Cell Source, Inc 10-Q for FY2024 Q1
Cell Source, Inc. (CLCS)
About this 10-Q
Cell Source, Inc filed this 10-Q on July 29, 2024, covering the quarter ended March 31, 2024 (FY2024 Q1).
Headline figures
Quarter ended March 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $1.28M
- compared with a net loss of $1.69M a year earlier
- Diluted EPS
- -$0.04
- compared with -$0.05 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _______ to _______
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file number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Issuer’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||
| None | N/A | N/A |
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.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
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| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any news or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
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As of July 23, 2024, the registrant had shares of $ par value common stock outstanding.
CELL SOURCE, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024
TABLE OF CONTENTS
| 2 |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
CELL SOURCE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| March 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Other current assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Deficiency | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Accrued expenses - related party | ||||||||
| Accrued expenses | ||||||||
| Accrued interest | ||||||||
| Accrued interest - related parties | ||||||||
| Accrued interest | ||||||||
| Accrued compensation | ||||||||
| Notes payable, net of debt discount of $ and $ as of March 31, 2024 and December 31, 2023, respectively | ||||||||
| Notes payable - related parties | ||||||||
| Notes payable | ||||||||
| Convertible notes payable, net of debt discount of $ and $ as of March 31, 2024 and December 31, 2023, respectively | ||||||||
| Convertible notes payable - related parties,
net of debt discount of $ | ||||||||
| Convertible notes payable | ||||||||
| Derivative liabilities | ||||||||
| Financing liability | ||||||||
| Advances payable | ||||||||
| Advances payable - related party | ||||||||
| Advances payable | ||||||||
| Accrued dividend payable | ||||||||
| Total Liabilities | ||||||||
| Commitments and contingencies (Note 8) | ||||||||
| Stockholders’ Deficiency: | ||||||||
| Convertible Preferred Stock, $ par value, shares authorized; | ||||||||
| Series A Convertible Preferred Stock,
shares designated, shares issued and outstanding as of March 31, 2024 and December 31, 2023; liquidation preference of
$ | ||||||||
| Series B Convertible Preferred
Stock, shares designated, and shares issued and outstanding as of March 31, 2024 and December 31, 2023,
respectively; liquidation preference of $ | ||||||||
| Series C Convertible Preferred
Stock, shares designated, and shares issued and outstanding as of March 31, 2024 and December 31, 2023,
respectively; liquidation preference of $ | ||||||||
| Preferred stock, value | ||||||||
| Common Stock, $ par value, shares authorized; and shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Deficiency | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders’ Deficiency | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 3 |
CELL SOURCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| - | ||||||||
| For
the Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Operating Expenses: | ||||||||
| Research and development | $ | $ | ||||||
| Research and development - related party | ||||||||
| Research and development | ||||||||
| General and administrative | ||||||||
| Total Operating Expenses | ||||||||
| Loss From Operations | ( | ) | ( | ) | ||||
| Other (Expense) Income: | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Interest expense - related parties | ( | ) | ( | ) | ||||
| Interest expense | ( | ) | ( | ) | ||||
| Interest expense - amortization of debt discount | ( | ) | ( | ) | ||||
| Interest expense - amortization of debt discount - related party | ( | ) | ( | ) | ||||
| Interest expense - amortization of debt discount | ( | ) | ( | ) | ||||
| Change in fair value of derivative liabilities | ||||||||
| Total Other Expense | ( | ) | ( | ) | ||||
| Net Loss | ( | ) | ( | ) | ||||
| Dividend attributable to Series A, B, and C preferred stockholders | ( | ) | ( | ) | ||||
| Net Loss Applicable to Common Stockholders | $ | ( | ) | $ | ( | ) | ||
| Net Loss Per Common Share - Basic and Diluted | $ | ) | $ | ) | ||||
| Weighted Average Common Shares Outstanding - | ||||||||
| Basic and Diluted | ||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 4 |
CELL SOURCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIENCY
(Unaudited)
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficiency | ||||||||||||||||||||||||||||||||||
| FOR THE THREE MONTHS ENDED MARCH 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||
| Convertible Preferred | Convertible Preferred | Convertible Preferred | Additional | Total | ||||||||||||||||||||||||||||||||||||||||
| Stock - Series A | Stock - Series B | Stock - Series C | Common Stock | Paid-In | Accumulated | Stockholders’ | ||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficiency | ||||||||||||||||||||||||||||||||||
| Balance, January 1, 2024 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Conversion of convertible notes payable and accrued interest into Series C Convertible Preferred Stock and common stock | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Series A, B and C Convertible Preferred Stock dividends: | ||||||||||||||||||||||||||||||||||||||||||||
| Accrual of earned dividends | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Common stock issued in satisfaction of accrued compensation | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Issuance of Series B Convertible Preferred Stock for cash, net | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Common stock issued in satisfaction of convertible note payable interest | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation: | ||||||||||||||||||||||||||||||||||||||||||||
| Warrants | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Common stock | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficiency | ||||||||||||||||||||||||||||
| FOR THE THREE MONTHS ENDED MARCH 31, 2023 | ||||||||||||||||||||||||||||||||||||
| Convertible Preferred | Convertible Preferred | Additional | Total | |||||||||||||||||||||||||||||||||
