SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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

FOR THE QUARTERLY PERIOD ENDED ~~MARCH 31,~~JUNE 30, 2009

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

For the Transition Period from __________________ to _________________________

Commission File Number 0-10909

(Exact name of registrant as specified in its charter)

DELAWARE	22-2343568
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

420 LEXINGTON AVE, SUITE 450 NEW YORK, NEW YORK	10170
(Address of principal executive offices)	(zip code)

Registrant’s telephone number, including area code: 212-584-4180

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Large accelerated filer o

Non-accelerated filer o (Do not check if a smaller reporting company)

Smaller reporting company x

~~7,949,476~~8,541,848 SHARES, $.001 PAR VALUE, AS OF ~~MAY 13,~~AUGUST 12, 2009

March 31,
2009

December 31,
2008

Current assets:
  Cash and cash equivalents $ 392,791 $ 430,786
  Accounts receivable 12,109 7,193
  Prepaid expenses and other current assets 136,274 92,444

        Total current assets 541,174 530,423

Property and equipment, net 84,428 99,490
Goodwill 558,169 558,169
Intangible Asset 624,986 633,789
Other assets 2,112 2,445

$ 1,810,869 $ 1,824,316

See accompanying notes to consolidated financial statements

Three Months Ended March 31,
2009 2008
Earned revenues $ 45,138 $ 693
Direct costs 23,550 -
Gross profit 21,588 693
Selling, general and administrative 1,878,536 2,524,331
Operating loss (1,856,948 ) (2,523,638 )
Other income (expense):
Interest income 304 -
Interest expense (10,599 ) (3,551 )
Net loss $ (1,867,243 ) $ (2,527,199 )

Basic and diluted
Net loss per share $ (.24 ) $ (.52 )
Weighted average
shares outstanding 7,802,894 4,904,542

~~See accompanying notes to consolidated financial statements~~

Adjustments to reconcile net loss to net cash used in operating activities:

See accompanying notes to consolidated financial statements.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - The Company

Note 2 - Summary of Significant Accounting Policies

Principles of Consolidation: The consolidated financial statements include the accounts of NeoStem, Inc. (a Delaware corporation) and its wholly-owned subsidiaries, NeoStem Therapies, Inc. ~~and~~, Stem Cell Technologies, Inc. and NeoStem (China) Inc. and its variable interest entities, Qingdao Niao Bio-Technology Ltd and Beijing Ruijiao Bio-Technology Ltd. All intercompany transactions and balances have been ~~eliminated.~~eliminated

Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Cash Equivalents: Short-term cash investments, which have a maturity of ninety days or less when purchased, are considered cash equivalents in the consolidated statement of cash flows.

Concentrations of Credit-Risk: Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash. The Company places its cash accounts with high credit quality financial institutions, which at times may be in excess of the FDIC insurance limit.

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 of computer software programs are amortized over their estimated useful lives of five years. Depreciation is computed on the straight-line method. Repairs and maintenance 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 for the current year and (b) deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an enterprise’s financial statement or tax returns.

Comprehensive Income (Loss): Refers to revenue, expenses, gains and losses that under generally accepted accounting principles are included in comprehensive income but are excluded from net income as these amounts are recorded directly as an adjustment to stockholders’ equity. At ~~March 31, 2009 and~~ December 31, 2008 there were no such adjustments required. At June 30, 2009 a $62 exchange rate loss was recognized which has been reflected on the balance sheet as accumulated other comprehensive loss as a separate component of stockholder’s equity, in accordance with the consolidation of a foreign operation.

Goodwill: Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in a business combination. The Company reviews recorded goodwill for potential impairment annually or upon the occurrence of an impairment indicator. The Company performed its annual impairment tests as 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 are determined to be indefinite. Purchased intangible assets are carried at cost less accumulated amortization. Definite-lived intangible assets, which consists of patents and rights associated with the Very Small Embryonic Like (“VSEL”) Stem Cells which constitutes the principal assets acquired in the acquisition of Stem Cell 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 and whenever 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 in circumstances indicate that the carrying amount of an asset that we expect to hold and use may not be recoverable, we will estimate the undiscounted future cash 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 be necessary, 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)"). SFAS No. 123(R) establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. This statement focuses 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 to SFAS 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. The Company determines value of stock options by the Black-Scholes option pricing model. The value of options issued ~~during 2008, 2007 and~~since January 1, 2006 or that were unvested at January 1, 2006 are being recognized as an operating expense ratably on a monthly basis over the vesting period of each option. ~~There were no options issued during the three months ended March 31, 2009.~~ With regard to stock options and warrants issued to non-employees the Company has adopted EITF 96-18 “Accounting for Equity Instruments That Are Issued to Other Than 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 by dividing 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 basic earnings 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. For the three and six months ended ~~March 31~~June 30, 2009 and 2008 the Company incurred net losses and therefore no common stock equivalents were utilized in the calculation of earnings per share. At ~~March 31,~~June 30, 2009 and 2008 the ~~company~~Company had common stock equivalents outstanding as follows:

March 31, 2009 March 31, 2008
Stock Options 1,718,300 1,826,800
Warrants 5,305,692 2,107,688

Series D Stock, Common stock equivalents

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 Company recognizes revenue related to the collection and cryopreservation of autologous adult stem cells when the cryopreservation process is completed which is generally twenty four hours after cells have been collected. Revenue related to advance payments of storage fees is recognized ratably over the period covered by the advanced payments. The Company also earns revenue, in the form of start up fees, from physicians seeking to establish autologous adult stem cell collection centers. ~~These fees are in consideration of the Company establishing a service territory for the physician.~~ Start up fees are ~~recognized~~billed once the agreement has been signed and the physician has been qualified by the Company’s credentialing committee. During the quarter ended June 30, 2009, the Company has modified its revenue recognition policy relative to these fees to recognize such fees as revenues ratably over the appropriate period of time to which the revenue element relates. Previously these fees were recognized in full when agreements were signed and the physician had been qualified by the Company’s credentialing committee. This modification of our revenue recognition policy did not have a material impact on our results of operations.

Note 3 – Recent Accounting Pronouncements

~~In April 2009, the FASB issued FSP FAS 141(R)- 1 “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies”~~. This FSP amends the guidance in FASB Statement No. 141(R) and is effective for the first annual reporting period beginning on or after December 15, 2008. We are currently evaluating the requirements of this pronouncement on our proposed merger with China Biopharmaceuticals Holdings, Inc. but do not anticipate this will have an impact on the merger or our financial position if the merger is approved by shareholders.

In April 2009, the FASB issued FASB Staff Position No. 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies, (“FSP 141(R)-1”). FSP 141(R)-1 amends and clarifies SFAS No. 141(R). FSP 141(R)-1 requires an acquirer to recognize at fair value, at the acquisition date, an asset acquired or a liability assumed in a business combination that arises from a contingency if the acquisition-date fair value of that asset or liability can be determined during the measurement period. If the fair value cannot be determined during the measurement period, an asset or a liability shall be recognized at the acquisition date if the asset or liability can be reasonably estimated and if information available before the end of the measurement period indicates that it is probable that an asset existed or that a liability had been incurred at the acquisition date. FSP 141(R)-1 amends the disclosure requirements of SFAS No. 141(R) to include business combinations that occur either during the current reporting period or after the reporting period but before the financial statements are issued. FSP 141(R)-1 is effective for fiscal years beginning after December 15, 2008 and interim periods within those years. We are currently evaluating the requirements of this pronouncement as it relates to our proposed merger with China Biopharmaceuticals Holdings, Inc. but do not anticipate this will have an impact on our financial position or our consolidated financial statements post-merger. This statement was effective January 1, 2009.

In December 2008, the FASB issued FASB Staff Position (“FSP”) FAS 140-4 and FIN 46(R)-8, Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities. This document increases disclosure requirements for public companies and is effective for reporting periods (interim and annual) that end after December 15, 2008. The purpose of this FSP is to promptly improve disclosures by public entities and enterprises until the pending amendments to FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, and FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, are finalized and approved by the Board. The FSP amends Statement 140 to require public entities to provide additional disclosures about transferors’ continuing involvements with transferred financial assets. It also amends Interpretation 46(R) to require public enterprises, including sponsors that have a variable interest in a variable interest entity, to provide additional disclosures about their involvement with variable interest entities. We implemented the requirements of FSP FAS 140-4 and FIN 46(R)-8 in the second quarter of 2009. As the requirements of this literature only impact our disclosures, there was no impact to our financial results.

In April 2009, the FASB issued FASB Staff Position No. 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly , (“FSP 157-4”). FSP 157-4 provides additional guidance for estimating fair value in accordance with SFAS No. 157 when the volume and level of activity for the asset or liability have significantly decreased. FSP 157-4 also includes guidance on identifying circumstances that indicate a transaction is not orderly. FSP 157-4 requires the disclosure of the inputs and valuation technique used to measure fair value and a discussion of changes in valuation techniques and related inputs, if any, during the period. FSP 157-4 also requires that the entity define major categories for equity securities and debt securities to be major security types. FSP 157-4 is effective for interim and annual reporting periods ending after June 15, 2009. We have adopted FSP 157-4 in our quarter ended June 30, 2009. The adoption of FASB Staff Position No. 157-4 did not have a material impact on our financial position or results of operations.

In April 2009, the FASB issued FASB Staff Position No. 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments, (“FSP 115-2 and FSP 124-2”). This FSP amends the other-than-temporary impairment guidance in U.S. GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. This FSP does not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities. FSP 115-2 and 124-2 requires the entity to assess whether the impairment is other-than-temporary if the fair value of a debt security is less than its amortized cost basis at the balance sheet date. This statement also provides guidance to assessing whether or not the impairment is other-than-temporary and guidance on determining the amount of the other-than-temporary impairment that should be recognized in earnings and other comprehensive income. FSP 115-2 and 124-2 also requires an entity to disclose information that enables users to understand the types of securities held, including those investments in an unrealized loss position for which the other-than-temporary impairment has or has not been recognized. FSP 115-2 and 124-2 are effective for interim and annual reporting periods ending after June 15, 2009. The adoption of FASB Staff Position No. 115-2 and FAS 124-2 did not have a material impact on our financial position or results of operations.

In April 2009, the FASB issued FASB Staff Position No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments. This Staff Position amends FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments, to require disclosures about fair value of financial instruments at interim reporting periods. This Staff Position is effective for interim reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009 provided FSP No. FAS 115-2 and FAS 124-2 (described above) are also early adopted. We adopted FSP No. FAS 107-1 in our quarter ended June 30, 2009. The adoption of FASB Staff Position No. FAS 107-1 and APB 28-1 did not have a material impact on our financial position or results of operations.

In May 2009, the FASB issued Statement No. 165, Subsequent Events. Statement 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued or are available to be issued. We have adopted Statement 165 in our quarter ended June 30, 2009. The adoption of Statement No. 165 did not have a material impact on our financial position or results of operations.

