Caladrus Biosciences
Annual Report 2008

Plain-text annual report

Morningstar® Document Research℠ FORM 10-KCaladrius Biosciences, Inc. - CLBSFiled: March 31, 2009 (period: December 31, 2008)Annual report with a comprehensive overview of the companyThe information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The userassumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot belimited or excluded by applicable law. Past financial performance is no guarantee of future results.UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-K(Mark One) xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2008ORoTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________Commission file number: 0-10909NEOSTEM, INC.(Exact name of registrant as specified in its charter)Delaware(State or other jurisdiction ofincorporation or organization)22-2343568(I.R.S. Employer Identification No.) 420 Lexington AvenueSuite 450New York, New York10170(Address of principal executive offices)(Zip Code) Registrant’s telephone number, including area code:(212) 584-4180 Securities Registered Pursuant to Section 12(b) of the Act: Title of Each ClassName of Each ExchangeOn Which RegisteredCommon Stock, $0.001 par value NYSE AmexClass A Common Stock Purchase WarrantsNYSE AmexSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes x NoIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. o Yes x NoIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe 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 requirementsfor the past 90 days. x Yes o NoIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this Chapter) is not contained herein, and willnot be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K orany amendment to this Form 10-K. oIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. Seedefinition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):Large accelerated filer oAccelerated filer o Non-accelerated filer oSmaller reporting company xSource: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x NoThe aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2008 (the last business day of themost recently completed second fiscal quarter) was approximately $5,382,672, computed by reference to the closing sales price of $0.99 for the commonstock on the American Stock Exchange reported for such date. (For purposes of determining this amount, only directors, executive officers, and 10% orgreater stockholders have been deemed affiliates). On March 27, 2009, 7,749,358 shares of the registrant's common stock, par value $0.001 per share, were outstanding. Documents incorporated by reference: Portions of the registrant’s definitive Proxy Statement for the 2009 Annual Meeting of Stockholders, to be filed with theCommission not later than 120 days after the close of the registrant’s fiscal year, have been incorporated by reference, in whole or in part, into Part III,Items 10, 11, 12, 13 and 14 of this Annual Report on Form 10-K. TABLE OF CONTENTSPART I ITEM 1. BUSINESS 4ITEM 1A. RISK FACTORS 32ITEM 1B. UNRESOLVED STAFF COMMENTS 58ITEM 2. PROPERTIES 58ITEM 3. LEGAL PROCEEDINGS 59ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 60PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASESOF EQUITY SECURITIES 61ITEM 6. SELECTED FINANCIAL DATA 63ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION 64ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 77ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 78ITEM 9A. CONTROLS AND PROCEDURES 78ITEM 9B. OTHER INFORMATION 79PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 80ITEM 11. EXECUTIVE COMPENSATION 80ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATEDSTOCKHOLDER MATTERS 80ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 80ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES 80PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 81 2Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CAUTION REGARDING FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K of NeoStem, Inc. (the “Company”) contains "forward-looking statements" within the meaning of the Private SecuritiesLitigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause theactual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance orachievements expressed or implied by such forward-looking statements. When used in this Annual Report, statements that are not statements of current orhistorical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words "plan," "intend," "may," "will," "expect,""believe," "could," "anticipate," "estimate," or "continue" or similar expressions or other variations or comparable terminology are intended to identify suchforward-looking statements. Additionally, statements concerning our ability to successfully develop the adult stem cell business at home and abroad, the futureof regenerative medicine and the role of adult stem cells in that future, the future use of adult stem cells as a treatment option and the role of VSELs in thatfuture, and the potential revenue growth of such business are forward-looking statements. Our future operating results are dependent upon many factors, andthe Company's further development is highly dependent on future medical and research developments and market acceptance, which is outside itscontrol. Forward-looking statements may not be realized due to a variety of factors, including, without limitation, (i) the Company’s ability to manage thebusiness despite continuing operating losses and cash outflows; (ii) the Company’s ability to obtain sufficient capital or a strategic business arrangement tofund its operations and expansion plans, including meeting its financial obligations under the various licensing and other strategic arrangements described inthis Annual Report and the successful commercialization of the relevant technology; (iii) the Company’s ability to build the management and human resourcesand infrastructure necessary to support the growth of the business; (iv) competitive factors and developments beyond the Company’s control; (v) scientificand medical developments beyond the Company’s control; (vi) the Company’s inability to obtain appropriate governmental licenses or any other adverse effector limitations caused by government regulation of the business; (vii) whether any of the Company’s current or future patent applications result in issuedpatents and the Company’s ability to obtain and maintain other rights to technology required or desirable for the conduct of its business; (viii) whether anypotential strategic benefits of the licensing transactions described in this Annual Report will be realized and whether any potential benefits from the acquisitionof these new licensed technologies will be realized; (ix) whether the Company can obtain the consents it may require to sublicensing arrangements fromtechnology licensors in connection with technology development; (x) the Company’s ability to maintain its NYSE Amex listing; and (xi) the other factorsdiscussed in Item 1A, “Risk Factors” contained herein and in other reports that we file with the SEC. Additional risks and uncertainties relate to (i) theCompany’s proposed merger transaction (“Merger”) pursuant to an Agreement and Plan of Merger with China Biopharmaceuticals Holdings, Inc., a Delawarecorporation ("CBH"), China Biopharmaceuticals Corp., a British Virgin Islands corporation and wholly-owned subsidiary of CBH, and CBH AcquisitionLLC, a Delaware limited liability company and wholly-owned subsidiary of NeoStem to acquire a 51% ownership interest in Suzhou Erye PharmaceuticalsCompany Ltd., a Sino-foreign joint venture with limited liability organized under the laws of the People’s Republic of China and (ii) proposed share exchangetransaction (“Share Exchange”) pursuant to a Share Exchange Agreement to acquire through a series of contractual arrangements certain benefits fromShandong New Medicine Research Institute of Integrated Traditional and Western Medicine Limited Liability Company, a China limited liabilitycompany. Such risks and uncertainties include, but are not limited to, the other events and factors disclosed in the Company’s Current Reports on Form 8-Kdated November 2, 2008 relating to each such transaction, and other risk factors discussed in Item 1A, “Risk Factors” contained herein and in other periodicCompany filings with the SEC and to be disclosed in the Proxy Statement/Registration Statement on Form S-4 anticipated to be filed in connection with theMerger and the Share Exchange. The Company’s filings with the Securities and Exchange Commission are available for review at www.sec.gov under “Searchfor Company Filings.” Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Exceptas required by law, the Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events orotherwise. 3Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. PART I ITEM 1. BUSINESS BUSINESS OVERVIEWNeoStem, Inc. (“we,” “NeoStem” or “the Company”) is engaged in a platform business of operating a commercial autologous (donor and recipientare the same) adult stem cell bank and is pioneering the pre-disease collection, processing and long-term storage of stem cells from adult donors that they canaccess for their own future medical treatment. We are managing a network of adult stem cell collection centers in major metropolitan areas of the United States,and believe that as adult stem cell therapies obtain necessary regulatory approvals and become standard of care, individuals will need the infrastructure,methods and procedures being developed by NeoStem to have their stem cells safely collected and conveniently stored for future therapeutic use. Stem cells,which are very primitive and undifferentiated cells that have the unique ability to transform into many different cells (such as white blood cells, nerve cells orheart muscle cells), can be found in the bone marrow or peripheral blood of adults. NeoStem only works with adult (not embryonic) stem cells. UsingNeoStem’s process, stem cells migrate, as a result of a mobilizing agent administered in the days preceding collection, from the bone marrow in which theyreside to the peripheral blood and are collected through a safe, minimally invasive procedure called “apheresis.” We have also entered the research anddevelopment arena, through the acquisition of a worldwide exclusive license to an early-stage technology to identify and isolate rare stem cells from adulthuman bone marrow, called VSEL (very small embryonic-like) stem cells. VSELs have many physical characteristics typically found in embryonic stemcells, including the ability to differentiate into specialized cells found in substantially all the different types of cells and tissue that make up the body.The adult stem cell industry is a field independent of embryonic stem cell research. NeoStem believes embryonic stem cell research is more likely tobe burdened by governmental, legal, ethical and technical issues than adult stem cell research. Medical researchers, scientists, medical institutions,physicians, pharmaceutical companies and biotechnology companies are currently developing therapies for the treatment of disease using adult stem cells. Asthese adult stem cell therapies obtain necessary regulatory approvals and become standard of care, patients will need a service to collect, process and store theirstem cells. NeoStem intends to provide this service.On January 19, 2006, NeoStem consummated the acquisition of the assets of NS California, Inc., a California corporation (“NS California”)relating to NS California’s business of collecting and storing adult stem cells. Effective with the acquisition, the business of NS California became NeoStem'sprincipal business, rather than NeoStem's historic business of providing capital and business guidance to companies in the healthcare and life scienceindustries. NeoStem now provides adult stem cell processing, collection and banking services with the goal of making stem cell collection and storage widelyavailable, so that the general population will have the opportunity to store their own stem cells for future healthcare needs. Using NeoStem's proprietaryprocess, NeoStem provides the infrastructure, methods and systems that allow adults to have their stem cells safely collected and conveniently banked forfuture therapeutic use as needed in the treatment of such life-threatening diseases as diabetes, heart disease and radiation sickness that may result from abioterrorist attack or nuclear accident. According to the National Institutes of Health, there are over 2,300 clinical trials currently underway relating to the useof adult stem cells, over 700 relating to autologous use, in the treatment of numerous serious diseases and conditions, including those that address cardiacdisease, autoimmune disorders such as lupus, multiple sclerosis, peripheral vascular diseases, and age related musculoskeletal disorders, as well as diabetes,cancer, neurological disease and wound healing. 4Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Initial participants in our collection center network have been single physician practices who opened collection centers in California, Pennsylvaniaand Nevada. Revenues generated by these early adopters have not been significant and are not expected to become significant. However, these centers haveserved as a platform for the development of NeoStem’s business model and today NeoStem is focusing on multi-physician and multi-specialty practicesjoining its network in major metropolitan areas. Toward this end, NeoStem signed an agreement in June 2008 for a New York City stem cell collection center tobe opened by Bruce Yaffe, M.D., Yaffe, Ruden and Associates, which facility became operational in November 2008. In July 2008, NeoStem signed anagreement for a Santa Monica, California based stem cell collection center to be opened by Stem Collect of Santa Monica LLC at The Hall Center. This facilitybecame operational in the fall of 2008. Additionally, NeoStem signed an agreement with Celvida LLC pursuant to which a Southern Florida stem cellcollection center located in Coral Gables, a suburb of Miami, became operational in September 2008. In March 2009, NeoStem signed an agreement withVincent C. Giampapa, M.D., F.A.C.S., to open a center at the Giampapa Institute for Anti-Aging Medical Therapy in Montclair, New Jersey. NeoStem also entered the research and development arena through its acquisition from the University of Louisville of the worldwide exclusive licenseto the VSEL technology. VSELs have many physical characteristics typically found in embryonic stem cells, including the ability to differentiate intospecialized cells found in different types of tissue that would be able to interact with the specific organ in order to repair degenerated, damaged or diseasedtissue (the three “Ds” of aging). NeoStem has the ability to harvest and cryopreserve these VSELs from individual patients, setting the stage for their use inpersonalized regenerative medicine. If VSELs can be expanded from individual patients and their potential to develop into different types of tissue cellsmaintained, it would represent a significant step toward overcoming the two major limitations in the development of stem cell therapies today, the ethicaldilemma regarding use of embryonic stem cells and the immunological problems associated with using cells from a third party donor. In connection with thelicense agreement, NeoStem also entered into a sponsored research agreement with the University of Louisville pursuant to which NeoStem is funding researchrelating to its VSEL technology at the laboratory of its co-inventor, Mariusz Ratajczak, M.D., Ph.D., head of the Stem Cell Biology Program at the JamesGraham Brown Cancer Center at the University of Louisville. The acquisition of the VSEL technology was made through NeoStem's acquisition of its newsubsidiary Stem Cell Technologies, Inc. (“SCTI”) in a stock-for-stock exchange.Although certain early obligations under the Company’s agreements relating to the VSEL technology were paid for with funds supplied by the sellerto SCTI prior to the acquisition, substantial additional funds will be needed and additional research and development capacity will be required to meet theCompany’s development obligations under the license agreement and develop the VSEL technology. The Company has applied to the U.S. Small BusinessAdministration for Small Business Innovation Research (“SBIR”) grants and may also seek to obtain funds through applications for other State and Federalgrants, grants abroad, direct investments, strategic arrangements as well as other funding sources to help offset all or a portion of these costs. A portion of theproceeds from the RimAsia Notes (described below) are being used to meet funding requirements of developing the VSEL technology. The Company isseeking to develop increased internal research capability and sufficient laboratory facilities or establish relationships to provide such research capability andfacilities. Toward this end, we have hired a Director of Stem Cell Research and Laboratory Operations and arranged for research facilities at the facility of astrategic partner. In addition to the research we are currently funding at the University of Louisville, we are also in discussions relating to other research togenerate data relating to other clinical applications of VSELs, including neural, cardiac and ophthalmic, to expand our research efforts and maximize the valueof this technology. In May 2008, we entered into a collection center agreement with the James Graham Brown Cancer Center at the University of Louisville, furtherexpanding our corporate and academic relationship. This unique collection center will allow the collection of large numbers of cells from adults donating themfor basic research as well as clients paying to have their cells stored for their own future medical need. We believe this is a unique opportunity given the interestof adult stem cell translational scientists and clinicians at the University in exploring the therapeutic potential of VSELs and other adult stem cells of the body.By enabling investigators to have access to large numbers of adult stem cells from interested and informed study subjects, we believe that translational adultstem cell research will move forward at an accelerated pace and that clinical trial designs will be more rapidly implemented to investigate new researchfindings. This collection center is anticipated to open in 2009 pending receipt of applicable institutional approvals. 5Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.NeoStem currently generates revenue and earnings from its platform business as follows: (1) fees from the collection centers in NeoStem's network,(2) client collection fees, (3) processing center collection fees and (4) storage fees, which represent recurring revenue paid each year or month. NeoStem hasalso established a relationship with CareCredit, a GE Financial Services Company and the nation’s leading patient financing program to assist its patientswho wish to pay for its services over time—which we believe opens up a broader client base to us. NeoStem is planning to educate individuals that have afamily history or early diagnosis of diseases being treated with stem cell therapy as well as those who have banked their infant’s stem cells that can afford this“bioinsurance.” Additionally, NeoStem is working on establishing collaborations with high profile medical centers and academic institutions involved incutting edge research and clinical trials relating to stem cells. NeoStem believes that there is a significant need for cell storage services for first responders andhomeland security personnel. In October 2008, we were advised that we would receive federal funding from the Department of Defense to evaluate the potentialuse of adult stem cell therapy for wound healing. It is anticipated that this research and the related funding will begin in 2009. The funds must be distributedto NeoStem prior to October 2010 and the budget we can submit for the project must not exceed $681,000. NeoStem's other go-to market strategies includecollaboration with cord blood companies, tissue banks, pharmaceutical companies, concierge medical programs, executive health plans, regenerative medicinespecialists and first responder groups. In April 2007, NeoStem participated in the founding of The Stem for Life Foundation (the “Foundation”). Themission of the Foundation is to heighten public awareness and knowledge of the benefits and promise of adult stem cells in treating serious medicalconditions. The Foundation is currently seeking a new executive director.We have engaged in various capital raising activities to pursue these business opportunities. In 2007, we raised $2,500,000 in gross proceeds throughthe private sale of our common stock, warrants and convertible promissory notes and in August 2007, we completed a public offering of units consisting ofshares of common stock and warrants to purchase common stock, which raised gross proceeds of $6,350,000. In 2008, we raised $2,900,000 in grossproceeds through the private placement of units consisting of shares of common stock and warrants to purchase common stock. Such capital raisingactivities have enabled us to pursue our business plan and begin to grow our adult stem cell collection and storage business, as well as to pursue acquisitionopportunities including the Merger and the Share Exchange (discussed below). However, fully developing our business, particularly defining the optimalmarketing and distribution model and identifying and structuring suitable acquisitions, has taken longer than anticipated. In order to fully develop ourbusiness, we will require additional capital. In order to move forward certain research and development activities, strategic relationships in various clinicaland therapeutic areas as well as to support activities related to the Merger Agreement and Share Exchange Agreement, and other ongoing obligations of theCompany, in March and February 2009, the Company issued promissory notes (the “RimAsia Notes”) totaling $1,150,000 to RimAsia Capital Partners, L.P.(“RimAsia”), a principal stockholder of the Company. The RimAsia Notes bear interest at a rate equal to 10% per annum and mature on October 31, 2009except that they mature earlier in the case of an equity financing by the Company that raises in excess of $10,000,000.In 2008, NeoStem had been actively exploring acquisition opportunities of revenue generating businesses, both domestically and abroad, includingbusinesses that are synergistic with its current business or additive to its current business. In November 2008, we entered into two acquisition agreements,both of which are currently anticipated to close in the second quarter of 2009 subject to receipt of all necessary consents and approvals. On November 2,2008, the Company entered into an Agreement and Plan of Merger with China Biopharmaceutical Holdings, Inc., a Delaware corporation (“CBH”), ChinaBiopharmaceuticals Corp., a British Virgin Islands corporation and wholly-owned subsidiary of CBH ("CBC"), and CBH Acquisition LLC (“MergerSub”), a Delaware limited liability company and a wholly-owned subsidiary of the Company, pursuant to which CBH, which owns 51% of the equity ofSuzhou Erye Pharmaceuticals Company Ltd (“Erye”), will be merged with and into Merger Sub with Merger Sub continuing as the surviving company andas a direct wholly-owned subsidiary of the Company (the “Merger”); provided, that CBH will spin off all of its shares of capital stock of CBC to CBH’sstockholders in a distribution so that the only material assets of CBH following such spin-off (the "Spin-off") will be CBH's 51% ownership interest in Erye,a Sino-foreign joint venture with limited liability organized under the laws of the People’s Republic of China (the "PRC"), plus net cash which shall not be lessthan $550,000. Erye specializes in research and development, production and sales of pharmaceutical products, as well as chemicals used in pharmaceuticalproducts. Erye, which has been in business for more than 50 years, currently manufactures over 100 drugs on seven Good Manufacturing Practices (GMP)lines, including small molecule drugs. On November 2, 2008, the Company also entered into a Share Exchange Agreement (the “Share Exchange Agreement”),with China StemCell Medical Holding Limited, a Hong Kong company (the “HK Entity”), Shandong New Medicine Research Institute of IntegratedTraditional and Western Medicine Limited Liability Company, a China limited liability company ("Shandong"), Beijing HuaMeiTai Bio-technology LimitedLiability Company (“WFOE”) and Zhao Shuwei, the sole shareholder of the HK Entity (“HK Shareholder”), pursuant to which NeoStem agreed to acquirefrom the HK Entity all of the outstanding interests in the HK Entity, and through a series of contractual arrangements, obtain certain benefits from Shandong(the “Share Exchange”). Shandong is engaged in the business (the "Shandong Business") of research, development, popularization and transference ofregenerative medicine technology (except for those items for which it does not have special approval) in the PRC. For more information on the Merger andShare Exchange, see “Business - Merger and Share Exchange” and “Risk Factors – Risks Relating to the Merger and Share Exchange.” The Company is alsotaking certain other initiatives to expand its operations into China. 6Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.NeoStem is also pursuing businesses that are related to its platform business of collection, processing and storage of adult stem cells which include(i) “medical tourism” due to advanced stem cell therapies developing at a faster pace outside the United States, (ii) supplying collected stem cells for theconduct of adult stem cell research, (iii) storing excess cells collected from a patient at oncology transplant centers, and (iv) supplying stem cells for diagnosticand therapeutic use.On August 29, 2006, NeoStem's stockholders approved an amendment to its certificate of incorporation to effect a reverse stock split of the NeoStemCommon Stock at a ratio of one-for-ten shares and to change its name from "Phase III Medical, Inc." to "NeoStem, Inc." On June 14, 2007, NeoStem'sstockholders approved an amendment to NeoStem's certificate of incorporation to effect a reverse split of our NeoStem Common Stock at a ratio of up to one-for-ten shares in the event it was deemed necessary by the NeoStem Board of Directors in order to be accepted onto a securities exchange. On July 9, 2007, theNeoStem Board of Directors approved a one-for-ten reverse stock split to be effective upon the initial closing of NeoStem’s public offering in order to satisfythe listing requirements of the NYSE Amex. On August 9, 2007, the reverse split was effective and NeoStem Common Stock commenced trading on theNYSE Amex under the symbol “NBS." Accordingly, all numbers in this report have been adjusted to reflect both the one-for-ten reverse stock split whichwas effective as of August 31, 2006 and the one-for-ten reverse stock split which was effective as of August 9, 2007.NeoStem’s prior business was providing capital and business guidance to companies in the healthcare and life science industries, in return for apercentage of revenues, royalty fees, licensing fees and other product sales of the target companies. Additionally, through June 30, 2002, NeoStem was aprovider of extended warranties and service contracts via the Internet at warrantysuperstore.com. NeoStem was engaged in the “run off” of such extendedwarranties and service contracts through March 2007. For a discussion of NeoStem’s involvement in such other activities and Company history, see “FormerBusiness Operations.”NeoStem was incorporated under the laws of the State of Delaware in September 1980 under the name Fidelity Medical Services, Inc. NeoStem'scorporate headquarters is located at 420 Lexington Avenue, Suite 450, New York, NY 10170, its telephone number is (212) 584-4180 and its website addressis www.neostem.com. The information on its website does not constitute a part of this report. NeoStem’s information as filed with the Securities andExchange Commission is available via a link on its websites as well as at www.sec.gov. 7Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.ADULT STEM CELL COLLECTION BUSINESSWhat are Stem Cells?Stem cells are very primitive and undifferentiated cells that have the unique ability to transform into many different cells, such as white blood cells,nerve cells or heart muscle cells. Stem cells can be found throughout the body, but are found in higher concentrations in the bone marrow and “mobilized”peripheral blood of adults. Certain processes can cause the stem cells to leave the bone marrow and enter the blood where they can be collected. NeoStemcurrently only works with adult stem cells collected from peripheral blood through a safe, minimally invasive procedure called “apheresis.”Stem Cells and Regenerative MedicineNeoStem is developing its business in the adult stem cell field and seeking to capitalize on the increasing importance NeoStem believes adult stemcells will play in the future of regenerative medicine. The use of adult stem cells as a treatment option for those who develop heart disease, certain types ofcancer and other critical health problems is a burgeoning area of clinical research today. The adult stem cell industry is a field independent of embryonic stemcell research. NeoStem believes that embryonic stem cell therapies have certain barriers to development due to political, ethical, legal and technicalissues. Medical researchers, scientists, medical institutions, physicians, pharmaceutical companies and biotechnology companies are currently developingtherapies for the treatment of disease using adult stem cells. As these adult stem cell therapies obtain necessary regulatory approvals and become standard ofcare, patients will need a service to collect, process and store their stem cells. NeoStem intends to provide this service. According to Robin Young, a leadingmedical technology analyst and founder and CEO of RRY Publications who organized the 3rd Annual Stem Cell Summit held in New York City in February2008, an increasing number of physicians are incorporating stem cell therapies into their therapeutic tools. According to Mr. Young, in the past 24 months,over 11,000 people in the United States had already received stem cell therapies as part of their conventional treatment and he projects that by 2017 there willbe 1.973 million annual procedures using stem cell therapies in multiple medical markets, generating annual revenues of an estimated $8.5 billion.The Future of Adult Stem Cell Therapies Using Cells Collected from Peripheral BloodNeoStem currently only works with adult stem cells collected from peripheral blood, as opposed to stem cells derived or collected through othermethods. An article in the February 27, 2008 volume of The Journal of the American Medical Association entitled, "Clinical Applications of Blood-Derivedand Marrow-Derived Stem Cells for Nonmalignant Diseases" studied a broad array of clinical studies conducted between January 1997 and December2007 and concluded that there was evidence that stem cells harvested from blood or bone marrow do appear to provide disease-ameliorating effects in certainauto-immune diseases and cardiovascular disorders. The article also highlighted that the vast majority of human stem cell trials have focused on clinicalapplications for hematopoietic and/or mesenchymal stem cells, both of which may be obtained from peripheral blood, bone marrow, or umbilical cord bloodand placenta. The National Institutes of Health lists more than 2,300 clinical trials currently underway investigating adult stem cell use as potential therapiesfor a wide-range of diseases, including, cancer, diabetes, heart and vascular disease, and autoimmune disorders such as lupus, multiple sclerosis andarthritis. More than 700 of these trials relate to autologous use.NeoStem's ability to provide adult stem cell collection and storage services to the general population for their future medical use places NeoStem in aunique position to benefit from the rapidly growing need for autologous, blood-derived stem cells. NeoStem believes that as clinical understanding of thebenefits of blood-derived stem cells grows and therapies developed from these cells show medical promise, so does the potential value of a personal supply ofone's own stem cells. With NeoStem's expanding nationwide network of collection centers, NeoStem is enabling people to donate and store their own stem cellsfor their personal use in times of future medical need. 8Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Plan of OperationsNeoStem is engaging in a platform business of autologous adult stem cell collection, processing and storage. NeoStem believes that as adult stem celltherapies obtain necessary regulatory approvals and become more and more widely used, individuals will need the infrastructure, methods and proceduresbeing developed by NeoStem to have their stem cells safely collected and conveniently stored for future therapeutic use. NeoStem generates revenues from thisplatform business as follows: · collection center fees; · initial collection of adult stem cells; · processing and storage of adult stem cells (generating recurring revenue); and · utilization of adult stem cells (when stem cells are used).NeoStem’s service model creates a source of an individual’s stem cells that enables physicians to potentially treat a variety of diseases and engage inresearch to progress therapeutic development using adult stem cells. NeoStem derives fees from collection centers operated by physicians who join its networkand anticipates deriving fees from medical institutions joining its network. Depending on the particular collection center, NeoStem generates revenues throughcertain upfront and annual fees from the collection centers in our network, patient collection fees, processing center fees and storage fees.NeoStem also sees potential revenues from:· being a supplier of stem cells for research and clinical trials; · government and military contracts; · Small Business Innovation Research (“SBIR”) grants; · licensing of technology; and · medical tourism.NeoStem has been processing and storing the adult stem cells collected with its processes at its California facility. This space was sufficient for theCompany’s past needs but the Company plans to close this facility by the end of the second quarter of 2009 and transfer its processing and storage operationsto state of the art facilities operated by leaders in cell processing. It intends to utilize New England Cryogenic Center, Inc. (“NECC”) with whom it entered intoa Master Services agreement and a first statement of work, effective as of August 2007, to provide additional processing and cryogenic storage to the Companyat its FDA registered and licensed facility in Newton, Massachusetts (the “NECC Facility”), to process and store for certain research purposes, and to utilizeProgenitor Cell Therapy LLC, with whom the Company entered into a Cell Processing and Storage Customer Agreement in January 2009, to process and storefor commercial purposes at the current Good Manufacturing Practices (“cGMP”) level at its California and New Jersey facilities. These strategic alliances willprovide increased processing and storage capacity, redundancy of storage and an expanded Northeast presence as NeoStem expands its services in the UnitedStates. (See “- Processing and Storage”). 9Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Marketing and CustomersNeoStem intends to hire a seasoned sales and marketing executive to lead the efforts in embarking on a marketing, advertising and sales campaignindividually and through collaborations with others for the purpose of educating physicians and potential clients on the benefits of adult stem cell collectionand storage. NeoStem’s “Go-To-Market” strategy is to drive this general awareness. The essence of this strategy is to reach the end-customers as quickly aspossible and to accelerate the adoption curve of our service. In this regard and in connection with the opening of the New York City collection center, theCompany will embark on a Tri-State area public awareness program to inform the general population, including the 1,200 patients per week who presentlyreceive medical care services from Yaffe, Ruden and Associates, about the importance of stem cell collection and long term storage. In addition, NeoStem plansto utilize marketing resources to increase the number of physicians who collaborate with the Company in the operation of collection centers. NeoStem believes several consumer segments may recognize and experience the long-term benefits from banking their own stem cells. These include: · Individuals with a family history of serious diseases that show potential for treatment with stem cell therapies that are currently under research,e.g., diabetes, heart disease or cancer; · Wellness and regenerative medicine communities; · Families who have already banked the umbilical cord blood from their newborns; · High net worth and educated consumers; and · Individuals at high risk for radiation exposure or hazardous materials.NeoStem is designing its marketing efforts to educate physicians on the benefits both of making stem cell collection and storage services available totheir adult patients and participating in our collection program. NeoStem believes that individuals will find adult stem cell collection appealing as part of aBio-Insurance program for the following reasons:· Finding a “matching” donor is very difficult; · People can die while on a wait-list for a donor; · High rejection rate of stem cells from a donor due to “graft vs. host” disease (40% even if a “perfect match”); · Risk of transmission of communicable disease; · Possible reluctance by physicians to collect and use autologous stem cells once a patient is sick because their bone marrow may have becomecompromised; · Effects of age on quantity and quality of stem cells; and · Financing options contribute to affordability.Company InitiativesNeoStem’s current initiatives include plans to:· Strategically expand and develop NeoStem’s network of collection centers; · Develop strategic initiatives with cord blood companies, tissue banks and pharmaceutical companies; · Collaborate with academic institutions on licensing opportunities, development of collection centers and provision of collection services forongoing clinical trials; · Develop partnerships with executive health programs, wellness physicians, concierge medical programs, medical spas and first respondergroups; · Expand NeoStem’s intellectual property portfolio within the stem cell arena; · Expand its Government Programs Initiatives, and in this regard has efforts underway targeting key federal and state agencies as well ascongressional committees in order to raise awareness of the benefits of adult stem cell therapy as a treatment option. In October 2008, we wereadvised that we would receive federal funding from the Department of Defense to evaluate the potential use of adult stem cell therapy for woundhealing, currently anticipated to be in the approximate net amount of $681,000; 10Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. · Submit grant applications to National Institutes of Health and others to fund Company programs; and ·Expand certain of its operations into China (See “China Expansion”). In April 2007, NeoStem participated in the founding of the Foundation. The mission of the Foundation is to heighten public awareness andknowledge of the benefits and promise of adult stem cells in treating serious medical conditions. The Foundation is committed to assisting those who protectus. First Responders (Fire, Police, Rescue and Military) are at high risk for exposure to radiation, burns, wounds and other trauma. The Foundation will helpprovide resources, not just for those emergency workers, but also to other individuals who become chronically ill and will be in need of assistance to collect,process and store their own stem cells now for use in the future. The Foundation was formed under the Pennsylvania Not-for-Profit Corporation Law and isintended to qualify as a 501(c)(3) corporation under the Internal Revenue Code, as amended. Certain members of NeoStem’s management are officers and/orsit on the Board of Trustees of the Foundation. The Foundation is currently seeking a new executive director. Adult Stem Cell CollectionsDuring 2008, we were focused on establishing a nationwide network of collection centers and participating physicians in certain major metropolitanareas of the United States to drive growth, in addition to exploring acquisition opportunities of revenue generating businesses.Initial participants in our collection center network have been single physician practices who opened collection centers in California, Pennsylvaniaand Nevada. Revenues generated by these early adopters have not been significant and are not expected to become significant. However, these centers haveserved as a platform for the development of NeoStem’s business model and today NeoStem is focusing on multi-physician and multi-specialty practicesjoining its network in major metropolitan areas. Toward this end, NeoStem has signed collection agreements as follows:· An agreement in June 2008 for a New York City stem cell collection center to be opened by Bruce Yaffe, M.D., Yaffe, Ruden andAssociates. This facility received a provisional license from the New York State Department of Health in September 2008 and becameoperational in November 2008. This practice is comprised of over 20 physicians and physician’s assistants and treats over 1,200 patients perweek. · An agreement in July 2008 for a Santa Monica, California based stem cell collection center to be opened by Stem Collect of Santa Monica LLCat The Hall Center. This facility became operational in the fall of 2008. The Hall Center specializes in cutting-edge offerings of “FunctionalMedicine” – a science-based practice of medicine – complemented by an array of holistic wellness services. · An agreement with Celvida LLC (for more information regarding NeoStem’s relationship with Celvida, see below) pursuant to which a SouthernFlorida stem cell collection center located in Coral Gables, a suburb of Miami, became operational in September 2008. · An agreement with Vincent C. Giampapa, M.D., F.A.C.S., in March 2009, to open a center at the Giampapa Institute for Anti-Aging MedicalTherapy in Montclair, New Jersey. One of the first certified anti-aging medical physicians in the world, Dr. Giampapa is Director of the PlasticSurgery Center Internationale as well as The Giampapa Institute and is renowned for a non-surgical complete facial rejuvenation procedure thatinvolves the use of adult stem cells. · An agreement in October 2007 to open an adult stem cell collection center with ProHealthcare Associates, one of the largest and most prominentmulti-specialty practices in the region, with over 100 doctors and 500,000 patients. In January 2008, ProHealthcare Associates received aprovisional license from the New York State Department of Health and became operational. In October 2008, it received its final license. 11Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The terms of NeoStem’s collection center agreements are substantially similar. NeoStem provides adult stem cell processing and storage services, aswell as management, expertise and other services to the collection center. In each case, the collection center agrees that NeoStem will be the exclusive provider toit of adult stem cell processing and storage, management and other specified services. The agreements generally provide for the payment to NeoStem by thecollection center of specified marketing and support fees and annual network services fees, and provide a fee schedule and the allocation of expenses andrevenues among the parties. Each of the agreements is for a multi-year period, depending on the particular center, typically has an automatic renewal forconsecutive one year periods at the end of the initial term and may relate to a territory. The agreements contain insurance obligations and indemnificationprovisions, limitations on liability and other standard provisions. NeoStem grants to each collection center a non-exclusive license to use its trademarks andintellectual property but otherwise retains all rights thereto, and each collection center is bound by confidentiality obligations to NeoStem and non-competitionprovisions. The agreements may be terminated upon prior written notice of a specified period in advance upon certain uncured material breaches of theagreement or, depending on the agreement, certain other specified occurrences. With the intention of increasing the number and quality of physician practices joining the collection network, in January 2008, NeoStem entered intoa Development Agreement with CelVida LLC (“CelVida”), an entity formed by individuals experienced in recruiting and organizing physicians and theirpractices, to act as a developer of collection centers to join NeoStem’s network by finding locations, organizing operating entities and guiding those entities inconstructing, equipping, furnishing and staffing the collection facility. Pursuant to the terms of the agreement, CelVida may from time to time identify toNeoStem territories in which it proposes performing due diligence to determine the feasibility of locating one or more centers in the territory. NeoStem may, inits discretion, advise whether CelVida may or may not proceed in the identified territory and in the event CelVida is authorized to proceed, CelVida hasspecified time periods in which to complete its due diligence as to feasibility, organize an operating entity for the center and construct, equip, furnish and staffa center for operation. So long as these periods are adhered to and subject to NeoStem’s right to choose at its option not to enter into a collection center agreementwith a proposed entity for a proposed territory, NeoStem will refrain from engaging in discussions or authorizing any person other than CelVida to take anyaction to develop a center in the specified territory (“exclusivity”). In the event CelVida does not complete each of these tasks within the specified period of time,then CelVida’s rights to exclusivity in the territory cease. CelVida is bound by certain confidentiality provisions and non-competition provisions. Theagreement is for an initial term of three (3) years and may be terminated by either party by giving prior notice to the other party upon their uncured materialbreach of the agreement. Pursuant to the terms of this agreement, in January 2008, NeoStem and CelVida signed a collection center agreement with respect tothe Miami/Coral Gables, Florida area.A 2007 development agreement with Stem Collect LLC was terminated by the Company in August 2008.On December 15, 2006, NeoStem entered into a five year agreement (the “Original HemaCare Agreement”) with HemaCare Corporation(“HemaCare”) pursuant to which HemaCare agreed to provide NeoStem with collection services for the procurement of adult stem cells from peripheral bloodfor the purpose of long-term storage. HemaCare has been providing services consisting of apheresis collection of adult stem cells from peripheral blood forlong-term storage and in certain circumstances for research purposes. These services typically have been provided at either the HemaCare facility or atcollection centers in NeoStem’s network of collection centers, subject to the terms of HemaCare’s license and other regulatory requirements. HemaCare hasoperations on the West Coast and parts of the Northeast. Additionally, under the agreement HemaCare agreed to provide to NeoStem standard operatingprocedures (“SOPs”) for the collection of peripheral blood progenitor cells to be used by NeoStem as its own SOPs and has been required to keep these SOPsup to date. NeoStem may continue to use the SOPs for up to ten years following termination of the agreement, subject to continued payment by NeoStem of amaintenance fee. These services have been provided to NeoStem on an exclusive basis. 12Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Under the Original HemaCare Agreement, the parties agreed to standard confidentiality obligations during the term of the agreement and for threeyears thereafter. The agreement is for a term of five years, subject to earlier termination by either party, generally upon 180 days’ prior notice. NeoStem willprovide to HemaCare payment for such services as set forth in the agreement, which will be fixed for a 12 month period and may thereafter be increased basedon mutual agreement of the parties.On February 24, 2009, NeoStem, Hemacare and Coral Blood Services, Inc., a wholly-owned subsidiary of HemaCare (“CBS”) entered into a firstamendment to the Original HemaCare Agreement. Under this amendment, CBS will provide collection services along with HemaCare, each in such stateswhere such entity is currently licensed to operate. The amendment also provides for a reduced notification period for termination of the Original HemaCareAgreement (generally from 180 to 90 days), adjusted fees and activities and that each will develop their own standard operating procedures (“SOPs”) andsupply the other with all SOP modifications and amendments.Since NeoStem has been developing its own SOPs for its collection business and has the internal expertise in apheresis it is considering becoming anindependently licensed collector of stem cells to enable it to collect adult stem cells for storage at the facilities of its network members for those who choose notto become independently licensed as well as to collect stem cells for research purposes, subject to its receipt of appropriate licenses. Processing and StorageNeoStem is currently processing and storing the adult stem cells collected with its processes at its California facility. The California facility has abiologics license from the State of California. California requires a laboratory to be in full compliance with the American Association of Blood Banks(“AABB”) in order to be licensed. In April 2007, NeoStem received two provisional licenses from the State of New York for its California facility. The firstlicense permits NeoStem’s California facility to collect, process and store hematopoietic progenitor cells (“HPCs”) collected from New York residents. Thesecond license permits solicitation in New York relating to the collection of HPCs. A third provisional license received in January 2008, permits the Californiafacility to collect, process, store and use for medical research HPCs collected from New York residents. Each license is subject to certain limitations statedtherein. This space was sufficient for the Company’s past needs but the Company plans to close this facility by the end of the second quarter of 2009 andtransfer its processing and storage operations to state of the art facilities operated by leaders in cell processing. It intends to utilize New England CryogenicCenter, Inc. (“NECC”), with whom it entered into a Master Services agreement and a first statement of work effective as of August 2007 to provide additionalprocessing and cryogenic storage to the Company at its FDA registered and licensed facility in Newton, Massachusetts (the “NECC Facility”), to process andstore for certain research purposes, and to utilize Progenitor Cell Therapy LLC, with whom the Company entered into a Cell Processing and Storage CustomerAgreement in January 2009, to process and store for commercial purposes at the cGMP level at its California and New Jersey facilities.Effective as of August 15, 2007, NeoStem entered into a Master Services Agreement (the "services agreement") with NECC, under which NECCwill provide processing and cryogenic storage services for adult stem cells ("ASCs") collected by NeoStem. This strategic alliance with NECC, one of thecountry’s largest cryogenic laboratories, will provide increased processing and storage capacity, redundancy of storage and an expanded Northeast presence asNeoStem expands its services and physician's network in the United States. The services agreement is for an initial term of five years, with automatic renewalfor consecutive two year periods at the end of the initial term. The parties will enter into a statement of work for each specific project to be performed by NECCunder the services agreement, with the responsibilities of the parties, specific fees for processing and cryogenic storage and expense reimbursement to be agreedupon in each statement of work. The services agreement contains standard confidentiality and mutual indemnification provisions. NeoStem generally retainsthe rights to all inventions and intellectual property developed during the course of performance of a project under the services agreement, and NECC is boundby certain non-competition provisions during the term of the services agreement and for two years thereafter. Either party may terminate the services agreementupon 180 days' written notice prior to the end of then current term, or at any time upon certain uncured events of default. NECC will continue to store ASCsfor not less than 12 months from the date of any termination so as to enable NeoStem to make appropriate arrangements for replacement of processing andstorage services. Effective as of August 15, 2007, the parties have entered into the first statement of work under the services agreement pursuant to whichNECC is to provide processing and cryogenic storage at the NECC Facility. NECC received a license from the State of New York to process, store and usefor research HPCs collected from New York residents; however, a new license is needed due to a change of the medical director at the facility and we areadvised that this new license is in process. 13Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.On October 15, 2008, effective as of October 1, 2008, the parties entered into the second statement of work (“Second SOW”) under the servicesagreement to establish at the NECC Facility research and development capabilities for NeoStem. As discussed, NeoStem has entered the research anddevelopment arena through its acquisition from the University of Louisville of a worldwide exclusive license to an early-stage technology to identify and isolaterare stem cells from adult human bone marrow, called VSEL (very small embryonic-like) stem cells. The Second SOW relates to the use by NeoStem ofshared laboratory space and equipment at the NECC Facility to perform company independent research as well as isolation and processing of VSELs. It alsorelates to research and development services that may be requested by NeoStem from New England Cell Therapies and Applied Research (“NECTAR”), adivision of NECC, from time to time at the NECC Facility, and the use by NeoStem of certain administrative space next to the NECC Facility. The SecondSOW calls for a monthly rental fee to be paid to NECTAR for the shared laboratory space and the administrative space, of $5,000 for the first twelve monthsand $6,000 per month thereafter. Services of NECTAR technical and scientific personnel and equipment, is available for a specified fee. NeoStem also has theright to open an adult stem cell collection center at the NECC Facility upon receipt of applicable regulatory approval, subject to the agreement of the parties onappropriate space. NeoStem will be responsible for all costs involved in opening and operating any such collection center and for regulatory compliance. TheSecond SOW also provides for NECTAR’s use of certain of NeoStem’s equipment and scientific and technical personnel for specified fees. The Second SOWhas a term of two years and may be earlier terminated by either party upon 180 days’ prior written notice. The services agreement is for an initial term of fiveyears, with automatic renewal for consecutive two year periods at the end of the initial term.On January 9, 2009, the Company entered into a Cell Processing and Storage Customer Agreement (the “PCT Agreement”) with Progenitor CellTherapy LLC (“PCT”). Under the PCT Agreement, PCT will provide to the Company autologous adult stem cell processing and storage services utilizingcGMP standards. Such services will be provided at both PCT’s California and New Jersey facilities. The Company agrees to use PCT for processing andstorage services for commercial purposes on an exclusive basis commencing with such time as PCT completes certain preliminary services and is ready andable to start the processing and storage services as required by the agreement. PCT agrees to provide to us stem cell processing and long term storage servicesfor our business on an exclusive basis. Prior to commencing these services, PCT agrees to provide certain preliminary services consisting of technologytransfer and protocol review and revision to ensure that the processing and storage services are cGMP compliant. The agreement sets forth agreed upon fees forthe delivery of the services as well as providing for a one-time payment of $35,000 for the preliminary services of which $20,000 has been paid to date. Theagreement is for a four year term, subject to earlier termination on 365 days notice as set forth in the agreement.On March 6, 2009, the Company and PCT expanded PCT’s services under the PCT Agreement to include its developing a plan to set up a stem cellprocessing and manufacturing operation in Beijing, China that the Company would pursue in partnership with an off-shore entity. This plan would supportresearch and cell therapy development and manufacturing operations. The plan will include a conceptual architectural design, cost estimates for construction,facility validation to meet cGMP standards, equipment requirements and estimated costs of equipment procurement, and other related matters. The plan isrequired to be completed by April 17, 2009, subject to PCT having received the technical information reasonably necessary to complete the plan. PCT’s feesfor this work will be $100,000 (of which $50,000 was paid in March 2009 upon the effectiveness of the agreement) plus expenses. 14Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Industry and Geographical Segmental InformationAs a result of NeoStem’s acquisition of substantially all the assets and operations of NS California on January 19, 2006, NeoStem had operationsin two segments through March 2007. One segment is the collection, processing and banking of adult stem cells and the other segment was the “run off” of itssale of extended warranties and service contracts via the Internet. This “run-off” of warranty and service contracts was completed in March 2007. To date,NeoStem’s operations have been conducted in only one geographical segment. For further financial information regarding segments, please see the financialstatements and notes thereto included elsewhere in this annual report.Acquisition of NS California, Inc. On January 19, 2006, NeoStem, through a wholly-owned subsidiary, consummated its acquisition of the assets of NS California relating to NSCalifornia’s business of collecting, processing and storing adult stem cells, pursuant to an Asset Purchase Agreement dated December 6, 2005. The purchaseprice consisted of 50,000 shares of NeoStem Common Stock, plus the assumption of certain enumerated liabilities of NS California and liabilities underassumed contracts. NeoStem also entered into employment agreements with NS California’s chief executive officer and one of its founders as part of thetransaction. NS California was incorporated in California in July 2002, and from its inception through the acquisition by NeoStem was engaged in the sale ofadult stem cell banking services. In October 2003, NS California leased laboratory space in a research facility at Cedars Sinai Hospital in California andentered into an agreement with a third party to provide adult stem cell collection services. By December 2003, NS California had outfitted its laboratory withequipment for processing, cryopreservation and storage of adult stem cells. In May 2004, after a validation process and inspection and approval by the Stateof California, NS California received a biologics license and commenced commercial operations. In January 2005, NS California moved its adult stem cellprocessing and storage facility to Good Samaritan Hospital in California. NS California was compelled to cease operations because it did not have sufficientassets to complete the revalidation of the new laboratory and NS California’s biologics license was suspended. In October 2005, NS California restarted thevalidation of the laboratory at Good Samaritan Hospital, and on May 29, 2006 NeoStem was issued a new biologics license from the State of California.Pursuant to the Asset Purchase Agreement, NS California was obligated to return to NeoStem (out of the 50,000 shares of Common Stock issued) 167 sharesper day for each day after February 15, 2006 that such biologics license had not been issued up to a total of 10,000. NS California has returned 10,000 sharesto NeoStem.Prior Relationship with NS CaliforniaOn March 31, 2004, NeoStem entered into a joint venture agreement to assist NS California in finding uses of and customers for NS California’sservices and technology. NeoStem’s initial efforts concentrated on developing programs utilizing NS California’s services and technology through governmentagencies. That agreement was terminated as a result of the NS California acquisition. On September 9, 2005, NeoStem signed a revenue sharing agreementwith NS California pursuant to which NeoStem had agreed to fund NS California certain amounts to pay pre-approved expenses and other amounts based ona formula relating to NeoStem’s ability to raise capital. Once funded, NS California would pay NeoStem monthly based on the revenue generated in theprevious month with a minimum payment due each month. That agreement was terminated as a result of the NS California acquisition. 15Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.RESEARCH AND DEVELOPMENT; THERAPEUTICS MARKETPLACEIn addition to our platform business of collecting, processing and storing adult stem cells from the peripheral blood, NeoStem entered the researchand development arena through its acquisition from the University of Louisville of the worldwide exclusive license to the VSEL technology.Acquisition of VSEL TechnologyOn November 13, 2007, NeoStem entered into an acquisition agreement with UTEK Corporation ("UTEK") and Stem Cell Technologies, Inc., awholly-owned subsidiary of UTEK ("SCTI"), pursuant to which NeoStem acquired all the issued and outstanding common stock of SCTI in a stock-for-stock exchange. Pursuant to a license agreement (the "License Agreement") between SCTI and the University of Louisville Research Foundation ("ULRF"),SCTI owns an exclusive, worldwide license to a technology developed by researchers at the University of Louisville to identify and isolate rare stem cells fromadult human bone marrow, called VSELs (very small embryonic-like) stem cells. Concurrent with the SCTI acquisition, NeoStem entered into a sponsoredresearch agreement (the "Sponsored Research Agreement" or "SRA") with ULRF under which NeoStem will support further research in the laboratory ofMariusz Ratajczak, M.D., Ph.D., a co-inventor of the VSEL technology and head of the Stem Cell Biology Program at the James Graham Brown CancerCenter at the University of Louisville. Certain early obligations of the Company under the License Agreement and the SRA were paid for by funds supplied byUTEK to SCTI prior to the acquisition. In consideration for the acquisition, NeoStem issued to UTEK 400,000 unregistered shares of its common stock forall the issued and outstanding common stock of SCTI.VSELs have many characteristics typically found in embryonic stem cells, including the ability to differentiate into specialized cells found indifferent types of tissue that would be able to interact with the specific organ in order to repair degenerated, damaged or diseased tissue (the three "Ds" ofaging). NeoStem has the ability to harvest and cryopreserve these VSELs from individual patients, setting the stage for their use in personalized regenerativemedicine. If VSELs can be expanded from individual patients and their potential to develop into different types of tissue cells maintained, it would represent asignificant step toward overcoming the two major limitations in the development of stem cell therapies today, the ethical dilemma regarding use of embryonicstem cells and the immunological problems associated with using cells from a third party donor.Under the License Agreement, SCTI agreed to engage in a diligent program to develop the VSEL technology. Certain license fees, milestone paymentsand royalties, and specified payments in the event of sublicensing, are to be paid to ULRF from SCTI, and SCTI is responsible for all payments for patentfilings and related applications. The License Agreement has an initial term ending the later of (i) 20 years and (ii) the last to expire patent claim. The LicenseAgreement also contains certain provisions relating to "stacking," permitting SCTI to pay royalties to ULRF at a reduced rate in the event it is required to alsopay royalties to third parties exceeding a specified threshold for other technology in furtherance of the exercise of its patent rights or the manufacture ofproducts using the VSEL technology. To date, the Company has paid: (i) $29,000 for reimbursement of all expenses related to patent filing and prosecutionincurred prior to the effective date (the “Effective Date”) of the License Agreement; (ii) a nonrefundable prepayment of $20,000 creditable against the first$20,000 of patent expenses incurred after the Effective Date; and (iii) a nonrefundable license issue fee equal to $46,000. 16Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Although the funds obtained through the acquisition of SCTI funded certain early obligations under NeoStem’s agreements relating to the VSELtechnology, substantial additional funds will be needed and additional research and development capacity will be required to meet its development obligationsunder the License Agreement and develop the VSEL technology. NeoStem has applied for Small Business Innovation Research (SBIR) grants and may alsoseek to obtain funds through applications for other State and Federal grants, grants abroad, direct investments, strategic arrangements as well as other fundingsources to help offset all or a portion of these costs. It is seeking to develop increased internal research capability and sufficient laboratory facilities orestablish relationships to provide such research capability and facilities. In this regard, in July 2008 NeoStem hired a Director of Stem Cell Research andLaboratory Operations and in October 2008 it entered into the Second SOW with NECC pursuant to which, among other things, NeoStem may use sharedlaboratory space and equipment at the NECC Facility to perform company independent research as well as isolation and processing of VSELs.SCTI has the right to sublicense the VSEL technology in accordance with the terms of the License Agreement. The License Agreement also sets forththe parties’ rights and obligations with regard to patent prosecution, including that SCTI will take the lead in connection therewith. SCTI can terminate theLicense Agreement for any reason upon 60 days' prior written notice, and either party can terminate upon 30 days' prior written notice upon certain uncuredmaterial breaches of the agreement or immediately upon certain bankruptcy related events. Portions of the license may be converted to a non-exclusive license ifSCTI does not diligently develop the VSEL technology or terminated entirely if SCTI chooses to not pay for the filing and maintenance of any patentsthereunder. ULRF retained the right under the License Agreement to license and practice the VSEL technology for noncommercial purposes only, such aseducation, academic research, teaching and public service, and also retained the right of publication subject to certain confidentiality limitations and priorreview by SCTI.VSEL Technology Research Program Concurrently with the License Agreement, NeoStem entered into the Sponsored Research Agreement with ULRF (“the SRA”). Pursuant to the SRA,NeoStem will support additional research relating to the VSEL technology to be carried out in the laboratory of Dr. Ratajczak as principal investigator. Inreturn, NeoStem will receive the exclusive first option to negotiate a license to the research results. Under the SRA, NeoStem agrees to support the research asset forth in a research plan in an amount of $375,000. Such costs are to be paid by NeoStem in accordance with a payment schedule which sets forth thetiming and condition of each such payment over a two and one-half year period which commences with the commencement of the research, as follows: (i)$100,000 (for which there was originally a $50,000 credit) upon receipt of all approvals and stem cell specimens on which to perform the research (the “FirstPayment Date”); (ii) $100,000 on the first yearly anniversary of the First Payment Date; (iii) $75,000 on the second yearly anniversary of the First PaymentDate; and (iv) $25,000 upon the achievement of each of four specified milestones. In October 2008, the SRA was amended to provide for certain additionalresearch to be conducted as work preliminary to the first research aim under the SRA (“Pre-Aim 1”), for which approximately one-half of the $50,000 creditwas utilized to pay the fee. Pre-Aim 1 was completed in November 2008. The parties are in discussions to amend the SRA to accelerate the research based onthe research results obtained from Pre-Aim 1. Under the SRA, ULRF retains the rights to intellectual property developed by its employees in performance of the research relating to the VSELTechnology, and NeoStem and ULRF jointly own intellectual property developed jointly by employees of ULRF and NeoStem in performance of the research.So long as NeoStem continues to support and fund the filing of patent applications and other intellectual property protection for the same, NeoStem has thefirst option to negotiate for an exclusive, worldwide commercial license to ULRF's interest in any such developed or jointly developed intellectual property. TheSRA also establishes rates for royalties and revenue sharing between the parties in the event no license agreement is executed with regard to joint intellectualproperty but one party chooses to develop or license it to a third party. 17Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The term of the research under the original SRA is two and one-half years and shall commence after all applicable institution (e.g., institutionalreview board ("IRB")) and Federal approvals are obtained and upon the adult stem cell specimens required for the research being provided to the laboratory. Itis anticipated that the first of the specimens will be received in April 2009. Certain of SCTI's diligence obligations with respect to developing the VSELtechnology commence upon receipt of these cell specimens. Either party may terminate the SRA if Dr. Ratajczak is unable to perform the research and anacceptable successor is not available, or if required approval of a review committee at the University of Louisville or ULRF is not given or is withdrawn.NeoStem may terminate the SRA upon 90 days' written notice to ULRF and either party may terminate the SRA on 30 days' written notice in the event ofuncured defaults or breaches.Other ResearchNeoStem had been reviewing its options with regard to establishing an independent research facility on its own or in collaboration with othercommercial or blood banking entities on the East Coast in order that NeoStem may expand its research activities relating to the VSEL technology andpotentially other research projects identified from time to time. In this regard, in July 2008 NeoStem hired a Director of Stem Cell Research and LaboratoryOperations and in October 2008 it entered into the Second SOW with NECC pursuant to which, among other things, NeoStem may use shared laboratoryspace and equipment at the NECC facility to perform company independent research as well as isolation and processing of VSELs. We have also retainedPCT to develop the plan for the facility in Beijing, China which would support research and cell therapy development as well as manufacturing operations.NeoStem is also in discussions relating to other research in the laboratories of other research scientists to generate data relating to other clinicalapplications of VSELS, including neural, cardiac and ophthalmic, among others.Regenerative Procedures with Stem Cell Applications; Other Licensing ArrangementsIn February 2009, NeoStem entered into a License Agreement with Vincent Giampapa, M.D., F.A.C.S. pursuant to which the Company acquired aworld-wide, exclusive, royalty bearing, perpetual and irrevocable license, with the right to sublicense, to certain innovative stem cell technology andapplications for cosmetic facial and body procedures and skin rejuvenation. In January 2009, Dr. Giampapa entered into a three year consulting agreementwith the Company to serve as a consultant in anti-aging. As part of his agreement, he agrees to travel to China a minimum of three times per year for thepurpose of educating, training and assessing medical staff.INTELLECTUAL PROPERTYNeoStem is seeking patent protection for its technology. NeoStem acquired and is prosecuting one pending U.S. patent application which had beenfiled by NS California. This patent application is directed to a process by which stem cells from the bone marrow are mobilized, isolated from adultperipheral blood and stored. In addition, NeoStem has filed a patent application directed to low-dose, short course, cytokine induction of stem cellmobilization.Pursuant to the License Agreement, SCTI acquired from ULRF the exclusive, world-wide license to a patent application and know-how relating tovery small embryonic-like (VSEL) stem cells. The U.S. patent application filed by ULRF on the VSEL technology is being prosecuted by NeoStem. Thispatent relates specifically to a method of isolating and using VSELs. SCTI also received a license under the License Agreement to unpatented inventions anddiscoveries contained in certain manuscripts relating to transplantation of VSELs and mobilization of VSELs in certain circumstances, which has beenpursued in subsequently filed provisional patent applications. 18Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Pursuant to a license agreement between the Company and Vincent Giampapa, M.D., F.A.C.S., the Company has acquired an exclusive, world-widelicense to a granted US patent, patent application and know-how relating to methods and compositions for the restoration of age-related tissue loss. There canbe no assurance that any of NeoStem’s patent applications will issue as patents or should patents issue that they will not be found invalid. The patentposition of biotechnology companies generally is highly uncertain and involves complex legal, scientific and factual questions.GOVERNMENTAL REGULATIONFor a description of matters relating to governmental regulation, please see “Risk Factors - Risks Relating to NeoStem’s Business - We operate in ahighly regulated environment, and NeoStem's failure to comply with applicable regulations, registrations and approvals would materially and adversely affectour business,” “Risk Factors - Risks Relating to NeoStem’s Business - Our adult stem cell collection, processing and storage business was not contemplatedby many existing laws and regulations” and “Risk Factors - Risks Relating to NeoStem’s Business - Our new research and development activities presentadditional risks.”COMPETITIONFor a description of matters relating to competition, please see “Risk Factors - Risks Relating to Competition” and “Risk Factors - Risks Relating toNeoStem’s Business - Our new research and development activities present additional risks.”CHINA INITIATIVES In November 2008, NeoStem signed the Merger Agreement and Share Exchange Agreement (as more fully described below) to begin its expansion intoChina. Separately, in 2009, NeoStem embarked on other activities to expand its operations into China.The rationale behind the Company’s expansion into China is to accelerate stem cell therapy, research and development and creation of intellectual propertypositions in an environment that is more readily accepting of stem cell therapies. These initiatives will be lead by U.S. researchers and physicians incollaboration with experts in the People’s Republic of China (“PRC”) for each clinical indication being pursued. China has a large population with a rapidlygrowing middle and upper class who are becoming focused on regenerative medicine and can afford such services. We believe that a collaboration involvingthese two countries will create immediate commercial, financial and scientific opportunities.In February 2009, NeoStem entered into a License Agreement with Vincent Giampapa, M.D., F.A.C.S. pursuant to which the Company acquired a world-wide, exclusive, royalty bearing, perpetual and irrevocable license, with the right to sublicense, to certain innovative stem cell technology and applications forcosmetic facial and body procedures and skin rejuvenation. In January 2009, Dr. Giampapa entered into a three year consulting agreement with the Companyto serve as a consultant in anti-aging. As part of his agreement, he agrees to travel to China a minimum of three times per year for the purpose of educatingtraining and assessing medical staff. In January 2009, on behalf of the Company Dr. Giampapa traveled to China and presented and demonstrated some ofhis skin rejuvenation techniques using autologous adult stem cells at the 2009 International Stem Cell Technology and Applications Summit in Qingdao,China. His demonstrations were televised by China Central Television (CCTV), attracting wide public interest as well as professional interest from theSummit's audience of leading stem cell practitioners. 19Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.On March 6, 2009, the Company and PCT expanded their cell processing agreement for services in the United States to include PCT’s developing a plan toset up a stem cell processing and manufacturing operation in Beijing, China that the Company would pursue in partnership with an off-shore entity. Thisplan would support research and cell therapy development and manufacturing operations. The plan will include a conceptual architectural design, costestimates for construction, facility validation to meet cGMP standards, equipment requirements and estimated costs of equipment procurement, and otherrelated matters. The plan is required to be completed by April 17, 2009, subject to PCT having received the technical information reasonably necessary tocomplete the plan. The Company has begun other initiatives to expand its operations into China. RimAsia has been facilitating certain of these efforts and has paid certainexpenses that the Company has agreed to reimburse. The Company intends to set up a wholly foreign owned enterprise (“WFOE”) which it will own throughan offshore entity. It is expected that the WFOE will enter into a series of contractual arrangements memorialized by several documents known as variableinterest entity documents (collectively, the “VIE Documents”) with one or more limited liability companies to be established in China. We intend to cooperatewith a research organization in China in applying for significant governmental grants to fund certain research and development activities which may helpexpansion of the application of the Company’s stem cell technology. NeoStem is classified as a foreign enterprise under PRC law, and the WFOE is classifiedas a foreign-invested enterprise. Because various regulations in the PRC currently restrict or prohibit foreign-invested entities from holding certain licenses andcontrolling businesses in certain industries, including the Company’s business of stem cell technology research and application, NeoStem hopes to rely on thecontractual relationships memorialized in the VIE Documents to control the business, personnel, and financial affairs of the PRC limited liability companies.The Company is exploring the possibility of these expansion activities being a substitute for its moving forward with closing the transactions under the ShareExchange Agreement. See Risk Factors - “Risks Related to Doing Business in China.” 20Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. A schematic of the structure of the China initiatives follows: The NeoStem stem cell business model in China can be broken down as follows: ··Treatment ·Provision of regenerative medicine therapies using neural stem cells for the treatment of a variety of CNS (central nervous system)conditions such as ALS, cerebral atrophy, cerebral palsy, external blunt force traumas, Parkinson’s Disease, spinal cord injuries, andstroke and related ailments ·Provision of regenerative medicine therapies using autologous mesenchymal stem cells extracted from bone marrow for the treatment ofvarious limb ischemia conditions ·Expansion into additional therapeutic areas using US based technologies. ··Storage ·Collection, processing and cryogenic preservation and storage of adult stem cells from peripheral blood for potential future regenerativemedical treatmentSource: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ·There are no commercial scale providers that offer this service in China ·Storage is one of the core businesses of NeoStem in the US; Combined Company will be able to derive significant operating support andtechnical knowledge in establishing on a commercial scale such an operation with international best practices and standards 21Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ··Cosmetic & Anti-Aging ·Provision of stem cell based treatments for cosmetic and anti-aging applications ·Distribution of related health supplements and nutriceutical products ·Distributor network spanning multiple provinces. ··R&D ·Research and commercial development on VSEL (Very Small Embryonic Like) stem cell technology with NBS and its US R&D partner,the University of Louisville, the institution at which the VSEL technology was developed and at which research with NBS is continuing ·Establishment of dedicated R&D facility in Beijing in conjunction with several major PRC medical and research institutes is anticipated··Addressable market for CNS conditions alone is significant ·Estimates for CNS market alone are 25-29 million, comprising 10 million victims of stroke, 10 million afflicted by cerebellum atrophy, 5million patients with cerebral palsy, and the balance suffering from a number of conditions including ALS and Parkinson’s ·Domestic market remains largely untapped ·PRC Domestic market remains largely untapped ·Less than 3,000 patients have been treated to date throughout China ··Medical tourism also shows potential ·Estimated 23 million potential stem cell patients from affluent countries world-wide with one of four major nervous system diseases that canbe treated by stem cell treatment MERGER AND SHARE EXCHANGEAgreement and Plan of MergerOn November 2, 2008, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), with China Biopharmaceuticals Holdings, Inc.,a Delaware corporation ("CBH"), China Biopharmaceuticals Corp., a British Virgin Islands corporation and wholly-owned subsidiary of CBH ("CBC"), andCBH Acquisition LLC, a Delaware limited liability company and wholly-owned subsidiary of NeoStem ("Merger Sub"). The Merger Agreement contemplatesthe merger of CBH with and into Merger Sub, with Merger Sub as the surviving entity (the “Merger”); provided, that prior to the consummation of the Merger,CBH will spin off all of its shares of capital stock of CBC to CBH’s stockholders in a distribution so that the only material assets of CBH following suchspin-off (the "Spin-off") will be CBH's 51% ownership interest in Suzhou Erye Pharmaceuticals Company Ltd. (“Erye”), a Sino-foreign joint venture withlimited liability organized under the laws of the People’s Republic of China (the "PRC"), plus net cash which shall not be less than $550,000. Erye specializesin research and development, production and sales of pharmaceutical products, as well as chemicals used in pharmaceutical products. Erye, which has beenin business for more than 50 years, currently manufactures over 100 drugs on seven Good Manufacturing Practices (GMP) lines, including small moleculedrugs. 22Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, all of the shares of common stock, par value $.01 per share, of CBH("CBH Common Stock"), issued and outstanding immediately prior to the effective time of the Merger (the "Effective Time") will be converted into the right toreceive, in the aggregate, 7,500,000 shares of NeoStem Common Stock (of which 150,000 shares will be held in escrow pursuant to the terms of an escrowagreement to be entered into between CBH and NeoStem). Subject to the cancellation of outstanding warrants to purchase shares of CBH Common Stock heldby RimAsia Capital Partners, L.P. ("RimAsia"), a principal stockholder of NeoStem and the sole holder of shares of Series B Convertible Preferred Stock,par value $0.01 per share, of CBH (the "CBH Series B Preferred Stock"), all of the shares of CBH Series B Preferred Stock issued and outstandingimmediately prior to the Effective Time will be converted into (i) 5,383,009 shares of NeoStem Common Stock, (ii) 6,977,512 shares of Series CConvertible Preferred Stock, without par value, of NeoStem, each with a liquidation preference of $1.125 per share and convertible into shares of NeoStemCommon Stock at a conversion price of $.90 per share, and (iii) warrants to purchase 2,400,000 shares of NeoStem Common Stock at an exercise price of$0.80 per share.At the Effective Time, in exchange for cancellation of all of the outstanding shares of Series A Convertible Preferred Stock, par value $.01 per share, of CBH(the "CBH Series A Preferred Stock") held by Stephen Globus, a director of CBH, and/or related persons, NeoStem will issue to Mr. Globus and/or relatedpersons an aggregate of 50,000 shares of NeoStem Common Stock. NeoStem also will issue 60,000 shares of NeoStem Common Stock to Mr. Globus and40,000 shares of NeoStem Common Stock to Chris Peng Mao, the Chief Executive Officer of CBH, in exchange for the cancellation and the satisfaction in fullof indebtedness in the aggregate principal amount of $90,000, plus any and all accrued but unpaid interest thereon, and other obligations of CBH to Globusand Mao. NeoStem will bear 50% of up to $450,000 of CBH's expenses post-merger, and satisfaction of the liabilities of Messrs. Globus and Mao will counttoward that obligation. NeoStem also will issue 200,000 shares to CBC to be held in escrow, payable if NeoStem successfully consummates its previouslyannounced acquisition of control of Shandong New Medicine Research Institute of Integrated Traditional and Western Medicine Limited Liability Companyand there are no further liabilities above $450,000.Also at the Effective Time, subject to acceptance by the holders of all of the outstanding warrants to purchase shares of CBH Common Stock (other thanwarrants held by RimAsia), such warrants shall be canceled and the holders thereof shall receive warrants to purchase up to an aggregate of up to 2,012,097shares of NeoStem Common Stock at an exercise price of $2.50 per share.Upon consummation of the transactions contemplated by the Merger, NeoStem will own 51% of the ownership interests in Erye, and Suzhou Erye Economyand Trading Co. Ltd., a limited liability company organized under the laws of the PRC ("EET"), will own the remaining 49% ownership interest. Inconnection with the execution of the Merger Agreement, NeoStem, Merger Sub and EET have negotiated a revised joint venture agreement (the "Joint VentureAgreement"), which, subject to finalization and approval by the requisite PRC governmental authorities, will become effective and will govern the rights andobligations with respect to their respective ownership interests in Erye. Pursuant to the terms and conditions of the Joint Venture Agreement, dividenddistributions to EET and NeoStem will be made in proportion to their respective ownership interests in Erye; provided, however, that for the three-year periodcommencing on the first day of the first fiscal quarter after the Joint Venture Agreement becomes effective, (i) 49% of undistributed profits (after tax) will bedistributed to EET and lent back to Erye by EET for use by Erye in connection with the construction of a new plant for Erye; (ii) 45% of the net profit (aftertax) will be provided to Erye as part of the new plant construction fund, which will be characterized as paid-in capital for NeoStem's 51% interest in Erye;and (iii) 6% of the net profit will be distributed to NeoStem directly for NeoStem’s operating expenses. In the event of the sale of all of the assets of Erye orliquidation of Erye, NeoStem will be entitled to receive the return of such additional paid-in capital before distribution of Eyre’s assets is made based upon theownership percentages of NeoStem and EET, and upon an initial public offering of Erye which raises at least 50,000,000 RMB (or approximately U.S.$7,100,000), NeoStem will be entitled to receive the return of such additional paid-in capital. 23Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Pursuant to the Merger Agreement, NeoStem has agreed to use its reasonable best efforts to cause the members of NeoStem's Board of Directors to consist ofthe following five members promptly following the Effective Time: Robin L. Smith (Chairman), current Chairman of the Board and Chief Executive Officerof NeoStem; Madam Zhang Jian, the Chairman and Chief Financial Officer of CBH, the General Manager of Erye and a 10% holder of EET, and RichardBerman, Steven S. Myers and Joseph Zuckerman, each a director of NeoStem (the latter three to be independent directors, as defined under the NYSE Amexlisting standards). NeoStem’s intention thereafter will be to cause the number of members constituting the NeoStem Board of Directors to be increased fromfive to seven, in accordance with NeoStem’s by-laws, as amended, and to fill the two vacancies created thereby with one additional independent director (asdefined under the NYSE Amex listing standards) to be selected by a nominating committee of the NeoStem Board of Directors and with Eric Wei, themanaging partner of RimAsia.The Merger Agreement acknowledges that in its discretion the Compensation Committee of NeoStem’s Board of Directors may grant bonuses of up to1,000,000 shares or options under any equity compensation plan in connection with the closing of the transactions under the Merger Agreement. The MergerAgreement also provides that options outstanding immediately prior to the closing of the transactions under the Merger Agreement to purchase shares ofcommon stock held by current employees, advisory board members, directors and certain consultants of the Company, in the sole discretion of theCompensation Committee, may be amended, cancelled and reissued or otherwise modified so that the exercise price shall be $.80 per share.In connection with the Merger, NeoStem intends to file with the Securities and Exchange Commission (the “SEC”) a combined registration statement andproxy statement on Form S-4 (including any amendments, supplements and exhibits thereto, the “Proxy Statement/Registration Statement”) with respect to,among other things, the shares of NeoStem Common Stock to be issued in the Merger (the "Issuance") and a proposed amendment to NeoStem’s certificate ofincorporation to effect an increase in NeoStem’s authorized shares of preferred stock, without par value, that may be necessary to consummate thetransactions contemplated by the Merger Agreement (the “Charter Amendment"). The Merger has been approved by the NeoStem Board of Directors. TheIssuance and Charter Amendment contemplated by the Merger Agreement are subject to approval by the stockholders of NeoStem and the Merger, the Spin-Offand the other transactions contemplated by the Merger Agreement are subject to approval by the stockholders of CBH.In connection with execution of the Merger Agreement, each of the officers and directors of CBH, RimAsia, Erye and EET have entered into a lock-up andvoting agreement, pursuant to which they have agreed to vote their shares of CBH Common Stock in favor of the Merger and to the other transactionscontemplated by the Merger Agreement and are prohibited from selling their CBH Common Stock and/or NeoStem Common Stock from November 2, 2008through the expiration of the six-month period immediately following the consummation of the transactions contemplated by the Merger Agreement (the "Lock-Up Period"). Similarly, the officers and directors of NeoStem have entered into a lock-up and voting agreement, pursuant to which they have agreed to votetheir shares of NeoStem Common Stock in favor of the Issuance and are prohibited from selling their NeoStem Common Stock during the Lock-Up Period.The transactions contemplated by the Merger Agreement are subject to the authorization for listing on the NYSE Amex (or any other stock exchange on whichshares of NeoStem Common Stock are listed) of the shares to be issued in connection with the Merger, shareholder approval, approval of NeoStem'sacquisition of 51% ownership interest in Erye by relevant PRC governmental authorities, receipt of a fairness opinion and other customary closing conditionsset forth in the Merger Agreement. The Merger currently is expected to be consummated in the second quarter of 2009.The foregoing description of the Merger Agreement is not complete and is qualified in its entirety by reference to the Merger Agreement, which is incorporatedby reference as Exhibit 2(a) hereto. 24Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Share ExchangeOn November 2, 2008, the Company entered into a Share Exchange Agreement (the “Share Exchange Agreement”), with China StemCell Medical HoldingLimited, a Hong Kong company (the "HK Entity"), Shandong New Medicine Research Institute of Integrated Traditional and Western Medicine LimitedLiability Company, a China limited liability company ("Shandong"), Beijing HuaMeiTai Bio-technology Limited Liability Company (“WFOE”) and ZhaoShuwei, the sole shareholder of the HK Entity (“HK Shareholder”), pursuant to which NeoStem agreed to acquire from the HK Entity all of the outstandinginterests in the HK Entity, and through a series of contractual arrangements described below, seeks to obtain certain benefits from Shandong. Shandong isengaged in the business (the "Shandong Business") of research, development popularization and transference of regenerative medicine technology (except forthose items for which it does not have special approval) in the PRC.The HK Shareholder owns 100% of the ownership interests in the HK Entity, and the HK Entity owns 100% of ownership interests in the WFOE. The WFOEseeks to obtain certain benefits from Shandong through a series of contractual arrangements memorialized through several documents known as variableinterest entity documents (collectively, the “VIE Documents”). The relevant VIE Documents, to which the WFOE, Shandong and the founder of Shandong,Dr. Wang Taihua, are parties, include a power of attorney, an exclusive technical and consulting service agreement, a loan agreement, a share pledge agreementand an exclusive option agreement. In November 2008, RimAsia extended a loan to the WFOE in the amount of $150,000 for the purpose of capitalizing it,which NeoStem has acknowledged is a cost of closing the Share Exchange that shall be satisfied at such closing.Pursuant to the terms and subject to the conditions set forth in the Share Exchange Agreement, NeoStem will acquire all of the outstanding shares of capitalstock of the HK Entity (the "HK Shares"), in exchange (the "Share Exchange") for up to 5,000,000 shares (the “Exchange Shares”) of NeoStem CommonStock. The Exchange Shares will be issuable at the closing of the transactions contemplated by the Share Exchange Agreement (the "Closing") as follows: (i)4,000,000 shares of NeoStem Common Stock will be issued to the HK Shareholder and (ii) 1,000,000 shares of NeoStem Common Stock will be issued to theHK Shareholder in escrow (the "Escrow Shares"), the certificates for which will be held pursuant to the terms of an escrow agreement to be entered intobetween NeoStem and the HK Shareholder. Subject to the terms and conditions of the escrow agreement, 500,000 Escrow Shares will be released from escrowwithin 30 days after the first 50,000,000 RMB (or approximately U.S. $7,100,000) sales revenue are achieved in the PRC by Shandong (the "RevenueMilestone") and 500,000 Escrow Shares will be released within 30 days after the last of three collection and storage banks in three provinces in the PRC (i.e.,one such bank in each such province) is established by Shandong (the "Storage Bank Milestone"). 500,000 Escrow Shares will revert to NeoStem if theRevenue Milestone is not met on or before December 31, 2009 and 500,000 Escrow Shares will revert to NeoStem if the Storage Bank Milestone is not met onor before the date of the second anniversary of the Closing.In connection with the Share Exchange, NeoStem intends to file with the SEC the combined Proxy Statement/Registration Statement referred to underAgreement and Plan of Merger (above), to, among other things, seek stockholder approval of the Share Exchange. The Share Exchange has been approved bythe NeoStem Board of Directors, subject to approval by the stockholders of NeoStem.The transactions contemplated by the Share Exchange Agreement are subject to the authorization for listing on the NYSE Amex (or any other stock exchange onwhich shares of NeoStem Common Stock are listed or quoted) of the Exchange Shares, stockholder approval, regulatory approval and other customaryclosing conditions set forth in the Share Exchange Agreement. The Share Exchange currently is expected to close in the second quarter of 2009. In addition tothe other closing conditions set forth in the Share Exchange Agreement, NeoStem’s obligation to close is also conditioned upon the results of due diligence,including but not limited to, legal, financial and business due diligence, being reasonably satisfactory to it. NeoStem, as well as the other parties, also havethe right to terminate the Share Exchange Agreement by written notice to the other parties if the transactions contemplated thereby are not consummated byMarch 31, 2009. 25Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The foregoing description of the Share Exchange Agreement is not complete and is qualified in its entirety by reference to the Share Exchange Agreement, whichis incorporated by reference as Exhibit 2(b) hereto. FINANCING ACTIVITIES2009 Financing ActivitiesIn order to move forward certain research and development activities, strategic relationships in various clinical and therapeutic areas as well as to supportactivities related to the Merger Agreement and Share Exchange Agreement, and other ongoing obligations of the Company, in March and February 2009, theCompany issued promissory notes (the “RimAsia Notes”) totaling $1,150,000 to RimAsia Capital Partners, L.P. (“RimAsia”), a principal stock holder of theCompany. The RimAsia Notes bear interest at a rate equal to 10% per annum and mature on October 31, 2009 except that they mature earlier in the case of anequity financing by the Company that raises in excess of $10,000,000.2008 Financing ActivitiesOn May 21, 2008, NeoStem completed a private placement of securities pursuant to which $900,000 in gross proceeds was raised (the “May 2008private placement”). On May 20 and May 21, 2008, NeoStem entered into Subscription Agreements (the "Subscription Agreements") with 16 accreditedinvestors listed therein (the "Investors"). Pursuant to the Subscription Agreements, NeoStem issued to each Investor units comprised of one share of itsNeoStem Common Stock and one redeemable five-year warrant to purchase one share of NeoStem Common Stock at a purchase price of $1.75 per share, at aper-unit price of $1.20. The warrants are not exercisable for a period of six months and are redeemable by NeoStem if the NeoStem Common Stock trades at aprice equal to or in excess of $2.40 for a specified period of time. In the May 2008 private placement, NeoStem issued an aggregate of 750,006 units toInvestors consisting of 750,006 shares of NeoStem Common Stock and 750,006 redeemable warrants, for an aggregate purchase price of $900,000. Dr.Robin L. Smith, NeoStem’s Chairman and Chief Executive Officer, purchased 16,667 units for a purchase price of $20,000 and Catherine M. Vaczy,NeoStem’s Vice President and General Counsel, purchased 7,500 units for a purchase price of $9,000. New England Cryogenic Center, Inc., or NECC, oneof the largest full-service cryogenic laboratories in the world and a strategic partner of NeoStem since October 2007, also participated in the offering. Pursuantto the terms of the Subscription Agreements, NeoStem was required to prepare and file no later than forty-five days (with certain exceptions) after the closing ofthe May 2008 private placement, a Registration Statement with the SEC to register the shares of NeoStem Common Stock issued to Investors and the shares ofNeoStem Common Stock underlying the warrants. Such registration statement was filed with the SEC on July 1, 2008.In connection with the May 2008 private placement, NeoStem paid as finders’ fees to accredited investors, cash in the amount of $3,240 and issuedfive year warrants to purchase an aggregate of 35,703 shares of NeoStem Common Stock. Such warrants contain generally the same terms as those sold to theInvestors, except they contain a cashless exercise feature and piggyback registration rights. Cash in the amount of 4% of the proceeds received by NeoStemfrom the future exercise of 30,000 of the Investor warrants is also payable to one of the finders. 26Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.On September 2, 2008, NeoStem completed a private placement of securities pursuant to which $1,250,000 in gross proceeds was raised (the“September 2008 private placement”). On September 2, 2008, NeoStem entered into a subscription agreement with RimAsia Capital Partners, L.P. Pursuantto the subscription agreement, NeoStem issued to RimAsia one million units, at a per-unit price of $1.25, each unit comprised of one share of NeoStemCommon Stock and one redeemable five-year warrant to purchase one share of NeoStem Common Stock at a purchase price of $1.75 per share. The warrantsare not exercisable for a period of six months and are redeemable by NeoStem if the NeoStem Common Stock trades at a price equal to or in excess of $3.50for a specified period of time or the dollar value of the trading volume of the NeoStem Common Stock for each day during a specified period of time equals orexceeds $100,000. In the September 2008 private placement, NeoStem thus issued 1,000,000 units to RimAsia consisting of 1,000,000 shares of NeoStemCommon Stock and 1,000,000 redeemable warrants, for an aggregate purchase price of $1,250,000. Pursuant to the terms of the subscription agreement,NeoStem is required to prepare and file no later than 180 days after the closing of the September 2008 private placement, a registration statement with the SECto register the resale of the shares of NeoStem Common Stock issued to RimAsia and the shares of NeoStem Common Stock underlying the warrants;provided, that the Company is not liable to pay specified amounts under the terms of the Subscription Agreement if the Company does not file such aregistration statement in a timely manner because the Company does not have available audited financial statements required by the SEC of a company withwhich the Company has signed a letter of intent to acquire. On December 18, 2008, Neostem and RimAsia entered into a letter agreement (the “Amendment”) pursuant to which, among other things, thewarrants issued to RimAsia in the September 2008 private placement were amended to restrict their exercisability in the event that such exercise would increaseRimAsia’s beneficial ownership of NeoStem’s Common Stock to above 19.9%. The restriction on exercisability also applies to warrants issued in anyproposed 2009 capital raise and as further discussed below. The warrants are not exercisable to the extent that the number of shares of Common Stock to beissued pursuant to such exercise would exceed, when aggregated with all other shares of Common Stock beneficially owned by RimAsia at such time, thenumber of shares of Common Stock which would result in RimAsia beneficially owning in excess of 19.9% of NeoStem’s Common Stock. Such restrictionson exercisability shall not apply upon a merger, consolidation or sale of all or substantially all of the assets of NeoStem if the shareholders of NeoStem prior tosuch transaction do not own more than 50% of the entity succeeding to the business of NeoStem after such transaction, and such restriction does not applyfollowing any exercise of any mandatory conversion or redemption rights by NeoStem. Such restriction on exercise shall remain in place until such time asapproval of NeoStem’s shareholders shall be obtained, which proposal is to be included in the Joint Proxy Statement/Prospectus to be filed in connection withthe proposed Merger. See also above “ – Merger and Share Exchange – Agreement and Plan of Merger” for information on NeoStem Class B Warrants andNeoStem Class C Convertible Preferred Stock to be issued to RimAsia in connection with the Merger, which are also the subject of the Amendment and therestriction on exercisability and conversion, respectively. See also the description of the November 2008 private placement (below), in which securities wereissued of which RimAsia may be deemed the beneficial owner, which would also be included, as appropriate, in any calculation under the Amendment. On October 23, 2008, NeoStem completed a private placement of securities pursuant to which $250,000 in gross proceeds was raised (the “October2008 private placement”). On October 15, 2008, NeoStem entered into a subscription agreement with an accredited investor. Pursuant to the subscriptionagreement, NeoStem issued to the investor 200,000 units at a per-unit price of $1.25, each unit comprised of one share of NeoStem Common Stock and onefive-year warrant to purchase one share of NeoStem Common Stock at a purchase price of $1.75 per share. The warrants are not exercisable for a period ofsix months. In the October 2008 private placement, NeoStem thus issued 200,000 units to the investor consisting of 200,000 shares of NeoStem CommonStock and 200,000 warrants, for an aggregate purchase price of $250,000. The issuance of the units was subject to the prior approval of the NYSE Amex,which approval was obtained on October 23, 2008, and on that date the units were issued. Pursuant to the terms of the subscription agreement, NeoStem isrequired to prepare and file no later than 180 days after the final closing of the October 2008 private placement, a registration statement with the SEC to registerthe resale of the shares of NeoStem Common Stock issued to the investor and the shares of NeoStem Common Stock underlying the warrants; provided, thatthe Company is not liable to pay specified amounts under the terms of the Subscription Agreement if the Company does not file such a registration statementin a timely manner because the Company does not have available audited financial statements required by the SEC of a company the Company proposes toacquire.On November 26, 2008, NeoStem completed a private placement of securities pursuant to which $500,000 in gross proceeds was raised (the“November 2008 private placement”). On November 7, 2008, NeoStem entered into a subscription agreement with Fullbright Finance Limited, a corporationorganized under the laws of the British Virgin Islands and an affiliate of EET. Pursuant to the subscription agreement, NeoStem issued to the investor 400,000units at a per-unit price of $1.25, each unit comprised of one share of NeoStem Common Stock and one redeemable five-year warrant to purchase one share ofNeoStem Common Stock at a purchase price of $1.75 per share. The warrants are not exercisable for a period of six months and are redeemable by NeoStemif the NeoStem Common Stock trades at a price equal to or in excess of $3.50 for a specified period of time. In the November 2008 private placement,NeoStem thus issued 400,000 Units to the investor consisting of 400,000 shares of NeoStem Common Stock and 400,000 redeemable warrants, for anaggregate purchase price of $500,000. The issuance of the units was subject to the prior approval of the NYSE Amex. Pursuant to the terms of thesubscription agreement, NeoStem is required to prepare and file no later than 180 days after the final closing of the November 2008 private placement, aregistration statement with the SEC to register the resale of the shares of NeoStem Common Stock issued to the investor and the shares of NeoStem CommonStock underlying the warrants; provided, that the Company is not liable to pay specified amounts under the terms of the Subscription Agreement if theCompany does not file such a registration statement in a timely manner because the Company does not have available audited financial statements required bythe SEC of a company the Company proposes to acquire. In connection with Fullbright’s purchase of the Units, EET, the principal shareholders of whichare also the principal shareholders of Fullbright, borrowed $500,000 from RimAsia, and the Units acquired by Fullbright were pledged to RimAsia ascollateral therefor. 27Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.2007 Financing ActivitiesIn January 2007, NeoStem had entered into a strategic alliance with UTEK, a specialty finance company focused on technology transfer, as part ofits plan to move forward to expand its proprietary position in the adult stem cell collection and storage arena as well as the burgeoning field of regenerativemedicine. The purpose of the agreement was to identify potential technology acquisition opportunities that fit NeoStem’s strategic vision. Through its strategicalliance agreements with companies in exchange for their equity securities, UTEK assists such companies in enhancing their new product pipeline byfacilitating the identification and acquisition of innovative technologies from universities and research laboratories worldwide. UTEK is a businessdevelopment company with operations in the United States, United Kingdom and Israel. In January 2007, NeoStem issued 12,000 shares of NeoStemCommon Stock to UTEK, vesting as to 1,000 shares per month commencing January 2007. See above for information on NeoStem’s acquisition of the VSELtechnology in November 2007 via a transaction with UTEK.In January and February 2007, NeoStem raised an aggregate of $2,500,000 through the private placement of 250,000 units at a price of $10.00 perunit to 35 accredited investors (the “January 2007 private placement”). Each unit was comprised of two shares of NeoStem Common Stock, one redeemableseven-year warrant to purchase one share of NeoStem Common Stock at a purchase price of $8.00 per share and one non-redeemable seven-year warrant topurchase one share of NeoStem Common Stock at a purchase price of $8.00 per share. NeoStem issued an aggregate of 500,000 shares of NeoStem CommonStock, and warrants to purchase up to an aggregate of 500,000 shares of NeoStem Common Stock at an exercise price of $8.00 per share. Emerging GrowthEquities, Ltd (“EGE”), the placement agent for the January 2007 private placement, received a cash fee equal to $171,275 and was entitled to expensereimbursement not to exceed $50,000. NeoStem also issued to EGE redeemable seven-year warrants to purchase 34,355 shares of NeoStem Common Stock ata purchase price of $5.00 per share, redeemable seven-year warrants to purchase 17,127 shares of NeoStem Common Stock at a purchase price of $8.00 pershare and non-redeemable seven-year warrants to purchase 17,127 shares of NeoStem Common Stock at a purchase price of $8.00 per share. Pursuant to theterms of the January 2007 private placement, NeoStem was obligated to prepare and file, no later than ten days after the filing of NeoStem’s Annual Report onForm 10-K, a registration statement with the SEC to register the shares of NeoStem Common Stock issued to the investors and the shares of NeoStemCommon Stock underlying the warrants issued to the investors and to EGE. Such registration statement was filed with the SEC on February 7, 2007. TheJanuary 2007 private placement was conditioned upon entry by the NeoStem Board of Directors and executive officers into a lock-up agreement, pursuant towhich such directors and officers will not, without the consent of EGE, sell or transfer their NeoStem Common Stock until the earlier of: (a) six monthsfollowing the effective date of the registration statement filed to register the shares underlying the units, or (b) twelve months following the sale of the units.This registration statement was declared effective by the SEC on April 25, 2007.In August, 2007, NeoStem raised an aggregate of $6,350,000 through a best efforts underwritten public offering of 1,270,000 units at a price of$5.00 per unit (the “August 2007 public offering”). Each unit consisted of one share of NeoStem Common Stock and a five year Class A warrant to purchaseone-half a share of NeoStem Common Stock at a price of $6.00 per share. Thus, 1,000 units consisted of 1,000 shares of NeoStem Common Stock andClass A warrants to purchase 500 shares of NeoStem Common Stock. The aggregate number of units sold was 1,270,000, the aggregate number of shares ofNeoStem Common Stock included within the units was 1,270,000 and the aggregate number of Class A Warrants included within the units was 535,000.Mercer Capital, Ltd. (“Mercer”) acted as lead underwriter for the August 2007 public offering. In connection with this offering, NeoStem issued five yearwarrants to purchase an aggregate of 95,250 shares of NeoStem Common Stock at $6.50 per share to Mercer and other participating underwriters. Afterpayment of underwriting commissions and expenses and other costs of the August 2007 public offering, the aggregate net proceeds to NeoStem were$5,620,000. 28Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.2006 Financing ActivitiesOn December 30, 2005, and in January 2006, NeoStem consummated the private placement sale to 19 accredited investors of units consisting ofconvertible promissory notes and detachable warrants (“the WestPark private placement”). Gross proceeds raised were $250,000 on December 30, 2005 and$250,000 in January 2006, totaling an aggregate of $500,000 in gross proceeds. Each unit was comprised of: (a) a nine month note in the principal amount of$25,000 bearing 9% simple interest, payable semi-annually, with the 2nd payment paid upon maturity, convertible into shares of NeoStem Common Stock atan initial conversion price of $6.00 per share; and (b) 4,167 detachable three year warrants, each for the purchase of one share of NeoStem Common Stock atan exercise price of $12.00 per share. The notes were subject to mandatory conversion by NeoStem if the closing price of the NeoStem Common Stock hadbeen at least $18.00 for a period of at least 10 consecutive trading days prior to the date on which notice of conversion was sent by NeoStem to the holders ofthe promissory notes, and if the underlying shares were then registered for resale with the SEC. Holders of the units are entitled to certain registration rights (seebelow). NeoStem issued to WestPark Capital, Inc., the placement agent for the WestPark private placement, (i) 5,000 shares of NeoStem Common Stock(2,500 shares on December 30, 2005 and 2,500 shares in January 2006); and (ii) warrants to purchase an aggregate of 8,334 shares of NeoStem CommonStock (4,167 on December 30, 2005 and 4,167 in January 2006). By January 2007 all the convertible promissory notes issued in the WestPark privateplacement had either been converted into shares of NeoStem Common Stock or repaid by NeoStem (see below).In May 2006, NeoStem entered into an advisory agreement with Duncan Capital Group LLC (“Duncan”). Pursuant to the advisory agreement,Duncan provided to NeoStem on a non-exclusive best efforts basis, services as a financial consultant in connection with any equity or debt financing, Merger,acquisition as well as with other financial matters. In return for these services, NeoStem was paying to Duncan a monthly retainer fee of $7,500 (50% ofwhich could be paid by NeoStem in shares of its NeoStem Common Stock valued at fair market value) and reimbursing it for its reasonable out-of-pocketexpenses up to $12,000. Pursuant to the advisory agreement, Duncan also agreed that it or an affiliate would act as lead investor in a proposed privateplacement of securities, for a fee of $200,000 in cash and 24,000 shares of restricted NeoStem Common Stock. On June 2, 2006 (the “June 2006 privateplacement”), NeoStem entered into a securities purchase agreement with 17 accredited investors (the “June 2006 investors”). DCI Master LDC, an affiliate ofDuncan, acted as lead investor. Duncan received its fee as described above. NeoStem issued to each June 2006 investor shares of its NeoStem Common Stockat a per-share price of $4.40 along with a five-year warrant to purchase a number of shares of NeoStem Common Stock equal to 50% of the number of sharesof NeoStem Common Stock purchased by the June 2006 investor (together with the NeoStem Common Stock issued, the “June 2006 securities”). The grossproceeds from this sale were $2,079,000. In February 2007, the term of this agreement was extended through December 2007. Additionally, it was amended toprovide that the monthly retainer fee be entirely paid by issuing to Duncan an aggregate of 15,000 shares of NeoStem Common Stock vesting monthly over theremaining term of the agreement. The vesting of these shares was accelerated in July 2007 such that they were fully vested and the advisory agreement wascanceled in August 2007.Pursuant to the securities purchase agreement for the June 2006 private placement, NeoStem expanded the size of its Board to four directors, andappointed Dr. Robin L. Smith as Chairman of the Board and Chief Executive Officer of NeoStem. Dr. Smith, who was previously Chairman of the AdvisoryBoard of NeoStem, purchased 5,000 shares of NeoStem Common Stock and warrants to purchase 2,400 shares of NeoStem Common Stock pursuant to theterms of the securities purchase agreement. NeoStem also agreed to expand the size of the Board upon the initial closing under the securities purchase agreementto permit DCI Master LDC to designate one additional independent member to the NeoStem Board of Directors reasonably acceptable to NeoStem. RichardBerman was originally appointed to the NeoStem Board of Directors in November 2006 to serve as such designee. The securities purchase agreement alsoprohibits NeoStem from taking certain action without the approval of a majority of the Board of Directors for so long as the purchasers in the June 2006private placement own at least 20% of the NeoStem Common Stock, including making loans, guarantying indebtedness, incurring indebtedness that is notalready included in a Board approved budget on the date of the securities purchase agreement that exceeds $100,000, encumbering NeoStem’s technology andintellectual property or entering into new or amending employment agreements with executive officers. DCI Master LDC was also granted access to Companyfacilities and personnel and given other information rights. Pursuant to the securities purchase agreement, all then current and future officers and directors ofNeoStem were to not, without the prior written consent of DCI Master LDC, dispose of any shares of capital stock of NeoStem, or any securities convertibleinto, or exchangeable for or containing rights to purchase, shares of capital stock of NeoStem until three months after the effective date of the registrationstatement filed with the SEC to register the securities issued in the June 2006 private placement (described below). Such registration statement was declaredeffective on November 6, 2006. 29Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The officers of NeoStem, as a condition of the initial closing under the securities purchase agreement for the June 2006 private placement, enteredinto letter agreements with NeoStem pursuant to which they converted an aggregate of $278,653 of accrued salary into shares of NeoStem Common Stock at aper share price of $4.40. After adjustments for applicable payroll and withholding taxes which were paid by NeoStem, NeoStem issued to such officers anaggregate of 37,998 shares of NeoStem Common Stock. NeoStem also adopted an Executive Officer Compensation Plan, effective as of the date of closing ofthe securities purchase agreement and pursuant to the letter agreements each officer agreed to be bound by the Executive Officer Compensation Plan. In additionto the conversion of accrued salary, the letter agreements provided for a reduction by 25% in base salary for each officer until NeoStem achieves certainmilestones, the granting of options to purchase shares of NeoStem Common Stock under NeoStem’s 2003 Equity Participation Plan which become exercisableupon NeoStem achieving certain revenue milestones and the acceleration of the vesting of certain options and restricted shares held by the officers. InJanuary 2007, the milestones relating to the reduction in base salary had been achieved; however, the same officers (and in addition the Chief Executive Officerwho became an employee in connection with the June 2006 private placement) agreed to subsequent amendments to or replacements of their employmentagreements which provided instead for a 20% reduction in base salary and/or agreement by the officer to extend their employment term, as well as certainadditional or amended terms.In connection with the securities purchase agreement, on June 2, 2006 NeoStem entered into a registration rights agreement with each of the June 2006investors (the “June 2006 registration rights agreement”). Pursuant to the June 2006 registration rights agreement, NeoStem was obligated to prepare and file nolater than June 30, 2006 a registration statement with the SEC to register the shares of NeoStem Common Stock and the shares of Common Stock underlyingthe warrants issued in the June 2006 private placement. NeoStem and the June 2006 investors agreed to amend the registration rights agreement and extend thedue date of the registration statement to August 31, 2006. A registration statement was filed pursuant thereto and declared effective by the SEC onNovember 6, 2006.Pursuant to the terms of the WestPark private placement (described above), NeoStem agreed to file with the SEC and have effective by July 31,2006, a registration statement registering the resale by the investors in the WestPark private placement of the shares of NeoStem Common Stock underlying theconvertible promissory notes and the warrants sold in the WestPark private placement. In the event NeoStem did not do so, (i) the conversion price of theconvertible promissory notes would be reduced by 5% each month, subject to a floor of $4.00; (ii) the exercise price of the warrants would be reduced by 5%each month, subject to a floor of $10.00; and (iii) the warrants could be exercised pursuant to a cashless exercise provision. NeoStem did not have theregistration statement effective by July 31, 2006 and requested that the investors in the WestPark private placement extend the date by which the registrationstatement was required to be effective until February 28, 2007. NeoStem also offered to the investors the option of (A) extending the term of the convertible notefor an additional four months from the maturity date in consideration for which (i) NeoStem would issue to the investor for each $25,000 in principal amountof the convertible note 568 shares of unregistered NeoStem Common Stock; and (ii) the exercise price per warrant would be reduced from $12.00 to $8.00, or(B) converting the convertible note into shares of NeoStem Common Stock in consideration for which (i) the conversion price per conversion share would bereduced to $4.40; (ii) NeoStem would issue to the investor for each $25,000 in principal amount of the Note, 1,136 shares of NeoStem Common Stock;(iii) the exercise price per warrant would be reduced from $12.00 to $8.00; and (iv) a new warrant would be issued substantially on the same terms as theoriginal Warrant to purchase an additional 4,167 shares of NeoStem Common Stock for each $25,000 in principal amount of the convertible note at anexercise price of $8.00 per share. Pursuant to this, the investor was also being asked to waive any and all penalties and liquidated damages accumulated as ofthe date of the agreement. 30Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.In September 2006, NeoStem revised the offer relating to the option of conversion of the WestPark Notes by eliminating the issuance of the additional1,136 shares of NeoStem Common Stock for each $25,000 in principal amount of the Note converted. As of October 30, 2006, investors holding $425,000of the $500,000 of convertible promissory notes had agreed to convert them into shares of NeoStem Common Stock and $162,500 (of which $137,500 inprincipal amount was subsequently transferred and converted by the transferees) had agreed to extend the term of the convertible promissory notes on the termsset forth above. On November 6, 2006, the registration statement was declared effective. In January 2007, the remaining $75,000 in outstanding convertiblepromissory notes were repaid.During July and August 2006, NeoStem raised an aggregate of $1,750,000 through the private placement to 34 accredited investors of 397,727shares of its NeoStem Common Stock at $4.40 per share and warrants to purchase 198,864 shares of NeoStem Common Stock at $8.00 per share (the“Summer 2006 private placement”). The terms of the Summer 2006 private placement were substantially similar to the terms of the June 2006 privateplacement.FORMER BUSINESS OPERATIONSNeoStem was incorporated under the laws of the State of Delaware in September 1980 under the name Fidelity Medical Services, Inc. Under priormanagement it engaged in various businesses, including the development and sale of medical imaging products, the retail sale and wholesale distribution ofstationery and related office products in the United Kingdom, operation of a property and casualty insurance business, and ultimately through June 2002 thesale of extended warranties and service contracts over the Internet covering automotive, home, office, personal electronics, home appliances, computers andgarden equipment. In June 2002, management determined, in light of continuing operating losses, to discontinue its warranty and service contract businessand to seek new business opportunities for NeoStem. NeoStem entered a new line of business where it provided capital and guidance to companies in multiplesectors of the healthcare and life science industries, in return for a percentage of revenues, royalty fees, licensing fees and other product sales of the targetcompanies. In addition to such activities, since June 2002 NeoStem continued to “run off” the sale of its warranties and service contracts. This run off wascompleted in March 2007. EMPLOYEESAs of March 27, 2009, NeoStem had 16 employees, of which 11 are full-time. 31Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ITEM 1A. RISK FACTORS THE RISKS DESCRIBED BELOW ARE NOT THE ONLY RISKS FACING THE COMPANY. ADDITIONAL RISKS THAT THECOMPANY DOES NOT YET KNOW OF OR THAT IT CURRENTLY THINKS ARE IMMATERIAL MAY ALSO IMPAIR ITS BUSINESSOPERATIONS. IF ANY OF THE RISKS OCCUR, ITS BUSINESS STRATEGY, FINANCIAL CONDITION OR OPERATING RESULTSCOULD BE ADVERSELY AFFECTED. RISKS RELATING TO THE COMPANY'S FINANCIAL CONDITION AND COMMON STOCK We have a history of operating losses and we will continue to incur losses. Since our inception in 1980, we have generated only limited revenues from sales and have incurred substantial net losses of $9,242,071,$10,445,473 and $6,051,400 for the years ended December 31, 2008, 2007 and 2006, respectively. We expect to incur additional operating losses as well asnegative cash flow from our adult stem cell collection, processing and storage business operations until we successfully commercialize and develop thisbusiness, if ever. The Company will incur losses and negative cash flow for the foreseeable future as a result of our research and development activities andother operations until the VSEL technology and such operations can be successfully implemented, integrated into our business and commercialized, if ever. We have a history of liquidity problems, which may affect our ability to raise capital. At December 31, 2008, we had a cash balance of $431,000, negative working capital of $(431,000) and a stockholders’ equity of $863,200. Ourhistory of illiquidity and losses may make it difficult for us to raise capital on favorable terms. We have from time to time raised capital for our activitiesthrough the sale of our equity securities and promissory notes. Most recently, we raised an aggregate of $1,150,000 in 2009 through the issuance ofpromissory notes, and in 2008 we raised an aggregate of $2,900,000 through the private placement sale of our common stock and warrants to purchase ourcommon stock. Such capital raising activities have enabled us to pursue our business plan and begin to grow our adult stem cell collection and storagebusiness, including expanding marketing and sales activities, as well as to pursue acquisition opportunities. The funds we obtained through the acquisitionof SCTI funded certain early obligations under our agreements relating to our VSEL technology; however, we expect that substantial additional funds will needto be raised in order for us to continue to fund additional research and development activities relating to the VSEL technology, support marketing effortsrelating to the adult stem cell collection centers in the Company’s network and to pursue related business opportunities, including medical tourism and theCompany’s expansion activities in China. The Company has applied for SBIR grants and also anticipates seeking to obtain funds through applications forother State and Federal grants, grants abroad, direct investments into SCTI, strategic arrangements as well as other funding sources to help offset all or aportion of these costs; however, there can be no assurance that such funding will be received. We will need substantial additional financing and/or additional revenues to continue operations.We will require substantial additional capital to fund our current operating plan for our business, including the development of our VSEL technologyand support marketing efforts relating to the adult stem cell collection centers in the Company’s network and to pursue related business opportunities,including medical tourism and expansion into China. In addition, our cash requirements may vary materially from those now planned because of expensesrelating to marketing, advertising, sales, distribution, research and development and regulatory affairs, as well as the costs of maintaining, expanding andprotecting our intellectual property portfolio, including potential litigation costs and liabilities. 32Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. If we are unable to obtain future capital on acceptable terms, this will negatively affect our business operations and current investors. We expect that in the future we will seek additional capital through public or private financings. Additional financing may not be available onacceptable terms, or at all. If additional capital is raised through the sale of equity, or securities convertible into equity, further dilution to then existingstockholders will result. If additional capital is raised through the incurrence of debt, our business could be affected by the amount of leverage incurred. Forinstance, such borrowings could subject us to covenants restricting our business activities, paying interest would divert funds that would otherwise beavailable to support commercialization and other important activities, and holders of debt instruments would have rights and privileges senior to those ofequity investors. If we are unable to obtain adequate financing on a timely basis, we may be required to delay, reduce the scope of or eliminate some of ourplanned activities, any of which could have a material adverse effect on the business. We will continue to experience cash outflows.We continue to incur expenses, including the salary of our executive officers, rent, legal, marketing and accounting fees, insurance and generaladministrative expenses. We are building the infrastructure for our business and will experience additional cash outflows in the foreseeable future. It is notpossible at this time to state whether we will be able to finance these cash outflows or when we will be able to achieve and sustain a positive cash position. Ourability to become profitable will depend on many factors, including our ability to successfully commercialize and develop the business. We cannot assure thatwe will ever become profitable and we expect to continue to incur losses. NS California, the company from which we initially acquired our adult stem cellbusiness, had nominal operations and nominal assets at the time of our acquisition. From its inception in 2002 through September 30, 2005, NS Californiahad aggregate revenues of $25,500, and aggregate losses of $2,357,940. We cannot guarantee that we will be more successful than NS California inachieving sufficient revenues for profitability. Even if we do achieve profitability, we cannot guarantee that we can sustain or increase profitability in thefuture. If revenues grow slower than we anticipate, or if operating expenses exceed our expectations or cannot be adjusted accordingly, then our business,results of operations, financial condition and cash flows will be materially and adversely affected. Because our strategy includes acquisitions of otherbusinesses, products or technologies, acquisition expenses and any cash used to make these acquisitions will reduce our available cash. Our stock has historically had limited trading volume. Our common stock currently trades on the NYSE Amex (formerly known as the American Stock Exchange) and until August 9, 2007 was traded onthe Over-the-Counter Bulletin Board, an electronic, screen-based trading system operated by the National Association of Securities Dealers, Inc. Our stock hasgenerally been thinly traded and, although trading volume has increased since it has commenced trading on the NYSE Amex, we cannot assure you that ourstock will continue to have improved liquidity or that it will increase above current levels. Our Class A Warrants also trade on the NYSE Amex, but have hadvery limited trading volume. As a result, an investor may find it difficult to dispose of our common stock or warrants. Our stock and Class A warrants may be delisted from the NYSE Amex. On February 10, 2009, we received notice from the NYSE Amex indicating that the Company is not in compliance with Section 704 of the NYSE AmexCompany Guide (the “Guide”), which requires a listed company to hold meetings of its shareholders annually. On November 3, 2008, the Company hadannounced that it planned to hold a shareholder meeting to obtain approval of the Share Exchange Agreement and the Merger Agreement. It had been theCompany’s understanding that this series of events constituted sufficiently unusual circumstances to permit a single combined meeting to be held in 2009 andthat this would be in compliance with Section 704. The Company was afforded the opportunity to submit a plan of compliance to the NYSE Amex by March10, 2009, that demonstrates it will bring it back into compliance by August 11, 2009. The Company submitted such a plan on a timely basis. TheCompany is also nearing the NYSE Amex’s financial thresholds for continued listing including minimum shareholders’ equity requirements and certain otherquantitative and qualitative listing standards. If the plan is not accepted by the NYSE Amex or the Company’s financial condition does not improve, theCompany may be subject to delisting procedures as set forth in Section 1010 and Part 12 of the Guide. If the Company is delisted and is not able to relist, orto list on another exchange, liquidity in our securities may be reduced and an investor may find it difficult to dispose of our common stock and Class AWarrants. 33Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Our stock price could be volatile. The price of our common stock has fluctuated widely in the past and may be more volatile in the future. Factors such as the announcements ofgovernment regulation, new products or services introduced by us or by our competition, healthcare legislation, trends in health insurance, litigation,fluctuations in operating results, our success in commercializing our business, market conditions for healthcare stocks in general as well as economicrecession could have a significant impact on the future price of our common stock. The historically low volume of trading in our common stock has made itmore vulnerable, and it may continue to be more vulnerable, to rapid changes in price in response to market conditions.Sales of substantial amounts of our common stock in the open market, or the availability of such shares for sale, could adversely affect the priceof our common stock and other securities. We had 7,749,358 shares of common stock outstanding as of March 27, 2009. The following securities that may be exercised for, or are convertibleinto, shares of our common stock were issued and outstanding as of March 27, 2009: ·Options. Stock options to purchase 1,723,300 shares of our common stock at a weighted average exercise price of approximately $3.95 pershare. ·Class A Warrants. Warrants to purchase 635,000 shares of our common stock at an exercise price of $6.00 per share. The Class A warrantswere issued in our public offering in August 2007. ·Underwriters Warrants. Warrants issued to the underwriter in our public offering in August 2007 to purchase 95,250 shares of our commonstock at an exercise price of $6.50 per share (130% of the price of the common stock sold in the public offering). ·Other Warrants. Warrants to purchase 5,280,692 shares of our common stock at a weighted average exercise price of approximately $3.61 pershare. The vast majority of the outstanding shares of NeoStem Common Stock, as well as substantially all the shares of NeoStem Common Stock thatmay be issued under our outstanding options, warrants and Class A warrants, are or have the contractual right to be registered or are otherwise not restrictedfrom trading. 34Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Our outstanding warrants may negatively affect our ability to raise additional capital.During the terms of our outstanding warrants, Class A warrants and underwriter warrants, their holders are given the opportunity to profit from arise in the market price of our common stock. So long as these warrants are outstanding, the terms on which we could obtain additional capital may beadversely affected. The holders of these warrants might be expected to exercise them at a time when we would, in all likelihood, be able to obtain any neededcapital by a new offering of securities on terms more favorable than those provided by these warrants.Failure To Maintain Effective Internal Controls In Accordance With Section 404 Of The Sarbanes-Oxley Act Could Have A Material AdverseEffect On Our Business And Stock Price.If we fail to maintain adequacy of our internal controls in accordance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and assuch standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that wehave effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Failure to achieve and maintain an effectiveinternal control environment could have a material adverse effect on our stock price. During the course of our testing of our internal controls, we may identify,and have to disclose, material weaknesses or significant deficiencies in our internal controls that will have to be remediated. Implementing any appropriatechanges to our internal controls may require specific compliance training of our directors, officers and employees, entail substantial costs in order to modifyour existing accounting systems, and take a significant period of time to complete. Such changes may not, however, be effective in maintaining the adequacyof our internal controls, and any failure to maintain that adequacy, or consequent inability to produce accurate financial statements on a timely basis, couldincrease our operating costs and could materially impair our ability to operate our business. In addition, investors’ perceptions that our internal controls areinadequate or that we are unable to produce accurate financial statements may negatively affect our stock price. RISKS RELATING TO THE COMPANY'S BUSINESS If the potential of stem cell therapy to treat serious disease is not realized, the value of our stem cell collection, processing and storage and ourdevelopment programs could be significantly reduced. The potential of stem cell therapy to treat serious disease is currently being explored. Stem cell therapy is not a commonly used procedure and it hasnot been proven in clinical trials that stem cell therapy will be an effective treatment for diseases other than those currently addressed by hematopoietic stemcell transplants (hematopoietic stem cells are the stem cells from which all blood cells are made). No stem cell products have been successfully developed andcommercialized to date, and none have received regulatory approval in the United States or internationally. Stem cell therapy may be susceptible to variousrisks, including undesirable and unintended side effects, unintended immune system responses, inadequate therapeutic efficacy or other characteristics thatmay prevent or limit its approval or commercial use. The value of our stem cell collection, processing and storage and our development programs could besignificantly reduced if the use of stem cell therapy to treat a wide-range of serious diseases is not proven effective in the near future. Because the stem cell industry is subject to rapid technological and therapeutic changes, our future success will materially depend on the viabilityof the commercial use of stem cells for the treatment of disease. Our success materially depends on the development of therapeutic treatments and cures for disease using stem cells. The broader medical andresearch environment for such treatments and cures critically affects the utility of stem cells, the services we offer to the public, and our future success. Thevalue of stem cells in the treatment of disease is subject to potentially revolutionary technological, medical and therapeutic changes. However, futuretechnological and medical developments or improvements in conventional therapies could render the use of stem cells and our services and equipment obsoleteand unmarketable. As a result, there can be no assurance that our services will provide competitive advantages over other technologies. If technological ormedical developments arise that materially alter the commercial viability of our technology or services, we may be forced to incur significant costs in replacingor modifying equipment in which we have already made a substantial investment prior to the end of its anticipated useful life. Alternatively, significantadvances may be made in other treatment methods or in disease prevention techniques which could significantly reduce or entirely eliminate the need for theservices we provide. The materialization of any of these risks could have a material adverse effect on our business, financial condition, our results ofoperations or our ability to operate at all. 35Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. We may be forced to undertake lengthy and costly efforts to build market acceptance of our stem cell collection, processing and storage services,the success of which is critical to our profitability. There can be no assurance that these services will gain market acceptance. To date, only aminimal number of collections have been performed at the collection centers in our network. Our future success in the business of collecting, processing and storing adult stem cells depends on the successful and continued market acceptanceof this service. Broad use and acceptance of our service requires marketing expenditures and education and awareness of consumers and medical practitionerswho, under present law, must order stem cell collection on behalf of a potential customer. The time and expense required to educate and build awareness of ourservices and their potential benefits could significantly delay market acceptance and our ultimate profitability. The successful commercialization of ourservices will also require that we satisfactorily address the concerns of medical practitioners in order to avoid potential resistance to recommendations for ourservices and ultimately reach our potential consumers. No assurances can be given that our business plan and marketing efforts will be successful, that wewill be able to commercialize our services, or that there will be market acceptance of our services or clinical acceptance of our services by physicians sufficientto generate any material revenues for us. To date, only a minimal number of collections have been performed at the collection centers in our network. Ethical and other concerns surrounding the use of stem cell therapy may increase the regulation of or negatively impact the public perception ofour stem cell services, thereby reducing demand for our services. The use of embryonic stem cells for research and stem cell therapy has been the subject of debate regarding related ethical, legal and social issues.Although our business only utilizes adult stem cells and does not involve the more controversial use of embryonic stem cells, the use of other types of humanstem cells for therapy could give rise to similar ethical, legal and social issues as those associated with embryonic stem cells. Additionally, it is possible thatour business could be negatively impacted by any stigma associated with the use of embryonic stem cells if the public fails to appreciate the distinctionbetween the use of adult versus embryonic stem cells. The commercial success of our business will depend in part on public acceptance of the use of stem celltherapy, in general, for the prevention or treatment of human diseases. Public attitudes may be influenced by claims that stem cell therapy is unsafe orunnecessary, and stem cell therapy may not gain the acceptance of the public or the medical community. Public pressure or adverse events in the field of stemcell therapy that may occur in the future also may result in greater governmental regulation of our business creating increased expenses and potential regulatorydelays relating to the approval or licensing of any or all of the processes and facilities involved in our stem cell banking services. In the event that the use ofstem cell therapy becomes the subject of adverse commentary or publicity, our business could be adversely affected and the market price for our commonstock could be significantly harmed. 36Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. We operate in a highly regulated environment, and our failure to comply with applicable regulations, registrations and approvals would materiallyand adversely affect our business. Historically, the FDA has not regulated banks that collect and store stem cells. More recent changes, however, require establishments engaged in therecovery, processing, storage, labeling, packaging or distribution of any Human Cells, Tissues, and Cellular and Tissue-Based Products (HCT/Ps) or thescreening or testing of a cell tissue donor to register with the FDA. The registration requirement was effective as of January 2004 and we are currently soregistered. The FDA also adopted rules in May 2005 that regulate current Good Tissues Practices (cGTP). Certain of our operations, or operations of ourcontracted service providers, are subject to these regulations, and there can be no assurance that we or they will be able, or will have the resources, to complyor to remain in compliance. Future FDA regulations could also adversely impact or limit our ability to market or perform our services. In order to collect andstore blood stem cells we must conduct (or arrange for the conduct of) a variety of laboratory tests which are regulated under the federal Clinical LaboratoryImprovement Amendments (CLIA). Any facility conducting regulated tests must obtain a CLIA certificate of compliance and submit to regular inspection.Some states require additional regulation and oversight of clinical laboratories operating within their borders and some impose obligations on out-of-state laboratories providing services to their residents. Many of the states in which we, our strategic partners or members of our collection network engage incollection, processing or storage activities have licensing requirements that must be complied with. Additionally, there may be state regulations impacting theuse of blood products that would impact our business. We currently have a biologics license from the State of California. We also have two provisionallicenses from the State of New York, which permit the Company’s California facility to collect, process and store hematopoietic progenitor cells (“HPCs”)collected from New York residents, and also permit the solicitation in New York relating to the collection of HPCs. A third provisional license received inJanuary 2008, permits the California facility to collect, process, store and use for medical research HPCs collected from New York residents. New EnglandCryogenic Center, Inc., or NECC, the cryogenic laboratory with whom we have formed a strategic alliance to provide additional processing and storagecapacity for consumers on the East Coast, to process and store for certain research purposes; and PCT, the facility with whom we have formed a strategicalliance to provide additional processing and storage capacity for commercial purposes at the cGMP level at its California and New Jersey facilities, have eachrepresented to the Company that each has such licenses as are required to perform the services provided for under their respective agreements with theCompany. Each such license is subject to certain limitations. There can be no assurance that we, our strategic partners or members of our collection centernetwork will be able to obtain any necessary licenses required to conduct business in any states, or maintain licenses that are required and obtained withrespect to such states, including California and New York. Certain licensing requirements involve the need to hire medical directors and others with certaintraining and technical backgrounds and there can be no assurance that such individuals can be retained or will remain retained. We may also be subject tostate and federal privacy laws related to the protection of our customers’ personal health information and state and federal laws related to the security of suchpersonal health information and other personal data to which we would have access through the provision of our services. In particular, we serve as a “business associate” of various health care providers in our collection center network who are obligated to comply with privacy and security standardsadopted under the Health Insurance Portability and Accountability Act of 1996 (HIPAA). As a business associate, we incur certain regulatory obligationswhich will be changing over the next year as a result of amendments to HIPAA under the American Recovery and Reinvestment Act of 2009 (ARRA). UnderARRA, our privacy and security compliance burden will increase, and we will be subject to audit and enforcement by the federal government and in somecases, enforcement by state authorities. We will also be obligated to publicly disclose wrongful disclosures or losses of personal health information. We maybe required to spend substantial amounts of time and money to comply with these requirements, any regulations and licensing requirements, as well as anyfuture legislative and regulatory initiatives. Failure to comply with applicable regulatory requirements or delay in compliance may result in, among otherthings, injunctions, operating restrictions, and civil fines and criminal prosecution which would have a material adverse effect on the marketing and sales ofour services and impair our ability to operate profitably or preclude our ability to operate at all in the future. NeoStem is in the process of transferring itsprocessing and storage operations to NECC and PCT due to space constraints at its California facility. Any delay in complying with licensing requirementsapplicable to such new processing and storage facilities could have a material adverse impact on our business. 37Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Our adult stem cell collection, processing and storage business was not contemplated by many existing laws and regulations.The service that we provide is unique. It is not medical treatment, although it involves medical procedures. It is not clinical research, although wehave entered the research and development arena relating to the VSEL technology and additional research participation is part of our business plan. Ourresearch activities are subject to different regulations than our commercial activities. Our adult stem cell collection, processing and storage business was notcontemplated by many of the regulations in the field in which we operate and as a result, there is often considerable uncertainty when we are analyzing theapplicability of regulatory requirements. We have devoted significant resources to ensuring compliance with those laws that we believe to be applicable andwhen applicability of a law is in doubt, we have opted to comply in order to minimize risk. It is possible, however, that regulators may disagree with some ofour interpretations of the law prompting additional compliance requirements or even enforcement actions. Such enforcement may have a material adverse effecton our operations or may require re-structuring of our operations or impair our ability to operate profitably.Our failure to comply with laws related to hazardous materials could materially harm us.We are subject to state and federal laws regulating the proper disposal of biohazardous material. Although we believe we are currently in compliancewith all such applicable laws, a violation of such laws, or the future enactment of more stringent laws or regulations, could subject us to liability fornoncompliance and may require us to incur costs and/or otherwise have a material adverse effect on our ability to do business.Side effects or limitations of the stem cell collection process or a failure in the performance of our or our strategic partners’ cryopreservationstorage facility or systems could harm our business and reputation.To the extent a customer experiences adverse side effects from the stem cell collection process, the quantities of stem cells collected through ourprocess are ultimately determined to be in inadequate therapeutic amounts, or our or our strategic partners’ cryopreservation storage services are disrupted ordiscontinued, or our ability to provide banked stem cells is impaired for any reason, our business and operations could be adversely affected. Any equipmentfailure that causes a material interruption or discontinuance in our or our strategic partners’ cryopreservation storage of stem cell specimens could result instored specimens being damaged and unable to be utilized. Adverse side effects of the collection process, limitations of the collection process (such as whetherthe collection process produces a sufficient quantity of stem cells for all future therapeutic applications) or specimen damage (including contamination or lossin transit to us), could result in litigation against us and reduced future revenue, as well as harm to our reputation. Our insurance may not adequatelycompensate us for any losses that may occur due to any such adverse side effects, limitations or failures in our or our strategic partners’ systems orinterruptions in our or our strategic partners’ ability to maintain proper, continued, cryopreservation storage services. Our and our strategic partners’ systemsand operations are vulnerable to damage or interruption from fire, flood, equipment failure, break-ins, tornadoes and similar events for which we do not haveredundant systems or a formal disaster recovery plan and we may not carry sufficient business interruption insurance to compensate us for losses that mayoccur. Any claim of adverse side effects or limitations or material disruption in our or our strategic partners’ ability to maintain continued uninterruptedstorage systems could have a material adverse effect on our business, operating results and financial condition. 38Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. We are dependent on existing relationships with third parties to conduct our business.Our process of collecting stem cells involves the injection of a “mobilizing agent” which causes the stem cells to leave the bone marrow and enter intothe blood stream. The injection of this mobilizing agent is an integral part of the collection process. There is currently only one supplier of this mobilizingagent, and we are currently dependent upon our relationship with such supplier to maintain an adequate supply. Although we continue to explore alternativemethods of stem cell collection including the use of alternative mobilizing agents, there can be no assurance that any such methods will prove to be successful.In the event that our supplier is unable or unwilling to continue to supply a mobilizing agent to us on commercially reasonable terms, and we are unable toidentify alternative methods or find substitute suppliers on commercially reasonable terms, we may not be able to successfully commercialize our business.We are also currently using only one outside “apheresis” provider that also is the apheresis provider to certain of our collection centers being operated bymembers of our network. “Apheresis” is the process through which stem cells are extracted from a patient’s whole blood and it is an integral part of ourcollection process. Although other third parties could provide apheresis services, any disruption in the relationship with this service would cause a delay in thedelivery of our services. In order to successfully commercialize our business, we will continue to depend upon our relationship with such companies or we orthe collection centers operated by members of our network will need to develop internal capabilities to provide this service and obtain appropriate licensure. Seealso “- Our new research and development activities present additional risks” for additional risks relating to our dependence on third parties for developmentof our VSEL technology.Our success will depend in part on establishing and maintaining effective strategic partnerships and collaborations, which may imposerestrictions on our business and subject us to additional regulation.A key aspect of our business strategy is to establish strategic relationships in order to gain access to critical supplies, to expand or complement ourresearch and development or commercialization capabilities, or to reduce the cost of research and development or commercializing services on our own. Therecan be no assurance that we will enter into such relationships, that the arrangements will be on favorable terms or that such relationships will be successful.Relationships with licensed professionals such as physicians may be subject to state and federal laws including fraud and abuse regulations restricting thereferral of business, prohibiting certain payments to physicians, or otherwise limiting our options for structuring a relationship. If our services become widelyreimbursable by government or private insurers, we could be subject to additional regulation and perhaps additional limitations on our ability to structurerelationships with physicians. Additionally, state regulators may impose restrictions on the types of business relationships into which licensed physicians orother licensed professionals may enter. Failure to comply with applicable fraud and abuse regulations or other regulatory requirements could result in civilfines, criminal prosecution or other sanctions. Even if we do enter into these arrangements, we may not be able to maintain these relationships or establish newones in the future on acceptable terms. Furthermore, these arrangements may require us to grant certain rights to third parties, including exclusive rights ormay have other terms that are burdensome to us. If any of our partners terminate their relationship with us or fail to perform their obligations in a timelymanner, our research and development activities or commercialization of our services may be substantially impaired or delayed. If we fail to structure ourrelationships with physicians in accordance with applicable fraud and abuse laws or other regulatory requirements it could have a material adverse effect onour business.We are dependent upon our management, scientific and medical personnel and we may face difficulties in attracting qualified employees ormanaging the growth of our business.Our future performance and success are dependent upon the efforts and abilities of our management, medical and scientific personnel. Furthermore,our future growth will require hiring a significant number of qualified technical, medical, scientific, commercial, business and administrative personnel.Accordingly, recruiting and retaining such personnel in the future will be critical to our success. If we are not able to attract and retain, on acceptable terms, thequalified personnel necessary for the continued development of our business, including those required in order for us to obtain and maintain appropriatelicensure, we may not be able to sustain our operations or achieve our business objectives. Our failure to manage growth effectively could limit our ability toachieve our commercialization and other goals relating to, and we may fail in developing, our new business.39Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. General economic recession could negatively impact demand for our services.Economic recession, including attendant job loss, could negatively impact the demand for our services.Our research and development activities present additional risks.Our research and development activities relating to the VSEL technology are subject to many of the same risks as our adult stem cell collection,processing and storage business, and there can be no assurance that we independently or through collaborations will successfully develop, commercialize ormarket the VSEL technology. Any sublicensing arrangements we may desire to enter into in connection with the development of this technology are subject tothe prior approval of the University of Louisville and there can be no assurance they will give such approvals although they may not unreasonably withholdtheir approval. Further, we have development obligations under our exclusive license agreement with the University of Louisville pursuant to which we havelicensed the VSEL technology. As we currently have minimal capacity to conduct research and development activities, to assist in meeting such developmentobligations we have entered into a sponsored research agreement with the University of Louisville pursuant to which research services are being provided andon which we are currently dependent on their performance in developing the VSEL technology. Additional research projects are also being pursued. We will,however, require additional research and development capacity and access to funds to meet our obligations under the license agreement and fully develop theVSEL technology and integrate it into our business, and expect losses to increase as our research and development efforts progress. We have applied for SBIRgrants and also anticipate seeking to obtain such funds through applications for other State and Federal grants, grants abroad, direct investments into SCTI,strategic arrangements as well as other funding sources to help offset all or a portion of these costs; however, there can be no assurance that such funds will bereceived. We must also develop increased internal research capability and sufficient laboratory facilities or establish relationships to provide such researchcapability and facilities. There can be no assurance that we will be able to establish and maintain such relationships on commercially acceptable terms, if atall. Further, we must meet payment and other obligations under the license and sponsored research agreements. The license agreement requires the payment ofcertain license fees, royalties and milestone payments, payments for patent filings and applications and the use of due diligence in developing andcommercializing the VSEL technology. The sponsored research agreement requires periodic and milestone payments. Our failure to meet financial or otherobligations under the license or sponsored research agreements in a timely manner could result in the loss of some or all of our rights to proprietary technology(as an example, portions of the license may be converted to a non-exclusive license or it can be terminated entirely), and/or we could lose our right to have theUniversity of Louisville conduct research and development efforts. The commercial viability of our VSEL technology is subject to substantially the same risks as our adult stem cell collection, processing and storagebusiness, but it may also depend upon the ability to successfully expand the number of VSELs collected through our adult stem cell collection process into atherapeutically viable amount as well as the utility of VSELs for therapeutic purposes. As the number of VSELs which can be isolated from the adultperipheral blood collected is relatively small, the ability to create a therapeutic quantity of VSELs from a small number of cells may be essential to effectivelyusing VSELs. There are many biotechnology laboratories attempting to develop stem cell expansion technology, but to date, stem cell expansion techniques arevery inefficient and typically the target cells stop dividing naturally, keeping the yield low. A critical aspect of our adult stem cell collection and bankingservice relating to the VSEL technology could therefore be the utilization of stem cell expansion processes, and there can be no assurance that such technologywill be available.40Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Moreover, stem cell collection and harvesting techniques are becoming the subject of new and rapidly developing technologies and could undergosignificant change in the future. Rapid technological development could result in our VSEL technology becoming obsolete prior to its successful integration intothe process and commercialization of our collection, processing and storage business. Successful biotechnology development in general is highly uncertain andis dependent on numerous factors, many of which are beyond our control. Technology that appears promising in the early phases of development may fail tobe successfully commercialized for numerous reasons, including, but not limited to competing technologies for the same indication.We believe that the VSEL technology is properly classified under the FDA’s HCT/P regulatory paradigm and not as a medical device or as a biologicor drug. There can be no assurance that the FDA would agree that this category of regulatory classification applies to the VSEL technology, and thereclassification of this technology could have adverse consequences for us and make it more difficult or expensive for us to conduct this business by requiringregulatory clearance, approval and/or compliance with additional regulatory requirements.If we are unable to obtain future financing when needed, we may not be able to pay fees relating to our licenses, patents or otherintellectual property on a timely basis or at all, which could result in a loss of any or all of our intellectual property rights.Our License Agreement with the University of Louisville requires, and other license agreements to which we are or may become a party in the future will ormay require, us to pay license fees, royalties and milestone payments and fees for patent filings and applications. In addition, obtaining and maintainingpatent protection depends, in part, on our ability to pay the applicable filing and maintenance fees. Our failure to meet financial obligations under our licenseagreements in a timely manner or our non-payment or delay in payment of our patent fees, could result in the loss of some or all of our rights to proprietarytechnology or the inability to secure or enforce intellectual property protection. The loss of any or all of our intellectual property rights would limit our abilityto develop and/or market our services, which would materially adversely affect our business, financial condition and results of operations.Any future acquisitions may expose us to additional risks. We continuously review acquisition prospects that would complement our current business, increase the size and geographic scope of our operationsor otherwise offer revenue generating or other growth opportunities. In 2008 we were actively involved in exploring, and continue to explore, acquisitionopportunities of revenue generating businesses, both domestically or abroad, including businesses that are synergistic with or additive to our currentbusiness. The financing for any of these acquisitions (including the Merger and Share Exchange transactions) could dilute the interests of our stockholders,result in an increase in our indebtedness or both. Acquisitions may entail numerous risks, including: ·difficulties in assimilating acquired operations, technologies or products, including the loss of key employees from acquired businesses; ·diversion of management’s attention from our core business; ·risks of entering markets (including those overseas) in which we have limited or no prior experience; and ·our management team has limited experience in purchasing and integrating new businesses. 41Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Our failure to successfully complete the integration of any acquired business could have a material adverse effect on our business, financialcondition and operating results. In addition, there can be no assurance that we will be able to identify additional suitable acquisition candidates or consummateadditional acquisitions on favorable terms. RISKS RELATING TO COMPETITION The stem cell preservation market has and continues to become increasingly competitive.We may face competition from companies with far greater financial, marketing, technical and research resources, name recognition, distributionchannels and market presence than us, who are marketing or developing new services that are similar to the services that are now being or may in the future bedeveloped by us. There can be no assurance that we will be able to compete successfully.For example, in the established market for cord blood stem cell banking, the growth in the number of families banking their newborn’s cord bloodstem cells has been accompanied by an increasing landscape of competitors. Our business, which has been more recently developed, already faces competitionfrom other established operators of stem cell preservation businesses and providers of stem cell storage services. We believe that certain of our competitors haveestablished stem cell banking services to process and store stem cells collected from adipose tissue (fat tissue). This type of stem cell banking will requirepartnering with cosmetic surgeons who perform liposuction procedures. In addition, we believe the use of adult stem cells from adipose tissue will requireextensive clinical trials to prove the safety and efficacy of such cells and the enzymatic process required to extract adult stem cells from fat. From a technologyperspective this ability to expand a small number of stem cells could present a competitive alternative to stem cell banking. The ability to create a therapeuticquantity of stem cells from a small number of cells is essential to using embryonic stem cells and would be desirable to treat patients who can only supply asmall number of their own stem cells. There are many biotechnology laboratories attempting to develop stem cell expansion technology, but to date, stem cellexpansion techniques are very inefficient and typically the target cells stop dividing naturally, keeping the yield low. This could also have an adverse effect onour ability to fully utilize our VSEL technology, which will be dependent upon access to reliable stem cell expansion technology. However, even though reliablestem cell expansion technology may ease some of the limitations of the competitive alternatives to our business, it would also allow us to utilize the VSELtechnology and also complement adult stem cell banking by allowing individuals to extend the banking of an initial collection of cells for many applications.We also understand that other technologies are being developed which claim the ability to harvest stem cells through a variety of other techniques,such as turning skin cells into cells that behave like embryonic stem cells or harvesting stem cells from the pulp of baby teeth. No assurance can be given thatsuch technologies, or any other technologies, will not ultimately prove to be more successful, have a faster rate of market penetration or have broaderapplication than ours. There can be no assurance that technological or medical breakthroughs by our current or future competitors will not render theCompany’s business of stem cell preservation commercially or otherwise unappealing or obsolete. In addition, the Company believes that one’s use of theirown (autologous) stem cells presents fewer risks and increases the therapeutic value of stem cell therapy but the Company could nonetheless face competitionfrom companies seeking to promote the benefits of third party donors.In the event that we are not able to compete successfully with our current or potential competitors, it may be difficult for us to grow our revenue andmaintain our existing business without incurring significant additional expenses to try to refine our technology, services or approach to our business to bettercompete, and even then there would be no guarantee of success.42Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. We may face competition in the future from established cord blood banks and some hospitals.Cord blood banks such as ViaCord (a division of ViaCell International, a wholly-owned subsidiary of PerkinElmer, Inc.) or Cryo-Cell Internationalmay be drawn to the field of stem cell collection because their processing labs and storage facilities can be used for processing adult stem cells from peripheralblood and their customer lists may provide them with an easy access to the market. We estimate that there are approximately 59 cord blood banks in theUnited States, approximately 44 of which are autologous (donor and recipient are the same) and approximately 15 of which are allogeneic (donor and recipientare not the same). Hospitals that have transplant centers to serve cancer patients may elect to provide some or all of the services that we provide. We estimatethat there are approximately 200 hospitals in the United States with stem cell transplant centers. All of these competitors may have access to greater financialresources. In addition, other established companies with greater access to financial resources may enter our markets and compete with us. There can be noassurance that we will be able to compete successfully. RISKS RELATING TO INTELLECTUAL PROPERTY There is significant uncertainty about the validity and permissible scope of patents in the biotechnological industry. We may not be able to obtainpatent protection.There can be no assurance that the patent applications to which we hold rights will result in the issuance of patents, or that any patents issued orlicensed to our company will not be challenged and held to be invalid or of a scope of coverage that is different from what we believe the patent’s scope to be.Further, there can be no assurance that any future patents related to these technologies will ultimately provide adequate patent coverage for or protection of ourpresent or future technologies, products or processes. Our success will depend, in part, on whether we can obtain patents to protect our own technologies;obtain licenses to use the technologies of third parties if necessary, which may be protected by patents; protect our trade secrets and know-how; and operatewithout infringing the intellectual property and proprietary rights of others.We may be unable to protect our intellectual property from infringement by third parties.Despite our efforts to protect our intellectual property, third parties may infringe or misappropriate our intellectual property or may developintellectual property competitive to ours. Our competitors may independently develop similar technology, duplicate our processes or services or design aroundour intellectual property rights. As a result, we may have to litigate to enforce and protect our intellectual property rights to determine their scope, validity orenforceability. Intellectual property litigation is costly, time-consuming, diverts the attention of management and technical personnel and could result insubstantial uncertainty regarding our future viability. The loss of intellectual property protection or the inability to secure or enforce intellectual propertyprotection would limit our ability to develop and/or market our services in the future. This would also likely have an adverse affect on the revenuesgenerated by any sale or license of such intellectual property. Furthermore, any public announcements related to such litigation or regulatory proceedings couldadversely affect the price of our common stock. Third parties may claim that we infringe on their intellectual property. We also may be subject to costly litigation in the event our technology infringes upon another party’s proprietary rights. Third parties may have, ormay eventually be issued, patents that would be infringed by our technology. Any of these third parties could make a claim of infringement against us withrespect to our technology. We may also be subject to claims by third parties for breach of copyright, trademark or license usage rights. An adversedetermination in any litigation of this type could require us to design around a third party’s patent, license alternative technology from another party orotherwise result in limitations in our ability to use the intellectual property subject to such claims. Litigation and patent interference proceedings could result insubstantial expense to us and significant diversion of efforts by our technical and management personnel. An adverse determination in any such interferenceproceedings or in patent litigation to which we may become a party could subject us to significant liabilities to third parties or, as noted above, require us toseek licenses from third parties. If required, the necessary licenses may not be available on acceptable financial or other terms or at all. Adversedeterminations in a judicial or administrative proceeding or failure to obtain necessary licenses could prevent us, in whole or in part, from commercializing ourproducts, which could have a material adverse effect on our business, financial condition and results of operations.43Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. RISKS RELATING TO THE MERGER AND SHARE EXCHANGERisks relating to both the Merger and the Share ExchangeThe consummation of the Merger and Share Exchange and related transactions are contingent upon the satisfaction of certain closingconditions, and the failure or delay in satisfying such closing conditions could result in increased costs and enhanced expenditure of resources ora decline in NeoStem's stock price.The transactions contemplated by the Agreement and Plan of Merger and the Share Exchange Agreement are subject to the satisfaction of severalclosing conditions. In order to consummate the Merger, the stockholders of NeoStem must approve both the issuance of securities in connection with theMerger and the amendment to NeoStem's amended and restated certificate of incorporation to increase the number of authorized shares of Preferred Stock andthe CBH stockholders must approve the Merger and the Spin-off. In addition, in order to consummate the Merger, the shares of NeoStem Common Stock tobe issued in connection with the Merger must be authorized for listing on the NYSE Amex (or any other stock exchange on which shares of NeoStem CommonStock are listed); approval by the relevant PRC and other governmental authorities of NeoStem's acquisition of 51% ownership interest in Erye, as describedabove, must be obtained; NeoStem must receive a re-affirmation of the fairness opinion issued by vFinance; and other customary closing conditions set forthin the Agreement and Plan of Merger must be satisfied. The Share Exchange Agreement also contains various conditions to closing. There is no guarantee thatsuch approvals will be obtained or that such conditions will be satisfied.Any failure to satisfy or delay in satisfying any condition to closing, could result in increased costs as a result of additional efforts directed towardsattempting to consummate the transactions, as well as decreased operational performance pending the outcome of the efforts directed at completion of thetransactions. Legal, accounting, and printing fees must be paid whether or not the Merger or Share Exchange transactions are consummated, and the amountof any or all of these fees may be enhanced if there is any failure or delay in satisfying the closing conditions. Any such delays or failures to satisfyconditions could materially adversely affect NeoStem’s business, financial condition and results of operations. In addition, a failure to complete the Mergerand/or the Share Exchange, or a delay in completing either or both transactions, could result in a decline of the market price of NeoStem Common Stock to theextent that the relevant current market price reflects a market assumption that either the Merger and/or the Share Exchange will be completed.44Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. NeoStem will need substantial additional financing to fund operations of NeoStem, CBH and Shandong following the Merger and ShareExchange, and if it is unable to obtain future capital on acceptable terms or at all, the business operations of the combined entity will be adverselyaffected.None of NeoStem, CBH or the Shandong Institute has sufficient capital to fund the operating plan for the business of the combined company following theMerger and the Share Exchange. In addition, NeoStem's cash requirements may increase significantly because of the transaction costs relating to the Mergerand the Share Exchange. Although NeoStem expects to seek additional capital through public or private financings, additional financing may not be availableon acceptable terms, or at all. If NeoStem is unable to obtain adequate financing on a timely basis, or at all, it may be unable to operate the business of thecombined company following the Merger and the Share Exchange.Sales of substantial amounts of NeoStem Common Stock in the open market, or the availability of such shares for sale, could adversely affect theprice of NeoStem Common Stock and other securities, and certain currently outstanding options and warrants will be repriced.As of March 27, 2009, 7,749,358 shares of NeoStem Common Stock were issued and outstanding. Upon consummation of the Merger and theShare Exchange, it is expected that approximately 25,982,367 shares of NeoStem Common Stock will be outstanding. Immediately prior to theconsummation of the Merger and the Share Exchange, NeoStem intends to reprice currently outstanding options and warrants to purchase an aggregate ofapproximately 3,077,283 shares of NeoStem Common Stock pursuant to the terms of the Agreement and Plan of Merger. It is currently anticipated thatoptions to purchase an aggregate of approximately 1,642,300 shares of NeoStem Common Stock with a current range of exercise prices of $0.95 to $25.00 pershare will be repriced to a range of $0.80 to $6.8779 per share, and warrants to purchase an aggregate of approximately 1,339,733 shares of NeoStemCommon Stock with a current range of exercise prices of $3.00 to $8.00 per share will repriced to a range of $2.00 to $3.68 per share. After giving effect to therepricing and the consummation of the Merger and the Share Exchange, the following securities that may be exercised for, or are convertible into, shares ofNeoStem Common Stock are currently anticipated to be outstanding:·Stock options to purchase 1,723,300 shares of NeoStem Common Stock at an approximate weighted average exercise price of approximately$0.90 per share.·Warrants to purchase 4,645,692 shares of NeoStem Common Stock at an approximate weighted average exercise price of approximately$2.27 per share.·Class A Warrants to purchase 635,000 shares of NeoStem Common Stock at an exercise price of $2.8922 per share. The Class AWarrants were issued in our public offering in August 2007. ·Class B Warrants to purchase 2,400,000 shares of NeoStem Common Stock at an exercise price of $0.80 per share. The Class B Warrantswill be issued in connection with the Merger. ·Class C Warrants to purchase up to 2,012,097 shares of NeoStem Common Stock at an exercise price of $2.50 per share. The Class CWarrants may be issued in connection with the Merger. ·NeoStem Series C Preferred Stock, convertible into up to 6,977,512 shares of NeoStem Common Stock at a conversion price of $0.90 pershare. The NeoStem Series C Preferred Stock may be issued in connection with the Merger. The vast majority of the outstanding shares of NeoStem Common Stock, as well as substantially all the shares of NeoStem Common Stock thatmay be issued under our outstanding options, warrants and Class A warrants, are or have the contractual right to be registered or are otherwise not restrictedfrom trading.45Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Our outstanding warrants may negatively affect our ability to raise additional capital.During the terms of NeoStem's outstanding warrants and Class A Warrants, and the Class B Warrants and Class C Warrants to be issued inconnection with the Merger, the holders thereof are given the opportunity to profit from a rise in the market price of the NeoStem Common Stock. So long asthese warrants are outstanding, the terms on which we could obtain additional capital may be adversely affected. The holders of these warrants mightbe expected to exercise them at a time when NeoStem would, in all likelihood, be able to obtain any needed capital by a new offering of securities on terms morefavorable than those provided by these warrants. Risks Relating to the MergerSet forth below are certain risk factors relating to the proposed Merger of which you should be aware. More complete risk factors relating to theproposed Merger will be included in the Proxy Statement/Registration Statement.The consummation of the transactions contemplated by the Merger Agreement is dependent upon NeoStem's obtaining all relevant and necessarygovernmental approvals from the relevant PRC government authorities.Pursuant to the Merger Agreement, NeoStem will acquire, indirectly through NeoStem's ownership in Merger Sub, a 51% ownership interest in Erye,with EET owning the remaining 49% ownership interest in Erye. NeoStem, Merger Sub and EET must enter into a Joint Venture Agreement to govern therights and obligations of NeoStem, Merger Sub and EET with respect to their ownership in Erye. The Joint Venture Agreement, together with the articles ofincorporation of Erye, must be delivered to the relevant PRC governmental organizations for inspection and approval, and the closing of the transactionscontemplated by the Merger Agreement are contingent upon, among other things, obtaining all relevant and necessary governmental approvals from the relevantPRC government authorities of the Joint Venture Agreement, the articles of incorporation and the transactions contemplated thereby. There can be no assurancethat NeoStem will be able to obtain all such relevant and necessary governmental approvals from the relevant PRC government authorities on a timely basis orat all.NeoStem has incurred, and expects to continue to incur, significant costs and expenses in connection with the proposed Merger. Any failure toobtain, or delay in obtaining, the necessary PRC government approvals would prevent NeoStem from being able to consummate, or delay the consummationof, the transactions contemplated by the Merger Agreement, which could materially adversely affect its business, financial condition and results of operations.Following the Merger, a substantial portion of NeoStem's assets will be located in the PRC and a substantial portion of NeoStem's revenue will bederived from operations in the PRC. Since this is one of NeoStem's first ventures into the Chinese market, NeoStem's operations may be subject toadditional risks and uncertainties.Because NeoStem does not have any experience in doing business in the PRC, the Company’s directors, officers, managers, and employees will beencountering for the first time the economic, political, and legal climate that is unique to the PRC, which may present risk and uncertainties to NeoStem'soperations. Although in recent years the PRC’s government has implemented measures emphasizing the use of market forces for economic reform, thereduction of state ownership of productive assets and the establishment of sound corporate governance in business enterprises, a substantial portion ofproductive assets in the PRC is still owned by the PRC’s government. In addition, the PRC’s government continues to play a significant role in regulatingindustry development by imposing industrial policies. It also exercises significant control over the PRC’s economic growth through the allocation of resources,controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries orcompanies.46Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.There can be no assurance that the PRC’s economic, political or legal systems will not develop in a way that becomes detrimental to our business,results of operations and prospects. NeoStem's activities may be materially and adversely affected by changes in the PRC’s economic and social conditionsand by changes in the policies of the PRC’s government, such as measures to control inflation, changes in the rates or method of taxation and the imposition ofadditional restrictions on currency conversion.Additional factors that NeoStem may experience in connection with having operations in the PRC that may adversely affect NeoStem's business andresults of operations include the following: ·NeoStem may not be able to enforce or obtain a remedy under any material agreements. ·PRC restrictions on foreign investment could severely impair NeoStem's ability to conduct its business or acquire or contractwith other entities in the future. ·Restrictions on currency exchange may limit NeoStem's ability to use cash flow most effectively or to repatriate our investmentand fluctuations in currency values could adversely affect operating results. ·Cultural, language and managerial differences may result in the reduction of our overall performance. ·Political instability in the PRC could harm NeoStem's business.Risks Relating to the Share ExchangeSet forth below are certain risk factors relating to the proposed Share Exchange of which you should be aware. More complete risk factors relating tothe proposed Share Exchange will be included in the Proxy Statement/Registration Statement.If the government of the PRC determines that the arrangements that establish the structure for operating the Shandong Business do not complywith PRC government restrictions on foreign investment in the relevant industry, NeoStem may be subject to severe consequences and penalties.Pursuant to the Share Exchange Agreement, NeoStem will acquire the HK Entity, which owns the WFOE, and the WFOE seeks to obtain certainbenefits from Shandong through the VIE Documents. As a Delaware corporation, NeoStem is classified as a foreign enterprise under PRC law, and the WFOEis classified as a foreign-invested enterprise. Because various regulations in China currently restrict or prevent foreign-invested entities from holding certainlicenses and controlling businesses in certain industries, NeoStem must rely on the contractual relationships memorialized in the VIE Documents to obtainbenefits from the business, personnel, and financial affairs of Shandong.The PRC laws and regulations governing business entities are often vague and uncertain. There is a particular lack of clarity in the PRC lawapplicable to the arrangements establishing the operating structure. Despite the uncertain application of PRC law, the structure of the WFOE, together with thecontractual arrangements under the VIE Documents, has been implemented successfully where foreign-invested entities have participated in obtaining benefitsfrom PRC entities engaged in restricted businesses. However, PRC law is more vague on the subject of utilizing such structure in the context of prohibitedbusinesses in which Shandong may engage. Given this lack of clarity in PRC law, if NeoStem is found to be in violation of any existing or future PRC laws,regulations, and/or circulars, the relevant regulatory authorities would have broad discretion in dealing with such violation, including levying fines,confiscating NeoStem's income, revoking business and/or operating licenses, requiring NeoStem to restructure the relevant ownership structure or operations,and requiring NeoStem to discontinue all or any portion of its operations in the PRC. Any of these actions could cause significant disruption to NeoStem'sbusiness operations and may materially and adversely affect NeoStem's business, financial condition and results of operations. There can be no assurancethat NeoStem will not be found in violation of any current or future PRC laws, regulations, and/or circulars.47Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The WFOE’s contractual arrangements with Shandong and its equity owners as memorialized in the VIE documents may not be as effectivein obtaining benefits from Shandong as direct ownership of Shandong.NeoStem intends to conduct substantially all of the Shandong Business in the PRC and generate substantially all of its revenues from the ShandongBusiness vis-à-vis the WFOE and Shandong, through contractual arrangements with Shandong and its equity owners that provide NeoStem with certainbenefits from Shandong. NeoStem will depend on Shandong to hold and maintain certain licenses and other relevant government approvals necessary for itsbusiness activities. Shandong also owns certain assets relating to its business and operations, and employs the personnel necessary to carry out such businessand operations. NeoStem will have no ownership interest in Shandong. The contractual arrangements as embodied in the VIE Documents may not be aseffective in providing NeoStem with benefits from Shandong as direct ownership of Shandong. In addition, Shandong or its equity owners may breach thecontractual arrangements.Employees and/or officers of Shandong may encounter conflicts of interest between their duties to NeoStem and to Shandong. There can be noassurance that when conflicts of interest arise, the ultimate equity owners of Shandong will act completely in NeoStem's interests or that conflicts of interestwill be resolved in NeoStem's favor. These ultimate equity owners could violate any applicable non-competition or employment agreements or their legal dutiesby diverting business opportunities from NeoStem to others. In any event, we would have to rely on legal remedies under PRC law. These remedies may notalways be effective in vindicating our rights, particularly in light of the uncertainties of the PRC legal system.Following the Share Exchange, a substantial portion of NeoStem's assets will be located in the PRC and a substantial portion of NeoStem'srevenue will be derived from operations in the PRC. Since this is one of NeoStem's first ventures into the Chinese market, NeoStem's operationsmay be subject to additional risks and uncertainties.See Risks Relating to the Merger (above).For additional factors that NeoStem may experience in connection with having operations in the PRC that may adversely affect NeoStem's businessand results of operations, see Risk Factors Relating to the Merger (above). 48Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Risks Related to the Joint Venture AgreementEven if Erye continues to be profitable, NeoStem will be entitled to receive only 6% of the net profits of Erye for a three-year period commencingon the first day of the fiscal quarter after the consummation of the Merger, which could adversely affect NeoStem's results of operations.Upon consummation of the transactions contemplated by the Merger, NeoStem will own 51% of the ownership interests in Erye, and EET will ownthe remaining 49% ownership interest. Pursuant to the terms and conditions of the Joint Venture Agreement, dividend distributions to EET and NeoStem willbe made in proportion to their respective ownership interests in Erye; provided, however, that for the three-year period commencing on the first day of the firstfiscal quarter after the Joint Venture Agreement becomes effective, (i) 49% of undistributed profits (after tax) will be distributed to EET and lent back to Eryeby EET for use by Erye in connection with the construction of a new plant for Erye; (ii) 45% of the net profit (after tax) will be provided to Erye as part of thenew plant construction fund, which will be characterized as paid-in capital for NeoStem's 51% interest in Erye; and (iii) 6% of the net profit will bedistributed to NeoStem directly for NeoStem’s operating expenses. There can be no assurance that Erye will continue to be profitable following theconsummation of the Merger, if at all, or that NeoStem will ever receive any distributions from Erye whatsoever.Many terms of the Joint Venture Agreement, as well as the location of its operations, limit NeoStem's ability to control major decisions of Erye,which could adversely affect NeoStem's business.Pursuant to the Joint Venture Agreement, Erye's Board of Directors shall be comprised of two individuals designated by EET and three individualsdesignated by NeoStem; provided, that one of the positions designated by NeoStem shall be assumed by the member of the NeoStem Board of Directorsdesignated by EET. Pursuant to the terms of the Joint Venture Agreement, the affirmative vote of all of the Erye Board of Directors is required for severalmajor decisions of Erye including the amendment of the Joint Venture Agreement or Articles of Association of Erye, the termination or dissolution of Erye,increase or reduction of the registered capital of Erye and merger or spin-off of Erye. Pursuant to the terms of the Joint Venture Agreement, the affirmative voteof more than 75% of the Erye Board of Directors is required for several major decisions of Erye, including, among others, the disposition of all material assetsof Erye, a change of more than 50% of the equity interest in Erye, changes in more than 50% of the directors of Erye within any consecutive 24 month period,decisions on the material strategy and operation and development of Erye and the entrance into related party transactions with Erye's shareholders and theiraffiliates. In addition, since many of Erye's officers will live outside the United States, it may be difficult for us to exert control over the day-to-day operationsof Erye.Some terms of the Joint Venture Agreement limit NeoStem's ability with respect to future acquisitions of and investments in chemical drugmanufacturing companies, which could adversely affect NeoStem's business.Pursuant to the terms of the Joint Venture Agreement, prior to the investment by NeoStem in any chemical drug manufacturing company thatcompetes directly with the business of Erye, NeoStem must obtain the consent from Erye. NeoStem also must consult with Erye prior to introducing any newsmall molecule drug in China with respect to whether it can be produced more cheaply or efficiently by Erye. There can be no assurance that Erye will give itsconsent to NeoStem’s investment in any chemical drug manufacturing company, which could adversely affect the development of NeoStem's business.The income obtained by NeoStem as a shareholder of Erye from the relocation of Erye will be transferred to EET, which could adversely affectNeoStem's results of operations.Pursuant to the terms of the Joint Venture Agreement, after the relocation of Erye, the old plant shall cease all its current business and all income inthe form of relocation compensation by the government, and total payments generated from any lease or transfer to third party shall be vested in EET, whichcould adversely affect NeoStem's results of operations.49Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.RISKS RELATING TO DOING BUSINESS IN CHINAWe are beginning to pursue business opportunities in China in addition to those contemplated by the Merger Agreement and the Share ExchangeAgreement, and it is expected that our business will develop an increasingly significant presence in China. Please consult the “Business Overview” section ofthis Annual Report, which contains a discussion of our agreement with PCT contemplating a plan for the establishment of a stem cell processing, storage andmanufacturing operation in Beijing; a summary of our plans to create a new WFOE and one or more new limited liability companies in China directed at ourefforts to exercise control over the proposed stem cell processing, storage and manufacturing operation and related research and development activities; and adescription of our license agreement with Vincent Giampapa, M.D., F.A.C.S. pertaining to the China territory. Because China’s economy, laws, regulationsand policies are different from those typically found in the west and are continually changing, we will face risks including those summarized below: China is a developing nation governed by a one party government and may be more susceptible to political, economic, and social upheaval thanother nations. China is a developing country governed by a one-party government. China is also a country with an extremely large population, widening incomegaps between rich and poor and between urban and rural residents, minority ethnic and religious populations, and growing access to information about thedifferent social, economic, and political systems to be found in other countries. China has also experienced extremely rapid economic growth over the lastdecade, and its legal and regulatory systems have changed rapidly to accommodate this growth. These conditions make China unique and may make itsusceptible to major structural changes. Such changes could include a reversal of China’s movement to encourage private economic activity; labordisruptions or other organized protests; nationalization of private businesses; internal conflicts between the police or military and the citizenry; andinternational political or military conflict. If any of these events were to occur, it could shut down China’s economy and cause us to temporarily orpermanently cease any operations in China. The PRC’s laws, regulations and policies, and changes to them, may limit the ability of our operations in China to operate profitably, or mayprevent our operations in China from functioning at all. Any operations we pursue in China may be heavily regulated by many state, provincial and local authorities. Any operations in China may besubject to the actions of PRC government regulators such as the State Food and Drug Administration (“SFDA”). Government regulations may have a materialimpact on our operations in China, increase costs and prevent or delay our company in licensing, manufacturing and marketing any products or services wemay decide to offer. Any research, development, testing, manufacturing or marketing activities that we engage in may be subject to various governmentalregulations in China, including health and drug regulations. Government regulations, among other things, cover the inspection of and controls over testing,manufacturing, safety and environmental considerations, efficacy, labeling, advertising, promotion, record keeping and sale and distribution ofpharmaceutical products. In the event we seek to license, manufacture, sell or distribute any products or services, we might need the proper approval fromcertain government agencies such as the SFDA. The future growth and profitability of any operations in China would be contingent on obtaining the requisiteapprovals. There is no assurance that we will obtain such approvals. In addition, delays or rejections may be encountered based upon additional government regulation from future legislation, administrative action orchanges in governmental policy and interpretation. Any marketing activities we might engage in also may subject us to government regulations with respect tothe prices that we intend to charge or any other marketing and promotional related activities. Government regulations may substantially increase our costs fordeveloping, licensing, manufacturing and marketing any products or services, impacting negatively on our operation, revenue, income and cash flow. Therecould be changes in government regulations applicable to pharmaceutical industries, which changes may adversely affect our business.50Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. We are in the process of developing a significant business presence in China. Since this is one of our first ventures into the Chinese market, ouroperations may be subject to additional risks and uncertainties.Because we do not have any experience in doing business in the PRC, our directors, officers, managers, and employees will be encountering for thefirst time the economic, political, and legal climate that is unique to the PRC, which may present risk and uncertainties to our operations. Although in recentyears the PRC’s government has implemented measures emphasizing the use of market forces for economic reform, the reduction of state ownership ofproductive assets and the establishment of sound corporate governance in business enterprises, a substantial portion of productive assets in the PRC is stillowned by the PRC’s government. In addition, the PRC’s government continues to play a significant role in regulating industry development by imposingindustrial policies. It also exercises significant control over the PRC’s economic growth through the allocation of resources, controlling payment of foreigncurrency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. There can be noassurance that the PRC’s economic, political or legal systems will not develop in a way that becomes detrimental to our business, results of operations andprospects. Our activities may be materially and adversely affected by changes in the PRC’s economic and social conditions and by changes in the policies ofthe PRC’s government, such as measures to control inflation, changes in the rates or method of taxation and the imposition of additional restrictions oncurrency conversion.If political relations between China and the Unites States or Europe deteriorate, it could cause a downturn in our financial condition; disruptionsto our operations; or a less receptive public response to the goods or services we may offer.The relationship between China and the United States and Europe is subject to sudden fluctuation and periodic tension. Relations may also becompromised if the U.S. or Europe becomes a more vocal advocate of Taiwan or proceeds to sell certain military weapons and technology to Taiwan. Changesin political conditions in China and changes in the state of Sino-U.S. relations and Sino-European relations are difficult to predict and could adversely affectour operations or financial condition. In addition, because of our involvement in the Chinese market, any deterioration in political relations might cause apublic perception in the United States or elsewhere that might cause the goods or services we may offer to become less attractive. Because we are not limited toany specific industry, there is no basis for investors in this offering to evaluate the possible extent of any impact on our ultimate operations if relations arestrained between China and either the United States or Europe.We may not be able to enforce our rights in China.China’s legal and judicial system may negatively impact foreign investors. In 1982, the National People’s Congress amended the Constitution ofChina to authorize foreign investment and guarantee the “lawful rights and interests” of foreign investors in the China. However, China’s system of laws inthis area is not yet comprehensive. The legal and judicial systems in the China are still rudimentary, and enforcement of existing laws is inconsistent. Manyjudges in China lack the depth of legal training and experience that would be expected of a judge in a more developed country. Because the China judiciary isrelatively inexperienced in enforcing the laws that do exist, anticipation of judicial decision-making is more uncertain than would be expected in a moredeveloped country. It may be impossible to obtain swift and equitable enforcement of laws that do exist, or to obtain enforcement of the judgment of one courtby a court of another jurisdiction. China’s legal system is based on civil law, or written statutes; a decision by one judge does not set a legal precedent thatmust be followed by judges in other cases. In addition, the interpretation of Chinese laws may vary to reflect domestic political changes.51Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. PRC laws and regulations that may govern our business operations in China are sometimes vague and uncertain. There are substantial uncertaintiesregarding the interpretation and application of PRC laws and regulations, including but not limited to the laws and regulations governing our business and theenforcement and performance of our contractual arrangements in the event of the imposition of statutory liens, death, bankruptcy and criminalproceedings. We will be required to comply with certain PRC laws and regulations. These laws and regulations are sometimes vague and may be subject tofuture changes, and their official interpretation and enforcement may involve substantial uncertainty. The effectiveness of newly enacted laws, regulations oramendments may be delayed, resulting in detrimental reliance by foreign investors. New laws and regulations that affect existing and proposed futurebusinesses may also be applied retroactively. We cannot predict what effect the interpretation of existing or new PRC laws or regulations may have on ourbusiness. The laws of China are likely to govern many of our material agreements. We cannot assure you that we will be able to enforce our interests or our materialagreements or that remedies will be available outside of certain regions. For example, the system of laws and the enforcement of existing laws in China may notbe as certain in implementation and interpretation as in the United States. The Chinese judiciary is relatively inexperienced in enforcing corporate andcommercial law, leading to a higher than usual degree of uncertainty as to the outcome of any litigation. The inability to enforce or obtain a remedy under anyof our future agreements may have a material adverse impact on our operations.If China imposes restrictions to reduce inflation, future economic growth in China could be severely curtailed, which could lead to a significantdecrease in the efficiency and/or profitability of our operations in China.While the economy of China has experienced rapid growth, this growth has been uneven among various sectors of the economy and in different geographicalareas of the country. Rapid economic growth can lead to growth in the supply of money and rising inflation. If prices for any products or services beingdeveloped in China rise at a rate that is insufficient to compensate for the rise in the costs of supplies, materials or labor, it may have an adverse effect onprofitability. In order to control inflation in the past, China has imposed controls on bank credits, limits on loans for fixed assets and restrictions on statebank lending. If similar restrictions are imposed, it may lead to a slowing of economic growth. We cannot predict with any certainty the degree to which ourline of business will be affected by any slow-down of economic growth.Many industries in China are subject to government regulations that limit or prohibit foreign investments in such industries, which may limit ourpotential to control certain businesses, acquire specific interests, or partake of particular ventures.The Chinese government has imposed regulations in various industries, such as publishing, media, market research, medical research (including the stemcell business) and social research industries, that would limit foreign investors’ equity ownership or prohibit foreign investments altogether in companies thatoperate in such industries. As a result, the range of new business ventures or the nature of investment opportunities available to us may be limited. The laws and regulations governing the stem cell therapy industry in China are developing and subject to future changes. Future PRC laws mayimpose conditions or requirements with which we may not be able to comply, which could materially and adversely affect our business. As the stem cell therapy industry is at an early stage of development in China, new laws and regulations may be adopted in the future to address newissues that arise from time to time. As a result, substantial uncertainties exist regarding the interpretation and implementation of current and any future PRClaws and regulations applicable to the stem cell therapy industry. There is no way to predict the content or scope of applicability of future Chinese stem cellregulation. There can be no assurances that in the future the PRC government authorities will not issue laws or regulations which may impose conditions orrequirements with which we may not be able to comply, which could materially and adversely affect our business, financial condition and results ofoperations.52Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The import into China or export from China of technology relating to stem cell therapy may be prohibited or restricted. The Ministry of Commerce (MOFCOM) and Ministry of Science and Technology of China (MOST) jointly publish the Catalogue of Technologiesthe Export of which from China is Prohibited or Restricted, and the Catalogue of Technologies the Import of which into China Prohibited or Restricted. Stemcell related technologies are not listed in the current versions of these catalogues, and therefore their import or export should not be forbidden or require thatapproval MOFCOM and MOST. However, these catalogues are subject to revision and, as the PRC authorities develop policies concerning stem celltechnologies, it is possible that the categories would be amended or updated should the Chinese government want to regulate the export or import of stem cellrelated technologies to protect material state interests or for other reasons. Should the catalogues be updated so as to bring any activities of the planned stem cellprocessing, storage and manufacturing operation in Beijing and related research and development activities under their purview, any such limitations orrestrictions imposed on the operations and related activities could materially and adversely affect our business, financial condition and results of operations.If China enacts regulations that reach a greater number of industry segments so as to forbid or restrict foreign investment, our ability toconsummate business combinations or enter into business transactions could be severely impaired.Many of the rules and regulations that companies face in China are not explicitly communicated. If new laws or regulations forbid foreign investment inindustries in which we want to complete a business combination, the laws could severely impair our choice of candidate pool of potential targetbusinesses. Additionally, if the relevant Chinese authorities find us or the target business with which we ultimately complete a business combination to be inviolation of any existing or future Chinese laws or regulations, they would have broad discretion in dealing with such a violation, including, withoutlimitation:· levying fines;· revoking our business and other licenses;· requiring that we restructure our ownership or operations; and· requiring that we discontinue any portion or all of our business.Additionally, the business relationships we establish in China will be subject to PRC interpretations of the applicability of PRC law to our particular businessarrangements.Recent changes in China’s currency policies may cause our ability to succeed in the international markets to be diminished.Historically, China “pegged” its currency to the United States dollar. This meant that each unit of Chinese currency had a set ratio for which it could beexchanged for United States currency, as opposed to having a floating value like other countries’ currencies. Many countries argued that this system ofkeeping the Chinese currency low when compared to other countries gave Chinese companies an unfair price advantage over foreign companies. Due tomounting pressure from outside countries, China recently reformed its economic policies to establish a floating value. As a result of this policy reform,Chinese-based operations may be adversely affected since the competitive advantages that existed as a result of the former policies will cease. We cannot assureyou that our interests in China will be able to compete effectively with the new policies in place.53Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Anti-inflation measures may be ineffective or harm our ability to do business in China. In recent years, the PRC government has instituted anti-inflationary measures to curb the risk of an overheated economy characterized by debilitatinginflation. These measures have included devaluations of the renminbi, restrictions on the availability of domestic credit, and limited re-centralization of theapproval process for some international transactions. These austerity measures may not succeed in slowing down the economy’s excessive expansion orcontrol inflation, or they may slow the economy below a healthy growth rate and lead to economic stagnation or recession; in the worst-case scenario, themeasures could slow the economy without curbing inflation. The PRC government could adopt additional measures to further combat inflation, including theestablishment of price freezes or moratoriums on certain projects or transactions. Such measures could harm the economy generally and hurt our business bylimiting the income of our customers available to spend on our services, by forcing us to lower our profit margins, and by limiting our ability to obtain creditor other financing to pursue our expansion plans or maintain our business. The uncertain legal environment in China could limit the legal protections available to you and could adversely affect our ability to provide ourservices in China.Any WFOE structure we establish would be subject to the uncertainties of applicable PRC law. WFOE’s are subject generally to laws and regulationsapplicable to foreign investment in China and, in particular, to laws applicable to wholly foreign-owned enterprises. The PRC legal system is a civil lawsystem based on written statutes. Unlike common law systems, it is a system in which decided legal cases have little precedential value. PRC laws,regulations and legal requirements governing economic matters are evolving rapidly, and their interpretation and enforcement involve uncertainties. Theseuncertainties could limit the legal protections available to foreign investors and entities, including you and us, such as the right of foreign-invested enterprisesto hold licenses and permits. As the PRC legal system matures, changes in its legislation or interpretation of its legislation may adversely affect our ability toprovide our services and any associated products in China.Regulations relating to the transfer of state-owned property rights in enterprises may increase the cost of any acquisitions or transactions, andmay therefore impose an additional administrative burden on us.The legislation governing the acquisition of a China state-owned company contains stringent governmental regulations. The transfer of state-owned propertyrights in enterprises must take place through a government approved “state-owned asset exchange,” and the value of the transferred property rights must beevaluated by those Chinese appraisal firms qualified to do “state-owned assets evaluation.” The final price must not be less than 90.0% of the appraisalprice. Additionally, bidding/auction procedures are essential in the event that there is more than one potential transferee. In the case of an acquisition byforeign investors of state-owned enterprises, the acquirer and the seller must make a resettlement plan to properly resettle the employees, and the resettlementplan must be approved by the Employees’ Representative Congress. The seller must pay all unpaid wages and social welfare payments from the existingassets of the target company to the employees. These regulations may adversely affect our ability to acquire a state-owned business or assets.In the event that our future expansion creates a scenario where certain directors and/or officers will live outside the United States and asignificant portion of our assets will be located outside the United States, investors may not be able to enforce federal securities laws or their otherlegal rights.Future expansion may require that many of our directors and/or officers will reside outside of the United States, and a substantial portion of our assets may belocated outside of the United States. As a result, it may be difficult, or in some cases not possible, for investors in the United States to enforce their legalrights, to effect service of process upon certain of our directors or officers or to enforce judgments of United States courts predicated upon civil liabilities andcriminal penalties against our directors and officers pursuant to United States laws.54Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Cultural, language and managerial differences may result in the reduction of our overall performance. While Chinese mergers and acquisitions are increasing in frequency, assimilating cultural, language and managerial differences remainsproblematic. Friction may result due to the consolidation of management teams from different cultural backgrounds. In addition, errors arising throughlanguage translations may cause miscommunications relating to material information, which could adversely affect our business operations. These factorsmay make the management of our operations in China more difficult.Political instability in China could harm our business. We may target or have associations with businesses in China that have operations associated with developing countries in Asia where political,economic and social transition is taking place. Some Asian countries, including China, have experienced political instability, expropriation or nationalizationof property, civil strife, strikes, acts of war and insurrections. Any of these conditions occurring could disrupt or terminate our operations, causing ouroperations to be curtailed or terminated in these areas or our operations to decline and could cause us to incur additional costs. Ethical and other concerns surrounding the use of stem cell therapy may increase the regulation of or negatively impact the public perception ofour stem cell services, thereby reducing demand for our services. The use of embryonic stem cells for research and stem cell therapy has been the subject of debate regarding related ethical, legal and social issues.The Ministry of Science and Technology and the Ministry of Health of the PRC issued “The Ethical Guiding Principles for the Research of HumanEmbryonic Stem Cell” on December 24, 2003, which are formulated for the purpose of aligning the research of human embryonic stem cell in the biomedicalfield in China with the ethical criterion of life, ensuring the respect and observance of internationally recognized ethical standards of life and the relevantprovisions of our country, as well as promoting the healthy development of the research on human embryonic stem cell. According to the Ethical GuidingPrinciples, all those engaging in activities concerning the research of human embryonic stem cell within the territory of PRC shall abide by the present GuidingPrinciples, according to which, any research on reproductive cloning is prohibited, and no human gamete, germ cell, embryo or fetus tissues may be boughtor sold. Although our business does not involve the more controversial use of embryonic stem cells, the use of other types of human stem cells for therapycould give rise to similar ethical, legal and social issues as those associated with embryonic stem cells. Additionally, it is possible that our business could benegatively impacted by any stigma associated with the use of embryonic stem cells if the public fails to appreciate the distinction between the use of adultversus embryonic stem cells. The commercial success of our business will depend in part on public acceptance of the use of stem cell therapy, in general, forthe prevention or treatment of human diseases. Public attitudes may be influenced by claims that stem cell therapy is unsafe or unnecessary, and stem celltherapy may not gain the acceptance of the public or the medical community. Public pressure or adverse events in the field of stem cell therapy that may occurin the future also may result in greater governmental regulation of our business creating increased expenses and potential regulatory delays relating to theapproval or licensing of any or all of the processes and facilities involved in our stem cell banking services. In the event that the use of stem cell therapybecomes the subject of adverse commentary or publicity, our business could be adversely affected and the market price for our common stock could besignificantly harmed. 55Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. In the event we consummate our plans to establish the stem cell processing, storage and manufacturing operation in Beijing and related researchand development activities, and the government of the PRC determines that the arrangements that establish any new WFOE structure implementedfor conducting these operations do not comply with PRC government restrictions on foreign investment in the relevant industry, or if the structureis not compatible with PRC laws regarding foreign investment generally, we may be subject to severe consequences and penalties, and we may beprecluded from launching any such new operation.As noted in the “Business Overview” section of this Annual Report, we are planning the launch of a stem cell processing, storage and manufacturing operationin Beijing as well as related research and development activities. However, any such development would be dependent upon our establishing a new WFOE andone or more new China-based limited liability companies. Any such new WFOE would be classified as a foreign-invested enterprise. Because variousregulations in China currently restrict or prevent foreign-invested entities from holding certain licenses and controlling businesses in certain industries, wewould be required to rely on the contractual relationships memorialized in the relevant VIE Documents to obtain benefits from the business, personnel, andfinancial affairs of any new stem cell processing, storage and manufacturing operation in Beijing and related research and development activities.Our ability to lease the premises for a new facility, to hire personnel, to purchase lab equipment, to seek government grants, and to transfer certain ofour intellectual property and “know how” to a new facility, would all depend upon the functionality of the VIE Documents and upon the application of PRClaw to the structure of any new WFOE. The PRC laws and regulations governing business entities are often vague and uncertain. Despite the uncertaintiesassociated with the application of PRC law, a structure involving a WFOE, together with the contractual arrangements under the VIE Documents, has beenimplemented successfully where foreign-invested entities have participated in controlling PRC entities engaged in “restricted businesses.” However, should afacility we establish be deemed to engage in a “prohibited business,” there would be a particular lack of clarity as to the application of PRC law. Given the lackof clarity in PRC law, if we were to be found in violation of any existing or future PRC laws, regulations, and/or circulars, the relevant regulatory authoritieswould have broad discretion in dealing with such violation, including levying fines, confiscating our income, revoking business and/or operating licenses,requiring us to restructure the relevant ownership structure or operations, and requiring us to discontinue all or any portion of our operations in the PRC. Anyof these actions could cause significant disruption to our business operations and may materially and adversely affect our business, financial condition andresults of operations. There can be no assurance that we will not be found in violation of any current or future PRC laws, regulations and/or circulars.As we proceed to establish the stem cell processing, storage and manufacturing operation in Beijing, any new WFOE’s contractual arrangementswith the facility and its equity owners, as memorialized in the VIE documents, may not be as effective in providing benefits from the facility asdirect ownership of the facility.In the event the stem cell processing, storage and manufacturing operation and related research and development activities is established, substantially all ofthe business, as well as substantially all of our revenues from the operation, would be directed by means of the WFOE, through contractual arrangements withthe facility and its equity owners and any other limited liability company set up in connection with these activities that would provide us with benefits fromthe facility. We would depend on the facility to enter into a lease agreement for the premises; hire employees; purchase laboratory equipment; seek governmentfunding; and hold certain of our intellectual property and “know-how.” We would also depend on the facility to maintain certain licenses and other relevantgovernment approvals necessary for its business and operations. We would have no direct ownership interest in the facility. The contractual arrangements asembodied in the VIE Documents may not be as effective in providing us benefits from such facility as would direct ownership. In addition, the facility or itsequity owners may breach the contractual arrangements. We would similarly rely on any other limited liability company set up in connection with the conductof related research and development activities.Employees and/or officers of the prospective processing and storage facility/laboratory may encounter conflicts of interest between their duties to us and to thefacility. There can be no assurance that if conflicts of interest arise, the ultimate equity owners of the facility will act completely in our interests or thatconflicts of interest will be resolved in our favor. These ultimate equity owners could violate any applicable non-competition or employment agreements or theirlegal duties by diverting business opportunities from us to others. In any event, we would have to rely on legal remedies under PRC law. These remedies maynot always be effective in vindicating our rights, particularly in light of the uncertainties of the PRC legal system.56Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. If we move forward with our plans to expand into China through the establishment of any new WFOE and any new China-based limited liabilitycompany, we may need to partly rely on distributions paid pursuant to the applicable contractual relationships for certain of our cash needs. Ifthese entities are unable to remit to us sufficient distributions due to statutory or contractual restrictions, our cash needs may not be met.We anticipate that certain of our cash needs may be met by means of the distributions to be paid pursuant to the contractual relationships relevant to any newWFOE we may establish. That is, our access to distributions from the planned stem cell processing, storage and manufacturing operation in Beijing includingrelated research and development activities would be limited to our rights under contract. In the event we proceeded with these plans, we would depend in parton receipt of these distributions for paying cash distributions to our shareholders, servicing any debt we may incur and paying our operating expenses. Thepayment of distributions in China is subject to limitations. Regulations in the PRC currently permit payment of dividends by PRC subsidiaries only out ofaccumulated profits as determined in accordance with accounting standards and regulations in China. In addition, if any of the relevant entities incur anydebt in the future, the instruments governing the debt may restrict the respective entity’s ability to make distributions. In the event that contractual rights,statutory enactments or PRC regulations delayed or prevented our receipt of anticipated distributions, our operations may be materially adversely affected.PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from making loans oradditional capital contributions to any PRC operating subsidiaries and affiliated entities that we may establish.In the event that we establish a new WFOE or any other PRC operating subsidiaries and affiliated entities, any loans or additional capital contributions that wemight make to such entities must comply with PRC legal requirements relating to foreign debt registration and to PRC companies’ “registered capital” and“total investment.” “Registered capital” refers to the capital contributed to or paid into a PRC company in cash or in kind, and “total investment” refers to theamount of a company’s registered capital plus all external borrowings by such company. The amounts of a PRC company’s registered capital and totalinvestment are set forth in the company’s constitutional documents and are approved by the competent government authority in advance. Loans to suchcompanies cannot exceed the difference between such company’s registered capital and total investment, unless the company has obtained the approval of theappropriate government approval authority.In the event we decide to establish any PRC subsidiaries and then seek to finance such PRC subsidiaries by making additional capital contributions, suchadditional contributions must be approved by the government approval authority. We cannot assure you that we will be able to obtain these governmentregistrations or approvals on a timely basis, if at all, with respect to future loans or additional capital contributions by us to any subsidiaries or affiliates. Ifwe fail to receive such registrations or approvals, our ability to capitalize any PRC operations would be negatively affected, which could adversely andmaterially affect the liquidity of any such PRC subsidiaries and our ability to expand our business.57Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.RISKS RELATED TO SEC INFORMAL REQUESTWe have received an informal request for documents in connection with an SEC investigation of a third party matter In connection with the SEC's investigation of a matter referred to as a matter of a third party (the “Third Party”), we have received an informal requestfrom the SEC, dated December 23, 2008, for the voluntary production of documents and information concerning the issuance, distribution, registration,purchase, sale and/or offer to sell our securities from January 1, 2007 to the present. The Third Party served as the lead underwriter of our public offeringthat was consummated in August 2007. We are cooperating fully with the SEC’s request. While there is no indication to date that we are the target of aninvestigation and the letter stated that the request should not be construed as an indication by the SEC or its staff that any violation of the federal securitieslaws has occurred, nor should it be considered a reflection upon any person, entity or security, there can be no assurance that the SEC will not take any actionagainst us. Any determination by the SEC to take action against us could be costly and time consuming, could divert the efforts and attention of ourdirectors, officers and employees from the operation of our business and could result in sanctions against us, any or all of which could have a materialadverse effect on our business and operating results. ITEM 1B. UNRESOLVED STAFF COMMENTS Not applicable. ITEM 2. PROPERTIES Effective as of July 1, 2006, the Company entered into an agreement for the use of space at 420 Lexington Avenue, New York, New York. Thisspace was subleased from an affiliate of Duncan Capital Group LLC (a former financial advisor to and an investor in the Company) and DCI Master LDC(the lead investor in the Company’s June 2006 private placement). Pursuant to the terms of the Agreement, the Company was obligated to pay $7,500monthly for the space, including the use of various office services and utilities. The agreement is on a month to month basis, subject to a thirty day priorwritten notice requirement to terminate. The space serves as the Company’s principal executive offices. On October 27, 2006, the Company amended thisagreement to increase the utilized space for an additional payment of $2,000 per month. In May 2007, the Board of Directors approved an amendment to thisagreement whereby, in exchange for a further increase in utilized space, the Company would pay on a monthly basis (i) $10,000 in cash and (ii) shares of theCompany’s restricted Common Stock with a value of $5,000 based on the fair market value of the Common Stock on the date of issuance. Commencing inAugust 2007, the parties agreed this monthly fee of $15,000 would be paid in cash on a month to month basis. In February 2008, the Company was advisedthat a portion of this sublet space was no longer available. The Company agreed to utilize the smaller space for a monthly fee of $9,000 beginning in March2008, as it was expected that many of our employees would be spending a majority of their time in Long Island, New York, helping to launch theProHealthcare collection center. On September 24, 2008, the Company entered into a license agreement with a provider of executive office space (the“Licensor”) to use office space at 420 Lexington Avenue, Suite 300, New York, NY 10170 (the “New Office Lease”). The New Office Lease had an initialterm from October 1, 2008 through September 30, 2009 at a monthly cost of $10,000, automatically renewing for successive one year terms unless 60 days’prior written notice was given by either party. Monthly charges upon renewal were to be determined by Licensor. Beginning February 1, 2009, the Companyhad the right to terminate the New Office Lease provided, among other things, that 60 days’ prior written notice was given. Upon entering into the New OfficeLease for office space at Suite 300, the Company further reduced the amount of office space it was utilizing at Suite 450 in the same building with acorresponding reduction in the monthly fee to $3,500 which was paid through December 31, 2008.58Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. NeoStem believed the combined office space at Suite 300 and Suite 450 at 420 Lexington Avenue, New York, NY, would be sufficient for its nearterm needs; however, sufficient space was again becoming available at Suite 450 and therefore 60 days’ prior written notice was given to Licensor in December2008 that the Company would be terminating the lease at Suite 300 effective February 1, 2009. It is anticipated that the Company will enter into an agreementfor the lease of executive office space at Suite 450, 420 Lexington Avenue, New York, NY 10170 with a lease term through June 2013. Rental and utilitypayments are anticipated to be in the aggregate approximate monthly amount of $20,100. To help defray the cost of the lease, the Company will license to thirdparties the right to occupy certain of the offices in Suite 450 and use certain business services. Such license payments will total approximately $14,400 permonth. The lease is expected to be entered into pursuant to an assignment and assumption of the original lease from the original lessor thereof, DCI MasterLDC (the lead investor in the Company’s June 2006 private placement) and affiliates of DCI Master LDC and Duncan Capital Group LLC (a former financialadvisor to and an investor in the Company), for which original lease a principal of such entities acted as guarantor (the “Guarantor”). The Company will becredited with an amount remaining as a security deposit with the landlord from such original lessor (the “Security Deposit Credit”), be required to deposit anadditional amount with the landlord to replenish the original amount of security for the lease, and pay an amount equal to the Security Deposit Credit to theGuarantor of the original lease, such security deposit and payment of the Security Deposit Credit to the Guarantor to be in the approximate aggregate amount of$157,100. Pending the execution of the new lease, the Company has been paying a fee of $2,500 per month to the landlord since January 2009. TheCompany believes this space should be sufficient for its needs for the foreseeable future, although there can be no assurance that the new lease will be enteredinto and the Company may then need to secure new executive office space.In January 2005, NS California began leasing space at Good Samaritan Hospital in Los Angeles, California at an annual rental of approximately$26,000 for use as its stem cell processing and storage facility. The lease expired on December 31, 2005, but the Company continues to occupy the space on amonth-to-month basis. This space was sufficient for the Company’s past needs but the Company plans to close this facility by the end of the second quarterof 2009 and transfer its processing and storage operations to state of the art facilities operated by leaders in cell processing. It intends to utilize NECC, withwhom it entered into a Master Services agreement and a first statement of work effective as of August 2007, to provide additional processing and cryogenicstorage to the Company at the NECC Facility in Newton, Massachusetts, to process and store for certain research purposes, and to utilize Progenitor CellTherapy LLC, with whom the Company entered into a Cell Processing and Storage Customer Agreement in January 2009, to process and store for commercialpurposes at the cGMP level at its California and New Jersey facilities. In addition, pursuant to NeoStem’s second statement of work with NECC entered intoin October 2008, NeoStem is currently paying $5,000 per month for the right to use shared laboratory space and certain administrative space at the NECCFacility. NS California also leased office space in Agoura Hills, California on a month-to-month basis from Symbion Research International at a monthlyrental of $1,687. Effective March 31, 2008, we canceled our space agreement with Symbion Research International. We currently do not anticipate acontinuing need for office space in California. Rent for these facilities for the years ended December 31, 2008, 2007 and 2006, was approximately $202,000,$215,000 and $79,000, respectively. ITEM 3. LEGAL PROCEEDINGS NeoStem is not aware of any material pending legal proceedings against it. In connection with the SEC's investigation of a matter referred to as a matter of a third party (the “Third Party”), NeoStem has received an informalrequest from the SEC, dated December 23, 2008, for the voluntary production of documents and information concerning the issuance, distribution,registration, purchase, sale and/or offer to sell its securities from January 1, 2007 to the present. The Third Party served as the lead underwriter of NeoStem'spublic offering that was consummated in August 2007. NeoStem is cooperating fully with the SEC’s request. The letter stated that the request should not beconstrued as an indication by the SEC or its staff that any violation of the federal securities laws has occurred, nor should it be considered a reflection uponany person, entity or security. There is no indication to date that NeoStem is the subject of an investigation. 59Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the Company's stockholders during the fourth quarter of 2008. 60Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OFEQUITY SECURITIES ITEM 5(a). MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.Our Common Stock trades on the NYSE Amex (previously known as the American Stock Exchange) under the symbol “NBS.” From August 31,2006 to August 8, 2007, it traded on the OTC Bulletin Board under the symbol “NEOI” and from July 24, 2003 to August 30, 2006 traded under the symbol“PHSM.” The following table sets forth the high and low sales prices and high and low bid prices (as applicable) of our Common Stock for each quarterlyperiod within the two most recent fiscal years, and for the current year to date, as reported by the NYSE Amex, the American Stock Exchange and/orNASDAQ Trading and Market Services (as applicable). On March 27, 2009, the closing sales price for our Common Stock was $0.94. Information setforth in the table below reflects inter-dealer prices without retail mark-up, mark-down, or commission, and may not necessarily represent actual transactions. 2009 High Low First Quarter (to March 27, 2009) $1.08 $0.43 2008 High Low First Quarter $2.24 $1.18 Second Quarter 1.48 0.41 Third Quarter 1.80 0.70 Fourth Quarter 2.15 0.41 2007 High Low First Quarter $8.00 $2.50 Second Quarter 6.40 3.70 Third Quarter 7.65 3.65 Fourth Quarter 4.75 1.28 HOLDERS. As of March 27, 2009, there were approximately 1,025 holders of record of the Company's Common Stock (which does not includebeneficial owners for whom Cede & Co. or others act as nominees). DIVIDENDS. Holders of Common Stock are entitled to dividends when, as, and if declared by the Board of Directors out of funds legally availabletherefor. We have not paid any cash dividends on our Common Stock and, for the foreseeable future, intend to retain future earnings, if any, to finance theoperations, development and expansion of our business. Future dividend policy is subject to the discretion of the Board of Directors. 61Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EQUITY COMPENSATION PLAN INFORMATION The following table gives information about the Company’s Common Stock that may be issued upon the exercise of options, warrants and rights under theCompany’s 2003 Equity Participation Plan as of December 31, 2008. This plan was the Company’s only equity compensation plan in existence as ofDecember 31, 2008. Plan Category (a)Number ofSecurities to beIssued UponExercise ofOutstandingOptions,Warrants andRights (b)Weighted-AverageExercise PriceofOutstandingOptions,Warrants andRights (c)Number ofSecuritiesRemainingAvailable ForFutureIssuanceUnder EquityCompensationPlan(ExcludingSecuritiesReflectedIn Column(a)) Equity Compensation Plans Approved by Shareholders 1,725,300 $3.96 36,298 Equity Compensation Plans Not Approved by Shareholders 0 0 0 TOTAL 1,725,300 $3.96 36,298 62Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. RECENT SALES OF UNREGISTERED SECURITIES Previously reported on the Company’s Current Reports on Form 8-K dated March 20, 2008, May 20, 2008, July 24, 2008, August 28, 2008, October 15,2008 and November 26, 2008, respectively. ITEM 5(b) USE OF PROCEEDS Not applicable. ITEM 5(c) REPURCHASES OF EQUITY SECURITIES There were no repurchases of equity securities by the Company or any affiliated purchaser during the fourth quarter of the fiscal year endedDecember 31, 2008 as to which information is required to be furnished. ITEM 6. SELECTED FINANCIAL DATA The selected statements of operations and balance sheet data set forth below are derived from audited financial statements of the Company. Theinformation set forth below should be read in conjunction with the Company's audited consolidated financial statements and notes thereto. See Item 8"Financial Statements and Supplementary Data" and Item 7 "Management's Discussion and Analysis of Financial Condition and Results ofOperations." The requirement to provide geographical information for the operations of the Company is not practical. Statement of Operations:($’000 except net loss per share which is stated in$ and weighted averagenumber of shares) YearEndedDecember 31,2008 Year EndedDecember 31,2007 Year EndedDecember 31,2006 Year EndedDecember 31,2005 Year EndedDecember 31,2004 Earned revenues $84 $232 $46 $35 $49 Direct costs 32 25 22 25 34 Gross profit 52 207 23 10 15 Operating (loss) (9,233) (10,439) (4,691) (1,601) (1,474)Net loss (9,242) (10,445) (6,051) (1,745) (1,748)Basic and diluted earnings per share: Net loss (1.53) (3.18) (4.43) (3.51) (5.37)Weighted average number of shares outstanding 6,056,886 3,284,116 1,365,027 497,758 325,419 Balance Sheet Data: $’000 As ofDecember 31,2008 As ofDecember 31,2007 As ofDecember 31,2006 As ofDecember 31,2005 As ofDecember 31,2004 Working Capital (Deficiency) $(431) $1,931 $(310) $(1,245) $(1,239) Total Assets 1,824 3,775 1,195 643 99 Current Liabilities 961 444 838 1,752 1,288 Long Term Debt — 15 65 — — (Accumulated Deficit) (39,994) (30,752) (20,307) (14,255) (12,510) Total Stockholders’ (Deficit)/ Equity 863 3,316 292 (1,818) (1,932) 63Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION The following discussion and analysis highlights significant factors influencing NeoStem’s financial condition and results of operations. It shouldbe read together with the audited consolidated financial statements and notes thereto included in Item 8 of this report, and is qualified in its entirety by referencethereto. This discussion contains forward-looking statements. Please see “Caution Regarding Forward-Looking Statements” for a discussion of the risks,uncertainties and assumptions relating to these statements. OVERVIEWNeoStem is engaged in a platform business of operating a commercial autologous (donor and recipient are the same) adult stem cell bank and ispioneering the pre-disease collection, processing and long-term storage of stem cells from adult donors that they can access for their own future medicaltreatment. We are managing a network of adult stem cell collection centers in major metropolitan areas of the United States. We have also entered the researchand development arenas, through the acquisition of a worldwide exclusive license to an early-stage technology to identify and isolate rare stem cells from adulthuman bone marrow, called VSEL (very small embryonic-like) stem cells. VSELs have many physical characteristics typically found in embryonic stemcells, including the ability to differentiate into specialized cells found in substantially all the different types of cells and tissue that make up the body. OnJanuary 19, 2006, we consummated the acquisition of the assets of NS California, Inc., a California corporation (“NS California”) relating to NSCalifornia’s business of collecting and storing adult stem cells. Effective with the acquisition, the business of NS California became our principal business,rather than our historic business of providing capital and business guidance to companies in the healthcare and life science industries. NeoStem providesadult stem cell processing, collection and banking services with the goal of making stem cell collection and storage widely available, so that the generalpopulation will have the opportunity to store their own stem cells for future healthcare needs. The adult stem cell industry is a field independent of embryonic stem cell research which NeoStem believes is more likely to be burdened bygovernmental, legal, ethical and technical issues than adult stem cell research. Medical researchers, scientists, medical institutions, physicians,pharmaceutical companies and biotechnology companies are currently developing therapies for the treatment of disease using adult stem cells. As these adultstem cell therapies obtain necessary regulatory approvals and become standard of care, patients will need a service to collect, process and bank their stemcells. NeoStem intends to provide this service.Initial participants in our collection center network have been single physician practices who opened collection centers in California, Pennsylvaniaand Nevada. Revenues generated by these early adopters have not been significant and are not expected to become significant. However, these centers haveserved as a platform for the development of NeoStem’s business model and today NeoStem is focusing on multi-physician and multi-specialty practicesjoining its network in major metropolitan areas. Toward this end, NeoStem signed an agreement in June 2008 for a New York City stem cell collection centerto be opened by Bruce Yaffe, M.D., Yaffe, Ruden and Associates, which facility became operational in November 2008. In July 2008, NeoStem signed anagreement for a Santa Monica, California based stem cell collection center to be opened by Stem Collect of Santa Monica LLC at The Hall Center. Thisfacility became operational in the fall of 2008. Additionally, NeoStem signed an agreement with Celvida LLC pursuant to which a Southern Florida stem cellcollection center located in Coral Gables, a suburb of Miami, became operational in September 2008. In March 2009, the Company signed an agreement toopen a collection center with the Giampapa Institute for Anti-Aging Medical Therapy in Montclair, New Jersey.64Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. During 2008, parallel to growing the platform business and the efforts we undertook in that regard to establish a network of collection centers incertain major metropolitan areas of the United States to drive growth, we recognized the need to acquire a revenue generating business in the United States orabroad and began exploring acquisition opportunities of revenue generating businesses. In November 2008, NeoStem entered into the Merger Agreement withCBH to acquire the 51% interest in Suzhou Erye Pharmaceuticals Company Ltd., “Erye” a Sino-foreign limited liability joint venture organized under thelaws of the PRC, which has been in business for more than 50 years and currently manufactures over 100 drugs on seven Good Manufacturing Practices(GMP) lines, including small molecule drugs. Erye specializes in research and development, production and sales of pharmaceutical products, as well aschemicals used in pharmaceutical products. Also in November 2008, NeoStem entered into the Share Exchange Agreement to obtain benefits from ShandongNew Medicine Research Institute of Integrated Traditional and Western Medicine Limited Liability Company, a China limited liability company, which isengaged in the business of research, development, popularization and transference of regenerative medicine technology (except for those items for which it doesnot have special approval) in the PRC. Subject to the fulfillment of various closing conditions (including shareholder approval), the Merger and the ShareExchange are currently anticipated to close near the end of the second quarter of 2009. The Company has engaged in various capital raising activities to pursue its business opportunities, raising approximately $3,823,000 in 2006,$7,939,000 in 2007 and $2,899,000 in 2008 through the sale of its Common Stock, warrants and convertible promissory notes. These amounts include anaggregate of $250,000 raised from the private placement of the convertible promissory notes in the Westpark private placement in January 2006, $2,079,000raised from the June 2006 private placement of shares of Common Stock and warrants to purchase shares of Common Stock, an aggregate of $1,750,000raised from the additional private placement of shares of Common Stock and warrants to purchase shares of Common Stock in rolling closings in thesummer of 2006, an aggregate of $2,500,000 (net proceeds of $2,320,000) raised in January and February 2007 from the private placement of units consistingof shares of Common Stock and warrants to purchase shares of Common Stock, an aggregate of $6,350,000 (net proceeds of $5,619,000) raised in August2007 from the public offering of 1,270,000 units consisting of shares of Common Stock and warrants to purchase shares of Common Stock, and anaggregate of $1,150,000, $1,000,000, $250,000 and $500,000, raised in May 2008, September 2008, October 2008 and November 2008, respectively, withtotal net proceeds of $2,899,000, from the additional private placement of Common Stock and warrants to purchase Common Stock. These capital raisingactivities enabled us to acquire the business of NS California, pursue our business plan and grow our adult stem cell collection and storage business,including expanding marketing and sales activities, and explore acquisition opportunities. In October 2008 we were advised that we would receive Federalfunding from the Department of Defense to evaluate the potential use of adult stem cell therapy for wound healing, and would be included in the Department ofDefense Fiscal Year 2009 Appropriations Bill. Such funding is currently anticipated to be in the approximate net amount of $681,000.In February and March 2009, in order to move forward certain research and development activities, strategic relationships in various clinical andtherapeutic areas as well as to support activities related to the Merger Agreement and Share Exchange Agreement, and other ongoing obligations of theCompany, the Company issued promissory notes (“RimAsia Notes”) totaling $1,150,000 to RimAsia Capital Partners, L.P., a principal stock holder of theCompany, which notes bear interest at a rate equal to 10% per annum and mature on October 31, 2009 except that they mature earlier in the case of an equityfinancing by the Company that raises in excess of $10,000,000. The acquisition of the VSEL technology was made through our acquisition of our subsidiary Stem Cell Technologies, Inc. in a stock-for-stockexchange. Although the funds obtained through the acquisition of SCTI funded certain early obligations under NeoStem’s agreements relating to the VSELtechnology, substantial additional funds will be needed and additional research and development capacity will be required to meet its development obligationsunder the License Agreement and develop the VSEL technology. NeoStem has applied for Small Business Innovation Research (SBIR) grants and may alsoseek to obtain funds through applications for other State and Federal grants, grants abroad, direct investments, strategic arrangements as well as other fundingsources to help offset all or a portion of these costs. A portion of the proceeds from the RimAsia Notes are being used to meet funding requirements ofdeveloping the VSEL technology.65Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. With regard to the proposed Merger and Share Exchange, it is not anticipated that in the next year either of these acquisitions will generate sufficientexcess cash flow to support NeoStem’s platform business and therefore the Company will also need to raise substantial additional funds to fund its platformbusiness and/or acquire another revenue generating business. Additionally, even if either or both of the acquisitions closes, the closings will likely not occuruntil the end of the second quarter of 2009 and NeoStem will need to fund its platform business as well as the large costs associated with the acquisitiontransactions until such time. NeoStem’s history of losses and liquidity problems may make it difficult to raise additional funding. There can be no assurancethat NeoStem will be able to obtain additional funding on terms acceptable to NeoStem. Any equity financing may be dilutive to stockholders and debtfinancing, if available, may involve significant restrictive covenants. The Company has begun other initiatives to expand its operations into China including with respect to technology licensing, establishment of stem cellprocessing and storage capabilities and research and clinical development. It is taking steps to establish a separate WFOE and one or more limited liabilitycompanies and put in place separate VIE documents with respect to these activities. The Company is exploring the possibility of these expansion activitiesbeing a substitute for its moving forward with closing the transactions under the Share Exchange Agreement. CRITICAL ACCOUNTING POLICIESNeoStem’s “Critical Accounting Policies” are as follows, and are also described in Note 2 to the audited consolidated financial statements and notesthereto, included in Item 8 of this report:Revenue Recognition: In the fourth quarter of 2006, NeoStem initiated the collection and banking of autologous adult stem cells and the firstcollection center in its collection center network opened. NeoStem recognizes revenue related to the collection and cryopreservation of autologous adult stem cellswhen the cryopreservation process is completed (generally twenty four hours after cells have been collected). Revenue related to advance payments of storagefees is recognized ratably over the period covered by the advance payments. Start up fees that are received from collection centers that seek to open collectioncenters (in consideration of NeoStem establishing a service territory for the collection center) are recognized after agreements are signed and the collection centerhas been qualified by NeoStem’s credentialing committee. Income Taxes and Valuation Reserves: We are required to estimate our income taxes in each of the jurisdictions in which we operate as part of preparing ourfinancial statements. This involves estimating the actual current tax in addition to assessing temporary differences resulting from differing treatments for taxand financial accounting purposes. These differences, together with net operating loss carryforwards and tax credits, are recorded as deferred tax assets orliabilities on our balance sheet. A judgment must then be made of the likelihood that any deferred tax assets will be realized from future taxable income. Avaluation allowance may be required to reduce deferred tax assets to the amount that is more likely than not to be realized. In the event we determine that wemay not be able to realize all or part of our deferred tax asset in the future, or that new estimates indicate that a previously recorded valuation allowance is nolonger required, an adjustment to the deferred tax asset is charged or credited to net income in the period of such determination. Upon receipt of the proceedsfrom the last foreign purchasers of the Company’s Common Stock in January 2000, Common Stock ownership changed in excess of 50% during the three-year period then ended. At December 31, 2008, the Company had net operating loss carryforwards of approximately $31,000,000 applicable to future Federalincome taxes, approximately $24,000,000 applicable to New York State income taxes, approximately $2,000,000 applicable to California income taxes andapproximately $12,500,000 applicable to New York City income taxes. Included in the Federal net operating loss carryforwards is approximately $2,121,000that has been limited by the ownership change. The tax loss carryforwards expire at various dates through 2028. The Company has recorded a full valuationallowance against its net deferred tax asset because of the uncertainty that the utilization of the net operating loss and deferred revenue and fees will be realized.66Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Goodwill: Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in a business combination. TheCompany reviews recorded goodwill for potential impairment annually or upon the occurrence of an impairment indicator. The Company performed its annualimpairment tests as of December 31, 2008 and determined no impairment exists. The Company will perform its future annual impairment as of the end ofeach fiscal year. Intangible Asset: SFAS No. 142 requires purchased intangible assets other than goodwill to be amortized over their useful lives unless those livesare determined to be indefinite. Purchased intangible assets are carried at cost less accumulated amortization. Definite-lived intangible assets, which consists ofpatents and rights associated with the Very Small Embryonic Like (“VSEL”) Stem Cells which constitutes the principal assets acquired in the acquisition ofStem Cells Technologies, Inc., have been assigned a useful life and are amortized on a straight-line basis over a period of twenty years.RECENT ACCOUNTING PRONOUNCEMENTS In September 2006, the Financial Accounting Standards Board ("FASB") issued SFAS No. 157, "Fair Value Measurements" ("SFAS No. 157"). SFAS No.157 defines fair value, establishes a framework for measuring fair value in accordance with U.S. GAAP, and expands disclosures about fair valuemeasurements. SFAS No. 157 does not require any new fair value measurements; rather, it applies to other accounting pronouncements that require or permitfair value measurements. In February 2008, the FASB issued FASB Staff Position ("FSP") No. 157-2, "Effective Date of FASB Statement No. 157" ("FSPNo. 157-2"). FSP No. 157-2 delays the effective date of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities, except for certain items that arerecognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). We were required to apply the provisions of SFAS No.157 to financial assets and liabilities prospectively as of January 1, 2008. Its adoption did not materially impact our results of operations or financialposition. We will be required to apply the provisions of SFAS No. 157 to nonfinancial assets and nonfinancial liabilities as of January 1, 2009 and arecurrently evaluating the impact of the application of SFAS No. 157 as it pertains to these items. In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities — including anamendment of FAS 115" ("SFAS No. 159"). SFAS No. 159 allows companies to choose, at specified election dates, to measure eligible financial assets andliabilities at fair value that are not otherwise required to be measured at fair value. Unrealized gains and losses shall be reported on items for which the fairvalue option has been elected in earnings at each subsequent reporting date. SFAS No. 159 also establishes presentation and disclosure requirements. SFASNo. 159 was effective for fiscal years beginning after January 1, 2008 and will be applied prospectively. At the present time SFAS No. 159 has no impact onour operations. 67Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. In June 2007, the FASB ratified EITF No. 07-03, “Accounting for Nonrefundable Advance Payments for Goods or Services Received for FutureResearch and Development Activities” (“EITF 07-03”). EITF 07-03 requires that nonrefundable advance payments for goods or services that will be used orrendered for future research and development activities be deferred and capitalized and recognized as an expense as the goods are delivered or the relatedservices are performed. EITF 07-03 is effective, on a prospective basis, for fiscal years beginning after December 15, 2007. At the present time the adoptionof EITF 07-03 does not have a material effect on the Company’s operations or financial position. In October 2007, the Company adopted the provisions of SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and OtherPostretirement Plans — an amendment of FASB Statements No. 87, 88, 106, and 132 (R)" ("SFAS No. 158"). This standard requires recognition of theoverfunded or underfunded status of each plan as an asset or liability in the consolidated balance sheet with the offsetting change in that funded status toaccumulated other comprehensive income. Upon adoption, this standard requires immediate recognition in accumulated other comprehensive income ofactuarial gains/losses and prior service costs/benefits — both of which were previously unrecognized. Additional minimum pension liabilities and relatedintangible assets are eliminated upon adoption of the new standard. At the present time we do not have any defined benefit pension plans and therefore themeasurement date provisions of SFAS No. 158 will not have a material impact on our consolidated financial statements. In December 2007, the FASB issued SFAS No. 141R, "Business Combinations" ("SFAS No. 141R"). SFAS No. 141R amends SFAS 141 andprovides revised guidance for recognizing and measuring identifiable assets and goodwill acquired, liabilities assumed, and any noncontrolling interest in theacquiree. It also provides disclosure requirements to enable users of the financial statements to evaluate the nature and financial effects of the businesscombination. It is effective for fiscal years beginning on or after December 15, 2008 and will be applied prospectively. We are currently evaluating the impactof adopting SFAS No. 141R on our current consolidated financial statements and how this may affect the proposed Merger and Share Exchange transactions. In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No.51" ("SFAS No. 160"). SFAS No. 160 requires that ownership interests in subsidiaries held by parties other than the parent, and the amount of consolidatednet income, be clearly identified, labeled, and presented in the consolidated financial statements. It also requires once a subsidiary is deconsolidated, anyretained noncontrolling equity investment in the former subsidiary be initially measured at fair value. Sufficient disclosures are required to clearly identify anddistinguish between the interests of the parent and the interests of the noncontrolling owners. It is effective for fiscal years beginning on or after December 15,2008 and requires retroactive adoption of the presentation and disclosure requirements for existing minority interests. All other requirements shall be appliedprospectively. At the present time SFAS No. 160 has no impact on our operations. We are currently evaluating the impact of adopting SFAS No. 160 and howthis may affect the proposed Merger and Share Exchange transactions. In December 2007, the EITF reached a consensus on EITF No. 07-01, Accounting for Collaborative Arrangements Related to the Development andCommercialization of Intellectual Property (“EITF 07-01”). EITF 07-01 discusses the appropriate income statement presentation and classification for theactivities and payments between the participants in arrangements related to the development and commercialization of intellectual property. The sufficiency ofdisclosure related to these arrangements is also specified. EITF 07-01 is effective for fiscal years beginning after December 15, 2008. At the present time EITFNo. 07-01 has no impact on our operations. However, based upon the nature of the Company’s business, EITF 07-01 could have an impact on its financialposition and results of operations in future years. 68Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASBStatement No. 133" ("SFAS No. 161"), which requires additional disclosures about objectives and strategies for using derivative instruments, how thederivative instruments and related hedged items are accounted for under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," andrelated interpretations, and how the derivative instruments and related hedged items affect our financial statements. SFAS No. 161 also requires disclosuresabout credit risk-related contingent features in derivative agreements. SFAS No. 161 is effective for fiscal years and interim periods beginning after November15, 2008 and will be applied prospectively. We are currently evaluating the impact of adopting SFAS No. 161 on our consolidated financial statements. In April 2008, the FASB issued FASB Staff Position No. 142-3, "Determination of the Useful Life of Intangible Assets" ("FSP 142-3"). FSP 142-3amends the factors that should be considered in developing renewal or extension assumptions that are used to determine the useful life of a recognizedintangible asset under SFAS No. 142, "Goodwill and Other Intangible Assets," and requires enhanced related disclosures. FSP 142-3 must be appliedprospectively to all intangible assets acquired as of and subsequent to fiscal years beginning after December 15, 2008. At the present time, FSP 142-3 has noimpact on our operations. In May 2008, the FASB issued Staff Position APB 14-1, "Accounting for Convertible Debt Instruments That May Be Settled in Cash uponConversion (Including Partial Cash Settlement)" ("APB 14-1") to clarify that convertible debt instruments that may be settled in cash upon conversion(including partial cash settlement) are not addressed by paragraph 12 of APB Opinion No. 14, "Accounting for Convertible Debt and Debt Issued with StockPurchase Warrants." Additionally, APB 14-1 specifies that issuers of such instruments should separately account for the liability and equity components in amanner that will reflect the entity's nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. APB 14-1 is effective forNeoStem as of January 1, 2009. At the present time APB 14-1 has no impact on our operations. We are evaluating the impact of adopting APB 14-1 on theproposed Merger and Share Exchange transactions. In June 2008, the FASB ratified EITF Issue No. 07-5, “Determining Whether an Instrument (or an Embedded Feature) Is Indexed to an Entity’s OwnStock” (“EITF 07-5”). EITF 07-5 provides that an entity should use a two step approach to evaluate whether an equity-linked financial instrument (orembedded feature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions. It also clarifies the impactof foreign currency denominated strike prices and market-based employee stock option valuation instruments on the evaluation. EITF 07-5 is effective forfiscal years beginning after December 15, 2008. The Company is currently evaluating the potential impact, if any, the new pronouncement will have on itsconsolidated financial statements. In June 2008, the FASB issued FSP EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are ParticipatingSecurities.” This FSP clarifies that all outstanding unvested share-based payment awards that contain rights to non-forfeitable dividends participate inundistributed earnings with common shareholders. Awards of this nature are considered participating securities and the two-class method of computing basicand diluted earnings per share must be applied. This FSP is effective for fiscal years beginning after December 15, 2008. NeoStem is currently evaluating thepotential impact, if any, the new pronouncement will have on its consolidated financial statements. 69Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. RESULTS OF OPERATIONS Years Ended December 31, 2008 and December 31, 2007 For the year ended December 31, 2008, total revenues were $83,500 compared to $232,000 for the year ended December 31, 2007. The revenuesgenerated in the years ended December 31, 2008 and 2007 were derived from a combination of revenues from the collection of autologous adult stem cells, startup fees collected from collection centers in NeoStem’s collection center network and additionally, for the year ended December 31, 2007, recognition of feesreceived in prior years from the sale of extended warranties and service contracts via the Internet, which were deferred and recognized over the life of suchcontracts. For the year ended December 31, 2008, NeoStem earned $52,500 relating to the collection and storage of autologous adult stem cells and $31,000 ofstart up fees. For the year ended December 31, 2007, NeoStem earned $41,000 from the collection and storage of autologous adult stem cells and $189,000from start up fees. The reduction in start up fees from 2007 to 2008 was due primarily to reduced activity in establishing collection centers and a concentrationof the Company’s efforts on recruiting clients into the existing network in the Greater New York area, Southern California and Coral Gables, Florida. Inaddition, start up fees have been reduced because the Company has more recently opted to help support the launch of its new centers by waiving or reducingits start up fees. NeoStem recognized revenues from the sale of extended warranties and service contracts via the Internet of $1,700 for the year endedDecember 31, 2007. Since NeoStem has not been in the business of offering extended warranties since 2002 it was expected that this revenue source woulddecline and the recognition of these revenues ended in March 2007. Direct costs are comprised of the cost of collecting autologous stem cells from clients and, as it relates to the prior business of offering extendedwarranties, the pro-rated cost of reinsurance purchased at the time an extended contract was sold to underwrite the potential obligations associated with suchwarranties. For the year ended December 31, 2008, the direct costs of collecting autologous stem cells were $32,000. For the year ended December 31, 2007, thedirect costs of collecting autologous stem cells were $24,000 and $1,000 was associated with the pro-rata cost of reinsurance purchased for associated extendedwarranties. Selling, general and administration expenses for the year ended December 31, 2008 has decreased by $1,360,000 or 13% over the year endedDecember 31, 2007, from $10,646,000 to $9,285,000. The decrease in selling, general and administrative expenses is primarily due to an overall decrease inoperating expenses as the Company made a concerted effort to reduce staff and trim expenses. In an effort to preserve cash in 2008 and 2007, the Companycontinued to utilize common stock, common stock options and warrants to pay for certain services. In 2008, the Company incurred $3,890,000 of expenserelated to the use of various equity instruments compared to 2007 when the Company incurred $4,590,000 of expense from such use, an overall reduction of$729,000. Equity instruments have been used for compensation purposes for management and other staff, consultants and directors and to pay forinvestment banking fees, investor relations, marketing expenses as well as other expenses. The compensatory element of the vesting of stock options andcommon stock granted to staff and directors was reduced by $1,462,000 in 2008 principally because the fair value of the options and common stock vestingin 2008 was significantly lower in comparison to 2007. The Company’s use of equity instruments to pay for investment banking fees, investor relations,marketing expense as well as other expenses increased by $589,000. Cash expenditures decreased $632,000, or 10%, when compared to 2007. This decreaseis the combination of an increase resulting from expenses and activities associated with the proposed Merger with CBH and the proposed Share Exchange withChina StemCell Medical Holding Limited relating to Shandong, in the amount of $806,000 and a reduction in operating expenses of $1,438,000. The decreasein cash funded operating expenses was primarily related to a decrease in legal expense of $630,000, investor relations expense of $312,000, consulting fees of$213,000, salary and benefits of $109,000, travel and entertainment of $108,000, validation expenses required for New York licensing of $60,000, theconclusion of severance payments to a former staff member of $54,000, stock exchange fees, filing fees and other related fees of $42,800, reduced attendanceat conferences of $29,500 and laboratory expenses of $14,000. These decreases were offset by increases in marketing expenses of $34,200, accounting fees of$18,000, research and development expenditures related to fees due the University of Louisville in connection with our VSEL license of $50,000, expenses forapplying for scientific grants and other activities to support our VSEL research of $18,000, and a variety of other expenses that resulted in a net expenseincrease of $14,100.70Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Years Ended December 31, 2007 and December 31, 2006 For the year ended December 31, 2007, total revenues were $232,000 compared to $46,000 for the year ended December 31, 2006. The revenuesgenerated in the years ended December 31, 2007 and 2006 were derived from a combination of revenues from the collection of autologous adult stem cells, startup fees collected from collection centers in NeoStem’s collection center network and recognition of fees received in prior years from the sale of extendedwarranties and service contracts via the Internet, which were deferred and recognized over the life of such contracts. For the year ended December 31, 2007,NeoStem earned $41,000 from the collection of autologous adult stem cells and $189,000 of start up fees. For the year ended December 31, 2006, NeoStemearned $11,000 from the collection of autologous adult stem cells and $10,000 from start up fees. NeoStem recognized revenues from the sale of extendedwarranties and service contracts via the Internet of $1,700 for the year ended December 31, 2007, as compared to $25,000 for the year ended December 31,2006. Since NeoStem has not been in the business of offering extended warranties since 2002 it was expected that this revenue source would decline and therecognition of these revenues ended in March 2007. Direct costs are comprised of the cost of collecting autologous stem cells from clients and the pro-rated cost of reinsurance purchased at the time anextended contract was sold to underwrite the potential obligations associated with such warranties. For the year ended December 31, 2007, the direct costs ofcollecting autologous stem cells were $24,000 and $1,000 was associated with the pro-rata cost of reinsurance purchased for associated extended warranties.For the year ended December 31, 2006, the direct costs of collecting autologous stem cells were $4,000 and $18,000 was associated with the pro-rata cost ofreinsurance purchased for associated extended warranties. Selling, general and administration expenses for the year ended December 31, 2007 increased by $5,931,000 or 126% over the year endedDecember 31, 2006, from $4,715,000 to $10,646,000. The increase in selling, general and administrative expenses was primarily due to increases inmarketing efforts through the hiring of staff, preparation of marketing materials, attending key marketing events and retaining the services of specializedmarketing consulting firms. However, a substantial portion of the increase was due to the compensatory element of stock options and stock awards grantedunder NeoStem’s 2003 Equity Participation Plan to certain officers, employees and consultants to NeoStem, totaling $2,980,000 for the year, an increase inoperating expenses of $2,147,000 over 2006. In addition, and in order to conserve cash, NeoStem used common stock and common stock purchase warrantsas consideration for services. During 2007, NeoStem issued common stock and common stock purchase warrants valued at $1,653,000 as consideration fordirector fees, consulting fees, investor relations, marketing, rent and marketing services, an increase of $1,432,000 over 2006. Cash expenditures increased$2,352,000 over 2006. Increases in staff increased salary and benefits by $1,078,000 over 2006; staff increases also increased travel and entertainmentexpenses by $281,000, cash expenditures for rent by $73,000 and telephone expense by $19,000 over 2006. For key, limited role, functions NeoStem hasutilized consultants to support staff efforts resulting in an increase in cash expenditures for consulting expense of $183,000. Marketing efforts to enlarge ourcollection center network and develop new markets increased operating expenses by $324,000. NeoStem also sought to increase public and investor awarenessof the value of adult stem cells which resulted in increases in investor relations expenses by $385,000 over 2006. In comparison to 2006, legal expensesincreased $57,000, accounting fees increased $44,000, stock transfer fees increased $30,000, postage increased $25,000, bad debts increased $20,000,depreciation and amortization increased $25,000, licensure expense increased $49,000 and stock exchange fees increased $64,000. Such increases wereessentially offset by reductions in fees paid to investment bankers in 2006 of $138,000 and settlement costs paid in 2006 of $189,000. 71Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Interest expense for the year ended December 31, 2007 was $22,000 as compared to $1,371,000 for the year ended December 31, 2006, a decrease of$1,349,000. This decrease was primarily as a result of the conversion of convertible promissory notes issued in the Westpark private placement (throughwhich NeoStem raised $500,000 through the sale of convertible promissory notes and warrants in December 2005 and January 2006 and in which WestparkCapital, Inc. acted as placement agent). Substantially all of this debt was converted to common stock in 2006 and the remaining $75,000 in principal balanceoutstanding was repaid in January 2007. LIQUIDITY AND CAPITAL RESOURCESGeneralAt December 31, 2008, NeoStem had a cash balance of $431,000 and a negative working capital of $(431,000). NeoStem has met its immediatecash requirements through offerings of Common Stock and warrants in 2008 which raised an aggregate gross amount of $2,900,000. NeoStem generatesrevenues from its adult stem cell collection activities. To date, NeoStem’s revenues generated from such activities have not been significant and we hadminimal adult stem cell collection activity during 2008.NeoStem had been exploring acquisition opportunities of revenue generating businesses and in November 2008 entered into the Merger Agreementwith CBH to acquire the 51% ownership interest in Erye, which manufactures over 100 drugs on seven cGMP lines and the Share Exchange Agreement withrespect to Shandong which is engaged in the business of research, development, popularization and transference of regenerative medicine technology (except forthose items for which it does not have special approval) in the PRC. The Company has also begun other initiatives to expand its operations into Chinaincluding with respect to technology licensing, establishment of stem cell processing and storage capacities and research and clinical development. TheCompany has incurred substantial expenses in connection with these China activities. The acquisition transactions are not expected to close before the secondquarter of 2009 and in any event neither the acquisition transactions nor the Company’s other initiatives in China are expected to generate sufficient excesscash flow to support NeoStem’s platform business or its initiatives in China in the near term. The Company is exploring the possibility of its independentinitiatives in China being a substitute for its moving forward with closing the transactions under the Share Exchange Agreement.The Company currently intends to meet its cash requirements in the near term through financing activities including an equity offering in the second quarter2009 in an amount anticipated to be no less than $10 million. During the first quarter 2009, the Company issued promissory notes to a principal stockholderof the Company which aggregated $1,150,000 (see Note 14 to the audited consolidated financial statements and related notes included in Item 8 of this report).In the event that this equity offering is not successful, the Company would need to substantially reduce its operating costs and would seek additional bridgefinancing until a future equity offering could be accomplished. 72Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Years Ended December 31, 2008 and December 31, 2007The following chart represents the net funds provided by or used in operating, financing and investment activities for each period indicated: Year Ended December31, 2008 December31, 2007 Cash (used) in operating activities $(4,732,000) $(6,132,000)Cash provided/(used) in investing activities $(9,800) $153,000 Cash provided by financing activities $2,869,000 $7,847,000 At December 31, 2008, NeoStem had a cash balance of $431,000, negative working capital of $(431,000) and a stockholders’ equity of $863,200. NeoStemincurred a net loss of $9,242,000 for the year ended December 31, 2008. Such loss adjusted for non-cash items, including common stock, common stockoption and common stock purchase warrant issuances which were related to services rendered of $3,890,000, depreciation and amortization of $116,000 andbad debt expense of $22,000; increases in accounts payable, notes payable, accrued liabilities reduced the cash required for operations and increases inprepaid insurance expenses increased the use of cash resulting in an overall increase of $482,000, resulted in cash used in operations totaling $4,732,000 forthe year ended December 31, 2008. Accordingly, the large difference between operating loss and cash used in operations was the result of a number of non-cashexpenses charged to results of operations. The negative working capital at December 31, 2008 is due primarily to $423,000 in amounts due law firms andfinancial consultants engaged in connection with the proposed Merger with CBH and the proposed Share Exchange with China StemCell Medical HoldingLimited relating to Shandong, and an accrued bonus of $250,000 due our Chief Executive Officer who has deferred receipt of such bonus in order to conserveNeoStem’s current cash.To meet its cash requirements for the year ended December 31, 2008, NeoStem relied on offerings of common stock and warrants completed in eachof May 2008, September 2008, October 2008 and November 2008 raising gross proceeds in the aggregate amount of $2,900,000 and its existing cashbalances. Under NeoStem’s current business plan it is generating revenues from its platform business of adult stem cell collection activities which to datehave not been significant, having had only nine collections during the year. NeoStem currently intends to meet its cash requirements in the near term with theproceeds of the RimAsia Notes and through financing activities, other collaborative arrangements and government awards and anticipates that with the recentopening of key collection centers and the Company’s initiatives in China, revenues may start to increase in 2009. On November 2, 2008, NeoStem signed the Merger Agreement to acquire CBH and its 51% interest in Suzhou Erye Pharmaceuticals Company Ltd.,and the Share Exchange Agreement to acquire China StemCell Medical Holding Limited and obtain benefits from Shandong New Medicine Research Instituteof Integrated Traditional and Western Medicine Limited Liability Company. Erye is in the middle of an expansion through relocation of its pharmaceuticalmanufacturing facility which is planned to be completed over the next three years. To date this activity has been self-funded by Erye and minorityshareholders of Erye and it is anticipated that they will continue to fund this project. In the event Erye is unable to raise the remaining funds needed for therelocation of its pharmaceutical manufacturing facility it could become incumbent upon NeoStem to assist in this effort. To facilitate the financing of thisrelocation project NeoStem has agreed to reinvest approximately 90% of its 51% interest in Erye into the company for its relocation pursuant to Erye’s jointventure agreement for a period of three years. In order to maximize the potential of Shandong, a capital infusion into the company will likely be needed to,among other things, build a laboratory and develop its regenerative medicine business. In the event either or both of the acquisitions do not close, NeoStemwould also need to raise substantial additional funds to fund its platform business and/or acquire a revenue generating business. It is not anticipated that inthe next year either of these acquisitions will generate sufficient excess cash flow to support NeoStem’s platform business and therefore the Company will alsoneed to raise substantial additional funds to fund its platform business and/or acquire another revenue generating business. Additionally, even if either or bothof the acquisitions closes, the closings will likely not occur until the end of the second quarter of 2009 and NeoStem will need to fund its platform business aswell as the large costs associated with the acquisition transactions until such time. NeoStem’s history of losses and liquidity problems may make it difficult toraise additional funding. There can be no assurance that NeoStem will be able to obtain additional funding on terms acceptable to NeoStem. Any equityfinancing may be dilutive to stockholders and debt financing, if available, may involve significant restrictive covenants. 73Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.In November 2007, NeoStem acquired the exclusive, worldwide rights to very small embryonic like (VSEL) technology developed by researchers atthe University of Louisville. These rights were acquired through NeoStem’s acquisition of Stem Cell Technologies, Inc., the licensee to a license agreement (the“License Agreement”) with the University of Louisville. Concurrent with acquiring these rights, NeoStem entered into a sponsored research agreement (the"Sponsored Research Agreement" or "SRA") with the University of Louisville Research Foundation (“ULRF”) under which NeoStem will support furtherresearch in the laboratory of Mariusz Ratajczak, M.D., Ph.D., a co-inventor of the VSEL technology and head of the Stem Cell Biology Program at the JamesGraham Brown Cancer Center at the University of Louisville. The term of the research is two and one-half years and is expected to commence in April 2009.The License Agreement requires the payment of certain license fees, royalties and milestone payments, payments for patent filings and applications and theuse of due diligence in developing and commercializing the VSEL technology. The SRA requires periodic and milestone payments. All payments required to bemade to date have been made.Under the License Agreement as amended in February 2009, NeoStem made in March 2009 payments of $66,000 in license issue fees andprepayment of patent costs and will be responsible for additional patent-related costs. Thereafter, an annual license maintenance fee of $10,000 will be requiredupon the issuance of a licensed patent and royalties will be payable based upon the sale of certain licensed products. Under the Sponsored ResearchAgreement, NeoStem agreed to support the research as set forth in a research plan in an amount of $375,000. Such costs are to be paid by NeoStem inaccordance with a payment schedule which sets forth the timing and condition of each such payment over the term of the SRA, the first payment of $100,000(for which there was originally a $50,000 credit) being due upon the commencement of the research. In October 2008, the SRA was amended to provide forcertain additional research to be conducted as work preliminary to the first research aim under the SRA, for which approximately one-half of the $50,000credit was utilized to pay the fee. Although certain early obligations under the Company’s agreements relating to the VSEL technology were paid for withfunds supplied by the seller to SCTI prior to the acquisition, substantial additional funds will be needed and additional research and development capacitywill be required to meet the Company’s development obligations under the License Agreement and develop the VSEL technology. The Company has applied tothe U.S. Small Business Administration for Small Business Innovation Research (SBIR) grants and may also seek to obtain funds through applications forother State and Federal grants, grants abroad, direct investments, strategic arrangements as well as other funding sources to help offset all or a portion of thesecosts. A portion of the proceeds from the RimAsia Notes (described above) are being used to meet funding requirements of developing the VSELtechnology. The Company is seeking to develop increased internal research capability and sufficient laboratory facilities or establish relationships to providesuch research capability and facilities. Toward this end, we have hired a Director of Stem Cell Research and Laboratory Operations and arranged for researchfacilities at the facility of a strategic partner. In addition to the research we are currently funding at the University of Louisville, we are also in discussionsrelating to other research to generate data relating to other clinical applications of VSELs, including neural, cardiac and ophthalmic, to expand our researchefforts and maximize the value of this technology. In October 2008, NeoStem was advised that we would receive Federal funding from the Department of Defense to evaluate the potential use of adultstem cell therapy for wound healing. It is anticipated that this research and the related funding will begin in 2009. The funds must be distributed to us byOctober 2010 and the budget we can submit for the project must not exceed $681,000. NeoStem continues to make application for awards through the SmallBusiness Innovative Research (SBIR) Program, although it has received no notice of any SBIR award to date. It is anticipated that some of the funds (if any)received from such appropriations and grants will fund certain expenses of Company while the remaining portion will be paid to third party researchers. 74Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The following table reflects a summary of NeoStem’s contractual cash obligations as of December 31, 2008: Payments due by period Contractual Obligations Total Less than 1 year 1-3 years 3-5 years More than5 years Capitalized lease $16,000 16,000 Facility lease 105,000 60,000 45,000 Minimum royalties due University of Louisville 66,000 66,000 Sponsored research agreement – University of Louisville 325,000 150,000 100,000 75,000 Employment agreements 316,000 316,000 Total $828,000 $608,000 $145,000 $75,000 $— Years Ended December 31, 2007 and December 31, 2006 The following chart represents the net funds provided by or used in operating, financing and investment activities for each period indicated: Year Ended December 31, 2007 December 31, 2006 Cash (used) in operating activities $(6,132,000) $(3,639,000)Cash provided/(used) in investing activities $153,000 $(43,000)Cash provided by financing activities $7,847,000 $3,630,000 At December 31, 2007, NeoStem had a cash balance of $2,304,000, working capital of $1,931,000 and a stockholders’ equity of $3,316,000.NeoStem incurred a net loss of $10,445,000 for the year ended December 31, 2007. Such loss adjusted for non-cash items, including common stock,common stock option and common stock purchase warrant issuances which were related to services rendered of $4,590,000, and depreciation of $54,000which was offset by cash settlements of various accounts payable, notes payable and accrued liabilities of $352,000, resulted in cash used in operationstotaling $6,132,000 for the year ended December 31, 2007. Accordingly, the large difference between operating loss and cash used in operations was the resultof a number of non-cash expenses charged to results of operations.To meet its cash requirement for the year ended December 31, 2007, NeoStem relied on proceeds from the sale of its securities resulting in netproceeds of $7,939,000 from the January 2007 private placement and the August 2007 public offering (as described below).In January and February 2007, NeoStem raised an aggregate of $2,500,000 through the private placement of 250,000 units at a price of $10.00 perunit (the “January 2007 private placement”). Each unit was comprised of two shares of NeoStem’s Common Stock, one redeemable seven-year warrant topurchase one share of Common Stock at a purchase price of $8.00 per share and one non-redeemable seven-year warrant to purchase one share of CommonStock at a purchase price of $8.00 per share. NeoStem issued an aggregate of 500,000 shares of Common Stock, and warrants to purchase up to an aggregateof 500,000 shares of Common Stock at an exercise price of $8.00 per share. Emerging Growth Equities, Ltd (“EGE”), the placement agent for theJanuary 2007 private placement, received a cash fee equal to $171,275 and was entitled to expense reimbursement not to exceed $50,000. NeoStem also issuedto EGE redeemable seven year warrants to purchase 34,255 shares of Common Stock at a purchase price of $5.00 per share, redeemable seven-year warrantsto purchase 17,127 shares of Common Stock at a purchase price of $8.00 per share and non-redeemable seven-year warrants to purchase 17,127 shares ofCommon Stock at a purchase price of $8.00 per share. The net proceeds of this offering were approximately $2,320,000. 75Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. In August 2007, NeoStem completed a sale of 1,270,000 units at a price of $5.00 per unit pursuant to a best efforts public offering. A registrationstatement on Form SB-2A (File No. 333-142923) relating to these units was filed with the Securities and Exchange Commission and declared effective on July16, 2007. Each unit consisted of one share of common stock and one-half of a five year Class A warrant to purchase one-half a share of common stock at aprice of $6.00 per share. Thus, 1,000 units consisted of 1,000 shares of common stock and Class A warrants to purchase 500 shares of common stock. Theaggregate number of shares of common stock included within the units was 1,270,000 and the aggregate number of Class A warrants included within the unitswas 535,000. In connection with the public offering, NeoStem issued five year warrants to purchase an aggregate of 95,250 shares of common stock at$6.50 per share to the underwriters for the offering. After payment of underwriting commissions and expenses and other costs of the offering, the aggregate netproceeds to NeoStem were $5,579,000. INFLATION NeoStem does not believe that its operations have been materially influenced by inflation in the fiscal year ended December 31, 2008, a situationwhich is expected to continue for the foreseeable future. SEASONALITY NeoStem does not believe that its operations are seasonal in nature. OFF-BALANCE SHEET ARRANGEMENTS NeoStem does not have any off-balance sheet arrangements. 76Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements and notes thereto required to be filed under this Item are presented commencing on page F-1 of this Annual Report on Form 10-K. Following is supplementary financial information: Selected Quarterly Financial Data$’000(except net loss per share which isstated in $) QuarterEnded12/31/08 QuarterEnded9/30/08 QuarterEnded6/30/08 QuarterEnded3/31/08 QuarterEnded12/31/07 QuarterEnded9/30/07 QuarterEnded6/30/07 QuarterEnded3/31/07 Revenues $34 $25 $24 $— $157 $13 $6 $56 Direct Costs 19 9 4 — 15 7 2 1 Gross profit 15 16 20 — 142 6 4 55 Operating Loss (2,431) (1,919) (2,360) (2,524) (2,342) (4,322) (1,957) (1,818) Net Loss (2,431) (1,922) (2,362) (2,527) (2,343) (4,328) (1,958) (1,816) Net loss per share (1) (.33) (.30) (.43) (.52) (.51) (1.26) (.74) (.73) (1) Earnings per share are computed independently for each of the quarters presented. Therefore, the sum of quarterly earnings per share do not equal thetotal computed for the year. 77Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. NeoStem, Inc. and SubsidiariesTable of Contents PageReport of Independent Registered Public Accounting Firm - Holtz Rubenstein Reminick LLP F – 1 Financial Statements: Consolidated Balance Sheets at December 31, 2008 and 2007 F – 2 Consolidated Statements of Operations Years Ended December 31, 2008, 2007 and 2006 F – 3 Consolidated Statements of Stockholders’ Equity/ (Deficit) Years Ended December 31, 2008, 2007 and 2006 F – 4 – F– 6 Consolidated Statements of Cash Flows Years Ended December 31, 2008, 2007 and 2006 F – 7 – F– 8 Notes to Consolidated Financial Statements F – 9 – F – 43 Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Report of Independent Registered Public Accounting FirmTo the Board of Directors and StockholdersNeoStem, Inc. and SubsidiariesWe have audited the accompanying consolidated balance sheets of NeoStem, Inc. and Subsidiaries as of December 31, 2008 and 2007 and the relatedconsolidated statements of operations, stockholders' equity/ (deficit) and cash flows for each of the years in the three-year period ended December 31,2008. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on thesefinancial statements based on our audits.We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that weplan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is notrequired to have, nor were we engaged to perform, audits of its internal control over financial reporting. Our audits include consideration of internal controlover financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion onthe effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a testbasis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonablebasis for our opinion.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of NeoStem, Inc. andSubsidiaries as of December 31, 2008 and 2007 and the results of their operations and cash flows for each of the years in the three-year period ended December31, 2008 in conformity with accounting principles generally accepted in the United States of America. /s/ Holtz Rubenstein Reminick LLPMelville, New YorkMarch 31, 2009 F-1Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. NEOSTEM, INC. AND SUBSIDIARIES Consolidated Balance Sheets December 31, 2008 2007 ASSETS Current assets: Cash and cash equivalents $430,786 $2,304,227 Accounts receivable, net of allowance for doubtful accounts of $0 and $19,500, respectively 7,193 24,605 Prepaid expenses and other current assets 92,444 46,248 Total current assets 530,423 2,375,080 Property and equipment, net 99,490 164,122 Intangible asset 633,789 669,000 Goodwill 558,169 558,169 Other assets 2,445 8,778 $1,824,316 $3,775,149 LIABILITIES AND STOCKHOLDERS’ EQUITY/(DEFICIT) Current liabilities: Accounts payable $508,798 $158,453 Accrued liabilities 427,767 228,726 Unearned revenues 9,849 2,902 Notes payable – related party, current — 24,022 Note payable – current — 4,720 Current portion of capitalized lease obligation 14,726 25,406 Total current liabilities 961,140 444,229 Capitalized lease obligation, net of current portion — 14,726 COMMITMENTS AND CONTINGENCIES Stockholders’ equity: Preferred stock; authorized, 5,000,000 shares Series B convertible redeemable preferred stock, liquidation value, 1 share of common stock per share, $.01 par value;authorized, 825,000 shares; issued and outstanding, 10,000 shares at December 31, 2008 and December 31, 2007 100 100 Common stock, $.001 par value; authorized, 500,000,000 shares; issued and outstanding, 7,715,006 December 31, 2008and 4,826,055 shares at December 31, 2007 7,715 4,826 Additional paid-in capital 40,871,570 34,802,309 Unearned compensation (21,900) (738,803)Accumulated deficit (39,994,309) (30,752,238)Total stockholders’ equity 863,176 3,316,194 $1,824,316 $3,775,149 The accompanying notes are an integral part of these consolidated financial statements F-2Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. NEOSTEM, INC. AND SUBSIDIARIES Consolidated Statements of Operations Years ended December 31, 2008 2007 2006 Revenues $83,541 $231,664 $45,724 Direct Costs 31,979 24,847 22,398 Gross Profit 51,562 206,817 23,326 Selling, General and Administrative 9,285,015 10,645,653 4,714,568 Operating Loss (9,233,453) (10,438,836) (4,691,242) Other Income (Expense): Interest Income 3,044 15,331 20,432 Interest Expense – Series A mandatorily Redeemable convertible Preferred Stock — — (9,934)Interest Expense (11,662) (21,968) (1,370,656) (8,618) (6,637) (1,360,158) Net Loss $(9,242,071) $(10,445,473) $(6,051,400) Basic loss per share $(1.53) $(3.18) $(4.43) Weighted average common shares outstanding 6,056,886 3,284,116 1,365,027 The accompanying notes are an integral part of these consolidated financial statements F-3Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. NEOSTEM, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity/(Deficit) SeriesB Convertible PreferredStock Common Stock Unearned AdditionalPaid Accumulated Shares Amount Shares Amount Compensation in Capital Deficit Total Balance at December31, 2005 10,000 $100 7,054,400 $7,050 $12,430,577 $(14,255,365) $(1,817,638) Adjustment for reverseCommon Stock split (6,348,960) (6,345) 6,345 — Issuance of CommonStock for cash, net ofoffering costs 945,382 945 3,572,123 3,573,068 Issuance of CommonStock for conversion ofPreferred Stock 54,494 55 1,219,614 1,219,669 Issuance of CommonStock to officers anddirectors 40,000 40 207,960 208,000 Issuance of restrictedCommon Stock to officersand directors 90,000 90 (600,000) 599,910 — Vesting of unearnedcompensation related torestricted CommonStock issued to officersand directors 228,334 228,334 Issuance of CommonStock for services 17,618 18 112,970 112,988 Equity component ofissuance of convertibledebt 263,612 263,612 Issuance of CommonStock purchasewarrants for services 75,496 75,496 Issuance of CommonStock for purchase ofassets of NS California 40,000 40 199,960 200,000 Issuance of CommonStock to pay off currentliabilities 66,458 66 308,396 308,462 Issuance of CommonStock for conversion ofconvertible debt 107,386 107 692,789 692,896 Issuance of CommonStock for extension ofdue dates of convertibledebt 3,693 4 21,019 21,023 Issuance of CommonStock purchasewarrants for the earlySource: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.conversion ofconvertible debt 652,130 652,130 Issuance of CommonStock for conversion ofdebt 7,650 8 44,992 45,000 Compensatory element ofstock options issued tostaff 560,465 560,465 Net Loss (6,051,400) (6,051,400)Balance at December31, 2006 10,000 $100 2,078,121 $2,078 $(371,666) $20,968,358 $(20,306,765) $292,105 The accompanying notes are an integral part of these consolidated financial statements F-4Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. NEOSTEM, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity/(Deficit) --(Con't.) Series B ConvertiblePreferred Stock Common Stock Unearned AdditionalPaid Accumulated Shares Amount Shares Amount Compensation in Capital Deficit Total Issuance of CommonStock for cash, net ofoffering costs 1,770,000 1,770 7,937,536 7,939,306 Issuance of CommonStock to acquire StemCell Technologies, Inc. 400,000 400 939,600 940,000 Issuance of CommonStock for capitalcommitment 30,000 30 164,970 165,000 Issuance of CommonStock to officers anddirectors 12,000 12 55,398 55,410 Issuance of restrictedCommon Stock forservices 95,542 95 (481,910) 481,815 Vesting of unearnedcompensation relatedto restricted CommonStock issued for services 392,135 392,135 Issuance of restrictedCommon Stock toofficers and directors 289,500 290 (1,446,957) 1,446,667 Vesting of unearnedcompensation related torestricted CommonStock issued to officersand directors 1,169,595 1,169,595 Issuance of CommonStock for services 150,892 151 386,363 386,514 Issuance of CommonStock purchase warrantsfor services 213,786 213,786 Compensatory element ofstock options issued tostaff 2,207,816 2,207,816 Net Loss (10,445,473) (10,445,473)Balance at December 31,2007 10,000 $100 4,826,055 $4,826 $(738,803) $34,802,309 $(30,752,238) $3,316,194 F-5Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. NEOSTEM, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity/(Deficit) --(Con't.) Series B ConvertiblePreferred Stock Common Stock Unearned AdditionalPaid Accumulated Shares Amount Shares Amount Compensation in Capital Deficit Total Issuance of CommonStock for cash, net ofoffering costs 2,359,152 2,359 2,894,401 2,896,760 Issuance of CommonStock to officers anddirectors 83,780 84 86,499 86,583 Issuance of restrictedCommon Stock forservices 40,000 40 (72,800) 72,760 — Vesting of unearnedcompensation relatedto restricted CommonStock issued forservices 173,331 173,331 Issuance of CommonStock to staff forcompensation 42,014 42 52,909 52,951 Vesting of unearnedcompensation related torestricted CommonStock issued to officersand directors 573,146 573,146 Issuance of CommonStock for services 384,157 384 499,900 500,284 Issuance of CommonStock purchasewarrants for services 613,766 613,766 Compensatory element ofstock options issued tostaff 1,986,103 1,986,103 Exercise of CommonStock options 2,500 2 1,873 1,875 Issuance of CommonStock to pay debt 3,529 4 5,643 5,647 Forfeiture of restrictedCommon Stock (26,250) (26) 19,257 (144,593) (125,362)Vesting of unearnedcompensation related torestricted CommonStock issued toemployees 23,969 23,969 Other adjustments 69 Net Loss (9,242,071) (9,242,071)Balance at December31, 2008 10,000 $100 7,715,006 $7,715 $(21,900) $40,871,570 $(39,994,309) $863,176 The accompanying notes are an integral part of these consolidated financial statements F-6Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. NEOSTEM, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Years ended December 31, 2008 2007 2006 Cash flows from operating activities: Net loss $(9,242,071) $(10,445,473) $(6,051,400)Adjustments to reconcile net loss to net cash used in operating activities: Common Stock, stock options and warrants issued as payment for compensation, services rendered and interest expense 3,890,419 4,590,256 2,280,779 Depreciation and amortization 115,961 53,778 27,623 Bad debt expense 21,500 19,500 — Amortization of debt discount — — 212,500 Series A mandatorily redeemable convertible preferred stock dividends — — 9,935 Unearned revenues 6,947 482 (24,325)Deferred acquisition costs — 1,254 17,868 Changes in operating assets and liabilities: Prepaid expenses and other current assets (46,197) 34,810 (72,251)Accounts receivable (4,088) (35,055) (9,050)Accounts payable, accrued expenses and other current liabilities 525,364 (351,976) (30,510) Net cash used in operating activities (4,732,165) (6,132,424) (3,638,831) Cash flows from investing activities: Cash received in connection with acquisition of technology — 271,000 — Acquisition of property and equipment (9,785) (117,893) (43,135)Net cash provided by/(used) in investing activities (9,785) 153,107 (43,135) Cash flows from financing activities: Net proceeds from issuance of capital stock 2,898,635 7,939,306 3,573,068 Proceeds from notes payable 131,617 337,120 180,396 Repayment of notes payable (136,337) (408,712) (352,898)Repayment of capitalized lease obligations (25,406) (20,829) (20,813)Proceeds from sale of convertible debentures — — 250,000 Net cash provided by financing activities 2,868,509 7,846,885 3,629,753 Net increase/ (decrease) in cash and cash equivalents (1,873,441) 1,867,568 (52,213) Cash and cash equivalents at beginning of year 2,304,227 436,659 488,872 Cash and cash equivalents at end of year $430,786 $2,304,227 $436,659 The accompanying notes are an integral part of these consolidated financial statements F-7Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. NEOSTEM, INC. AND SUBSIDIARIESConsolidated Statements of Cash Flows - continued Years ended December 31, 2008 2007 2006 Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $11,662 $21,968 $285,096 Supplemental schedule of non-cash investing and financing activities: Issuance of Common Stock for services rendered $500,284 $386,514 $208,000 Compensatory element of stock options $1,986,103 $2,207,816 $560,466 Issuance of non-vested restricted Common Stock for compensation $— $1,446,957 $— Issuance of Common Stock for compensation $139,534 $55,410 $112,988 Expense related to restricted shares vesting $770,447 $1,561,730 $228,334 Forfeiture of restricted stock grant $(125,362) — — Issuance of Common Stock purchase warrants for services $613,767 $213,786 $75,496 Issuance of non-vested restricted Common Stock for services $72,800 $481,910 $600,000 Issuance of Common Stock for purchase of Stem Cell Technologies, Inc. $— $940,000 $— Issuance of Common Stock for capital commitment $— $165,000 $— Net accrual of dividends on Series A preferred stock $— $— $9,935 Issuance of Common Stock for assets of NS California $— $— $200,000 Issuance of Common Stock and Common Stock purchase warrants for conversion of convertibledebt $— $— $1,050,495 Issuance of Common Stock for debt $5,646 $— $45,000 The accompanying notes are an integral part of these consolidated financial statements F-8Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Note 1 – The CompanyNeoStem, Inc. (“NeoStem”) was incorporated under the laws of the State of Delaware in September 1980 under the name Fidelity Medical Services, Inc. Ourcorporate headquarters is located at 420 Lexington Avenue, Suite 450, New York, NY 10170, our telephone number is (212) 584-4180 and our websiteaddress is www.neostem.com. NeoStem is engaged in a platform business of operating a commercial autologous (donor and recipient are the same) adult stem cell bank and is pioneering thepre-disease collection, processing and long-term storage of stem cells from adult donors that they can access for their own future medical treatment. We aremanaging a network of adult stem cell collection centers in major metropolitan areas of the United States. We have also entered the research and developmentarenas, through the acquisition of a worldwide exclusive license to an early-stage technology to identify and isolate rare stem cells from adult human bonemarrow, called VSEL (very small embryonic-like) stem cells. VSELs have many physical characteristics typically found in embryonic stem cells, includingthe ability to differentiate into specialized cells found in substantially all the different types of cells and tissue that make up the body. On January 19, 2006,we consummated the acquisition of the assets of NS California, Inc., a California corporation (“NS California”) relating to NS California’s business ofcollecting and storing adult stem cells. Effective with the acquisition, the business of NS California became our principal business, rather than our historicbusiness of providing capital and business guidance to companies in the healthcare and life science industries. The Company provides adult stem cellprocessing, collection and banking services with the goal of making stem cell collection and storage widely available, so that the general population will havethe opportunity to store their own stem cells for future healthcare needs. Prior to the NS California acquisition, the business of the Company was to provide capital and business guidance to companies in the healthcare and lifescience industries, in return for a percentage of revenues, royalty fees, licensing fees and other product sales of the target companies. Additionally, throughJune 30, 2002, the Company was a provider of extended warranties and service contracts via the Internet at warrantysuperstore.com. From June 2002 toMarch 2007 the Company was engaged in the "run off" of such extended warranties and service contracts. As of March 31, 2007 the recognition of revenuefrom the sale of extended warranties and service contracts was completed.On August 29, 2006, our stockholders approved an amendment to our Certificate of Incorporation to effect a reverse stock split of our Common Stock at aratio of one-for-ten shares and to change our name from Phase III Medical, Inc. to NeoStem, Inc. This reverse stock split was effective as of August 31, 2006.On June 14, 2007, our stockholders approved an amendment to our Certificate of Incorporation to effect a reverse stock split of our Common Stock at a ratiobetween one-for-three and one-for-ten shares in the event it was deemed necessary by the Company’s Board of Directors to be accepted onto a securitiesexchange. On July 9, 2007, the Board authorized the reverse stock split at a ratio of one-for-ten shares to be effective upon the initial closing of the Company’spublic offering in order to satisfy the listing requirements of The American Stock Exchange. On August 9, 2007 the reverse stock split was effective and theCompany's Common Stock commenced trading on The American Stock Exchange under the symbol "NBS." All shares and per share amounts in theaccompanying consolidated financial statements have been retroactively adjusted for all periods presented to reflect the reverse stock splits effective as ofAugust 31, 2006 and August 9, 2007. Recent DevelopmentsThe Company currently intends to meet its cash requirements in the near term through financing activities including an equity offering in the second quarter of2009 in an amount anticipated to be no less than $10 million. During the first quarter 2009, the Company issued promissory notes to a principal stockholderof the Company which aggregated $1,150,000 (See Note 14). In the event that this equity offering is not successful, the Company would need to substantiallyreduce its operating costs and would seek additional bridge financing until a future equity offering could be accomplished. Note 2 – Summary of Significant Accounting PoliciesPrinciples of Consolidation: The consolidated financial statements include the accounts of NeoStem, Inc. (a Delaware corporation) and its wholly-ownedsubsidiaries, NeoStem Therapies, Inc. and Stem Cell Technologies, Inc. All intercompany transactions and balances have been eliminated.Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of Americarequires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ fromthose estimates.Cash Equivalents: Short-term cash investments, which have a maturity of ninety days or less when purchased, are considered cash equivalents in theconsolidated statement of cash flows.Concentrations of Credit-Risk: Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally ofcash. The Company places its cash accounts with high credit quality financial institutions, which at times may be in excess of the FDIC insurance limit.Allowance for Doubtful Accounts: The Company establishes an allowance for doubtful accounts to provide for accounts receivable that may not becollectible. In establishing the allowance for doubtful accounts, the Company analyzes the collectability of individual large or past due accounts customer-by-customer and establishes reserves for accounts that it determines to be doubtful of collection. F-9Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Property and Equipment: The cost of property and equipment is depreciated over the estimated useful lives of the related assets of 3 to 5 years. The cost ofcomputer software programs are amortized over their estimated useful lives of five years. Depreciation is computed on the straight-line method. Repairs andmaintenance expenditures that do not extend original asset lives are charged to expense as incurred.Income Taxes: The Company, in accordance with SFAS 109, “Accounting for Income Taxes,” recognizes (a) the amount of taxes payable or refundable forthe current year and (b) deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an enterprise’s financialstatement or tax returns.Comprehensive Income (Loss): Refers to revenue, expenses, gains and losses that under generally accepted accounting principles are included incomprehensive income but are excluded from net income as these amounts are recorded directly as an adjustment to stockholders’ equity. At December 31,2008, 2007 and 2006 there were no such adjustments required.Goodwill: Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in a business combination. The Company reviewsrecorded goodwill for potential impairment annually or upon the occurrence of an impairment indicator. The Company performed its annual impairment testsas of December 31, 2008 and determined no impairment exists. The Company will perform its future annual impairment as of the end of each fiscal year.Intangible Asset: SFAS No. 142 requires purchased intangible assets other than goodwill to be amortized over their useful lives unless those lives aredetermined to be indefinite. Purchased intangible assets are carried at cost less accumulated amortization. Definite-lived intangible assets, which consists ofpatents and rights associated with the Very Small Embryonic Like (“VSEL”) Stem Cells which constitutes the principal assets acquired in the acquisition ofStem Cells Technologies, Inc., have been assigned a useful life and are amortized on a straight-line basis over a period of twenty years.Impairment of Long-lived Assets: We review long-lived assets and certain identifiable intangibles to be held and used for impairment on an annual basis andwhenever events or changes in circumstances indicate that the carrying amount of an asset exceeds the fair value of the asset. If other events or changes incircumstances indicate that the carrying amount of an asset that we expect to hold and use may not be recoverable, we will estimate the undiscounted futurecash flows expected to result from the use of the asset or its eventual disposition, and recognize an impairment loss. The impairment loss, if determined to benecessary, would be measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.Accounting for Stock Based Compensation: In December 2004, the FASB issued SFAS No. 123(R), "Share-Based Payment" ("SFAS No. 123(R)"). SFASNo. 123(R) establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. This statementfocuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123(R)requires that the fair value of such equity instruments be recognized as an expense in the historical financial statements as services are performed. Prior toSFAS No. 123(R), only certain pro forma disclosures of fair value were required. The Company has adopted SFAS No. l23(R) effective January 1, 2006. TheCompany determines value of stock options by the Black-Scholes option pricing model. The value of options issued during 2008, 2007 and 2006 or that wereunvested at January 1, 2006 are being recognized as an operating expense ratably on a monthly basis over the vesting period of each option. With regard tostock options and warrants issued to non-employees the Company has adopted EITF 96-18 “Accounting for Equity Instruments That Are Issued to OtherThan Employees for Acquiring or in Conjunction with Selling Goods and Services.”Earnings Per Share: Basic (loss)/earnings per share is based on the weighted effect of all common shares issued and outstanding, and is calculated bydividing net (loss)/income available to common stockholders by the weighted average shares outstanding during the period. Diluted (loss)/earnings per share,which is calculated by dividing net (loss)/income available to common stockholders by the weighted average number of common shares used in the basicearnings per share calculation plus the number of common shares that would be issued assuming conversion of all potentially dilutive securities outstanding,is not presented as it is anti-dilutive in all periods presented.Advertising Policy: All expenditures for advertising are charged against operations as incurred.Revenue Recognition: The Company initiated the collection and banking of autologous adult stem cells in the fourth quarter of 2006. The Companyrecognizes revenue related to the collection and cryopreservation of autologous adult stem cells when the cryopreservation process is completed which isgenerally twenty four hours after cells have been collected. Revenue related to advance payments of storage fees is recognized ratably over the period covered bythe advanced payments. The Company also earns revenue, in the form of start up fees, from physicians seeking to establish autologous adult stem cellcollection centers. These fees are in consideration of the Company establishing a service territory for the physician. Start up fees are recognized once theagreement has been signed and the physician has been qualified by the Company’s credentialing committee. F-10Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Warranty and service contract reinsurance premiums are recognized on a pro rata basis over the policy term. The deferred policy acquisition costs are the netcost of acquiring new and renewal insurance contracts. These costs are charged to expense in proportion to net premium revenue recognized. The provisions forlosses and loss-adjustment expenses include an amount determined from loss reports on individual cases and an amount based on past experience for lossesincurred but not reported. Such liabilities are necessarily based on estimates, and while management believes that the amount is adequate, the ultimate liabilitymay be in excess of or less than the amounts provided. The methods for making such estimates and for establishing the resulting liability are continuallyreviewed, and any adjustments are reflected in earnings currently.The Company had sold, via the Internet, through partnerships and directly to consumers, extended warranty service contracts for seven major consumerproducts. The Company recognized revenue ratably over the length of the contract. The Company purchased insurance to fully cover any losses under theservice contracts from a domestic carrier. The insurance premium and other costs related to the sale are amortized over the life of the contract. Note 3 – Recent Accounting PronouncementsIn September 2006, the Financial Accounting Standards Board ("FASB") issued SFAS No. 157, “Fair Value Measurements" ("SFAS No. 157"). SFASNo. 157 defines fair value, establishes a framework for measuring fair value in accordance with U.S. GAAP, and expands disclosures about fair valuemeasurements. SFAS No. 157 does not require any new fair value measurements; rather, it applies to other accounting pronouncements that require or permitfair value measurements. In February 2008, the FASB issued FASB Staff Position ("FSP") No. 157-2, "Effective Date of FASB Statement No. 157" ("FSPNo. 157-2"). FSP No. 157-2 delays the effective date of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities, except for certain items that arerecognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). We were required to apply the provisions of SFASNo. 157 to financial assets and liabilities prospectively as of January 1, 2008. Its adoption did not materially impact our results of operations or financialposition. We will be required to apply the provisions of SFAS No. 157 to nonfinancial assets and nonfinancial liabilities as of January 1, 2009 and arecurrently evaluating the impact of the application of SFAS No. 157 as it pertains to these items. In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities — including an amendment ofFAS 115" ("SFAS No. 159"). SFAS No. 159 allows companies to choose, at specified election dates, to measure eligible financial assets and liabilities at fairvalue that are not otherwise required to be measured at fair value. Unrealized gains and losses shall be reported on items for which the fair value option hasbeen elected in earnings at each subsequent reporting date. SFAS No. 159 also establishes presentation and disclosure requirements. SFAS No. 159 waseffective for fiscal years beginning after January 1, 2008 and will be applied prospectively. At the present time SFAS No. 159 has no impact on ouroperations. In June 2007, the FASB ratified EITF No. 07-03, “Accounting for Nonrefundable Advance Payments for Goods or Services Received for Future Research andDevelopment Activities” (“EITF 07-03”). EITF 07-03 requires that nonrefundable advance payments for goods or services that will be used or rendered forfuture research and development activities be deferred and capitalized and recognized as an expense as the goods are delivered or the related services areperformed. EITF 07-03 is effective, on a prospective basis, for fiscal years beginning after December 15, 2007. At the present time the adoption of EITF 07-03 does not have a material effect on the Company’s operations or financial position. In October 2007, the Company adopted the provisions of SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other PostretirementPlans — an amendment of FASB Statements No. 87, 88, 106, and 132 (R)" ("SFAS No. 158"). This standard requires recognition of the overfunded orunderfunded status of each plan as an asset or liability in the consolidated balance sheet with the offsetting change in that funded status to accumulated othercomprehensive income. Upon adoption, this standard requires immediate recognition in accumulated other comprehensive income of actuarial gains/losses andprior service costs/benefits — both of which were previously unrecognized. Additional minimum pension liabilities and related intangible assets are eliminatedupon adoption of the new standard. At the present time we do not have any defined benefit pension plans and therefore the measurement date provisions ofSFAS 158 will not have a material impact on our consolidated financial statements. F-11Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. In December 2007, the FASB issued SFAS No. 141R, "Business Combinations" ("SFAS No. 141R"). SFAS No. 141R amends SFAS 141 and providesrevised guidance for recognizing and measuring identifiable assets and goodwill acquired, liabilities assumed, and any noncontrolling interest in the acquiree.It also provides disclosure requirements to enable users of the financial statements to evaluate the nature and financial effects of the business combination. It iseffective for fiscal years beginning on or after December 15, 2008 and will be applied prospectively. We are currently evaluating the impact of adopting SFASNo. 141R on our current consolidated financial statements and how this may affect our proposed Merger and Share Exchange transactions discussed in Note13, Commitments and Contingencies. In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51"("SFAS No. 160"). SFAS No. 160 requires that ownership interests in subsidiaries held by parties other than the parent, and the amount of consolidated netincome, be clearly identified, labeled, and presented in the consolidated financial statements. It also requires once a subsidiary is deconsolidated, any retainednoncontrolling equity investment in the former subsidiary be initially measured at fair value. Sufficient disclosures are required to clearly identify anddistinguish between the interests of the parent and the interests of the noncontrolling owners. It is effective for fiscal years beginning on or after December 15,2008 and requires retroactive adoption of the presentation and disclosure requirements for existing minority interests. All other requirements shall be appliedprospectively. At the present time SFAS No. 160 has no impact on our operations. We are currently evaluating the impact of adopting SFAS No. 160 and howthis may affect our proposed Merger and Share Exchange transactions discussed in Note 13, Commitments and Contingencies. In December 2007, the EITF reached a consensus on EITF No. 07-01, Accounting for Collaborative Arrangements Related to the Development andCommercialization of Intellectual Property (“EITF 07-01”). EITF 07-01 discusses the appropriate income statement presentation and classification for theactivities and payments between the participants in arrangements related to the development and commercialization of intellectual property. The sufficiency ofdisclosure related to these arrangements is also specified. EITF 07-01 is effective for fiscal years beginning after December 15, 2008. At the present time EITFNo. 07-01 has no impact on our operations. However, based upon the nature of the Company’s business, EITF 07-01 could have an impact on its financialposition and results of operations in future years. In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB StatementNo. 133" ("SFAS No. 161"), which requires additional disclosures about objectives and strategies for using derivative instruments, how the derivativeinstruments and related hedged items are accounted for under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," and relatedinterpretations, and how the derivative instruments and related hedged items affect our financial statements. SFAS No. 161 also requires disclosures aboutcredit risk-related contingent features in derivative agreements. SFAS No. 161 is effective for fiscal years and interim periods beginning after November 15,2008 and will be applied prospectively. We are currently evaluating the impact of adopting SFAS No. 161 on our consolidated financial statements. In April 2008, the FASB issued FASB Staff Position No. 142-3, "Determination of the Useful Life of Intangible Assets" ("FSP 142-3"). FSP 142-3 amends thefactors that should be considered in developing renewal or extension assumptions that are used to determine the useful life of a recognized intangible assetunder SFAS No. 142, "Goodwill and Other Intangible Assets," and requires enhanced related disclosures. FSP 142-3 must be applied prospectively to allintangible assets acquired as of and subsequent to fiscal years beginning after December 15, 2008. At the present time FSP 142-3 has no impact on ouroperations. In May 2008, the FASB issued Staff Position APB 14-1, "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion(Including Partial Cash Settlement)" ("APB 14-1") to clarify that convertible debt instruments that may be settled in cash upon conversion (including partialcash settlement) are not addressed by paragraph 12 of APB Opinion No. 14, "Accounting for Convertible Debt and Debt Issued with Stock PurchaseWarrants." Additionally, APB 14-1 specifies that issuers of such instruments should separately account for the liability and equity components in a mannerthat will reflect the entity's nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. APB 14-1 is effective for the Company asof January 1, 2009. At the present time APB 14-1 has no impact on our operations. The Company is evaluating the impact of adopting APB 14-1 on ourproposed Merger and Share Exchange Transactions discussed in Note 13, Commitments and Contingencies. In June 2008, the FASB ratified EITF Issue No. 07-5, “Determining Whether an Instrument (or an Embedded Feature) Is Indexed to an Entity’s Own Stock”(EITF 07-5). EITF 07-5 provides that an entity should use a two step approach to evaluate whether an equity-linked financial instrument (or embeddedfeature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions. It also clarifies the impact of foreigncurrency denominated strike prices and market-based employee stock option valuation instruments on the evaluation. EITF 07-5 is effective for fiscal yearsbeginning after December 15, 2008. The Company is currently evaluating the potential impact, if any, the new pronouncement will have on its consolidatedfinancial statements. F-12Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. In June 2008, the FASB issued FSP EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are ParticipatingSecurities.” This FSP clarifies that all outstanding unvested share-based payment awards that contain rights to non-forfeitable dividends participate inundistributed earnings with common shareholders. Awards of this nature are considered participating securities and the two-class method of computing basicand diluted earnings per share must be applied. This FSP is effective for fiscal years beginning after December 15, 2008. The Company is currentlyevaluating the potential impact, if any; the new pronouncement will have on its consolidated financial statements. Note 4 – AcquisitionsOn January 19, 2006, the Company consummated the acquisition of the assets of NS California, Inc. (“NS California”) relating to NSCalifornia's business of collecting and storing adult stem cells, issuing 40,000 shares of the Company's Common Stock with a value of $200,000. Inaddition, the Company assumed certain liabilities of NS California’s which totaled $476,972. The underlying physical assets acquired from NS Californiawere valued at $109,123 resulting in the recognition of goodwill in the amount of $558,169. Upon completion of the acquisition the operations of NSCalifornia were assumed by the Company and have been reflected in the Statement of Operations since January 19, 2006. Effective with the acquisition,the business of NS California became the principal business of the Company. The Company now is providing adult stem cell processing, collection andbanking services with the goal of making stem cell collection and storage widely available, so that the general population will have the opportunity tostore their own stem cells for future healthcare needs. The Company also had issued 10,000 additional shares of its Common Stock to NS California to beheld in escrow pending the approval of the license for the laboratory used for the collection of stem cells. The agreement called for 167 shares to be forfeitedeach day the license was not obtained past February 15, 2006, with a maximum of 10,000 shares of Common Stock subject to forfeiture. The license wasobtained in May 2006 and therefore the Company notified NS California of the requirement that the 10,000 shares be forfeited to the Company. In January2007, the escrow period for the 20,000 shares was completed and the remaining shares were released to NS California. During the period from January 1, 2006to January 19, 2006 there were no significant operations realized by NS California; however in connection with and subsequent to the closing of the NSCalifornia transaction, the Company paid $212,791 to pay off certain liabilities incurred by NS California before the acquisition occurred and issued20,122 shares of its Common Stock, with a value of $100,612 in partial or full payment of certain of these obligations assumed by the Company.In November 2007, the Company entered into an acquisition agreement with UTEK Corporation ("UTEK") and Stem Cell Technologies, Inc., a wholly-owned subsidiary of UTEK ("SCTI"), pursuant to which the Company acquired all the issued and outstanding common stock of SCTI in a stock-for-stock exchange. Pursuant to a license agreement (the "License Agreement") between SCTI and the University of Louisville ResearchFoundation ("ULRF"), SCTI owns an exclusive, worldwide license to a technology developed by researchers at the University of Louisville to identify andisolate rare stem cells from adult human bone marrow, called VSELs (very small embryonic like) stem cells. Concurrent with the SCTI acquisition,NeoStem entered into a sponsored research agreement (the "SRA") with ULRF under which NeoStem will support further research in the laboratory ofMariusz Ratajczak, M.D., Ph.D., a co-inventor of the VSEL technology and head of the Stem Cell Biology Program at the James Graham Brown CancerCenter at the University of Louisville. SCTI was funded with $271,000, in cash, by UTEK. In consideration for the acquisition, the Company issued toUTEK 400,000 unregistered shares of its Common Stock, par value $0.001 per share for all the issued and outstanding common stock of SCTI. The totalvalue of the transaction is $940,000 and $669,000 has been capitalized as an intangible asset. SCTI was founded in November 2007 for the express purposeof acquiring this technology and there were no other significant operations conducted by SCTI before NeoStem acquired the company from its shareholder. Note 5 – Intangible AssetAt December 31, 2008 our intangible asset consisted of patent applications and rights associated with the VSEL Technology which constitutes the principalassets acquired in the acquisition of Stem Cells Technologies, Inc. At December 31, 2008 the original cost of these assets was $669,000 and the accumulatedamortization was $35,211 and the net book value was $633,789. F-13Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Estimated amortization expense for the five years subsequent to December 31, 2008 is as follows: Years Ending December 31, 2009 $35,211 2010 35,211 2011 35,211 2012 35,211 2013 35,211 Thereafter $457,734 The remaining weighted-average amortization period as of December 31, 2008 is 18 years. Note 6 – Accrued LiabilitiesAccrued liabilities are as follows: December 31, 2008 2007 Professional fees $136,843 $66,000 Interest on notes payable — 218 Salaries and related taxes 250,000 132,804 Other 40,923 29,704 $427,766 $228,726 Note 7 – Notes PayableOn March 17, 2003, the Company commenced a private placement offering to raise up to $250,000 in 6-month promissory notes in increments of $5,000bearing interest at 15% per annum. Only selected investors which qualify as “accredited investors” as defined in Rule 501(a) under the Securities Act of 1933,as amended, were eligible to purchase these promissory notes. The Company raised the full $250,000 through the sale of such promissory notes, resulting innet proceeds to the Company of $225,000, net of offering costs. The notes contain a default provision which raises the interest rate to 20% if the notes are notpaid when due. The Company issued $250,000 of these notes. During 2006, $90,000 had been converted into 15,300 shares of the Company’s CommonStock and $160,000 was repaid.In August 2004, the Company sold 30 day 20% notes in the amount of $55,000 to two accredited investors to fund current operations. As of December 31,2006 $30,000 of these notes has been paid and $25,000 converted into 4,250 shares of the Company’s Common Stock.In December 2004, the Company sold four notes to four accredited investors totaling $100,000 with interest rates that range from 8% to 20%. As of December31, 2006, $15,000 has been repaid and $85,000 converted into 14,450 shares of the Company’s Common Stock.In March 2005, the Company sold a 30 day 8% note in the amount of $17,000, in August 2005, an 8% note in the amount of $10,000 and in September2005, two 8% notes in the amounts of $6,000 and $15,000 to its President and then CEO, totaling $48,000 and were all due on demand. In January 2006, allnotes were repaid.On December 30, 2005, the Company sold $250,000 of convertible nine month Promissory Notes which bore 9% simple interest with net proceeds to theCompany of $220,000. These convertible notes were sold in connection with a subscription agreement between the Company and Westpark Capital, Inc.(“Westpark”). (The convertible notes and warrants sold in December 2005 and January 2006 in the transaction in which Westpark Capital, Inc. acted as theplacement agent is sometimes referred to herein as the “Westpark Private Placement”). The Company recorded a debt discount associated with the conversionfeature in the amount of $83,333, which was charged to interest expense during the year ended December 31, 2006. The debt discount recorded of $83,333does not change the amount of cash required to payoff the principal value of these Promissory Notes, at any time during the term, which is $250,000. As partof the Westpark Private Placement, these Promissory Notes have 4,167 detachable warrants for each $25,000 of debt, which entitle the holder to purchase oneshare of the Company’s Common Stock at a price of $12.00 per share. The warrants are exercisable for a period of three years from the date of the PromissoryNote. The Promissory Notes convert to the Company’s Common Stock at $6.00 per share. The Promissory Notes are convertible at anytime into shares ofCommon Stock at the option of the Company subsequent to the shares underlying the Promissory Notes and the shares underlying the warrants registration ifthe closing price of the Common Stock has been at least $18.00 for a period of at least 10 consecutive days prior to the date on which notice of conversion issent by the Company to the holders of the Promissory Notes. Pursuant to the terms of the Westpark Private Placement, the Company agreed to file with theSEC and have effective by July 31, 2006, a registration statement registering the resale by the investors in the Westpark Private Placement of the shares ofCommon Stock underlying the convertible notes and the warrants sold in the Westpark Private Placement. This registration statement was not made effectiveby July 31, 2006 and certain additional rights accrued to the Convertible Promissory Noteholders (see below for a detailed description of these additionalrights). F-14Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.In January 2006, the Company sold an additional $250,000 of convertible nine month Promissory Notes which bore 9% simple interest with net proceeds tothe Company of $223,880 as part of the Westpark Private Placement. The Company recorded a debt discount associated with the conversion feature in theamount of $129,167. For the year ended December 31, 2006, the Company charged $127,932 of the debt discount to interest expense. The debt discountrecorded of $129,167 does not change the amount of cash required to payoff the principal value of these Promissory Notes, at any time during the term,which is $250,000. These Promissory Notes were sold on the same terms and conditions as those sold in December 2005 as part of the Westpark PrivatePlacement. For the year ended December 31, 2006, the Company recorded as interest expense $263,612 associated with the warrants as their fair value usingthe Black-Scholes method.In an effort to improve the financial position of the Company, in July 2006, noteholders were offered the option of (A) extending the term of the convertiblenote for an additional four months from the maturity date in consideration for which (i) the Company shall issue to the investor for each $25,000 in principalamount of the convertible note 568 shares of unregistered Common Stock; and (ii) the exercise price per warrant shall be reduced from $12.00 to $8.00, or (B)converting the convertible note into shares of the Company’s Common Stock in consideration for which (i) the conversion price per conversion share shall bereduced to $4.40; (ii) the Company shall issue to the investor for each $25,000 in principal amount of the Note, 1,136 shares of Common Stock; (iii) theexercise price per warrant shall be reduced from $12.00 to $8.00; and (iv) a new warrant shall be issued substantially on the same terms as the originalWarrant to purchase an additional 4,167 shares of Common Stock for each $25,000 in principal amount of the convertible note at an exercise price of $8.00per share. Pursuant to this, the investor was also asked to waive any and all penalties and liquidated damages accumulated as of the date of the agreement.This offer was terminated on August 31, 2006. By August 31, 2006 investors owning $237,500 of the $500,000 of convertible promissory notes had agreedto convert the convertible note into shares of the Company’s Common Stock for consideration described above and investors holding $162,500 of the$500,000 of convertible promissory notes had agreed to extend the term of the convertible note for an additional four months from the maturity date forconsideration described above.In September 2006, a new offer was extended to the remaining noteholders to convert the convertible note into shares of the Company’s Common Stock inconsideration for which (i) the conversion price per conversion share shall be reduced to $4.40; (ii) the exercise price per warrant shall be reduced from $12.00to $8.00 and (iii) a new warrant shall be issued substantially on the same terms as the original Warrant to purchase an additional 4,167 shares of CommonStock for each $25,000 in principal amount of the convertible note at an exercise price of $8.00 per share. Pursuant to this, the investor was also being askedto waive any and all penalties and liquidated damages accumulated as of the date of the agreement.By December 31, 2006, investors owning $425,000 convertible promissory notes agreed to convert the convertible note into shares of the Company’s CommonStock for consideration described above. The Company issued 107,386 shares of Common Stock with a fair value of $692,896. In addition, the Companyissued 60,417 warrants with a fair value of $472,741 for Security holders that agreed to an early conversion of their convertible promissory notes. TheCompany also issued 3,693 shares of Common Stock as consideration for extending the term of the convertible notes, totaling $162,500, for an additionalfour months with a fair value of $21,023. The fair value of this Common Stock has been accounted for as interest expense. Amounts in excess of the facevalue of the convertible promissory notes and the fair value of the warrants issued as the result of early conversion have been accounted for as interest expense.The balance, $75,000, of convertible promissory notes was paid off in January 2007.In connection with the NS California acquisition, the Company assumed a 6% note due to Tom Hirose, a former officer of NS California in the amount of$15,812. Final payment was made in January 2008.On May 17, 2006, the Company issued an 8% promissory note in the amount of $20,000 due on demand to Robin L. Smith, M.D., the Company’s thenChairman of the Advisory Board. This promissory note was paid off on June 2, 2006.In July and August 2007, the Company borrowed an aggregate of $200,000 through the issuance of short term bridge notes to support operations pending theclosing of the Company’s August 2007 public offering described in Note 9. These bridge notes provided that they matured in six months from the date ofissuance, subject to the Company’s right to prepay, and bore interest at a rate of 15% per annum. Robin L. Smith M.D., Chief Executive Officer andChairman of the Board of the Company was issued a bridge note for $125,000. Richard Berman, a member of the Board of Directors, was issued a bridgenote for $50,000, and a bridge note for $25,000 was issued to another NeoStem shareholder. On August 10, 2007, the Board authorized the repayment in fullof the bridge notes and all outstanding bridge notes were repaid in full plus accrued interest. For the year ended December 31, 2007 the Company paid interestof $976 on these notes. F-15Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Note 8 – Series A Mandatorily Redeemable Convertible Preferred StockThe following summarizes the terms of Series A Preferred Stock as more fully set forth in the Certificate of Designation. The Series A Preferred Stock has aliquidation value of $1 per share, is non-voting and convertible into Common Stock of the Company at a price of $5.20 per share. Holders of Series APreferred Stock are entitled to receive cumulative cash dividends of $0.07 per share, per year, payable semi-annually. The Series A Preferred Stock is callableby the Company at a price of $1.05 per share, plus accrued and unpaid dividends. In addition, if the closing price of the Company’s Common Stock exceeds$13.80 per share for a period of 20 consecutive trade days, the Series A Preferred Stock is callable by the Company at a price equal to $0.01 per share, plusaccrued and unpaid dividends.The Certificate of Designation for the Series A Preferred Stock also states that at any time after December 1, 1999 the holders of the Series A Preferred Stockmay require the Company to redeem their shares of Series A Preferred Stock (if there are funds with which the Company may do so) at a price of $1.00 pershare.Notwithstanding any of the foregoing redemption provisions, if any dividends on the Series A Preferred Stock are past due, no shares of Series A PreferredStock may be redeemed by the Company unless all outstanding shares of Series A Preferred Stock are simultaneously redeemed.The holders of Series A Preferred Stock could convert their Series A Preferred Stock into shares of Common Stock of the Company at a price of $5.20 pershare. On March 17, 2006, the stockholders of the Company voted to approve an amendment to the Certificate of Incorporation which permitted the Company toissue in exchange for all 681,171 shares of Series A Preferred Stock outstanding and its obligation to pay $538,498 (or $.79 per share) in accrued dividendsthereon, a total of 54,494 shares of Common Stock (eight hundredths (.08) shares of Common Stock per share of Series A Preferred Stock). Pursuant thereto,as of December 31, 2006, all outstanding shares of Series A Preferred Stock had been cancelled and converted into Common Stock. Therefore at December 31,2008 and 2007, there were 0 shares of Series A Preferred Stock outstanding. Note 9 – Stockholders’ Equity(a) Series B Convertible Redeemable Preferred Stock:The total authorized shares of Series B Convertible Redeemable Preferred Stock is 825,000. The following summarizes the terms of the Series B Stock whoseterms are more fully set forth in the Certificate of Designation. The Series B Stock carries a zero coupon and each share of the Series B Stock is convertibleinto one share of the Company’s Common Stock. The holder of a share of the Series B Stock is entitled to ten times any dividends paid on the CommonStock and such Stock has ten votes per share and votes as one class with the Common Stock.The holder of any share of Series B Convertible Redeemable Preferred Stock has the right, at such holder’s option (but not if such share is called forredemption), exercisable after December 31, 2000, to convert such share into one (1) fully paid and non-assessable share of Common Stock (the “ConversionRate”). The Conversion Rate is subject to adjustment as stipulated in the Agreement. The Company’s right to redeem shares of Series B ConvertibleRedeemable Preferred Stock expired on June 30, 2000 pursuant to the terms of the Certificate of Designation.During the year ended December 31, 2000, holders of 805,000 shares of the Series B Preferred Stock converted their shares into 805,000 shares of theCompany’s Common Stock.At December 31, 2008 and 2007, 10,000 Series B Preferred Shares were issued and outstanding.