| Stock - Series A | Stock - Series C | Common Stock | Paid-In | Accumulated | Stockholders’ | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficiency | ||||||||||||||||||||||||||||
| Balance, January 1, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Balance | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Conversion of convertible notes payable and accrued interest into Series C Convertible Preferred Stock and common stock | - | |||||||||||||||||||||||||||||||||||
| Series A and C Convertible Preferred Stock dividends: | ||||||||||||||||||||||||||||||||||||
| Accrual of earned dividends | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Issuance of warrants in connection with issuance of convertible notes payable | - | - | - | |||||||||||||||||||||||||||||||||
| Conversion of Series C Convertible Preferred Stock into common stock | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Stock-based compensation: | ||||||||||||||||||||||||||||||||||||
| Common stock | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Balance | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 5 |
CELL SOURCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| 2024 | 2023 | |||||||
| For Three Months Ended | ||||||||
| March 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash Flows From Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Amortization of debt discount | ||||||||
| Amortization of debt discount - related party | ||||||||
| Amortization of debt discount | ||||||||
| Change in fair value of derivative liabilities | ( | ) | ||||||
| Non-cash interest expense - warrants | ( | ) | ( | ) | ||||
| Stock-based compensation: | ||||||||
| Common stock | ||||||||
| Warrants | ( | ) | ||||||
| Stock-based compensation | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | ||||||||
| Other current assets | ||||||||
| Accounts payable | ||||||||
| Accrued expenses | ||||||||
| Accrued expenses - related parties | ||||||||
| Accrued expenses | ||||||||
| Accrued interest | ||||||||
| Accrued interest - related parties | ||||||||
| Accrued interest | ||||||||
| Accrued compensation | ||||||||
| Net Cash Used In Operating Activities | ( | ) | ( | ) | ||||
| Cash Flows From Financing Activities: | ||||||||
| Proceeds from issuance of Series B Convertible Preferred Stock and warrants | ||||||||
| Proceeds from issuance of convertible notes payable | ||||||||
| Proceeds from issuance of convertible notes payable - related party | ||||||||
| Proceeds from issuance of convertible notes payable | ||||||||
| Repayment of financing liability | ( | ) | ||||||
| Net Cash Provided By Financing Activities | ||||||||
| Net Decrease In Cash | ( | ) | ( | ) | ||||
| Cash - Beginning of Period | ||||||||
| Cash - End of Period | $ | $ | ||||||
| Supplemental Disclosures of Cash Flow Information: | ||||||||
| Cash paid for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Issuance of warrants in connection with the issuance of notes payable | $ | $ | ||||||
| Accrual of warrant obligations in connection with issuance of convertible notes payable | $ | $ | ||||||
| Common stock issued in satisfaction of accrued compensation | $ | ( | ) | $ | ||||
| Conversion of accrued expenses into note principal | $ | $ | ||||||
| Accrual of earned preferred stock dividends | $ | ( | ) | $ | ( | ) | ||
| Conversion of convertible notes payable and accrued interest into Series C Preferred Stock and common stock | $ | $ | ||||||
| Issuance of warrants in connection with issuance of Series B Preferred Stock | $ | $ | ||||||
| Issuance of embedded derivative liabilities in connection with issuance of Series B Preferred Stock | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 6 |
CELL SOURCE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Business Organization, Nature of Operations, Risks and Uncertainties and Basis of Presentation
Organization and Operations
Cell Source, Inc. (“Cell Source”, “CSI” or the “Company”) is a Nevada corporation formed on June 6, 2012 that is the parent company of Cell Source Limited (“CSL”), a wholly owned subsidiary which was founded in Israel in 2011 in order to commercialize a suite of inventions relating to certain cancer treatments. The Company is a biotechnology company focused on developing cell therapy treatments based on the management of immune tolerance. The Company’s lead prospective product is its patented Veto Cell immune system management technology, which is an immune tolerance biotechnology that enables the selective blocking of immune responses. CSL’s Veto Cell immune system management technology is based on technologies patented, owned, and licensed to CSL by Yeda Research and Development Company Limited, an Israeli corporation (“Yeda”) (see Note 8, Commitments and Contingencies). The Company’s target indications include: lymphoma, leukemia and multiple myeloma through the facilitation of safer and more accessible stem cell (e.g. bone marrow) transplantation acceptance, treatment of end stage kidney disease and other non-malignant organ diseases through improved organ transplantation (broadened donor pool, reduced dependence on post-transplant anti-rejection therapy), and ultimately treating a variety of cancers and non-malignant diseases.
Risks and Uncertainties
On October 7, 2023, a conflict arose between Israel and Hamas militants on Israel’s southern border from the Gaza Strip. The intensity and duration of Israel’s current war against Hamas is difficult to predict, and as are such war’s economic implications on the Company’s business and operations. To the extent that any of these negative developments do occur, they may have an adverse effect on the Company’s business, results of operations and its ability to raise additional funds. As of March 31, 2024, the Company considered the impact of the war on its business and operational assumptions and estimates and determined there were no material adverse impacts on the Company’s condensed consolidated results of operations and financial position as of March 31, 2024.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the condensed consolidated financial position of the Company as of March 31, 2024 and the condensed consolidated results of its operations and cash flows for the three months ended March 31, 2024 and 2023. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the operating results for the full year ending December 31, 2024 or any other period. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related disclosures of the Company as of December 31, 2023 and for the year then ended which were included in the Company’s Annual Report on Form 10-K that was filed with the Securities and Exchange Commission (“SEC”) on June 24, 2024.
