Item 5. Market for Registrant’s
Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities.
The Company’s common stock is currently
quoted on the OTCQB (“OTCQB”). The OTCQB is a network of security dealers who buy and sell stock. The dealers are connected
by a computer network that provides information on current “bids” and “asks”, as well as volume information.
The Company’s common stock is quoted on the OTCQB under the symbol “AMBS”.
The following table sets forth, for the
calendar periods indicated the range of the high and low last reported of the Company’s common stock, as reported by the
OTCQB. The quotations represent inter-dealer prices without retail mark-ups, mark-downs or commissions, and may not necessarily
represent actual transactions. The quotations may be rounded for presentation.
Period
|
|
High
|
|
|
Low
|
|
First Quarter 2013
|
|
$
|
0.195
|
|
|
$
|
0.0453
|
|
Second Quarter 2013
|
|
$
|
0.09
|
|
|
$
|
0.027
|
|
Third Quarter 2013
|
|
$
|
0.0890
|
|
|
$
|
0.0279
|
|
Fourth Quarter 2013
|
|
$
|
0.0925
|
|
|
$
|
0.0391
|
|
Period
|
|
High
|
|
|
Low
|
|
First Quarter 2012
|
|
$
|
0.15
|
|
|
$
|
0.05
|
|
Second Quarter 2012
|
|
$
|
0.13
|
|
|
$
|
0.012
|
|
Third Quarter 2012
|
|
$
|
0.02
|
|
|
$
|
0.004
|
|
Fourth Quarter 2012
|
|
$
|
0.11
|
|
|
$
|
0.0046
|
|
As of April 15, 2014, Amarantus had 715,074,189 shares of common stock outstanding held by 61 shareholders
of record.
Transfer Agent
The Company's registrar and transfer agent
is VStock Transfer, LLC, 77 Spruce Street, Suite 201, Cedarhurst, New York 11516.
Dividend Policy
We have not previously paid any cash dividends
on our Common Stock and do not anticipate or contemplate paying dividends on our Common Stock in the foreseeable future. We currently
intend to utilize all available funds to develop our business. We can give no assurances that we will ever have excess funds available
to pay dividends.
Recent Sales of Unregistered Securities
On August 26, 2013, the Company issued 2,793,296 shares of the Company’s restricted common stock
to Matt Morris related to the conversion of a convertible note into common stock. These shares were issued pursuant to the exemptions
from the registration requirements of the Securities Act of 1933, as amended, afforded the Company under Section 4(2) promulgated
thereunder due to the fact that the issuance did not involve a public offering.
On September 4, 2013, the Company issued 100,000 shares of the
Company’s restricted common stock to Gerard Casale related to business advisory services. These shares were issued pursuant
to the exemptions from the registration requirements of the Securities Act of 1933, as amended, afforded the Company under Section
4(2) promulgated thereunder due to the fact that the issuance did not involve a public offering.
On September 24, 2013, the Company issued 10,000,000 shares
of the Company’s restricted common stock to Jeffery Stephens related to the conversion of a convertible note into common
stock. These shares were issued pursuant to the exemptions from the registration requirements of the Securities Act of 1933, as
amended, afforded the Company under Section 4(2) promulgated thereunder due to the fact that the issuance did not involve a public
offering.
On September 1, 2013, the Company issued 9,733,714 shares of
the Company’s restricted common stock to Ascendant Partners, LLC related to the conversion of a convertible note into common
stock. These shares were issued pursuant to the exemptions from the registration requirements of the Securities Act of 1933, as
amended, afforded the Company under Section 4(2) promulgated thereunder due to the fact that the issuance did not involve a public
offering.
On September 26, 2013, the Company issued 3,700,000 shares of
the Company’s restricted common stock to Jeffery Stephens related to the conversion of a convertible note into common stock.
These shares were issued pursuant to the exemptions from the registration requirements of the Securities Act of 1933, as amended,
afforded the Company under Section 4(2) promulgated thereunder due to the fact that the issuance did not involve a public offering.
On September 30, 2013, the Company issued 6,793,143 shares of
the Company’s restricted common stock to Dominion Capital LLC related to the conversion of a convertible note into common
stock. These shares were issued pursuant to the exemptions from the registration requirements of the Securities Act of 1933, as
amended, afforded the Company under Section 4(2) promulgated thereunder due to the fact that the issuance did not involve a public
offering.
On October 1, 2013, the Company issued 413 860 shares of the
Company’s restricted common stock to Dominion Capital LLC related dividend on Series D Preferred Stock. These shares were
issued pursuant to the exemptions from the registration requirements of the Securities Act of 1933, as amended, afforded the Company
under Section 4(2) promulgated thereunder due to the fact that the issuance did not involve a public offering.
On October 1, 2013, the Company issued 375,000 shares of the
Company’s restricted common stock to Sichenza Ross Friedman Ference related to business advisory services. These shares were
issued pursuant to the exemptions from the registration requirements of the Securities Act of 1933, as amended, afforded the Company
under Section 4(2) promulgated thereunder due to the fact that the issuance did not involve a public offering.
On October 1, 2013, the Company issued 250,000 shares of the
Company’s restricted common stock to VStock Transfer, LLC related to business advisory services. These shares were issued
pursuant to the exemptions from the registration requirements of the Securities Act of 1933, as amended, afforded the Company under
Section 4(2) promulgated thereunder due to the fact that the issuance did not involve a public offering.
On October 1, 2013, the Company issued 1,000,000 shares of the
Company’s restricted common stock to Jack Brewer related to business advisory services. These shares were issued pursuant
to the exemptions from the registration requirements of the Securities Act of 1933, as amended, afforded the Company under Section
4(2) promulgated thereunder due to the fact that the issuance did not involve a public offering.
On October 3, 2013, the Company issued 489 867 shares of the
Company’s restricted common stock to Black Mountain Equities, Inc. related to the conversion of a convertible note into common
stock. These shares were issued pursuant to the exemptions from the registration requirements of the Securities Act of 1933, as
amended, afforded the Company under Section 4(2) promulgated thereunder due to the fact that the issuance did not involve a public
offering.
On October 4, 2013, the Company issued 1,500,000 shares of the
Company’s restricted common stock to Daniel Kordash related to business advisory services. These shares were issued pursuant
to the exemptions from the registration requirements of the Securities Act of 1933, as amended, afforded the Company under Section
4(2) promulgated thereunder due to the fact that the issuance did not involve a public offering.
On October 7, 2013, the Company issued 1,875,000 shares of the
Company’s restricted common stock to Zacks & Company related to business advisory services. These shares were issued
pursuant to the exemptions from the registration requirements of the Securities Act of 1933, as amended, afforded the Company under
Section 4(2) promulgated thereunder due to the fact that the issuance did not involve a public offering.
On October 7, 2013, the Company issued 61,345 shares of the
Company’s restricted common stock to Richard Lane related to business advisory services. These shares were issued pursuant
to the exemptions from the registration requirements of the Securities Act of 1933, as amended, afforded the Company under Section
4(2) promulgated thereunder due to the fact that the issuance did not involve a public offering.
On October 7, 2013, the Company issued 128,158 shares of the
Company’s restricted common stock to Russell James Miller, Jr. Living Trust related to business advisory services. These
shares were issued pursuant to the exemptions from the registration requirements of the Securities Act of 1933, as amended, afforded
the Company under Section 4(2) promulgated thereunder due to the fact that the issuance did not involve a public offering.
On October15, 2013, the Company issued 7,875,594 shares of the
Company’s restricted common stock to Dominion Capital LLC related to the conversion of a convertible note into common stock.
These shares were issued pursuant to the exemptions from the registration requirements of the Securities Act of 1933, as amended,
afforded the Company under Section 4(2) promulgated thereunder due to the fact that the issuance did not involve a public offering.
On October 17, 2013, the Company issued 180,000 shares of the
Company’s restricted common stock to VStock Transfer, LLC related to business advisory services. These shares were issued
pursuant to the exemptions from the registration requirements of the Securities Act of 1933, as amended, afforded the Company under
Section 4(2) promulgated thereunder due to the fact that the issuance did not involve a public offering.
On October28, 2013, the Company issued 6,683,680 shares of the
Company’s restricted common stock to Dominion Capital LLC related to the conversion of a convertible note into common stock.
These shares were issued pursuant to the exemptions from the registration requirements of the Securities Act of 1933, as amended,
afforded the Company under Section 4(2) promulgated thereunder due to the fact that the issuance did not involve a public offering.
On November 12, 2013, the Company issued 7,863,883 shares of
the Company’s restricted common stock to Dominion Capital LLC related to the conversion of a convertible note into common
stock. These shares were issued pursuant to the exemptions from the registration requirements of the Securities Act of 1933, as
amended, afforded the Company under Section 4(2) promulgated thereunder due to the fact that the issuance did not involve a public
offering.
On December 2, 2013, the Company issued 7,161,125 shares of
the Company’s restricted common stock to Dominion Capital LLC related to the conversion of a convertible note into common
stock. These shares were issued pursuant to the exemptions from the registration requirements of the Securities Act of 1933, as
amended, afforded the Company under Section 4(2) promulgated thereunder due to the fact that the issuance did not involve a public
offering.
On December 2, 2013, the Company issued 7,161,125 shares of
the Company’s restricted common stock to Dominion Capital LLC related to the conversion of a convertible note into common
stock. These shares were issued pursuant to the exemptions from the registration requirements of the Securities Act of 1933, as
amended, afforded the Company under Section 4(2) promulgated thereunder due to the fact that the issuance did not involve a public
offering.
Unless otherwise stated, the sales of the
above securities were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(2) of the
Securities Act (or Regulation D or Regulation S promulgated thereunder), or Rule 701 promulgated under Section 3(b) of the
Securities Act as transactions by an issuer not involving any public offering or pursuant to benefit plans and contracts relating
to compensation as provided under Rule 701. The recipients of the securities in each of these transactions represented their intentions
to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and
appropriate legends were placed upon the stock certificates issued in these transactions.
Equity Compensation Plan Information
The Company’s Board of Directors
and its stockholders approved the 2008 Stock Plan (the “2008 Plan”). Under the Plan, the Board of Directors may grant
up to 28,242,127 shares of incentive stock options, nonqualified stock options, or stock awards to eligible persons, including
employees, nonemployees, members of the Board, consultants, and other independent advisors who provide services to the Company.
In general, options are granted with an exercise price equal to the fair value of the underlying common stock on the date of the
grant. Options generally have a contractual life of 10 years and vest over periods ranging from being fully vested as of the grant
dates to four years.
Further, in July 2012, our Board of Directors
adopted a new stock plan, the Management, Employee, Advisor and Director Preferred Stock Option Plan – 2012 Series B Convertible
Preferred Stock Plan. The purposes of this Plan are to attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Management, Employees, Advisors and Directors and to promote the success of
our business. Certain current and former Management, Employees, Advisors and Directors were awarded a total of 1,247,500 options
to purchase Series B Preferred shares on July 15
th
, 2012, and an additional 1,200,000 options on November 4, 2012
The following table shows information with
respect these plans as of the fiscal year ended December 31, 2013.
Equity Compensation Plan Information (Common Stock)
|
Plan category
|
|
Number of securities to be issued upon
exercise of outstanding
options,
warrants and rights (a)
|
|
|
Weighted-average
Exercise
price of outstanding
options, warrants and rights (b)
|
|
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a) (c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans approved by security holders
|
|
|
6,941,288
|
|
|
|
$0.05
|
|
|
|
623,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans not approved by security holders
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
6,941,288
|
|
|
|
$0.05
|
|
|
|
623,618
|
|
Equity Compensation Plan Information (Preferred Stock)
|
Plan category
|
|
Number of securities to be issued upon exercise of outstanding
options,
warrants and rights (a)
|
|
|
Weighted-average
Exercise
price of outstanding options, warrants and rights (b)
|
|
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans approved by security holders
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans not approved by security holders
|
|
|
2,287,500
|
|
|
$
|
0.4500
|
|
|
|
552,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,287,500
|
|
|
$
|
0.4500
|
|
|
|
552,500
|
|
Item 7. Management’s Discussion and Analysis
of Financial Condition and Results of Operations.
This report contains forward-looking
statements. These forward-looking statements include, without limitation, statements containing the words “believes,”
“anticipates,” “expects,” “intends,” “projects,” “will,” and other
words of similar import or the negative of those terms or expressions. Forward-looking statements in this report include, but are
not limited to, expectations of future levels of research and development spending, general and administrative spending, levels
of capital expenditures and operating results, sufficiency of our capital resources, our intention to pursue and consummate strategic
opportunities available to us, including sales of certain of our assets. Forward-looking statements subject to certain known and
unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or implied by such forward-looking statements. These
risks and uncertainties include, but are not limited to those described in “Risk Factors” of the reports filed with
the Securities and Exchange Commission.
The following discussion should be read
in conjunction with our consolidated financial statements and notes thereto included elsewhere herein.
Overview
Amarantus Bioscience Holdings, Inc.(”the
Company”) is a California-based development-stage biopharmaceutical company founded in January 2008. We focus on developing
our intellectual property and proprietary technologies to develop drug and diagnostic product candidates to treat human disease.
We own or have exclusive licenses to various product candidates in the biopharmaceutical and diagnostic areas of the healthcare
industry, with a specific focus on bringing this candidates to market in the areas of Alzheimer’s disease, Parkinson’s
disease, Retinal Degenerative disorders, Wolfram’s Syndrome and other ailments of the human body, with a particular focus
on the nervous system. Our business model is to develop our product candidates through various de-risking milestones that
we believe will be accretive to shareholder value and strategically partner with biopharmaceutical companies, diagnostic companies,
investors, private foundations and other key stakeholders in the specific sub-sector of the healthcare industry in which we are
developing our products in order to achieve regulatory approval in key jurisdictions and thereafter successfully market and distribute
our products.
Principal Products in Development
The Company’s philosophy is to acquire,
in-license, discover and develop drug candidates and diagnostics with the potential to address critically important biological
pathways involved in human disease.
LymPro Test ®
The Lymphocyte Proliferation Test
(“LymPro Test ®”, or “LymPro”) is a diagnostic blood test for Alzheimer’s disease originally
developed by the University of Leipzig in Germany. The test works by evaluating the cell surface marker CD69 on peripheral blood
lymphocytes following a mitogenic stimulation. The underlying scientific basis for LymPro is that Alzheimer’s patients have
a dysfunctional cellular machinery that inappropriately allows mature neurons in the brain to enter the mitotic process (cell division
/cell cycle). When this happens the neurons start the cell division process, but cannot complete that process. As a result, a number
of cytokines and other genes are upregulated, ultimately leading to cell death by apoptosis. This inappropriate cell division activation
process is also present in the lymphocytes of Alzheimer’s patients, as lymphocytes share a similar cellular division machinery
with brain neurons. We measure the integrity of this cellular division machinery process by measuring CD69 upregulation in response
to the mitogenic stimulation. If CD 69 is upregulated it means that the cellular division machinery process is correct and Alzheimer’s
is not present. If CD69 is not upregulated, it means there is a dysfunctional cellular division machinery process, and Alzheimer’s
is more likely. To date, data has been published in peer-reviewed publications on LymPro with 160 patients, demonstrating 92% co-positivity
and 91% co-negativity with an overall 95% accuracy rating for LymPro.
Eltoprazine
Eltoprazine is a small molecule drug candidate
that is a selective partial agonist on the 5HT1-A and 5HT1-B receptors of the serotonergic system in the brain originally discovered
and developed by Solvay Pharmaceuticals (now Abbvie). The serotonergic system has been associated with a wide range of disorders
motor and behavioral disorders including aggression, cognition, attention and control. The Company is developing Eltoprazine for
the treatment of the primary side effect of current Parkinson’s disease medication Levadopa-Induced Dyskinesia (“PD
LID”), as well as Adult Attention Deficit Hyperactivity Disorder (“Adult ADHD”). To date, over 700 patients have
been dosed with Eltoprazine at varying doses as high as 30mg; the active dose in both PD LID and Adult ADHD is 5mg. Primary and
secondary endpoints have been met for Eltoprazine in Phase 2 trials in PD LID and Adult ADHD.