(b) Common Stock:The authorized Common Stock of the Company is 500 million shares, par value $0.001 per share. F-16Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.In January 2006, the Company issued 7,650 shares of its Common Stock in exchange for $45,000 of notes payable. In addition, the Company issued 2,500shares of its Common Stock to Westpark as additional compensation for its role as placement agent in the Westpark Private Placement. The fair value of theseshares was $22,750 which was charged to expense. In 2006, the Company sold 438,832 shares of its Common Stock to accredited investors at a per share price of $4.40 resulting in net proceeds to the Companyof $1,827,068. In connection with these transactions, the Company issued 198,864 Common Stock purchase warrants with a term of five years and pershare exercise price of $8.00. In May 2006, the Company entered into an advisory agreement with Duncan Capital Group LLC (“Duncan”). Pursuant to the advisory agreement, Duncanwas providing to the Company on a non-exclusive “best efforts” basis, services as a financial consultant in connection with any equity or debt financing,merger, acquisition as well as with other financial matters. In consideration for such role, Duncan received a fee of $200,000 in cash and 24,000 shares ofrestricted Common Stock. On June 2, 2006, pursuant to the Duncan Private Placement, the Company sold 472,500 shares of its Common Stock to seventeenaccredited investors at a per share price of $4.40 resulting in gross proceeds of $2,079,000. In connection with this transaction, the Company issued 236,250Common Stock purchase warrants to these seventeen investors. These Common Stock purchase warrants have a term of 5 years and exercise price of $8.00per share. In addition, Dr. Robin L. Smith was paid $100,000 and 10,000 shares of Common Stock were issued to her in connection with an AdvisoryAgreement dated September 14, 2005 as amended by the Supplement to Advisory Agreement dated January 18, 2006 and Dr. Smith’s employment agreementwith the Company dated June 2, 2006.In June 2006, certain employees and members of senior management agreed to take restricted Common Stock as the net pay on $278,653 of unpaid salarythat dated back to 2005. This resulted in the issuances of 37,998 shares of Common Stock, valued at $167,192, or $4.40 per share. The balance of theunpaid salary was used to pay the withholding taxes which are associated with those earnings.In June 2006, Dr. Robin L. Smith was appointed Chairman and CEO of the Company. In connection with Dr. Smith’s appointment, 20,000 shares ofCommon Stock were issued under the Company’s 2003 Equity Participation Plan, as amended (the “2003 EPP”) to Dr. Smith valued at $88,000 which wasreflected as compensation expense in the year ended December 31, 2006. In addition, Dr. Smith was granted, under the 2003 EPP options to purchase 54,000shares of the Company’s Common Stock, which 30,000 option shares vested immediately, 12,000 option shares vest on the first anniversary of the effectivedate and 12,000 option shares vest on the second anniversary of the effective date. The exercise price of the options are (i) $5.30 as to the first 10,000 optionshares, (ii) $8.00 as to the second 10,000 option shares, (iii) $10.00 as to the third 10,000 option shares, (iv) $16.00 as to the next 12,000 option shares, and(v) $25.00 as to the balance.In 2006, the Company issued an aggregate of 66,458 shares of Common Stock in conversion of an aggregate of $308,462 in accounts payable owed tocertain vendors. The per share conversion prices ranged from $4.40 to $6.00. In 2006, in connection with the offer to noteholders for early conversion of the convertible promissory notes the Company issued 107,386 shares of CommonStock at a per share price ranging from $5.10 to $9.10. In 2006, in connection with the offer to noteholders for the extension of due dates of the Convertible Promissory Notes of the Westpark Private Placement, theCompany issued 3,693 shares of Common Stock with a per share price of $5.70. In November 2006, the Company issued stock grants, under the 2003 EPP, to two members of the Board of Directors, totaling 60,000 shares of CommonStock with a per share price of $7.00. These shares vested as follows: one-third vesting upon grant and one-third on the first and second anniversaries of thegrant dates. The Company recognized $163,334 as director fees in 2006, and the remaining $256,666 of unearned value was recognized ratably over theremaining vesting periods of which $140,004 was recognized in 2007 and $116,662 in 2008. In December 2006, the Company issued a stock grant, under the 2003 EPP, to an executive officer, totaling 30,000 shares of Common Stock with a per shareprice of $6.00. These shares vested as follows: 10,000 shares vested upon grant and the remainder vested upon the Company achieving a businessmilestone. The Company recognized $65,000, $87,500 and $27,500, respectively, as compensation expense in 2006, 2007 and 2008, respectively, relatingto this stock grant. F-17Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. In December 2006, the Company issued stock grants, under the 2003 EPP, to three members of management, totaling 20,000 shares of Common Stock with aper share price of $6.00. In 2006 the Company recognized $120,000 as compensation expense. In January 2007, the Company issued 12,000 shares of restricted Common Stock to its intellectual property acquisition consultant, vesting as to 1,000 sharesper month commencing January 2007. In 2007 the Company recognized $90,000 as expense related to this transaction. In January 2007, the Company issued an aggregate of 9,000 shares of Common Stock, under the 2003 EPP, to a former director and employee pursuant to hisagreement to serve as Chairman of the Company’s Scientific Advisory Board and consultant to the Company. In 2007 the Company recognized $54,000 ascompensation related to this transaction. In February 2007, the term of the Company’s financial advisory agreement with Duncan Capital Group LLC was extended through December 2007, providingthat the monthly fee be paid entirely in shares of Common Stock. The Company issued to Duncan 15,000 shares of restricted Common Stock as an advisoryfee payment vesting monthly through December 2007. The vesting of these shares was accelerated in July 2007 such that they were fully vested and theadvisory agreement was canceled in August 2007. In 2007 the Company recognized $82,500 as expense related to this transaction. In January and February 2007, the Company raised an aggregate of $2,500,000 through the private placement of 250,000 units at a price of $10.00 per unit(the “January 2007 private placement”). Each unit was comprised of two shares of the Company’s Common Stock, one redeemable seven-year warrant topurchase one share of Common Stock at a purchase price of $8.00 per share and one non-redeemable seven-year warrant to purchase one share ofCommon Stock at a purchase price of $8.00 per share. The Company issued an aggregate of 500,000 shares of Common Stock, and warrants to purchase upto an aggregate of 500,000 shares of Common Stock at an exercise price of $8.00 per share. Emerging Growth Equities, Ltd (“EGE”), the placement agent forthe January 2007 private placement, received a cash fee equal to $171,275 and was entitled to expense reimbursement not to exceed $50,000. The Companyalso issued to EGE redeemable seven-year warrants to purchase 34,255 shares of Common Stock at a purchase price of $5.00 per share, redeemable seven-year warrants to purchase 17,127 shares of Common Stock at a purchase price of $8.00 per share and non-redeemable seven-year warrants to purchase17,127 shares of Common Stock at a purchase price of $8.00 per share. The net proceeds of this offering were approximately $2,320,000. In February 2007, the Company issued 30,000 restricted shares of its Common Stock to a financial advisor in connection with a commitment for theplacement of up to $3,000,000 of the Company’s preferred stock, resulting in a charge to operations of $165,000.In April 2007, the Company issued 3,688 restricted shares of its Common Stock to a public relations advisor in connection with public relations servicesrendered to the Company, resulting in a charge to operations of $22,500.In May 2007, the Company issued 1,000 restricted shares of its Common Stock to an investment relations advisor in connection with investor relationsservices rendered to the Company, resulting in a charge to operations of $4,500.In May 2007, the Company issued 15,000 restricted shares of its Common Stock to an investor relations advisor in connection with investor relations servicesrendered to the Company, resulting in a charge to operations of $67,500.In May and June 2007, the Company issued an aggregate of 2,151 restricted shares of its Common Stock to its sublessor as partial payment for rent expense,resulting in charges to operations totaling $9,891.In June 2007, the Company issued, 12,000 restricted shares of its Common Stock to a law firm in connection with services rendered to the Company, ofwhich 6,000 shares vested in June 2007 and the remainder vested monthly through June 2008. These shares had a value of $50,400 and the Companyrecognized $37,800 and $12,600 as expense related to this transaction in 2007 and 2008, respectively. In June and July 2007, the Company issued, under the 2003 EPP, 3,000 shares of its Common Stock, in each month, to a consultant for certain managementservices rendered to the Company, resulting in a charge to operations of $1,410 and $15,000 respectively. In August 2007, this consultant was hired as anexecutive officer of the Company and in connection with this hiring was issued by the Company, under the 2003 EPP, 10,000 shares of its Common Stock asa hiring incentive. One half of these shares vested immediately and the remainder were scheduled to vest in one year on the anniversary date of the hiring date.The issuance of these shares thus resulted in a charge to operations of $28,896 and $4,375 in 2007 and 2008, respectively. In 2008 this executive officer leftthe Company and forfeited 5,000 of such shares, and as a result the Company credited operations for $8,020 of compensation expense previously recognizedrelating to these forfeited shares. F-18Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.In July 2007, the Company issued an aggregate of 909 restricted shares of its Common Stock to its sublessor as partial payment for rent expense, resulting incharges to operations totaling $5,000.In August 2007, the Company issued, under the 2003 EPP, 24,000 shares of its Common Stock to a consultant for certain management services rendered to theCompany, 18,000 of which shares vested monthly over the next twelve months and the remainder vest ratably for three years on the anniversary date of theagreement and resulted in a charge to operations of $41,667 in 2007 and $62,500 in 2008. In December 2007, an additional 12,353 shares were issued to thisconsultant in lieu of a $3,500 monthly fee due from December 2007 thru May 2008 (see below).In August 2007, the Company completed a sale of 1,055,900 units at a price of $5.00 per unit pursuant to a best efforts public offering. A registrationstatement on Form SB-2A (File No. 333-142923) relating to these units was filed with the Securities and Exchange Commission and declared effective on July16, 2007. Each unit consisted of one share of Common Stock and one-half of a five year Class A warrant to purchase one-half a share of Common Stock at aprice of $6.00 per share. Thus, 1,000 units consisted of 1,000 shares of Common Stock and Class A warrants to purchase 500 shares of CommonStock. On August 14, 2007, the Company completed a sale of 214,100 units at a price of $5.00 per unit pursuant to the same best efforts public offering.The units sold were identical to the units sold on August 8, 2007. The aggregate number of units thus sold was 1,270,000. The aggregate number of shares ofCommon Stock included within the units was 1,270,000 and the aggregate number of Class A Warrants included within the units was 635,000. Inconnection with the public offering, the Company issued five year warrants to purchase an aggregate of 95,250 shares of Common Stock at $6.50 per shareto the underwriters for the offering. After payment of underwriting commissions and expenses and other costs of the offering, the aggregate net proceeds to theCompany were $5,619,250.On August 8, 2007, the American Stock Exchange accepted for listing the Company’s Common Stock, units as described above, and Class A warrants underthe symbols “NBS”, “NBS.U”, and “NBS.WS” respectively. Trading on the American Stock Exchange commenced on August 9, 2007.In September 2007, the Company issued, under the 2003 EPP, an aggregate of 154,500 shares of its Common Stock to certain employees, including anaggregate of 125,000 shares to certain of its executive officers. In general, one-half of these shares issued vested immediately and the remainder vest in one yearon the anniversary date of the stock issuance. The issuance of these shares resulted in a charge to operations of $499,346 and $225,833 in 2007 and 2008,respectively. In November 2007, an employee that was a recipient of 7,000 shares of this award left the Company and forfeited 3,500 shares (one-half of thisaward). In December 2007, the Company cancelled 10,000 shares issued to an employee who did not satisfy the condition precedent to receipt of paying the taxwithholding obligation. In 2008, two employees (including an executive officer) that were recipients of 12,500 shares of this award left the Company andforfeited 6,250 shares (one-half of the awards). In addition, an executive officer that was a recipient of 40,000 shares of this award declined to accept theportion that vested to him in September 2008 because of the tax obligations associated with the award and returned 20,000 shares to the Company.In September 2007, the Company issued, under the 2003 EPP, an aggregate of 135,000 shares of its Common Stock to the independent members of its Boardof Directors. One-half of these shares vested immediately and the remainder vested in one year on the anniversary date of the stock issuance. The issuance ofthese shares resulted in a charge to operations of $445,505 and $225,833 in 2007 and 2008, respectively.In September 2007, the Company issued, under the 2003 EPP, 10,000 shares of its Common Stock to a consultant to the Company. One-half of these sharesissued vested immediately and the remainder vested in one year on the anniversary date of the stock issuance. The issuance of these shares resulted in a chargeto operations of $33,002 and $16,498 in 2007 and 2008, respectively.In September 2007, the Company issued, under the 2003 EPP, 10,000 shares of its Common Stock to a consultant to the Company. The issuance of theseshares resulted in a charge to operations of $49,500 in 2007.In October 2007, the Company issued, under the 2003 EPP, 2,500 shares of its Common Stock to a consultant to the Company. The issuance of these sharesresulted in a charge to operations of $11,250.In October 2007, the Company issued 15,000 restricted shares of its Common Stock to a consulting firm to the Company. The issuance of these sharesresulted in a charge to operations of $54,750. In December 2007, the Company issued 75,000 restricted shares of its Common Stock to a consultant to the Company. The issuance of these shares resultedin a charge to operations of $149,750. F-19Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.In December 2007, the Company issued, under the 2003 EPP, 12,353 shares of its Common Stock to a consultant to the Company. The issuance of theseshares resulted in a charge to operations of $21,017.In December 2007, the Company issued, under the 2003 EPP, 4,902 shares of its Common Stock to a consultant to the Company. The issuance of theseshares resulted in a charge to operations of $8,333.In December 2007, the Company issued, under the 2003 EPP, 2,778 shares of its Common Stock to an employee of the Company as consideration forrestructuring the employee’s compensation. The issuance of these shares resulted in a charge to operations of $4,723.In December 2007, the Company issued, under the 2003 EPP, 15,000 shares of its Common Stock to an employee of the Company as a compensatorybonus. The issuance of these shares resulted in a charge to operations of $25,500.In December 2007, the Company issued, under the 2003 EPP, 10,000 shares of its Common Stock to an employee of the Company as a compensatorybonus. The issuance of these shares resulted in a charge to operations of $17,000.Effective January 1, 2008, the Company entered into a one year consulting agreement with a financial services firm, pursuant to which this firm wasto provide consulting services during the term to the Company consisting of (i) reviewing the Company's financial requirements; (ii) analyzing and assessingalternatives for the Company's financial requirements; (iii) providing introductions to professional analysts and money managers; (iv) assisting the Companyin financing arrangements to be determined and governed by separate and distinct financing agreements; (v) providing analysis of the Company's industryand competitors in the form of general industry reports provided directly to the Company; and (vi) assisting the Company in developing corporate partneringrelationships. As consideration for these services, in February 2008, the Company issued to the consultant, (i) 50,000 shares of Common Stock; and (ii) twowarrants to purchase an aggregate of 120,000 shares of Common Stock (see “Warrants” below). This issuance of this stock resulted in a charge to operationsof $80,000 in 2008. The issuance of these securities was subject to the approval of the American Stock Exchange, which approval was obtained in February2008.In January 2008, the Company entered into a letter agreement with Dr. Robin L. Smith, its Chairman of the Board and Chief Executive Officer, pursuant towhich Dr. Smith's employment agreement dated as of May 26, 2006 and amended as of January 26, 2007 and September 27, 2007 was further amended toprovide that, in response to the Company’s efforts to conserve cash, $50,000 of her 2008 salary would be paid in shares of the Company’s Common Stock,the number of shares to be issued reduced by the amount of cash required to pay the withholding taxes associated with this amount of salary. Accordingly, Dr.Smith was issued 16,574 shares of the Company’s Common Stock pursuant to the Company’s 2003 EPP resulting in a charge to operations of $28,176.In January 2008, the Company entered into a letter agreement with Catherine M. Vaczy, its Vice President and General Counsel, pursuant to which Ms.Vaczy’s employment agreement dated as of January 26, 2007 was amended to provide that, in response to the Company’s efforts to conserve cash, Ms. Vaczywould be paid $11,250 of her 2008 salary in shares of the Company’s Common Stock, the number of shares to be issued reduced by the amount of cashrequired to pay the withholding taxes associated with this amount of salary. Accordingly, Ms. Vaczy was issued 3,729 shares of the Company’s CommonStock pursuant to the 2003 EPP resulting in a charge to operations of $6,339.In January 2008, the Company terminated an agreement with a consultant to the Company. In connection with the cancellation of this agreement, 5,000 sharesof Common Stock of the Company, previously issued, were surrendered by the consultant resulting in a credit to operations of $18,250.In January 2008, the Company issued 7,500 shares of the Company’s Common Stock to a consultant to the Company pursuant to the 2003 EPP resulting in acharge to operations of $13,425.In February 2008, the Company entered into a one year consulting agreement with a law firm to assist in funding efforts from the State and FederalGovernments as well as other assignments from time to time, in consideration for which it issued to the firm 40,000 restricted shares of Common Stock thatvest ratably on a monthly basis during 2008. The issuance of the shares was subject to the approval of the American Stock Exchange, such approval wasobtained in March 2008, and following this approval the shares were issued. The shares issued in connection with this agreement had a value of $72,800which is being recognized as an operating expense over the term of the agreement, and has resulted in a charge to operations for 2008 of $66,733.In February 2008, the Company entered into a six month engagement agreement with a financial advisor pursuant to which they were acting as the Company’sexclusive financial advisor for the term in connection with a potential acquisition of a revenue generating business, in the United States or abroad, or similartransaction. As partial consideration, the Company issued restricted shares of its Common Stock with a $45,000 value based on the five day average of theclosing prices of the Common Stock preceding the date of issuance which was to be paid on a pro rata basis during the term of the agreement. The issuance ofsuch securities was subject to the approval of the American Stock Exchange. Such approval was obtained in March 2008, and following that approval theCompany issued to the financial advisor in 2008 payments in Common Stock under the agreement totaling 38,861 shares, resulting in a charge to operationsof $45,650. F-20Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.In February 2008, the Company issued 20,000 shares of the Company’s Common Stock to the Company’s Director of Government Affairs pursuant to the2003 EPP resulting in a charge to operations of $32,000. The issuance of the shares was in lieu of salary payable in connection with such individual servingas the Vice President of the Stem for Life Foundation (“SFLF”), a not for profit corporation which the Company participated in founding and is considered bythe Company as a defacto contribution to the foundation. In April 2008, this individual resigned from her position as Director, Government Affairs with theCompany and Vice President of SFLF.In February 2008, the Company issued 5,325 shares of the Company’s Common Stock to a consultant to the Company pursuant to the 2003 EPP, resultingin a charge to operations of $8,646.In February 2008, the Company entered into a six month advisory services agreement with a financial securities firm whereby this firm was providingfinancial consulting services and advice to the Company pertaining to its business affairs. In consideration for such services, the Company agreed to issue150,000 restricted shares of its Common Stock to be issued over the term of the advisory services agreement, provided that the advisory services agreementcontinued to be in effect. The issuance of such securities was subject to the approval of the American Stock Exchange, which approval was obtained onMarch 20, 2008, and on that date the Company issued under the advisory services agreement the initial payments in Common Stock totaling 50,000shares. A total of 90,000 shares were issued in 2008, resulting in a charge to operations of $141,200. The Company has terminated this agreement and theremaining 60,000 shares will not be issued.In February 2008, the Company entered into a six month consulting agreement with an investor relations advisor who has provided investor relations andmedia services to the Company since 2005. In consideration for providing services under the consulting agreement, the Company agreed to issue to theadvisor an aggregate of 50,000 restricted shares of its Common Stock. The issuance of such securities was subject to the approval of the American StockExchange. Such approval was obtained on March 20, 2008 and on that date these shares were issued, resulting in a charge to operations of $85,000.In April 2008, the Company entered into a one month non-exclusive investment banking agreement in connection with the possible issuances by the Companyof equity, debt and/or convertible securities. In partial consideration for such services, the Company agreed to issue 9,146 restricted shares of its CommonStock as a retainer. The term of this agreement was extended. The issuance of the securities under this agreement was subject to the approval of the AmericanStock Exchange, which approval was obtained and on May 21, 2008 the 9,146 retainer shares were issued. This bank participated in the May 2008 privateplacement (as described below). The value of this Common Stock was $7,408.In May 2008, the Company completed a private placement of securities pursuant to which $900,000 in gross proceeds was raised (the “May 2008 privateplacement”). On May 20 and May 21, 2008, the Company entered into Subscription Agreements (the "Subscription Agreements") with 16 accreditedinvestors (the "Investors"). Pursuant to the Subscription Agreements, the Company issued to each Investor units (the "Units") comprised of one share of itsCommon Stock, par value $.001 per share (the "Common Stock") and one redeemable five-year warrant to purchase one share of Common Stock at apurchase price of $1.75 per share (the "Warrants"), at a per-unit price of $1.20. The Warrants are not exercisable for a period of six months and areredeemable by the Company if the Common Stock trades at a price equal to or in excess of $2.40 for a specified period of time (see “Warrants” below). In theMay 2008 private placement, the Company issued an aggregate of 750,006 Units to Investors consisting of 750,006 shares of Common Stock and 750,006redeemable Warrants, with a value of $404,817, for an aggregate purchase price of $900,000. Dr. Robin L. Smith, the Company’s Chairman and ChiefExecutive Officer, purchased 16,667 Units for a purchase price of $20,000 and Catherine M. Vaczy, the Company’s Vice President and General Counsel,purchased 7,500 Units for a purchase price of $9,000. New England Cryogenic Center, Inc. (“NECC”), one of the largest full-service cryogenic laboratoriesin the world and a strategic partner of the Company since October 2007, also participated in the offering. Pursuant to the terms of the SubscriptionAgreements, the Company was required to prepare and file (and did so on a timely basis) no later than forty-five days (with certain exceptions) after theclosing of the May 2008 private placement, a Registration Statement with the SEC to register the resale of the shares of Common Stock issued to Investors andthe shares of Common Stock underlying the Warrants, which was filed on July 1, 2008. In connection with the May 2008 private placement, the Companypaid as finders’ fees to accredited investors, cash in the amount of $3,240 and issued five year warrants to purchase an aggregate of 35,703 shares ofCommon Stock with a value of $23,671 (see “Warrants” below). Cash in the amount of 4% of the proceeds received by the Company from the future exerciseof 30,000 of the Investor Warrants is also payable to one of the finders. F-21Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.In May 2008, the Company entered into a two month agreement with a sales and marketing consultant pursuant to which the consultant was to provideconsultation services to the Company relating to business development, operations and staffing matters. In consideration for such services, the Companyagreed to issue to the consultant pursuant to the 2003 EPP: (i) 20,000 shares of Common Stock to vest as to 10,000 shares on the last day of each 30 day periodduring the term of the consulting agreement; and (ii) an option to purchase 20,000 shares of Common Stock at a per share purchase price equal to the closingprice of the Common Stock on the date of grant to vest and become exercisable as to 10,000 shares of Common Stock on the last day of each 30 day periodduring the term of the consulting agreement, subject in each case to the continued effectiveness of the agreement. All of such shares were subject to a six monthperiod during which consultant agreed none of these shares would be sold. The issuance of these shares resulted in a charge to operations of $27,600 and theissuance of the options resulted in a charge to operations of $22,870. In July 2008, the Company entered into a two month extension of this agreementpursuant to which the consultant was to continue to provide consultation services to the Company relating to business development, operations and staffingmatters. In consideration for such services, the Company has agreed to issue to the consultant pursuant to the 2003 EPP (i) 20,000 shares of Common Stockto vest as to 10,000 shares on the last day of each 30 day period during the term of the extended consulting agreement; and (ii) an option to purchase 20,000shares of Common Stock at a per share purchase price equal to the closing price of the Common Stock on the date of execution of the extended agreementto vest and become exercisable as to 10,000 shares of Common Stock on the last day of each 30 day period during the extended term of the consultingagreement, subject in each case to the continued effectiveness of the extended agreement. In the event of full time employment of the consultant this vestingwould be accelerated. All of such shares were subject to a six month period during which consultant agreed none of these shares would be sold. The issuanceof these shares has resulted in a charge to operations of $16,400 and the issuance of the options resulted in a charge to operations of $13,926.In May 2008, the Company entered into a two month agreement with a consultant pursuant to which the consultant was to provide services to the Companyrelating to government affairs and related areas. In consideration for such services, the Company agreed to issue to the consultant pursuant to the 2003 EPP: (i)20,000 shares of Common Stock to vest as to 10,000 shares on the last day of each 30 day period during the term of the consulting agreement; and (ii) anoption to purchase 20,000 shares of Common Stock at a per share purchase price equal to the closing price of the Common Stock on the date of grant to vestand become exercisable as to 10,000 shares of Common Stock on the last day of each 30 day period during the term of the consulting agreement, subject ineach case to the continued effectiveness of the agreement. All of such shares were subject to a six month period during which consultant agreed none of theshares would be sold. The issuance of these shares resulted in a charge to operations of $26,000 and the issuance of the options resulted in a charge tooperations of $23,620.In May 2008, the Company issued to a business development consultant for services previously rendered, 1,000 shares of Common Stock under the 2003EPP which vested immediately. The issuance of these shares resulted in a charge to operations of $960.In May 2008, the Company entered into a three month consulting agreement with a public relations and communications consultant focusing on specificconsumer demographics. As partial consideration for these services, the Company agreed to issue: (i) 20,000 restricted shares of its Common Stock on each of(a) the date of execution of the agreement (the “Execution Date”), (b) thirty days after the Execution Date, and (c) sixty days after the Execution Date; and (ii) afive year warrant to purchase up to 30,000 shares of Common Stock (as described under “Warrants” below), exercisable as to 10,000 shares each at $3.00,$4.00 and $5.00, respectively. These warrants have a value of $19,828. The issuance of the securities under this agreement was subject to the approvalof the American Stock Exchange, which approval was obtained on September 20, 2008 and the initial payments in Common Stock and the Warrant wereissued. In 2008 the Company issued a total of 40,000 restricted shares of its Common Stock pursuant to this agreement resulting in a charge to operations of$36,800. In July 2008, the Company terminated this agreement and the final 20,000 shares were not issued.In June 2008, the Company entered into a six month consulting agreement with an investor relations advisor. As consideration for these services, the Companyissued (i) 50,000 restricted shares of its Common Stock, vesting as to 25,000 shares on the date of execution of the consulting agreement and 25,000 shares91 days thereafter, which resulted in a charge to operations of $42,500 and (ii) a five year warrant to purchase an aggregate of 250,000 shares of CommonStock, with a value of $179,485 (as described under “Warrants” below). The issuance of such securities was subject to the approval of the American StockExchange, which approval was obtained on June 20, 2008 and the initial payment in Common Stock and the Warrant were issued. Pursuant to the terms ofthe agreement, the Company was required to prepare and file (and did so on a timely basis) no later than July 3, 2008, a Registration Statement with the SECto register the resale of the shares of Common Stock issued to the consultant and the shares of Common Stock underlying the Warrant. F-22Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.In August 2008, the Company entered into letter agreements with Dr. Robin L. Smith, its Chairman of the Board and Chief Executive Officer, Larry A. May,its Chief Financial Officer and Catherine M. Vaczy, its Vice President and General Counsel, pursuant to which, in response to the Company’s efforts toconserve cash, each of these officers agreed to accept shares of the Company’s Common Stock in lieu of unpaid accrued salary. Dr. Smith agreed to accept inlieu of $24,437.50 in unpaid salary accrued during the period July 15, 2008 through August 31, 2008, 33,941 shares of the Company's Common Stock witha value of $27,848. Mr. May agreed to accept in lieu of $10,687.50 in unpaid salary accrued during the period July 15, 2008 through August 31, 2008,14,844 shares of the Company's Common Stock with a value of $12,172. Ms. Vaczy agreed to accept in lieu of $10,578.50 in unpaid salary accrued duringthe period July 15, 2008 through August 31, 2008, 14,692 shares of the Company's Common Stock with a value of $12,047. In addition certain other seniormembers of the staff agreed to accept Common Stock in lieu of cash compensation resulting in the issuance of 17,014 shares of Common Stock with a valueof $13,951. The number of shares so issued to each officer and senior staff member was based on the closing price of the Common Stock on August 27,2008, $.72, for which the Company agreed to pay total withholding taxes. All such shares were issued under the Company's 2003 EPP, as amended. Inaddition, the vesting of an aggregate of 52,500 shares of the Company’s Common Stock granted to such persons under the 2003 EPP on September 27, 2007was authorized to be accelerated from September 27, 2008 to August 28, 2008. All such arrangements were approved by the Compensation Committee of theBoard of Directors.In September 2008, the Company completed a private placement of securities pursuant to which $1,250,000 in gross proceeds were raised (the “September2008 private placement”). On September 2, 2008, the Company entered into a Subscription Agreement (the "Subscription Agreement") with RimAsia CapitalPartners, L.P., a pan-Asia private equity firm (the "Investor"). Pursuant to the Subscription Agreement, the Company issued to the Investor one million units(the "Units") at a per-unit price of $1.25, each Unit comprised of one share of Common Stock and one redeemable five-year warrant to purchase one share ofCommon Stock at a purchase price of $1.75 per share (the "Warrants"). The Warrants are not exercisable for a period of six months and are redeemable bythe Company if the Common Stock trades at a price equal to or in excess of $3.50 for a specified period of time or the dollar value of the trading volume of theCommon Stock for each day during a specified period of time equals or exceeds $100,000 (see “Note 9, Stockholders’ Equity (c) Warrants” below). In theSeptember 2008 private placement, the Company thus issued 1,000,000 Units to the Investor consisting of 1,000,000 shares of Common Stock and 1,000,000redeemable Warrants, with a value of $583,031, for an aggregate purchase price of $1,250,000. Pursuant to the terms of the Subscription Agreement, theCompany is required to prepare and file no later than one hundred and eighty (180) days after the closing of the September 2008 private placement, aRegistration Statement with the SEC to register the resale of the shares of Common Stock issued to Investor and the shares of Common Stock underlying theWarrants; provided, that the Company is not liable to pay specified amounts under the terms of the Subscription Agreement if the Company does not file sucha registration statement in a timely manner because the Company does not have available audited financial statements required by the SEC of a company withwhich the Company has signed a letter of intent to acquire. The Company does not yet have available audited financial statements of CBH with which it hasentered into the Merger Agreement (see “Note 13, Commitments and Contingencies, Agreement and Plan of Merger”). The Warrants also provide that in noevent may they be net cash settled.In October 2008, the Company issued, under the 2003 EPP, 5,000 shares of its Common Stock to an employee, its new Director of Stem Cell Research andLaboratory Operations. The issuance of these shares resulted in a charge to operations of $7,000.In October 2008, the Company completed a private placement of securities pursuant to which $250,000 in gross proceeds was raised (the “October 2008private placement”). On October 15, 2008, the Company entered into a Subscription Agreement (the "Subscription Agreement") with an accredited investorlisted therein (the "Investor"). Pursuant to the Subscription Agreement, the Company issued to the Investor 200,000 units (the "Units") at a per-unit price of$1.25, each Unit comprised of one share of its Common Stock and one five-year warrant to purchase one share of Common Stock at a purchase price of$1.75 per share, with a value of $121,157 (the "Warrants"). The Warrants are not exercisable for a period of six months (see “Note 9, Stockholders’Equity (c) Warrants” below). In the October 2008 private placement, the Company thus issued 200,000 Units to the Investor consisting of200,000 shares of Common Stock and 200,000 Warrants, for an aggregate purchase price of $250,000. The issuance of the Units wassubject to the prior approval of the American Stock Exchange (now known as the NYSE Amex), which approval was obtained onOctober 23, 2008, and on that date the Units were issued. Pursuant to the terms of the Subscription Agreement, the Company isrequired to prepare and file no later than one hundred and eighty (180) days after the final closing of the October 2008 privateplacement, a Registration Statement with the SEC to register the resale of the shares of Common Stock issued to the Investor and theshares of Common Stock underlying the Warrants; provided, that the Company is not liable to pay specified amounts under the terms ofthe Subscription Agreement if the Company does not file such a registration statement in a timely manner because the Company doesnot have available audited financial statements required by the SEC of a company the Company proposes to acquire. The Company doesnot yet have available audited financial statements of CBH with which it has entered into the Merger Agreement (see “Note 13,Commitments and Contingencies, Agreement and Plan of Merger”). The Warrants also provide that in no event may they be net cashsettled. F-23Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.In November 2008, the Company completed a private placement of securities pursuant to which $500,000 in gross proceeds was raised (the “November 2008private placement”). On November 7, 2008, the Company entered into a Subscription Agreement (the "Subscription Agreement") with an accredited investorlisted therein (the "Investor"). Pursuant to the Subscription Agreement, the Company issued to the Investor 400,000 units (the "Units") at a per-unit price of$1.25, each Unit comprised of one share of its Common Stock and one redeemable five-year warrant to purchase one share of Common Stock at a purchaseprice of $1.75 per share, with a value of $243,063 (the "Warrants"). The Warrants are not exercisable for a period of six months and are redeemable by theCompany if the Common Stock trades at a price equal to or in excess of $3.50 for a specified period of time (see “Note 9, Stockholders’ Equity (c) Warrants”below). In the November 2008 private placement, the Company thus issued 400,000 Units to the Investor consisting of 400,000 shares of Common Stock and400,000 redeemable Warrants, for an aggregate purchase price of $500,000. The issuance of the Units was subject to the prior approval of the NYSE Amex.Pursuant to the terms of the Subscription Agreement, the Company is required to prepare and file no later than one hundred and eighty (180) days after thefinal closing of the November 2008 private placement, a Registration Statement with the SEC to register the resale of the shares of Common Stock issued to theInvestor and the shares of Common Stock underlying the Warrants; provided, that the Company is not liable to pay specified amounts under the terms of theSubscription Agreement if the Company does not file such a registration statement in a timely manner because the Company does not have available auditedfinancial statements required by the SEC of a company the Company proposes to acquire. The Company does not yet have available audited financialstatements of CBH with which it has entered into the Merger Agreement (see “Note 13, Commitments and Contingencies, Agreement and Plan of Merger”). TheWarrants also provide that in no event may they be net cash settled. (c) Warrants: The Company has issued Common Stock purchase warrants from time to time to investors in private placements, certain, vendors, underwriters, anddirectors and officers of the Company. A total of 5,322,333 shares of Common Stock are reserved for issuance upon exercise of outstanding warrants as ofDecember 31, 2008 at prices ranging from $0.71 to $12.00 and expiring through 2013.From August 2004 through March 2005, the Company issued three year warrants to purchase a total of 1,500 shares of its Common Stock at $5.00 per shareto the Company’s investor relations firm. In August 2007, the Company extended the expiration dates of 1,250 of such warrants for a period of two years.In September 2005, the Company issued 2,400 Common Stock purchase warrants to its then Chairman of its Advisory Board, Dr. Robin L. Smith. Thesewarrants were scheduled to vest at the rate of 200 per month beginning with September 14, 2005. The vesting of these warrants was accelerated so that theybecame immediately vested on June 2, 2006 pursuant to Dr. Smith’s employment agreement. Each warrant entitles the holder to purchase one share of theCompany’s Common Stock at a price of $8.00 per share. The warrant expires three years from issuance.In December 2005 and January 2006, the Company issued an aggregate of 91,668 Common Stock purchase warrants to the investors and placement agent inthe Westpark private placement. Each warrant entitled the holder to purchase one share of Common Stock at a price of $12.00 per share for a period of threeyears; however, the exercise price of a substantial portion of such warrants was reduced to $8.00 pursuant to a special offer to the Westpark investors toextend the term or agree to an early conversion of the promissory notes issued in the Westpark private placement (see Note 7, “Notes Payable”).In March 2006, the Company issued 1,200 Common Stock purchase warrants to the Company’s marketing consultants. These warrants vest 200 per monthbeginning March 2006 and entitle the holder to purchase one share of Common Stock at a price of $10.00 per share for a period of three years. In 2006, theconsulting agreement was terminated and 400 of the Common Stock purchase warrants issued were cancelled.In June 2006, pursuant to the Duncan Private Placement, the Company sold 472,500 shares of its Common Stock to seventeen accredited investors at a pershare price of $4.40 resulting in gross proceeds of $2,079,000. In connection with this transaction the Company issued 236,250 Common Stock purchasewarrants to these seventeen investors. These Common Stock purchase warrants have a term of 5 years and exercise price of $8.00 per share and provided forcertain registration rights and certain penalties if such registration was not achieved within 150 days of the initial closing of the Duncan Private Placement. InAugust 2006, the Company filed with the SEC a registration statement registering the resale by the investors in the Duncan Private Placement of the shares ofCommon Stock underlying the warrants sold in the Duncan Private Placement. F-24Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.In July and August 2006, the Company sold an aggregate of 397,727 shares of Common Stock to 34 accredited investors at a per share price of $4.40resulting in gross proceeds to the Company of $1,750,000. In connection with this transaction, the Company issued 198,864 Common Stock purchasewarrants with a term of five years and per share exercise price of $8.00.In July and August 2006, in connection with the offer to noteholders for early conversion of the Convertible Promissory Notes of the Westpark PrivatePlacement, the Company issued 39,583 warrants. These Common Stock purchase warrants have a term of 5 years and exercise price of $8.00 per share. In August 2006, the Company issued warrants to purchase an aggregate of 17,000 shares of Common Stock at $8.00 per share to four persons underadvisory agreements. Such warrants are each exercisable for five years from the date of issue.In September 2006, in connection with the offer to noteholders for early conversion of the Convertible Promissory Notes of the Westpark Private Placement, theCompany issued 20,833 warrants. These Common Stock purchase warrants have a term of 5 years and exercise price of $8.00 per share.In October 2006, in connection with the offer to noteholders for early conversion of the Convertible Promissory Notes of the Westpark Private Placement, theCompany issued 10,417 warrants. These Common Stock purchase warrants have a term of 5 years and exercise price of $8.00 per share.In our January 2007 private placement the Company issued 250,000 units, each unit comprised of two shares of the Company’s Common Stock, oneredeemable seven-year warrant to purchase one share of Common Stock at a purchase price of $8.00 per share and one non-redeemable seven-year warrant topurchase one share of Common Stock at a purchase price of $8.00 per share. The Company issued an aggregate of 500,000 shares of Common Stock, andwarrants to purchase up to an aggregate of 500,000 shares of Common Stock at an exercise price of $8.00 per share. The Company also issued to EGEredeemable seven year warrants to purchase 34,255 shares of Common Stock at a purchase price of $5.00 per share, redeemable seven-year warrants topurchase 17,127 shares of Common Stock at a purchase price of $8.00 per share and non-redeemable seven-year warrants to purchase 17,127 shares ofCommon Stock at a purchase price of $8.00 per share. All of the redeemable warrants above are redeemable at the option of the Company, at a redemptionprice of $.0001 per warrant if, among other things, the underlying Common Stock reaches a certain trading value per share for a specified period of time and aminimum average daily trading volume. In March 2007, the Company engaged a marketing and investor relations consultant. Pursuant to this agreement, the Company issued to the consultantwarrants to purchase 150,000 shares of its Common Stock at a purchase price of $4.70 per share. Such warrants were to vest over a 12 month period at arate of 12,500 per month, subject to acceleration in certain circumstances, and are exercisable until April 30, 2010. During the year ended December 31, 2007the Company recognized $142,158 as consulting expense related to the vested portion of these warrants. In November 2007 this agreement was terminated andwarrants as to 100,000 shares of Common Stock related to this agreement were canceled. In May 2007, the Company engaged an investor relations consultant. Pursuant to this agreement, the Company issued to the consultant warrants to purchase10,000 shares of its Common Stock at a purchase price of $4.90 per share. Such warrants vested on issuance and during the year ended December 31, 2007the Company recognized $37,480 as consulting expense related to these warrants. In June 2007, the Company engaged a consultant to create marketing materials for our sales and marketing staff. Pursuant to this agreement, the Companyissued to the consultant warrants to purchase 4,000 shares of its Common Stock at a purchase price of $6.10 per share. Such warrants vested on issuanceand during the year ended December 31, 2007 the Company recognized $22,512 as marketing expense related to these warrants. In the Company’s August 2007 public offering (described under Note 9(b), Common Stock, above) units were issued comprised of shares of the Company’sCommon Stock and Class A warrants to purchase an aggregate of 635,000 shares of Common Stock at $6.00 per share. Such Class A warrants becameexercisable and separately tradable from the units on October 12, 2007 and are exercisable through July 16, 2012. The Company also issued to itsunderwriter group warrants (the “Underwriter Warrants”) to purchase an aggregate of 95,250 shares of Common Stock at $6.50 per share, exercisablecommencing one year from the date of issuance through August 14, 2012. The Class A Warrants were issued pursuant to the terms of a Restated WarrantAgreement made as of August 14, 2007 between the Company and the Class A Warrant agent. The Underwriter Warrants were issued individually to eachmember of the underwriting group. The Underwriter Warrants had a higher exercise price ($6.50) than that of the Class A Warrants, and unlike the Class AWarrants, could not be exercised for a period of one year from the date of issuance and contained provisions for cashless exercise. In September 2008, theCompany made the determination that certain of the Underwriter Warrants, exercisable for an aggregate of 86,865 shares of Common Stock, should beaccounted for as a derivative liability and reported on our balance sheet as such commencing as of September 30, 2008. For information purposes, upon theclosing of our August 2007 public offering the fair value and thus the derivative liability value of these certain Underwriter Warrants was $195,551 and inthe table below are the derivative liability values of these Underwriter Warrants at end of each quarter since the closing of our August 2007 public offering: F-25Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Date DerivativeLiability Value 9/30/2007 $107,713 12/31/2007 $4,344 3/31/2008 $5,212 6/30/2008 $35 9/30/2008 $13 12/31/2008 $0 In October 2007, the Company engaged a consultant to create marketing materials for our sales and marketing staff. Pursuant to this agreement, the Companyissued to the consultant warrants to purchase 3,000 shares of its Common Stock at a purchase price of $4.61 per share. Such warrants vested on issuanceand during the year ended December 31, 2007 the Company recognized $11,636 as marketing expense related to these warrants.In January 2008, the Company entered into a one year consulting agreement with a financial services firm (as described under “Common Stock” above). Asconsideration for these services, in February 2008, the Company issued to the consultant, (i) 50,000 shares of Common Stock; and (ii) two warrants topurchase an aggregate of 120,000 shares of Common Stock. The first warrant grants the consultant the right to purchase up to 20,000 shares of CommonStock at a per share purchase price equal to $2.00; and the second Warrant grants the consultant the right to purchase up to 100,000 shares of Common Stockat a per share purchase price equal to $5.00, all as set forth in the Warrants. The total combined value of these Warrants was $141,304. The Warrants shallvest on a pro rata basis so long as services continue to be provided under the agreement and are exercisable until January 1, 2013. The issuance of theseWarrants resulted in a charge to operations of $105,855 for 2008. The issuance of such securities was subject to the approval of the American StockExchange, which approval was obtained in February 2008.In May 2008, the Company completed a private placement of securities pursuant to which $900,000 in gross proceeds was raised (as described under“Common Stock” above). Pursuant to the May 2008 private placement, the Company issued to each Investor Units comprised of one share of CommonStock and one redeemable five-year warrant to purchase one share of Common Stock at a purchase price of $1.75 per share (the "Warrants"), at a per-unitprice of $1.20. The Warrants to purchase an aggregate of 750,006 shares of Common Stock issued in the May 2008 private placement are not exercisable for aperiod of six months and thereafter are exercisable through May 19, 2013, and are redeemable by the Company, at its option, at a redemption price of $.0001per share, if the Common Stock trades at a price equal to or in excess of $2.40 for a specified period of time. The value of these warrants is $403,817. TheInvestors received certain registration rights for the shares of Common Stock underlying the Warrants, as described under “Common Stock,” above, and inJuly 2008 the Company timely filed a registration statement relating thereto. As also described, the Company issued warrants to purchase an aggregate of35,703 shares of Common Stock, with a value of $23,671, in partial payment of finder’s fees (the “Finder’s Warrants”), which Finder’s Warrants containgenerally the same terms as the Warrants except they contain a cashless exercise feature and have piggyback registration rights for the resale of the sharesunderlying the Finder’s Warrants.In May 2008, the Company entered into a three month consulting agreement with a public relations and communications consultant focusing on specificconsumer demographics (as described under “Common Stock” above). As partial consideration for these services, the Company issued a five year warrant topurchase up to 30,000 shares of Common Stock, exercisable as to 10,000 shares each at $3.00, $4.00 and $5.00, respectively, all as set forth in theWarrant. The issuance of the securities under this agreement was subject to the approval of the American Stock Exchange, which approval was obtained onJune 20, 2008 and the initial payments in Common Stock and the Warrant were issued. The Warrant is exercisable through June 19, 2013. The issuance ofthe Warrant resulted in a charge to operations of $19,828 in 2008.In June 2008, the Company entered into a six month consulting agreement with an investor relations advisor (as described under “Common Stock” above). Aspartial consideration for these services, the Company issued to the advisor a five year warrant (the “Warrant”) to purchase up to 250,000 shares of CommonStock, vesting as to 41,667 shares on the date of execution of the consulting agreement (the “Execution Date”) and each of the first, second, third, fourth andfifth monthly anniversaries of the Execution Date (each, a “Vesting Date”) (except it shall vest as to 41,666 shares on the fourth and fifth anniversaries);provided, that on each Vesting Date the consulting agreement shall continue to be in effect, at an exercise price per share as follows: (a) as to 50,000 shares atan exercise price of $1.00 per share, (b) as to an additional 50,000 shares at an exercise price of $1.30 per share, (c) as to an additional 50,000 shares at anexercise price of $1.75 per share; (d) as to an additional 50,000 shares at an exercise price of $2.00 per share, and (e) as to an additional 50,000 shares at anexercise price of $3.00 per share, all as set forth in the Warrant. The issuance of the securities under this agreement was subject to the approval of theAmerican Stock Exchange, which approval was obtained in June 2008 and the initial payments in Common Stock and the Warrant were issued. TheWarrant is exercisable until June 19, 2013. Pursuant to the terms of the agreement, and as described under “Common Stock” above, the Company wasrequired to prepare and file (and did so on a timely basis) no later than July 3, 2008, a Registration Statement with the SEC to register the resale of the sharesof Common Stock issued to the consultant and the shares of Common Stock underlying the Warrant. The issuance of the Warrant resulted in a charge tooperations of $179,485 in 2008. F-26Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.In July 2008, in furtherance of the Company’s desire to increase its presence in the health and wellness industry, the Company entered into a two yearconsulting agreement with Margula Company LLC (“Margula”), pursuant to which Margula will provide various promotional services to the Company,including various speaking engagements (the “Margula Consulting Agreement”). These services will be primarily provided through Suzanne Somers. Inconsideration therefor, the Company issued to Margula a five year warrant (the “Warrant”) to purchase up to an aggregate of 600,000 shares of CommonStock at $0.78 per share (the closing price of the Common Stock on the American Stock Exchange on the commencement date of the agreement) (the“Commencement Date”), to vest and become exercisable as to: (i) 200,000 shares upon the completion of a stated milestone; (ii) 100,000 shares upon the earlierof the completion of a stated milestone and December 31, 2008; (iii) 100,000 shares upon the earlier of the completion of an additional stated milestone andDecember 31, 2008; (iv) 100,000 shares upon the earlier of the completion of a stated milestone and September 30, 2009; and (v) 4,167 shares on eachmonthly anniversary of the Commencement Date through July 28, 2010 (with the final monthly vesting being 4,159), so long as on the respective vesting datethe Margula Consulting Agreement shall not have been terminated. By the close of the year ended December 31, 2008, 400,000 shares had vested based on theachievement of certain milestones or reaching December 31, 2008 and a total of 16,668 shares had vested on the monthly anniversaries of the CommencementDate. The effectiveness of the Warrant was subject to the prior approval of the American Stock Exchange, which was obtained in September 2008. Pursuantto the terms of the Warrant, the Company is required to prepare and file no later than February 1, 2009, a Registration Statement with the SEC to register theresale of the shares of Common Stock underlying the Warrant; provided, that the obligation to timely file such a registration statement shall be delayed in theevent the Company does not have available audited financial statements required by the SEC of a company which the Company plans to acquire. TheCompany does not yet have available audited financial statements of CBH with which it has entered into the Merger Agreement, (see “Note 13, Commitmentsand Contingencies, Agreement and Plan of Merger”). The value of this Warrant is $387,204 and the vested portion of this Warrant resulted in a charge tooperations of $283,539 in 2008.In September 2008, the Company completed the September 2008 private placement (as described under “Common Stock” above) pursuant to which$1,250,000 in gross proceeds was raised. Pursuant to the September 2008 private placement, the Company issued to the Investor, RimAsia Capital Partners,L.P., one million units (the "Units") at a per-unit price of $1.25, each Unit comprised of one share of its Common Stock and one redeemable five-yearwarrant to purchase one share of Common Stock at a purchase price of $1.75 per share (the "Warrants"). The Warrants to purchase 1,000,000 shares of theCompany’s Common Stock issued in the September 2008 private placement are not exercisable for a period of six months and are redeemable by theCompany, at its option, at a redemption price of $.0001 per share, if the Common Stock trades at a price equal to or in excess of $3.50 for a specified periodof time or the dollar value of the trading volume of the Common Stock for each day during a specified period of time equals or exceeds $100,000. The value ofthese Warrants is $583,031. The Investor received certain registration rights for the shares underlying the Warrants, as described under “Common Stock”above; provided, that the Company is not liable to pay specified amounts under the terms of the Subscription Agreement if the Company does not file such aregistration statement in a timely manner because the Company does not have available audited financial statements required by the SEC of a company withwhich the Company has signed a letter of intent to acquire. The Company does not yet have available audited financial statements of CBH with which it hasentered into the Merger Agreement (see “Note 13, Commitments and Contingencies, Agreement and Plan of Merger”). The Warrants also provide that in noevent may they be net cash settled.In October 2008, the Company completed the October 2008 private placement pursuant to which $250,000 in gross proceeds was raised. Pursuant to theOctober 2008 private placement, the Company issued to the Investor 200,000 units (the "Units") at a per-unit price of $1.25, each Unit comprised of oneshare of its Common Stock and one five-year warrant to purchase one share of Common Stock at a purchase price of $1.75 per share, with a value of$121,157 (the "Warrants"). The Warrants to purchase 200,000 shares of the Company’s Common Stock issued in the October 2008 private placement are notexercisable for a period of six months. The Investor received certain registration rights for the shares underlying the Warrants, as described under “CommonStock” above; provided, that the Company is not liable to pay specified amounts under the terms of the Subscription Agreement if the Company does not filesuch a registration statement in a timely manner because the Company does not have available audited financial statements required by the SEC of a companythe Company proposes to acquire. The Company does not yet have available audited financial statements of CBH with which it has entered into the MergerAgreement (see “Note 13, Commitments and Contingencies, Agreement and Plan of Merger”). The Warrants also provide that in no event may they be net cashsettled. F-27Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.In November 2008, the Company completed the November 2008 private placement of securities pursuant to which $500,000 in gross proceeds was raised.Pursuant to the November 2008 private placement, the Company issued to the Investor 400,000 units (the "Units") at a per-unit price of $1.25, each Unitcomprised of one share of its Common Stock and one redeemable five-year warrant to purchase one share of Common Stock at a purchase price of $1.75 pershare, with a value of $243,063 (the "Warrants"). The Warrants to purchase an aggregate of 400,000 shares of Common Stock issued in the November 2008private placement are not exercisable for a period of six months and the warrants are redeemable by the Company, at its option, at a redemption price of $.0001per share, if the underlying Common Stock reaches a trading value of $3.50 for at specified period of time. The Investor received certain registration rights forthe shares underlying the Warrants, as described under “Common Stock” above; provided, that the Company is not liable to pay specified amounts under theterms of the Subscription Agreement if the Company does not file such a registration statement in a timely manner because the Company does not haveavailable audited financial statements required by the SEC of a company the Company proposes to acquire. The Company does not yet have available auditedfinancial statements of CBH with which it has entered into the Merger Agreement (see “Note 13, Commitments and Contingencies, Agreement and Plan ofMerger”). The Warrants also provide that in no event may they be net cash settled.At December 31, 2008 the outstanding warrants by range of exercise prices are as follows: Exercise Price Warrants OutstandingDecember 31, 2008 WeightedAverageRemainingContractualLife (years) Warrants ExercisableDecember 31, 2008 $0.71 to $4.17 3,275,709 4.60 1,494,878 $4.17 to $7.62 977,011 3.58 968,677 $7.62 to $11.08 1,057,109 3.52 1,057,109 $11.08 to $12.00 12,504 0.04 12,504 5,322,333 4.19 3,533,168 (d) Options:The Company’s 2003 Equity Participation Plan (the “2003 EPP”) permits the grant of share options and shares to its employees, Directors,consultants and advisors for up to 2,500,000 shares of Common Stock as stock compensation. All stock options under the 2003 EPP are generallygranted at the fair market value of the Common Stock at the grant date. Employee stock options vest ratably over a period determined at time of grantand generally expire 10 years from the grant date.Effective January 1, 2006, the Company’s 2003 EPP is accounted for in accordance with the recognition and measurement provisions of Statementof Financial Accounting Standards ("FAS") No. 123 (revised 2004), Share-Based Payment ("FAS 123(R)"), which replaces FAS No. 123,Accounting for Stock-Based Compensation, and supersedes Accounting Principles Board Opinion ("APB") No. 25, Accounting for Stock Issued toEmployees, and related interpretations. FAS 123 (R) requires compensation costs related to share-based payment transactions, including employeestock options, to be recognized in the financial statements. In addition, the Company adheres to the guidance set forth within Securities andExchange Commission ("SEC") Staff Accounting Bulletin ("SAB") No. 107, which provides the Staff's views regarding the interaction betweenSFAS No. 123(R) and certain SEC rules and regulations and provides interpretations with respect to the valuation of share-based payments forpublic companies. F-28Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The twelve month periods ended December 31, 2008, 2007 and 2006 include share-based compensation expense totaling $1,986,103, $2,207,816and $560,466, respectively. Such amounts have been included in the consolidated statements of operations within general and administrativeexpenses. Stock option compensation expense in 2008, 2007 and 2006 is the estimated fair value of options granted amortized on a straight-linebasis over the requisite service period for entire portion of the award and those options that vested upon the accomplishment of business milestones.Options vesting on the accomplishment of business milestones will not be recognized for compensation purposes until such milestones areaccomplished. At December 31, 2008 there were options to purchase 270,000 shares outstanding that will vest on the accomplishment of certainbusiness milestones.The weighted average estimated fair value of stock options granted in the years ended December 31, 2008, 2007 and 2006 were $1.45, $2.27 and$6.30. The fair value of options at the date of grant was estimated using the Black-Scholes option pricing model. During 2008, 2007 and 2006, theCompany took into consideration the guidance under SFAS 123(R) and SAB No. 107 when reviewing and updating assumptions. The expectedvolatility is based upon historical volatility of our stock and other contributing factors. The expected term is based upon observation of actual timeelapsed between date of grant and exercise of options for all employees. Previously such assumptions were determined based on historical data. The range of assumptions made in calculating the fair values of options are as follows: Year EndedDecember 31,2008 Year EndedDecember 31,2007 Year EndedDecember 31,2006 Expected term (in years) 10 10 10 Expected volatility 100% - 181% 118% - 346% 168% - 205% Expected dividend yield 0% 0% 0% Risk-free interest rate 3.64% - 4.19% 4.06% - 4.95% 5.00% Stock option activity under the 2003 Equity Participation Plan is as follows: Number ofShares (1) Range ofExercise Price WeightedAverageExercise Price WeightedAverageRemainingContractualTerm AverageIntrinsic Value Balance at December 31, 2005 178,850 $3.00 - $18.00 $7.00 Granted 270,750 $4.40 - $25.00 $7.60 Exercised — — — Expired — — — Cancelled (5,000) — $6.00 Balance at December 31, 2006 444,600 $3.00 - $25.00 $7.30 Granted 696,700 $1.70 - $8.00 $4.65 Exercised — — — Expired — — — Cancelled (27,500) — $6.30 Balance at December 31, 2007 1,113,800 $1.70 - $25.00 $5.66 Granted 928,000 $0.71 - $1.67 $1.52 Exercised (2,500) — $0.75 Expired — — — Cancelled (314,000) — $2.82 Balance at December 31, 2008 1,725,300 $0.71 - $25.00 $3.96 8.01 $— Vested and Exercisable at December 31, 2008 1,290,050 $0.71 - $25.00 $4.29 7.66 $— (1) -- All options are exercisable for a period of ten years.Options exercisable at December 31, 2006 – 242,850 at a weighted average exercise price of $6.90.Options exercisable at December 31, 2007 – 681,132 at a weighted average exercise price of $5.81.Options exercisable at December 31, 2008 – 1,290,050 at a weighted average exercise price of $4.29. F-29Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Weighted Average Stock Options Remaining Stock Options Outstanding Contractual Life Exercisable Exercise Price December 31, 2008 (years) December 31, 2008 $ 0.71 to $ 4.17 832,000 9.1 565,750 $ 4.17 to $ 7.63 802,200 8.1 639,200 $ 7.63 to $11.08 50,000 7.0 44,000 $11.08 to $14.54 3,000 5.2 3,000 $14.54 to $25.00 38,100 6.5 38,100 1,725,300 1,290,050 Options are usually granted at an exercise price at least equal to the fair value of the Common Stock at the grant date and may be granted to employees,Directors, consultants and advisors of the Company. As of December 31, 2008, there was approximately $1,120,000 of total unrecognized compensation costsrelated to unvested stock option awards of which $152,000 of unrecognized compensation expense is related to stock options that vest over a weighted averagelife of .6 years. The balance of unrecognized compensation costs, $968,000, is related to stock options that vest based on the accomplishment of businessmilestones.The summary of options vesting during 2008 is as follows: Options Weighted AverageGrant Date FairValue Non-Vested at December 31, 2007 432,668 $4.91 Issued 928,000 $1.45 Cancelled (314,000) $2.79 Vested (608,918) $2.36 Exercised (2,500) $0.75 Non-Vested at December 31, 2008 435,250 $2.94 The total value of shares vested during the year ended December 31, 2008 was $1,986,103.On June 2, 2006 the Company accelerated the vesting dates of 52,500 stock options granted to certain officers and senior staff of the Company. Theacceleration of vesting dates was not considered a material change in the terms of such options and accordingly the fair value was not adjusted. The Companyalso adopted an Executive Officer Compensation Plan, effective as of June 2, 2006, in connection with a purchase agreement for the sale of472,250 shares of the Company's Common Stock to seventeen accredited investors. Pursuant to letter agreements each officer agreed to be bound by theExecutive Officer Compensation Plan. In addition to the conversion of accrued salary, the letter agreements provided for a reduction by 25% inbase salary for each officer and the granting of options to purchase shares of Common Stock under the Company's 2003 EPP, tobecome exercisable upon the Company achieving certain revenue milestones. In October 2008 these milestones were modified and all such options vested inOctober 2008.In February 2008, the Company granted options to certain of its officers and employees to purchase shares of Common Stock under the Company’s 2003EPP, to become exercisable upon the Company achieving certain business milestones. In October 2008, the milestones relating to an aggregate of 55,000 ofthese options were modified. The modification of such milestones was not considered a material change in the terms of such options and accordingly the fairvalue was not adjusted. Prior to the end of 2008, the milestones relating to 45,000 of the 55,000 options so modified were achieved and the options relatedthereto became vested and exercisable. F-30Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Note 10 – Income TaxesNet deferred tax assets consisted of the following as of December 31: 2008 2007 2006 Deferred tax assets: Net operating loss carryforwards $12,582,000 $9,971,000 $6,276,000 Stock option compensation 2,059,000 1,199,000 243,000 Other equity compensation 649,000 315,000 99,000 Provision for doubtful accounts 18,000 8,000 — Deferred revenue 4,000 1,000 1,000 Deferred legal and other fees 37,000 40,000 91,000 Deferred tax assets 15,349,000 11,534,000 6,710,000 Deferred tax liabilities: Amortization of Goodwill (47,000) (31,000) (15,000)Depreciation and amortization (5,000) (14,000) (2,000)Non-employee equity compensation (611,000) (524,000) (124,000)Deferred tax liability (663,000) (569,000) (141,000)Net deferred tax assets before valuation allowance 14,686,000 10,965,000 6,569,000 Net deferred tax asset valuation allowance (14,686,000) (10,965,000) (6,569,000) $— $— $— The provision for income taxes is different than the amount computed using the applicable statutory federal income tax rate with the difference for each yearsummarized below: 2008 2007 2006 Federal tax benefit at statutory rate (34.0%) (34.0%) (34.0%)State and local tax benefit at statutory rate (9.5%) (9.5%) (9.5%)Change in valuation allowance 43.5% 43.5% 43.5% Provision for income taxes 0.00% 0.00% 0.00% The Tax Reform Act of 1986 enacted a complex set of rules limiting the utilization of net operating loss carryforwards to offset future taxable income followinga corporate ownership change. The Company’s ability to utilize its NOL carryforwards is limited following a change in ownership in excess of fifty percentagepoints during any three-year period.Upon receipt of the proceeds from the last foreign purchasers of the Company’s Common Stock in January 2000, Common Stock ownership changed inexcess of 50% during the three-year period then ended. At December 31, 2008, the Company had net operating loss carryforwards of approximately$31,000,000 applicable to future Federal income taxes, approximately $24,000,000 applicable to New York State income taxes, approximately $2,000,000applicable to California income taxes and approximately $12,500,000 applicable to New York City income taxes. Included in the Federal net operating losscarryforwards is approximately $2,121,000 that has been limited by the ownership change. The tax loss carryforwards expire at various dates through 2028.The Company has recorded a full valuation allowance against its net deferred tax asset because of the uncertainty that the utilization of the net operating lossand deferred revenue and fees will be realized. F-31Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Note 11 – Segment InformationUntil April 30, 2001, the Company operated in two segments; as a reinsuror and as a seller of extended warranty service contracts through the Internet. Thereinsurance segment and the sale of warranty service have been discontinued and the Company’s remaining revenues were derived from the run-off of its saleof extended warranties and service contracts via the Internet. Additionally, the Company established a new business in the banking of adult autologous stemcells sector. To date, the Company’s operations have been conducted in only one geographical segment. Although the Company has realized minimal revenuefrom the banking of adult autologous stem cells, the Company operated in two segments until the "run-off" was completed. As of March 31, 2007 the run offof the sale of extended warranties and service contracts was completed.Note 12 – Related Party TransactionsOn January 20, 2006, Mr. Robert Aholt, Jr. tendered his resignation as Chief Operating Officer of the Company. In connection therewith, on March 31, 2006,the Company and Mr. Aholt entered into a Settlement Agreement and General Release (the “Settlement Agreement”). Pursuant to the Settlement Agreement, theCompany agreed to pay to Mr. Aholt the aggregate sum of $250,000 (less applicable Federal and California state and local withholdings and payrolldeductions), payable, initially over a period of two years in biweekly installments of $4,807.69 commencing on April 7, 2006, except that the first paymentwas in the amount of $9,615.38. In July 2006, this agreement was amended to call for semi-monthly payments of $10,417 for the remaining 21 months. Inthe event the Company breaches its payment obligations under the Settlement Agreement and such breach remains uncured, the full balance owed shall becomedue. The Company and Mr. Aholt each provided certain general releases. Mr. Aholt also agreed to continue to be bound by his obligations not to compete withthe Company and to maintain the confidentiality of Company proprietary information. At December 31, 2008 and 2007, $0 and $24,022 was due,respectively, Mr. Aholt pursuant to the terms of the Settlement Agreement. The payments under this agreement due to Mr. Aholt were completed in March 2008.In October 2007, the Company entered into a three month consulting agreement with Matthew Henninger pursuant to which he agreed to provide services as abusiness consultant in areas requested by the Company, including financial analysis projects and acquisition target analysis. As compensation for theseservices, pursuant to the agreement he was entitled to receive a cash fee of $8,333 payable each month during the term of the agreement as well as a fee in theevent a transaction was effected during the term as a result of the performance of the consultant’s services. In January 2008, the Company and the consultantentered into an agreement whereby the consultant agreed to accept in satisfaction of his final payment under the agreement, 4,902 shares of the Company’sCommon Stock issued under and pursuant to the terms of the Company’s 2003 EPP based on the fair market value of the Common Stock on the date ofapproval by the Compensation Committee of the Company’s Board of Directors. The fair value of these shares was $8,333 and charged to consulting expensein 2008. No other fee was paid. The consultant is currently in an exclusive relationship with the Company’s Chief Executive Officer. In the November 2008 private placement (see Note 9(b), Common Stock above), Fullbright Finance Limited, a corporation organized in the British VirginIslands, the principal shareholders of which are Liu Xiaohao, Senior Vice President of CBH (see description of proposed merger in Note 13, Commitmentsand Contingencies below), Shi Mingshen, Chief Operating Officer of CBH and Ding Weihua, a director of CBH, purchased 400,000 units for an aggregateconsideration of $500,000, each unit comprised of one share of NeoStem Common Stock and one redeemable five-year warrant to purchase one share ofNeoStem Common Stock at a purchase price of $1.75 per share, at a per-unit price of $1.25. In connection with Fullbright's purchase of the units, EET (seedescription of proposed Merger in Note 13, Commitments and Contingencies below), the principal shareholders of which are also the principal shareholders ofFullbright, borrowed $500,000 from RimAsia Capital Partners, L.P. (a principal stockholder of the Company; see also description of proposed Merger in Note13, Commitments and Contingencies below), and the units acquired by Fullbright were pledged to RimAsia as collateral therefor. See “Agreement and Plan ofMerger” in Note 13, below, for information on RimAsia and EET, and their respective affiliates, relating to the proposed Merger. Robin L. Smith, the Company’s Chairman and Chief Executive Officer, and Steven Myers, a member of the Company’s Board of Directors and Audit,Compensation and Nominating Committees, are holders of CBH Common Stock. Accordingly, a special committee of the Company’s Board of Directors(comprised of Mark Weinreb, Richard Berman and Joseph Zuckerman) approved on behalf of the Company the execution of the Merger Agreement and thetransactions contemplated thereby. F-32Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Note 13 – Commitments and ContingenciesOn May 26, 2006, the Company entered into an employment agreement with Dr. Robin L. Smith, pursuant to which Dr. Smith serves as the Chief ExecutiveOfficer of the Company. This agreement was for a period of two years, which term could be renewed for successive one-year terms unless otherwiseterminated by Dr. Smith or the Company. The effective date of Dr. Smith’s employment agreement was June 2, 2006, the date of the initial closing under thesecurities purchase agreement for the June 2006 private placement. Under this agreement, Dr. Smith was entitled to receive a base salary of $180,000 per year,to be increased to $236,000 after the first year anniversary of the effective date of her employment agreement. If the Company raised an