Note 2 - Going Concern and Management Plans
During
the three months ended March 31, 2024, the Company had not generated any revenues, had a net loss of approximately $
The
Company is currently funding its operations on a month-to-month basis. While there can be no assurance that it will be successful, the
Company is in active negotiations to raise additional capital. The Company’s primary sources of operating funds since inception
have been equity and debt financings. Management’s plans include continued efforts to raise additional capital through debt and
equity financings. There is no assurance that these funds will be sufficient to enable the Company to fully complete its development
activities or attain profitable operations. If the Company is unable to obtain such additional financing on a timely basis or, notwithstanding
any request the Company may make, if the Company’s debt holders do not agree to convert their notes into equity or extend the maturity
dates of their notes, the Company may have to curtail its development, marketing and promotional activities, which would have a material
adverse effect on the Company’s business, financial condition and results of operations, and ultimately the Company could be forced
to discontinue its operations and liquidate. Subsequent to March 31, 2024 and as more fully described in Note 9, Subsequent Events,
the Company received aggregate proceeds of $
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which contemplate continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values. The consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty.
Note 3 - Summary of Significant Accounting Policies
| 7 |
CELL SOURCE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Company computes basic net loss per share by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding for the period and excludes the effects of any potentially dilutive securities. Diluted earnings per share includes the dilution that would occur upon the exercise or conversion of all dilutive securities into common stock using the “treasury stock” and/or “if converted” methods, as applicable.
Schedule of Weighted Average Dilutive Common Shares
| March 31, | ||||||||
| 2024 | 2023 | |||||||
| Options | ||||||||
| Warrants | ||||||||
| Convertible notes [1] [2] | ||||||||
| Convertible preferred stock | ||||||||
| Total | ||||||||
| [1] |
| [2] |
Recent Accounting Standards
In October 2023, the FASB issued ASU 2023-06, “Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative,” to amend certain disclosure and presentation requirements for a variety of topics within the ASC. These amendments align the requirements in the ASC to the removal of certain disclosure requirements set out in Regulation S-X and Regulation S-K, announced by the SEC. The effective date for each amended topic in the ASC is either the date on which the SEC’s removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, or on June 30, 2027, if the SEC has not removed the requirements by that date. Early adoption is prohibited. The Company is currently evaluating the impact of this standard but does not expect it to have a material impact on its condensed consolidated financial statements.
In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segments Disclosures (Topic 280), which updates reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses on both an annual and interim basis. The guidance becomes effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. Since this new ASU addresses only disclosures, the Company does not expect the adoption of this ASU to have any material effects on its financial condition, results of operations or cash flows. The Company is currently evaluating any new disclosures that may be required upon adoption of ASU 2023-07.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this update address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This update also includes certain other amendments to improve the effectiveness of income tax disclosures. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024 with early adoption permitted. The Company is currently evaluating the impact of this standard but does not expect it to have a material impact on its condensed consolidated financial statements.
Since the date of the Annual Report on Form 10-K for the year ended December 31, 2023, there have been no material changes to the Company’s significant accounting policies, except as disclosed herein.
Note 4 - Fair Value
The following table provides a summary of the changes in fair value, including net transfers in and/or out, of all Level 3 liabilities measured at fair value on a recurring basis using unobservable inputs during the three months ended March 31, 2024 and 2023:
Schedule of Changes in Fair Value of Liabilities Measured at Fair Value on a Recurring Basis
| Accrued | Accrued | Derivative | ||||||||||||||
| Interest | Compensation | Liabilities | Total | |||||||||||||
| Balance - January 1, 2024 | $ | $ | $ | $ | ||||||||||||
| Accrual of warrant obligation | ||||||||||||||||
| Issuance of warrants and conversion option | ||||||||||||||||
| Common stock issued in satisfaction of accrued compensation | ( | ) | ( | ) | ||||||||||||
| Change in fair value | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Balance - March 31, 2024 | $ | $ | $ | $ | ||||||||||||
| Accrued | Accrued | |||||||||||
| Interest | Compensation | Total | ||||||||||
| Balance - January 1, 2023 | $ | $ | $ | |||||||||
| Accrual of warrant obligation | ||||||||||||
| Change in fair value | ( | ) | ( | ) | ( | ) | ||||||
| Balance - March 31, 2023 | $ | $ | $ | |||||||||
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable. The Company’s Level 3 liabilities shown in the above table consist of accrued obligations to issue warrants and common stock to non-employees and is recorded at fair value at inception and subsequent changes in fair value are charged to the condensed consolidated statement of operations at each reporting period.
| 8 |
CELL SOURCE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In applying the Black-Scholes option pricing model utilized in the valuation of Level 3 liabilities, the Company used the following approximate assumptions:
Schedule of Assumptions Used for Valuation of Level 3 Liabilities
| For the Three Months Ended | ||||||||
| March 31, | ||||||||
| 2024 | 2023 | |||||||
| Risk-free interest rate | % - | % | %- | % | ||||
| Expected term (years) | - | - | ||||||
| Expected volatility | % | % | ||||||
| Expected dividends | %- | % | % | |||||
The expected term used is the contractual life of the instrument being valued. Since the Company’s stock does not have significant trading volume, the Company is utilizing an expected volatility based on a review of the historical volatilities, over a period of time, equivalent to the expected life of the instrument being valued, of similarly positioned public companies within its industry. The risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent with the expected term of the instrument being valued.