MANF
Mesencephalic Astrocyte-derived Neurotrophic
Factor (“MANF”) is an endogenous, evolutionally conserved and widely expressed protein that was discovered by the Company’s
Chief Scientific Officer Dr. John Commissiong. MANF acts on a variety of molecular functions, including as a part of the endoplasmic
reticulum stress response (“ER-SR”) system of the unfolded protein response (“UPR”). MANF has demonstrated
efficacy as a disease-modifying treatment in various animal models, including Parkinson’s disease, retinitis pigmentosa,
cardiac ischemia and stroke. The Company has made a strategic decision to focus the development of MANF in orphan indications and
is currently evaluating the most appropriate indication for development based on data currently being assembled internally, by
contract research organizations and academic collaborators.
Since inception, the Company’s research
team has been focused on developing MANF as a therapeutic for Parkinson’s disease, and other apoptosis-related disorders.
The Company’s business plans are focused in these specific areas:
Other
Exploration of the Company’s PhenoGuard
platform for neurrotrophic factor discovery and discovery and evaluation of external drug candidates for potential in-licensure
or acquisition.
For the next 12 months, the Company intends
to focus primarily on the commercialization of LymPro, the further clinical development of Eltoprazine, and the preclinical development
of MANF.
Critical Accounting Policies
Principles of Consolidation
- The
Consolidated Financial Statements include the accounts of Amarantus BioScience Holdings, Inc. and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Use of Estimates
- The preparation
of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and
reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Certain Significant Risks and Uncertainties
-
The Company participates in a global, dynamic, and highly competitive industry and believes that changes in any of the following
areas could have a material adverse effect on the Company’s future financial position, results of operations, or cash flows:
ability to obtain future financing; advances and trends in new technologies and industry standards; regulatory approval and market
acceptance of the Company’s products; development of the necessary manufacturing capabilities and the Company’s ability
to obtain adequate resources of necessary materials; development of sales channels; certain strategic relationships; litigation
or claims against the Company based on intellectual property, patent, product, regulatory, or other factors; and the Company’s
ability to attract and retain employees and other resources necessary to support its growth.
Concentration of Credit Risk
-
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents.
The Company places its cash and cash equivalents with domestic financial institutions that are federally insured within statutory
limits.
Cash and Cash Equivalents
-
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
Property and Equipment
- Property
and equipment, when acquired, are stated at cost and are depreciated on a straight-line basis over their estimated useful lives
as follows:
Equipment
|
3 years
|
Computer equipment
|
2 years
|
Furniture and fixtures
|
3 years
|
The Company disposed of all of its furniture
and equipment and recorded a loss on disposal of $1,129 in 2012. Depreciation expense for the years ended December 31, 2013 and
2012 and for the period from January 14, 2008 (date of inception) to December 31, 2013 was $0, $7,260, and $33,014, respectively.
Impairment of Long-Lived Assets
-
The Company reviews the carrying value of long-lived assets, including intangible assets and property and equipment, for impairment
whenever events or changes in circumstances indicate that the carrying value may not be fully recoverable. There have been no impairments
for the years ended December 31, 2013 and 2012 and for the period from January 14, 2008 (date of inception) to December 31,
2013
Revenue Recognition
- The Company
recognizes revenue when the earnings process is complete, when revenue is realized or realizable and earned, when persuasive evidence
a revenue arrangement exists, delivery of goods or services has occurred, the sales price is fixed or determinable, and collectability
is reasonably assured.
The Company accounts for milestones related
to research and development activities in accordance with the milestone method of revenue recognition of Accounting Standards Codification
Topic 605-28, under which consideration contingent on the achievement of a substantive milestone is recognized in its entirety
in the period when the milestone is achieved. A milestone is considered to be substantive when it meets all of the following criteria:
the milestone is commensurate with either the performance required to achieve the milestone or the enhancement of the value of
the delivered items resulting from the performance required to achieve the milestone; the milestone relates solely to past performance;
and, the milestone is reasonable relative to all of the deliverables and payment terms within the agreement.
The Company recognized no revenue during
the years ended December 31, 2013 and 2012 and $415,996 of revenue during the period from January 14, 2008 (date of inception)
to December 31, 2013. To date, the Company has only received research grant revenue and contract revenue. Research grant revenue
and contract revenue is recognized as the Company provides the services stipulated in the underlying agreement based on the time
and expenditures incurred, and all terms required in the agreement have been met. Amounts received in advance of services
provided are recorded as deferred revenue and amortized as revenue when the services are provided.
Research and Development Expenditures
-
Research and development expenses consist of personnel costs, including salaries, benefits and stock-based compensation, materials
and supplies, licenses and fees, and overhead allocations consisting of various administrative and facilities related costs. Research
and development activities are also separated into three main categories: research, clinical development, and biotechnology development.
Research costs typically consist of preclinical and toxicology costs. Clinical development costs include costs for Phase 1 and
2 clinical studies. Biotechnology development costs consist of expenses incurred in connection with product formulation and analysis.
The Company charges research and development costs, including clinical study costs, to expense when incurred.
Fair Value of Financial Instruments
- The fair value of certain of the Company’s financial instruments, including cash and cash equivalents, accrued compensation,
and other accrued liabilities, approximate cost because of their short maturities. The Company measures the fair value of certain
of its financial assets and liabilities on a recurring basis. A fair value hierarchy is used to rank the quality and reliability
of the information used to determine fair values. Financial assets and liabilities carried at fair value will be classified and
disclosed in one of the following three categories:
• Level
1-Quoted prices (unadjusted) in active markets for identical assets and liabilities.
• Level
2-Inputs other than Level 1 that are observable, either directly or indirectly, such as unadjusted quoted prices for similar assets
and liabilities, unadjusted quoted prices in the markets that are not active, or other inputs that are observable or can be corroborated
by observable market data for substantially the full term of the assets or liabilities.
• Level
3-Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets
or liabilities.
Stock-Based Compensation
-
Stock-based compensation is measured at the grant date based on the fair value of the award. The fair value of the award that is
ultimately expected to vest is recognized as expense on a straight-line basis over the requisite service period, which is generally
the vesting period. The expense recognized for the portion of the award that is expected to vest has been reduced by an estimated
forfeiture rate. The forfeiture rate is determined at the time of grant and revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates.
Expected Term
— The expected
term of options represents the period that the Company’s stock-based awards are expected to be outstanding based on the simplified
method, which is the half-life from vesting to the end of its contractual term.
Expected Volatility
—
The company computes stock price volatility over expected terms based on its historical common stock trading prices.
Risk-Free Interest Rate
—
The Company bases the risk-free interest rate on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent
remaining term.
Expected Dividend
— The
Company has never declared or paid any cash dividends on its common shares and does not plan to pay cash dividends in the foreseeable
future, and, therefore, uses an expected dividend yield of zero in its valuation models.
The Company recognizes fair value of stock
options granted to nonemployees as stock-based compensation expense over the period in which the related services are received.
Preferred Stock
- Preferred shares subject to
mandatory redemption (if any) are classified as liability instruments and are measured at fair value. The Company classifies conditionally
redeemable preferred shares, which includes preferred shares that feature redemption rights that are either within the control
of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control, as
temporary equity. At all other times, the Company classifies its preferred shares in stockholders’ deficiency.
Convertible Instruments
- GAAP requires companies to
bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments
if certain criteria are met. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded
derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the
hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value
under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur
and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.
An exception to this rule is when the host instrument is deemed to be conventional, as that term is described under applicable
GAAP.
When the Company has determined that the
embedded conversion options should not be bifurcated from their host instruments, the Company records, when necessary, discounts
to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between
the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price
embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date
of redemption. The Company also records, when necessary, deemed dividends for the intrinsic value of conversion options embedded
in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of
the transaction and the effective conversion price embedded in the preferred shares.
Common Stock Purchase Warrants and Derivative Financial Instruments
- The Company classifies all of its common stock purchase warrants and other derivative financial instruments as equity if
the contracts (1) require physical settlement or net-share settlement or (2) give the Company a choice of net-cash settlement or
settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any
contracts that (1) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and
if that event is outside the control of the Company), (2) give the counterparty a choice of net-cash settlement or settlement in
shares (physical settlement or net-share settlement), or (3) that contain reset provisions. The Company assesses classification
of its common stock purchase warrants and other derivatives at each reporting date to determine whether a change in classification
between assets and liabilities is required.
Debt Discounts
-
The Company
records, as a discount to notes and convertible notes, the relative fair value of warrants issued in connection with the issuances
and the intrinsic value of any conversion options based upon the differences between the fair value of the underlying common stock
at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these
arrangements are amortized to interest expense using the interest method over the earlier of the term of the related debt or their
earliest date of redemption.
Income Taxes
- The Company
accounts for income taxes using the liability method whereby deferred tax asset and liability account balances are determined based
on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates
and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary,
to reduce deferred tax assets to their estimated realizable value.
In evaluating the ability to recover its
deferred income tax assets, the Company considers all available positive and negative evidence, including its operating results,
ongoing tax planning, and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis. In the event the Company
determines that it would be able to realize its deferred income tax assets in the future in excess of their net recorded amount,
it would make an adjustment to the valuation allowance that would reduce the provision for income taxes. Conversely, in the event
that all or part of the net deferred tax assets are determined not to be realizable in the future, an adjustment to the valuation
allowance would be charged to earnings in the period such determination is made.
The Company recognizes the effect of uncertain
income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured
at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in
the period in which the change in judgment occurs.
The Company records interest and penalties
related to uncertain tax positions in the provision for income tax expense on the consolidated statements of operations and comprehensive
loss.
Net Loss Per Common Shareholder
-
Basic net loss per share is based upon the weighted average number of common shares outstanding. Diluted net loss per share
is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed
by applying the treasury stock method. Under this method, options, warrants and restricted stock are assumed to be exercised at
the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common
stock at the average market price during the period.
Recently Issued Accounting Pronouncements
In July 2013, the Financial Accounting Standards Board, or the
FASB, issued Accounting Standards Update, or ASU, No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating
Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists”, or ASU No. 2013-11, which concludes that, under
certain circumstances, unrecognized tax benefits should be presented in the financial statements as a reduction to a deferred tax
asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. ASU No. 2013-11 will be effective
for us beginning January 1, 2014. We do not anticipate that the adoption of this standard will have a material impact on our financial
position or results of operations.
Results of Operations
For the Fiscal Year Ended December
31, 2013 compared to the Fiscal Year Ended December 31, 2012
During the fiscal years ended December
31, 2013 and December 31, 2012, we generated no revenue. Operating expenses for the year ended December 31, 2013 increased to $5,711,134
as compared to $4,090,342 for the year ended December 31, 2012 primarily due to increased research and development expenses. Accordingly,
this resulted in a loss from operations of $5,711,134 for the year ended December 31, 2013 as compared to a loss from operations
of $4,090,342 for the year ended December 31, 2012.
Research and development costs for the year ended December 31, 2013 were $2,088,992 as compared to $583,869
for the year ended December 31, 2012.
In 2013, research and development
expenses increased $1,505,123 or 258% primarily due to increased costs related to technical consultants, stock based compensation,
preclinical research studies and other product development costs.
General and administrative costs for the
year ended December 31, 2013 were $3,622,142 as compared to $3,506,473 for the year ended December 31, 2012. In 2013, general and
administrative expenses increased $115,669 or 3% primarily due to increased patent related legal costs, investor and public relations
services, outside services and stock based compensation. These increases were largely offset by reduced consulting expenses in
2013.
For the year ended December 31, 2013, we incurred interest expense of $2,630,914 and other income totaling
$0 as compared to $1,518,420 and $11,862, respectively, for the year ended December 31, 2012. The change in interest expense was
attributable to the increased debt financing activity in the year ended December 31, 2013. For the year ended December 31, 2013,
we incurred a loss on the issuance of convertible notes of $6,708,728 as compared to $0 for the year ended December 31, 2012. For
the year ended December 31, 2013, we incurred a loss on the issuance of common stock of $352,096 as compared to $0 for the year
ended December 31, 2012. For the year ended December 31, 2013, the change in fair value of warrants and derivatives liabilities
generated other income of $271,191 as compared to $485,006 for the year ended December 31, 2012.
We incurred a net loss for the year
ended December 31, 2013 of $15,131,681 as compared to $5,135,618 for the year ended December 31, 2012, an increase of
$9,996,063. This change is attributable to the increase in operating expenses of $1,620,792 and an increase in total interest
and other income/expense of $8,375,271.
Liquidity and Capital Resources
As of December 31, 2013, the Company had
total current assets of $1,247,820 consisting of $1,032,634 in cash and cash equivalents and $215,186 in prepaid expenses and other
current assets. As of December 31, 2013, the Company had current liabilities in the amount of $8,539,190, consisting of:
Accounts payable
|
|
$
|
971,199
|
|
Accrued liabilities
|
|
$
|
292,395
|
|
Accrued interest
|
|
$
|
112,124
|
|
Related party liabilities
|
|
$
|
247,967
|
|
8% Senior convertible debentures
|
|
$
|
931,942
|
|
Convertible promissory notes
|
|
$
|
124,393
|
|
Derivative liability
|
|
$
|
5,859,170
|
|
As of December 31, 2013, the Company had a working capital deficit in the amount of $7,219,370 compared
to a deficit of $4,059,959 at December 31, 2012.
The table below sets forth selected cash flow data for the periods presented:
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
$
|
(3,473,237
|
)
|
|
$
|
(1,154,726
|
)
|
Net cash provided by (used in) investing activities
|
|
|
(70,000
|
)
|
|
|
(56,000
|
)
|
Net cash provided by (used in) financing activities
|
|
|
4,418,697
|
|
|
|
1,366,430
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
$
|
875,460
|
|
|
$
|
156,704
|
|
We consummate financing transactions with various investors
in 2013 as follows.
On March 7, 2014, the Company signed a $20 million purchase
agreement with Lincoln Park Capital Fund, LLC, an Illinois limited liability company. Upon signing the Purchase Agreement LPC agreed
to purchase 4,000,000 shares of our common stock for $400,000 as an initial purchase under the agreement. We also entered into
a registration rights agreement with LPC whereby we agreed to file a registration statement related to the transaction with the
SEC covering the shares that may be issued to Lincoln Park Capital Fund under the Purchase Agreement within ten days after the
date the Company files with the SEC in this annual report on Form 10-K. After the SEC has declared effective the registration statement
related to the transaction, we have the right, in our sole discretion, over a 30-month period to sell up to an additional $19.6
million of our common stock to Lincoln Park Capital Fund in amounts up to $500,000 per sale, depending on certain conditions as
set forth in the Purchase Agreement. There are no upper limits to the price Lincoln Park Capital Fund may pay to purchase our common
stock and the purchase price of shares of Common Stock sold pursuant to the Purchase Agreement will be based on prevailing market
prices of our Common Stock at the time of sales without any fixed discount, and the Company will control the timing and amount
of any sales of Common Stock to Lincoln Park Capital Fund. In addition, the Company may direct Lincoln Park Capital Fund to purchase
additional amounts as accelerated purchases if on the date of a regular purchase the closing sale price of the Common Stock is
not below the threshold price as set forth in the Purchase Agreement. Lincoln Park Capital Fund shall not have the right or the
obligation to purchase any shares of our common stock on any business day that the price of our common stock is below the floor
price as set forth in the Purchase Agreement.
The purchase agreement contains customary representations, warranties,
covenants, closing conditions and indemnification and termination provisions by, among and for the benefit of the parties. LPC
has covenanted not to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of the Company’s
shares of common stock. In consideration for entering into the $20 million agreement, we issued to LPC 6,000,000 shares of our
common stock and may issue up to an additional 3,500,000 shares pro rata if and when we sell to Lincoln Park Capital Fund up to
an additional $19.6 million of our common stock. The agreement may be terminated by us at any time at our discretion without any
monetary cost to us. Actual sales of shares of Common Stock to LPC under the agreement will depend on a variety of factors to be
determined by the Company from time to time, including (among others) market conditions, the trading price of the Common Stock
and determinations by the Company as to available and appropriate sources of funding for the Company and its operations. The proceeds
received by the Company under the agreement are expected to be used for product development, commercialization, strategic acquisitions,
and general corporate purposes.
The success of our business plan during
the next 12 months and beyond is contingent upon us generating sufficient revenue to cover our costs of operations, or upon us
obtaining additional financing. Should our revenues be less than anticipated, or should our expenses be greater than anticipated,
then we may seek to obtain business capital through the use of private and public equity fundraising or shareholder loans. There
can be no assurance that such additional financing will be available to us on acceptable terms, or at all. Similarly, there can
be no assurance that we will be able to generate sufficient revenue to cover the costs of our business operations. We will use
all commercially-reasonable efforts at our disposal to raise sufficient capital to run our operations on a go forward basis.