In June 2009, the FASB issued Statement No. 166, Accounting for Transfers of Financial Assets, an amendment of FASB Statement No. 140. Statement 166 eliminates the concept of a “qualifying special-purpose entity” from Statement 140 and changes the requirements for derecognizing financial assets. We will adopt Statement 166 in 2010 and are currently evaluating the impact of its pending adoption on our consolidated financial statements.

In June 2009, the FASB issued Statement No. 167, Amendments to FASB Interpretation No. 46(R) . Statement 167 amends the evaluation criteria to identify the primary beneficiary of a variable interest entity provided by FASB Interpretation No. 46(R) , Consolidation of Variable Interest Entities—An Interpretation of ARB No. 51 . Additionally, Statement 167 requires ongoing reassessments of whether an enterprise is the primary beneficiary of the variable interest entity. We will adopt Statement 167 in 2010 and are currently evaluating the impact of its pending adoption on our consolidated financial statements.

Note 4 - Notes Payable

Note 5 – Convertible Redeemable Preferred Stock

Note 56 - Stockholders’ Equity

In January 2009, the Company entered into an agreement with a consultant which has been providing investor ~~relation~~relations 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. In consideration for providing services under this agreement, the Company agreed to issue to the consultant an aggregate of 40,000 shares of restricted Common Stock, to vest as to 8,000 shares on the last day of each month of January through May 2009. The issuance of such securities was subject to the approval of the NYSE Amex, which approval was obtained in May 2009. The stock issued to this consultant had a value of $27,600 of which ~~$16,560 was recognized as an operating expense in~~$11,040 and $27,600 were charged to operations during the three and six months ended ~~March 31,~~June 30, 2009, respectively, based on the vesting of the Common Stock. ~~The issuance of such securities is subject to the approval of the NYSE Amex.~~

In January 2009, the Company issued to its grant consultant, 20,000 shares of restricted Common Stock, with a value of $13,800 as a bonus under the consultant’s Consulting Agreement with the Company dated February 8, 2008, in consideration for such consultant being instrumental in securing the Company’s inclusion in the Department of Defense Fiscal Year 2009 Appropriations Bill in the net amount of approximately $680,000. The issuance of such securities was subject to the approval of the NYSE Amex, which approval was obtained in January 2009. The Company has entered into a new consulting agreement with ~~such~~this grant consultant for a one-year term commencing as of January 1, 2009. In consideration for services, the consultant 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’s Common Stock on the date of execution of the agreement, which has been determined to be 67,416 shares, to vest as to one-half of such shares on June 30, 2009 and the remaining one-half of such shares on December 31, 2009. The issuance of such securities ~~are~~was subject to the approval of the NYSE ~~Amex.~~Amex, which approval was obtained in May 2009. For the three and six months ended ~~March 31,~~June 30, 2009 the Company has recognized $15,000 and $30,000, respectively, as an operating expense relating to these shares.

In March 2009, the Company entered into an agreement with a consultant, ~~which has been providing financial market related services to the Company since 2008,~~ pursuant to which this consultant was retained to provide additional financial market related services for a three month period. In partial consideration for providing services under this agreement, the Company agreed to issue to the consultant an aggregate of 25,000 shares of restricted Common Stock, with a value of $17,250, to vest as to one-third of the shares at the end of each monthly period during the term. The issuance of such securities was subject to the approval of the NYSE Amex, which approval was obtained in May 2009. Based on these vesting terms, the Company has recognized ~~$5,750~~$11,500 and $17,250 as an operating expense in the three and six months ended ~~March 31, 2009.~~June 30, 2009, respectively. This consultant was also issued a five year warrant to purchase 25,000 shares of restricted Common Stock at a per share exercise price of $1.00, with a value of $16,867. (See Warrants below).

In April 2009, the Company entered into an agreement with a consultant to provide support services in connection with our pending Merger to the Company. In partial consideration for providing services under this agreement, the Company agreed to issue to the consultant an aggregate of 10,000 shares of Common Stock, with a value of $11,800. The issuance of such securities was subject to the approval of the NYSE Amex, which approval was obtained in May 2009. The Company has recognized $11,800 as an operating expense in the three and six months ended June 30, 2009, respectively.

In March 2009, the Company entered into an agreement with a consultant to provide financial market related services for a three month period beginning March 2009. As partial consideration for providing services under this agreement, the Company agreed to issue to the consultant a five year warrant to purchase 25,000 shares of restricted Common Stock at a per share exercise price of $1.00, with a value of $16,867, vesting in its entirety at the end of the ~~term; for the three months ended March 31, 2009 the Company recognized $5,622 as an operating expense.~~term. The issuance of ~~this warrant is~~such securities was subject to the approval of the NYSE ~~Amex.~~Amex, which approval was obtained in May 2009. The Company recognized $11,245 and $16,867 as an operating expense for the three and six months ended June 30, 2009, respectively.

Number Outstanding
Weighted Average
Remaining

Number
Exercisable

Exercise Price March 31, 2009 Contractual Life (years) March 31, 2009
$ 0.78 to $ 3.02 3,295,709 4.36 2,504,045
$ 3.02 to $ 5.27 184,250 2.91 184,250
$ 5.27 to $ 7.51 802,761 3.43 802,761
$ 7.51 to $ 8.00 1,022,972 3.36 1,022,972
5,305,692 4,514,028

The weighted average estimated fair value of stock options granted in the three months ended ~~March 31,~~June 30, 2009 and 2008 were $0$1.96 and ~~$1.48,~~$1.12, respectively and for the six months ended June 30, 2009 and 2008 the weighted average estimated fair value of stock options granted were $1.96 and $1.52, respectively. The fair value of options at the date of grant was estimated using the Black-Scholes option pricing model. During the ~~three~~six months ended ~~March 31,~~June 30, 2009 and the years ended 2008, 2007 and 2006, the Company took into consideration the guidance under SFAS 123(R) and SAB No. 107 when reviewing and updating assumptions. The expected volatility is based upon historical volatility of our stock and other contributing factors. The expected term is based upon observation of actual time elapsed between date of grant and exercise of options for all employees. Previously such assumptions were determined based on historical data.

Three Months Ended March 31,
2009 2008
Expected term (in years) None Issued 10

Expected volatility None Issued 119% to 121%

Expected dividend yield None Issued 0%

Risk-free interest rate None Issued 3.64% to 3.85%

~~(1)~~

--(1) — All options are exercisable for a period of ten years.

Number Outstanding
Weighted Average
Remaining

Number
Exercisable

Exercise Price March 31, 2009 Contractual Life (years) March 31, 2009
$ 0.71 to $ 4.17 827,000 8.82 663,000
$ 4.17 to $ 7.63 800,200 7.86 639,200
$ 7.63 to $ 11.08 50,000 6.70 46,000
$ 11.08 to $ 14.54 3,000 4.92 3,000
$ 14.54 to $ 25.00 38,100 6.27 38,100
1,718,300 1,389,300

As of ~~March 31,~~June 30, 2009, there was approximately ~~$1,086,300~~$1,392,179 of total unrecognized compensation costs related to unvested stock option awards of which ~~$92,500~~$424,594 of unrecognized compensation expense is related to stock options that vest over a weighted average life of ~~.25~~1.27 years. The balance of ~~$993,800~~$967,584 of unrecognized compensation costs is related to stock options that vest based on the accomplishment of business milestones.

	Options			Weighted Average Grant Date Fair Value
Non-Vested at December 31, 2008		435,250		$	2.93
Issued		850,000			1.96
Expired		(2,000	)		7.00
Canceled		(7,500	)		1.00
Vested		(804,250			1.90
Exercised		-
Non-Vested at June 30, 2009		471,500		$	2.96

Options Weighted Average Grant Date Fair Value
Non-Vested at December 31, 2008 435,250 $ 2.93
Issued -
Expired (2,000 )
Canceled (5,000 ) 2.81
Vested (99,250 ) 1.68
Exercised -
Non-Vested at March 31, 2009 329,000 $ 3.35

The total value of shares vested during the ~~three~~six months ended ~~March 31,~~June 30, 2009 was $~~59,770~~.$1,398,387.

The number of remaining shares authorized to be issued for the U.S. Equity Plan is as follows

Shares authorized for Issuance under the 2003 Equity Plan			2,500,000
Shares authorized for Issuance under the 2009 Equity Plan			3,800,000
Options Outstanding			(2,565,800)
Common Stock Issued			(834,185)
Options Exercised			(2,500)
Remaining shares authorized to be issued as of June 30, 2009			2,897,515

Note 67 - Segment Information

~~To date,~~Historically, the Company’s operations have been conducted in only one geographical segment and since March 31, 2007 the Company has realized revenue only from the banking of adult autologous stem cells. In June, 2009 the Company established NeoStem (China), Inc. (“NeoStem China” or the “WFOE”) as a wholly foreign owned subsidiary of NeoStem. The WFOE is domiciled in Qingdao and under its scope of business approved by the Chinese regulatory authorities, the WFOE may engage in the research & development, transfer and technological consultation service of bio-technology, regenerative medical technology and anti-aging technology (excluding the development or application of human stem cell, gene diagnosis and treatment technologies); consultation of economic information; import, export and wholesaling of machinery and equipments (the import and export do not involve the goods specifically stipulated in/by state-operated trade, import & export quota license, export quota bidding, export permit, etc.). In furtherance of complying with PRC’s foreign investment prohibition on stem cell research and development, clinical trials and related activities, we conduct our current business in the PRC via two domestic variable interest entities. To date operations in China have been limited. Our segment data is as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
Revenues earned from external customers:
United States	$	31,600		$	23,500		$	76,700		$	24,200
China		-			-			-			-

Income/(loss) from operations:
United States	$	(3,856,400	)	$	(2,361,800	)	$	(5,539,000	)	$	(4,884,100	)
China	$	(1,086,700	)		-		$	(1,271,400	)		-

Note 78 - Related Party Transactions

In order to move forward certain research and development activities, strategic relationships in various clinical and therapeutic areas as well as to support activities related to the Company’s proposed Merger and Share Exchange transactions, ~~and~~other initiatives in China as well as other ongoing obligations of the Company, on February 25, 2009 and March 6, 2009, respectively, the Company issued promissory notes to RimAsia Capital Partners , L. P. (“RimAsia”), a principal stockholder of the Company, in the principal amounts of $400,000 and $750,000, respectively. The notes ~~bear~~bore interest at the rate of 10% per annum and ~~are~~were due and payable on October 31, 2009, except that all principal and accrued interest on the ~~notes shall be~~Notes was immediately due and payable in the event the Company ~~raises~~raised over $10 million in equity financing prior to October 31, 2009. The notes ~~contain~~contained standard events of default and in the event of a default that iswas not subsequently cured or waived, the interest rate ~~will~~would increase to a rate of 15% per annum and, at the option of RimAsia and upon notice, the entire unpaid principal balance together with all accrued interest thereon ~~will~~would be immediately due and payable. The notes or any portion thereof ~~may~~could be prepaid at any time and from time to time at the discretion of the Company without premium or penalty. On April 9, 2009 these notes and the related accrued interest were repaid from the proceeds of the April 2009 Private Placement. In addition, April 9, 2009 NeoStem paid RimAsia $472,559 for reimbursement of funds advanced by RimAsia in connection with NeoStem’s expansion activities in China.

