
(ii) effectuating an increase in the Companys authorized shares of common stock from 100 million shares to 500 million shares and to change the Companys name to AmStem Corporation. The Company received a majority of the
shareholders consent for number i and ii); and (iii) the Company will also issue a total of 4,000,000 shares to certain parties that have assisted with the completion of the SPA. The Company has filed a Form 14C with the SEC as notice of
the name change and increase to the authorized number of shares. The Company closed the merger in the fourth quarter of fiscal year end March 31, 2010, with the Company issuing 102,597,040 shares of common stock to Histostem.



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##### Table of Contents

AmStem Corporation

(a development stage enterprise)

Notes to
Consolidated Financial Statements(Continued)



Since the Company entered into the Stock Purchase Agreement with Histostem our substantive business
operations have focused primarily on positioning the Company to leverage Histostems platform throughout the United States and the world and to obtain the necessary financing to complete the transaction. We have incorporated a wholly owned
subsidiary, AmStem International, Inc., a Nevada Corporation, to use for distribution of stem cell related products.

11. Related Party
Transactions

At March 31, 2009, the due to related party account of $231,121 is made up of advances from the majority stockholder to
assist the Company with its financial obligations. During the nine months ended December 31, 2009, the Company converted the total amount of $231,121 into a formalized debt agreement. The promissory note is non-interest bearing and is due the
earlier of the closing of any subsequent funding received by the Company with minimum gross proceeds of 3 million dollars or January 1, 2011. In the event the Company is unable to repay the note on or before the maturity date, the Company
will pay to the note holder 1.5% simple monthly interest on all amounts outstanding.

The Company contracted with Norco Accounting and
Consulting Inc. (Norco) to provide accounting and consulting services. The Company spent approximately $12,800 and $11,900 during the nine months ended December 31, 2009 and 2008, respectively. As of December 31, 2009, the
Company owes Norco $977. Norco is 50% owned by Andrew J. Norstrud, who joined the Company in September of 2007, as the Companys Chief Financial Officer. The Company continues to use Norco for accounting staffing needs under the contract signed
prior to Andrew J. Norstrud joining the Company.

The above amounts are not necessarily indicative of the amounts that would have been
incurred had a comparable transaction been entered into with independent parties.

12. Gain on Settlement of Liabilities

During the nine months ended December 31, 2009, the Company recorded a gain of $286,670 related to the settlement of several liabilities and accrued
expenses. The Company also renegotiated the legal expenses related to the attorney that is assisting with the completion of the merger documents, which resulted in a net gain of $42,966.

During the nine months ended December 31, 2009, the Company recorded a gain of $400,000 related to the return of 5,000,000 shares of common stock that were previously issued for services which were
never received.

13. Subsequent Events

Subsequent to December 31, 2009, a note holder converted Convertible Notes into 1,276,027 shares of common stock for $63,801 of convertible debt and related accrued interest.

Subsequent to December 31, 2009, the Company completed the closing of the Reorganization and Stock Purchase Agreement with Histostem Co., Ltd.



|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
|------- | ------------------------------------------------------------------------------------

THIS FILING CONTAINS FORWARD-LOOKING STATEMENTS. THE WORDS ANTICIPATED, BELIEVE, EXPECT, PLAN,
INTEND, SEEK, ESTIMATE, PROJECT, WILL, COULD, MAY, AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS INCLUDE, AMONG
OTHERS, INFORMATION REGARDING FUTURE OPERATIONS, FUTURE CAPITAL EXPENDITURES, AND FUTURE NET CASH FLOW. SUCH STATEMENTS REFLECT THE COMPANYS CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND FINANCIAL PERFORMANCE AND INVOLVE RISKS AND
UNCERTAINTIES, INCLUDING, WITHOUT LIMITATION, GENERAL ECONOMIC AND BUSINESS CONDITIONS, CHANGES IN FOREIGN, POLITICAL, SOCIAL, AND ECONOMIC CONDITIONS, REGULATORY INITIATIVES AND COMPLIANCE



