NEOSTEM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

		Three Months Ended March 31,
		2012				2011
Revenues		$	22,056,768			$	19,590,958
Cost of revenues			16,321,520				14,276,501
Gross profit			5,735,248				5,314,457
Research and development			2,714,507				2,755,192
Selling, general, and administrative			9,452,200				9,634,895
Operating Expenses			12,166,707				12,390,087
Operating loss			(6,431,459	)			(7,075,630	)
Other income (expense):
Other income (expense), net			166,703				(250,437	)
Interest expense			(1,096,133	)			(852,243	)
			(929,430	)			(1,102,680	)
Loss from continuing operations before provision for
income taxes and noncontrolling interests			(7,360,889	)			(8,178,310	)
Provision for income taxes			122,261				592,648
Net loss from continuing operations			(7,483,150	)			(8,770,958	)
Loss from discontinued operations - net			(1,723,718	)			(928,800	)
Net loss			(9,206,868	)			(9,699,758	)
Less - net income attributable to noncontrolling interests			141,265				473,233
Net loss attributable to NeoStem, Inc.			(9,348,133	)			(10,172,991	)
Preferred dividends			107,844				186,633
Net loss attributable to NeoStem, Inc. common shareholders		$	(9,455,977	)		$	(10,359,624	)
Basic and diluted (loss) per share attributable to:
Continuing operations		$	(0.07	)		$	(0.12	)
Discontinued operations		$	(0.02	)		$	(0.01	)
NeoStem, Inc. common shareholders		$	(0.08	)		$	(0.14	)
Weighted average common shares outstanding			111,806,949				73,654,165

 

April 2012 Investor Presentation

NeoStem, Inc. (“NeoStem” or the “Company”) intends, from time to time, to utilize at various industry and other conferences a slide presentation.

On September 28, 2011, NeoStem, Inc., a Delaware corporation (“NeoStem” or the “Company”) gave notice to Commerce Court Small Cap Value Fund, Ltd. (“Commerce Court”) of termination of the Common Stock Purchase Agreement dated as of May 19, 2010 between the Company and Commerce Court (as described below in Item 1.02 of this Current Report on Form 8-K). Also on September 28, 2011, the Company entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with Aspire Capital Fund, LLC, an Illinois limited liability company (“Aspire Capital”), which provides that, upon the terms and subject to the conditions and limitations set forth therein, Aspire Capital is committed to purchase up to an aggregate of $20.0 million of shares of common stock, par value $0.001 per share, of NeoStem (the “Purchase Shares”) over the term of the Purchase Agreement.

NeoStem, Inc. (“NeoStem” or the “Company”) intends, from time to time, to utilize at various industry and other conferences a slide presentation.

NeoStem, Inc. (“NeoStem” or the “Company”) intends, from time to time, to utilize at various industry and other conferences a slide presentation.

On July 19, 2011, NeoStem, Inc. (the “Company”) entered into an Underwriting Agreement (the “Underwriting Agreement”) with Lazard Capital Markets LLC (“Lazard”) and JMP Securities LLC (“JMP”), as representatives of the underwriters named in the Underwriting Agreement (the “Underwriters”), relating to a public offering (the “Offering”) by the Company of 13,750,000 units (the “Units”), underwritten on a firm commitment basis, with each Unit consisting of one share of the Company’s common stock, par value $0.001 per share (“Common Stock”), and a warrant (each, a “Warrant”) to purchase 0.75 of a share of Common Stock. The public offering price for each Unit is $1.20 ($1.11 per Unit, net of underwriting discount). Each Warrant will have an exercise price of $1.45 per share, will be exercisable immediately upon issuance and will expire five years from the date of issuance. Units will not be issued or certificated. The shares of Common Stock and the Warrants are immediately separable and will be issued separately, but will be purchased together in the Offering.

On July 13, 2011, NeoStem, Inc., a Delaware corporation (“NeoStem” or the “Company”) and Amorcyte, Inc., a Delaware corporation (“Amorcyte”), entered into an Agreement and Plan of Merger (as such agreement may be amended from time to time, the “Amorcyte Merger Agreement”), among NeoStem, Amorcyte, Amo Acquisition Company I, Inc., a Delaware corporation (“Subco”), and Amo Acquisition Company II, LLC, a Delaware limited liability company (“Subco II”).