In order to accelerate the establishment of Qingdao Niao for research and development purposes in the PRC, in April 2009 Suzhou Erye Pharmaceuticals Company Ltd. (“Erye”) advanced in Renminbi the U.S. dollar equivalent of $176,000 to the shareholder of Qingdao Niao on our behalf. In May 2009 we repaid the amount of $176,000 to Erye. Erye is owned 51% by CBH (with which we have entered into the Merger Agreement) and 49% by Erye Economy and Trading Co. Ltd (of which Fullbright Finance Limited, a beneficial holder of more than five percent of the Company’s stock, is a wholly-owned subsidiary).

On April 30, 2009 the Company entered into a License and Referral Agreement with Promethean Corporation (“Promethean”) through its subsidiary Ceres Living, Inc. (“Ceres”) to use certain Company marks and publications in connection with certain sales and marketing activities relating to its nutritional supplement known as AIO Premium Cellular (the “Product”); and in connection with the license, Ceres will pay to the Company or the Stem for Life Foundation specified fees for each unit of the Product sold; and Ceres shall engage in a referral service with respect to the Company’s adult stem cell collection and storage activities. Ceres will receive a specified fee from the Company for each client referred who completes and pays for a stem cell collection. The term of the agreement is three years with each party having the right to renew annually, thereafter. The CEO of Promethean is in an ~~$11 million~~exclusive relationship with the CEO of the Company.

As part of the stem cell initiatives undertaken by NeoStem, on June 15, 2009, NeoStem signed a ten-year, exclusive, royalty bearing agreement with Enhance BioMedical Holdings Limited (“Enhance”) to provide Enhance with the training, technical, and other assistance required for Enhance to offer stem cell based therapies in Taiwan, Shanghai, and five other provinces in eastern China including Jiangsu, Zhejiang, Fujian, Anhui and Jiangxi. This agreement also gives NeoStem the option to acquire up to a 20% fully diluted equity interest in Enhance for a period of five years. NeoStem will receive certain milestone payments as well as be entitled to a stated royalty on the revenues derived from Enhance’s offering ~~of preferred stock~~these stem cell based therapies. Enhance was an investor in the April 2009 Private Placement, pursuant to which ~~RimAsia~~it purchased $5 million of ~~Company securities. (See Note 8 - Subsequent Events)~~Series D Units, and thus acquired 400,000 shares of Series D Stock (convertible into 4,000,000 shares of Common Stock upon stockholder approval) and 4,000,000 Series D Warrants, each to purchase one share of Common Stock at an exercise price of $2.50 per share (to become exercisable upon stockholder approval).

Note 9 – Commitments

The Company has entered into an agreement for the lease of executive office space from SLG Graybar Sublease LLC (the “Landlord”) at Suite 450, 420 Lexington Avenue, New York, with a lease term effective April 1, 2009 through June 30, 2013 (the “Lease”). Rental, storage and utility payments are currently in the aggregate approximate monthly amount of $20,600. To help defray the cost of the Lease, the Company has licensed to third parties the right to occupy certain of the offices in Suite 450 and use certain business services. Such license payments currently total approximately $11,360 per month and the license agreements are for periods of one year or less. The CEO of one such licensee, Promethean Corporation, is in an exclusive relationship with the Company’s CEO. The Lease was entered into pursuant to an assignment and assumption of the original lease from the original lessor thereof, DCI Master LDC (the lead investor in a private placement by the Company in June 2006) and affiliates of DCI Master LDC and Duncan Capital Group LLC (a former financial advisor to and an investor in the Company), for which original lease a principal of such entities acted as guarantor (the “Guarantor”), a consent to such assignment from the Landlord and a lease modification agreement between the Company and the Landlord, such documents being dated April 13, 2009 with effective delivery April 17, 2009. The Company was credited with an amount remaining as a security deposit with the Landlord from such original lessor (the “Security Deposit Credit”), was required to deposit an additional 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 the Guarantor of the original lease. The total payments made by the Company for such security deposit and payment of the Security Deposit Credit to the Guarantor were in the approximate aggregate amount of $157,100. Richard Berman, a director of the Company, utilizes an office in Suite 450 in his capacity as a member of the Company’s Audit Committee and Chairman of the Company’s Compensation and Nominating Committees, and for other business purposes.

In May 2009, Qingdao Niao, the Chinese domestic company controlled by the WOFE, NeoStem China, through various business arrangements, entered into leases with Beijing Zhong-guan-cun Life Science Park Development Corp., Ltd. pursuant to which Qingdao Niao is leasing laboratory, office and storage space in Beijing for the aggregate monthly amount of approximately $23,000. Lease payments are due quarterly in advance, and upon entering into the lease a three month security deposit was required in addition to the first quarterly payment. The term of the leases is for approximately three years.

Note 810 - Subsequent Events

~~On April 9,~~The following are the subsequent events that management believes materially effect the financial position or results of operations or are otherwise informative to the reader of these financial statements from July 1, 2009 to August 12, 2009.

As of July 1, 2009, the Company ~~completed a private placement financing totaling $11 million from three Asia-based investors. The financing consisted~~entered into an Amendment No. 1 to Agreement and Plan of Merger with China Biopharmaceuticals Holdings, Inc. (“CBH”), China Biopharmaceuticals Corp., CBH’s wholly-owned subsidiary (“CBC”) and CBH Acquisition LLC, NeoStem’s wholly-owned subsidiary. Pursuant to the terms of the ~~issuance~~Amendment:

The number of shares of NeoStem Common Stock to be issued to the CBH Common Stockholders was reduced to an aggregate of 7,150,000 shares (such that the Exchange Ratio in the Merger will be 0.19255), with no additional shares being escrowed;

The number of shares to be issued to RimAsia Capital Partners, L.P. ("RimAsia") will be increased to 6,458,009 shares of Common Stock and 8,177,512 shares of NeoStem Series C Convertible Preferred Stock, each with a liquidation preference of $1.125 and convertible to shares of NeoStem Common Stock at an initial conversion price of $.90 (with the Class B warrants to be issued to RimAsia eliminated), in exchange for certain advances made or to be made by RimAsia and described below;

125,000 shares of NeoStem Common Stock will be issued to Erye Economy and Trading Co. Ltd. (“EET”) (the 49% holder of Suzhou Erye Pharmaceuticals Company Ltd. (“Erye”), 51% of which is owned by CBH and which 51% will be acquired by NeoStem in the Merger) or its designee for assistance in effectuating the Merger;

The number of shares to be issued to Steven E. Globus and Chris Mao, respectively a director and CEO of CBH, in exchange for satisfaction of loans made by them to CBH, shall be reduced to an aggregate of approximately 17,158 shares;

Conditions to closing were amended to (a) add a condition that in order to satisfy its obligations under a memorandum of understanding with EET, CBH shall have caused Erye to transfer the land and building for its principal manufacturing facility to EET or its affiliate for a sum to be agreed upon, and for EET or its affiliate to lease that facility back to Erye at a nominal fee for a term through construction of Erye's new manufacturing facility and until such date as Erye’s new facility is completed and fully operational (which transaction will remove a significant asset from the CBH balance sheet) and (b) provide that instead of a spinoff of the CBC shares as a liquidating distribution to the shareholders of CBH, such shares may be privately sold or transferred to a liquidating trust;

Eric Wei (a principal of RimAsia) will be added to the current NeoStem Board of Directors after the Merger is effected, and thereafter, Shi Mingsheng (a principal of EET and Fullbright and a current director of CBH) will also be added after receipt of PRC approvals;

Privately issued NeoStem warrants outstanding immediately prior to the closing of the Merger shall be amended to reduce their exercise price if the current exercise price is $4.00 and above;

The Compensation Committee of NeoStem’s Board of Directors may in lieu of lowering the exercise price of outstanding options to $.80 as provided in the original merger agreement, lower the exercise price to a price which is greater than $.80 (but not less than fair market value) and provide alternative cash or equity consideration to eligible NeoStem employees, directors, advisors and consultants;

The outside date for completion of the Merger is extended to October 31, 2009.

Additionally, as of ~~880,000 units priced at $12.50 per unit, with each unit consisting of one share~~July 1, 2009, NeoStem, CBH, CBC and RimAsia, which is a significant investor in the Company and CBH, entered into a Funding Agreement pursuant to which it was agreed that RimAsia shall supply additional funding to both NeoStem and CBH in an amount up to $1.6 million (including approximately $1 million advanced to date), which amount shall be deemed settled upon its receipt of the ~~Company’s Series D Convertible Redeemable Preferred Stock (“Series D Stock”) (convertible, subject~~increased amount of NeoStem securities described above to be received by RimAsia as part of the Merger consideration. If less than $1.6 million has been advanced at that time, the difference shall be paid to NeoStem at the closing of the merger. In the event the Merger has not received shareholder approval by October 31, 2009, NeoStem is required to repay RimAsia all payments incurred or made by RimAsia on behalf of NeoStem.

On July 6, 2009, the Company entered into an employment agreement with Alan Harris, M.D., Ph.D. (the “Employment Agreement”), pursuant to which Dr. Harris will serve as ~~described below, into ten shares~~the Company’s Vice President of ~~Common Stock)~~Drug Development and ~~ten warrants~~Regulatory Affairs for a period of three years from July 6, 2009 (the “Commencement Date”), unless such term is earlier terminated by Dr. Harris or the Company in accordance with ~~each warrant~~the provisions of the Employment Agreement. In this capacity, Dr. Harris will be responsible for overseeing the research, development and regulatory activities of the Company; overseeing the regulatory activities of the Company; assisting in the preparation and submission of grant applications for funding; advancing the Company’s intellectual property portfolio, as well as other activities. In consideration for his services to the Company, Dr. Harris shall receive a fixed annual salary of $240,000 and shall be entitled to participate in the Company’s compensation and employee benefit plans and programs.

On the Commencement Date, Dr. Harris was granted an option to purchase ~~one share of Common Stock.~~

~~Upon the affirmative vote of holders of a majority of the voting power~~150,000 shares of the Company’s Common Stock required pursuant to the Company’s Amended and Restated By-Laws and the NYSE Amex, each share of Series D Stock will automatically be converted into ten (10) shares of Common Stock at an initial conversion price of $1.25 per share based on an original issue price of $12.50 per share; provided that if by October 31, 2009 such affirmative vote is not achieved, the Company must redeem all shares of Series D Stock at a redemption price per share of $12.50 plus the accrued dividends as of such date. The Series D Stock has an accruing dividend of ten percent (10%) per annum, payable (i) annually in cash on each anniversary of the issue date, provided that the shares of Series D Stock remain outstanding on such date or (ii) upon a liquidation, dissolution or winding up of the Company. The Series D Stock (i) ranks senior to all of the Company’s capital stock with respect to the payment of dividends and to the distribution of assets upon liquidation, dissolution or winding up, (ii) does not have any voting rights, (iii) does not have any anti-dilution protection, and (iv) does not have any preemptive rights. The warrants have a per share exercise price equal to $2.50 and are callable by the Company if the Common Stock trades at a price equal to a minimum of $3.50 for a specified period of time. Subject to the affirmative vote of the Company’s shareholders and the rules of the NYSE Amex, the warrants will become exercisable for a period of five years. The securities sold were sold without registration under the Securities Act of 1933, as amended (the " Securities Act") pursuant to Regulation S and Regulation D, each promulgated under the Securities Act and may not be resold in the United States or to U.S. persons unless registered under the Securities Act or pursuant to an exemption from registration under the Securities Act.