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##### Table of Contents

WITH GOVERNMENTAL REGULATIONS, THE ABILITY TO ACHIEVE FURTHER MARKET PENETRATION AND ADDITIONAL CUSTOMERS, AND VARIOUS OTHER MATTERS, MANY OF WHICH ARE BEYOND THE COMPANYS CONTROL. SHOULD
ONE OR MORE OF THESE RISKS OR UNCERTAINTIES OCCUR, OR SHOULD UNDERLYING ASSUMPTIONS PROVE TO BE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY AND ADVERSELY FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED, OR OTHERWISE INDICATED. CONSEQUENTLY, ALL OF THE
FORWARD-LOOKING STATEMENTS MADE IN THIS FILING ARE QUALIFIED BY THESE CAUTIONARY STATEMENTS AND THERE CAN BE NO ASSURANCE OF THE ACTUAL RESULTS OR DEVELOPMENTS.

The following discussion and analysis of our financial condition and plan of operations should be read in conjunction with our financial statements and related notes appearing elsewhere herein. This
discussion and analysis contains forward-looking statements including information about possible or assumed results of our financial conditions, operations, plans, objectives and performance that involve risk, uncertainties and assumptions. The
actual results may differ materially from those anticipated in such forward-looking statements. The words expect, anticipate, estimate or similar expressions are also used to indicate forward-looking statements. The following discussions should be
read in conjunction with our financial statements and the notes thereto presented in Item 1  Financial Statements and our audited financial statements and the related Managements Discussion and Analysis of Financial Condition
and Results of Operations included in our report on Form 10-K for the year ended March 31, 2009.

General Overview

The Company was originally incorporated in Nevada on December 28, 1992 as Arklow Associates, Inc. On September 1, 2005, R
Capital, Stem Cell Florida, and the Company (then Altadyne, Inc.) entered into a Reorganization and Stock Purchase Agreement. At that point, the Company had no assets, liabilities or ongoing operations. Pursuant to the agreement, Altadyne acquired
100% of the issued and outstanding shares of common stock of Stem Cell Florida in a non-cash transaction and Stem Cell Florida became a wholly-owned subsidiary of Altadyne, and the shareholders of Stem Cell Florida became shareholders of the
Company. The Company assumed operation of the business of Stem Cell Florida, which was to establish stem cell therapy clinics and stem cell marketing. On October 5, 2005, the Company changed its name to Stem Cell Therapy International, Inc. to
reflect the new business of the Company. On November 2, 2009, the Company changed its name to AmStem Corporation in order to reflect the subsequent merged operations with Histostem Co., Ltd.

Merger with Histostem:

The
Company entered into a Reorganization and Stock Purchase Agreement with Histostem Co., Ltd., a Korean company (Histostem) on March 10, 2008, as amended on September 23, 2009 (the SPA), pursuant to which we have
agreed to acquire 90% of the issued and outstanding shares of Histostem in consideration for the issuance of 60% of our issued and outstanding stock. The closing of the transaction was subject to a number of conditions, including, but not limited
to, (i) increasing the size of the Board of Directors to seven members; (ii) effectuating an increase in the Companys authorized shares of common stock from 100 million shares to 500 million shares and to change the
Companys name to AmStem International Corp. (subsequent to September 30, 2009, the Company received a majority of the shareholders consent for number i and ii); and (iii) the Company will also issue a total of 4,000,000 shares
to certain parties that have assisted with the completion of the SPA. The Company has filed a Form 14C with the SEC as notice of the name change and increase to the authorized number of shares. The Company closed the merger in the fourth quarter of
fiscal year end March 31, 2010, with the Company issuing 102,597,040 shares of common stock to Histostem.

Since the Company entered into
the Stock Purchase Agreement with Histostem our substantive business operations have focused primarily on positioning the Company to leverage Histostems platform throughout the United States and the world and to obtain the necessary financing
to complete the transaction.

In April 2009, the Company formed AmStem International, Inc., a wholly owned subsidiary of the Company. AmStem
International, Inc. is a new biotechnology company which provides biotherapeutic and cosmetic stem cell products, stem cell collection and storage know-how, and access to nanotechnology vital to the cutting edge stem cell research. For the nine
months ended December 31, 2009, there was no activity in this Company.



