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STEMGEN, INC. - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

January 21, 2014

The information contained in this Form 10-Q is intended to update the information contained in our Annual Report on Form 10-K for the year ended June 30, 2013 and presumes that readers have access to, and will have read, the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and other information contained in such Form 10-K. The following discussion and analysis also should be read together with our financial statements and the notes to the financial statements included elsewhere in this Form 10-Q. The following discussion contains certain statements that may be deemed "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements appear in a number of places in this Report, including, without limitation, "Management's Discussion and Analysis of Financial Condition and Results of Operations." These statements are not guarantees of future performance and involve risks, uncertainties and requirements that are difficult to predict or are beyond our control. Forward-looking statements speak only as of the date of this quarterly report. You should not put undue reliance on any forward-looking statements. We strongly encourage investors to carefully read the factors described in our Annual Report on Form 10-K for the year ended June 30, 2013 in the section entitled "Risk Factors" for a description of certain risks that could, among other things, cause actual results to differ from these forward-looking statements. We assume no responsibility to update the forward-looking statements contained in this quarterly report on Form 10-Q. The following should also be read in conjunction with the unaudited Financial Statements and notes thereto that appear elsewhere in this report. Company History StemGen, Inc. ("STEMGEN" or the "Company") was incorporated in Delaware in 1992, and in 1996 received all remaining assets of Infotechnology, Inc. ("Infotech"), a Delaware company, following the completion of Infotech's Chapter 11 Bankruptcy reorganization, in accordance with an Assignment and Assumption Agreement, dated October 11, 1996 , and effective as of June 21, 1996 . As a result of a series of transactions during the 1980's, Infotech, then principally engaged in the information and communications business, acquired equity interests in Comtex News Network, Inc. ("Comtex") and Analex Corporation ("Analex"), formerly known as Hadron, Inc. Our business was the maintenance of our equity interest in and note receivable from Comtex and equity interest in Analex . On September 25, 2006 , we exchanged the equity investment in Comtex common stock and the Note Receivable from Comtex of $856,954 , for 55,209 shares of the STEMGEN Series A Preferred stock. We no longer have an equity interest in either the common stock of Comtex or the Note from Comtex . During October 2006 , we sold the remaining 21,000 shares of common stock of publicly-held Analex , a defense contractor specializing in systems engineering and developing innovative technical intelligence solutions in support of U.S. national security. We no longer have an equity interest in Analex . On December 24, 2012 , the Corporation received a nonrefundable deposit of $32,500 under a Letter of Intent ("LOI") which it entered into on December 11, 2012 with StemGen Inc. a Nevada corporation. Effective February 5, 2013 , the Company amended its Certificate of Incorporation. As a result of the Amendment, the Company's corporate name changed from Amasys Corporation to StemGen, Inc and a reverse stock split was effectuated where all the outstanding shares of the Company's common stock were exchanged at a ratio of one for eighty. The LOI was terminated on August 6, 2013 . Since we redeemed and converted all of our outstanding Series A Preferred Stock at the end of September 2006 , starting October 1, 2006 we have not conducted any business operations. All of our operating results and cash flows reported in the accompanying financial statements from October 1, 2006 are considered to be those related to development stage activities and represent the 'cumulative from entering developmental stage' amounts from its development stage activities required to be reported pursuant to Financial Accounting Standards Board Accounting Standards Codification ("ASC") Topic 915 "Development Stage Entities". -12- Business of Issuer Currently, the Company seeks suitable candidates for a business combination with a private company. The Company has made no efforts to identify a possible business combination. As a result, the Company has not conducted negotiations or entered into a letter of intent concerning any target business. The business purpose of the Company is to seek the acquisition of, or merger with, an existing company. We intend to provide shareholders with complete disclosure concerning a target company and its business, including audited financial statements prior to any merger or acquisition where such disclosure is required by law. The Company is currently considered to be a "blank check" company. The U.S. Securities and Exchange Commission (the "SEC") defines those companies as "any development stage company that is issuing a penny stock, within the meaning of Section 3 (a)(51) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and that has no specific business plan or purpose, or has indicated that its business plan is to merge with an unidentified company or companies." Under SEC Rule 12b-2 under the Exchange Act, the Company also qualifies as a "shell company," because it has no or nominal assets (other than cash) and no or nominal operations. Many states have enacted statutes, rules and regulations limiting the sale of securities of "blank check" companies in their respective jurisdictions. Management does not intend to undertake any efforts to cause a market to develop in our securities, either debt or equity, until we have successfully concluded a business combination. The Company intends to comply with the periodic reporting requirements of the Exchange Act for so long as it is subject to those requirements. The Company's principal business objective for the next 12 months and beyond such time will be to achieve long-term growth potential through a combination with a business rather than immediate, short-term earnings. The Company will not restrict its potential candidate target companies to any specific business, industry or geographical location and, thus, may acquire any type of business. The analysis of new business opportunities will be undertaken by or under the supervision of the officer and director of the Company. As of this date, the Company has not entered into any definitive agreement with any party, nor have there been any specific discussions with any potential business combination candidate regarding business opportunities for the Company. The Company has unrestricted flexibility in seeking, analyzing and participating in potential business opportunities. In its efforts to analyze potential acquisition targets, the Company will consider the following kinds of factors: a) Potential for growth, indicated by new technology, anticipated market expansion or new products; b) Competitive position as compared to other firms of similar size and experience within the industry segment as well as within the industry as a whole; c) Strength and diversity of management, either in place or scheduled for recruitment; d) Capital requirements and anticipated availability of required funds, to be provided by the Company or from operations, through the sale of additional securities, through joint ventures or similar arrangements or from other sources; e) The cost of participation by the Company as compared to the perceived tangible and intangible values and potentials; f) The extent to which the business opportunity can be advanced; g) The accessibility of required management