~~-12-~~

The investing firms were RimAsia Capital Partners, L,P, (“RimAsia”), a pan-Asia private equity firm operating in partnership with a regional network of strategic investors drawn from leading Asian families and companies, investing $5 million for 400,000 units; Enhance Biomedical Holding Corporation based in Shanghai, also investing $5 million for 400,000 units and Elancrest Investments Ltd., a Singapore-based firm, investing $1 million for 80,000 units. RimAsia previously invested $1.25 million in NeoStem, as was announced on September 3, 2008. The funds will be used to support the development of NeoStem’s VSEL (very small embryonic-like stem cells) technology licensed from the University of Louisville and help advance NeoStem’s expansion activities in China, including those relating to recent licenses acquired, its pending acquisitions and medical tourism – defined as travel to a foreign country by people whose primary and explicit purpose is to receive advanced medical therapies - relating to wounds, orthopedics and regenerative medicine. NeoStem hopes to be a part of the growing medical tourism industry through its connections with leading physicians in China and the U.S. NeoStem plans to connect U.S. citizens with advanced therapies not yet available in the U.S., and to attract people from other countries to seek safe and effective regenerative therapies as they become available here. A portion of the funds also will be used to expand U.S.-based operations including for general corporate purposes. In addition, a portion of the proceeds were used to repay $1,150,000 in bridge financing (see ~~Note 4 - Notes Payable~~) received from RimAsia in February and March 2009, plus $12,014 in interest on the bridge financing and other costs recently advanced by RimAsia in connection with the Company’s expansion activities in China totaling $472,559.09. The notes issued in the bridge financing provided that all principal and accrued interest on the notes would be immediately due and payable in the event the Company raised over $10 million in equity financing prior to October 31, 2009. As a result of the private placement financing, such amounts became due and have been paid as described above.

The Company has entered into an agreement for the lease of executive office space from SLG Graybar Sublease LLC (the “Landlord”) at Suite 450, 420 Lexington Avenue, New York, with a lease term effective April 1, 2009 through June 30, 2013 (the “Lease”). Rental and utility payments are currently in the aggregate approximate monthly amount of $20,100. To help defray the cost of the Lease, the Company has licensed to third parties the right to occupy certain of the offices in Suite 450 and use certain business services. Such license payments currently total approximately $13,860 per month and the license agreements are for periods of one year or less. The CEO of one such licensee, Promethean Corporation, is in an exclusive relationship with the Company’s CEO. The Lease was entered into pursuant to an assignment and assumption of the original lease from the original lessor thereof, DCI Master LDC (the lead investor in a private placement by the Company in June 2006) and affiliates of DCI Master LDC and Duncan Capital Group LLC (a former financial advisor to and an investor in the Company), for which original lease a principal of such entities acted as guarantor (the “Guarantor”), a consent to such assignment from the Landlord and a lease modification agreement between the Company and the Landlord, such documents being dated April 13, 2009 with effective delivery April 17, 2009. The Company was credited with an amount remaining as a security deposit with the Landlord from such original lessor (the “Security Deposit Credit”), was required to deposit an additional 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 the Guarantor of the original lease. The total payments made by the Company for such security deposit and payment of the Security Deposit Credit to the Guarantor were in the approximate aggregate amount of $157,100. Richard Berman, a director of the Company, utilizes an office in Suite 450 in his capacity as Chairman of the Company’s Audit, Compensation and Nominating Committees and for other business purposes.

In order to advance our regenerative medicine business abroad and expand our expertise into a new area, on April 13, 2009, the Company entered into a License Agreement (the “License Agreement”) with Regenerative Sciences, LLC (“RSI”) with an effective date of March 3, 2009 pursuant to which the Company acquired an exclusive, royalty bearing, perpetual and irrevocable license, with the right to sublicense, for the Asia territory, to use an innovative process that rapidly grows a patient’s own adult stem cells to treat a variety of musculoskeletal diseases. The licensed procedure has been developed by RSI, a Colorado-based company focused on developing a medical procedure for the treatment of chronic orthopedic conditions. The licensed intellectual property consists of two issued patents, seven pending patent applications and know-how and improvements relating thereto all as set forth in the License Agreement. The License Agreement provides for a specified percentage of royalties to be paid to RSI by the Company and certain diligence obligations of the Company.

On May 1, 2009, the Company and RSI entered into a three year consulting agreement effective March 3, 2009 whereby RSI will provide to the Company consulting services in the area of stem cell therapy in orthopedics for the development of business in Asia in return for which the Company has agreed to pay to the consultant an annual cash fee, payable monthly, and certain stated equity over the term of the agreement.

~~-13-~~

On April 23, 2009, the Company entered into a License Agreement with Vincent Falanga, M.D., pursuant to which the Company acquired a world-wide, exclusive, royalty bearing license, with the right to sublicense, to certain innovative stem cell technology and applications for wound healing. The term of the License Agreement continues until the later of ten years from the first commercial sale or the last to expire patent claim. The licensed intellectual property consists of a pending patent application and know-how, copyrights and trademarks, and improvements relating thereto. Dr. Falanga retained a royalty-free license to use the licensed intellectual property for professional use in his established medical practice and for doing medical research. The License Agreement provides for a specified percentage of royalties to be paid to Dr. Falanga by the Company and certain diligence obligations of the Company. The license agreement also calls for certain annual payments commencing with the execution of the agreement, creditable against royalties otherwise due and payable under the agreement.

On April 30, 2009 the Company entered into a License and Referral Agreement with Promethean Corporation (“Promethean”) through its subsidiary Ceres Living, Inc. (“Ceres”) to use certain Company marks and publications in connection with certain sales and marketing activities relating to its nutritional supplement known as AIO Premium Cellular (the “Product”); and in connection with the license, Ceres will pay to the Company or the Stem for Life Foundation specified fees for each unit of the Product sold; and Ceres shall engage in a referral service with respect to the Company’s adult stem cell collection and storage activities. Ceres will receive a specified fee from the Company for each client referred who completes and pays for a stem cell collection. The term of the agreement is three years with each party having the right to renew annually, thereafter. The CEO of Promethean is in an exclusive relationship with the CEO of the Company.

On April 9, 2009, the Company’s Board of Directors adopted and on May 8, 2009 the Company’s stockholders approved, the 2009 Equity Compensation Plan (the “2009 Plan”). The general purpose of the 2009 Plan is to provide an incentive to our employees, directors, consultants and advisors by enabling them to share in the future growth of our business. The 2009 Plan will be administered by the Compensation Committee of our Board of Directors. Pursuant to the 2009 Plan, the Compensation Committee may grant options to purchase shares of our Common Stock, stock appreciation rights and restricted stock units payable in shares of our Common Stock, as well as restricted or unrestricted shares of our Common Stock. The aggregate number of shares of Common Stock available for issuance in connection with options and awards granted under the 2009 Plan will be 3,800,000, subject to customary adjustments for stock splits, stock dividends or similar transactions. The Company intends to file with the Securities and Exchange Commission a Registration Statement on Form S-8 to register the shares of Common Stock underlying awards to be granted under the 2009 Plan. The 2009 Plan is subject to the approval of the NYSE Amex.

As of May 8, 2009, the Compensation Committee of the Board of Directors approved, subject to the filing of a Registration Statement on Form S-8 with the SEC to register the issuance of the shares issuable under the Company’s 2009 Equity Plan and the approval of the NYSE Amex of the listing of the shares issuable under the Company’s 2009 Plan, the making of certain awards under a Board of Directors Compensation Plan. Accordingly, the Compensation Committee approved the issuance to members of the Board acting in their capacity as Board members and to the Board Secretary, options to be issued under the 2009 Plan to purchase an aggregate of 575,000 shares of Common Stock. The options will be exercisable at an exercise price equal to the ~~fair market value~~closing price of the ~~common stock~~Common Stock on the date of ~~grant~~grant. The option vests as to 50,000 shares immediately and ~~will be fully exercisable upon grant. Additionally, Chairs~~as to the remaining 100,000 shares on the one year anniversary of the ~~Board~~Commencement Date. Upon (i) shareholder approval of the proposal to expand the option pool available under the 2009 Equity Plan and ~~Board Committees were authorized~~(ii) the consummation of the Merger with CBH, Dr. Harris shall be granted an option to ~~be issued for each Chair they hold, either $25,000 or 25,000 shares of fully vested Common Stock. Accordingly, an aggregate of $50,000 was paid and 50,000~~purchase 200,000 shares of Common Stock ~~will be awarded upon the satisfaction of the foregoing described conditions. Additionally, options to purchase an aggregate of 175,000 shares of Common Stock exercisable~~ at an exercise price equal to the ~~fair market value~~closing price of the Common Stock on the date of grant. This option shall vest as to 100,000 shares on the second anniversary of the Commencement Date and as to the remaining 100,000 shares on the third anniversary of the Commencement Date. The options granted to Dr. Harris shall be subject to written option grant agreements. In the event Dr. Harris is terminated other than for Cause (as defined in the Employment Agreement) within thirty days of a vesting date, the vesting of the applicable shares of Common Stock shall accelerate.

Additionally, upon the achievement of certain Milestones as set forth in the Employment Agreement, Dr. Harris shall receive a cash bonus of $15,000, payable within thirty days of the achievement of a Milestone. Dr. Harris shall also receive (i) reimbursement of $1,500 per month for health benefits; (ii) a $1,000 per month car allowance; and (iii) reimbursement for all reasonable travel and other reasonable expenses (in accordance with the Company’s policy) incurred by him in connection with the performance of his duties and obligations under the Employment Agreement.

The Company may terminate Dr. Harris’ employment prior to the expiration of the three-year term immediately upon written notice to Dr. Harris. Dr. Harris may terminate his employment with the Company upon sixty days prior written notice. If the Company terminates Dr. Harris’ employment other than for Cause (as defined in the Employment Agreement), the Company shall pay Dr. Harris severance equal to two months of base salary, payable on Dr. Harris’ regular payroll dates. Except as describe above, Dr. Harris’ options shall not vest beyond his termination date. No other payments shall be made, or benefits provided, to Dr. Harris by the Company except as otherwise required by law.

Dr. Harris previously executed a Confidentiality, Non-Compete and Inventions Assignment Agreement pursuant to which Dr. Harris agreed to be bound by certain non-compete provisions and certain non-solicitation provisions during the term of his employment with the Company.