Off Balance Sheet Arrangements
Not applicable
Going Concern
We are a development stage company engaged
in biotechnology research and development. We have suffered recurring losses from operations since inception, and have generated
negative cash flows from operations. For these reasons, in its report dated April 21, 2014, our auditors have raised a substantial
doubt about our ability to continue as a going concern. Our financial statements have been prepared assuming that we will continue
as a going concern which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
We expect to incur further losses in the development of our business and have been dependent on funding operations through the
issuance of convertible debt and private sale of equity securities. These conditions raise substantial doubt about our ability
to continue as a going concern. Management’s plans include continuing to finance operations through the private or public
placement of debt and/or equity securities and the acquisition of non-dilutive forms of financing including grants. However, no
assurance can be given at this time as to whether we will be able to achieve these objectives. The financial statements do not
include any adjustment relating to the recoverability and classification of recorded asset amounts or the amounts and classification
of liabilities that might be necessary should we become unable to continue as a going concern.
Item 8. Financial Statements and Supplementary
Data.
The financial statements are included herein
commencing on page F-1.
Index to Financial Statements Required
by Article 8 of Regulation S-X:
Audited Financial Statements:
|
F-1
|
Reports of Independent Registered Public Accounting Firm
|
F-3
|
Consolidated Balance Sheets as of December 31, 2013 and 2012;
|
F-4
|
Consolidated Statements of Operations for the years ended December 31, 2013 and 2012, and for the period from inception to December 31, 2013;
|
F-6
|
Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2013 and 2012, and the period from inception to December 31, 2013;
|
F-7
|
Consolidated Statements of Cash Flows for the years ended December 31, 2013 and 2012, and for the period from inception to December 31, 2013;
|
F-8
|
Notes to the Consolidated Financial Statements
|
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Board of Directors and Stockholders
of
Amarantus Bioscience Holdings, Inc.
(A Development Stage Company)
We have audited the accompanying consolidated
balance sheet of Amarantus Bioscience Holdings, Inc. (the “Company”) (a development stage company) as of December 31,
2013 and the related consolidated statements of operations, changes in stockholders’ equity (deficit) and cash flows for
the year then ended. The consolidated financial statements for the period from January 14, 2008 (inception) through December 31,
2012 were audited by other auditors. The consolidated financial statements for the period from January 14, 2008 (inception) to
December 31, 2012 include total revenues and net loss applicable to common stockholders of $415,996 and $11,496,177, respectively.
Our opinion on the consolidated statements of operations, changes in stockholders’ equity (deficit) and cash flows for the
period from January 14, 2008 (inception) to December 31, 2013, insofar as it relates to amounts through December 31, 2012 is based
solely on the report of the other auditor. These consolidated financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.
Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, based on our audit and
the report of the predecessor independent registered public accounting firm, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial position of Amarantus Bioscience Holdings, Inc. as of
December 31, 2013, and the consolidated results of their operations and their cash flows for the year ended December 31, 2013 and
for the period from January 14, 2008 (inception) to December 31, 2013 in conformity with accounting principles generally accepted
in the United States of America.
The accompanying consolidated financial
statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated
financial statements, the Company has suffered substantial losses from operations and its liabilities exceed it assets. These matters
raise substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also
discussed in Note 2 to the consolidated financial statements. The accompanying consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/ Marcum LLP
New York, NY
April 21, 2014
Silberstein Ungar, PLLC CPAs and Business
Advisors
Phone (248) 203-0080
Fax (248) 281-0940
30600 Telegraph Road, Suite 2175
Bingham Farms, MI 48025-4586
www.sucpas.com
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Amarantus Bioscience Holdings, Inc.
Sunnyvale, California
We have audited the consolidated balance
sheet of Amarantus Bioscience Holdings, Inc., a development stage company (the “Company”), as of December 31, 2012
and 2011, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the years then
ended, and for the period from January 14, 2008 (date of inception) to December 31, 2012. These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control
over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements
referred to above present fairly, in all material respects, the financial position of Amarantus Bioscience Holdings, Inc. as of
December 31, 2012 and 2011, and the results of its operations and its cash flows for the years then ended, and for the period from
January 14, 2008 (date of inception) to December 31, 2012, in conformity with accounting principles generally accepted in the United
States of America.
The accompanying financial statements have
been prepared assuming the Company will continue as a going concern. The Company is a development stage company engaged in biotechnology
research and development. The Company has suffered recurring losses from operations since inception, has a working capital deficit,
and has generated negative cash flow from operations that raises substantial doubt about its ability to continue as a going concern.
Management’s plans in regard to these matters are described in Note 2 to the financial statements. The financial statements
do not include any adjustments that might result from the outcome of these uncertainties.
/s/ Silberstein Ungar, PLLC
Silberstein Ungar, PLLC
Bingham Farms, Michigan
April 16, 2013
Amarantus Bioscience Holdings, Inc.
(A development stage
company)
Consolidated Balance Sheets
|
|
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,032,634
|
|
|
$
|
157,174
|
|
Prepaid expenses and other current assets
|
|
|
215,186
|
|
|
|
520,620
|
|
Total current assets
|
|
|
1,247,820
|
|
|
|
677,794
|
|
Intangible assets
|
|
|
611,094
|
|
|
|
532,143
|
|
Total assets
|
|
$
|
1,858,914
|
|
|
$
|
1,209,937
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity (Deficit)
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
971,199
|
|
|
$
|
2,596,848
|
|
Accrued liabilities
|
|
|
292,395
|
|
|
|
18,746
|
|
Accrued interest
|
|
|
112,124
|
|
|
|
109,861
|
|
Related party liabilities
|
|
|
247,967
|
|
|
|
243,525
|
|
Convertible notes payable
|
|
|
—
|
|
|
|
740,000
|
|
Warrant liability
|
|
|
—
|
|
|
|
232,988
|
|
8% Senior convertible debentures
|
|
|
931,942
|
|
|
|
—
|
|
Convertible promissory notes
|
|
|
124,393
|
|
|
|
768,892
|
|
Derivative liability
|
|
|
5,859,170
|
|
|
|
26,893
|
|
Total current liabilities
|
|
|
8,539,190
|
|
|
|
4,737,753
|
|
Total liabilities
|
|
|
8,539,190
|
|
|
|
4,737,753
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Series D convertible preferred stock ($1,000 stated value; 1,300 shares designated and authorized; 1,299.327 and -0- shares issued and outstanding as of December 31, 2013 and December 31, 2012, respectively)
|
|
|
838,894
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity (deficit):
|
|
|
|
|
|
|
|
|
Convertible preferred stock, $0.001 par value — 10,000,000 shares authorized at December 31, 2013 and December 31, 2012, respectively:
|
|
|
|
|
|
|
|
|
Series A, $0.001 par value, 250,000 shares designated, -0- and 250,000 shares issued and outstanding as of December 31, 2013 and December 31, 2012, respectively
|
|
|
—
|
|
|
|
250
|
|
Series B, $0.001 par value, 2,500,000 shares designated, -0- shares issued and outstanding as of December 31,
2013 and December 31, 2012, respectively
|
|
|
—
|
|
|
|
—
|
|
Series C, $0.001 par value, 750,000 shares designated, 750,000 and -0- shares issued and outstanding as of December 31, 2013 and December 31, 2012, respectively
|
|
|
750
|
|
|
|
—
|
|
Common stock, $0.001 par value — 1,000,000,000 shares authorized at December 31, 2013 and 2012, respectively; 574,171,945 and 342,516,931 shares issued and outstanding at December 31, 2013 and 2012, respectively
|
|
|
574,172
|
|
|
|
342,517
|
|
Additional paid-in capital
|
|
|
18, 938,039
|
|
|
|
7,991,465
|
|
Deficit accumulated during the development stage
|
|
|
(27,032,131
|
)
|
|
|
(11,862,048
|
)
|
Total stockholders’ equity (deficit)
|
|
|
(7,519,170
|
)
|
|
|
(3,527,816
|
)
|
Total liabilities and stockholders’ equity (deficit)
|
|
$
|
1,858,914
|
|
|
$
|
1,209,937
|
|
The accompanying notes are an integral
part of these consolidated financial statements.
Amarantus Bioscience Holdings, Inc.
(A development stage
company)
Consolidated Statements of Operations
|
|
Year Ended December 31,
|
|
|
Cumulative
Period From
January 14,
2008 (Date of
Inception) to
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
Net Revenues
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
415,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
2,088,992
|
|
|
|
583,869
|
|
|
|
4,278,647
|
|
General and administrative
|
|
|
3,622,142
|
|
|
|
3,506,473
|
|
|
|
11,573,062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
5,711,134
|
|
|
|
4,090,342
|
|
|
|
15,851,709
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(5,711,134
|
)
|
|
|
(4,090,342
|
)
|
|
|
(15,435,713
|
)
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(2,630,914
|
)
|
|
|
(1,518,420
|
)
|
|
|
(5,360,513
|
)
|
Loss on issuance of common stock
|
|
|
(352,096
|
)
|
|
|
—
|
|
|
|
(352,096
|
)
|
Loss on issuance of debt
|
|
|
(6,708,728
|
)
|
|
|
—
|
|
|
|
(6,708,728
|
)
|
Other income (expense)
|
|
|
—
|
|
|
|
(11,862
|
)
|
|
|
75,827
|
|
Change in fair value of warrants and derivative liabilities
|
|
|
271,191
|
|
|
|
485,006
|
|
|
|
1,153,365
|
|
Total other income (expense)
|
|
|
(9,420,547
|
)
|
|
|
(1,045,276
|
)
|
|
|
(11,192,145
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(15,131,681
|
)
|
|
$
|
(5,135,618
|
)
|
|
$
|
(26,627,858
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividend
|
|
|
38,402
|
|
|
|
—
|
|
|
|
38,402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss applicable to common stockholders
|
|
$
|
(15,170,083
|
)
|
|
$
|
(5,135,618
|
)
|
|
$
|
(26,666,260
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share net loss applicable to common stockholders’:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and fully diluted
|
|
$
|
(0.03
|
)
|
|
$
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in computing basic loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and fully diluted
|
|
|
450,931,510
|
|
|
|
140,710,454
|
|
|
|
|
|
The accompanying notes are an integral
part of these consolidated financial statements.
Amarantus Bioscience Holdings, Inc.
(A Development Stage
Company)
Consolidated Statements of Stockholders’
Equity (Deficit)
Period from January 14, 2008 (Date of Inception) to December 31, 2013
|
|
Convertible
Preferred Stock
|
|
|
Common
Stock
|
|
|
|
|
|
Deficit
Accumulated
|
|
|
Total
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Additional
Paid-in
Capital
|
|
|
during
the
Development
Stage
|
|
|
Stockholders’
Equity
(Deficit)
|
|
Balances as of January 14, 2008
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Issuance of common stock in December
2006 at $0.001 per share in exchange for cash or services
|
|
|
—
|
|
|
|
—
|
|
|
|
4,020,000
|
|
|
|
4,020
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,020
|
|
Sale of warrant to investor
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
35
|
|
|
|
—
|
|
|
|
35
|
|
Dividend to founder for assumption of debts
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(365,870
|
)
|
|
|
(365,870
|
)
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(406,706
|
)
|
|
|
(406,706
|
)
|
Balances as of December 31, 2008
|
|
|
—
|
|
|
|
—
|
|
|
|
4,020,000
|
|
|
|
4,020
|
|
|
|
35
|
|
|
|
(772,576
|
)
|
|
|
(768,521
|
)
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(306,190
|
)
|
|
|
(306,190
|
)
|
Balances as of December 31, 2009
|
|
|
—
|
|
|
|
—
|
|
|
|
4,020,000
|
|
|
|
4,020
|
|
|
|
35
|
|
|
|
(1,078,766
|
)
|
|
|
(1,074,711
|
)
|
Issuance of Series 1 convertible preferred stock
in May 2010 for cash at $0.40 per share — net of issuance costs of $50,000
|
|
|
1,250,000
|
|
|
|
450,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
450,000
|
|
Issuance of Series 1 convertible preferred stock
in October 2010 in exchange for convertible promissory notes)
|
|
|
488,354
|
|
|
|
195,342
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
195,342
|
|
Issuance of Series 1 convertible preferred stock
in November 2010 for cash at $0.40 per share
|
|
|
100,000
|
|
|
|
40,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
40,000
|
|
Preferred stock warrants reclassified from liabilities
expense
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
37,110
|
|
|
|
—
|
|
|
|
37,110
|
|
Stock-based compensation expense
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
25,175
|
|
|
|
—
|
|
|
|
25,175
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,207,561
|
)
|
|
|
(1,207,561
|
)
|
Balances as of December 31,
2010
|
|
|
1,838,354
|
|
|
$
|
685,342
|
|
|
|
4,020,000
|
|
|
$
|
4,020
|
|
|
$
|
62,320
|
|
|
$
|
(2,286,327
|
)
|
|
$
|
(1,534,645
|
)
|
The accompanying notes are an integral
part of these consolidated financial statements
Amarantus Bioscience Holdings, Inc.