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##### Table of Contents

Critical Accounting Policies

The accounting policies of the Company are in accordance with generally accepted accounting principles of the United States of America, and their basis of
application is consistent. Outlined below are those policies considered particularly significant:

The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Common stock transactions for services are recorded at either the fair value of the stock issued or the fair value of the services rendered, whichever is more evident on the day that the transactions are
executed. The certificates must be issued subsequent to the transaction date.

Research and development costs are charged to operations when
incurred and are included in operating expenses.

Results of Operations

As of December 31, 2009 and for the three months ended December 31, 2009 and 2008

We had no revenue during the three months ended December 31, 2009 or 2008. This is primarily due to the fact that management has been concentrating
most of its efforts on finalizing the Histostem transaction. The Company is in the process of negotiating new revenue contracts.

Legal
expenses decreased $21,134 to $42,745 for the three months ended December 31, 2009 as compared to $63,879 for the three month period ended December 31, 2008. The decrease in legal expense is primarily due to the initial legal fees paid in
2008 in relation to the merger. For the three months ended December 31, 2009, the Company had some minor litigation and merger costs, in addition to the legal fees in conjunction with the Securities and Exchange Commission filings.

Consulting expenses decreased $10,896 to $29,329 for the three months ended December 31, 2009 as compared to $40,225 for the three month period
ended December 31, 2008. The decrease in consulting expense is primarily due to the decrease in consulting agreements while the Company concentrated on completing the merger agreement.

Accounting expenses increased $9,770 to $16,153 for the three months ended December 31, 2009 as compared to $6,383 for the three month period ended
December 31, 2008. The increase in accounting expense is primarily due to the additional audit fees related to the review of the Form S-1 and an overall increase in accounting and audit fees during 2009.

Compensation expense decreased $26,250 to $60,000 for the three months ended December 31, 2009 as compared to $86,250 for the three month period ended
December 31, 2008. The decrease in compensation expense is due to the expiration of the employment agreements with the Chief Financial Officer and the Chief Operating Officer. The Companys Board of Directors agreed to pay both the
President and Chief Financial Officer $10,000 per month beginning in October 2009.

Stock based compensation increased to $25,704 for the
three months ended December 31, 2009 as compared to $8,777 for the three month period ended December 31, 2008. The increase in stock based compensation is due to grants of options to a Board member for services.

Settlement expenses increased to $111,000 for the three months ended December 31, 2009 as compared to ($90,000) for the three month period ended
December 31, 2008. Settlement expense is primarily the result of the settlement of the Princeton Healthcare lawsuit.

Selling, general
and administrative expenses increased $25,795 to $26,716 for the three months ended December 31, 2009 as compared to $921 for the three months ended December 31, 2008. The increase in selling, general and administrative expenses is due to
an increase in travel and entertainment expenses for additional trips to Korea in coordinating the completion of the merger and the additional costs to establish the Companys website.



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##### Table of Contents

Gain on settlement of liabilities increased $400,000 for the three months ended December 31, 2009 as
compared to $0 for the three months ended December 31, 2008. The increase in gain on settlement of liabilities is mainly due to the cancellation of 5,000,000 shares of common stock in connection with the nonperformance of a services agreement.

Interest expense, net, increased $183,075 to $183,428 for the three months ended December 31, 2009 as compared $353 for the three month
period ended December 31, 2008. The increase in interest expense is due to the increase in notes payable and the related amortization of the discount, beneficial conversion feature and the discount related to the value of the underlying
warrants issued in connection with the debt.

Our net loss for the three months ended December 31, 2009 was $95,075 as compared to
$116,788 during the same period in 2008. The loss primarily reflects the increase in settlement expense and interest expense, net of the gain on the settlement of liabilities.

As of December 31, 2009 and for the nine months ended December 31, 2009 and 2008

We had no revenue during the nine months ended December 31, 2009 or 2008. This is primarily due to the fact that management has been concentrating most of its efforts on finalizing the Histostem transaction. The Company is in the
process of negotiating new revenue contracts.