NeoStem intends, from time to time, to utilize at various industry and other conferences a slide presentation.

In order to fund the development of advanced cell therapies in the U.S. and China, management believes that we will need to raise additional capital. We will also require additional cash in connection with the expansion of the PCT business. We currently expect to fund our operating activities through the use of existing cash balances, the use of our current or other equity lines or through capital raising transactions, potential additional warrant and option exercises, the 6% of net profits to which we are entitled from Erye, and, ultimately, the growth of our revenue generating activities.

NEOSTEM, INC. AND SUBSIDIARIES
  
Consolidated Statements of Operations

 

With our acquisition of a controlling interest in Erye and expansion into China, we have transitioned from being a one-dimensional U.S. service provider with nominal revenues to being a multi-dimensional international biopharmaceutical company with current revenues and operations in three distinct segments: (i) Cell Therapy — United States; (ii) Regenerative Medicine — China; and (iii) Pharmaceutical Manufacturing — China.

Erye is constructing a new pharmaceutical manufacturing facility and began transferring its operations in January 2010. The relocation is continuing as the new production lines are completed and receive cGMP. certification through 2011. In January 2010, Eyre received notification that the SFDA approved Erye’s application for cGMP certification to manufacture solvent crystallization sterile penicillin and freeze dried raw sterile penicillin at the new facility, which provides for 50% to 100% greater manufacturing capacity, than its existing facility. Historically these lines accounted for 20% of Erye’s sales. In June 2010, Erye passed the government inspection by the SFDA to manufacture penicillin and cephalosporin powder at the new facility. The facility is fully operational with respect to these lines. Erye has now relocated 90% of its 2010 sales capacity to the new facility. The new facility is estimated to cost approximately $38 million, of which approximately $34 million has been incurred through December 31, 2010. Construction has been and will continue to be self-funded by Erye and EET, the holder of the minority joint venture interest in Erye. We have agreed for a period of another two years to reinvest in Erye approximately 90% of the net earnings we would be entitled to receive under the Joint Venture Agreement by reason of our 51% interest in Erye.

We are also engaged in other initiatives to expand our operations into China including with respect to technology licensing, establishment of stem cell processing and storage capabilities and research and clinical development. In June 2009 we established NeoStem (China) as our wholly foreign-owned subsidiary or WFOE. To comply with PRC’s foreign investment regulations regarding stem cell research and development, clinical trials and related activities, we conduct our current stem cell business in the PRC through two domestic variable interest entities (“VIEs”). We have incurred and expect to continue to incur substantial expenses in connection with our China activities.

NeoStem, Inc. intends, from time to time, to present and/or distribute to the investment community and utilize at various industry and other conferences a slide presentation.

In early 2010, Erye began relocating its operations to its new state-of-the-art manufacturing facility.  While the facility is not yet operating at peak efficiency, it has already begun to see increased production from the two cGMP approved lines for the manufacturing of penicillin and cephalosporin powder for injection that have historically accounted for over 70% of Erye's revenues. At its peak, the new facility is expected to provide an increase in production capacity of more than 50% over the old facility.

Additionally, the Company has begun to generate revenues from its pipeline of licensed stem cell-based regenerative medicine therapies; a key element of NeoStem's growth strategy in both the United States and China. Recently, the local authority in charge of pricing for public medical services in China approved pricing and eligibility for patients to receive reimbursement for up to 80% of the cost of an orthopedic procedure under the new technology category being administered at a leading specialist orthopedic hospital in China.  This approval is a significant milestone that the Company believes will fuel its revenues from such activities and facilitate the execution of similar arrangements with other specialist hospitals in China in the near future.  see release

On November 16, 2010, NeoStem, Inc. entered into an Underwriting Agreement with Cowen and Company, LLC, relating to a public offering of 6,337,980 units with each Underwritten Unit consisting of one share of the Company’s common stock and a warrant to purchase 0.50 of a share of Common Stock.