expertise, personnel, raw materials, services, professional assistance and other required items; and h) Other relevant factors. -13- In applying the foregoing criteria, no one of which will be controlling, management will attempt to analyze all factors and circumstances and make a determination based upon reasonable investigative measures and available data. Potentially available business opportunities may occur in many different industries, and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex. Due to the Company's limited capital available for investigation, the Company may not discover or adequately evaluate adverse facts about the opportunity to be acquired. Form of Acquisition The manner in which the Company participates in an opportunity will depend upon the nature of the opportunity, the respective needs and desires of the Company and the promoters of the opportunity, and the relative negotiating strength of the Company and such promoters. It is likely that the Company will acquire its participation in a business opportunity through the issuance of common stock or other securities of the Company. Although the terms of any such transaction cannot be predicted, it should be noted that in certain circumstances the criteria for determining whether or not an acquisition is a so-called "tax free" reorganization under Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code") depends upon whether the owners of the acquired business own 80% or more of the voting stock of the surviving entity. If a transaction were structured to take advantage of these provisions rather than other "tax free" provisions provided under the Code, all prior stockholders would in such circumstances retain 20% or less of the total issued and outstanding shares of the surviving entity. Under other circumstances, depending upon the relative negotiating strength of the parties, prior stockholders may retain substantially less than 20% of the total issued and outstanding shares of the surviving entity. This could result in substantial additional dilution to the equity of those who were stockholders of the Company prior to such reorganization. The present stockholders of the Company will likely not have control of a majority of the voting securities of the Company following a reorganization transaction. As part of such a transaction, all or a majority of the Company's directors may resign and one or more new directors may be appointed without any vote by stockholders. In the case of an acquisition, the transaction may be accomplished upon the sole determination of management without any vote or approval by stockholders. In the case of a statutory merger or consolidation directly involving the Company, it will likely be necessary to call a stockholders' meeting and obtain the approval of the holders of a majority of the outstanding securities. The necessity to obtain such stockholder approval may result in delay and additional expense in the consummation of any proposed transaction and will also give rise to certain appraisal rights to dissenting stockholders. Most likely, management will seek to structure any such transaction so as not to require stockholder approval. It is anticipated that the investigation of specific business opportunities and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial cost for accountants, attorneys and others. If a decision is made not to participate in a specific business opportunity, the costs theretofore incurred in the related investigation might not be recoverable. Furthermore, even if an agreement is reached for the participation in a specific business opportunity, the failure to consummate that transaction may result in the loss to the Registrant of the related costs incurred. -14- Critical Accounting Policies We prepare our financial statements in accordance with accounting principles generally accepted in the United States (GAAP), which requires management to make estimates and assumptions that affect reported amounts and related disclosures. Management identifies critical accounting estimates as: - those that require the use of assumptions about matters that are inherently and highly uncertain at the time the estimates are made; and - those for which changes in the estimate or assumptions, or the use of different estimates and assumptions, could have a material impact on our results of operations or financial condition. Management has discussed the development, selection and disclosure of our critical accounting estimates with our Board of Directors. For a description of our critical accounting estimates that require us to make the most difficult, subjective or complex judgments, please see our Annual Report on Form 10-K for the year ended June 30, 2013 . We have not changed these policies from those previously disclosed. For the Three Months Ended December 31, 2013 and 2012 Results of Operations General and Administrative Expenses General and administrative expenses were $1,825 and $23,737 for the three months ended December 31, 2013 and 2012, respectively. The decrease in general and administrative expenses of $21,912 for the three month period was mainly due to the various corporate expenses as a result of changing the Company name and performing a reverse stock split in 2012. Other Income (Expense) Other expense was $17,095 and $16,539 for the three months ended December 31, 2013 and 2012, respectively. The increase for the three month period is due to the additional interest expense accrued on our additional notes payable, related party balances and interest expense recorded for shares issued as an inducement to enter into a loan. For the Six Months Ended December 31, 2013 and 2012 Results of Operations General and Administrative Expenses General and administrative expenses were $15,245 and $35,812 for the six months ended December 31, 2013 and 2012, respectively. The increase in general and administrative expenses of $20,567 for the six month period was mainly due to various corporate expenses as a result of changing the Company name and performing a reverse stock split in 2012. Other Income (Expense) Other expense was $33,958 and $27,983 for the six months ended December 31, 2013 and 2012, respectively. The decrease for the six month period of $5,975 is due to reduced interest expense recorded for shares issued as an inducement to enter into a loan. -15- Liquidity and Capital Resources Net cash used in operating activities was $12,190 and $24,412 in the six months ended December 31, 2013 and 2012, respectively. The decrease was primarily due to the increase in professional fees for the six months ended December 31, 2012 compared to 2013. Net cash provided by investing activities was $-0 - and $-0 - in the six months ended December 31, 2013 and 2012, respectively. Net cash provided by financing activities was $12,500 and $45,500 in the six months ended December 31, 2013 and 2012, respectively. We suffered recurring losses from operations and have an accumulated deficit of $890,165 as of December 31, 2013 . Currently, we are a non-operating public company. We seek suitable candidates for a business combination with a private company. In the event we use all of our cash resources, C.W. Gilluly has indicated the willingness to loan us funds at the prevailing market rate, assuming we find a suitable candidate for a business combination, until such business combination is consummated. Even though this is Mr. Gilluly's current intention, he has made no firm commitment and it is at his sole discretion whether or not to fund us. In the event Mr. Gilluly does not fund us, we will not have the funds necessary to operate and will have to dissolve. Contractual Obligations As a "smaller reporting company" as defined by Item 10 of Regulation S-K, the Company is not required to provide this information. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements. -16-


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