Legal expenses decreased $140,545 to $93,180 for the nine months ended December 31, 2009
as compared to $233,725 for the nine month period ended December 31, 2008. The decrease in legal expense is primarily due to the initial legal fees paid in 2008 in relation to the merger. For the nine months ended December 31, 2009, the
Company had some minor litigation and merger costs, in addition to the legal fees in conjunction with the Securities and Exchange Commission filings as well as the overall decrease in Company activity while concentrating on the completion of the
merger agreement.

Consulting expenses decreased $303,044 to $43,567 for the nine months ended December 31, 2009 as compared to $346,611
for the nine month period ended December 31, 2008. The decrease in consulting expense is primarily due to the decrease in consulting agreements while the Company concentrated on completing the merger agreement.

Accounting expenses increased $1,391 to $63,451 for the nine months ended December 31, 2009 as compared to $62,060 for the nine month period ended
December 31, 2008. The increase in accounting expense is primarily due to additional audit fees related to the review of the Form S-1 and an overall increase in accounting and audit fees during 2009.

Compensation expense decreased $56,631 to $218,824 for the nine months ended December 31, 2009 as compared to $275,455 for the nine month period ended
December 31, 2008. The decrease in compensation expense is due to the expiration of the employment agreements with the Chief Financial Officer and the Chief Operating Officer. In September 2009, the Company agreed to pay the Companys
President and Chief Financial Officer each $25,000. The Companys Board of Directors agreed to pay both the President and Chief Financial Officer $10,000 per month beginning in October 2009.

Stock based compensation increased to $120,224 for the nine months ended December 31, 2009 as compared to $26,331 for the nine month period ended
December 31, 2008. The increase in stock based compensation is due to grants of options for the Officers and Directors.

Settlement
expenses increased to $111,000 for the nine months ended December 31, 2009 as compared to $98,850 for the nine month period ended December 31, 2008. Settlement expense is primarily the result of the Company settling several lawsuits.

Selling, general and administrative expenses increased $16,288 to $33,287 for the nine months ended December 31, 2009 as compared to
$16,999 for the nine months ended December 31, 2008. The increase in selling, general and administrative expenses is due an increase in travel and entertainment expenses for additional trips to Korea in coordinating the completion of the merger
and the additional costs to establish the Companys website.

Gain on settlement of liabilities increased to $729,636 for the nine months
ended December 31, 2009 from $0 for the nine months ended December 31, 2008. The increase in gain on settlement of liabilities is mainly due to the cancellation of 5,000,000 shares of common stock in connection with the nonperformance of a
services agreement.



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##### Table of Contents

Interest expense, net, increased $550,783 to $552,328 for the nine months ended December 31, 2009 as
compared to $1,545 for the nine month period ended December 31, 2008. The increase in interest expense is due to the increase in notes payable and the related amortization of the discount.

Our net loss for the nine months ended December 31, 2009 was $506,225 as compared to $1,061,576 during the same period in 2008. The loss primarily
reflects the decrease in legal expenses, consulting expenses and compensation expenses, net of the gain on the settlement of some accrued expenses.

Liquidity and Capital Resources

The Companys financial statements have been
prepared assuming that the Company will continue as a going concern. For the nine months ended December 31, 2009 and the period since December 2, 2004 (date of inception) through December 31, 2009, the Company has had a net loss of
$506,225 and $4,534,883, respectively and cash used by operations of $384,527 and $1,043,388, respectively, and negative working capital of $116,644 at December 31, 2009.

As of December 31, 2009, the Company has not emerged from the development stage. In view of these matters, recoverability of recorded asset amounts shown in the accompanying financial statements is
dependent upon the Companys ability to begin significant operations and to achieve a level of profitability. Since inception, the Company has financed its activities principally from shareholder advances and some relatively minor sales of
equity securities (as set forth below). The Company intends on financing its future development activities and its working capital needs largely from the sale of equity securities, debt financing and loans from the Companys Chief Executive
Officer, until such time that funds provided by operations are sufficient to fund working capital requirements. There can be no assurance that the Company will be successful at achieving its financing goals at reasonably commercial terms, if at all.