(A development stage
company)
Consolidated Statements of and Stockholders’
Equity (Deficit)
Period from January 14, 2008 (Date of
Inception) to December 31, 2013
|
|
Convertible
Preferred Stock
|
|
|
Common
Stock
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Additional
Paid-in
Capital
|
|
|
Accumulated
during the
Development
Stage
|
|
|
Total
Stockholders’
Equity
(Deficit)
|
|
Balances
as of January 1, 2010
|
|
|
1,838,354
|
|
|
$
|
685,342
|
|
|
|
4,020,000
|
|
|
$
|
4,020
|
|
|
$
|
62,320
|
|
|
$
|
(2,286,327
|
)
|
|
$
|
(1,534,645
|
)
|
Preferred shares
converted to common
|
|
|
(1,838,354
|
)
|
|
|
(685,342
|
)
|
|
|
1,838,354
|
|
|
|
1,838
|
|
|
|
683,504
|
|
|
|
—
|
|
|
|
—
|
|
Option exercises
|
|
|
—
|
|
|
|
—
|
|
|
|
1,469,338
|
|
|
|
1,469
|
|
|
|
181,893
|
|
|
|
—
|
|
|
|
183,362
|
|
Merger record ATI
shares retired
|
|
|
—
|
|
|
|
—
|
|
|
|
(7,327,692
|
)
|
|
|
(7,327
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(7,327
|
)
|
Effect of reverse
recapitalization merger
|
|
|
—
|
|
|
|
—
|
|
|
|
45,500,000
|
|
|
|
45,500
|
|
|
|
(33,487
|
)
|
|
|
—
|
|
|
|
12,013
|
|
Merger issuance of
stock and record shell common
|
|
|
—
|
|
|
|
—
|
|
|
|
21,500,000
|
|
|
|
21,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
21,500
|
|
Option exercise post
merger
|
|
|
—
|
|
|
|
—
|
|
|
|
737,357
|
|
|
|
738
|
|
|
|
16,718
|
|
|
|
—
|
|
|
|
17,456
|
|
Issuance of common
stock
|
|
|
—
|
|
|
|
—
|
|
|
|
13,199,235
|
|
|
|
13,199
|
|
|
|
1,754,535
|
|
|
|
—
|
|
|
|
1,767,734
|
|
Merger expenses
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(26,186
|
)
|
|
|
—
|
|
|
|
(26,186
|
)
|
Stock-based compensation
expense
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
656,252
|
|
|
|
—
|
|
|
|
656,252
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(4,440,103
|
)
|
|
|
(4,440,103
|
)
|
Balances as of
December 31, 2011
|
|
|
—
|
|
|
|
—
|
|
|
|
80,936,592
|
|
|
|
80,937
|
|
|
|
3,295,549
|
|
|
|
(6,726,430
|
)
|
|
|
(3,349,944
|
)
|
Issuance of preferred
stock for services
|
|
|
250,000
|
|
|
|
250
|
|
|
|
—
|
|
|
|
—
|
|
|
|
249,750
|
|
|
|
—
|
|
|
|
250,000
|
|
Issuance of common
stock
|
|
|
—
|
|
|
|
—
|
|
|
|
261,580,339
|
|
|
|
261,580
|
|
|
|
4,062,562
|
|
|
|
—
|
|
|
|
4,324,142
|
|
Stock-based compensation
expense
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
383,604
|
|
|
|
—
|
|
|
|
383,604
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(5,135,618
|
)
|
|
|
(5,135,618
|
)
|
Balances as of
December 31, 2012
|
|
|
250,000
|
|
|
|
250
|
|
|
|
342,516,931
|
|
|
|
342,517
|
|
|
|
7,991,465
|
|
|
|
(11,862,048
|
)
|
|
|
(3,527,816
|
)
|
Preferred stock -
Series A converted to common
|
|
|
(250,000
|
)
|
|
|
(250
|
)
|
|
|
8,094,117
|
|
|
|
8,094
|
|
|
|
118,840
|
|
|
|
—
|
|
|
|
126,684
|
|
Preferred stock -
Series C issued to officers as compensation
|
|
|
750,000
|
|
|
|
750
|
|
|
|
—
|
|
|
|
—
|
|
|
|
37,800
|
|
|
|
—
|
|
|
|
38,550
|
|
Common stock issued
for services
|
|
|
—
|
|
|
|
—
|
|
|
|
21,199,822
|
|
|
|
21,200
|
|
|
|
838,813
|
|
|
|
—
|
|
|
|
860,013
|
|
Common stock issued
to acquire intangible assets
|
|
|
—
|
|
|
|
—
|
|
|
|
2,000,000
|
|
|
|
2,000
|
|
|
|
77,000
|
|
|
|
—
|
|
|
|
79,000
|
|
Common stock issued
in settlement of accounts payable
|
|
|
—
|
|
|
|
—
|
|
|
|
7,430,922
|
|
|
|
7,431
|
|
|
|
252,229
|
|
|
|
—
|
|
|
|
259,660
|
|
Common stock issued
in settlement of notes payable
|
|
|
—
|
|
|
|
—
|
|
|
|
93,860,499
|
|
|
|
93,860
|
|
|
|
2,106,140
|
|
|
|
—
|
|
|
|
2,200,000
|
|
Common stock issued
upon conversion of convertible promissory notes
|
|
|
—
|
|
|
|
—
|
|
|
|
98,455,794
|
|
|
|
98,456
|
|
|
|
1,460,739
|
|
|
|
—
|
|
|
|
1,559,195
|
|
Common stock issued
for Series D convertible preferred stock dividend
|
|
|
—
|
|
|
|
—
|
|
|
|
413,860
|
|
|
|
414
|
|
|
|
12,002
|
|
|
|
(12,416
|
)
|
|
|
—
|
|
Loss on issuance
of common stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
352,096
|
|
|
|
—
|
|
|
|
352,096
|
|
Common stock issued upon exercise of common stock options
|
|
|
—
|
|
|
|
—
|
|
|
|
200,000
|
|
|
|
200
|
|
|
|
(200
|
)
|
|
|
—
|
|
|
|
—
|
|
Debt discount written
off - associated with convertible promissory notes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(250,000
|
)
|
|
|
—
|
|
|
|
(250,000
|
)
|
Beneficial conversion feature - debt discount - convertible promissory
notes
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
225,996
|
|
|
|
—
|
|
|
|
225,996
|
|
Beneficial conversion
feature - Series D Convertible Preferred stock
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
320,500
|
|
|
|
—
|
|
|
|
320,500
|
|
Relative fair value
associated with senior secured convertible debentures issued with detachable warrants
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,938,930
|
|
|
|
—
|
|
|
|
1,938,930
|
|
Convertible promissory
notes converted and associated reclassification of derivative liability
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,712,000
|
|
|
|
—
|
|
|
|
2,712,000
|
|
Series D convertible
preferred stock 8% dividend accrued at period end
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(25,986
|
)
|
|
|
(25,986
|
)
|
Stock-based compensation
expense
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
743,689
|
|
|
|
—
|
|
|
|
743,689
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(15,131,681
|
)
|
|
|
(15,131,681
|
)
|
Balances as of
December 31, 2013
|
|
|
750,000
|
|
|
$
|
750
|
|
|
|
574,171,945
|
|
|
$
|
574,172
|
|
|
|
18,938,039
|
|
|
$
|
(27,032,131
|
)
|
|
$
|
(7,519,170
|
)
|
The accompanying notes are an integral
part of these consolidated financial statements
Amarantus Bioscience Holdings, Inc.
(A development stage
company)
Consolidated Statements of Cash Flows
|
|
Year Ended December 31,
|
|
|
Cumulative
Period From
January 14,
2008
(Date of Inception) to December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(15,131,681
|
)
|
|
$
|
(5,135,618
|
)
|
|
$
|
(26,627,858
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
—
|
|
|
|
7,260
|
|
|
|
33,014
|
|
Amortization of debt discount
|
|
|
1,768,093
|
|
|
|
655,881
|
|
|
|
2,423,974
|
|
Amortization of deferred financial costs
|
|
|
253,110
|
|
|
|
13,091
|
|
|
|
266,201
|
|
Amortization of intangibles
|
|
|
70,049
|
|
|
|
—
|
|
|
|
70,049
|
|
Stock issued for services
|
|
|
860,013
|
|
|
|
1,637,696
|
|
|
|
2,497,709
|
|
Loss on debt issuance
|
|
|
6,708,728
|
|
|
|
—
|
|
|
|
6,708,728
|
|
Loss on stock issuance
|
|
|
352,096
|
|
|
|
672,414
|
|
|
|
1,024,510
|
|
Gain on disposal of equipment
|
|
|
—
|
|
|
|
1,129
|
|
|
|
(2,621
|
)
|
Preferred stock Series C issued as compensation
|
|
|
38,550
|
|
|
|
—
|
|
|
|
38,550
|
|
Stock-based compensation expense
|
|
|
743,689
|
|
|
|
383,604
|
|
|
|
1,808,720
|
|
Non-cash interest expense related to warrants and derivatives
|
|
|
—
|
|
|
|
—
|
|
|
|
763,316
|
|
Change in fair value of warrants and derivative liabilities
|
|
|
(271,191
|
)
|
|
|
(485,006
|
)
|
|
|
(1,148,597
|
)
|
Common stock issued at conversion of Series A preferred stock
|
|
|
126,684
|
|
|
|
—
|
|
|
|
126,684
|
|
Gain on settlement of convertible note and warrants
|
|
|
—
|
|
|
|
—
|
|
|
|
(137,632
|
)
|
Changes in assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
|
367,757
|
|
|
|
(166,025
|
)
|
|
|
(133,766
|
)
|
Accounts payable
|
|
|
87,719
|
|
|
|
1,184,118
|
|
|
|
3,478,376
|
|
Accrued liabilities and other non-current liabilities
|
|
|
548,705
|
|
|
|
77,477
|
|
|
|
743,732
|
|
Related party liabilities
|
|
|
4,442
|
|
|
|
(147
|
)
|
|
|
(139,345
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(3,473,237
|
)
|
|
|
(1,154,126
|
)
|
|
|
(8,206,256
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of property and equipment
|
|
|
—
|
|
|
|
—
|
|
|
|
(40,392
|
)
|
Acquisition of other assets
|
|
|
(70,000
|
)
|
|
|
(55,000
|
)
|
|
|
(125,000
|
)
|
Security deposit write-off
|
|
|
0
|
|
|
|
(1,000
|
)
|
|
|
(1,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(70,000
|
)
|
|
|
(56,000
|
)
|
|
|
(166,392
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings
|
|
|
5,047,846
|
|
|
|
1,413,430
|
|
|
|
7,718,824
|
|
Repayment of borrowings
|
|
|
(303,715
|
)
|
|
|
(47,000
|
)
|
|
|
(450,715
|
)
|
Proceeds from issuance of common stock
|
|
|
—
|
|
|
|
—
|
|
|
|
1,797,941
|
|
Proceeds from issuance of stock options
|
|
|
—
|
|
|
|
—
|
|
|
|
200,818
|
|
Proceeds from issuance of convertible preferred stock
|
|
|
—
|
|
|
|
—
|
|
|
|
540,000
|
|
Costs of financings
|
|
|
(325,434
|
)
|
|
|
—
|
|
|
|
(401,621
|
)
|
Proceeds from sale of warrant
|
|
|
—
|
|
|
|
—
|
|
|
|
35
|
|
Net cash provided by financing activities
|
|
|
4,418,697
|
|
|
|
1,366,430
|
|
|
|
9,405,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
875,460
|
|
|
|
156,304
|
|
|
|
1,032,634
|
|
Cash and cash equivalents, beginning of period
|
|
|
157,174
|
|
|
|
870
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
1,032,634
|
|
|
$
|
157,174
|
|
|
$
|
1,032,634
|
|
The accompanying notes are an integral
part of these consolidated financial statements.
Amarantus Bioscience Holdings, Inc.
(A development stage
company)
Consolidated Statements of Cash Flows
|
|
Year Ended December 31,
|
|
|
Cumulative
Period From
January 14, 2008
(Date of Inception) to December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
Supplemental schedule of non-cash activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bifurcation of derivatives embedded in convertible notes
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
548,053
|
|
Beneficial conversion feature - Series D convertible preferred stock
|
|
|
320,500
|
|
|
|
—
|
|
|
|
320,500
|
|
Beneficial conversion feature - debt discount - convertible promissory notes
|
|
|
225,996
|
|
|
|
—
|
|
|
|
225,996
|
|
Relative fair value associated with senior secured convertible debentures issued with detachable warrants
|
|
|
1,938,930
|
|
|
|
—
|
|
|
|
1,938,930
|
|
Convertible promissory notes converted and associated reclassification of derivative liability
|
|
|
2,712,000
|
|
|
|
—
|
|
|
|
2,712,000
|
|
Debt discount written off - associated with convertible promissory notes
|
|
|
(250,000
|
)
|
|
|
—
|
|
|
|
(250,000
|
)
|
Debt discount associated with convertible promissory notes - derivative liability
|
|
|
812,500
|
|
|
|
—
|
|
|
|
812,500
|
|
Stock warrants reclassified from liabilities to equity
|
|
|
—
|
|
|
|
—
|
|
|
|
39,142
|
|
Preferred stock issued in lieu of payment of payable
|
|
|
—
|
|
|
|
250,000
|
|
|
|
250,000
|
|
Preferred stock Series D issued for accounts payable
|
|
|
1,169,394
|
|
|
|
—
|
|
|
|
1,169,394
|
|
Convertible promissory notes issued for payables and accrued liabilities
|
|
|
123,410
|
|
|
|
305,932
|
|
|
|
653,037
|
|
Convertible notes payable issued for accounts payables
|
|
|
160,715
|
|
|
|
—
|
|
|
|
160,715
|
|
Issuance of warrants to investors
|
|
|
—
|
|
|
|
371,180
|
|
|
|
371,180
|
|
Stock issued for prepaid expenses
|
|
|
—
|
|
|
|
31,188
|
|
|
|
31,188
|
|
Payables forgiven for property and equipment
|
|
|
—
|
|
|
|
10,000
|
|
|
|
10,000
|
|
Stock issued to acquire intangible assets
|
|
|
79,000
|
|
|
|
477,143
|
|
|
|
556,143
|
|
Stock issued to satisfy accounts payable and accrued expenses
|
|
|
259,660
|
|
|
|
560,808
|
|
|
|
820,468
|
|
Stock issued for notes payable
|
|
|
2,200,000
|
|
|
|
—
|
|
|
|
2,200,000
|
|
Stock issued for convertible debt
|
|
|
1,559,195
|
|
|
|
964,982
|
|
|
|
2,524,177
|
|
Intrinsic value of beneficial conversion feature
|
|
|
—
|
|
|
|
224,985
|
|
|
|
224,985
|
|
Reclassification of warrants to APIC
|
|
|
—
|
|
|
|
2,032
|
|
|
|
2,032
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
|
60,553
|
|
|
|
—
|
|
|
|
60,533
|
|
The accompanying notes are an integral
part of these consolidated financial statements.
Amarantus Bioscience Holdings, Inc.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
FOR THE YEARS ENDED DECEMBER 31, 2013 and 2012, and
|
for the period from january 14, 2008 (date of inception) to december 31, 2013
|
Amarantus Bioscience Holdings, Inc.
(the “Company”) is a Nevada corporation that was formed to facilitate a merger with Amarantus BioScience, Inc., a Delaware
corporation that was incorporated on January 14, 2008. The Company is a development stage biopharmaceutical drug development
company dedicated to sourcing high-potential therapeutic platform technologies and aligning their development with complementary
clinical-stage compounds to reduce overall enterprise risk. Through December 31, 2013, the Company has been primarily engaged in
biotechnology research and development and raising capital to fund its operations.
On April 5, 2013, the Company (formerly
known as Amarantus Bioscience, Inc.) filed a Certificate of Amendment to its Articles of Incorporation with the Secretary of State
of Nevada, pursuant to which the Company’s name was changed from Amarantus Bioscience, Inc. to Amarantus Bioscience Holdings,
Inc.
|
2.
|
Development
Stage and Going Concern
|
The Company’s activities since inception
have consisted principally of acquiring product and technology rights, raising capital, and performing research and development.
The Company is considered to be in the development stage as of December 31, 2013, as our principal commercial operations have
not commenced. Successful completion of the Company’s development programs and, ultimately, the attainment of profitable
operations are dependent on future events, including, among other things, its ability to access potential markets; secure financing,
develop a customer base; attract, retain and motivate qualified personnel; and develop strategic alliances. From inception, the
Company has been funded by a combination of equity and debt financings. Although management believes that the Company will be able
to successfully fund its operations, there can be no assurance that the Company will be able to do so or that the Company will
ever operate profitably.
The Company expects to continue to incur
substantial losses over the next several years during its development phase. To fully execute its business plan, the Company will
need to complete certain research and development activities and clinical studies. Further, the Company’s product candidates
will require regulatory approval prior to commercialization. These activities may span many years and require substantial expenditures
to complete and may ultimately be unsuccessful. Any delays in completing these activities could adversely impact the Company. The
Company plans to meet its capital requirements primarily through issuances of debt and equity securities and, in the longer term,
revenue from product sales.
The accompanying financial statements have been prepared in conformity with accounting principles generally
accepted in the United States of America (GAAP), which contemplate continuation of the Company as a going concern. As of December
31, 2013, the Company had cash and cash equivalents of $1,032,634. During the year ended December 31, 2013, the Company incurred
a net loss of $15,131,681 and had negative cash flows from operating activities of $3,473,237. In addition, the Company had an
accumulated deficit of $27,032,131 at December 31, 2013. The Company believes its current capital resources are not sufficient
to support its operations. Management intends to continue its research efforts and to finance operations of the Company through
debt and/or equity financings. Management plans to seek additional debt and/or equity financing through private or public offerings
or through a business combination or strategic partnership. There can be no assurance that the Company will be successful in obtaining
additional financing on favorable terms, or at all. These matters raise substantial doubt about the Company’s ability to
continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of these
uncertainties.
SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
- The
Consolidated Financial Statements include the accounts of Amarantus BioScience Holdings, Inc. and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Use of Estimates
- The preparation
of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and
reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Certain Significant Risks and Uncertainties
-
The Company participates in a global, dynamic, and highly competitive industry and believes that changes in any of the following
areas could have a material adverse effect on the Company’s future financial position, results of operations, or cash flows:
ability to obtain future financing; advances and trends in new technologies and industry standards; regulatory approval and market
acceptance of the Company’s products; development of the necessary manufacturing capabilities and the Company’s ability
to obtain adequate resources of necessary materials; development of sales channels; certain strategic relationships; litigation
or claims against the Company based on intellectual property, patent, product, regulatory, or other factors; and the Company’s
ability to attract and retain employees and other resources necessary to support its growth.
Concentration of Credit Risk
-
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents.
The Company places its cash and cash equivalents with domestic financial institutions that are federally insured within statutory
limits.
Cash and Cash
Equivalents
- The Company considers all highly liquid investments purchased with an original maturity of three months
or less to be cash equivalents.
Intangible Assets
– Intangible
assets or certain rights to use certain intangible assets for the Company’s research and development activities are capitalized
as assets in cases where the Company has determined that those assets have an identifiable alternative future use in accordance
with US GAAP. If the Company concludes that those assets have useful lives that are indeterminable then they are assumed to be
indefinite lived unless. In 2013 the Company determined that the useful lives of those assets can be reasonable estimated and in
which case those assets are being amortized to expense over their estimated useful lives of between 10.9 years and 18.5 years depending
on the patent expire date.