As
of March 31, 2024 and December 31, 2023, the Company had an obligation to issue and shares of common stock to service
providers that had a fair value of $
See Note 6, Stockholders’ Deficiency – Common Stock and Stock Warrants for additional details associated with the issuance of common stock and warrants.
Note 5 – Notes Payable
As
of March 31, 2024 and through the date of this filing, notes and convertible notes payable with principal amounts totaling $
During
the three months ended March 31, 2024 and 2023, the Company recorded interest expense of $
Convertible Notes Payable
During
the three months ended March 31, 2024, a convertible note with $
On
March 22, 2024, the Company completed its private offering of
Convertible Notes Payable - Related Parties
In
March 2024, the Company received additional advances of $
Note 6 – Stockholders’ Deficiency
Preferred Stock Dividends
During
the three months ended March 31, 2024 and 2023, the Company accrued additional preferred dividends of $
| 9 |
CELL SOURCE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Series B Convertible Preferred Stock
During
the three months ended March 31, 2024, the Company received proceeds of $
Series C Convertible Preferred Stock
See Note 5, Notes Payable – Convertible Notes Payable for details associated with conversions of notes payable into shares of Series C Convertible Preferred Stock.
Common Stock
See Note 5, Notes Payable – Convertible Notes Payable for details associated with conversions of accrued interest into shares of common stock.
During the three months ended March 31, 2024, the Company issued shares of the Company’s common stock with an issuance date fair value of $ in connection with a legal settlement that was included within accrued compensation as of December 31, 2023.
During the three months ended March 31, 2024, the Company issued shares of the Company’s common stock to a certain investor on January 1, 2024 in satisfaction of convertible note payable late fees. The shares had an issuance date fair value of $ which was recognized immediately.
During
the three months ended March 31, 2024, the Company issued immediately vested shares of the Company’s common stock to
a certain consultant as compensation for services performed. The shares had a grant date fair value of $
Stock Warrants
During
the three months ended March 31, 2024, the Company entered into an advisory agreement with a certain advisor to perform independent advisory
services in connection with business operations from January 5, 2024 to June 4, 2024. In consideration of services to be performed, the
Company issued -year warrants to purchase
See Note 5, Notes Payable for additional details associated with the issuance of stock warrants.
Stock-Based Compensation
During
the three months ended March 31, 2024, the Company recognized stock-based compensation expense of $, consisting of $ of
expense related to warrants (of which, $ was included within stockholder’s deficiency and $(
As of March 31, 2024, there was $ of unrecognized stock-based compensation expense which will be recognized over a weighted average remaining amortization period of years.
Note 7 – Related Party Transactions
As
of March 31, 2024 and December 31, 2023, the Company was required to issue warrants to purchase an aggregate of
See Note 5, Notes Payable – Convertible Notes Payable – Related Parties for details of a convertible note issued to a director of the Company.
| 10 |
CELL SOURCE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 8 – Commitments and Contingencies
Yeda Research and License Agreement
During
the three months ended March 31, 2024 and 2023, the Company recorded research and development expenses of $
MD Anderson Sponsored Research Agreements
The
Company recognized $
Litigation
In
January 2019, the holder of a promissory note in the principal amount of $
Loss contingencies considered remote are generally not disclosed, unless they involve guarantees, in which case the guarantees would be disclosed. There can be no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows. Aside from the matters discussed above, there are no other known contingencies through the date of this filing.
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CELL SOURCE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 9 – Subsequent Events
The Company has evaluated events that have occurred after the balance sheet and through the date the financial statements were issued. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the financial statements, except as disclosed below.
Subsequent
to March 31, 2024, the Company received gross proceeds of $
Subsequent
to March 31, 2024, the Company received proceeds of $
Subsequent
to March 31, 2024, the Company entered into note amendment agreements with a trust controlled by Darlene Soave to extend the
maturity dates of a note originally issued to Ms. Soave and assigned to the trust and the Verstraete Note, which had an outstanding principal amount of $
Subsequent
to March 31, 2024, the Company entered into an exchange agreement with a note holder, whereby the noteholder and the Company agreed to
exchange a note payable with a principal amount of $ for a warrant to purchase an aggregate of
Subsequent to March 31, 2024, the Company issued shares of the Company’s common stock to a certain investor as payment for convertible note payable late fees incurred.
Subsequent to March 31, 2024, the Company issued an aggregate of shares of its common stock as payment-in-kind dividends to holders of its Series A Convertible Preferred Stock, Series B Convertible Preferred Stock, and Series C Convertible Preferred Stock.
Subsequent to March 31, 2024, the Company
entered into a note amendment agreement with a note holder to extend the maturity date of a note in the principal amount of $
Subsequent to March 31, 2024, the Company
entered into a note amendment agreement with a note holder to extend the maturity date of a note in the principal amount of $
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of the condensed consolidated results of operations and financial condition of Cell Source, Inc. (“CSI”, “Cell Source”, the “Company”, “us,” “we,” “our,”) as of March 31, 2024 and for the three months ended March 31, 2024 and 2023 should be read in conjunction with our unaudited financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the Securities and Exchange Commission (“SEC”) on June 24, 2024.