During the nine months ended December 31, 2009, the Company issued 2,625,000 shares of common stock for the conversion of a $125,000
note payable and related accrued interest of $6,250.

During the nine months ended December 31, 2009, the Company received $400,000 and
agreed to repay to the lenders $500,000 (Convertible Notes) at the earlier of either six months or when the Company is able to obtain subsequent financing with minimum gross proceeds of $1,000,000. The interest rate is a simple 10% per annum.
At the holders choice the note can be converted into common shares at a rate of $0.04 per common share. The holder of the note can also convert the note, pursuant to the terms of the subsequent financing at a rate of 125% of the amount due at
the closing of subsequent financing.

The Convertible Notes contain an embedded conversion feature. The difference between the conversion
price and the Companys estimated fair market value of its stock price on the commitment date of the notes was calculated to be $193,064 for notes issued during the nine months ended December 31, 2009. The Company amortized the beneficial
conversion feature over the life of the convertible debt.

The Company also issued 6,000,000 warrants in connection with the Convertible
Notes. The warrants are exercisable at $0.04 per share, vest immediately and expire in August and September 2014. The Company valued the warrants at their relative fair value of $184,384 and recorded a discount on the Convertible Notes. The discount
is amortized as interest expense over the term of the Convertible Notes. During the three and nine months ended December 31, 2009, the Company recognized interest expense of $150,730 and $358,048 from the amortization of the discount and the
beneficial conversion feature.

During the nine months ended December 31, 2009, the note holders converted the Convertible Notes into
12,702,460 shares of common stock for $635,123 of convertible debt and related accrued interest.

Effective June 27, 2007, the Company
entered into an agreement with Newbridge Securities, Corp. (Newbridge) to assist the Company on a best efforts basis in raising approximately $250,000 in a private offering of up to 2 million shares of restricted common
stock at a price of $0.125 per share. As of December 31, 2009, the Company has received $206,024 of proceeds, which represents $250,000 gross proceeds less $43,976 of offering costs.

On November 2, 2009, the Company entered into a Preferred Stock Purchase Agreement (the Agreement) with Socius Capital Group, LLC, a
Delaware limited liability company (the Investor). Pursuant to the terms of the Agreement, the Company has the right, over a term of two years, subject to certain conditions, to demand through one or more tranche notices that the
Investor purchase up to a total $5 million of the Companys Series A Preferred



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Stock (Preferred Stock) at $10,000 per share. The Preferred Stock pays a dividend of 10% per annum, payable in additional shares of Preferred Stock, and is redeemable at the
Companys option at any time after the one year anniversary of initial issuance.

At closing, the Company issued the Investor a warrant
to purchase up to approximately 42 million shares of the Companys common stock at an exercise price of $0.159 per share. The warrant vests with each tranche closing, with respect to an amount of shares equal to 135% of the dollar amount
of the tranche in question, and the exercise price with respect to the shares vested adjusts to the closing price the trading day before the tranche notice date. The Company cannot draw on the facility until a registration statement covering the
resale of the warrant shares is effective and certain other conditions are satisfied.

In addition, the Company paid the Investor $20,000 at
closing to cover the Investors legal fees and will pay a commitment fee in the amount of $250,000, in cash or shares of the Companys common stock, at the closing of the first tranche. As of the date of this filing, the Company has not
closed on the first tranche of funding.

Unpredictability of future revenues; Potential fluctuations in quarterly operating results;
Seasonality:

As a result of our limited operating history and the emerging nature of the biotechnological markets in which we compete, we
are unable to accurately forecast future revenues. Our current and future expense levels are based largely on our investment plans and future revenues and are to a large extent fixed and expected to increase.

Sales and operating results generally depend on the volume of, timing of and ability to fulfill the number of orders received for the biological solution
and the number of patients treated which are difficult to forecast. We may be unable to adjust spending in a timely manner to compensate for any unexpected revenue shortfall. Accordingly, any significant shortfall in revenues in relation to our
planned expenditures would have an immediate adverse effect on our business, prospects, financial condition and results of operations. Further, as a strategic response to changes in the competitive environment, we may from time to time make certain
pricing, service or marketing decisions which could have a material adverse effect on our business, prospects, financial condition and results of operations.