Impairment of Long-Lived Assets
-
The Company reviews the carrying value of long-lived assets, including intangible assets and property and equipment, for impairment
whenever events or changes in circumstances indicate that the carrying value may not be fully recoverable. There have been no impairments
for the years ended December 31, 2013 and 2012.
Restatement of Prior Quarters
In the fourth quarter of 2013, we discovered that some of the
amounts we had previously reported in prior quarters had not been recorded correctly. The adjustments to correct for accounting
differences were made in the fourth quarter of 2013 and are primarily related to our accounting for convertible note obligations.
The following table sets forth the effects of the restatement
on affected items within our previously reported Consolidated Balance Sheets for the periods ended March 31, 2013, June 30, 2013
and September 30, 2013 had the adjustments been made in the corresponding quarters.
|
|
March
31, 2013
|
|
|
June
30, 2013
|
|
|
September
30, 2013
|
|
|
|
As
Reported
|
|
|
As
Restated
|
|
|
As
Reported
|
|
|
As
Restated
|
|
|
As
Reported
|
|
|
As
Restated
|
|
Derivative liabilities
|
|
|
921,954
|
|
|
|
794,468
|
|
|
|
250,011
|
|
|
|
419,239
|
|
|
|
1,544,443
|
|
|
|
2,427,367
|
|
Convertible promissory notes
|
|
|
328,727
|
|
|
|
328,726
|
|
|
|
674,161
|
|
|
|
631,961
|
|
|
|
485,936
|
|
|
|
475,780
|
|
Total Liabilities
|
|
|
6,165,888
|
|
|
|
6,038,401
|
|
|
|
5,576,483
|
|
|
|
5,
703,511
|
|
|
|
4,664,706
|
|
|
|
5,537,474
|
|
Additional paid in capital
|
|
|
9,367,041
|
|
|
|
11.274,893
|
|
|
|
10,728,916
|
|
|
|
12,678,967
|
|
|
|
13,760,385
|
|
|
|
16,053.726,
|
|
Deficit accumulated during the development stage
|
|
|
(14,719,336
|
)
|
|
|
(16,499,701
|
)
|
|
|
(15,620,221
|
)
|
|
|
(17,697,300
|
)
|
|
|
(17,645,773
|
)
|
|
|
(20,737,511
|
)
|
Stockholder’s deficit
|
|
$
|
(4,967,128
|
)
|
|
$
|
(4,839,641
|
)
|
|
$
|
(4,449,302
|
)
|
|
$
|
(4,576,330
|
)
|
|
$
|
(3,354,569
|
)
|
|
$
|
(4,152,966
|
)
|
The following table sets forth the effects of the restatement
on affected items within our previously reported Consolidated Statement of Operations for the three months ended March 31, 2013,
June 30, 2013 and September 30, 2013 had the adjustments been made in the corresponding quarters.
|
|
March
31, 2013
|
|
|
June
30, 2013
|
|
|
September
30, 2013
|
|
|
|
As
Reported
|
|
|
As
Restated
|
|
|
As
Reported
|
|
|
As
Restated
|
|
|
As
Reported
|
|
|
As
Restated
|
|
Operating loss
|
|
$
|
(1,884,597
|
)
|
|
$
|
(1,884,597
|
)
|
|
$
|
(1,304,475
|
)
|
|
$
|
(1,304,475
|
)
|
|
$
|
(678,548
|
)
|
|
$
|
(678,548
|
)
|
Non-operating income (loss)
|
|
|
(972,691
|
)
|
|
|
(2,753,056
|
)
|
|
|
403,590
|
|
|
|
106,876
|
|
|
|
(1,346,964
|
)
|
|
|
(2,361,623
|
)
|
Net loss
|
|
|
(2,857,288
|
)
|
|
|
(4,637,653
|
)
|
|
|
(900,885
|
)
|
|
|
(1,197,599
|
)
|
|
|
(2,025,512
|
)
|
|
|
(3,040,171
|
)
|
Net loss per common share, basic and diluted
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.01
|
)
|
The following table sets forth the effects of the restatement
on affected items within our previously reported Consolidated Statement of Operations for the six and nine months ended June 30,
2013 and September 30, 2013, respectively had the adjustments been made in the corresponding quarters.
|
|
June
30, 2013
|
|
|
September
30, 2013
|
|
|
|
As
Reported
|
|
|
As
Restated
|
|
|
As
Reported
|
|
|
As
Restated
|
|
Operating loss
|
|
$
|
(3,189,072
|
)
|
|
$
|
(3,189,072
|
)
|
|
$
|
(3,867,619
|
)
|
|
$
|
(3,867,619
|
)
|
Non-operating loss
|
|
|
(569,101
|
)
|
|
|
(2,646,180
|
)
|
|
|
(1,916,066
|
)
|
|
|
(5,007,804
|
)
|
Net Loss
|
|
$
|
(3,758,173
|
)
|
|
$
|
(5,835,252
|
)
|
|
$
|
(5,783,685
|
)
|
|
$
|
(8,875,423
|
)
|
Net loss per common share, basic and diluted
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.02
|
)
|
Revenue Recognition
- The Company
recognizes revenue when the earnings process is complete, when revenue is realized or realizable and earned, when persuasive evidence
a revenue arrangement exists, delivery of goods or services has occurred, the sales price is fixed or determinable, and collectability
is reasonably assured.
The Company accounts for milestones related
to research and development activities in accordance with the milestone method of revenue recognition of Accounting Standards Codification
Topic 605-28, under which consideration contingent on the achievement of a substantive milestone is recognized in its entirety
in the period when the milestone is achieved. A milestone is considered to be substantive when it meets all of the following criteria:
the milestone is commensurate with either the performance required to achieve the milestone or the enhancement of the value of
the delivered items resulting from the performance required to achieve the milestone; the milestone relates solely to past performance;
and, the milestone is reasonable relative to all of the deliverables and payment terms within the agreement.
To date, the Company has only received
research grant revenue and contract revenue. Research grant revenue and contract revenue is recognized as the Company provides
the services stipulated in the underlying agreement based on the time and expenditures incurred, and all terms required in the
agreement have been met. Amounts received in advance of services provided are recorded as deferred revenue and amortized
as revenue when the services are provided.
Research and Development Expenditures
-
Research and development expenses consist of personnel costs, including salaries, benefits and stock-based compensation, materials
and supplies, licenses and fees, and overhead allocations consisting of various administrative and facilities related costs. Research
and development activities are also separated into three main categories: research, clinical development, and biotechnology development.
Research costs typically consist of preclinical and toxicology costs. Clinical development costs include costs for Phase 1 and
2 clinical studies. Biotechnology development costs consist of expenses incurred in connection with product formulation and analysis.
The Company charges research and development costs, including clinical study costs, to expense when incurred.
Fair Value of Financial Instruments
- The fair value of certain of the Company’s financial instruments, including cash and cash equivalents, accrued compensation,
and other accrued liabilities, approximate cost because of their short maturities. The Company measures the fair value of certain
of its financial assets and liabilities on a recurring basis. A fair value hierarchy is used to rank the quality and reliability
of the information used to determine fair values. Financial assets and liabilities carried at fair value will be classified and
disclosed in one of the following three categories:
• Level 1-Quoted
prices (unadjusted) in active markets for identical assets and liabilities.
• Level 2-Inputs
other than Level 1 that are observable, either directly or indirectly, such as unadjusted quoted prices for similar assets and
liabilities, unadjusted quoted prices in the markets that are not active, or other inputs that are observable or can be corroborated
by observable market data for substantially the full term of the assets or liabilities.
• Level 3-Unobservable
inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Stock-Based Compensation
-
Stock-based compensation is measured at the grant date based on the fair value of the award. The fair value of the award that is
ultimately expected to vest is recognized as expense on a straight-line basis over the requisite service period, which is generally
the vesting period. The expense recognized for the portion of the award that is expected to vest has been reduced by an estimated
forfeiture rate. The forfeiture rate is determined at the time of grant and revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates.
Expected Term
— The expected
term of options represents the period that the Company’s stock-based awards are expected to be outstanding based on the simplified
method, which is the half-life from vesting to the end of its contractual term.
Expected Volatility
—
The Company computes stock price volatility over expected terms based on its historical common stock trading prices.
Risk-Free Interest Rate
—
The Company bases the risk-free interest rate on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent
remaining term.
Expected Dividend
— The
Company has never declared or paid any cash dividends on its common shares and does not plan to pay cash dividends in the foreseeable
future, and, therefore, uses an expected dividend yield of zero in its valuation models. The Company recognizes fair value of stock
options granted to nonemployees as stock-based compensation expense over the period in which the related services are received.
Preferred Stock
- Preferred shares subject to mandatory
redemption (if any) are classified as liability instruments and are measured at fair value. The Company classifies conditionally
redeemable preferred shares, which includes preferred shares that feature redemption rights that are either within the control
of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control, as
temporary equity. At all other times, the Company classifies its preferred shares in stockholders’ deficiency.
Convertible Instruments
– The Company bifurcates
conversion options from their host instruments and account for them as free standing derivative financial instruments if certain
criteria are met. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative
instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument
that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable
generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument
with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule
is when the host instrument is deemed to be conventional, as that term is described under applicable GAAP.
When the Company has determined that the
embedded conversion options should not be bifurcated from their host instruments, the Company records, when necessary, discounts
to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between
the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price
embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date
of redemption. The Company also records, when necessary, deemed dividends for the intrinsic value of conversion options embedded
in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of
the transaction and the effective conversion price embedded in the preferred shares.
Common Stock Purchase Warrants and Derivative Financial Instruments
- The Company classifies all of its common stock purchase warrants and other derivative financial instruments as equity if
the contracts (1) require physical settlement or net-share settlement or (2) give the Company a choice of net-cash settlement or
settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any
contracts that (1) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and
if that event is outside the control of the Company), (2) give the counterparty a choice of net-cash settlement or settlement in
shares (physical settlement or net-share settlement), or (3) that contain reset provisions. The Company assesses classification
of its common stock purchase warrants and other derivatives at each reporting date to determine whether a change in classification
between assets and liabilities is required.
Debt Discounts -
The Company records,
as a discount to notes and convertible notes, the relative fair value of warrants issued in connection with the issuances and the
intrinsic value of any conversion options based upon the differences between the fair value of the underlying common stock at the
commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements
are amortized to interest expense using the interest method over the earlier of the term of the related debt or their earliest
date of redemption.
Income Taxes
- The Company
accounts for income taxes using the liability method whereby deferred tax asset and liability account balances are determined based
on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates
and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary,
to reduce deferred tax assets to their estimated realizable value.
In evaluating the ability to recover its
deferred income tax assets, the Company considers all available positive and negative evidence, including its operating results,
ongoing tax planning, and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis. In the event the Company
determines that it would be able to realize its deferred income tax assets in the future in excess of their net recorded amount,
it would make an adjustment to the valuation allowance that would reduce the provision for income taxes. Conversely, in the event
that all or part of the net deferred tax assets are determined not to be realizable in the future, an adjustment to the valuation
allowance would be charged to earnings in the period such determination is made.
The Company recognizes the tax benefit
from uncertain tax positions in accordance with GAAP, which prescribes a recognition threshold and measurement, attribute for the
financial statement recognition and measurement of uncertain tax positions taken or expected to be taken in a company’s tax
return.
Net Loss Per Common Shareholder -
Basic
net loss per share is based upon the weighted average number of common shares outstanding. Diluted net loss per share is based
on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying
the treasury stock method. Under this method, options, warrants and restricted stock are assumed to be exercised at the beginning
of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the
average market price during the period.
Recently Issued Accounting Pronouncements
In July 2013, the Financial Accounting
Standards Board, or the FASB, issued Accounting Standards Update, or ASU, No. 2013-11, “Presentation of an Unrecognized Tax
Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists”, or ASU No. 2013-11,
which concludes that, under certain circumstances, unrecognized tax benefits should be presented in the financial statements as
a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. ASU
No. 2013-11 will be effective for us beginning January 1, 2014. We do not anticipate that the adoption of this standard will have
a material impact on our financial position or results of operations.
Executive Compensation
Unpaid bonuses to
Gerald E. Commissiong,
President and Chief Executive Officer and Dr. John W. Commissiong, Chief Scientific, Officer, were improperly reflected as prepaid
expenses and other current assets in form 10-K filed with the Security and Exchange Commission on 4/17/2013, and forms 10-Q filed
with the Security and Exchange Commission on 5/12/2013, 8/19/2013 and 11/14/2013. This improper classification was not in conformity
with the financial policies of the Company. In the fourth quarter 2013 were paid and thereby eliminating this improper classification.
A total bonus of $443,874 was paid in 2014, $230,222 for Gerald E. Commissiong, and $213,763 for Dr. John W. Commissiong
Prepaid expenses and other current assets:
|
|
Year Ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
$
|
91,853
|
|
|
$
|
409,710
|
|
Deferred financing costs
|
|
|
109,233
|
|
|
|
46,909
|
|
Other
|
|
|
14,100
|
|
|
|
64,001
|
|
Total
|
|
$
|
215,186
|
|
|
$
|
520,620
|
|
Accrued liabilities:
|
|
Year Ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
Accrued compensation and related benefits
|
|
$
|
266,407
|
|
|
$
|
18,746
|
|
Series D Convertible Preferred dividend
|
|
|
25,987
|
|
|
|
—
|
|
Total
|
|
$
|
292,394
|
|
|
$
|
18,746
|
|
Related party liabilities:
|
|
Year Ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
Promissory note
|
|
$
|
222,083
|
|
|
$
|
222,083
|
|
Accrued interest
|
|
|
25,884
|
|
|
|
21,442
|
|
Total
|
|
$
|
247,967
|
|
|
$
|
243,525
|
|
This promissory note dated March 5, 2008 is due and payable
March 5, 2015 and carries a annual interest rate of 2%. The note can be converted at the option of the Company based upon the FMV
of common stock as of the date of issuance at the closing price quoted on the exchange on which the Company’s common stock
is listed. The conversion price as at December is $0.0798, and would convert to 3,107,356 shares.
|
4.
|
Fair Value Measurements
|
Accounting standards have been issued which
define fair value, establishes a market-based framework or hierarchy for measuring fair value and expands disclosures about fair
value measurements. The standard is applicable whenever another accounting pronouncement requires or permits assets and liabilities
to be measured at fair value. The standard does not expand or require any new fair value measures; however its application may
change current practice.