On July 8, 2009, pursuant to a letter agreement (the “Letter Agreement”) entered into with Catherine M. Vaczy, Esq., the Vice President and General Counsel the Company, the Company reinstated and extended Ms. Vaczy’s employment agreement dated January 26, 2007, which employment agreement was amended on January 9, 2008 and August 29, 2008 (the “Original Agreement”). The Letter Agreement was effective as of July 8, 2009 (the “Effective Date”) and continues for a one year term (the “Term”). In consideration for Ms. Vaczy’s services during the Term, Ms. Vaczy shall receive a base salary of $182,500.

Upon the Effective Date, Ms. Vaczy shall receive (i) a stock award under the Company’s 2009 Equity Plan for 25,000 shares of Common Stock and (ii) an option grant for 200,000 shares of Common Stock under the Company’s 2009 Equity Plan with an exercise price equal to the closing price of the Common Stock on the date of grant, ~~vesting as~~which option shall vest with respect to 100,000 ~~ratably over a two year period~~shares on the Effective Date and aswith respect to ~~75,000 immediately~~the remaining 100,000 shares upon ~~grant were authorized to be issued to members~~shareholder approval of the Company’s ~~Scientific Advisory Board~~proposed Merger with CBH. Options granted to Ms. Vaczy shall remain exercisable for a period of two years following her termination of employment with the Company.

Additionally, upon shareholder approval of (i) the proposal to expand the option pool available under the 2009 Equity Plan and (ii) the merger with CBH, Ms. Vaczy shall be granted an option for 100,000 shares of Common Stock, which option shall vest in full on the first anniversary of the Effective Date. Ms. Vaczy shall also be entitled to a $5,000 cash bonus upon the ~~satisfaction~~achievement of each of two stated business milestones. Pursuant to the Letter Agreement, any severance payments to which Ms. Vaczy may become entitled under her Original Agreement shall be based upon her then-current salary for a three-month period.

On July 8, 2009, the Company granted under its 2009 Equity Plan to certain employees, directors, consultants and advisors, (i) options to purchase an aggregate of 1,330,000 shares of Common Stock at a per share exercise price equal to $1.71 which was the closing price of the ~~foregoing described conditions.~~Common Stock on the date of grant and (ii) an aggregate of 525,000 shares of Common Stock. A total of 900,000 options and 525,000 shares were granted to officers and a director. In lieu of cash bonuses to certain officers, the Company has agreed to pay taxes associated with the issuances of the shares of Common Stock granted to the officers in a total amount estimated to be $583,400.

On July 13, 2009, the Company terminated in accordance with the terms thereof the Share Exchange Agreement dated November 2, 2008 (the "Share Exchange Agreement") by and between NeoStem, China StemCell Medical Holding Limited, a Hong Kong company (the "HK Entity"), Shandong New Medicine Research Institute of Integrated Traditional and Western Medicine Limited Liability Company, a China limited liability company (the "Institute Co. ") (its preexistence is Shandong New Medicine Research Institute of Integrated Traditional and Western Medicine, “Institute”), Beijing HuaMeiTai Bio-technology Limited Liability Company (“WFOE”) and Zhao Shuwei (“HK Shareholder”). The Share Exchange Agreement provided for a transaction whereby NeoStem would acquire rights in the Institute Co. in connection with NeoStem's planned expansion into the PRC. As a result of the termination, the Company will be relieved of issuing the 5,000,000 shares of its Common Stock that would have been issued under the Share Exchange Agreement. Beginning in 2009, NeoStem embarked on other activities to expand its operations into the PRC through a stem cell division that will be in place of closing on the transactions contemplated by the Share Exchange Agreement. As a result on July 13, 2009, NeoStem terminated the Share Exchange Agreement and is in discussions regarding the possibility of acquiring an option to purchase the Institute Co. during the next three years.

On July 15, 2009, the Company filed with the SEC a Proxy Statement/Registration Statement on Form S-4 in connection with the Merger.

In July 2009, in connection with NeoStem’s determination to terminate its proposed Share Exchange transaction in favor of independently building out its stem cell business in China, NeoStem expanded its relationship with Shandong Life Science and Technology Research Institute (“SLSI”), of which Dr. Cai Jianqian of the Shandong Provincial Association of Chinese Medicine is President, to provide for commitments from SLSI in addition to those agreed to effective April 23, 2009 (described below). In return, NeoStem has agreed to grant to SLSI an additional 100,000 shares under its 2009 Non-U.S. Based Equity Plan (the “2009 Non-U.S. Plan”), subject to approval of the 2009 Non-U.S. Plan at the Company’s Special Meeting of Shareholders to be held in connection with the proposed Merger with CBH. Previously, effective April 23, 2009, the Company had entered into a ~~three year~~ ~~consulting agreement pursuant to which a consultant is providing~~Consulting Agreement with SLSI. Through SLSI, Dr. Cai Jianqian will provide consulting services to ~~the Company~~NeoStem in the area of business development, strategic planning and government affairs in the healthcare industry in the ~~People’s Republic~~PRC, including the introduction of ~~China (“PRC”), engaging in such activities as requested by the Company from time to time including, but not limited to the introduction~~NeoStem to hospitals and medical practices within the PRC to advance NeoStem’s strategic relationships. In return, NeoStem will pay SLSI an annual fee of $100,000 and issue SLSI an aggregate of 250,000 options under the NeoStem, Inc. 2009 Non-U.S. Plan, subject to the approval of the 2009 Non-U.S. Plan at the Special Meeting, to become exercisable over approximately a two year period. Dr. Cai Jianqian became acquainted with the Company through her son Chris Peng Mao, CEO of CBH.

On July 29, 2009, the Company amended the terms of its employment agreement with its Chief Executive Officer, Dr. Robin Smith to extend the term of Dr. Smith’s employment to December 31, 2011 and subject to consummation of the proposed Merger with CBH, awarded to Dr Smith a $275,000 cash bonus for ~~the advancement~~2009 and comparable minimum annual bonuses for 2010 and 2011.

Effective as of ~~strategic relationships~~July 27, 2009, NeoStem (China), Inc., a wholly foreign owned subsidiary of the Company in ~~return~~China (the “WFOE”), entered into an employment agreement with Peter Sun (the “Employment Agreement”), pursuant to which Mr. Sun will serve as the WFOE’s General Manager for a period of three years from July 27, 2009 (the “Commencement Date”), unless such term is earlier terminated by Mr. Sun or the WFOE in accordance with the provisions of the Employment Agreement. In this capacity, Mr. Sun will be responsible for overseeing the entire business, from the validation of WFOE’s business plan, to the execution of the WFOE’s strategy. Pursuant to the Employment Agreement, in consideration for his services to the WFOE, Mr. Sun shall receive a fixed annual salary and a monthly allowance to cover various expenses incurred by him in connection with the performance of his duties and obligations under the Employment Agreement. He shall also be entitled to receive employee benefits as required by Labor Contract Law of the People’s Republic of China (the “Chinese Labor Contract Law”). Upon the approval by the Company’s shareholders of its proposed Merger with CBH and the Company’s 2009 Non-US Based Equity Compensation Plan (the “Non-U.S. Plan”), subject to the rules of the NYSE Amex and further subject to all the terms and conditions of the Non-U.S. Plan, Mr. Sun shall be granted a stated warrant under the Non-U.S. Plan at an exercise price equal to the closing price of the Common Stock on the date of grant, subject to approval of the Company’s Compensation Committee of Board which vests based on the achievement of certain milestones as set forth in the Employment Agreement.

The Company or Mr. Sun may terminate this Employment Agreement according to certain provisions of Chinese Labor Contract Law. If Mr. Sun’s employment is terminated due to causes set forth under Chinese Labor Contract Law, the Company shall pay Mr. Sun the severance based on the number of years he has worked for the Company at the rate of one month’s wages for each full year worked. Mr. Sun has also executed a Confidentiality and Non-Compete Agreement pursuant to which Mr. Sun agreed to be bound by certain non-compete provisions and certain non-solicitation provisions.

In July 2009, the WOFE entered into a cooperation agreement with NeoStem’s PRC consultant, Shandong Life and Science Institute, a not-for-profit organization under PRC law, to organize and convene various clinical trials. This agreement requires funding by the WOFE in the amount of RMB 5,000,000 (approximately $730,000).

In August 2009 the Company entered into an additional services agreement with PCT pursuant to which PCT will provide advice, drawings, documents, equipment lists and other deliverables in connection with developing the Beijing laboratory. The Company is required to pay $60,000 to PCT for these services, $30,000 of which was paid upon execution of the agreement. The Company agreed to pay an additional $15,000 to PCT in the ~~consultant~~event PCT completes the services on an ~~annual cash fee, payable monthly, and certain stated equity over the term of the agreement.~~

~~-14-~~

expedited basis.

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

FORWARD LOOKING STATEMENTS

General

This Quarterly Report on Form 10-Q and the documents incorporated herein contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. When used in this Quarterly Report, statements that are not statements of current or historical 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 such forward-looking statements. Additionally, statements concerning our ability to successfully develop the adult stem cell business at home and abroad, the future of 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 that future, and the potential revenue growth of such business are forward-looking statements. Our future operating results are dependent upon many factors, and the Company's further development is highly dependent on future medical and research developments and market acceptance, which is outside its control. Forward-looking statements may not be realized due to a variety of factors, including, without limitation, (i) the Company’s ability to manage the business despite continuing operating losses and cash outflows; (ii) the Company’s ability to obtain sufficient capital or a strategic business arrangement to fund its operations and expansion plans, including meeting its financial obligations under various licensing and other strategic arrangements and the successful commercialization of the relevant technology; (iii) the Company’s ability to build the management and human resources and infrastructure necessary to support the growth of the business; (iv) competitive factors and developments beyond the Company’s control; (v) scientific and medical developments beyond the Company’s control; (vi) the Company’s inability to obtain appropriate governmental licenses or any other adverse effect or limitations caused by government regulation of the business; (vii) whether any of the Company’s current or future patent applications result in issued patents and the Company’s ability to obtain and maintain other rights to technology required or desirable for the conduct of its business; (viii) whether any potential strategic benefits of various licensing transactions will be realized and whether any potential benefits from the acquisition of these new licensed technologies will be realized; (ix) whether the Company can obtain the consents it may require to sublicensing arrangements from technology licensors in connection with technology development; (x) the Company’s ability to maintain its NYSE Amex listing; and (xi) the other factors discussed in Item 1A, “Risk Factors” contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 (the “Form 10-K”) and in other reports that we file with the SEC.