This Quarterly Report contains forward-looking statements as that term is defined in the federal securities laws. The events described in forward-looking statements contained in this Quarterly Report may not occur. Generally, these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of our plans or strategies, projected or anticipated benefits from acquisitions to be made by us, or projections involving anticipated revenues, earnings or other aspects of our operating results. The words “may,” “will,” “expect,” “believe,” “anticipate,” “project,” “plan,” “intend,” “estimate,” and “continue,” and their opposites and similar expressions, are intended to identify forward-looking statements. We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based. Factors that may affect our results include, but are not limited to, the risks and uncertainties discussed in Item 1A (“Risk Factors”) of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on June 24, 2024.
Overview
We are a cell therapy company focused on immunotherapy. Since our inception, we have been involved with the development of proprietary immune system management technology licensed from Yeda Research & Development Company Limited (“Yeda”), the commercial arm of the Weizmann Institute. We have since shifted the focus of our research and development efforts to MD Anderson.
This technology addresses one of the most fundamental challenges within human immunology: how to tune the immune response such that it tolerates selected desirable foreign cells, but continues to attack all other (undesirable) targets. In simpler terms, a number of potentially life-saving treatments have limited effectiveness today because the patient’s immune system rejects them. For example, while HSCT – hematopoietic stem cell transplantation (e.g. bone marrow transplantation) has become a preferred therapeutic approach for treating blood cell cancer, most patients do not have a matched family donor. Although matched unrelated donors and cord blood can each provide an option for such patients, haploidentical stem cell transplants (sourced from partially mismatched family members) are rapidly gaining favor as a treatment of choice. This is still a risky and difficult procedure primarily because of potential conflicts between host (recipient) and donor immune systems and also due to viral infections that often follow even successful HSCT while the compromised new immune system works to reconstitute itself by using the transplanted stem cells. Today, rejection is partially overcome using aggressive immune suppression treatments that leave the patient exposed to many dangers by compromising their immune system.
The unique advantage of Cell Source technology lies in the ability to induce sustained tolerance of transplanted cells (or organs) by the recipient’s immune system in a setting that requires only mild immune suppression, while avoiding the most common post-transplant complications. The scientific term for the result of successfully inducing such tolerance in a transplantation setting is chimerism, where the recipient’s immune system tolerates the co-existence of the (genetically different) donor type and host type cells. Attaining sustained chimerism is an important prerequisite to achieving the intrinsic GvL (graft versus leukemia) effect of HSCT and supporting the reconstitution of normal hematopoiesis (generation of blood cells, including those that protect healthy patients from cancer) in blood cancer patients. Preclinical data and initial clinical data show that Cell Source’s Veto Cell technology can provide superior results in allogeneic (donor-derived) HSCT by allowing for haploidentical stem cell transplants under a mild conditioning regimen, while avoiding the most common post-transplant complications. Combining this with CAR (Chimeric Antigen Receptor) T cell therapy as a unified VETO CAR-T treatment, we will be able to treat patients in relapse as well as those in remission and use the cancer killing power of CAR-T to protect the patient while their immune system fully reconstitutes, thus providing an end-to-end solution for blood cancer treatment by potentially delivering a fundamentally safer and more effective allogeneic HSCT: prevention of relapse; avoidance GvHD; prevention of viral infections; and enhanced persistence of GvL effect. This means that the majority of patients will be able to find a donor, and will have access to a potentially safer procedure with higher long term survival rates than what either donor-derived HSCT or autologous CAR-T each on their own currently provide.
The ability to induce permanent chimerism (and thus sustained tolerance) in patients – which allows the transplantation to overcome rejection without having to compromise the rest of the immune system – may open the door to effective treatment of a number of severe medical conditions, in addition to blood cancers, which are characterized by this need. These include:
| ● | The broader set of cancers, including solid tumors, that can potentially be treated effectively using genetically modified cells such as CAR-T cell therapy, but also face efficacy and economic constraints due to limited persistence based on immune system issues (i.e., the need to be able to safely and efficiently deliver allogeneic CAR-T therapy). Inducing sustained tolerance to CAR-T cells may bring reduced cost and increased efficacy by allowing for off-the-shelf (vs. patient-derived) treatments with more persistent cancer killing capability. | |
| ● | Organ failure and transplantation. A variety of conditions can be treated by the transplantation of vital organs. However, transplantation is limited both by the insufficient supply of available donor organs and the need for lifelong, daily anti-rejection treatments post-transplant. Haploidentical organ transplants, with sustained chimerism, have the potential to make life saving transplants accessible to the majority of patients, with the prospect of improved life quality and expectancy. | |
| ● | Non-malignant hematological conditions (such as type one diabetes and sickle cell anemia) which could, in many cases, also be more effectively treated by stem cell transplantation if the procedure could be made safer and more accessible by inducing sustained tolerance in the stem cell transplant recipient. |
Human Capital Resources
Other than our Chief Executive Officer, we currently do not have any full-time employees, but retain the services of independent contractors/consultants on a contract-employment basis.