We expect to experience significant fluctuations in our future quarterly operating results due to a variety of factors, many of which are outside our control.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources that is material to investors.



|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------

Not applicable.



|ITEM 4T. | CONTROLS AND PROCEDURES
|-------- | -----------------------

The
Companys Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Companys disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the
period covered by this Quarterly Report on Form 10- Q. Based upon such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Companys disclosure controls and procedures were
not effective.

Changes in Internal Control Over Financial Reporting

No change in the Companys internal control over financial reporting occurred during the three months ended December 31, 2009, that materially
affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.



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PART II  OTHER INFORMATION



|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------

See disclosure of
legal proceeds in the Companys March 31, 2009 Form 10K as filed with the Securities and Exchange Commission on July 10, 2009.



|ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|------- | -----------------------------------------------------------

During the three months ended December 31, 2009, the Company issued 3,764,960 shares of common stock in conversion of $188,248 of notes payable and accrued expenses. These shares were issued without
any public offering in accordance with Section 4(2) of the Securities Act of 1933, as amended.

During the three months ended
December 31, 2009, the Company issued 150,000 shares of common stock for services valued at $14,250. These shares were issued without any public offering in accordance with Section 4(2) of the Securities Act of 1933, as amended.

During the three months ended December 31, 2009, the Company issued 1,000,000 shares of common stock to a Company in settlement of a
lawsuit valued at $161,000. These shares were issued without any public offering in accordance with Section 4(2) of the Securities Act of 1933, as amended.



|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES
|------- | -------------------------------

None.



|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- | ---------------------------------------------------

None.



|ITEM 5. | OTHER INFORMATION
|------- | -----------------

None.



|ITEM 6. | EXHIBITS AND REPORTS ON FORM 8-K
|------- | --------------------------------

Exhibit Index. The following exhibits are filed with or incorporated by reference into this quarterly report:



|      |  |                                                                                                                                                                                                                          
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3(i)  |  | Amendment to the Articles of Incorporation incorporated herein by reference to the Current Report on Form 8-K filed on November 3, 2009                                                                                  
|      | 
|10.1  |  | Restated Reorganization and Stock Purchase Agreement between Stem Cell Therapy International, Inc., and Histostem Co., Ltd., incorporated herein by reference to the Current Report
on Form 8-K filed September 25, 2009.
|      | 
|10.40 |  | Employee Agreement between Stem Cell Therapy International, Inc. and David Stark incorporated herein by reference to Form 10-Q filed on November 16, 2009                                                                
|      | 
|10.41 |  | Employee Agreement between Stem Cell Therapy International, Inc. and Andrew J. Norstrud incorporated herein by reference to Form 10-Q filed on November 16, 2009                                                         
|      | 
|31.1  |  | Chief Executive Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                         
|      | 
|31.2  |  | Chief Financial Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                         
|      | 
|32.1  |  | Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.)                                                                                                                                        
|      | 
|32.2  |  | Certification of the Chief Financial Officer (Pursuant to 18 U.S.C. Section 1350.)                                                                                                                                       
|      | 
|99.1  |  | Preferred Stock Purchase Agreement, dated November 2, 2009, incorporated herein by reference to the Current Report on Form 8-K filed on November 3, 2009                                                                 
|      | 
|99.2  |  | Warrant to Purchase Common Stock, dated November 2, 2009, incorporated herein by reference to the Current Report on Form 8-K filed on November 3, 2009                                                                   



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SIGNATURES

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

Date: February 16, 2010



|       |  |                                                                          
|------ |  | -------------------------------------------------------------------------
|       | 
|By:    |  | /S/    DAVID
STARK                                                       
|Name:  |  | David Stark                                                              
|Title: |  | Chairman of the Board of Directors, President and Chief Executive Officer

Date: February 16, 2010



|       |  |                                                                                      
|------ |  | -------------------------------------------------------------------------------------
|       | 
|By:    |  | /S/    ANDREW J.
NORSTRUD                                                            
|Name:  |  | Andrew J. Norstrud                                                                   
|Title: |  | Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer



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