Proposed Merger; ~~Share Exchange Agreement; Other~~ China ~~Initiatives~~Expansion

Additional risks and uncertainties relate to (i) the Company’s proposed merger transaction (“Merger”) pursuant to an Agreement and Plan of Merger with China Biopharmaceuticals Holdings, Inc., a Delaware corporation ("CBH"), China Biopharmaceuticals Corp., a British Virgin Islands corporation and wholly-owned subsidiary of CBH, and CBH Acquisition LLC, a Delaware limited liability company and wholly-owned subsidiary of NeoStem to acquire a 51% ownership interest in Suzhou Erye Pharmaceuticals Company Ltd., a Sino-foreign joint venture with limited liability organized under the laws of the People’s Republic of China; and (ii) the Company’s proposed share exchange transaction (“Share Exchange”) pursuant to a Share Exchange Agreement to acquire through a series of contractual arrangements certain benefits from Shandong New Medicine Research Institute of Integrated Traditional and Western Medicine Limited Liability Company, a China limited liability company; and (iii) the Company’s other ~~initiatives~~expansion activities in China, that may cause actual future experience and results to differ materially from those discussed in these forward-looking statements. Important factors (i) related to the proposed Merger that might cause such a difference include, but are not limited to, (a) costs related to the Merger; (b) failure of the Company's or CBH’s stockholders to approve the Merger; (c) the Company's or CBH's inability to satisfy the conditions of the Merger; (d) the Company's inability to maintain its NYSE Amex listing; (e) the inability to integrate the Company’s and CBH's businesses successfully and grow such merged businesses as anticipated; (f) the need for outside financing to meet capital requirements; and (g) failure to have an effective Joint Venture Agreement satisfactory to the parties and regulatory authorities; (ii) related to the Share Exchange that might cause such a difference include, but are not limited to, (a) costs related to the Share Exchange; (b) failure of the Company’s stockholders to approve the Share Exchange; (c) an inability to satisfy the conditions of the Share Exchange; (d) the Company's inability to maintain its NYSE Amex listing; (e) the successful application of the variable interest entity to a prohibited business in China; (f) the inability to integrate the Company’s and Shandong's businesses successfully and grow such merged businesses as anticipated; and (g) the need for outside financing to meet capital requirements; (iii) related to the Company’s other initiatives in China that might cause such a difference include, but are not limited to, (a) costs related to funding these initiatives; (b) the successful application under Chinese law of the variable interest entity structure to the Company’s business, which structure the Company is relying on to conduct its business in China due to the fact that the Catalogue Guiding Foreign Investment in Industries in China categorizes the stem cell business as a prohibited business in China; (c) the inability to integrate the Company and the business operations in China successfully and grow such merged businesses as anticipated; and (d) the need for outside financing to meet capital requirements; and ~~(iv)~~(iii) related to each of the Merger ~~the Share Exchange~~ and the Company’s other ~~initiatives~~expansion activities in China, respectively, the other events and factors disclosed in the Company’s Current Reports on Form 8-K dated November 2, 2008 and July 2, 2009, respectively, relating to the Merger and ~~the Share Exchange,~~expansion into China, respectively, and other risk factors discussed in Item 1A, “Risk Factors” contained in the Company’s Form 10-K and in other periodic Company filings with the SEC and ~~to be~~ disclosed in the Proxy Statement/Registration Statement on Form S-4 ~~anticipated to be~~ filed with the SEC in connection with the ~~Merger and the Share Exchange.~~Merger. The Company’s filings with the Securities and Exchange Commission are available for review at www.sec.gov under “Search for Company Filings.” Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Except as required by law, the Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

The Company has begun other initiatives to expand its operations into China including with respect to technology licensing, establishment of stem cell processing and storage capabilities and research and clinical development. RimAsia, a principal stockholder of the Company, has been facilitating certain of these efforts and has paid certain expenses that the Company has agreed to reimburse (approximately $473,000 of which was reimbursed out of the proceeds of the private placement financing of preferred stock and warrants in April 2009 which raised gross proceeds of $11 million, described below). ~~The~~In connection with the expansion into China, the Company ~~is taking steps to establish a separate wholly foreign owned enterprise (a “WFOE”) and one or more limited liability companies~~has established the WFOE and put in place ~~separate~~ variable interest entity ~~documents~~arrangements with respect to each of Qingdao Niao and Beijing Research with respect to these ~~activities.~~activities (described below). The Company ~~is exploring~~believes that these activities will be sufficient to help the ~~possibility of these expansion activities~~Company expand into the China market and ~~other activities being~~shall be a substitute for its moving forward with closing the transactions under the Share Exchange Agreement.

The Company has engaged in various capital raising activities to pursue its business opportunities. In April and June of 2009, respectively, it raised gross proceeds of approximately $11 million and $5 million, respectively, through the private placement of its Series D Preferred Stock and Series D Warrants.

In June 2009, Qingdao Niao entered into a three year co-operation agreement with the Qingdao Second Sanatorium of Jinan Military Command (“Second Sanatorium”). As both a leading comprehensive hospital within the PLA network and as one of the principal healthcare centers in charge of ensuring the well-being of senior and retired military officials in China, Qingdao Second Sanatorium is a key player within the domestic anti-aging and cosmetics arena. Qingdao Niao intends to collaborate with Second Sanatorium to offer both stem cell based therapies for a variety of conditions as well as stem cell based anti-aging and cosmetics therapies.

RESULTS OF OPERATIONS

Three and Six Months Ended ~~March 31,~~June 30, 2009 ~~Compared~~compared to Three and Six Months Ended ~~March 31,~~June 30, 2008

The activities related to our proposed merger with CBH have increased our expenses by $392,400 primarily from the legal and professional services utilized to prepare for public filings and shareholder approval of our proposed merger.

Our efforts to establish an operation in China to provide processing and storage as well as research and development capabilities and advanced therapies has resulted in an increase in our operating expenses by approximately $972,800 and included expenditures for rent of laboratory space, legal expenses associated with establishing our subsidiary company and related operations in China, consultants retained to support our implementation and introduction of advanced therapies in China, recruiting fees for identifying senior managers for our operation in China and travel.

Our operating expenses in cash expenses was primarily related to an increase in legal and professional services, of $284,600, utilized to prepare for public filings and shareholder approval of our proposed merger with CBH and our expansion into China,the United States increased $483,900.

VSEL Research in the United States has increased $284,400, in particular, operations of our Boston research laboratory and related staff increased operating expense by $209,800, fees paid to consultants to support our research efforts have increased VSEL research expenses by $27,600, payments ~~of $66,000~~ to the University of Louisville in connection with our obligations for the VSEL technology licensed in November 2007 increased research expenses by $15,300, and patent expenses increased our research expenses by $31,700.

Administrative, sales and marketing expense increased by approximately $199,500. Legal expenses increased $44,800 and consulting fees increased $58,500 as the result of the recently held annual shareholders meeting, licensing agreements completed in the quarter and several filings with the SEC not related to our Merger activities. Expenses related to preparing and filing patents increased $17,500. Investor communications costs have increased by $88,000 as the result of increased efforts to make investors aware of the Company’s expansion into the development of stem cell therapies and into China. Director fees increased $50,000 as the result of a new Directors’ compensation plan introduced in April, 2009. The Company completed its transfer of stem cell cryopreservation operations to Progenitor Cell Therapy and closed its laboratory in June, 2009. The transfer of cryopreservation operations increased expenses for the quarter by $15,000. Surplus equipment was transferred to our Boston laboratory and there were no other losses associated with the closure. The cost increases were offset by decreases in salary and benefits of $35,800 as a result of staff reductions the Company had been implementing in non-strategic areas in the past year; these staff reductions have had a corresponding reduction in travel expenses of $29,300. Accounting fees have decreased by $26,600. In addition, marketing expenses have decreased by $28,800 as a result of more focused efforts in major metropolitan areas. The balance of changes in administrative, sales and marketing expenses have come from a variety of areas that have resulted in a net increase of $46,200 for the three months ended June 30, 2009 over the three months ended June 30, 2008.

The activities related to our proposed merger with CBH have increased our expenses by $677,000 primarily from the legal and professional services utilized to prepare for public filings and shareholder approval of our proposed merger.

Our efforts to establish an operation in China to provide processing and storage as well as research and development capabilities and advanced therapies has resulted in an increase in our operating expenses by approximately $1,136,500 and included expenditures for rent of laboratory space, legal expenses associated with establishing our subsidiary company and related operations in China, consultants retained to support our implementation and introduction of advanced therapies in China, recruiting fees for identifying senior managers for our operation in China and travel.

Our operating expenses in the United States increased $483,300.

VSEL Research in the United States has increased $405,900, in particular, operations of our Boston research laboratory and related staff costs increased operating expense by $256,900, fees paid to consultants to support our research efforts have increased VSEL research expenses by $23,500, payments to the University of Louisville in connection with our obligations for the VSEL technology licensed in November 2007 increased research expenses by $81,300, and patent expenses, amortization of intangible assets as well as other related miscellaneous costs combined to increase our research expenses by $44,200.

Administrative, sales and marketing expense increased by approximately $77,400. Legal expenses increased $63,100 and consulting fees increased $68,500 as the result of the recently held annual shareholders meeting, licensing agreements completed in the period and several filings with the SEC not related to our Merger activities. Expenses related to preparing and filing patents increased $17,500. Investor communications costs have increased by $74,600 as the result of increased efforts to make investors aware of the Company’s expansion into the development of stem cell therapies and into China. Director fees increased $50,000 as the result of a new Directors’ compensation plan introduced in April 2009. The costs required to maintain our listing on NYSE Amex increased by $25,200. The Company completed its transfer of stem cell cryopreservation operations to Progenitor Cell Therapy and closed its laboratory in June 2009. The transfer of cryopreservation operations increased expenses for the period by $35,000. Surplus equipment was transferred to our Boston laboratory and there were no other losses associated with the closure. These cost increases were offset by decreases in salary and benefits of $131,900 as a result of staff reductions the Company had been implementing in non-strategic areas in the past year, these staff reductions have had a corresponding reduction in travel expense of $83,900. Accounting fees have decreased by $24,800. In addition, the marketing expenses have decreased by $113,100 as a result of more focused efforts in major metropolitan areas. The balance of changes in administrative, sales and marketing expenses have come from a variety of areas that have resulted in a net increase of $97,200 for the six months ended June 30, 2009 over the six months ended June 30, 2008.