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Recent Developments
Preclinical Results and Clinical Results
Following on a successful, intensive collaboration with Professor Zelig Eshhar, the inventor of CAR-T cell therapy, data confirmed that Veto Cells can markedly extend persistence of genetically modified T cells from the same donor and that genetically modified Veto Cells can effectively inhibit tumors expressing an antigen recognized by the transgenic T cell receptor. Furthermore, human Veto Cells transfected with CAR exhibit anti-tumor activity in-vitro without losing their veto activity. These preclinical results form the basis of our current development of a clinical protocol for allogeneic VETO CAR-T HSCT combined therapy for blood cancer treatment. Cell Source plans to submit this protocol for approval in 2023. The Phase 1/2 clinical trial at the University of Texas MD Anderson Cancer Center, using Cell Source’s Anti-viral Veto Cells, has successfully treated 12 patients each receiving a haploidentical HSCT under reduced intensity conditioning with Veto Cells. The primary endpoints of the trial are to achieve engraftment of the T-cell depleted transplant, under a mild immune suppression regimen, without the incidence of severe GvHD by using Veto cells. Having attained these endpoints thus far, we have structured the balance of the trial to both determine maximum Veto cell dose tolerance and also to ensure that we can avoid certain antibody-related issues that appeared with some of the initial patients treated. If it continues to succeed in human clinical trials, we believe that this novel treatment may have a meaningful and potentially broad impact on the field of stem cell transplantation:
| 1) | Significantly improve outcomes of transplantations by reducing the host (transplant recipient) rejection rate of T-cell depleted stem cells (e.g. from bone marrow) – thus supporting successful engraftment of the transplanted cells, which is the treatment for the blood cancer itself. In order to improve the safety of this cancer treatment, Veto Cell technology has shown in both preclinical studies and initial clinical data that it can markedly reduce both the risk of GvHD and the need for using aggressive amounts of immunosuppression treatments. We have shown in preclinical studies, and are seeing in the clinic, the reduction of viral infections that typically threaten patients post transplantation. This safer means of delivering stem cell transplants would significantly reduce the HSCT mortality rate and therefore lead to broader use of this treatment. Furthermore, by adding CAR-T to the HSCT protocol, which we have already done successfully in preclinical studies, we can bridge between the initial transplantation and the conclusion of immune reconstitution, thus providing both short-term and ongoing protection against remission. This has the potential to significantly improve efficacy beyond that of the current outcomes of either CAR-T or HSCT on their own. | |
| 2) | Substantively increase the number of transplantations by enabling successful engraftment under lower levels of immune suppression and therefore making the therapy accessible to older and sicker patients (who today may not survive ablation). | |
| 3) | Further increase the number of transplantations by making transplantation appropriate for other indications (for which today transplantation would be considered an inappropriately risky treatment). See, e.g. BMT 2021 Correction of Sickle Cell Disease by Allogeneic Hematopoietic Cell Transplantations with Anti-3rd Party Veto Cells, Bone Marrow Transplantation, March 3, 2021. |
In addition, our Veto Cell technology may possibly play a role in the treatment of a number of additional serious and currently poorly treated non-malignant diseases. Finally, based on preclinical studies using genetically modified cells, we believe that Veto Cells will be able to act as critical enabler for other cell therapies, most notably CAR-T cell therapy, which has recently shown strong initial indications of being effective in the near term in treating blood cancer.
Recent Developments
Preclinical Results and Clinical Results
After two years of intensive collaboration with Professor Zelig Eshhar, the inventor of CAR-T cell therapy, preclinical data confirmed that Veto Cells can markedly extend persistence of genetically modified T cells from the same donor and that genetically modified Veto Cells can effectively inhibit tumors expressing an antigen recognized by the transgenic T cell receptor. Furthermore, human Veto Cells transfected with CAR exhibit anti-tumor activity in-vitro without losing their veto activity. These preclinical results have formed the basis of our current development of a clinical protocol for allogeneic VETO CAR-T HSCT combined therapy for blood cancer treatment. Cell Source plans to submit this protocol for approval by the end of 2024. The Phase 1/2 clinical trial at the University of Texas MD Anderson Cancer Center, using Cell Source’s Anti-viral Veto Cells, has successfully completed the first three treatment cohorts, with 12 patients each receiving a haploidentical HSCT under reduced intensity conditioning with Veto Cells. This first in human dose optimization trial has thus far shown that the initial dose is in fact the optimal dose, as all nine patients had successful stem cell engraftment after 42 days, in the absence of severe GvHD. Cell Source has continued the trial as it proceeds with the next cohorts of patients, using the higher dose level, in order to complete the dose finding process.
Private Placement of Series B Convertible Preferred Stock
Beginning in October 2023, the Company entered into subscription agreements with certain accredited investors in a private placement offering. Each unit, which is sold at a price of $7.50 per unit, consists of one (1) share of Series B Convertible Preferred Stock and a five-year warrant to purchase a certain number of shares of common stock at an exercise price of $0.75 per share. For every $100,000 of units acquired, the investor will receive warrants to purchase an aggregate of 150,000 shares of common stock.
From October 2023 through the date of filing, the Company sold 206,799 units for gross proceeds of $1,551,000 and issued warrants to purchase 2,326,500 shares of the Company’s common stock.
Condensed Consolidated Results of Operations
Three Months Ended March 31, 2024 Compared with the Three Months Ended March 31, 2023
Research and Development
Research and development expense was $356,213 and $338,500 for the three months ended March 31, 2024 and 2023, respectively, an increase of $17,713, or 5%. This increase is primarily attributable to increased research and development activities performed by Doctor Yair Reisner during the 2024 period.