Fair value is defined under the standard
as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market
in an orderly transaction between market participants on the measurement date. The standard also establishes a three-level hierarchy,
which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair
value:
●
|
Level 1
— inputs to the valuation methodology are quoted prices (unadjusted) for an identical asset or liability in an active market
|
●
|
Level 2
— inputs to the valuation methodology include quoted prices for a similar asset or liability in an active market or model-derived valuations in which all significant inputs are observable for substantially the full term of the asset or liability
|
●
|
Level 3
— inputs to the valuation methodology are unobservable and significant to the fair value measurement of the asset or liability
|
The Company’s financial assets and
liabilities that are measured at fair value on a recurring basis as of December 31, 2013 and 2012, by level within the fair value
hierarchy, are as follows:
Fair Value Measurements
at December 31, 2013
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Warrant liability
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Derivative Liability
|
|
|
—
|
|
|
|
—
|
|
|
|
5,859,170
|
|
|
|
5,859,170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,859,170
|
|
|
$
|
5,859,170
|
|
Fair Value Measurements
at December 31, 2012
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Warrant liability
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
232,988
|
|
|
$
|
232,988
|
|
Derivative Liability
|
|
|
—
|
|
|
|
—
|
|
|
|
26,893
|
|
|
|
26,893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
259,881
|
|
|
$
|
259,881
|
|
The following table provides a summary of changes in the fair
value of the Company’s Level 3 financial liabilities from January 1, 2012 to December 31, 2013:
|
|
Warrant Liability
|
|
|
Derivative Liability
|
|
|
Total
|
|
December 31, 2011
|
|
|
283,931
|
|
|
|
140,706
|
|
|
|
424,637
|
|
Conversion of warrants to common stock
|
|
|
(2,031
|
)
|
|
|
—
|
|
|
|
(2,031
|
)
|
Issuance of convertible notes
|
|
|
—
|
|
|
|
4,044,349
|
|
|
|
4,044,349
|
|
Change in fair value
|
|
|
(48,912
|
)
|
|
|
(4,158,162
|
)
|
|
|
(4,207,074
|
)
|
December 31, 2012
|
|
|
232,988
|
|
|
|
26,893
|
|
|
|
259,881
|
|
Issuance of convertible notes
|
|
|
—
|
|
|
|
8,582,295
|
|
|
|
8,582,295
|
|
Reclass to additional paid in capital
|
|
|
—
|
|
|
|
(2,711,816
|
)
|
|
|
(2,711,816
|
)
|
Change in fair value
|
|
|
(232,988
|
)
|
|
|
(38,202
|
)
|
|
|
(271,190
|
)
|
December 31, 2013
|
|
|
—
|
|
|
$
|
5,859,170
|
|
|
$
|
5,859,170
|
|
As of December 31, 2013 and 2012, the fair
value of the warrant liability was $0 and $232,988, respectively. The changes in fair value for the years ended December 31, 2013
and 2012 of $232,988 and $48,912, respectively, have been recorded in the accompanying statements of operations as a component
of other income (expense). The fair value of the warrants at December 31, 2013 and 2012 were determined using the Black-Scholes
model with the following assumptions:
|
|
2013
|
|
|
2012
|
|
Annualized volatility
|
|
|
331%
- 335
%
|
|
|
|
275%
- 624%
|
|
Contractual life (years)
|
|
|
.04
|
|
|
|
.5
|
|
Expected dividends
|
|
|
0%
|
|
|
|
0%
|
|
Risk-free investment rate
|
|
|
0.62 - 0.91%
|
|
|
|
0.12 - .014%
|
|
Derivative liability
A number of the Company’s convertible
notes contain embedded derivatives wherein their automatic conversion, which is contingent upon a future equity raise, can accelerate
the realization of the expected payout for each note. This feature creates the possibility of a greater than expected return for
the note holder and thus a higher than expected liability for the Company. The value of this feature was estimated for each note
using the probability expected return method, in which the payout of distinct potential early conversion scenarios was discounted
to the present using the expected IRR of the note and compared with the present value of the note if held to maturity. Probabilities
were applied to the value of early conversion in each scenario to arrive at a probability-weighted value of the early conversion
feature.
For certain convertible note obligations,
the Company is required to measure and record a related derivative liability, representing the estimated fair value of any embedded
conversion options. As of December 31, 2013 and December 31, 2012, the fair value of the derivative liability was $5,859,170 and
$26,893, respectively. The changes in fair value for the twelve months ended December 31, 2013 and December 31, 2012 is $13,000,
and $436,095, have been recorded in the accompanying statements of operations as a component of other income (expense).
The following table sets forth the computation of the basic
and diluted net loss per share attributable to Amarantus common stockholders for the periods indicated:
|
|
Year Ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
Numerator
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(15,131,681
|
)
|
|
$
|
(5,135,618
|
)
|
Preferred stock dividend
|
|
|
38,402
|
|
|
|
—
|
|
Net loss applicable to common stockholders
|
|
$
|
(15,170,083
|
)
|
|
$
|
(5,135,618
|
)
|
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding during the period:
|
|
|
|
|
|
|
|
|
Common stock - basic
|
|
|
450,931,510
|
|
|
|
140,710,454
|
|
Common shares equivalents
|
|
|
—
|
|
|
|
—
|
|
Common stock - diluted
|
|
|
450,931,510
|
|
|
|
140,710,454
|
|
|
|
|
|
|
|
|
|
|
Net loss per share
|
|
$
|
(0.03
|
)
|
|
$
|
(0.04
|
)
|
Potentially dilutive securities:
|
|
|
|
|
|
|
Outstanding time-based common stock options
(1)
|
|
|
6,941,000
|
|
|
|
-
|
(2)
|
Outstanding time-based preferred stock options
(1)
|
|
|
2,288,000
|
|
|
|
-
|
(2)
|
Warrants
(1)
|
|
|
84,553,000
|
|
|
|
-
|
(2)
|
Relating party liabilities
|
|
|
3,107,000
|
|
|
|
-
|
(2)
|
Convertible promissory note(s)
(1)
|
|
|
6,325,000
|
|
|
|
-
|
(2)
|
8% Senior convertible debentures
|
|
|
75,000,000
|
|
|
|
-
|
(2)
|
Convertible preferred stock
(1) (3)
|
|
|
753,000
|
|
|
|
-
|
(2)
|
(1)
|
The impact of time-based stock options, warrants, the convertible notes and the convertible preferred stock on earnings per share is anti-dilutive in a period of loss from continuing operations.
|
|
|
(2)
|
Total anti dilutive securities in 2012 was approximately 84,000,000.
|
|
|
(3)
|
Includes Series C and D Convertible Preferred
Stock.
|
The following table summarizes our intangible assets:
|
|
Year Ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
Intangible assets:
|
|
|
|
|
|
|
|
|
License – Power 3 Medical
|
|
$
|
430,252
|
|
|
$
|
484,643
|
|
License – Memory Dx (LymPro)
|
|
|
145,940
|
|
|
$
|
47,500
|
|
License – University of Massachusetts
|
|
|
34,902
|
|
|
|
—
|
|
Total intangible assets net
|
|
$
|
611,094
|
|
|
$
|
532,143
|
|
Amortizable intangible assets as of December 31, 2013 and 2012
consist of the following:
|
|
December 31, 2013
|
|
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net Book
Value
|
|
License costs
|
|
|
681,143
|
|
|
|
(70,049
|
)
|
|
|
611,094
|
|
|
|
December 31, 2012
|
|
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net Book
Value
|
|
License costs
|
|
$
|
532,143
|
|
|
$
|
—
|
|
|
$
|
532,143
|
|
These license costs will be amortized over their patent expire
date. As of December 31, 2013, amortization expense for the next five years is expected to be as follows:
2014
|
|
$
|
44,599
|
|
2015
|
|
|
44,599
|
|
2016
|
|
|
44,721
|
|
2017
|
|
|
44,599
|
|
2018
|
|
|
44,599
|
|
thereafter
|
|
|
387,977
|
|
Total
|
|
$
|
611,094
|
|
Power 3 Medical License and subsequent
asset purchase
The Company acquired a license and the intellectual property rights to 2 diagnostic blood test platforms
known as NuroPro and BC-SeraPro from Power3 Medical Products, Inc. in 2012. NuroPro is a neurodegenerative disease diagnostic platform
with a lead application in Parkinson’s disease. BC SeraPro is an oncology diagnostic platform with a lead application in
Breast Cancer. In December of 2012, the Company acquired all of the assets from the bankruptcy estate of Power3 Medical Products,
Inc.
Memory Dx (LymPro) License
On December 14, 2012, the Company
entered into an exclusive license agreement (the “License Agreement”) with Memory Dx, LLC (“MDx”) under
which MDx granted to the Company an exclusive worldwide license to develop, manufacture, market, sell and import medical devices
under MDx’s intellectual property pertaining to Alzheimer’s disease diagnosis (the “License”). As consideration
for the License, the Company issued 2,000,000 shares of its common stock at $0.0395 per share to MDx in March 2013 and will pay
MDx a royalty equal to 9% of the net proceeds of all sales resulting from the License. Further, MDx, with the Company’s engagement,
is to complete a validation study regarding a blood test for the detection of Alzheimer’s disease. To prepare the laboratory
for this study, the Company paid MDx $50,000 in 2013. The Company will also assist MDx in fund raising, and, upon successful completion
of the validation study, pay MDx $1,000,000 in cash or Company stock. The Company may sell, sub-license or assign the License Agreement
and has an option to terminate the License Agreement upon 30 days written notice if MDx is unable to meet its obligations regarding
the validation study.
University of Massachusetts License
On December 12, 2013, the Company entered
into a licensing arrangement with the University of Massachusetts whereby the Company obtained an exclusive world-wide royalty
bearing license to conduct research, develop and commercialize intellectual property related to soluble MANF in Pancreatic Beta-Cell
Disorders. The Company paid an upfront fee of $35,000 upon entering into the agreement. Under the agreement, the Company has certain
obligations to use commercially reasonable efforts to develop and commercialize the licensed patents. The agreement provides for
specific milestone payments to be made to the university upon the occurrence of certain development related events. The agreement
also provides that the Company will pay certain minimum and sales-based royalties to the university once product sales are commenced.
Under the agreement, the Company is obligated to reimburse the university for all costs related to maintaining the licensed patents.
The Company may terminate the agreement for any reason upon 90 days’ written notice.
|
7.
|
collaborative agreements
|
University of Massachusetts
The Company has entered into a series of exclusive license agreements
with the University of Massachusetts (the “UMass”) on December 12, 2013 that provide the Company with certain technology
and related patent rights and materials associated with Mesencdphalic Astrocyte derived Neurotrophic Factor, or MANF-based therapeutics.
Under the terms of the agreements, the Company pays license
fees and specified development costs and will be required to pay royalties amounting to 2% of net sales of products originating
from the licensed technologies. The agreements will expire at the end of the life of the last issued patent.
The Company incurred license fees and specified development
costs under the UMass agreements of $34,441 for the year ended December 31, 2013, which are included in research and development
expense.
|
8.
|
Convertible Notes Payable
|
The following table summarizes the Company’s outstanding
convertible notes payable obligations:
|
|
|
|
|
|
|
|
|
Principal Balance Outstanding
|
|
Issue Date
|
|
Maturity Date
|
|
Stated
Interest Rate
|
|
|
Conversion Terms
|
|
December 31,
2013
|
|
|
December 31,
2012
|
|
11/14/2012
|
|
06/03/2013
|
|
|
10.0
|
%
|
|
Fixed at $0.10
|
|
$
|
0
|
|
|
$
|
600,000
|
|
10/4/2011
|
|
9/6/2014
|
|
|
20.0
|
%
|
|
$0.05 subject to adjustments
|
|
|
0
|
|
|
|
140,000
|
|
|
|
|
|
|
|
|
|
Notes payable, current
|
|
$
|
0
|
|
|
$
|
740,000
|
|
Subsequent to December 31, 2013, the Company issues
approximately 93,860,000 shares of common stock to settle the convertible notes payable and accrued interest.
|
9.
|
8% Senior convertible debentures
|
The following table summarizes the Company’s
outstanding 8% convertible promissory note obligations:
|
|
|
|
|
|
|
|
|
Principal Balance Outstanding
|
|
Issue Date
|
|
Maturity
Date
|
|
Stated
Interest
Rate
|
|
|
Conversion Terms
|
|
December 31, 2013
|
|
|
December 31,
2012
|
|
10/2/2013
|
|
10/2/2014
|
|
|
8.0
|
%
|
|
Variable conversion price
|
|
$
|
1,788,889
|
|
|
$
|
-0
|
|
-9/6/2013
|
|
9/6/2014
|
|
|
8.0
|
%
|
|
Variable conversion price
|
|
|
1,544,443
|
|
|
|
-0-
|
|
|
|
Sub total
|
|
|
|
|
|
|
|
|
3,333,332
|
|
|
|
-0
|
|
|
|
Discount on convertible promissory notes
|
|
|
(2,401,390
|
)
|
|
|
-0-
|
|
|
|
Current portion of 8% convertible promissory notes, net
|
|
$
|
931,942
|
|
|
$
|
-0
|
|
Subsequent to December 31, 2013 all the
8% senior convertible debentures converted to capital stock of the Company.
The Debenture agreement provides that the Company may be obligated
to pay partial liquidated damages to certain Investors in the event that the company is unable to deliver Common Stock pursuant
to the terms of the agreement upon an elected conversion. The amount of liquidated damages is determined based on a fixed dollar
amount per trading day during which the conversion shares remain undelivered.
The Company entered into a registration
rights agreement with the Investors pursuant to which the Company filed a registration statement with the Securities and Exchange
Commission. The registration statement went effective February 4, 2014.
|
10.
|
Convertible Promissory Notes
|
The following table summarizes the Company’s
outstanding convertible promissory note obligations:
|
|
|
|
|
|
|
|
|
Principal Balance Outstanding
|
|
Issue Date
|
|
Maturity
Date
|
|
Stated
Interest
Rate
|
|
|
Conversion Terms
|
|
December 31, 2013
|
|
|
December 31,
2012
|
|
6/5/2013
|
|
12/2/2013
|
|
|
6.0
|
%
|
|
Fixed at $0.02
|
|
|
20,000
|
|
|
|
-0-
|
|
11/4/2012
|
|
5/3/2013
|
|
|
6.0
|
%
|
|
Fixed at $0.01
|
|
|
10,173
|
|
|
|
10,173
|
|
8/23/2012
|
|
2/19/2013
|
|
|
6.0
|
%
|
|
Fixed at $0.015
|
|
|
50,000
|
|
|
|
50,000
|
|
11/2012
|
|
On Demand
|
|
|
None
|
|
|
Variable conversion price
|
|
|
720
|
|
|
|
720
|
|
6/6/2011
|
|
6/6/2013
|
|
|
5.0
|
%
|
|
Fixed at $0.04
|
|
|
10,000
|
|
|
|
10,000
|
|
4/11/2011
|
|
4/11/2013
|
|
|
5.0
|
%
|
|
Fixed at $0.04
|
|
|
25,000
|
|
|
|
25,000
|
|
5/1/2011
|
|
5/1/2013
|
|
|
5.0
|
%
|
|
Fixed at $0.10
|
|
|
4,250
|
|
|
|
4,250
|
|
4/1/2011
|
|
4/1/2013
|
|
|
5.0
|
%
|
|
Variable conversion price
|
|
|
4,250
|
|
|
|
4,250
|
|
09/21/2012-09/01/2013
|
|
03/20/2013-06/05/2013
|
|
|
6.0
|
%
|
|
Fixed prices ranging from $0.0051-$0.0545
|
|
|
|
|
|
|
154,900
|
|
12/28/2010
|
|
On Demand
|
|
|
5.0
|
%
|
|
Fixed at $0.0030
|
|
|
|
|
|
|
13,000
|
|
12/28/2010– 06/09/2011
|
|
12/6/2011
|
|
|
5.0
|
%
|
|
Variable conversion price
|
|
|
|
|
|
|
375,000
|
|
8/21/2012
|
|
2/21/2013
|
|
|
None
|
|
|
Variable conversion price
|
|
|
|
|
|
|
6,066
|
|
12/13/2010
|
|
12/13/2012
|
|
|
5.0
|
%
|
|
Variable conversion price
|
|
|
|
|
|
|
100,000
|
|
6/6/2012
|
|
12/3/2012
|
|
|
6.0
|
%
|
|
Fixed at $0.03
|
|
|
|
|
|
|
13,000
|
|
9/26/2011
|
|
3/24/2012
|
|
|
6.0
|
%
|
|
Fixed at $0.10
|
|
|
|
|
|
|
3,000
|
|
4/27/2011
|
|
4/27/2013
|
|
|
5.0
|
%
|
|
Variable conversion price
|
|
|
-0-
|
|
|
|
50,000
|
|
|
|
Sub total
|
|
|
|
|
|
|
|
|
124,393
|
|
|
|
819,359
|
|
|
|
Discount on convertible promissory notes
|
|
|
-0-
|
|
|
|
(50,467
|
)
|
|
|
Current portion of convertible promissory notes, net
|
|
$
|
124,393
|
|
|
$
|
768,892
|
|
For notes that converted to common stock during the year ended
December 31, 2013, the Company issued approximately 98,456,000 shares of common stock and extinguished approximately
$3,463,162 of principal obligations as a result of those conversions.
Convertible notes in default
At December 31, 2013,
the Company was in technical
default of certain convertible notes with an aggregate principal balance outstanding of approximately $124,000 that were due prior
to December 31, 2013
If the registration statement at any time ceases to be effective
or if the Investors are not permitted to utilize the prospectus related to the registration statement to resell securities intended
to be registered therein for more than 10 consecutive calendar days or for more than an aggregate of 15 calendar days during any
twelve month period, then the Company is obligated to pay the affected Investors an amount in cash, as partial liquidated damages,
equal to 2% multiplied by the aggregate subscription amount paid by the Investors each month until such condition is cured, plus
interest if any such liquidated damages are paid beyond a specified payment date as provided for in the agreement.