aggregate of$5,000,000 through equity or debt financing (with the exception of the financing under the securities purchase agreement), Dr. Smith’s base salary was to beraised to $275,000. Dr. Smith was also eligible for an annual bonus determined by the Board and monthly perquisites that total approximately $2,200 permonth. Pursuant to the employment agreement, Dr. Smith’s advisory agreement with the Company, as supplemented, was terminated, except that (i) thevesting of the warrant to purchase 2,400 shares of Common Stock granted thereunder was accelerated so that the warrant became fully vested as of theeffective date of the employment agreement, (ii) Dr. Smith received $100,000 in cash and 10,000 shares upon the initial closing under the June 2006 privateplacement, (iii) if an aggregate of at least $3,000,000 was raised and/or other debt or equity financings prior to August 15, 2006 (as amended, August 31,2006), Dr. Smith was to receive an additional payment of $50,000, (iv) a final payment of $3,000 relating to services rendered in connection with Dr. Smith’sadvisory agreement, paid at the closing of the June 2006 private placement, and (v) all registration rights provided in the advisory agreement were to continuein effect. As of August 30, 2006, in excess of $3,000,000 had been raised and accordingly, Dr. Smith was entitled to a payment of $50,000. Dr. Smith elected to have$30,000 of this amount distributed to certain employees of the Company, including its Chief Financial Officer and General Counsel, in recognition of theirefforts on behalf of the Company and retained $20,000. Upon the effective date of the Employment Agreement, Dr. Smith was awarded 20,000 shares ofCommon Stock of the Company, under the Company’s 2003 Equity Participation Plan, as amended (the “2003 EPP”) and options to purchase 54,000 sharesof Common Stock under the 2003 EPP, which options expire ten years from the date of grant. On January 26, 2007, in connection with the January 2007 private placement, the Company entered into a letter agreement with Dr. Smith, pursuant to whichDr. Smith’s employment agreement dated as of May 26, 2006 was amended to provide that: (a) the term of her employment would be extended to December31, 2010; (b) upon the first closings in the January 2007 private placement, Dr. Smith’s base salary would be increased to $250,000; (c) her base salarywould be increased by 10% on each one year anniversary of the agreement; (d) no cash bonus would be paid to Dr. Smith for 2007; and (e) cash bonuses andstock awards under the Company’s 2003 EPP would be fixed at the end of 2007 for 2008, in an amount to be determined. Other than as set forth therein, Dr.Smith’s original employment agreement and all amendments thereto remain in full force and effect. As consideration for her agreement to substantially extendher employment term, among other agreements contained in this amendment, on January 18, 2007, Dr. Smith was also granted an option under theCompany’s 2003 EPP to purchase 55,000 shares of the Common Stock at a per share exercise price equal to $5.00 vesting as to (i) 25,000 shares upon thefirst closings in the January 2007 private placement; (ii) 15,000 shares on June 30, 2007; and (iii) 15,000 shares on December 31, 2007. Per Dr. Smith’s January 26, 2007 letter agreement with the Company, upon termination of Dr. Smith’s employment by the Company without cause or by Dr.Smith with good reason, the Company shall pay to Dr. Smith her base salary at the time of termination for the two year period following such termination. Inaddition, per Dr. Smith’s May 26, 2006 employment agreement, upon termination of Dr. Smith’s employment by the Company without cause or by Dr.Smith for good reason, Dr. Smith is entitled to: (i) a pro-rata bonus based on the annual bonus received for the prior year; (ii) medical insurance for a one yearperiod; and (iii) have certain options vest. Upon termination of Dr. Smith’s employment by the Company for cause or by Dr. Smith without good reason, Dr.Smith is entitled to: (i) the payment of all amounts due for services rendered under the agreement up until the termination date; and (ii) have certain optionsvest. Upon termination for death or disability, Dr. Smith (or her estate) is entitled to: (i) the payment of all amounts due for services rendered under theagreement until the termination date; (ii) family medical insurance for the applicable term; and (iii) have certain options vest.Upon a change in control of the Company, per Dr. Smith’s May 26, 2006 employment agreement, Dr. Smith is entitled to: (i) the payment of base salary forone year; (ii) a pro-rata bonus based on the annual bonus received for the prior year; (iii) medical insurance for a one year period; and (iv) have certain optionsvest. Effective as of September 27, 2007, the Company entered into a letter agreement with Dr. Smith, pursuant to which Dr. Smith's employment agreement datedas of May 26, 2006 and amended as of January 26, 2007, was further amended to provide that: (a) Dr. Smith's base salary would be increased to $275,000(the amount to which Dr. Smith would have been entitled under her original employment agreement prior to her agreement on January 26, 2007 to accept areduced salary of $250,000); (b) her base salary would be increased by 10% on each one year anniversary of the agreement; (c) a cash bonus of $187,500 (anamount equal to 75% of her base salary) would be paid October 1, 2007; (d) Dr. Smith's bonus for 2008 is set in the amount of $250,000 (an amount equal to100% of her base salary) to be paid October 1, 2008; (e) the Company will pay membership and annual fees for a club in New York of Dr. Smith's choice forbusiness entertaining and meetings and (f) any severance payments will be paid out over 12 months. Other than as set forth therein, Dr. Smith's originalemployment agreement and all amendments thereto remain in full force and effect. With regard to Dr. Smith’s 2007 bonus she elected to be paid $118,750,distribute $34,000 to other key staff members and to defer payment of the remaining $34,750. In May 2008, Dr. Smith was paid $24,750 of her remaining2007 bonus and the balance was paid to another key staff member. With regard to Dr. Smith’s 2008 bonus, which was earned on October 1, 2008, in an effortto help conserve the Company’s current cash, she has elected to defer receiving payment of the bonus until a future undetermined date. The Companyrecognized this bonus as compensation in 2008 and it is reflected on the balance sheet as an accrued liability. F-33Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.In January 2008, the Company entered into a letter agreement with Dr. Smith pursuant to which Dr. Smith's employment agreement dated as of May 26, 2006and amended as of January 26, 2007 and September 27, 2007 was further amended to provide that, in response to the Company’s efforts to conserve cash,Dr. Smith would be paid $50,000 of her 2008 salary in shares of the Company’s Common Stock (thus reducing the cash component of her base salary for2008 to $225,000), net of shares in payment of applicable withholding taxes valued at the closing price of the Common Stock on the date of issuance.Accordingly, Dr. Smith was issued 16,574 shares of the Company’s Common Stock pursuant to the Company’s 2003 EPP which was based on a price pershare of $1.70, the closing price of the Common Stock on the date of approval by the Compensation Committee of the Board of Directors. This issuance ofCommon Stock resulted in a charge to operations of $28,176.On August 29, 2008, the Company entered into a letter agreement with Dr. Smith, pursuant to which, in response to NeoStem’s efforts to conserve cash, Dr.Smith agreed to accept shares of the Company’s Common Stock in lieu of unpaid accrued salary. Dr. Smith agreed to accept in lieu of $24,437.50 in unpaidsalary accrued during the period July 15, 2008 through August 31, 2008, 33,941 shares of the Company’s Common Stock (thus further reducing the cashcomponent of her base salary for 2008). The number of shares so issued was based on $0.72, the closing price of the Common Stock on the date of approvalby the Compensation Committee of the Board of Directors, for which NeoStem agreed to pay total withholding taxes. All such shares were issued under theCompany’s 2003 EPP. This issuance of stock resulted in a charge to operations of $27,848. In connection therewith, the vesting of 15,000 shares of CommonStock granted to Dr. Smith under the 2003 EPP on September 27, 2007 was accelerated from September 27, 2008 to August 28, 2008. On February 6, 2003, Mr. Mark Weinreb was appointed President and Chief Executive Officer of the Company and the Company entered into anemployment agreement with Mr. Weinreb. On June 2, 2006, Mr. Weinreb resigned as Chief Executive Officer and Chairman of the Board, but will continue asPresident and a director of the Company. Mr. Weinreb’s original employment agreement had an initial term of three years, with automatic annual extensionsunless earlier terminated by the Company or Mr. Weinreb (notice of non-renewal was provided by NeoStem to Mr. Weinreb and therefore the agreement expiredin accordance with its terms in December 2008). Under this agreement, in addition to base salary he was entitled to an annual bonus in the amount of $20,000for the initial year in the event, and concurrently on the date, that the Company received debt and/or equity financing in the aggregate amount of at least$1,000,000 since the beginning of his service, and $20,000 for each subsequent year of the term, without condition. On May 4, 2005, the Board voted to approve an amendment to Mr. Weinreb’s employment agreement, subject to approval of the stockholders which wasobtained on July 20, 2005, pursuant to which among other things Mr. Weinreb’s employment agreement was amended to (a) extend the expiration date thereoffrom February 2006 to December 2008; (b) change Mr. Weinreb’s annual base salary of $217,800 (with an increase of 10% per annum) to an annual basesalary of $250,000 (with no increase per annum); (c) grant Mr. Weinreb 30,000 shares of Common Stock, 10,000 shares of which shall vest on each of thedate of grant and the first and second anniversaries of the date of grant; (d) commencing in August 2006, increase Mr. Weinreb’s annual bonus from $20,000to $25,000; and (e) in 2006, provide for the reimbursement of all premiums in an annual aggregate amount of up to $18,000 payable by Mr. Weinreb for lifeand long term care insurance covering each year during the remainder of the term of his employment. Pursuant to and as a condition of the closing of the June 2006 private placement, Mr. Weinreb entered into a letter agreement with the Company in which heagreed to convert $121,532 of accrued salary (after giving effect to employment taxes which were paid by the Company) into 16,573 shares of CommonStock at a per share price equal to $4.40 (the price of the shares being sold in the June 2006 private placement). Mr. Weinreb further agreed to a reduction inhis base salary by 25% until the achievement by the Company of certain milestones. In consideration for such compensation concessions: (i) the remainingvesting of the option shares which was scheduled to vest as to 10,000 shares each on July 20, 2006 and July 20, 2007, was accelerated such that it becamefully vested as of June 2, 2006, the date of the closing of the June 2006 private placement; and (ii) a restricted stock grant of 20,000 shares of Common Stockwhich were also scheduled to vest as to 10,000 shares on each of July 20, 2006 and July 20, 2007, was similarly accelerated. F-34Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. On January 26, 2007, the Company entered into a letter agreement with Mr. Weinreb pursuant to which Mr. Weinreb’s employment agreement dated as ofAugust 12, 2005 was supplemented with new terms which provide that: (a) upon the first closings in the January 2007 private placement, Mr. Weinreb’s basesalary would be paid at the annual rate of $200,000 (an annual rate which is 20% lower than the amount to which he was otherwise entitled under hisemployment agreement); (b) he would be entitled to quarterly bonuses of $5,000 commencing March 31, 2007; (c) he would be entitled to bonuses rangingfrom $3,000 to $5,000 upon the Company achieving certain business milestones; and (d) any other bonuses would only be paid upon approval by theCompensation Committee of the Board of Directors. In consideration of his agreement to a reduction in base salary, and in connection with his entering intothis agreement, an option to purchase 10,000 shares of Common Stock at $6.00 per share, previously granted to Mr. Weinreb on December 5, 2006 and tied tothe opening of certain collection centers, vested upon the execution of the agreement. Other than as set forth therein, Mr. Weinreb’s original employmentagreement and all amendments thereto remained in full force and effect. This supplemental agreement was to terminate upon the Company achieving certainrevenue, financing or adult stem cell collection milestones, or at the discretion of the Compensation Committee of the Board of Directors. This supplementalagreement terminated in August 2007, by its terms. Pursuant to the amendments to Mr. Weinreb’s employment agreement in August 2005, in the event of termination of Mr. Weinreb’s employment by theCompany without cause (except for certain instances of disability), Mr. Weinreb was entitled to receive a lump sum payment equal to his then base salary andautomobile allowance for a period of one year, and to be reimbursed for disability insurance for Mr. Weinreb and for medical and dental insurance for Mr.Weinreb and his family for the remainder of the term (through December 31, 2008). Per Mr. Weinreb’s January 26, 2007 letter agreement with the Company,in the event of termination of his employment, severance will be paid in equal installments over a 12 month period in accordance with the payroll policies andpractices of the Company. The January 26, 2007 letter agreement was to be in effect until the Company achieved certain adult stem cell collection, revenue orfinancing milestones, or until the Compensation Committee of the Board of Directors determined to terminate the agreement. This supplemental agreementterminated in August 2007, by its terms. Mr. Weinreb’s original employment agreement provides that in the event of certain instances of disability, Mr.Weinreb is entitled to receive his base salary for three months followed by half his base salary for another three months.Effective as of September 28, 2007, the Company entered into a letter agreement with Mr. Weinreb, pursuant to which Mr. Weinreb's employment agreementdated as of February 6, 2005 and amended as of August 12, 2005 and June 1, 2006 (together, the "Agreement") (such Agreement being supplemented as ofJanuary 26, 2007, the effectiveness of which supplement has expired by its terms), was further amended to provide that: (a) Mr. Weinreb's base salary wouldbe increased from $200,000 to $210,000; (b) the sole bonus to which he will be entitled shall be a quarterly bonus of $7,500 payable at the end of eachquarterly period during the term commencing as of September 30, 2007; (c) in the event of termination of employment, any severance to which Mr. Weinreb isentitled under the Agreement shall equal the lesser of one year of his base salary or his base salary payable for the remainder of the term, in each case paid outover a 12 month period in accordance with the payroll policies and practices of the Company; and (d) any unused vacation to which Mr. Weinreb is entitledunder the Agreement in any calendar year shall be forfeited without compensation. Other than as set forth therein, Mr. Weinreb's Agreement remained in fullforce and effect.On April 20, 2005, the Company entered into a letter agreement with Catherine M. Vaczy pursuant to which Ms. Vaczy served as the Company’s VicePresident and General Counsel. The term of this original agreement was three years. In consideration for Ms. Vaczy’s services under the letter agreement,Ms. Vaczy was entitled to receive an annual salary of $155,000 during the first year of the term, a minimum annual salary of $170,500 during the secondyear of the term, and a minimum annual salary of $187,550 during the third year of the term. On the date of the letter agreement, Ms. Vaczy was granted anoption to purchase 1,500 shares of Common Stock pursuant to the Company’s 2003 EPP, with an exercise price equal to $10.00 per share. The option was tovest and become exercisable as to 500 shares on each of the first, second and third year anniversaries of the date of the agreement and remain exercisable as toany vested portion thereof in accordance with the terms of the Company’s 2003 EPP and the Company’s Incentive Stock Option Agreement. Pursuant to andas a condition of the closing of the June 2006 private placement, Ms. Vaczy entered into a letter agreement with the Company in which she agreed to convert$44,711 in accrued salary (after giving effect to employment taxes which were paid by the Company) into 6,097 shares of Common Stock at a per share priceequal to $4.40 (the price of the shares being sold in the June 2006 private placement). Ms. Vaczy further agreed to a reduction in her base salary by 25% untilthe achievement by the Company of certain milestones. In consideration for such compensation concessions, the vesting of the option to purchase 8,500shares of Common Stock was accelerated such that it became fully vested as of June 2, 2006, the date of the closing of the June 2006 private placement. On January 26, 2007, the Company entered into another letter agreement with Ms. Vaczy pursuant to which Ms. Vaczy continues to serve as the Company’sVice President and General Counsel. This agreement supersedes Ms. Vaczy’s employment agreement dated as of April 20, 2005 and all amendmentsthereto. Subject to the terms and conditions of the letter agreement, the term of Ms. Vaczy’s employment in such capacity will continue through December 31,2008. In consideration for her services under the letter agreement, Ms. Vaczy will be entitled to receive a minimum annual salary of $150,000 during 2007(such amount being 20% less than the annual salary to which Ms. Vaczy would have been entitled commencing April 20, 2007 pursuant to the terms of heroriginal employment agreement) and a minimum annual salary of $172,500 during 2008. In consideration for such salary concessions and agreement toextension of her employment term, Ms. Vaczy is also entitled to receive a cash bonus upon the occurrence of certain milestones and shall also be eligible foradditional cash bonuses in certain circumstances, in each case as may be approved by the Compensation Committee of the Board of Directors. F-35Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Ms. Vaczy is also entitled to payment of certain perquisites and/or reimbursement of certain expenses incurred by her in connection with the performance ofher duties and obligations under the letter agreement, and to participate in any incentive and employee benefit plans or programs which may be offered by theCompany and in all other plans in which the Company executives participate.Pursuant to Ms. Vaczy’s amended employment agreement dated January 26, 2007, in the event Ms. Vaczy’s employment is terminated prior to the end of theterm (December 31, 2008), for any reason, earned but unpaid cash compensation and unreimbursed expenses due as of the date of such termination will bepayable in full. In addition, in the event Ms. Vaczy’s employment is terminated prior to the end of the term for any reason other than by the Company withcause or Ms. Vaczy without good reason, Ms. Vaczy or her executor of her last will or the duly authorized administrator of her estate, as applicable, will beentitled to receive severance payments equal to $187,500 in the event the employment termination date is during 2007 and $215,700 in the event theemployment termination date is during 2008, paid in accordance with the Company’s standard payroll practices for executives. In no event will suchpayments exceed the remaining salary payments in the term. In the event her employment is terminated prior to the end of the term by the Company withoutcause or by Ms. Vaczy for good reason, all options granted by the Company will immediately vest and become exercisable in accordance with their terms.In January 2008, the Company entered into a letter agreement with Ms. Vaczy pursuant to which Ms. Vaczy’s employment agreement dated as of January 26,2007 was amended to provide that, in response to the Company’s efforts to conserve cash, Ms. Vaczy would be paid $11,250 of her 2008 salary in shares ofthe Company’s Common Stock (thus reducing the cash component of her salary for 2008 to $161,250). Accordingly, Ms. Vaczy was issued 3,729 shares ofthe Company’s Common Stock pursuant to the Company’s 2003 EPP which was based on a price per share of $1.70, the closing price of the Common Stockon the date of approval by the Compensation Committee of the Board of Directors. This issuance of Common Stock resulted in a charge to operations of$6,339. At Dr. Smith’s election, Ms. Vaczy received a portion of Dr. Smith’s bonus that was accrued and earned in 2007.On August 29, 2008, the Company entered into a letter agreement with Ms. Vaczy, pursuant to which, in response to the Company’s efforts to conserve cash,Ms. Vaczy agreed to accept shares of the Company’s Common Stock in lieu of unpaid accrued salary. Ms. Vaczy agreed to accept in lieu of $10,578.50 inunpaid salary accrued during the period July 15, 2008 through August 31, 2008, 14,692 shares of the Company’s Common Stock (thus further reducing thecash component of her base salary for 2008). The number of shares so issued was based on $0.72, the closing price of the Common Stock on the date ofapproval by the Compensation Committee of the Board of Directors, for which NeoStem agreed to pay total withholding taxes. All such shares were issuedunder the Company’s 2003 EPP. This issuance of stock resulted in a charge to operations of $12,047. In connection therewith, the vesting of 22,500 shares ofthe Company’s Common Stock granted to Ms. Vaczy under the 2003 EPP on September 27, 2007 was accelerated from September 27, 2008 to August 28,2008.In connection with the Company’s acquisition of the assets of NS California on January 19, 2006, the Company entered into an employment agreement withLarry A. May. Mr. May is the former Chief Executive Officer of NS California. Pursuant to Mr. May’s employment agreement, he is to serve as an officer ofthe Company reporting to the CEO for a term of three years, subject to earlier termination as provided in the agreement. In return, Mr. May was to be paid anannual salary of $165,000, payable in accordance with the Company’s standard payroll practices, and was entitled to participate in the Company’s benefitplans and perquisites generally available to other executives. Mr. May was granted, on his commencement date, an employee stock option under theCompany’s 2003 EPP to purchase 1,500 shares of the Company’s Common Stock at a per share purchase price equal to $5.00, the closing price of theCommon Stock on the commencement date, which was scheduled to vest as to 500 shares of Common Stock on the first, second and third anniversaries ofthe commencement date. Pursuant to and as a condition of the closing of the June 2006 private placement, Mr. May entered into a letter agreement with theCompany in which he agreed to convert $12,692 in accrued salary (after giving effect to employment taxes which were paid by the Company) into 1,731shares of Common Stock at a per share price equal to $4.40 (the price of the shares being sold in the June 2006 private placement). Mr. May further agreed toa reduction in his base salary by 25% until the achievement by the Company of certain milestones. In consideration for such compensation concessions, thevesting of the option to purchase 1,500 shares of Common Stock was accelerated such that it became fully vested as of June 2, 2006, the date of the closing ofthe June 2006 private placement. F-36Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. On January 26, 2007, in connection with the January 2007 private placement, the Company entered into a letter agreement with Mr. May, pursuant to whichMr. May’s employment agreement dated as of January 19, 2006 was supplemented with new terms to provide that: (a) upon the first closings in the January2007 private placement, Mr. May’s base salary would be paid at the annual rate of $132,000 (an annual rate which is 20% lower than the amount to which hewas otherwise entitled under his original employment agreement); and (b) any bonus would only be paid upon approval by the Compensation Committee ofthe Board of Directors. Other than as set forth therein, Mr. May’s original employment agreement and all amendments thereto remained in full force and effect.This supplemental agreement was to terminate upon the Company achieving certain revenue, financing or adult stem cell collection milestones, at thediscretion of the Compensation Committee of the Board of Directors or at such time as Mr. May was no longer the Company’s Chief Financial Officer. Thissupplemental agreement terminated in August 2007, by its terms.Under Mr. May’s original employment agreement, upon termination of Mr. May’s employment by the Company for any reason except a termination for cause,Mr. May is entitled to receive severance payments equal to one year’s salary, paid according to the same timing of salary as he is then receiving. No severancepayments shall be made unless and until Mr. May executes and delivers to the Company a release of all claims against the Company. No other payments areto be made, or benefits provided, except as otherwise required by law.On August 29, 2008, the Company entered into a letter agreement with Mr. May, pursuant to which, in response to the Company’s efforts to conserve cash,Mr. May agreed to accept shares of the Company’s Common Stock in lieu of unpaid accrued salary. Mr. May agreed to accept in lieu of $10,687.50 inunpaid salary accrued during the period July 15, 2008 through August 31, 2008, 14,844 shares of the Company's Common Stock. The number of shares soissued was based on $0.72, the closing price of the Common Stock on the date of approval by the Compensation Committee of the Board of Directors, forwhich the Company agreed to pay total withholding taxes. All such shares were issued under the Company’s 2003 EPP. This issuance of stock resulted in acharge to operations of $12,172. In connection therewith, the vesting of 5,000 shares of the Company’s Common Stock granted to Mr. May under the 2003EPP on September 27, 2007 was accelerated from September 27, 2008 to August 28, 2008.On February 21, 2003 the Company began leasing office space in Melville, New York at an original annual rental of $18,000. The lease was renewed throughMarch 2007 with an annual rental of approximately $22,800. This lease was terminated effective October 1, 2006 which resulted in the loss of the securitydeposit of $3,000 tendered when the lease was originally signed. Rent expense for this office approximated $20,400 for the year ended December 31, 2006.Effective as of July 1, 2006, the Company entered into an agreement for the use of space at 420 Lexington Avenue, Suite 450, New York, New York. Thisspace was subleased from an affiliate of Duncan Capital Group LLC (a former financial advisor to and an investor in the Company) and DCI Master LDC(the lead investor in the Company’s June 2006 private placement). Pursuant to the terms of the Agreement, the Company was obligated to pay $7,500monthly for the space, including the use of various office services and utilities. The agreement is on a month to month basis, subject to a thirty day priorwritten notice requirement to terminate. The space serves as the Company’s principal executive offices. On October 27, 2006, the Company amended thisagreement to increase the utilized space for an additional payment of $2,000 per month. In May 2007, the Board of Directors approved an amendment to thisagreement whereby, in exchange for a further increase in utilized space, the Company would pay on a monthly basis (i) $10,000 in cash and (ii) shares of theCompany’s restricted Common Stock with a value of $5,000 based on the fair market value of the Common Stock on the date of issuance. Commencing inAugust 2007, the parties agreed this monthly fee of $15,000 would be paid in cash on a month to month basis. In February 2008, the Company was advisedthat a portion of this sublet space was no longer available. The Company agreed to utilize the smaller space for a monthly fee of $9,000 beginning in March2008, as it was expected that many of our employees would be spending a majority of their time in Long Island, New York, helping to launch theProHealthcare collection center. On September 24, 2008, the Company entered into a license agreement with a provider of executive office space (the“Licensor”) to use office space at 420 Lexington Avenue, Suite 300, New York, NY 10170 (the “New Office Lease”). The New Office Lease had an initialterm from October 1, 2008 through September 30, 2009 at a monthly cost of $10,000, automatically renewing for successive one year terms unless 60 days’prior written notice was given by either party. Monthly charges upon renewal were to be determined by Licensor. Beginning February 1, 2009, the Companyhad the right to terminate the New Office Lease provided, among other things, that 60 days’ prior written notice was given. Upon entering into the New OfficeLease for office space at Suite 300, the Company further reduced the amount of office space it was utilizing at Suite 450 in the same building with acorresponding reduction in the monthly fee to $3,500 which was paid through December 31, 2008. NeoStem believed the combined office space at Suite 300and Suite 450 at 420 Lexington Avenue, New York, NY, would be sufficient for its near term needs; however, sufficient space was again becoming availableat Suite 450 and therefore 60 days’ prior written notice was given to Licensor in December 2008 that the Company would be terminating the lease at Suite 300effective February 1, 2009. The Company anticipates entering into a lease directly with the landlord of Suite 450 and in the interim, has been paying a fee of$2,500 a month thereto since January 2009. The Company believes this space should be sufficient for its needs for the foreseeable future. In January 2005,NS California began leasing space at Good Samaritan Hospital in Los Angeles, California at an annual rental of approximately $26,000 for use as its stemcell processing and storage facility. The lease expired on December 31, 2005, but the Company continues to occupy the space on a month-to-monthbasis. This space was sufficient for the Company’s past needs but the Company plans to close this facility by the end of the second quarter of 2009 andtransfer its processing and storage operations to state of the art facilities operated by leaders in cell processing. It intends to utilize New England CryogenicCenter, Inc. (“NECC”), with whom it entered into a Master Services agreement and a first statement of work effective as of August 2007 to provide additionalprocessing and cryogenic storage to the Company at its FDA registered and licensed facility in Newton, Massachusetts (the “NECC Facility”), to process andstore for certain research purposes, and to utilize Progenitor Cell Therapy LLC, with whom the Company entered into a Cell Processing and Storage CustomerAgreement in January 2009, to process and store for commercial purposes at the cGMP level at its California and New Jersey facilities. In addition, pursuantto NeoStem’s second statement of work with NECC entered into in October 2008, NeoStem is currently paying $5,000 per month for the right to use sharedlaboratory space and certain administrative space at the NECC Facility. NS California also leased office space in Agoura Hills, California on a month-to-month basis from Symbion Research International at a monthly rental of $1,687. Effective March 31, 2008 we cancelled our space agreement with SymbionResearch International. We currently do not anticipate a continuing need for office space in California. Rent for these facilities for the twelve months endedDecember 31, 2008, 2007 and 2006, was approximately $202,000, $215,000 and $79,000, respectively. F-37Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. In November 2007, the Company entered into an acquisition agreement with UTEK Corporation ("UTEK") and Stem Cell Technologies, Inc., a wholly-owned subsidiary of UTEK ("SCTI"), pursuant to which the Company acquired all the issued and outstanding common stock of SCTI in a stock-for-stockexchange. SCTI contains an exclusive, worldwide license to a technology developed by researchers at the University of Louisville to identify and isolate rarestem cells from adult human bone marrow, called VSELs (very small embryonic like) stem cells. Concurrent with the SCTI acquisition, NeoStem entered intoa sponsored research agreement (“SRA”) with the University of Louisville under which NeoStem will support further research in the laboratory of MariuszRatajczak, M.D., Ph.D. a co-inventor of the VSEL technology and head of the Stem Cell Biology Program at the James Brown Cancer Center at the Universityof Louisville. The SRA calls for total payments of $375,000 over a two and one-half year period, as follows: (i) $100,000 (for which there was originally a$50,000 credit) upon receipt of all approvals and stem cell specimens on which to perform the research (the “First Payment Date”); (ii) $100,000 on the firstyearly anniversary of the First Payment Date; (iii) $75,000 on the second yearly anniversary of the First Payment Date; and (iv) $25,000 upon theachievement of each of four specified milestones. It is anticipated this research will commence in April 2009. In October 2008, the SRA was amended toprovide for certain additional research to be conducted as work preliminary to the first research aim under the SRA (“Pre-Aim 1”), for which approximatelyone-half of the $50,000 credit was utilized to pay the fee. This Pre-Aim 1 was completed in November 2008. The parties are in discussions to amend the SRAto accelerate the research based on the research results of Pre-Aim 1 having been obtained. Under the License Agreement, SCTI agreed to engage in a diligent program to develop the VSEL technology. Certain license fees and royalties are to be paid toUniversity of Louisville Research Foundation (“ULRF”) from SCTI, and SCTI is responsible for all payments for patent filings and related applications.Portions of the license may be converted to a non-exclusive license if SCTI does not diligently develop the VSEL Technology or terminated entirely if SCTIchooses to not pay for the filing and maintenance of any patents thereunder. The License Agreement, which has an initial term of 20 years, calls for thefollowing specific payments: (i) reimbursement of $29,000 for all expenses related to patent filing and prosecution incurred before the effective date (“EffectiveDate”) of the license agreement (all of which has been paid); (ii) a non-refundable prepayment of $20,000 creditable against the first $20,000 of patent expensesincurred after the Effective Date, due upon commencement of research under the SRA, which will occur upon IRB approval and receipt of samples; (iii) a non-refundable license issue fee of $46,000, due upon commencement of research under the SRA; (iv) a non-refundable annual license maintenance fee of $10,000upon issuance of the licensed patent in the United States; (v) a specified royalty percentage on net sales; (vi) specified milestone payments and (vii) specifiedpayments in the event of sublicensing. Pursuant to a February 2009 amendment to the License Agreement the payments under (ii) and (iii) became due andwere paid in March 2009. The License Agreement also contains certain provisions relating to "stacking," permitting SCTI to pay royalties to ULRF at areduced rate in the event it is required to also pay royalties to third parties exceeding a specified threshold for other technology in furtherance of the exercise ofits patent rights or the manufacture of products using the VSEL technology. Although the funds obtained through the acquisition of SCTI funded certain earlyobligations under the Company’s agreements relating to the VSEL technology, substantial additional funds will be needed and additional research anddevelopment capacity will be required to meet its development obligations under the License Agreement and develop the VSEL technology. The Company hasapplied for Small Business Innovation Research (SBIR) grants and may also seek to obtain funds through applications for other State and Federal grants,direct investments, strategic arrangements as well as other funding sources to help offset all or a portion of these costs. It is seeking to develop increasedinternal research capability and sufficient laboratory facilities or establish relationships to provide such research capability and facilities. In this regard, inJuly 2008 the Company hired a Director of Stem Cell Research and Laboratory Operations and in October 2008 it entered into the second statement of workwith NECC pursuant to which, among other things, NeoStem may use shared laboratory space and equipment at the NECC facility to perform Companyindependent research as well as isolation and processing of VSELs. In consideration for the Acquisition, the Company issued to UTEK 400,000 unregisteredshares of its Common Stock for all the issued and outstanding common stock of SCTI. The value of the transaction is $940,000 and $669,000 has beencapitalized as an intangible asset. In 2008, the Company paid $50,000 pursuant to these agreements. F-38Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Agreement and Plan of Merger On November 2, 2008, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), with China Biopharmaceuticals Holdings, Inc.,a Delaware corporation ("CBH"), China Biopharmaceuticals Corp., a British Virgin Islands corporation and wholly-owned subsidiary of CBH ("CBC"), andCBH Acquisition LLC, a Delaware limited liability company and wholly-owned subsidiary of NeoStem ("Merger Sub"). The Merger Agreement contemplatesthe merger of CBH with and into Merger Sub, with Merger Sub as the surviving entity (the “Merger”); provided, that prior to the consummation of the Merger,CBH will spin off all of its shares of capital stock of CBC to CBH’s stockholders in a liquidating distribution so that the only material assets of CBHfollowing such spin-off (the "Spin-off") will be CBH's 51% ownership interest in Suzhou Erye Pharmaceuticals Company Ltd. (“Erye”), a Sino-foreign jointventure with limited liability organized under the laws of the People’s Republic of China (the "PRC"), plus net cash which shall not be less than $550,000.Erye specializes in research and development, production and sales of pharmaceutical products, as well as chemicals used in pharmaceutical products. Erye,which has been in business for more than 50 years, currently manufactures over 100 drugs on seven Good Manufacturing Practices (GMP) lines, includingsmall molecule drugs.Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, all of the shares of common stock, par value $.01 per share, of CBH("CBH Common Stock"), issued and outstanding immediately prior to the effective time of the Merger (the "Effective Time") will be converted into the right toreceive, in the aggregate, 7,500,000 shares of NeoStem Common Stock (of which 150,000 shares will be held in escrow pursuant to the terms of an escrowagreement to be entered into between CBH and NeoStem). Subject to the cancellation of outstanding warrants to purchase shares of CBH Common Stock heldby RimAsia Capital Partners, L.P. ("RimAsia"), a principal stockholder of NeoStem and the sole holder of shares of Series B Convertible Preferred Stock,par value $0.01 per share, of CBH (the "CBH Series B Preferred Stock"), all of the shares of CBH Series B Preferred Stock issued and outstandingimmediately prior to the Effective Time will be converted into (i) 5,383,009 shares of NeoStem Common Stock, (ii) 6,977,512 shares of Series CConvertible Preferred Stock, without par value, of NeoStem, each with a liquidation preference of $1.125 per share and convertible into shares of NeoStemCommon Stock at a conversion price of $.90 per share, and (iii) warrants to purchase 2,400,000 shares of NeoStem Common Stock at an exercise price of$0.80 per share.At the Effective Time, in exchange for cancellation of all of the outstanding shares of Series A Convertible Preferred Stock, par value $.01 per share, of CBH(the "CBH Series A Preferred Stock") held by Stephen Globus, a director of CBH, and/or related persons, NeoStem will issue to Mr. Globus and/or relatedpersons an aggregate of 50,000 shares of NeoStem Common Stock. NeoStem also will issue 60,000 shares of NeoStem Common Stock to Mr. Globus and40,000 shares of NeoStem Common Stock to Chris Peng Mao, the Chief Executive Officer of CBH, in exchange for the cancellation and the satisfaction in fullof indebtedness in the aggregate principal amount of $90,000, plus any and all accrued but unpaid interest thereon, and other obligations of CBH to Globusand Mao. NeoStem will bear 50% of up to $450,000 of CBH's expenses post-merger, and satisfaction of the liabilities of Messrs. Globus and Mao will counttoward that obligation. NeoStem also will issue 200,000 shares to CBC to be held in escrow, payable if NeoStem successfully consummates its previouslyannounced acquisition of control of Shandong New Medicine Research Institute of Integrated Traditional and Western Medicine Limited Liability Companyand there are no further liabilities above $450,000.Also at the Effective Time, subject to acceptance by the holders of all of the outstanding warrants to purchase shares of CBH Common Stock (other thanwarrants held by RimAsia), such warrants shall be cancelled and the holders thereof shall receive warrants to purchase up to an aggregate of up to 2,012,097shares of NeoStem Common Stock at an exercise price of $2.50 per share. F-39Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Upon consummation of the transactions contemplated by the Merger, NeoStem will own 51% of the ownership interests in Erye, and Suzhou Erye Economyand Trading Co. Ltd., a limited liability company organized under the laws of the PRC ("EET"), will own the remaining 49% ownership interest. Inconnection with the execution of the Merger Agreement, NeoStem, Merger Sub and EET have negotiated a revised joint venture agreement (the "Joint VentureAgreement"), which, subject to finalization and approval by the requisite PRC governmental authorities, will become effective and will govern the rights andobligations with respect to their respective ownership interests in Erye. Pursuant to the terms and conditions of the Joint Venture Agreement, dividenddistributions to EET and NeoStem will be made in proportion to their respective ownership interests in Erye; provided, however, that for the three-year periodcommencing on the first day of the first fiscal quarter after the Joint Venture Agreement becomes effective, (i) 49% of undistributed profits (after tax) will bedistributed to EET and lent back to Erye by EET for use by Erye in connection with the construction of a new plant for Erye; (ii) 45% of the net profit (aftertax) will be provided to Erye as part of the new plant construction fund, which will be characterized as paid-in capital for NeoStem's 51% interest in Erye;and (iii) 6% of the net profit will be distributed to NeoStem directly for NeoStem’s operating expenses. In the event of the sale of all of the assets of Erye orliquidation of Erye, NeoStem will be entitled to receive the return of such additional paid-in capital before distribution of Eyre’s assets is made based upon theownership percentages of NeoStem and EET, and upon an initial public offering of Erye which raises at least 50,000,000 RMB (or approximately U.S.$7,100,000), NeoStem will be entitled to receive the return of such additional paid-in capital.Pursuant to the Merger Agreement, NeoStem has agreed to use its reasonable best efforts to cause the members of NeoStem's Board of Directors to consist ofthe following five members promptly following the Effective Time: Robin L. Smith (Chairman), current Chairman of the Board and Chief Executive Officerof NeoStem; Madam Zhang Jian, the Chairman and Chief Financial Officer of CBH, the General Manager of Erye and a 10% holder of EET, and RichardBerman, Steven S. Myers and Joseph Zuckerman, each a director of NeoStem (the latter three to be independent directors, as defined under the NYSE Amexlisting standards). NeoStem’s intention thereafter will be to cause the number of members constituting the Board of Directors of NeoStem to be increased fromfive to seven in accordance with NeoStem’s bylaws, as amended and to fill the two vacancies created thereby with one additional independent director (asdefined under the NYSE Amex listing standards) to be selected by a nominating committee of the Board of Directors of NeoStem and with Eric Wei, themanaging partner of RimAsia.In connection with the Merger, NeoStem intends to file with the Securities and Exchange Commission (the “SEC”) a combined registration statement andproxy statement on Form S-4 (including any amendments, supplements and exhibits thereto, the “Proxy Statement/Registration Statement”) with respect to,among other things, the shares of NeoStem Common Stock to be issued in the Merger (the "Issuance") and a proposed amendment to NeoStem’s certificate ofincorporation to effect an increase in NeoStem’s authorized shares of preferred stock, without par value, that may be necessary to consummate thetransactions contemplated by the Merger Agreement (the “Charter Amendment"). The Merger has been approved by the NeoStem Board of Directors. TheIssuance and Charter Amendment contemplated by the Merger Agreement are subject to approval by the stockholders of NeoStem and the Merger, the Spin-Offand the other transactions contemplated by the Merger Agreement are subject to approval by the stockholders of CBH.In connection with execution of the Merger Agreement, each of the officers and directors of CBH, RimAsia, Erye and EET have entered into a lock-up andvoting agreement, pursuant to which they have agreed to vote their shares of CBH Common Stock in favor of the Merger and to the other transactionscontemplated by the Merger Agreement and are prohibited from selling their CBH Common Stock and/or NeoStem Common Stock from November 2, 2008through the expiration of the six-month period immediately following the consummation of the transactions contemplated by the Merger Agreement (the "Lock-Up Period"). Similarly, the officers and directors of NeoStem have entered into a lock-up and voting agreement, pursuant to which they have agreed to votetheir shares of NeoStem Common Stock in favor of the Issuance and are prohibited from selling their NeoStem Common Stock during the Lock-Up Period.The transactions contemplated by the Merger Agreement are subject to the authorization for listing on the NYSE Amex (or any other stock exchange on whichshares of NeoStem Common Stock are listed) of the shares to be issued in connection with the Merger, shareholder approval, approval of NeoStem'sacquisition of 51% ownership interest in Erye by relevant PRC governmental authorities, receipt of a fairness opinion and other customary closing conditionsset forth in the Merger Agreement. The Merger currently is expected to be consummated in the second quarter of 2009.Share ExchangeOn November 2, 2008, the Company entered into a Share Exchange Agreement (the “Share Exchange Agreement”), with China StemCell Medical HoldingLimited, a Hong Kong company (the "HK Entity"), Shandong New Medicine Research Institute of Integrated Traditional and Western Medicine LimitedLiability Company, a China limited liability company ("Shandong"), Beijing HuaMeiTai Bio-technology Limited Liability Company (“WFOE”) and ZhaoShuwei, the sole shareholder of the HK Entity (“HK Shareholder”), pursuant to which NeoStem agreed to acquire from the HK Entity all of the outstandinginterests in the HK Entity, and through a series of contractual arrangements described below, obtain certain benefits from Shandong. Shandong is engaged inthe business (the "Shandong Business") of research, development popularization and transference of regenerative medicine technology (except for those itemsfor which it does not have special approval) in the PRC. F-40Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The HK Shareholder owns 100% of the ownership interests in the HK Entity, and the HK Entity owns 100% of ownership interests in the WFOE. The WFOEseeks to obtain benefits from Shandong through a series of contractual arrangements memorialized through several documents known as variable interestentity documents (collectively, the “VIE Documents”). The relevant VIE Documents, to which the WFOE, Shandong and the founder of Shandong, Dr. WangTaihua, are parties, include a power of attorney, an exclusive technical and consulting service agreement, a loan agreement, a share pledge agreement and anexclusive option agreement.Pursuant to the terms and subject to the conditions set forth in the Share Exchange Agreement, NeoStem will acquire all of the outstanding shares of capitalstock of the HK Entity (the "HK Shares"), in exchange (the "Share Exchange") for up to 5,000,000 shares (the “Exchange Shares”) of NeoStem CommonStock. The Exchange Shares will be issuable at the closing of the transactions contemplated by the Share Exchange Agreement (the "Closing") as follows: (i)4,000,000 shares of NeoStem Common Stock will be issued to the HK Shareholder and (ii) 1,000,000 shares of NeoStem Common Stock will be issued to theHK Shareholder in escrow (the "Escrow Shares"), the certificates for which will be held pursuant to the terms of an escrow agreement to be entered intobetween NeoStem and the HK Shareholder. Subject to the terms and conditions of the escrow agreement, 500,000 Escrow Shares will be released from escrowwithin 30 days after the first 50,000,000 RMB (or approximately U.S. $7,100,000) sales revenue are achieved in the PRC by Shandong (the "RevenueMilestone") and 500,000 Escrow Shares will be released within 30 days after the last of three collection and storage banks in three provinces in the PRC (i.e.,one such bank in each such province) is established by Shandong (the "Storage Bank Milestone"). 500,000 Escrow Shares will revert to NeoStem if theRevenue Milestone is not met on or before December 31, 2009 and 500,000 Escrow Shares will revert to NeoStem if the Storage Bank Milestone is not met onor before the date of the second anniversary of the Closing.In connection with the Share Exchange, NeoStem intends to file with the SEC the combined Proxy Statement/Registration Statement referred to underAgreement and Plan of Merger (above), to, among other things, seek stockholder approval of the Share Exchange. The Share Exchange has been approved bythe NeoStem Board of Directors, subject to approval by the stockholders of NeoStem.The transactions contemplated by the Share Exchange Agreement are subject to the authorization for listing on the NYSE Amex (or any other stock exchange onwhich shares of NeoStem Common Stock are listed or quoted) of the Exchange Shares, stockholder approval, regulatory approval and other customaryclosing conditions set forth in the Share Exchange Agreement. The Share Exchange currently is expected to close in the second quarter of 2009. Note 14 - Subsequent EventsIn January 2009, the Company entered into a Cell Processing and Storage Customer Agreement (the “PCT Agreement”) with Progenitor Cell Therapy LLC(“PCT”). Under the PCT Agreement, PCT will provide to the Company autologous adult stem cell processing and storage services utilizing current GoodManufacturing Practices (“cGMP”) standards. Such services will be provided at both PCT’s California and New Jersey facilities. The Company agrees touse PCT for processing and storage services for commercial purposes on an exclusive basis commencing with such time as PCT completes certainpreliminary services and is ready and able to start the processing and storage services as required by the agreement. PCT agrees to provide to us stem cellprocessing and long term storage services for our business on an exclusive basis. Prior to commencing these services, PCT agrees to provide certainpreliminary services consisting of technology transfer and protocol review and revision to ensure that the processing and storage services are cGMPcompliant. The agreement sets forth agreed upon fees for the delivery of the services as well as providing for a one-time payment of $35,000 for thepreliminary services of which $20,000 has been paid to date. The agreement is for a four year term, subject to earlier termination on 365 days notice as setforth in the agreement. In March 2009, the Company and PCT entered into a second agreement to expand PCT’s services to include its developing a plan to setup a stem cell processing and manufacturing operation in Beijing, China that the Company would pursue in partnership with an off-shore entity. This planwould support research and cell therapy development and manufacturing operations. The plan will include a conceptual architectural design, cost estimatesfor construction, facility validation to meet cGMP standards, equipment requirements and estimated costs of equipment procurement, and other relatedmatters. The plan is required to be completed by April 17, 2009, subject to PCT having received the technical information reasonably necessary to completethe plan. PCT’s fees for this work will be $100,000 (of which $50,000 was paid in March 2009 upon the effectiveness of the agreement) plus expenses. F-41Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.In January 2009, the Company entered into an agreement with a physician pursuant to which this physician was retained as a consultant in anti-aging, toprovide expertise relating to regenerative procedures with stem cell applications, as well as training and educational presentations. The term of this agreement isJanuary 2009 through December 31, 2011. In consideration for providing these services, pursuant to the agreement the physician is to receive an annual fee of$120,000 payable as to (i) $96,000 in equal monthly installments of $8,000 on the last day of each month during the term of the agreement and (ii) $24,000by the issuance of shares of the Company’s Common Stock under the 2003 EPP in equal monthly installments of $2,000 on the last day of each monthduring the term of the agreement at a per share purchase price equal to the closing price of the Common Stock on the last day of each month, which paymentshall be made in cash in the event shares under the 2003 EPP are unavailable. In February and March 2009, 2,352 and 3,571 shares of Common Stock,respectively, were issued to the physician pursuant to this agreement. In February 2009, the Company entered into another agreement with this physicianpursuant to which the Company was granted a worldwide, exclusive, royalty bearing, perpetual and irrevocable license (with the right to sublicense) to certaininnovative stem cell technologies and applications for cosmetic facial and body procedures and skin rejuvenation. This agreement calls for the followingpayments to be made to the physician: (i) an annual payment and (ii) a specified royalty on sales of products developed incorporating the licensed technology.In January 2009, the Company entered into an agreement with a consultant which has been providing investor relation services to the Company since 2005,pursuant to which this consultant was retained to provide additional investor relations/media relations services from January 1, 2009 to May 31, 2009. Inconsideration for providing services under this agreement, the Company agreed to issue to the consultant an aggregate of 40,000 shares of restricted CommonStock, to vest as to 8,000 shares on the last day of each month of January through May 2009. The issuance of such securities is subject to the approval of theNYSE Amex.In January 2009, the Company issued to its grant consultant, 20,000 shares of restricted Common Stock as a bonus under the consultant’s ConsultingAgreement with the Company dated February 8, 2008, in consideration for such consultant being instrumental in securing the Company’s inclusion in theDepartment of Defense Fiscal Year 2009 Appropriations Bill in the net amount of approximately $680,000. The issuance of such securities was subject to theapproval of the NYSE Amex, which approval was obtained in January 2009. The Company has entered into a new consulting agreement with such grantconsultant for a one-year term commencing as of January 1, 2009, pursuant to which it will provide assistance to the Company in the following areas: (i)with regard to negotiation, drafting and finalization of contracts; (ii) in the development of strategic plans; (iii) with regard to funding from various agencies ofthe State of New Jersey and Federal government; and (iv) with other assignments it may receive from time to time. In consideration for such services, theconsultant will be issued shares of the Company’s restricted Common Stock equal to a value of $60,000 based on the closing price of the Company’sCommon Stock on the date of execution of the agreement, to vest as to one-half of such shares on June 30, 2009 and the remaining one-half of such shares onDecember 31, 2009. The issuance of such securities is subject to the approval of the NYSE Amex.In January 2009, the Company issued to a marketing consultant 12,000 shares of restricted Common Stock pursuant to the terms of a three month consultingagreement entered into in October 2008, scheduled to vest pursuant to the agreement as to 4,000 shares at the end of each 30 day period during the term. Theissuance of such securities was subject to the approval of the NYSE Amex, which approval was obtained in January 2009.In January 2009, the Company issued to a member of its Scientific Advisory Board 20,000 shares of Common Stock under the 2003 EPP, in consideration ofthis individual’s contribution to a special project related to the design of a cardiac stem cell clinical trial for end stage cardiomiopathy anticipated to beconducted in the People’s Republic of China.In February 2009, the Company entered into a consulting agreement with a physician to provide services to the Company including providing medicalexpertise in the areas of apheresis and laboratory medicine and to serve (as needed) as medical director for companies in the Company’s stem cell collectioncenter network as well as other related activities, in consideration for which the physician is to receive a monthly fee of $5,000 and a one-time payment of10,000 shares of Common Stock under the 2003 EPP, which shares were issued as of February 2009. In February 2009, the Company issued to a consultant a five year warrant to purchase 5,000 shares of Common Stock at a purchase price of $1.40 per share.This warrant was issued in consideration of services rendered after the expiration of an October 2007 consulting agreement with the Company pursuant towhich this consultant was engaged to create marketing materials for our sales and marketing staff. The issuance of this warrant was subject to the approval ofthe NYSE Amex and vested on issuance.The employment agreements for members of the Company’s management (excluding the Chief Executive Officer) expired between December 31, 2008 andJanuary 19, 2009. However, the Company has continued to compensate these individuals based on their base salary and employee benefits that wouldotherwise be due to such individuals under such agreements. In order to conserve the Company’s current cash, commencing with the pay period endedJanuary 31, 2009, the Chief Executive Officer has been deferring payment of one-half of her base salary and commencing with the pay period ended February15, 2009, the other members of management also have been deferring payment of one-half of their respective base salaries. F-42Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.In order to move forward certain research and development activities, strategic relationships in various clinical and therapeutic areas as well as to supportactivities related to the Company’s proposed Merger and Share Exchange transactions and other ongoing obligations of the Company, on February 25, 2009and March 6, 2009, respectively, the Company issued promissory notes to RimAsia, a principal stockholder of the Company (the “Payee”) in the principalamounts of $400,000 and $750,000, respectively. The Notes bear interest at the rate of 10% per annum and are due and payable on October 31, 2009 (the“Maturity Date”), except that all principal and accrued interest on the Notes shall be immediately due and payable in the event the Company raises over $10million in equity financing prior to the Maturity Date. The Notes contain standard events of default and in the event of a default that is not subsequentlycured or waived, the interest rate will increase to a rate of 15% per annum and, at the option of the Payee and upon notice, the entire unpaid principal balancetogether with all accrued interest thereon will be immediately due and payable. The Notes or any portion thereof may be prepaid at any time and from time totime at the discretion of the Company without premium or penalty. In March 2009, the Company entered into an agreement with a consultant which has been providing financial market related services to the Company since2008, pursuant to which this consultant was retained to provide additional financial market related services for a three month period. In consideration forproviding services under this agreement, the Company agreed to issue to the consultant an aggregate of 25,000 shares of restricted Common Stock, to vest asto one-third of the shares at the end of each monthly period during the term; a five year warrant to purchase 25,000 shares of restricted Common Stock at a pershare exercise price of $1.00, vesting in its entirety at the end of the term; and an aggregate of $15,000 in cash. The issuance of such securities is subject tothe approval of the NYSE Amex. F-43Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 9A. CONTROLS AND PROCEDURES (a) Disclosure Controls and Procedures Disclosure controls and procedures are the Company’s controls and other procedures that are designed to ensure that information required to be disclosed in thereports that the Company files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarizedand reported in a complete, accurate and appropriate manner, within the time periods specified in the Securities and Exchange Commission’s rules and forms.Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in thereports that the Company files under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and ChiefFinancial Officer, as appropriate, to allow timely decisions regarding required disclosure. As of the end of the Company's fourth fiscal quarter endedDecember 31, 2008 covered by this report, the Company carried out an evaluation, with the participation of the Company's management, including theCompany's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures pursuant to Rule13a-15 of the Exchange Act. Based on that evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company'sdisclosure controls and procedures are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submitsunder the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Due tothe inherent limitations of control systems, not all misstatements may be detected. These inherent limitations include the realities thatjudgments in decision-making can be faulty and the breakdowns can occur because of a simple error or mistake. Additionally, controls can becircumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. Our controls andprocedures can only provide reasonable, not absolute, assurance that the above objectives have been met.(b) Management’s Annual Report on Internal Control Over Financial Reporting The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term isdefined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of the Company’s management, including the Company’sChairman and Chief Executive Officer along with the Company’s Vice President and Chief Financial Officer, the Company conducted an evaluation of theeffectiveness of internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission. Based on the evaluation under the framework in Internal Control — Integrated Framework,management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2008. (c) Attestation Report of Registered Public Accounting Firm This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financialreporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securitiesand Exchange Commission that permit the Company to provide only management's report in this annual report. 78Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (d) Changes in Internal Control over Financial Reporting There have been no changes in the Company's internal controls over financial reporting, as such term is defined in Exchange Act Rule 13a-15, thatoccurred during the Company's last fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, theCompany's internal control over financial reporting. ITEM 9B. OTHER INFORMATION None. 79Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required by this Item is incorporated into this Annual Report on Form 10-K by reference to the Proxy Statement for our 2009Annual Meeting of Stockholders, to be filed not later than April 30, 2009 (120 days after the close of our fiscal year ended December 31, 2008). ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is incorporated into this Annual Report on Form 10-K by reference to the Proxy Statement for our 2009 AnnualMeeting of Stockholders, to be filed not later than April 30, 2009. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERS The information required by this Item is incorporated into this Annual Report on Form 10-K by reference to the Proxy Statement for our 2009Annual Meeting of Stockholders, to be filed not later than April 30, 2009. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this Item is incorporated into this Annual Report on Form 10-K by reference to the Proxy Statement for our 2009Annual Meeting of Stockholders, to be filed not later than April 30, 2009. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESThe information required by this Item is incorporated into this Annual Report on Form 10-K by reference to the Proxy Statement for our 2009 AnnualMeeting of Stockholders, to be filed not later than April 30, 2009. 80Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES The following documents are being filed as part of this Report: (a)(1) FINANCIAL STATEMENTS: Reference is made to the Index to Financial Statements and Financial Statement Schedule on Page F-1. (a)(2) FINANCIAL STATEMENT SCHEDULE: Reference is made to the Index to Financial Statements and Financial Statement Schedule on Page F-1. All other schedules have been omitted because the required information is not present or is not present in amounts sufficient to require submission ofthe schedule, or because the information required is included in the Financial Statements or Notes thereto. (a)(3) EXHIBITS:Exhibit Description Reference1(a) Underwriting Agreement(1) 1.(A) 2(a) Agreement and Plan of Merger, dated as of November 2, 2008, by and among NeoStem, Inc., China BiopharmaceuticalsHoldings, Inc., China Biopharmaceuticals Corp., and CBH Acquisition LLC (2) 2.1 (b) Share Exchange Agreement, dated as of November 2, 2008 by and among NeoStem, Inc., China StemCell Medical HoldingLimited, Shandong New Medicine Research Institute of Integrated Traditional and Western Medicine Limited LiabilityCompany, Beijing HuaMeiTai Bio-technology Limited Liability Company, and Zhao Shuwei (3) 2.13(a) Amended and Restated Certificate of Incorporation dated August 29, 2006(4) 3.1 (b) Amendment to Amended and Restated Certificate of Incorporation dated August 8, 2007 (5) 3.1 (c) Amended and Restated By-laws(6) 3.1 (d) First Amendment to Amended and Restated By-laws(7) 3.24(a) Form of Underwriter’s Warrant dated August 14, 2007 (8) 10.2 (b) Form of Underwriter Warrant Clarification Agreement among NeoStem, Inc. and certain members of its Underwriting Group(9) 10.4 (c) Form of Class A Warrant Agreement and Certificate from August 2007 (1) 4.2 (d) Form of Warrant Clarification Agreement between NeoStem, Inc. and Continental Stock Transfer and Trust Company (9) 10.3 (e) Form of Warrant (10) 99.1 (f) Restated Warrant Agreement dated August 14, 2007 (8) 10.1 (g) Form of Promissory Note—September 2002 Offering (11) 4.1 (h) Form of Promissory Note—February 2003 Offering (11) 4.2 (i) Form of Promissory Note—March 2003 Offering (11) 4.3 (j) Form of Convertible Promissory Note from December 2005 (10) 10.1 (k) Registration Rights Agreement, dated June 2, 2006, between Phase III Medical, Inc. and certain investors listed therein (12) 10.2 (l) Form of Warrant to Purchase Shares of Common Stock of Phase III Medical, Inc from June 2006 (12) 10.3 (m) Form of Phase III Medical, Inc. Registration Rights Agreement from July/August 2006 (4) 10.2 (n) Form of Phase III Medical, Inc. Warrant to Purchase Shares of Common Stock from July/August 2006 (4) 10.3 (o) Form of Redeemable Warrant to Purchase Shares of Common Stock of NeoStem, Inc. from January/February 2007 (13) 10.2 (p) Form of Non-Redeemable Warrant to Purchase Shares of Common Stock of NeoStem, Inc. from January/February 2007 (13) 10.3 (q) Form of Redeemable Warrant to Purchase Shares of Common Stock of NeoStem, Inc. from May 2008 (14) 10.1 (r) Form of Redeemable Warrant to Purchase Shares of Common Stock of NeoStem, Inc. issued to RimAsia Capital PartnersL.P. in September 2008 (15) 10.2 81Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (s) Letter Agreement dated December 18, 2008 between NeoStem, Inc. and RimAsia Capital Partners, L.P. (+) 4.1 (t) Form of Warrant to Purchase Shares of Common Stock of NeoStem, Inc. from October 2008 (+) 4.2 (u) Form of Redeemable Warrant to Purchase Shares of Common Stock of NeoStem, Inc. from November 2008 (+) 4.3 (v) Specimen Certificate for Common Stock (5) 4.110(a) NeoStem, Inc. 2003 Equity Participation Plan* (16) B-1 (b) NeoStem, Inc. 2003 Equity Participation Plan, as amended* (17) 10.2 (c) Form of Stock Option Agreement* (11) 10.2 (d) Form of Option Agreement dated July 20, 2005* (6) 10.5 (e) Stock Option Agreement dated as of February 6, 2003 between Corniche Group Incorporated and Mark Weinreb* (18) 99.3 (f) Restricted Stock Agreement with Mark Weinreb* (19) 10.8 (g) Promissory Note made by the Company in favor of Catherine M. Vaczy (20) 10.2 (h) Form of Promissory Note Extension (6) 10.6 (i) Stock Purchase Agreement, dated April 20, 2005, between Phase III Medical, Inc. and Catherine M. Vaczy (20) 10.1 (j) Stock Option Agreement dated April 20, 2005, between Phase III Medical, Inc. and Catherine M. Vaczy* (20) 10.4 (k) Amendment dated July 18, 2005 to Stock Purchase Agreement with Catherine M. Vaczy dated April 20, 2005* (6) 10.1 (l) Securities Purchase Agreement, dated June 2, 2006, between Phase III Medical, Inc. and certain investors listed therein (12) 10.1 (m) Form of Phase III Medical, Inc. Securities Purchase Agreement from July/August 2006 (4) 10.1 (n) Form of Amendment Relating to Purchase by Investors in Private Placement of Convertible Notes and WarrantsDecember 2005 and January 2006 (4) 10.4 (o) Second Form of Amendment Relating to Purchase by Investors in Private Placement of Convertible Notes and WarrantsDecember 2005 and January 2006 (17) 10.1 (p) Form of Subscription Agreement from January/February 2007 among NeoStem, Inc., Emerging Growth Equities, Ltd. Andcertain investors listed therein (13) 10.1 (q) Form of Subscription Agreement from May 2008 among NeoStem, Inc. and certain investors listed therein (14) 10.1 (r) Form of Subscription Agreement between NeoStem, Inc. and RimAsia Capital Partners, L.P. (15) 10.1 (s) Form of Subscription Agreement from October 2008 between NeoStem, Inc. and an investor listed therein (+) 10.1 (t) Form of Subscription Agreement from November 2008 between NeoStem, Inc. and an investor listed therein (+) 10.2 (u) Asset Purchase Agreement dated December 6, 2005 by and among Phase III Medical, Inc., Phase III Medical HoldingCompany, and NeoStem, Inc. (21) 99.1 (v) Agreement and Plan of Acquisition among NeoStem, Inc., Stem Cell Technologies, Inc. and UTEK Corporation (22) 10.1 (w) License Agreement between Stem Cell Technologies, Inc. and the University of Louisville Research Foundation, Inc. (22) 10.2 82Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (x) Sponsored Research Agreement between NeoStem, Inc. and the University of Louisville Research Foundation, Inc. (22) 10.3 (y) Stem Cell Collection Services Agreement dated December 15, 2006 between the Company and HemaCare Corporation (23) 10.1 (z) Advisory Agreement dated May 2006 between Phase III Medical, Inc. and Duncan Capital Group LLC (24) 10(ee) (aa) Amendment dated February 1, 2007 to Advisory Agreement dated May 2006 between Phase III Medical, Inc. and DuncanCapital Group LLC (23) 10.2 (bb) Sublease Agreement dated October 27, 2006 between NeoStem, Inc. and DC Associates LLC (17) 10.3 (cc) Amendment to sublease agreement between NeoStem, Inc. and DC Associates LLC dated May 22, 2007 (1) 10.1 (dd) Amendment to sublease agreement between NeoStem, Inc. and DC Associates LLC dated June 2007 (1) 10.2 (ee) Employment Agreement between Phase III Medical, Inc. and Dr. Robin L. Smith, dated May 26, 2006* (12) 10.4 (ff) January 26, 2007 Amendment to Employment Agreement of Robin Smith* (25) 10.1 (gg) September 27, 2007 Amendment to Employment Agreement of Robin L. Smith* (26) 10.1 (hh) Letter agreement dated January 9, 2008 with Dr. Robin Smith* (27) 10.1 (ii) Employment Agreement dated as of February 6, 2003 by and between Corniche Group Incorporated and Mark Weinreb* (18) 99.2 (jj) Amendment dated July 20, 2005 to Employment Agreement with Mark Weinreb dated February 6, 2003* (6) 10.2 (kk) Letter Agreement between Phase III Medical, Inc. and Mark Weinreb effective as of June 2, 2006* (12) 10.5 (ll) January 26, 2007 Amendment to Employment Agreement of Mark Weinreb* (25) 10.2 (mm) September 28, 2007 Amendment to Employment Agreement of Mark Weinreb* (26) 10.2 (nn) Employment Agreement between the Company and Larry A. May dated January 19, 2006* (28) 10.1 (oo) Letter Agreement between Phase III Medical, Inc. and Larry A. May effective as of June 2, 2006* (12) 10.7 (pp) January 26, 2007 Amendment to Employment Agreement of Larry A. May* (25) 10.3 (qq) Letter Agreement, dated April 20, 2005, between Phase III Medical, Inc. and Catherine M. Vaczy* (20) 10.3 (rr) Letter Agreement dated August 12, 2005 with Catherine M. Vaczy* (6) 10.7 (ss) Letter Agreement dated December 22, 2005 between Phase III Medical, Inc. and Catherine M. Vaczy* (29) 10(y) (tt) Letter Agreement dated January 30, 2006 between Phase III Medical, Inc. and Catherine M. Vaczy* (29) 10(cc) (uu) Letter Agreement between Phase III Medical, Inc. and Catherine M. Vaczy effective as of June 2, 2006* (12) 10.6 (vv) January 26, 2007 Employment Agreement with Catherine M. Vaczy* (25) 10.4 (ww) Letter agreement dated January 9, 2008 with Catherine M. Vaczy* (27) 10.2 (xx) Letter Agreement dated as of August 12, 2004 by and between Phase III Medical, Inc. and Dr. Wayne A. Marasco (30) 10.6 83Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (yy) Amendment dated July 20, 2005 to Employment Agreement with Wayne A. Marasco dated August 12, 2004 (6) 10.3 (zz) Letter Agreement between Phase III Medical, Inc. and Wayne A. Marasco effective as of June 2, 2006 (12) 10.8 (aaa) Employment Agreement between the Company and Denis O. Rodgerson dated January 19, 2006 (28) 10.2 (bbb) Employment Agreement between NeoStem, Inc. and Renee F. Cohen dated August 15, 2007* (31) 10.1 (ccc) Employment Agreement dated as of September 13, 2004 between Phase III Medical, Inc. and Robert Aholt, Jr. (30) 10.3 (ddd) Amendment dated July 20, 2005 to Employment Agreement with Robert Aholt dated September 13, 2004 (6) 10.4 (eee) Settlement Agreement and General Release dated March 31, 2006 between Phase III Medical, Inc. and Robert Aholt, Jr. (29) 10(dd) (fff) Board of Directors Agreement by and between Phase III Medical, Inc. and Joseph Zuckerman* (30) 10.8 (ggg) Form of Lock Up and Voting Agreement (NeoStem) dated November 2, 2008 by and between NeoStem, Inc., ChinaBioPharmaceutical Holdings, Inc. and the individuals listed therein (+) 10.3 (hhh) Form of Lock Up and Voting Agreement (China BioPharmaceutical Holdings, Inc.) dated November 2, 2008 by andbetween NeoStem, Inc., China BioPharmaceutical Holdings, Inc. and the individuals listed therein (+) 10.4 14(a) Code of Ethics for Senior Financial Officers (12) 14.1 21(a) Subsidiaries of the Registrant (+) 21.1 23(a) Consent of Holtz Rubenstein Reminick LLP (+) 23.1 31(a) Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (+) 31.1 31(b) Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (+) 31.2 32(a) Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of theSarbanes-Oxley Act of 2002 (+) 32.1 32(b) Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of theSarbanes-Oxley Act of 2002 (+) 32.2 _____________________Notes: + Filed herewith.* Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K pursuant to Item 15(b) of Form 10-K. (1)Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to Pre-Effective Amendment No. 3 to theCompany’s Registration Statement on Form SB-2/A, File No. 333-142923, which exhibit is incorporated here by reference. (2)Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the current report of the Company on Form 8-K, dated November 6, 2008, which exhibit is incorporated here by reference. 84Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (3)Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the current report of the Company on Form 8-K, dated November 6, 2008, which exhibit is incorporated here by reference. (4)Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the Company’s Registration Statement onForm S-1, File No. 333-137045, which exhibit is incorporated here by reference. (5)Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the Company’s Registration Statement onForm S-3, File No. 333-145988, which exhibit is incorporated here by reference. (6)Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the quarterly report of the Company onForm 10-Q for the quarter ended June 30, 2005, which exhibit is incorporated here by reference. (7)Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the current report of the Company on Form 8-K, dated August 1, 2006, which exhibit is incorporated here by reference. (8)Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the quarterly report of the Company onForm 10-QSB for the quarter ended September 30, 2007, which exhibit is incorporated here by reference. (9)Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the quarterly report of the Company onForm 10-Q for the quarter ended September 30, 2008, which exhibit is incorporated here by reference. (10)Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the current report of the Company on Form 8-K, dated December 31, 2005, which exhibit is incorporated here by reference. (11)Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the annual report of the Company on Form 10-K for the year ended December 31, 2003, which exhibit is incorporated here by reference. (12)Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the current report of the Company on Form 8-K, dated June 2, 2006, which exhibit is incorporated here by reference. (13)Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the current report of the Company on Form 8-K, dated January 26, 2007, which exhibit is incorporated here by reference. (14)Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the current report of the Company on Form 8-K, dated May 20, 2008, which exhibit is incorporated here by reference. (15)Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the current report of the Company on Form 8-K, dated August 28, 2008, which exhibit is incorporated here by reference. (16)Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the Preliminary Proxy Statement on Schedule14A, dated July 18, 2006, which exhibit is incorporated here by reference. (17)Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to Pre-Effective Amendment No. 1 to theCompany’s Registration Statement on Form S-1, File No. 333-137045, which exhibit is incorporated here by reference. (18)Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the current report of the Company on Form 8-K, dated February 6, 2003, which exhibit is incorporated here by reference. (19)Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the quarterly report of the Company onForm 10-Q for the quarter ended September 30, 2005, which exhibit is incorporated here by reference. (20)Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the current report of the Company on Form 8-K, dated April 20, 2005, which exhibit is incorporated here by reference. 85Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (21)Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the current report of the Company on Form 8-K, dated December 6, 2005, which exhibit is incorporated here by reference. (22)Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the current report of the Company on Form 8-K, dated November 13, 2007, which exhibit is incorporated here by reference. Certain portions of Exhibits 10(w) (10.2) and 10(x) (10.3) wereomitted based upon a request for confidential treatment, and the omitted portions were filed separately with the Securities and ExchangeCommission on a confidential basis. (23)Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the Company’s annual report on Form 10-Kfor the year ended December 31, 2006, which exhibit is incorporated here by reference. (24)Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the quarterly report of the Company onForm 10-Q for the quarter ended March 31, 2006, which exhibit is incorporated herein by reference. (25)Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the second current report of the Company onForm 8-K, dated January 26, 2007, which exhibit is incorporated here by reference. (26)Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the current report of the Company on Form 8-K, dated September 27, 2007, which exhibit is incorporated here by reference. (27)Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the current report of the Company on Form 8-K, dated January 9, 2008, which exhibit is incorporated here by reference. (28)Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the current report of the Company on Form 8-K, dated January 19, 2006, which exhibit is incorporated here by reference. (29)Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the Company’s annual report on Form 10-Kfor the year ended December 31, 2005, which exhibit is incorporated here by reference. (30)Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the Company’s annual report on Form 10-Kfor the year ended December 31, 2004, which exhibit is incorporated here by reference. (31)Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the current report of the Company on Form 8-K, dated August 15, 2007, which exhibit is incorporated here by reference. 86Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized in the City of New York, State of New York, on March 31, 2009. NEOSTEM, INC. By/s/ Robin L. Smith Name: Robin L. Smith Title: Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated. Signature Title Date /s/ Robin L. Smith Director, Chief Executive March 31, 2009Robin L. Smith Officer and Chairman of theBoard (Principal Executive Officer) /s/ Larry A. May Chief Financial Officer March 31, 2009Larry A. May (Principal Financial Officer andPrincipal Accounting Officer) /s/ Mark Weinreb Director and President March 31, 2009Mark Weinreb /s/ Joseph Zuckerman Director March 31, 2009Joseph Zuckerman /s/ Richard Berman Director March 31, 2009Richard Berman /s/ Steven S. Myers Director March 31, 2009Steven S. Myers 87 Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. December 18, 2008 RimAsia Capital Partners, L.P.1808 Hutchison House10 Harcourt Road,AdmiraltyHong KongAttn: Eric Wei Dear Eric: This will confirm our understanding with regard to (i) the amendment of that certain outstanding warrant (the “September 2008 Warrants”) held by RimAsiaCapital Partners, L.P. (“RimAsia”) to purchase up to 1,000,000 shares of the common stock, $.001 par value (the “Common Stock”) of NeoStem, Inc. (“NeoStem”) which was issued to RimAsia in September 2008; (ii) the proposed issuance to RimAsia in a capital raise in early 2009 of warrants (included aspart of units) to purchase up to 4,000,000 shares of Common Stock (the”2009 Capital Raise Warrants”); and (iii) the proposed issuance to RimAsia pursuantto that certain Agreement and Plan of Merger (the “Merger Agreement”) entered into as of November 2, 2008, by and among NeoStem, CBH Acquisition LLC,a Delaware limited liability company and a wholly owned subsidiary of NeoStem (“Subco”), China Biopharmaceuticals Holdings, Inc., a Delawarecorporation (“CBH”) and China Biopharmaceutical Corp., a British Virgin Islands corporation (“CBC”), of Class B Warrants (the “Class B Warrants”) ofNeoStem to purchase up to 2,400,000 shares of Common Stock and 6,977,512 shares of NeoStem’s Series C Convertible Preferred Stock (the “PreferredStock”). The parties desire that the September 2008 Warrants, the 2009 Capital Raise Warrants, the Class B Warrants (collectively, the “Warrants”) and the PreferredStock all contain a “blocker,” such that exercise of the Warrants and/or conversion of the Preferred Stock will be blocked at any time that such exercise orconversion would increase RimAsia’s beneficial ownership of the Company’s common stock above 19.9% (with certain exceptions described below).Accordingly, RimAsia agrees that the (i) September 2008 Warrants are hereby amended to give effect to the paragraph set forth below, and (ii) the 2009 CapitalRaise Warrants, Class B Warrants and Preferred Stock shall give effect to the paragraph set forth below when and to the extent that they are issued. Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. “Notwithstanding anything herein to the contrary, in no event shall the Holder be entitled to [exercise any portion of this Warrant/convert any portion of thePreferred Stock] in excess of that portion of this [Warrant/Preferred Stock] upon [exercised/conversion] of which the sum of (1) the number of shares ofCommon Stock beneficially owned by the Holder and its Affiliates (other than shares of Common Stock which may be deemed beneficially owned through theownership of the unconverted portion of the [Warrant/Preferred Stock] or the unexercised or unconverted portion of any other security of the Holder subject to alimitation on exercise or conversion analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon theconversion of the portion of this [Warrant/Preferred Stock] with respect to which the determination of this proviso is being made, would result in beneficialownership by the Holder and its Affiliates of any amount greater than 19.99% of the then outstanding shares of Common Stock (whether or not, at the time ofsuch exercise, the Holder and its Affiliates beneficially own more than 19.9% of the then outstanding shares of Common Stock). As used herein, the term“Affiliate” means any person or entity that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common controlwith a person or entity, as such terms are used in and construed under Rule 144 under the Securities Act. For purposes of the second preceding sentence,beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulations 13D-Gthereunder, except as otherwise provided in clause (1) of such sentence. The preceding limitations set forth herein shall not apply upon a merger, consolidationor sale of all or substantially all of the assets of the Company if the shareholders of the Company prior to such transaction do not own more than 50% of theentity succeeding to the business of the Company after such transaction, and does not apply following any exercise of any mandatory conversion orredemption rights by the Company and shall remain in place until such time as approval of NeoStem’s shareholders shall be obtained to remove suchlimitation and such request shall be made of the shareholders by a proposal to be contained in the Company’s proxy statement/Form S-4 to be filed inconnection with the approval of the Merger Agreement.” Very truly yours, /s/ Robin L. Smith Robin L. Smith, CEO, NeoStem, Inc. Accepted and Agreed: RIMASIA CAPITAL PARTNERS, L.P. By: /s/ Eric Wei Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 10.3 LOCK UP AND VOTING AGREEMENT LOCK UP AND VOTING AGREEMENT dated November 2, 2008 (the “Voting Agreement”) is by and between NEOSTEM, INC., a Delawarecorporation (the “Parent”), The CHINA BIOPHARMACEUTICALS HOLDINGS, INC., a Delaware corporation (the “Company”), and the individuals orentities listed on Schedule A annexed hereto (collectively, the “Stockholders” and each individually is a “Stockholder”). RECITALS WHEREAS, concurrent with the execution of this Voting Agreement, the Company, Parent and CBH Acquisition LLC (“Subco”), a Delaware limitedliability company and a wholly owned subsidiary of Parent, have entered into an Agreement and Plan of Merger dated of even date herewith (as amended fromtime to time, the “merger agreement”) pursuant to which the Company, which owns 51% of the equity of Suzhou Erye Pharmaceuticals Co. Ltd (“Erye”), willbe merged with and into Subco with Subco continuing as the surviving company and as a direct wholly owned subsidiary of Parent (the “merger”); WHEREAS, the Stockholders are the record and beneficial owners of certain shares of common stock, par value $0.001 per share, of the Parent (the“Common Shares”) in the amounts set forth opposite the Stockholder’s name on Schedule A hereto, and/or may become, at any time after the date hereof, therecord and beneficial owners of shares of capital stock of Parent (the Common Shares and any shares of capital stock of Parent that may be acquired after thedate hereof are collectively referred to herein as the “Shares”); and WHEREAS, as an inducement and a condition to entering into the merger agreement, the Company desires that each of the Stockholders agree, andeach of the Stockholders is willing to agree, to enter into this Voting Agreement. NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, the Parent, the Company and each of the Stockholders, intending to be legally bound, hereby agree as follows: 1. Certain Definitions. In addition to the terms defined elsewhere herein, capitalized terms used and not defined herein have the respectivemeanings ascribed to them in the merger agreement. For purposes of this Voting Agreement: (a)“Beneficially Own” or “Beneficial Ownership” with respect to any securities means having “beneficial ownership” of suchsecurities as determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),including pursuant to any agreement, arrangement or understanding, whether or not in writing. Without duplicative counting ofthe same securities by the same holder, securities Beneficially Owned by a Person shall include securities Beneficially Owned byall other Persons with whom such Person would constitute a “group” within the meaning of Section 13(d)(3) of the Exchange Act. Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (b)“Person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint stockcompany, trust (including any beneficiary thereof), unincorporated organization or government or any agency or politicalsubdivision thereof. 2. Disclosure. Each of the Stockholders hereby agrees to permit the Company and Parent to publish and disclose in the Company’s ProxyStatement, and any press release or other disclosure document which Parent and the Company reasonably determine to be necessary or desirable in connectionwith the merger and any transactions related thereto, each Stockholder’s identity and ownership of the Shares and the nature of each Stockholder’scommitments, arrangements and understandings under this Voting Agreement. 3. Voting of Shares. Each of the Stockholders, to the extent they are holders of Shares, in satisfaction of all contractual and legalrequirements, hereby: (i) consents to the Parent’s execution and delivery of the merger agreement and the taking of all actions by the Company to effect themerger; and (ii) agrees that, during the period commencing on the date hereof and continuing until the Termination Date (as defined below), contemporaneouslywith any meeting of the holders of the Shares, however called, or in connection with any written consent of the holders of the Shares, the Stockholder shallcause the Shares held of record or Beneficially Owned by the Stockholder, whether now owned or hereafter acquired, to consent in writing to the merger,adoption of the merger agreement and any actions required in furtherance thereof. 4. Covenants, Representations and Warranties of the Parent and each Stockholder. Each of the Stockholders hereby severally representsand warrants (with respect to such Stockholder only and not with respect to each other Stockholder) to, and agrees with, the Company as follows: (a)Ownership of Securities. Such Stockholder is the sole record and Beneficial Owner of the number of shares set forth oppositesuch Stockholder’s name on Schedule A hereto. On the date hereof, the Shares set forth opposite the Stockholder’s name onSchedule A hereto constitute all of the Shares or other securities of the Parent owned of record or Beneficially Owned by suchStockholder or with respect to which such Stockholder has voting power by proxy, voting agreement, voting trust or other similarinstrument. Such Stockholder has sole voting power and sole power to issue instructions with respect to the matters set forth inSection 3 hereof, sole power of disposition, sole power of conversion, sole power to demand and waive appraisal rights and solepower to agree to all of the matters set forth in this Voting Agreement, in each case with respect to all of the Shares set forth oppositesuch Stockholder’s name on the signature page hereof, with no limitations, qualifications or restrictions on such rights, subject toapplicable securities laws, and the terms of this Voting Agreement. (b)Authorization. Such Stockholder has the legal capacity, power and authority to enter into and perform all of suchStockholder’s obligations under this Voting Agreement. The execution, delivery and performance of this Voting Agreement by suchStockholder will not violate any other agreement to which such Stockholder is a party including, without limitation, any votingagreement, stockholders agreement, voting trust, trust or similar agreement. This Voting Agreement has been duly and validlyexecuted and delivered by such Stockholder and constitutes a valid and binding agreement enforceable against such Stockholder inaccordance with its terms. There is no beneficiary or holder of a voting trust certificate or other interest of any trust of which suchStockholder is a trustee whose consent is required for the execution and delivery of this Voting Agreement or the consummation bysuch Stockholder of the transactions contemplated hereby. If such Stockholder is married and such Stockholder’s Sharesconstitute community property, this Voting Agreement has been duly authorized, executed and delivered by, and constitutes a validand binding agreement of, such Stockholder’s spouse, enforceable against such person in accordance with its terms. -2-Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (c)No Conflicts. (i) Except as may be required under Section 13 of the Exchange Act, no filing with, and no permit, authorization,consent or approval of, any state or federal public body or authority is necessary for the execution of this Voting Agreement bysuch Stockholder and the consummation by such Stockholder of the transactions contemplated hereby and (ii) none of theexecution and delivery of this Voting Agreement by such Stockholder, the consummation by such Stockholder of the transactionscontemplated hereby or compliance by such Stockholder with any of the provisions hereof shall (A) conflict with or result in anybreach of the organizational documents of such Stockholder (if applicable), (B) result in a violation or breach of, or constitute(with or without notice or lapse of time or both) a default (or give rise to any third party right of termination, cancellation, materialmodification or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license,contract, commitment, arrangement, understanding, agreement or other instrument or obligation of any kind to which suchStockholder is a party or by which such Stockholder or any of its properties or assets may be bound, or (C) violate any order,writ injunction, decree, judgment, order, statute, rule or regulation applicable to such Stockholder or any of its properties or assets. (d)No Encumbrances. Such Stockholder’s Shares at all times during the term hereof will be Beneficially Owned by suchStockholder, free and clear of all liens, claims, security interests, proxies, voting trusts or agreements, understandings orarrangements or any other encumbrances whatsoever. (e)No Solicitation. Such Stockholder agrees not to take any action inconsistent with or in violation of the merger agreement. -3-Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (f)Restriction on Transfer; Proxies and Non-Interference. At any time during the period (the “Lock-Up Period”) from the datehereof until the earlier of (i) one hundred and eighty (180) days following the closing of the Merger or (ii) the termination of theMerger Agreement, such Stockholder shall not, directly or indirectly, (i) except for a Permitted Transfer (as defined below) andexcept as contemplated by the merger agreement, offer for sale, sell, transfer, tender, pledge, encumber, assign or otherwise disposeof, or enter into any contract, option or other arrangement or understanding with respect to or consent to the offer for sale, sale,transfer, tender, pledge, encumbrance, assignment or other disposition of, any or all of any such Stockholder’s Shares, or anyinterest therein, whether such shares are held by such Stockholder as of the date hereof or are acquired by such Stockholder fromand after the date hereof, whether in connection with the merger or otherwise (together with the Shares, the “Lock-Up Shares”), (ii)except as contemplated by this Voting Agreement, grant any proxies or powers of attorney, deposit any Shares into a voting trust orenter into a voting agreement with respect to the Lock-Up Shares, or (iii) take any action that would make any representation orwarranty of such Stockholder contained herein untrue or incorrect or have the effect of preventing or disabling such Stockholderfrom performing such Stockholder’s obligations under this Voting Agreement. (g)Reliance by the Company. Such Stockholder understands and acknowledges that the Company is entering into the mergeragreement in reliance upon such Stockholder’s execution and delivery of this Voting Agreement. (h)Permitted Transfer. Notwithstanding the foregoing or any other provision of this Agreement to the contrary, any Stockholdermay sell or transfer any Shares to any Stockholder or any other Person who executes and delivers to the Company an agreement, inform and substance acceptable to the Company, to be bound by the terms of this Agreement to the same extent as the transferringStockholder (any such transfer, a “Permitted Transfer”). 5. Stop Transfer Legend. (a)Each of the Stockholders agrees and covenants to the Company that such Stockholder shall not request that the Parent registerthe transfer (book-entry or otherwise) of any certificate or uncertificated interest representing any of such Stockholder’s Shares,unless such transfer is made in compliance with this Voting Agreement. (b)Without limiting the covenants set forth in paragraph (a) above, in the event of a stock dividend or distribution, or any changein Shares by reason of any stock dividend, split-up, recapitalization, combination, exchange of shares or the like, other thanpursuant to the merger, the term “Shares” shall be deemed to refer to and include any and all shares into which or for which any orall of the Shares may be changed or exchanged, and appropriate adjustments shall be made to the terms and provisions of thisVoting Agreement. -4-Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 6. Further Assurances. From time to time until the expiration of the Lock-Up Period, at the Company’s request and without furtherconsideration, each Stockholder shall execute and deliver such additional documents and take all such further lawful action as may be necessary or desirableto consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Voting Agreement. 7. Stockholder Capacity. If any Stockholder is or becomes during the term hereof a director or an officer of the Parent, such Stockholdermakes no agreement or understanding herein in his capacity as such director or officer. Each of the Stockholders signs solely in his or her capacity as therecord and Beneficial Owner of the Stockholder’s Shares. 8. Termination. Except as otherwise provided herein, the covenants and agreements contained herein with respect to the Shares shall terminateupon the earlier of (a) the Termination Date regardless of the circumstances or (b) the expiration of the Lock-Up Period. 9. Miscellaneous. (a)Entire Agreement. This Voting Agreement constitutes the entire agreement among the parties with respect to the subject matterhereof and supersedes all other prior agreements and understandings, both written and oral, between the parties with respect to thesubject matter hereof. (b)Certain Events. Subject to Sections 4(f) and (g) hereof, each of the Stockholders agrees that this Voting Agreement and theobligations hereunder shall attach to each such Stockholder’s Shares and shall be binding upon any Person to which legal orBeneficial Ownership of such Shares shall pass, whether by operation of law or otherwise, including without limitation, eachStockholder’s heirs, guardians, administrators or successors. Notwithstanding any such transfer of Shares, the transferor shallremain liable for the performance of all obligations under this Voting Agreement. (c)Assignment. This Voting Agreement shall not be assigned by operation of law or otherwise without the prior written consent ofthe Company in the case of an assignment by any Stockholder and each Stockholder in the case of any assignment by theCompany; provided that the Company may assign, in its sole discretion, its rights and obligations hereunder to any direct orindirect wholly owned subsidiary of the Company, but no such assignment shall relieve the Company of its obligations hereunderif such assignee does not perform such obligations. (d)Amendment and Modification. This Voting Agreement may not be amended, changed, supplemented, waived or otherwisemodified or terminated, except upon the execution and delivery of a written agreement executed by the parties hereto affected bysuch amendment. -5-Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (e)Notices. Any notice or other communication required or which may be given hereunder shall be in writing and delivered (i)personally, (ii) via telecopy, (iii) via overnight courier (providing proof of delivery) or (iv) via registered or certified mail (returnreceipt requested). Such notice shall be deemed to be given, dated and received (i) when so delivered personally, via telecopy uponconfirmation, or via overnight courier upon actual delivery or (ii) two days after the date of mailing, if mailed by registered orcertified mail. Any notice pursuant to this section shall be delivered as follows: If to the Stockholder, to the address set forth for the Stockholder on Schedule A to this Voting Agreement.If to Parent:NeoStem, Inc.420 Lexington AvenueSuite 450New York, New York 10170Attn: Catherine Vaczy, Esq.Facsimile: (646) 514-7787with copies to:Lowenstein Sandler, PC65 Livingston AvenueRoseland, NJ 07078Attention: Alan Wovsaniker, Esq.Fax: 973-597-2565If to the Company:China Biopharmaceuticals, Inc.No. 859, Pan Xu RoadSuzhou, Jiangsu Province, China, 215000Attention: Chris MaoTelecopy: _______________with a copy (which shall not constitute notice) to:Troutman Sanders LLPThe Chrysler Building405 Lexington AvenueNew York, New York 10174Attention: Howard H. Jiang, Esq.Telecopy: (212) 704-6288 -6-Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (f)Severability. Whenever possible, each provision or portion of any provision of this Voting Agreement will be interpreted in sucha manner as to be effective and valid under applicable law but if any provision or portion of any provision of this VotingAgreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, suchinvalidity, illegality or unenforceability will not affect any other provision or portion of any provision of this Voting Agreement insuch jurisdiction, and this Voting Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid,illegal or unenforceable provision or portion of any provision had never been contained herein. (g)Specific Performance. Each of the parties hereto agrees, recognizes and acknowledges that a breach by it of any covenants oragreements contained in this Voting Agreement will cause the other parties to sustain damages for which they would not have anadequate remedy at law for money damages, and therefore each of the parties hereto agrees that in the event of any such breach anyaggrieved party shall be entitled to the remedy of specific performance of such covenants and agreements (without any requirementto post bond or other security and without having to prove actual damages) and injunctive and other equitable relief in addition toany other remedy to which it may be entitled, at law or in equity. (h)Remedies Cumulative. All rights, powers and remedies provided under this Voting Agreement or otherwise available in respecthereof at law or in equity shall be cumulative and not alternative, and the exercise of any such rights, powers or remedies by anyparty shall not preclude the simultaneous or later exercise of any other such right, power or remedy by such party. (i)No Waiver. The failure of any party hereto to exercise any right, power or remedy provided under this Voting Agreement orotherwise available in respect hereof at law or in equity, or to insist upon compliance by any other party hereto with its obligationshereunder, and any custom or practice of the parties at variance with the terms hereof, will not constitute a waiver by such party ofits right to exercise any such or other right, power or remedy or to demand such compliance. (j)No Third Party Beneficiaries. This Voting Agreement is not intended to confer upon any person other than the parties heretoany rights or remedies hereunder. (k)Governing Law. This Voting Agreement will be governed and construed in accordance with the laws of the State of Delaware,without giving effect to the principles of conflict of laws thereof. (l)Submission to Jurisdiction. Each party to this Voting Agreement irrevocably consents and agrees that any legal action orproceeding with respect to this Agreement and any action for enforcement of any judgment in respect thereof will be brought in thestate or federal courts located within the jurisdiction of the United States District Court for the Southern District of New York,and, by execution and delivery of this Voting Agreement, each party to this Voting Agreement hereby irrevocably submits to andaccepts for itself and in respect of its property, generally and unconditionally, the exclusive jurisdiction of the aforesaid courts andappellate courts from any appeal thereof. Each party to this Voting Agreement further irrevocably consents to the service of processout of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof in the manner set forth inSection 9(e). Each party to this Voting Agreement hereby irrevocably waives any objection which it may now or hereafter have tothe laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Voting Agreement broughtin the courts referred to above and hereby further irrevocably waives and agrees not to plead or claim in any such court that anysuch action or proceeding brought in any such court has been brought in an inconvenient forum. Nothing in this Section 9(l) shallbe deemed to constitute a submission to jurisdiction, consent or waiver with respect to any matter not specifically referred to herein. -7-Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (m)WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY INCONNECTION WITH ANY ACTION, SUIT OR PROCEEDING IN CONNECTION WITH THIS VOTING AGREEMENT. (n)Description Headings. The description headings used herein are for convenience of reference only and are not intended to bepart of or to affect the meaning or interpretation of this Voting Agreement. (o)Counterparts. This Voting Agreement may be executed in counterparts, each of which will be considered one and the sameVoting Agreement and will become effective when such counterparts have been signed by each of the parties and delivered to theother parties, it being understood that all parties need not sign the same counterpart. (p)No Survival. No representations, warranties and covenants of the Stockholder in this Agreement shall survive the merger. TheStockholder shall have no liability hereunder except for any willful and material breach of this Agreement by the Stockholder. (q)Action in Stockholder Capacity Only. The parties acknowledge that this Agreement is entered into by each Stockholder solelyin such Stockholder’s capacity as the beneficial owner of such Stockholder’s Shares and, notwithstanding anything herein to thecontrary, nothing in this Agreement in any way restricts or limits any action taken by such Stockholder or any designee or relatedparty of such Stockholder in his or her capacity as a director or officer of the Company and the taking of any actions in his or hercapacity as an officer or director of the Company will not be deemed to constitute a breach of this Agreement, regardless of thecircumstances related thereto. [SIGNATURE PAGE FOLLOWS] -8-Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. IN WITNESS WHEREOF, Parent and each of the Stockholders have caused this Voting Agreement to be duly executed as of the day and year firstabove written. NEOSTEM, INC. By: Name Title CHINA BIOPHARMACEUTICALS HOLDINGS, INC. By: Name Title Richard Berman Director Steven Myers Director Dr. Joseph Zuckerman Director Larry A. May Vice President and Chief Financial Officer Catherine M. Vaczy Vice President and General Counsel -9-Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Mark Weinreb President and Director Dr. Robin L. Smith Chief Executive Officer and Chairman of the Board -10-Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 10.4 LOCK UP AND VOTING AGREEMENT LOCK UP AND VOTING AGREEMENT dated November 2, 2008 (the “Voting Agreement”) is by and between NEOSTEM, INC., a Delawarecorporation (the "Parent”), The CHINA BIOPHARMACEUTICALS HOLDINGS, INC., a Delaware corporation (the “Company”), and the individuals orentities listed on Schedule A annexed hereto (collectively, the “Stockholders” and each individually is a “Stockholder”). RECITALS WHEREAS, concurrent with the execution of this Voting Agreement, the Company, Parent and CBH Acquisition LLC (“Subco”), a Delaware limitedliability company and a wholly owned subsidiary of Parent, have entered into an Agreement and Plan of Merger dated of even date herewith (as amended fromtime to time, the “merger agreement”) pursuant to which the Company, which owns 51% of the equity of Suzhou Erye Pharmaceuticals Co. Ltd ("Erye"), willbe merged with and into Subco with Subco continuing as the surviving company and as a direct wholly owned subsidiary of Parent (the “merger”); WHEREAS, the Stockholders are the record and beneficial owners of certain shares of common stock, par value $0.001 per share, of the Company(the “Common Shares”), all outstanding shares of Series A Preferred Stock, par value $0.001 per share, of the Company (the "Series A Preferred Stock") andall outstanding shares of Series B Preferred Stock, par value $0.001 per share, of the Company (the "Series B Preferred Stock") in the amounts set forthopposite the Stockholder's name on Schedule A hereto, and/or may become, at any time after the date hereof, the record and beneficial owners of shares ofcapital stock of the Company (the Common Shares, Series A Preferred Stock, Series B Preferred Stock and any shares of capital stock of the Company thatmay be acquired after the date hereof are collectively referred to herein as the “Shares”); and WHEREAS, as an inducement and a condition to entering into the merger agreement, Parent desires that each of the Stockholders agree, and each ofthe Stockholders is willing to agree, to enter into this Voting Agreement. NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, the Parent, the Company and each of the Stockholders, intending to be legally bound, hereby agree as follows: 1. Certain Definitions. In addition to the terms defined elsewhere herein, capitalized terms used and not defined herein have the respectivemeanings ascribed to them in the merger agreement. For purposes of this Voting Agreement: (a)“Beneficially Own” or “Beneficial Ownership” with respect to any securities means having “beneficial ownership” of suchsecurities as determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),including pursuant to any agreement, arrangement or understanding, whether or not in writing. Without duplicative counting ofthe same securities by the same holder, securities Beneficially Owned by a Person shall include securities Beneficially Owned byall other Persons with whom such Person would constitute a “group” within the meaning of Section 13(d)(3) of the Exchange Act. Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (b)“Person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint stockcompany, trust (including any beneficiary thereof), unincorporated organization or government or any agency or politicalsubdivision thereof. 2. Disclosure. Each of the Stockholders hereby agrees to permit the Company and Parent to publish and disclose in the Company's ProxyStatement, and any press release or other disclosure document which Parent and the Company reasonably determine to be necessary or desirable in connectionwith the merger and any transactions related thereto, each Stockholder's identity and ownership of the Shares and the nature of each Stockholder'scommitments, arrangements and understandings under this Voting Agreement. 3. Series A and B Preferred Approval; Voting of Company Stock. (a) Each of the Stockholders, to the extent they are holders of shares of Series A Preferred Stock or Series B Preferred Stock, in satisfaction of allcontractual and legal requirements, hereby: (i) consents to the Company’s execution and delivery of the merger agreement and the taking of all actions by theCompany to effect the merger; and (ii) agrees that, during the period commencing on the date hereof and continuing until the Termination Date (as definedbelow), contemporaneously with any meeting of the holders of the Shares, however called, or in connection with any written consent of the holders of theShares, the Stockholder shall cause the shares of Series A Preferred Stock and Series B Preferred Stock held of record or Beneficially Owned by theStockholder, whether now owned or hereafter acquired, to consent in writing to the merger, adoption of the merger agreement and any actions required infurtherance thereof. (b) Each of the Stockholders, to the extent they are holders of shares of Series A Preferred Stock or Series B Preferred Stock, in satisfaction of anyrequirements of the Certificate of Designations of Series A Preferred Stock or Series B Preferred Stock of the Company (the “Certificate of Designations”) orotherwise, hereby (i) consents to the provisions in the merger agreement which provide for the merger consideration to be paid to holders of shares of Series APreferred Stock and Series B Preferred Stock in the manner set forth in the merger agreement and (ii) waives any right to notice of the merger under theCertificate of Designations or otherwise. Each of the Stockholders, to the extent they are holders of shares of Series B Preferred Stock, agrees to take allactions and execute all documents which the Parent or the Company reasonably requests to effect the exchange of their equity interests in the Company for theParent securities described in the merger agreement on the terms set forth in the merger agreement. In particular, the holder of the Series B Preferred Stockagrees to exchange such shares, and all other equity interests it owns in the Company, for the RimAsia Exchanged Common Shares, the Series C ConvertiblePreferred Stock and the Class B Warrants. RimAsia also agrees to cancel all warrants it holds in the Company simultaneously with the merger, whichwarrants (the "RimAsia CBH Warrants") are fully described on Schedule A. Each of the Stockholders, to the extent they are holders of Series A PreferredStock, agrees to take all actions and execute all documents which the Parent or the Company reasonably requests to cancel and/or exchange their Series APreferred Stock as partial consideration for shares of NeoStem Common Stock as more particularly set forth in the merger agreement. The holders of SeriesB Preferred Stock also agree to cancel all warrants. They hold in the Company simultaneously with the merger, which warrants are fully described onSchedule A. The holders of Series A Preferred Stock and Series B Preferred Stock agree to cancel all Series A and Series B Preferred Stock held by them, toreturn the certificates for such shares to the Company and to execute any other documents reasonably requested by the Company or NeoStem simultaneouslywith delivery by the Company to them of the securities described above as consideration. -2-Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (c) Each of the Stockholders hereby agrees that, during the period commencing on the date hereof and continuing until the first to occur of (x) theEffective Time of the merger or (y) the taking by the Board of Directors of the Company of any action permitted under the merger agreement properly toterminate the merger agreement in accordance with its terms (the “Termination Date”), at any meeting of the holders of the Shares, however called, or inconnection with any written consent of the holders of the Shares, he shall vote (or cause to be voted) the Shares held of record or Beneficially Owned by theStockholder, whether now owned or hereafter acquired: (i) in favor of approval of the merger, adoption of the merger agreement and any actions required infurtherance thereof and hereof, (ii) against any action or agreement that would result in a breach in any respect of any covenant, representation or warranty, orany other obligation or agreement, of the Company under the merger agreement or any Stockholder under this Voting Agreement and (iii) except as otherwiseagreed to in writing in advance by Parent, against the following actions (other than the merger and the transactions contemplated by this Voting Agreement andthe merger agreement): (A) any extraordinary corporate transaction, such as a merger, consolidation or other business combination involving the Company,(B) a sale, lease or transfer of a material amount of assets of the Company, or a reorganization, recapitalization, dissolution or liquidation of the Company;(C)(1) any change in a majority of the individuals who constitute the Company's board of directors; (2) any change in the present capitalization of theCompany or any amendment of the Company's Certificate of Incorporation or By-Laws; (3) any material change in the Company's corporate structure orbusiness; or (4) any other action which, in the case of each of the matters referred to in clauses (C)(1), (2) or (3), is intended, or could reasonably be expected,to impede, interfere with, delay, postpone, or materially and adversely affect the merger and the transactions contemplated by this Voting Agreement and themerger agreement. (d) To the extent that any Stockholder holds any options, warrants or other rights to acquire securities of the Company, theStockholder consents to the treatment of such securities under the merger agreement and agrees to exchange and/or cancel any options or warrants as providedin the merger agreement. (e) Each of the Stockholders, to the extent they are holders of the Company’s Series A Preferred Stock or Series B Preferred Stock,agrees that notwithstanding anything else in any agreement to the contrary, (i) no further consent of or notice to the holders of the Series A or Series B PreferredStock shall be required in connection with the Company’s execution of the merger agreement or consummation of the transactions contemplated thereby,including, without limitation, the merger and (ii) neither the Company’s execution of the merger agreement or consummation of the transactions contemplatedthereby, including, without limitation, the merger, shall trigger, or give any legal rights except as contemplated by the merger agreement. -3-Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (f) RimAsia agrees that any accrued dividends and any interest and penalties are cancelled, so that RimAsia will have no claims against NeoStemfollowing consummation of the Merger other than to receive the consideration provided in the merger agreement. 4. Covenants, Representations and Warranties of the Company and each Stockholder. The Company represents and warrants to Parent,and each Stockholder represents and warrants to Parent severally with respect to the securities held by it, that to the best of its knowledge, the signatories tothis Agreement, as listed on Exhibit A, constitute (a) the holders of 100% of the Series A Preferred Stock of the Company, (b) the holders of 100% of the SeriesB Preferred Stock of the Company, and (c) that there are no other classes of equity or persons with voting rights with respect to the merger other than theholders of the Series A and Series B Preferred Stock and the Common Stock of the Company. Each of the Stockholders hereby severally represents andwarrants (with respect to such Stockholder only and not with respect to each other Stockholder) to, and agrees with, Parent as follows: (a)Ownership of Securities. Such Stockholder is the sole record and Beneficial Owner of the number of shares set forth oppositesuch Stockholder's name on Schedule A hereto. On the date hereof, the Shares set forth opposite the Stockholder's name onSchedule A hereto constitute all of the Shares or other securities of the Company owned of record or Beneficially Owned by suchStockholder or with respect to which such Stockholder has voting power by proxy, voting agreement, voting trust or other similarinstrument. Such Stockholder has sole voting power and sole power to issue instructions with respect to the matters set forth inSection 3 hereof, sole power of disposition, sole power of conversion, sole power to demand and waive appraisal rights and solepower to agree to all of the matters set forth in this Voting Agreement, in each case with respect to all of the Shares set forth oppositesuch Stockholder's name on the signature page hereof, with no limitations, qualifications or restrictions on such rights, subject toapplicable securities laws, and the terms of this Voting Agreement. (b)Authorization. Such Stockholder has the legal capacity, power and authority to enter into and perform all of such Stockholder'sobligations under this Voting Agreement. The execution, delivery and performance of this Voting Agreement by such Stockholderwill not violate any other agreement to which such Stockholder is a party including, without limitation, any voting agreement,stockholders agreement, voting trust, trust or similar agreement. This Voting Agreement has been duly and validly executed anddelivered by such Stockholder and constitutes a valid and binding agreement enforceable against such Stockholder in accordancewith its terms. There is no beneficiary or holder of a voting trust certificate or other interest of any trust of which suchStockholder is a trustee whose consent is required for the execution and delivery of this Voting Agreement or the consummation bysuch Stockholder of the transactions contemplated hereby. If such Stockholder is married and such Stockholder's Sharesconstitute community property, this Voting Agreement has been duly authorized, executed and delivered by, and constitutes a validand binding agreement of, such Stockholder's spouse, enforceable against such person in accordance with its terms. -4-Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (c)No Conflicts. (i) Except as may be required under Section 13 of the Exchange Act, no filing with, and no permit, authorization,consent or approval of, any state or federal public body or authority is necessary for the execution of this Voting Agreement bysuch Stockholder and the consummation by such Stockholder of the transactions contemplated hereby and (ii) none of theexecution and delivery of this Voting Agreement by such Stockholder, the consummation by such Stockholder of the transactionscontemplated hereby or compliance by such Stockholder with any of the provisions hereof shall (A) conflict with or result in anybreach of the organizational documents of such Stockholder (if applicable), (B) result in a violation or breach of, or constitute(with or without notice or lapse of time or both) a default (or give rise to any third party right of termination, cancellation, materialmodification or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license,contract, commitment, arrangement, understanding, agreement or other instrument or obligation of any kind to which suchStockholder is a party or by which such Stockholder or any of its properties or assets may be bound, or (C) violate any order,writ injunction, decree, judgment, order, statute, rule or regulation applicable to such Stockholder or any of its properties or assets. (d)No Encumbrances. Such Stockholder's Shares at all times during the term hereof will be Beneficially Owned by suchStockholder, free and clear of all liens, claims, security interests, proxies, voting trusts or agreements, understandings orarrangements or any other encumbrances whatsoever. (e)No Solicitation. Such Stockholder agrees not to take any action inconsistent with or in violation of the merger agreement. (f)Restriction on Transfer; Proxies and Non-Interference. At any time during the period (the "Lock-Up Period") from the datehereof until the earlier of (i) one hundred and eighty (180) days following the closing of the Merger or (ii) the termination of theMerger Agreement, such Stockholder shall not, directly or indirectly, (i) except for a Permitted Transfer (as defined below) andexcept as contemplated by the merger agreement, offer for sale, sell, transfer, tender, pledge, encumber, assign or otherwise disposeof, or enter into any contract, option or other arrangement or understanding with respect to or consent to the offer for sale, sale,transfer, tender, pledge, encumbrance, assignment or other disposition of, any or all of any such Stockholder's Shares, or anyinterest therein, or any or all of any such Stockholder's shares of NeoStem Common Stock or NeoStem Preferred Stock, or anyinterest therein, whether such shares are held by such Stockholder as of the date hereof or are acquired by such Stockholder fromand after the date hereof, whether in connection with the merger or otherwise (together with the Shares, the "Lock-Up Shares"), (ii)except as contemplated by this Voting Agreement, grant any proxies or powers of attorney, deposit any Shares into a voting trust orenter into a voting agreement with respect to the Lock-Up Shares, or (iii) take any action that would make any representation orwarranty of such Stockholder contained herein untrue or incorrect or have the effect of preventing or disabling such Stockholderfrom performing such Stockholder's obligations under this Voting Agreement. -5-Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (g)Reliance by Parent. Such Stockholder understands and acknowledges that Parent is entering into the merger agreement inreliance upon such Stockholder's execution and delivery of this Stockholder Agreement. (h)Permitted Transfer. Notwithstanding the foregoing or any other provision of this Agreement to the contrary, any Stockholdermay sell or transfer any Shares to any Stockholder or any other Person who executes and delivers to Parent an agreement, in formand substance acceptable to Parent, to be bound by the terms of this Agreement to the same extent as the transferring Stockholder(any such transfer, a “Permitted Transfer”). (h)Restriction on Conversion. Each of the Stockholders hereby irrevocably agrees not to convert any Series A Preferred Stock orSeries B Preferred Stock that the Stockholder beneficially owns at or prior to the effective time of the merger except with NeoStem'sconsent and agrees to receive in exchange for the Shares in the merger the consideration provided for in the merger agreement. 5. Waiver of Appraisal Rights. Each of the Stockholders hereby irrevocably waives any and all appraisal, dissenter or other similar rightswhich the Stockholder may otherwise have with respect to the consummation of the merger, including without limitation, any rights pursuant to Section 262of the Delaware General Corporation Law. Each of the Stockholders acknowledges that it has been afforded a reasonably opportunity to review informationand ask questions regarding the merger agreement and the merger. 6. Stop Transfer Legend. (a)Each of the Stockholders agrees and covenants to Parent that such Stockholder shall not request that the Company register thetransfer (book-entry or otherwise) of any certificate or uncertificated interest representing any of such Stockholder's Shares, unlesssuch transfer is made in compliance with this Voting Agreement. (b)Without limiting the covenants set forth in paragraph (a) above, in the event of a stock dividend or distribution, or any changein Shares by reason of any stock dividend, split-up, recapitalization, combination, exchange of shares or the like, other thanpursuant to the merger, the term “Shares” shall be deemed to refer to and include any and all shares into which or for which any orall of the Shares may be changed or exchanged, including, without limitation, shares of NeoStem Common Stock and/or NeoStemPreferred Stock issued in respect thereof in connection with the merger agreement or otherwise, and appropriate adjustments shallbe made to the terms and provisions of this Voting Agreement. -6-Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 7. Further Assurances. From time to time until the expiration of the Lock-Up Period, at Parent's request and without further consideration,each Stockholder shall execute and deliver such additional documents and take all such further lawful action as may be necessary or desirable to consummateand make effective, in the most expeditious manner practicable, the transactions contemplated by this Voting Agreement. 8. Stockholder Capacity. If any Stockholder is or becomes during the term hereof a director or an officer of the Company, such Stockholdermakes no agreement or understanding herein in his capacity as such director or officer. Each of the Stockholders signs solely in his or her capacity as therecord and Beneficial Owner of the Stockholder's Shares. 9. Termination. Except as otherwise provided herein, the covenants and agreements contained herein with respect to the Shares shall terminateupon the earlier of (a) the Termination Date regardless of the circumstances or (b) the expiration of the Lock-Up Period. 10. Miscellaneous. (a)Entire Agreement. This Voting Agreement constitutes the entire agreement among the parties with respect to the subject matterhereof and supersedes all other prior agreements and understandings, both written and oral, between the parties with respect to thesubject matter hereof. (b)Certain Events. Subject to Sections 4(f) and (g) hereof, each of the Stockholders agrees that this Voting Agreement and theobligations hereunder shall attach to each such Stockholder's Shares and shall be binding upon any Person to which legal orBeneficial Ownership of such Shares shall pass, whether by operation of law or otherwise, including without limitation, eachStockholder's heirs, guardians, administrators or successors. Notwithstanding any such transfer of Shares, the transferor shallremain liable for the performance of all obligations under this Voting Agreement. (c)Assignment. This Voting Agreement shall not be assigned by operation of law or otherwise without the prior written consent ofParent in the case of an assignment by any Stockholder and each Stockholder in the case of any assignment by Parent; providedthat Parent may assign, in its sole discretion, its rights and obligations hereunder to any direct or indirect wholly owned subsidiaryof Parent, but no such assignment shall relieve Parent of its obligations hereunder if such assignee does not perform suchobligations. -7-Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (d)Amendment and Modification. This Voting Agreement may not be amended, changed, supplemented, waived or otherwisemodified or terminated, except upon the execution and delivery of a written agreement executed by the parties hereto affected bysuch amendment. (e)Notices. Any notice or other communication required or which may be given hereunder shall be in writing and delivered (i)personally, (ii) via telecopy, (iii) via overnight courier (providing proof of delivery) or (iv) via registered or certified mail (returnreceipt requested). Such notice shall be deemed to be given, dated and received (i) when so delivered personally, via telecopy uponconfirmation, or via overnight courier upon actual delivery or (ii) two days after the date of mailing, if mailed by registered orcertified mail. Any notice pursuant to this section shall be delivered as follows: If to the Stockholder, to the address set forth for the Stockholder on Schedule A to this Voting Agreement.If to Parent:NeoStem, Inc.420 Lexington AvenueSuite 450New York, New York 10170Attn: Catherine Vaczy, Esq.Facsimile: (646) 514-7787with copies to:Lowenstein Sandler, PC65 Livingston AvenueRoseland, NJ 07078Attention: Alan Wovsaniker, Esq.Fax: 973-597-2565 (f)Severability. Whenever possible, each provision or portion of any provision of this Voting Agreement will be interpreted in sucha manner as to be effective and valid under applicable law but if any provision or portion of any provision of this VotingAgreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, suchinvalidity, illegality or unenforceability will not affect any other provision or portion of any provision of this Voting Agreement insuch jurisdiction, and this Voting Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid,illegal or unenforceable provision or portion of any provision had never been contained herein. -8-Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (g)Specific Performance. Each of the parties hereto agrees, recognizes and acknowledges that a breach by it of any covenants oragreements contained in this Voting Agreement will cause the other parties to sustain damages for which they would not have anadequate remedy at law for money damages, and therefore each of the parties hereto agrees that in the event of any such breach anyaggrieved party shall be entitled to the remedy of specific performance of such covenants and agreements (without any requirementto post bond or other security and without having to prove actual damages) and injunctive and other equitable relief in addition toany other remedy to which it may be entitled, at law or in equity. (h)Remedies Cumulative. All rights, powers and remedies provided under this Voting Agreement or otherwise available in respecthereof at law or in equity shall be cumulative and not alternative, and the exercise of any such rights, powers or remedies by anyparty shall not preclude the simultaneous or later exercise of any other such right, power or remedy by such party. (i)No Waiver. The failure of any party hereto to exercise any right, power or remedy provided under this Voting Agreement orotherwise available in respect hereof at law or in equity, or to insist upon compliance by any other party hereto with its obligationshereunder, and any custom or practice of the parties at variance with the terms hereof, will not constitute a waiver by such party ofits right to exercise any such or other right, power or remedy or to demand such compliance. (j)No Third Party Beneficiaries. This Voting Agreement is not intended to confer upon any person other than the parties heretoany rights or remedies hereunder. (k)Governing Law. This Voting Agreement will be governed and construed in accordance with the laws of the State of Delaware,without giving effect to the principles of conflict of laws thereof. (l)Submission to Jurisdiction. Each party to this Voting Agreement irrevocably consents and agrees that any legal action orproceeding with respect to this Agreement and any action for enforcement of any judgment in respect thereof will be brought in thestate or federal courts located within the jurisdiction of the United States District Court for the Southern District of New York,and, by execution and delivery of this Voting Agreement, each party to this Voting Agreement hereby irrevocably submits to andaccepts for itself and in respect of its property, generally and unconditionally, the exclusive jurisdiction of the aforesaid courts andappellate courts from any appeal thereof. Each party to this Voting Agreement further irrevocably consents to the service of processout of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof in the manner set forth inSection 10(e). Each party to this Voting Agreement hereby irrevocably waives any objection which it may now or hereafter have tothe laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Voting Agreement broughtin the courts referred to above and hereby further irrevocably waives and agrees not to plead or claim in any such court that anysuch action or proceeding brought in any such court has been brought in an inconvenient forum. Nothing in this Section 10(l)shall be deemed to constitute a submission to jurisdiction, consent or waiver with respect to any matter not specifically referred toherein. -9-Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (m)WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY INCONNECTION WITH ANY ACTION, SUIT OR PROCEEDING IN CONNECTION WITH THIS VOTING AGREEMENT. (n)Description Headings. The description headings used herein are for convenience of reference only and are not intended to bepart of or to affect the meaning or interpretation of this Voting Agreement. (o)Counterparts. This Voting Agreement may be executed in counterparts, each of which will be considered one and the sameVoting Agreement and will become effective when such counterparts have been signed by each of the parties and delivered to theother parties, it being understood that all parties need not sign the same counterpart. (p)No Survival. No representations, warranties and covenants of the Stockholder in this Agreement shall survive the merger. TheStockholder shall have no liability hereunder except for any willful and material breach of this Agreement by the Stockholder. (q)Action in Stockholder Capacity Only. The parties acknowledge that this Agreement is entered into by each Stockholder solelyin such Stockholder’s capacity as the beneficial owner of such Stockholder’s Shares and, notwithstanding anything herein to thecontrary, nothing in this Agreement in any way restricts or limits any action taken by such Stockholder or any designee or relatedparty of such Stockholder in his or her capacity as a director or officer of the Company and the taking of any actions in his or hercapacity as an officer or director of the Company will not be deemed to constitute a breach of this Agreement, regardless of thecircumstances related thereto. [SIGNATURE PAGE FOLLOWS]-10-Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. IN WITNESS WHEREOF, Parent and each of the Stockholders have caused this Voting Agreement to be duly executed as of the day and year firstabove written. NEOSTEM, INC. By: Name: Title: CHINA BIOPHARMACEUTICALS HOLDINGS, INC. By: Name: Title: RIMASIA CAPITAL PARTNERS, LP By: Name: Title: ERYE ECONOMY AND TRADING CO. LTD. By: Name: Title: ERYE PHARMACEUTICALS COMPANY LTD. By: Name: Title: Chris Peng Mao Director and Chief Executive Officer -11-Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. An Lufan Director, President and Chief Technology Officer Liu Xiaohao Director and Senior Vice President Stephen E. Globus Director Mingsheng Shi Director and Chief Operating Officer Jian Zhang Director and Chief Financial Officer Weihua Ding Director Dr. Wang Taihua -12-Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 21.1 SUBSIDIARIES OF NEOSTEM, INC. NeoStem Therapies, Inc., a Delaware corporation. Stem Cell Technologies, Inc., a Florida corporation. CBH Acquisition LLC, a Delaware limited liability company. Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the incorporation by reference into the Registration Statements on Form S-8 (Registration No. 333-107438 and Registration No. 333-144265) and Registration Statement on Form S-3 (Registration No. 333-145988) of NeoStem, Inc. of our report dated March 31, 2009 with respect to theconsolidated financial statements of NeoStem, Inc. and Subsidiaries appearing in this Annual Report on Form 10-K of NeoStem, Inc. for the year endedDecember 31, 2008. /s/ Holtz Rubenstein Reminick LLP Holtz Rubenstein Reminick LLP Melville, New York March 31, 2009 Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 31.1 CERTIFICATIONS I, Robin L. Smith, certify that: 1. I have reviewed this Annual Report on Form 10-K of NeoStem, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrantand have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure thatmaterial information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly duringthe period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter(the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant'sinternal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting. Date: March 31, 2009 /s/ Robin L. Smith M.D. Name: Robin L. Smith M.D. Title: Chief Executive Officer(Principal Executive Officer) A signed original of this written statement required by Section 302 has been provided to the Corporation and will be retained by the Corporation and furnishedto the Securities and Exchange Commission or its staff upon request. Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 31.2 CERTIFICATIONS I, Larry A. May, certify that: 1. I have reviewed this Annual Report on Form 10-K of NeoStem, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrantand have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure thatmaterial information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly duringthe period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of thedisclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter(the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant'sinternal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting. Date: March 31, 2009 /s/ Larry A. May Name: Larry A. May Title: Chief Financial Officer(Principal Financial Officer) A signed original of this written statement required by Section 302 has been provided to the Corporation and will be retained by the Corporation and furnishedto the Securities and Exchange Commission or its staff upon request. Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 32.1 CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report on Form 10-K (the "Report") of NeoStem, Inc. (the "Corporation") for the year ended December 31, 2008, as filed withthe Securities and Exchange Commission on the date hereof, I, Robin L. Smith, Chief Executive Officer of the Corporation, certify, pursuant to 18 U.S.C.Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation. Dated: March 31, 2009 /s/ Robin L. Smith M.D. Robin L. Smith M.D.Chief Executive Officer The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350,Chapter 63 of Title 18, United States Code) and is not being filed as part of the Report or as a separate disclosure document. A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature thatappears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Corporation and will be retainedby the Corporation and furnished to the Securities and Exchange Commission or its staff upon request. Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 32.2 CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report on Form 10-K (the "Report") of NeoStem, Inc. (the "Corporation") for the year ended December 31, 2008, as filed withthe Securities and Exchange Commission on the date hereof, I, Larry A. May, Chief Financial Officer of the Corporation, certify, pursuant to 18 U.S.C.Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation. Dated: March 31, 2009/s/ Larry A. May Larry A. MayChief Financial Officer The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350,Chapter 63 of Title 18, United States Code) and is not being filed as part of the Report or as a separate disclosure document. A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature thatappears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Corporation and will be retainedby the Corporation and furnished to the Securities and Exchange Commission or its staff upon request. Source: Caladrius Biosciences, Inc., 10-K, March 31, 2009Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.

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