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General and Administrative
General and administrative expense, which is associated with external consulting and professional fees, payroll and stock-based compensation expenses, was $781,916 and $1,077,049 for the three months ended March 31, 2024 and 2023, respectively, a decrease of $295,133, or 27%. The decrease was primarily attributable to decreases in legal expenses of $222,000, stock-based compensation expense of $40,000 and consulting expenses of $30,000. The decrease in activity during the 2024 period is primarily related to the Company’s limited liquidity.
Interest Expense
Interest expense for the three months ended March 31, 2024 and 2023 was $137,121 and $135,770, respectively, an increase of $1,351, or 1%.
Interest Expense - Amortization of Debt Discount
Amortization of debt discount was $5,956 and $140,248 for the three months ended March 31, 2024 and 2023, respectively, a decrease of $134,292, or 96%. This decrease is primarily associated with a majority of the debt discount being fully amortized during 2023.
Change in Fair Value of Derivative Liabilities
During the three months ended March 31, 2024, we recognized a gain on the change in fair value of derivative liability of $5,800.
Liquidity and Going Concern
We measure our liquidity in a number of ways, including the following:
| March 31, 2024 | December 31,2023 | |||||||
| Cash | $ | 23 | $ | 22,203 | ||||
| Working capital deficiency | $ | (16,754,143 | ) | $ | (15,611,543 | ) | ||
During the three months ended March 31, 2024, we had not generated any revenues, had a net loss of approximately $1,275,000 and had used cash in operations of approximately $174,000. As of March 31, 2024, we had a working capital deficiency of approximately $16,754,000 and an accumulated deficit of approximately $42,943,000. As of March 31, 2024 and through the date of this filing, notes payable with principal amounts totaling $5,643,000 and $1,956,000, respectively, were past due. We will continue to incur net operating losses to fund operations. These conditions raise substantial doubt about our ability to continue as a going concern for at least one year from the date these financial statements are issued.
We are currently funding our operations on a month-to-month basis. While there can be no assurance that we will be successful, we are in active negotiations to raise additional capital. Our primary sources of operating funds since inception have been equity and debt financings. Management’s plans include continued efforts to raise additional capital through debt and equity financings. There is no assurance that these funds will be sufficient to enable us to fully complete our development activities or attain profitable operations. If we are unable to obtain such additional financing on a timely basis or, notwithstanding any request we may make, if our debt holders do not agree to convert their notes into equity or extend the maturity dates of their notes, we may have to curtail our development, marketing and promotional activities, which would have a material adverse effect on our business, financial condition and results of operations, and ultimately we could be forced to discontinue our operations and liquidate. Subsequent to March 31, 2024 and as more fully described in Note 9, Subsequent Events, we received aggregate proceeds of $500,000 from the issuance of notes payable and $726,000 from the issuance of Series B Convertible Preferred Stock.
There can be no assurances that we will be successful in generating additional cash from equity or debt financings or other sources to be used for operations. Should we not be successful in obtaining the necessary financing to fund our operations, we would need to curtail certain or all operational activities and/or contemplate the sale of our assets, if necessary.
During the three months ended March 31, 2024, our sources and uses of cash were as follows:
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Net Cash Used in Operating Activities
We experienced negative cash flows from operating activities for the three months ended March 31, 2024 and 2023 in the amounts of approximately $174,000 and $310,000, respectively. The net cash used in operating activities for the three months ended March 31, 2024 was primarily due to cash used to fund a net loss of approximately $1,275,000, adjusted for non-cash expenses in the aggregate amount of approximately $215,000, partially offset by $887,000 of net cash provided by changes in the levels of operating assets and liabilities. The net cash used in operating activities for the three months ended March 31, 2023, was primarily due to cash used to fund a net loss of approximately $1,692,000 adjusted for non-cash expenses in the aggregate amount of approximately $423,000, partially offset by $959,000 of net cash provided by changes in the levels of operating assets and liabilities.
Net Cash Provided by Financing Activities
Net cash provided by financing activities for the three months ended March 31, 2024 and 2023 was approximately $152,000 and $220,000, respectively. The net cash provided by financing activities during the three months ended March 31, 2024 was attributable to $25,000 of proceeds from the issuance of Series B convertible preferred stock and warrants and approximately $147,000 of proceeds from issuance of convertible notes payable to a related party, partially offset by $20,000 of repayment of financing liability. The net cash provided by financing activities during the three months ended March 31, 2023, was attributable to $219,960 of proceeds from the issuance of convertible notes payable.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Critical Accounting Estimates
The preparation of financial statements and related disclosures are in conformity with U.S. GAAP. These accounting principles require us to make estimates and judgments that can affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenue and expense during the periods presented. We believe that the estimates and judgments upon which we rely are reasonable based upon information available to us at the time that we make these estimates and judgments. To the extent that there are material differences between these estimates and actual results, our financial results will be affected. The accounting policies that reflect our more significant estimates and judgments and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results are described below.
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We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.
There have been no material changes to the Company’s critical accounting estimates since the 2023 Form 10-K.
Item 3. Quantitative And Qualitative Disclosures About Market Risk.
Not applicable.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Annual Report, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the Principal Executive and Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Internal controls are procedures which are designed with the objective of providing reasonable assurance that (1) our transactions are properly authorized, recorded and reported; and (2) our assets are safeguarded against unauthorized or improper use, to permit the preparation of our condensed consolidated financial statements in conformity with United States generally accepted accounting principles.