2013 Restructuring of Certain Convertible
Debentures and Related Warrants
On February 7
th
, 2013, the Company
completed a series of transactions related to the restructuring of certain convertible debentures and related warrants that were
in default. As a result, the Company executed two separate amended and restated Convertible Promissory Notes in the amounts of
$375,000 and $187,500 (the “New Notes”), respectively, payable to Dominion Capital, LLC. The Company had defaulted
on Promissory Notes issued in 2011 to certain individual investors in the total aggregate amount of $375,000 (the “Old Notes”),
and related cashless warrants in the amount of $500,000. Dominion capital paid $562,500 to acquire the Old Notes, and as part of
the transaction all of the related warrants have been retired, inclusive of a $37,500 payment from the Company to certain warrant
holders. The Old Notes and Related warrants had a conversion feature equal to a 66.6% floorless discount to a ‘Next Equity
Financing’, defined as a financing where equity, or debt that was convertible into common stock, with a fixed price conversion
feature. As a result of the 30 January financing previously announced, the Old Notes and Warrants, inclusive of interest, would
have been convertible into approximately $900,000 in common shares priced at $0.0333/share, which would have equated to 27,000,000
common shares.
As a result, of the transactions listed
above, $375,000 in notes became immediately convertible at a price of $0.015/share, equal to 25,000,000 common shares. The $187,500
is also priced at $0.015/share, however the note was not convertible for 6 months and the Company retains an option to repurchase
this note at any time until maturity. The $187,500 note was converted into 12,500,000 common shares in July 2013.
Concurrently, the Company retired a series
of convertible notes with unfavorable financing terms that were issued between June 30, 2012 and November 1, 2012.
As a result of these transactions, the
Company eliminated the costly potential default and reset provisions associated with the Old Notes and Warrants that the Company
believes were a potential impediment to future growth and more favorable future financing alternatives. With the retirement of
the Old Notes and repurchase by the Company of the Warrants, the Company is no longer in default of any convertible notes or warrants,
and has eliminated the risk of further dilutive potential of resets and default provisions contained within those retired instruments.
The company believes that this has streamlined and enhanced its capital structure placing the Company in a better position to move
forward with the execution of its scientific advancement plans.
January 2013 Convertible Promissory Note Amendment
On January 30, 2013, the Company executed
an amendment to a Convertible Promissory Note payable to Dominion Capital, LLC or its registered assigns (the “Dominion Note”),
dated November 14, 2012, providing for an increase in the purchase price for such note from $600,000 to $2,000,000, to be disbursed
in tranches through April 26, 2013. The Dominion Note bears interest at the rate of ten percent (10%) per annum until paid in full
and is convertible into shares of the Company’s common stock, subject to certain restrictions, at a price of $0.10 per share.
The Dominion Note has been amended to provide for an extended amortization schedule with a final maturity date of 28 October 2013.
The Company has the option to pay the Dominion Note in cash or stock at its discretion, subject to certain conditions. The Company
intends to apply the proceeds from the amended Dominion Note for working capital purposes. Dominion is not able to begin to convert
the note until May 14, 2013. The Company received all $600,000 from the initial agreement in 2012, and received the first tranche
of funding of $250,000 on January 30
th
, 2013. The extended amortization schedule provides for payments of $200,000 to
$250,000 every 2 weeks until the end of April 2013. The amended notes were converted in fiscal 2013.
|
11.
|
commitments and contingencies
|
Lease Arrangements
— The Company leases its
main office facility and laboratory space in San Francisco, CA under a one-year lease agreement with QB3 Incubator Partners, LP.
The lease agreement was entered into in October 2013 and provides for rental payments of $6,700 per month.
Rent expense for the years ended December 31,
2013 and 2012 was $29,511 and $33,596, respectively.
Contingencies
— From
time to time, the Company may become involved in litigation.
On January
6, 2012, the Company was served a summons regarding the filing of a lawsuit (Complaint for Breach of Contract, Specific Performance
and Common Counts) against the Company by a former consultant to the Company, Peter Freeman v. Amarantus Biosciences, Inc. In August
2012, the Company reached a settlement with Mr. Freeman whereby he received payment of $44,000 in monthly installments of $5,000,
and the settlement amounts were fully paid in the year ended December 31, 2012.
Amarantus is continuing to review the Company’s
legal options with respect to the material misrepresentations made by the officers of Power3 Medical and the Company’s rights
in the IP.
The Company is in non-payment of certain
convertible notes that were due prior to December 31, 2013, and is also late with regard to making payments to various trade account
vendors for goods and services received. Presently the Company is not aware of any accounts that have been turned over to collection
agencies or that might result in a lawsuit with the Company.
The Company incurred various obligations
related to the original acquisition of its intellectual property around the time the Company was founded. These transactions are
described more fully in Note 16, including a reference to contingent obligations reflected in the financial statements.
Series A Convertible Preferred Stock
In May 2012, the Company designated a class of preferred stock
as Series A Convertible Preferred Stock. The Series A shares have no entitlement to dividends and have no voting rights. In any
event of dissolution, liquidation or winding up of the Company, the Series A shares are entitled to receive a stated value of $1.00
per share. All distributions made to holders of the Series A shares and to holders of other stock of the Company upon liquidation
shall be made on a
pari passu
basis with distributions made to holders of the Company’s common stock. The series A
shares are convertible into the Company’s common stock at a stated conversion price that is equal to the lessor of 1) 110%
of the closing common stock price on the date of conversion or 2) 80% of the lowest closing common stock price occurring during
a 30 trading day period prior to notice of conversion. During 2013 the registered holder of the Company’s Series A convertible
preferred stock converted all 250,000 shares into 8,094,117 shares of the Company’s common stock.
The
Series A Convertible Preferred Stock was converted in January 2013 as part of a services settlement with a vendor.
Series B Preferred Stock
On April 2, 2013 the Company filed a Certificate
of Designation with the State of Nevada formally creating a series of Series B Convertible Preferred Stock. The Series B Convertible
Preferred Stock has no anti-dilution provisions, can only be issued to officers, directors and advisors of the Company, and cannot
be converted into common stock, transferred, sold or disposed of in any manner for 24 months.
Series C Convertible Preferred Stock
On April 1, 2013, the Company filed a Certificate
of Designation with the State of Nevada creating a series of Series C Convertible Preferred Stock. The Series C Convertible Preferred
Stock has no anti-dilution provisions, can only be issued to officers and directors of the Company, is convertible into a cumulative
total of 750,000 common shares and is automatically convertible into common stock upon listing of the Company’s common stock
to a national stock exchange. The holders of Series C shares are entitled to 300 common stock equivalent votes per share on all
corporate matters except those that by law only require a single series vote.
Series D Convertible Preferred Stock
On August 19, 2013, the
Company entered into a securities purchase agreement with an institutional investor (the “Investor”) pursuant to which
the Company issued shares of newly designated Series D 8% Convertible Preferred Stock (”Series D Preferred Stock”)
to the Investor in exchange for the Investor agreeing to paying off certain accounts payables of the Company, up to an aggregate
approximate amount of $1,250,000. In addition, the Company granted to the Investor the right to participate in future financings
of the Company until 12 months from the date of the last closing.
On August 19, 2013, the Company filed a Certificate of Designation designating 1,300 of our preferred
stock as Series D Preferred Stock. Each share of Series D Preferred Stock has a stated value of $1,000 and pays on a quarterly
basis 8% cumulative dividends per annum. Dividends are payable by the Company in cash or at the Company’s option, in shares
of common stock. The Series D Preferred Stock shall have no voting rights except in certain circumstances which would adversely
affect the Series D Preferred Stockholders. Each share of Series D Preferred Stock is convertible at any time into shares of common
stock by dividing the stated value per share by the then effective conversion price. The conversion price for the Series D
Preferred Stock shall equal $0.03 per share, subject to adjustment;
provided
,
however
, in the event
that during any period that the Series D Preferred Stock is outstanding, a holder delivers a conversion notice within 5 trading
days following a period that the average of 5 consecutive Volume Weighted Average Prices (VWAPs) is less than $0.02, the conversion
price shall be thereafter reduced, and only reduced, to equal the lesser of the then conversion price and 75% of the average of
the lowest 5 consecutive VWAPs prior to the delivery of such conversion notice. The Series D Preferred Stock is also subject to
redemption by the Series D Shareholders upon certain triggering events. The redemption amount upon any triggering event is
equal to the greater of 1) 130% of the stated value or 2) the stated value divided by the then conversion price multiplied by the
VMAP on the trading day immediately preceding the triggering event, plus any accrued and unpaid dividends. The redemption payment
may, at the option of the holder, be in cash or shares. Redemption triggering events may include certain events such as 1change
of control, bankruptcy, junior security redemptions, common stock delisting, or other adverse events as described under the agreement.
Stock Warrants
Company issued 83,333,251 Warrants in
2013 in connection with the Debenture and Warrant transaction. The Warrants are exercisable for a term of three years from the
date of issuance at an exercise price of $0.06 per share. The Warrants are exercisable on a cashless basis if at any time after
the six months anniversary there is no effective registration statement or current prospectus available for the resale of the
shares underlying the Warrants. The Company may call the warrants at an exercise price of $.001 per share if certain conditions
as described in the Warrant are met.
The following table summarizes the Company’s
warrant activity for the year ended December 31, 2013.
|
|
Number of Warrants
|
|
|
Weighted Average Exercise Price
|
|
Outstanding as of December 31, 2011
|
|
|
1,392,251
|
|
|
$
|
0.07
|
|
Issued in connection with convertible debt offerings
|
|
|
11,364,773
|
|
|
|
0.07
|
|
Exercised
|
|
|
(146,694
|
)
|
|
|
0.17
|
|
Expired
|
|
|
(25,501
|
)
|
|
|
0.01
|
|
Outstanding as of December 31, 2012
|
|
|
12,584,829
|
|
|
|
0.04
|
|
Issued in connection with convertible debt offerings
|
|
|
83,333,250
|
|
|
|
0.06
|
|
Exercised
|
|
|
-
|
|
|
|
0.00
|
|
Cancelled
|
|
|
(11,364,773
|
)
|
|
|
0.04
|
|
Expired
|
|
|
-
|
|
|
|
0.00
|
|
Outstanding as of December 31, 2013
|
|
|
84,553,306
|
|
|
|
0.06
|
|
Warrant Exchange
On March 7th, the Company accepted elections to exercise certain warrants in the aggregate amount of 60,000,000
shares of common stock for gross proceeds of $3,600,000. The total proceeds from the transaction were received by the Company in
the first quarter of 2014. Pursuant to the offer
to exercise dated February 13, 2014 as supplemented on March 6, 2014, the holders of outstanding warrants to purchase shares of
common stock of the Company at a price of $0.06 (the “Original Warrants”) were offered the opportunity to exercise
their Original Warrants and receive warrants (the “New Warrants”) to purchase three (3) shares of common stock of
the Company for every four (4) Original Warrants exercised. The New Warrants are exercisable at a price of $0.12 for a term of
five (5) years. The New Warrants are callable by the Company if the Volume Weighted Average Price (VWAP) of the Company’s
common stock for each of 20 consecutive trading days exceeds $0.18 and certain equity conditions are met. . The Company may also
call the New Warrants if the closing price of the Company’s common stock exceeds $0.18 on the date that is the earlier of
the receipt by the Company of an approval letter for listing of the Company’s common stock on an exchange or listing of
the common stock on an exchange. The holders of the New Warrants will also have piggy back – registration rights. Upon the
closing of the offer to exercise the Company issued New Warrants to purchase 45,000,000 shares of common stock of the Company.
The Company is authorized to issue 1,000,000,000
shares of common stock, $0.001 par value. The holders of common stock: (i) have equal rights to dividends from funds legally available
therefore, ratably when as and if declared by the Company’s Board of Directors; (ii) are entitled to share ratably in all
assets of the Company available for distribution to holders of common stock upon liquidation, dissolution, or winding up of the
affairs of the Company; (iii) do not have preemptive, subscription or conversion rights and there are no redemption or sinking
fund provisions applicable thereto; (iv) are entitled to one non-cumulative vote per share of common stock, on all matters which
shareholders may vote on at all meetings of shareholders; and (v) the holders of common stock have no conversion, preemptive or
other subscription rights. There is no cumulative voting for the election of directors. Each holder of
our common stock is entitled to one vote for each share of our common stock held on all matters submitted to a vote of stockholders.
As of December 31, 2013, our Board of Directors had declared no dividends payable to holders of our common stock.
Common Stock Registration
On October 3, 2013, the Company filed with
the U.S. Securities and Exchange Commission a Form S-1 Registration Statement under the Securities Act of 1933, subsequently amended
on December 2, 2013, December 31, 2013 and on January 27, 2014. The purpose of the registration statement was to register 173,333,160
share of common stock for resale by certain investors that are issuable upon conversion of 8% senior convertible debentures and
as interest on such debentures and warrants issued by the Company pursuant to a securities purchase agreement entered into between
the Company and the certain selling shareholders.
BBSE Delisting
On
January 17, 2013, the Board of Directors of Amarantus BioScience, Inc. adopted a unanimous written resolution authorizing the
Company’s officers, agents, and counsel to take any and all action reasonably necessary to cause the immediate cessation
of trading and delisting of Amarantus common stock from the Berlin-Bremen Stock Exchange (the “BBSE”), or from any
unofficially regulated markets controlled by the BBSE, including the commencement of legal proceedings in the United States or
Germany against the BBSE or any broker or other unauthorized person making a market in the Company’s stock in Germany through
the BBSE or otherwise. The Company’s common stock was listed on the BBSE without the Company’s prior knowledge, consent,
or authorization. The Company did not authorize or direct any BBSE broker to act as market maker for the Company’s common
stock, and believes such listing is part of an organized effort to circumvent U.S. securities laws, including the restrictions
against “naked short selling.” The Company’s common stock was delisted from the BBSE on March 19, 2013. The
Company believes that de-listing from the BBSE has helped to facilitate orderly trading of the Company’s common stock.
DTCC Chill
On April 18, 2013 the Company became aware
of a letter dated April 4, 2013 from the Depository Trust Company (“DTC”) indicating that on March 22, 2013, The Depository
Trust Company (“DTC”) imposed a restriction on physical deposit and Deposit/Withdrawal At Custodian (“DWAC”)
electronic deposit transactions (the “Deposit Chill”) on CUSIP 02300T 109 (the “Issue”), issued by Amarantus
Bioscience, Inc. (the “Issuer”). DTC imposed the Deposit Chill in order to prevent additional deposits of the Issue
for depository and book-entry transfer services for the reasons set forth below. The letter set forth the concerns of DTC and the
procedure the Company must follow in order to object to the imposition of the Deposit Chill. DTC detected various unusually large
deposits of shares of predecessor CUSIP 02300Q 105 (the “Predecessor Issue”) during the period from November 21, 2011
to February 1, 2013. More particularly, 234,841,928 shares of the Predecessor Issue and the Issue, representing a substantial percentage
of the outstanding float, were deposited at DTC during this period. In order for DTC to make a determination as to whether to lift
the Deposit Chill, DTC required that the Company submit a written response (the “Response”) to this notice. The Response
must include a legal opinion (“Legal Opinion”), addressed to DTC, in support and confirmation that the Issue satisfies
DTC eligibility requirements.
The Company provided the requested Response
to DTC in July of 2013. On July 30, 2013, the Company received notice that The Depository Trust Company has determined to lift
the deposit chill (“DTCC Chill”) on the Company’s common stock and has resumed accepting deposits for depository
and book-entry transfer services.
2008 Stock Plan
The Company’s Board of Directors approved the 2008 Stock
Plan (the “Plan”). Under the Plan, the Company may grant up to 28,242,127 shares of incentive stock options, nonqualified
stock options, or stock awards to eligible persons, including employees, nonemployees, members of the Board of Directors, consultants,
and other independent advisors who provide services to the Company. In general, options are granted with an exercise price equal
to the fair value of the underlying common stock on the date of the grant. Options granted typically have a contractual life of
10 years and vest over periods ranging from being fully vested as of the grant date to four years.
The following table is a summary of activity under the Plan:
|
|
|
|
|
|
|
|
Outstanding Options
Common
|
|
|
|
Common
stock options outstanding
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average Remaining Contractual Term
|
|
Balance – December 31, 2011
|
|
|
9,206,247
|
|
|
|
0.02
|
|
|
|
6.4
|
|
Options granted (weighted-average fair value of $0.