LIQUIDITY AND CAPITAL RESOURCES

During the first quarter of 2009, the Company issued promissory notes to RimAsia (the “RimAsia Notes”), a principal stockholder of the Company, which aggregated $1,150,000 (see Note 4 - Notes Payable). OnIn April 9, 2009, the Company completed a private placement financing totaling $11 million ~~from three Asia-based investors, including RimAsia.~~(the “April 2009 Private Placement”). The financing consisted of the issuance of 880,000 units priced at $12.50 per unit (“Series D Units”), with each ~~unit~~Series D Unit consisting of one share of the Company’s Series D Convertible Redeemable Preferred Stock (“Series D Stock”) ~~(convertible into 10 shares of Common Stock)~~ and ten warrants (“Series D Warrants”) with each Series D Warrant to purchase one share of ~~common stock.~~Common Stock. A total of 880,000 Series D Preferred shares and 8,800,000 warrants were issued. In June 2009 with a final closing on July 6, 2009, the Company completed an additional private placement financing with net proceeds of $4,679,220 (the “June 2009 Private Placement”). This financing consisted of the issuance of 400,280 Series D Units priced at $12.50 per unit. A total of 400,280 Series D Preferred Stock and 4,002,800 Series D Warrants were issued. The ~~conversion~~Company paid $324, 280 in fees and issued 12,971 Series D Units to agents that facilitated the June 2009 Private Placement. The Series D Units issued to the selling agents were comprised of ~~the~~12,971 shares of Series D Stock and 129,712 Series D Warrants. Upon the ~~exercise~~affirmative vote of ~~warrants is subject~~holders of a majority of the voting power of the Company’s Common Stock required pursuant to ~~shareholder approval~~the Company’s Amended and Restated By-Laws and the ~~rules of~~ NYSE Amex, ~~as described in Note 8 – Subsequent Events. If~~each share of Series D Stock will automatically be converted into ten (10) shares of Common Stock at an initial conversion price of $1.25 per share based on an original issue price of $12.50 per share; provided that if by October 31, 2009 such ~~shareholder approval of the conversion of Series D Stock~~affirmative vote is not achieved, the Company must redeem all shares of Series D Stock at a redemption price per share of $12.50 plus the accrued dividends as of such date. The total cash required to redeem the Series D Stock is $16,165,638 plus accrued dividends. The Series D Stock has an accruing dividend of ten percent (10%) per annum, payable (i) annually in cash on ~~each anniversary of the issue date so long as the Series D Stock remains outstanding or (ii) upon a liquidation, dissolution or winding up of the Company.~~April 9th. The Series D Stock ranks senior to all of the Company’s capital stock with respect to the payment of dividends and to the distribution of assets upon liquidation, dissolution or winding up. The warrants will be exercisable for 5 years andWarrants have a per share exercise price equal to $2.50 and are callable by the Company if the Common Stock trades at a price equal to a minimum of $3.50 for a specified period of time. Subject to the affirmative vote of the Company’s stockholders and the rules of the NYSE Amex, the Series D Warrants will become exercisable for five years.

Three Months Ended
March 31, 2009 March 31, 2008
Cash used in Operating activities $ (1,253,000 ) $ (1,401,700 )
Cash used in investing activities $ (5,700 ) )) $ (2,400 )
Cash provided by financing activities $ 1,220,700 $ 69,700

OFF-BALANCE SHEET ARRANGEMENTS

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

ITEM ~~4T.~~4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Changes in Internal Controls Over Financial Reporting

ITEM 1. LEGAL PROCEEDINGS

ITEM 1A. RISK FACTORS

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

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

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

the election of four directors (there was no solicitation in opposition to management’s nominees as listed in the proxy statement, and all such nominees were elected);

the approval of the 2009 Equity Compensation Plan, which makes up to 3,800,000 shares of Common Stock of the Company available for issuance to employees, directors, consultants and advisors of the Company and its subsidiaries pursuant to incentive or non-statutory stock options, restricted and unrestricted stock awards, restricted stock units and stock appreciation rights; and

the approval of the ratification of the appointment of Holtz Rubenstein Reminick LLP as the Corporation’s independent certified public accountants for the fiscal year ending December 31, 2009.

(i) The election of Robin L. Smith, Joseph Zuckerman, Richard Berman, and Steven Myers to serve as Directors of the Company until the next annual meeting of stockholders. The votes cast were as follows:

Director	For		Authority Withheld
Robin L. Smith		5,687,530		35,703
Joseph Zuckerman		5,687,531		35,702
Richard Berman		5,684,528		38,705
Steven S. Myers		5,687,531		35,702

(ii)

Approval of the 2009 Equity Plan. The votes cast were as follows:

For		Against				Abstain				Not Voted
3,790,394			85,399				10,677				1,836,763

(iii) Approval of the appointment of Holtz Rubenstein Reminick LLP as the Company’s independent certified public accountants for the fiscal year ending December 31, 2009. The votes were cast as follows:

For		Against				Abstain
5,693,970			27,781				1,482

ITEM 5. OTHER INFORMATION

Exhibit	Description	Reference

2.1	Amendment No. 1 to Agreement and Plan of Merger, made and entered into as of the 1st day of July, 2009, by and among NeoStem, Inc., CBH Acquisition LLC, China Biopharmaceuticals Holdings, Inc., and China Biopharmaceuticals Corp. (1)	10.1

2.2	Notice dated July 13, 2009 regarding termination of Share Exchange Agreement*	2.2

4.1	Certificate of Designations for Series D Preferred Stock (2)	4.1

4.2	Form of Series D Warrant issued in connection with April and June 2009 private placements (2)	4.2

4.3	Form of Series D Subscription Agreement (2)	4.3

10(a)	Lease Modification Agreement dated April 13, 2009 between NeoStem, Inc. and SLG Graybar Sublease LLC and Original Agreement of Lease dated as of June 14, 2006, with related Consent and Assignment and Assumption Documents (3)	10.1

10(b)	Network Agreement, dated June 15, 2009, between NeoStem, Inc. and Enhance BioMedical Holdings Limited (3)(3a)	10.2

10(c)	Amendment No. 1 dated June 29, 2009 to Lock Up and Voting Agreement (NeoStem) dated November 2, 2008 by and between NeoStem, Inc., China BioPharmaceuticals Holdings, Inc. and the individuals listed therein (3)	10.3

10(d)	Joinders dated June 29, 2009 to Lock Up and Voting Agreement (NeoStem) dated November 2, 2008 by and between NeoStem, Inc., China BioPharmaceuticals Holdings, Inc. and the individuals listed therein. (3)	10.4

10(e)	Funding Agreement made as of July 1, 2009 by and between NeoStem, Inc., China Biopharmaceuticals Holdings, Inc., China Biopharmaceuticals Corp., and RimAsia Capital Partners L.P. (1)	10.2

10(f)	Consigned Management and Technology Service Agreement dated June 1, 2009 among Qingdao Niao Bio-Technology Ltd., NeoStem (China), Inc. and The Shareholder of Qingdao Niao Bio-Technology Ltd. (4)	10.1

10(g)	Equity Pledge Agreement dated June 1, 2009 among Qingdao Niao Bio-Technology Ltd., NeoStem (China), Inc. and The Shareholder of Qingdao Niao Bio-Technology Ltd. (4)	10.2

10(h)	Exclusive Purchase Option Agreement dated June 1, 2009 among Qingdao Niao Bio-Technology Ltd., NeoStem (China), Inc. and The Shareholder of Qingdao Niao Bio-Technology Ltd. (4)	10.3

10(i)	Loan Agreement dated June 1, 2009 between NeoStem (China), Inc. and The Shareholder of Qingdao Niao Bio-Technology Ltd. (4)	10.4

10(j)	Consigned Management and Technology Service Agreement dated June 1, 2009 among Beijing Ruijieao Bio-Technology Ltd., NeoStem (China), Inc. and The Shareholder of Beijing Ruijieao Bio-Technology Ltd. (4)	10.5

~~4.1 Certificate of Designations for Series D Preferred Stock (1)~~

~~4.2 Form of Warrant issued in connection with April 2009 private placement (1)~~

~~4.3 Form of subscription agreement (1)~~

10(k)	Equity Pledge Agreement dated June 1, 2009 among Beijing Ruijieao Bio-Technology Ltd., NeoStem (China), Inc. and The Shareholder of Beijing Ruijieao Bio-Technology Ltd. (4)	10.6

10(l)	Exclusive Purchase Option Agreement dated June 1, 2009 among Beijing Ruijieao Bio-Technology Ltd., NeoStem (China), Inc. and The Shareholder of Beijing Ruijieao Bio-Technology Ltd. (4)	10.7

10(m)	Loan Agreement dated June 1, 2009 between NeoStem (China), Inc. and The Shareholder of Beijing Ruijieao Bio-Technology Ltd. (4)	10.8

10(n)	NeoStem, Inc. 2009 Equity Compensation Plan (5)	Appendix A

10(o)	Employment Agreement dated July 6, 2009 between NeoStem, Inc. and Alan Harris, M.D., Ph.D. (6)	10.1

10(p)	Letter Agreement dated July 8, 2009 between NeoStem, Inc. and Catherine M. Vaczy, Esq. (6)	10.2

10(q)	Amendment dated July 29, 2009 to Employment Agreement dated May 26, 2006 with Robin Smith (7)	10.1

31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*	31.1

31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*	31.2

32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**	32.1

32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**	32.2

10.1 Amendment No. 1 to Sponsored Research Agreement between NeoStem, Inc. and the University of Louisville Research Foundation, Inc.*

10.2 Amendment No. 1 to Exclusive License Agreement between Stem Cell Technologies, Inc. and the University of Louisville Research Foundation, Inc.*

31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

	(1)	Filed as an exhibit, numbered as indicated above, to the Current Report of the Company on Form 8-K, dated July 1, 2009, which exhibit is incorporated here by reference.
	(2)	Filed as an exhibit, numbered as indicated above, to the Current Report of the Company on Form 8-K, dated April 13, 2009, which exhibit is incorporated here by reference.

	*(3)	Filed as an exhibit, numbered as indicated above, to the Registration Statement on Form S-4 of the Company, Registration Number 333-160578, filed with the SEC on July 15, 2009, which exhibit is incorporated here by reference.
	(3a)	Confidential treatment has been requested for certain provisions of this Exhibit pursuant to Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended.
	(4)	Filed as an exhibit, numbered as indicated above, to the Current Report of the Company on Form 8-K, dated July 2, 2009, which exhibit is incorporated here by reference.
	(5)	Filed as an exhibit, numbered as indicated above, to the Proxy Statement of the Company on Schedule 14A filed with the SEC on April 14, 2009, which exhibit is incorporated here by reference.
	(6)	Filed as an exhibit, numbered as indicated above, to the Current Report of the Company on Form 8-K, dated July 6, 2009, which exhibit is incorporated here by reference.
	(7)	Filed as an exhibit, numbered as indicated above, to the Current Report of the Company on Form 8-K, dated July 29, 2009, which exhibit is incorporated here by reference.
		* Filed herewith ** Furnished herewith

~~Furnished herewith~~

~~-21-~~37

SIGNATURES

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

	NEOSTEM, INC. (Registrant)

	By:	/s/ Robin Smith M.D.
		Robin Smith M.D., Chief Executive Officer

	Date: ~~May 15,~~August 13, 2009

	By:	/s/ Larry A. May
		Larry A. May, Chief Financial Officer

	Date: ~~May 15,~~August 13, 2009

~~-22-~~38

		Page No.
Part I - Financial Information:

Item 1.	Consolidated Financial Statements (Unaudited):

	Consolidated Balance Sheets
	At ~~March 31,~~June 30, 2009 and December 31, 2008	3

	Consolidated Statements of Operations
	for the three months and six months
	ended ~~March 31,~~June 30, 2009 and 2008	4

	Consolidated Statements of Cash Flows
	for the ~~three~~six months ended ~~March 31,~~	5
	June 30, 2009 and 2008	5

	Notes to Unaudited Consolidated Financial Statements	~~6-14~~6-22

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	~~15-19~~23-32

Item 3.	Quantitative and Qualitative Disclosures About	19
	Market Risk	32

Item ~~4T.~~4.	Controls and Procedures	1932-33

Part II - Other Information:

Item 1.	Legal Proceedings	2033

Item 1A.	Risk Factors	2033

Item 2.	Unregistered Sales of Equity Securities and Use of
	Proceeds	2033-34

Item 3.	Defaults Upon Senior Securities	2134

Item 4.	Submission of Matters to a Vote of Securityholders	2134-35

Item 5.	Other Information	2135

Item 6.	Exhibits	2136-37

	Signatures	2238

	June 30, 2009			December 31, 2008
ASSETS
Current assets:
Cash and cash equivalents	$	10,449,531		$	430,786
Accounts receivable		39,008			7,193
Receivable due from related party		375,000			-
Prepaid expenses and other current assets		91,447			92,444
Total current assets		10,954,986			530,423

Property and equipment, net		138,637			99,490
Goodwill		558,169			558,169
Intangible Asset		616,184			633,789
Other assets		156,568			2,445
	$	12,424,544		$	1,824,316
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	167,594		$	508,798
Accrued liabilities		360,845			427,767
Notes payable		38,798			-
Unearned revenues		122,406			9,849
Dividends Payable		251,727			-
Capitalized lease obligations – current portion		2,600			14,726
Total current liabilities		943,970			961,140
Total liabilities		943,970			961,140

Convertible Redeemable Series D Preferred stock; liquidation value $12.50 per share; 1,293,251 shares issued and outstanding		7,685,768			-
Stockholders’ Equity:
Preferred stock; authorized, 5,000,000 shares
Series B convertible redeemable preferred stock,
liquidation value 10 shares of common stock per share; $0.01 par value; authorized, 825,000 shares; issued and outstanding, 10,000 shares		100			100

Common stock, $.001 par value; authorized,
500,000,000 shares; issued and outstanding,
8,007,705 June 30, 2009 and
7,715,006 December 31, 2008		8,007			7,715
Additional paid-in capital		50,591,405			40,849,670
Accumulated deficit		(46,804,644	)		(39,994,309	)
Accumulated other comprehensive loss		(62	)		-
Total stockholders’ equity		3,794,806			863,176

	$	12,424,544		$	1,824,316

Current liabilities:
Accounts payable	$	742,580		$	508,798
Accrued liabilities		612,759			427,767
Note payable, due related party		1,150,000			-
Notes payable		77,880			-
Unearned revenues		24,527			9,849
Capitalized lease obligations – current portion		7,546			14,726
Total current liabilities		2,615,292			961,140

Total Liabilities		2,615,292			961,140

Stockholders’ (Deficit)/Equity:
Preferred stock; authorized, 5,000,000 shares
Series B convertible redeemable preferred stock,
liquidation value 10 shares of common stock per share; $0.01 par value; authorized, 825,000 shares; issued and outstanding, 10,000 shares		100			100

Common stock, $.001 par value; authorized,
500,000,000 shares; issued and outstanding,
7,917,406 March 31, 2009 and
7,715,006 December 31, 2008		7,917			7,715
Additional paid-in capital		41,049,112			40,849,670
Accumulated deficit		(41,861,552	)		(39,994,309	)

Total stockholders’ (deficit) equity		(804,423	)		863,176

	$	1,810,869		$	1,824,316

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
Earned revenues	$	31,600		$	23,528		$	76,738		$	24,221
Direct costs		15,750			3,908			39,300			3,908
Gross profit		15,850			19,620			37,438			20,313
Selling, general, administrative and research		4,715,167			2,379,387			6,593,704			4,903,718
Operating loss		(4,699,317	)		(2,359,767	)		(6,556,266	)		(4,883,405	)
Other income (expense):
Interest income		12,389			1,712			12,694			1,712
Interest expense		(4,437	)		(3,718	)		(15,036	)		(7,269	)
Net loss		(4,691,365	)		(2,361,773	)		(6,558,608	)		(4,888,962	)
Dividends Series D Preferred Stock		(251,727	)		-			(251,727	)		-
Net loss attributable to Common Shareholders	$	(4,943,092	)	$	(2,361,773	)	$	(6,810,335	)	$	(4,888,962	)

Net loss per common share	$	(0.62	)	$	(0.43	)	$	(0.86	)	$	(0.94	)
Weighted average
common shares outstanding		7,970,469			5,490,257			7,887,318			5,196,717

	For the Three Months Ended March 31,						For the Six Months Ended June 30,
	2009			2008			2009			2008
Cash flows from operating activities:
Net loss	$	(1,867,243	)	$	(2,527,189	)	$	(6,810,335)		$	(4,888,962)

Adjustments to reconcile net loss to net cash used in operating activities:

Common shares issued and stock options granted for services rendered		199,643			1,325,289			1,758,574			2,407,961
Depreciation and amortization		29,893			16,225			60,009			41,462

Changes in operating assets and liabilities:
Accounts receivable		(4,916	)		(2,262	)		(31,816)			(6,525)
Prepaid expenses and other current assets		(43,830	)		(86,582	)
Prepaid expenses and other assets								(153,794)			(59,872)
Unearned revenues		14,678			(693	)		112,557			(233)
Accounts payable, accrued expenses, and other current liabilities		418,777			(126,527	)		(156,395)			(191,967)

Net cash used in operating activities		(1,252,999	)		(1,401,739	)		(5,221,200)			(2,698,136)

Cash flows from investing activities:
Acquisition of equipment		(5,695	)		(2,379	)		(80,947)			(2,379)

Net cash used in investing activities		(5,695	)		(2,379	)		(80,947)			(2,379)

Cash flows from financing activities:
Net Proceeds from issuance of convertible redeemable preferred stock and warrants								15,669,220			-
Amounts due from a related party								(375,000)			-
Net Proceeds from issuance of Common Stock								-			896,760
Proceeds from advances on notes payable		1,283,720			126,993			1,284,753			131,618
Payments of capitalized lease obligations		(7,180	)		(5,886	)		(12,126	)		(12,072)
Repayments of notes payable		(55,841	)		(51,440	)		(1,245,955)			(90,923)

Net cash provided by financing activities		1,220,699			69,667			15,320,892			925,383

Net decrease in cash and cash equivalents		(37,995	)		(1,334,451	)

Net increase/(decrease) in cash and cash equivalents								10,018,745			(1,775,132)
Cash and cash equivalents at beginning of period		430,786			2,304,227			430,786			2,304,227

Cash and cash equivalents at end of period	$	392,791		$	969,776		$	10,449,531		$	529,095

Large accelerated filer o	Accelerated filer o

Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company x

	March 31, 2009		December 31, 2008
Current assets:
Cash and cash equivalents	$	392,791	$	430,786
Accounts receivable		12,109		7,193
Prepaid expenses and other current assets		136,274		92,444

Total current assets		541,174		530,423

Property and equipment, net		84,428		99,490
Goodwill		558,169		558,169
Intangible Asset		624,986		633,789
Other assets		2,112		2,445

	$	1,810,869	$	1,824,316

	Three Months Ended March 31,
	2009			2008
Earned revenues	$	45,138		$	693
Direct costs		23,550			-
Gross profit		21,588			693
Selling, general and administrative		1,878,536			2,524,331
Operating loss		(1,856,948	)		(2,523,638	)
Other income (expense):
Interest income		304			-
Interest expense		(10,599	)		(3,551	)
Net loss	$	(1,867,243	)	$	(2,527,199	)

Basic and diluted
Net loss per share	$	(.24	)	$	(.52	)
Weighted average
shares outstanding		7,802,894			4,904,542

	March 31, 2009		March 31, 2008
Stock Options		1,718,300		1,826,800
Warrants		5,305,692		2,107,688

	June 30, 2009		June 30, 2008
Stock Options		2,565,800		1,779,800
Warrants		18,262,204		3,173,397
Series D Stock, Common stock equivalents		12,932,510		-

				Number Outstanding		Weighted Average Remaining		Number Exercisable
Exercise Price				March 31, 2009		Contractual Life (years)		March 31, 2009
$	0.78 to	$	3.02		3,295,709		4.36		2,504,045
$	3.02 to	$	5.27		184,250		2.91		184,250
$	5.27 to	$	7.51		802,761		3.43		802,761
$	7.51 to	$	8.00		1,022,972		3.36		1,022,972
					5,305,692				4,514,028

	Number of Shares			Range of Exercise Price		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Balance December 31, 2008		5,322,333		$	0.50 - $8.00	$	3.66
Granted		12,986,512					2.49
Exercised		-
Expired		(46,641	)				9.07
Cancelled		-
Balance June 30, 2009		18,262,204		$	0.50 - $8.00	$	2.82		4.53	$	1,170,956

				Number		Weighted Average Remaining		Number
Exercise Price				Outstanding June 30, 2009		Contractual Life (years)		Exercisable June 30, 2009
$	0.50 to	$	3.02		16,252,221		4.70		3,141,546
$	3.02 to	$	5.27		184,250		2.66		184,250
$	5.27 to	$	7.51		802,761		3.19		802,761
$	7.51 to	$	8.00		1,022,972		3.14		1,022,972
					18,262,204				5,151,529

	Number of Shares (1)			Range of Exercise Price		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value		Number of Shares (1)			Range of Exercise Price		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Balance December 31, 2008		1,725,300		$	0.71 - $25.00	$	3.96						1,725,300		$	0.71 - $25.00	$	3.96
Granted		-											850,000					1.98
Exercised		-											-
Expired		(2,000	)										(2,000	)				7.00
Cancelled		(5,000	)										(7,500	)				1.00
Balance March 31, 2009		1,718,300		$	0.71 - $25.00	$	3.96		7.78	$	-

Vested and Exercisable at March 31, 2009		1,389,300				$	4.10		7.56	$	-
Balance June 30, 2009													2,565,800		$	0.71 - $25.00	$	3.31		8.62	$	279,845
Vested and Exercisable at June 30, 2009													2,094,300				$	3.38		8.52	$	224,395

				Number		Weighted Average Remaining		Number
Exercise Price				Outstanding June 30, 2009		Contractual Life (years)		Exercisable June 30, 2009
$	0.71 to	$	4.17		1,674,500		9.25		1,368,000
$	4.17 to	$	7.63		800,200		7.61		639,200
$	7.63 to	$	11.08		50,000		6.46		46,000
$	11.08 to	$	14.54		3,000		4.67		3,000
$	14.54 to	$	25.00		38,100		6.02		38,100
					2,565,800				2,094,300

	Options			Weighted Average Grant Date Fair Value
Non-Vested at December 31, 2008		435,250		$	2.93
Issued		-
Expired		(2,000	)
Canceled		(5,000	)		2.81
Vested		(99,250	)		1.68
Exercised		-
Non-Vested at March 31, 2009		329,000		$	3.35

	Six Months Ended
	June 30, 2009			June 30, 2008
Cash used in operating activities	$	(5,221,200	)	$	(2,698,100	)
Cash used in investing activities	$	(80,900	) ))	$	(2,400	)
Cash provided by financing activities	$	15,320,900		$	925,400

	Three Months Ended
	March 31, 2009			March 31, 2008
Cash used in Operating activities	$	(1,253,000	)	$	(1,401,700	)
Cash used in investing activities	$	(5,700	) ))	$	(2,400	)
Cash provided by financing activities	$	1,220,700		$	69,700