In connection with the preparation of this Quarterly Report, management, with the participation of our Principal Executive and Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)). Based upon that evaluation, our Principal Executive and Financial Officer concluded that, as of March 31, 2024, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
Except as described below, we are not involved in any pending legal proceeding or litigations and, to the best of our knowledge, no governmental authority is contemplating any proceeding to which we are a party or to which any of our properties is subject, which would reasonably be likely to have a material adverse effect on us.
In January 2019, the holder of a promissory note in the principal amount of $250,000 due on March 16, 2016 instituted a collection action in the Supreme Court of the State of New York, County of New York. On June 12, 2019, the plaintiff served a motion for summary judgment through the Secretary of State which was heard on July 12, 2019 and granted. The Company contended that it was not given sufficient notice under the applicable statute and did not have an opportunity to oppose the motion. Judgment was entered in October 2019 in the amount of $267,680. The Company brought a motion to vacate based on the jurisdictional defect of the motion in not providing the required amount of time, but that motion was denied in February 2021 without properly addressing the jurisdictional issues raised by the Company. The Company appealed the denial and then filed a motion to Renew and Reargue the motion to vacate based on the Court’s failure to address critical issues. That motion was also denied on April 15, 2021 without addressing the Company’s arguments. The Company appealed the second denial as well and pursued both appeals in a consolidated manner so as to resolve all issues together. Each of the appeals was denied. While the Company’s motions were pending, the plaintiff commenced steps to collect judgment. During the year ended December 31, 2021, $103,088 of a deposit made with the court by a third party on behalf of the Company was released to an officer of the court and has been accounted for as partial note repayment, with an additional $146,912 due under the note repaid by a release of the remaining deposit to an officer of the court and garnishment of Company funds during the year ended December 31, 2022, which was also accounted for as a note repayment. In August 2023, a supplemental judgment of $38,838 was entered against the Company. Inasmuch, as there were no further opportunities to appeal, the Company was required to pay the remaining amount due, which was estimated to be approximately $113,000 and recorded as a liability as of December 31, 2023. As of May 31, 2024, after taking into account accrued and unpaid interest, approximately $117,000 was owed to the plaintiff and the plaintiff was seeking, among other things, additional monetary sanctions. In June 2024, the Company resolved this matter by making a final payment of $135,000, which was accrued for as of March 31, 2024, and the plaintiff agreed to cease the pursuit of additional sanctions against the Company and file a satisfaction of judgment.
Item 1A. Risk Factors.
There have been no material changes to the risk factors discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on June 24, 2024.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
In January 2024, we issued 2,000 shares of the Company’s common stock to a certain investor as payment for convertible note payable late fees incurred. We relied upon the exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) in connection with this transaction.
In February 2024, we issued 1,000,000 shares to a consultant for services rendered. We relied upon the exemption provided by Section 4(a)(2) of the Securities Act in connection with this transaction.
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In February 2024, we issued 3,333 units to an accredited investors at a price of $7.50 per unit. Each unit consisted of one share of Series B Preferred Stock and a warrant to purchase 11.25 shares of common stock at an exercise price of $0.75 per share. We relied upon the exemption provided by Section 4(a)(2) of the Securities Act in connection with this transaction.
In March 2024, a note in the principal amount of $100,000 automatically converted into 13,333 shares of our Series C Convertible Preferred Stock and we elected to issue 6,546 shares of common stock in lieu of the payment of $4,910 of cash interest due under such note. We relied upon the exemption provided by Section 4(a)(2) of the Securities Act in connection with these transactions.
In July 2024, we issued a five year warrant to purchase 100,000 shares of our common stock at an exercise price of $0.75 per share in exchange for a note held by an accredited investor in the principal amount of $30,000. We relied upon the exemption provided by Section 3(a)(9) of the Securities Act in connection with this transaction.
Item 3. Defaults Upon Senior Securities.
As of March 31, 2024 and through the date of this filing, notes payable and convertible notes payable with face values totaling approximately $5,643,000 and $1,956,000, respectively, were past due. Such notes continue to accrue interest and all relevant penalties have been accrued as of March 31, 2024. Of such past due notes payable, a holder of a note with principal amount of $250,000 issued a notice of default. See Item 1 above for additional details. We are in negotiations with all holders to extend the maturity dates of such notes or to convert the principal and accrued interest into equity.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
| 101.INS* | Inline XBRL Instance Document |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104* | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith
| 19 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CELL SOURCE, INC. | ||
| Dated: July 29, 2024 | By: | /s/ Itamar Shimrat |
| Name: | Itamar Shimrat | |
| Title: | Chief Executive Officer and Chief Financial Officer (Principal Executive, Financial and Accounting Officer) | |
| 20 |
Exhibit 31
CERTIFICATION OF
CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Itamar Shimrat, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Cell Source, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15I and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: July 29, 2024 | |
| /s/ Itamar Shimrat | |
| Itamar Shimrat | |
| Chief Executive Officer and Chief Financial Officer | |
| (Principal Executive, Financial, and Accounting Officer) |
Exhibit 32
CERTIFICATION OF
CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED
PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of Cell Source, Inc., a Nevada corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:
The Quarterly Report for the quarter ended March 31, 2024 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: July 29, 2024 | |
| /s/ Itamar Shimrat | |
| Itamar Shimrat | |
| Chief Executive Officer and Chief Financial Officer | |
| (Principal Executive, Financial, and Accounting Officer) |