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Non-Employee
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Options cancelled
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Options Exercised
|
|
|
(7,377,221
|
)
|
|
|
0.02
|
|
|
|
—
|
|
Balance – December 31, 2012
|
|
|
1,829,026
|
|
|
|
0.02
|
|
|
|
6.4
|
|
Options granted (weighted-average fair value of $0.52
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
|
|
|
776,924
|
|
|
|
0.05
|
|
|
|
9.2
|
|
Non-Employee
|
|
|
5,746,155
|
|
|
|
0.05
|
|
|
|
9.2
|
|
Options cancelled
|
|
|
(1,210,817
|
)
|
|
|
—
|
|
|
|
—
|
|
Options Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Balance – December 31, 2013
|
|
|
6,941,288
|
|
|
|
0.05
|
|
|
|
9.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options vested December 31, 2013
|
|
|
6,891,288
|
|
|
|
|
|
|
|
|
|
The amount of awards available to grant
under the Plan is 623,618 as of December 31, 2013.
Title
2012 Preferred Stock Plan
In July 2012, our Board of Directors adopted
a new stock plan, the Management, Employee, Advisor and Director Preferred Stock Option Plan – 2012 Series B Convertible
Preferred Stock Plan (“Preferred Stock Plan”). The purposes of the Preferred Stock Plan are to attract and retain
the best available personnel for positions of substantial responsibility, to provide additional incentive to Management, Employees,
Advisors and Directors and to promote the success of our business. Certain current and former Management, Employees, Advisors
and Directors were awarded a total of 1,248,000 options to purchase Series B Preferred shares on July 15, 2012, and an additional
1,200,000 options on November 4, 2012. These options currently vest over four years and cannot be converted into common shares
or sold for two years from the date of the Designation of the Series B Preferred shares. Each share of Series B Preferred stock
converts into fifty shares of common stock. The following table is a summary of activity under the Preferred Stock Plan:
|
|
|
|
|
|
|
|
Outstanding
Preferred Options
|
|
|
|
Preferred
Stock Options Outstanding
|
|
|
Weighted
Average
Exercise Price
|
|
|
Weighted
Average Remaining Contractual Term
|
|
Balance – December 31, 2011
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Preferred options granted
(weighted-average fair value of $0.0237)
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
|
|
|
2,287,500
|
|
|
|
0.4742
|
|
|
|
9.5
|
|
Non-Employee
|
|
|
160,500
|
|
|
|
0.225
|
|
|
|
9.8
|
|
Balance – December 31, 2012
|
|
|
2,448,000
|
|
|
|
0.4578
|
|
|
|
9.6
|
|
Preferred options cancelled
|
|
|
(160,500
|
)
|
|
|
0.225
|
|
|
|
9.8
|
|
Balance – December 31, 2013
|
|
|
2,287,500
|
|
|
|
0.4742
|
|
|
|
8.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred options vested at December 31, 2012
|
|
|
1,318,359
|
|
|
|
|
|
|
|
|
|
The amount of awards available to grant
under the Plan is 712,500 as of December 31, 2013.
Stock-based
compensation expense for all plans for the years ended December 31, and 2013 and 2012, is classified in the statements of operations as follows:
|
|
Year ended
December 31,
2013
|
|
|
Year ended
December 31,
2012
|
|
Research and development
|
|
$
|
337,494
|
|
|
$
|
101,566
|
|
General and administrative
|
|
|
406,195
|
|
|
|
282,038
|
|
Total
|
|
$
|
743,689
|
|
|
$
|
383,604
|
|
At December 31, 2013, there was a total
of $443,849 of unrecognized compensation cost — net of estimated forfeitures, related to non-vested stock option awards,
which is expected to be recognized over a weighted-average period of approximately 2.0 years.
The fair value of the Company’s stock-based awards during the twelve months ended December 31, 2013
and 2012 were estimated using the following assumptions:
|
|
Year Ended
December 31,
|
|
|
Year Ended
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
Weighted-average volatility
|
|
|
90.0
|
%
|
|
|
108.0
|
%
|
Weighted-average expected term
|
|
|
5
|
|
|
|
5
|
|
Expected dividends
|
|
|
0
|
%
|
|
|
0
|
%
|
Risk-free investment rate
|
|
|
2
|
%
|
|
|
0.5
|
%
|
Expected forfeiture rate
|
|
|
0
|
%
|
|
|
0
|
%
|
There is no provision for income
taxes because we have incurred operating losses since inception and applied a full valuation allowance against all deferred tax
assets.
The reported amount of income tax expense attributable to operations for the year
differs from the amount that would result from applying domestic federal statutory tax rates to loss before income taxes from operations
as summarized below:
Income (Loss) before income taxes
|
|
Year ended
December 31, 2013
|
|
|
Year ended
December 31, 2012
|
|
United States
|
|
$
|
(15,130,681
|
)
|
|
$
|
(5,135,618
|
)
|
Foreign
|
|
|
—
|
|
|
|
—
|
|
Total Income (Loss) before income taxes
|
|
$
|
(15,130,681
|
)
|
|
$
|
(5,135,618
|
)
|
|
|
Year ended December 31, 2013
|
|
|
Year ended December 31, 2012
|
|
Federal tax expense (benefit) at statutory rate
|
|
$
|
(5,144,773
|
)
|
|
$
|
(1,746,110
|
)
|
State tax expense (benefit) net of federal tax effect
|
|
|
(538,715
|
)
|
|
|
(298,348
|
)
|
R&D Credit
|
|
|
(46,000
|
)
|
|
|
(19,994
|
)
|
Non-deductible expenses
|
|
|
2,191,507
|
|
|
|
88,368
|
|
Change in Valuation Allowance
|
|
|
3,537,981
|
|
|
|
1,976,084
|
|
Other income
|
|
|
—
|
|
|
|
—
|
|
Total tax expense
|
|
$
|
—
|
|
|
$
|
—
|
|
The significant components of deferred tax
assets are as follows:
|
|
Year ended December 31, 2013
|
|
|
Year ended December 31, 2012
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carry-forward
|
|
$
|
7,317,778
|
|
|
$
|
4,162,890
|
|
Tax credit carry-forward
|
|
|
203,889
|
|
|
|
125,954
|
|
Accrued liabilities
|
|
|
722,863
|
|
|
|
419,704
|
|
Capitalized start-up costs
|
|
|
15,194
|
|
|
|
15,194
|
|
Depreciation
|
|
|
1,351
|
|
|
|
1,351
|
|
Gross Deferred Tax Assets
|
|
|
8,263,075
|
|
|
|
4,725,093
|
|
Valuation Allowance
|
|
|
(8,263,075
|
)
|
|
|
(4,725,093
|
)
|
Net deferred tax assets
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
December 31, 2013
|
|
|
December 31, 2012
|
|
Federal tax expense (benefit) at statutory rate
|
|
|
34.0
|
%
|
|
|
34.0
|
%
|
State tax expense (benefit) net of federal tax effect
|
|
|
3.6
|
%
|
|
|
5.8
|
%
|
R&D Credit
|
|
|
0.3
|
%
|
|
|
0.4
|
%
|
Non-deductible expenses
|
|
|
-14.5
|
%
|
|
|
-1.7
|
%
|
Change in Valuation Allowance
|
|
|
-23.4
|
%
|
|
|
-38.5
|
%
|
|
|
|
|
|
|
|
|
|
Total tax expense
|
|
|
—
|
%
|
|
|
—
|
%
|
The Company’s accounting for deferred
taxes involves the evaluation of a number of factors concerning the realizability of the Company’s net deferred tax assets.
The Company primarily considered such factors as the Company’s history of operating losses, the nature of the Company’s
deferred tax assets and the timing, likelihood and amount, if any, of future taxable income during the periods in which those temporary
differences and carryforwards become deductible. At present, the Company does not believe that it is more likely than not that
the deferred tax assets will be realized; accordingly, a full valuation allowance has been established and no deferred tax asset
is shown in the accompanying balance sheets. The valuation allowance increased by approximately $3,537,982 and $1,976,084 during
the years ended December 31, 2013 and December 31, 2012, respectively.
As of December 31, 2013, the Company had
net federal and state net operating loss carry-forwards of approximately $18,374,939 and $18,378,914, respectively. These net
operating loss carry forwards will begin to expire, if not utilized, beginning in 2028 for both federal and state income tax purposes.
The Company also has federal and state research and development credit carry-forwards of approximately $133,716 and $140,649,
respectively. The federal credits will expire if not utilized beginning in 2029. The California credits do not expire.
The Tax Reform Act of 1986 and similar
California legislation impose substantial restrictions on the use of net operating losses and tax credits in the event of an ownership
change of a corporation. Accordingly, the Company’s ability to use net operating losses and credit carry forwards may be
significantly limited in the future as a result of such an ownership change.
On January 1, 2009, the Company adopted
a newly issued standard of accounting for uncertain tax positions. This standard prescribes a comprehensive model for the recognition,
measurement, presentation and disclosure in financial statements of any uncertain tax positions that have been taken or expected
to be taken on a tax return. The cumulative effect of adopting the new standard resulted in no adjustment to retained earnings
as of January 1, 2009. No liability related to uncertain tax positions is recorded on the financial statements. It is the Company’s
policy to include penalties and interest expense related to income taxes as a component of tax expense, as necessary.
Beginning balance January 1, 2011
|
|
$
|
12,391
|
|
Increase/(decrease) of unrecognized tax benefits taken in prior years
|
|
|
—
|
|
|
|
|
|
|
Increase/(decrease) of unrecognized tax benefits related to current year
|
|
|
4,558
|
|
Increase/(decrease) of unrecognized tax benefits related to settlements
|
|
|
—
|
|
Reductions to unrecognized tax benefits related lapsing statute of limitations
|
|
|
—
|
|
Ending balance at December 31, 2012
|
|
$
|
16,949
|
|
Increase/(decrease) of unrecognized tax benefits taken in prior years
|
|
|
|
|
Increase/(decrease) of unrecognized tax benefits related to current year
|
|
|
10,487
|
|
Increase/(decrease) of unrecognized tax benefits related to settlements
|
|
|
—
|
|
Reductions to unrecognized tax benefits related lapsing statute of limitations
|
|
|
—
|
|
|
|
|
|
|
Ending balance at December 31, 2013
|
|
$
|
27,436
|
|
The total amount of unrecognized tax benefits
that if recognized, would affect the effective tax rate is $0.
The Company has not incurred any interest
or penalties as of December 31, 2013. The Company does not anticipate any significant change within 12 months of this reporting
date of its uncertain tax positions. The Company is subject to taxation in the US and California. There are no ongoing examinations
by taxing authorities at this time.
The Company’s tax years 2008 through
2013 will remain open for examination by the federal and state authorities for 3 and 4 years, respectively, from the date of utilization
of any net operating loss credits.
|
16.
|
Related-Party Transactions
|
Acquisition of MANF and associated
obligations
The Company was co-founded in 2008 by
Mr. Gerald Commissiong and Dr. John Commissiong under the original name of CNS Protein Therapeutics, Inc. (“CNS”),
and changed its name to Amarantus Bioscience, Inc. in 2010, and now Amarantus Bioscience Holdings, Inc. Dr. Commisiong is
currently the Chief Scientific Officer, a member of the Board of Directors (appointed in March 2011) and majority shareholder
of the Company. Mr. Gerald Commissiong is currently the Chief Executive Officer, a member of the Board of Directors, and
a significant shareholder of the Company. Dr. Commissiong also founded Neurotrophics, Inc., a Canadian company, in 2003.
In 2007, Neurotrophics established an agreement with EMS Development Group to acquire the intellectual property rights to a protein
compound, mesencephalic astrocyte-derived neurotrophic factor (“MANF”), from Prescient Neuropharma Co. MANF was discovered
by Dr. Commissiong while working for Prescient in 2002, as a drug candidate with promising therapeutic properties for treatment
of syndromes such Parkinson’s Disease.
EMS received $59,000 in 2007 in funding
from Neurotrophics to purchase the MANF intellectual property rights. Prior to this payment, Neurotrophics received a total of
$100,000 in investments from certain outside parties. The same investors provided $100,000 in funding to CNS in 2008, and CNS
renegotiated and assumed the $100,000 convertible note investment made into Neurotrophics. The investors directed Neurotrophics
and EMS to assign the MANF intellectual property rights to CNS and CNS agreed to assume certain other liabilities related to the
technology transfer. CNS will compensate these creditors on a future date mutually agreeable between the parties. In addition,
CNS agreed to compensate EMS for its assistance in acquiring the rights to MANF by making installment payments in an aggregate
amount of $95,000.
The technology transfer transaction created
a contingent liability for the Company. Legal counsel to the Company has advised that transfers of assets out of the usual course
of business, referred to under applicable Canadian law as “bulk sales”, must comply with certain rules in order to
avoid a potential voiding of the sale or transfer, making the purchaser liable to unpaid trade creditors, or creating an encumbrance
on the assets transferred or sold. The transfer of the MANF rights by Neurotrophics to CNS may impose such obligations on CNS,
as a purchaser. Counsel further advised that upon payment in full of all of the Neurotrophics debts outstanding as of March 5,
2008, no action can be successfully maintained to void or set aside the transfer of the MANF rights to CNS, and thus to the Company.
To remedy this contingent liability, CNS
agreed to compensate Neurotrophics to repay its creditors on a future date mutually agreeable between the parties, and agreed
to assume debts owed to John Commissiong and Gerald Commissiong by Neurotrophics.
The Company has recorded a total of $0
and $0 as of December 31, 2013 and 2012, respectively in obligations reflecting this liability in its financial statements. The
Company recorded the assumption of the Neurotrophics debts as a distribution in 2008.
Royalty Agreement - Founders
In October 2010, the Company entered into
an agreement with the founders, Gerald Commissiong and John Commissiong, where they will receive a 2.5% (1.25% each for Gerald
Commissiong and John Commissiong) Royalty from the gross commercial revenue of patents derived from the Company’s
proprietary PhenoGuard platform technology, including patents associated with the MANF Protein and related Gene." To date
no payments have been made.
Former
Chairman
The Company obtained the services of its
former Chairman Martin D. Cleary through a consulting agreement. During the years ended December 31, 2013, 2012, and the
period from January 14, 2008 (date of inception) to December 31, 2013, consulting services of $0, $0, and $479,166, respectively
are included in the statement of operations. This agreement also includes a change of control clause whereby the Company shall
pay Mr. Cleary a bonus of 5% of the gross proceeds to the Company resulting from the change of control. Upon his election and
in his sole discretion, and in lieu of the change of control bonus, the Company shall issue to him shares of the Company’s
common stock equal to 2.5% of the Company’s fully diluted capitalization as of the date of termination of the agreement.
Mr. Cleary resigned from the Company in July, 2012.
Related Party Capital Transactions
In March 2012, a former and an existing
Board of Director member converted a Convertible Promissory Note in the amount of $21,000, each plus accrued interest. This resulted
in the issuance of 217,280 shares of Common Stock to each party. In addition, in March 2012 an existing Board of Director member
converted a Convertible Promissory Note in the amount of $30,000. This resulted in the issuance of 608,300 shares of Common Stock.
The same Board member also holds $60,172 of Convertible Promissory Note with the company as of December 31, 2013. $100,000 of this
Convertible Promissory Note was converted in January 2013, resulting in the issuance of 2,765,625 shares of Common Stock. The same
Board member also holds $5,556 8% Senior convertible debentures.
Related Party Debt transactions
In October 2013, the Company’s Chief Executive Officer,
Gerald Commissiong, its Chief Scientific Officer, John Commissiong and one of the Company’s Directors Robert Harris invested
$5,000 each or an aggregate of $15,000 in the Debenture and Warrant Transaction (see Note 9) and was each issued a Denture in
the principal aggregate amount of $5,556 and a warrant to purchase 138,889 shares. The shares underlying the Debentures and Warrants
purchased by Messrs. Gerald Commissiong, John Commissiong and Robert Harris were not included in the related registration statement.
The Company evaluated subsequent events
through the date that its financial statements were available for issuance on April 21, 2014.
Eltoprazine In-License Agreement
Effective January 14, 2014, the “Company
entered into a License Agreement (the “License Agreement”) with PGI Drug Discovery, LLC (“PGI”), pursuant
to which the Company was granted an exclusive license (with a right to sublicense) to utilize certain Licensed Compounds and Licensed
Products (as each is defined in the License Agreement) of PGI, which includes certain intellectual property covering the use of
Eltoprazine and certain of its related compounds in all therapeutic indications (“Eltoprazine”), as further described
in the License Agreement).
Pursuant to the terms of the License Agreement,
the Company has agreed to: (i) pay PGI $100,000 in cash for the License within 20 days of the execution of the License Agreement,
(ii) pay PGI up to an aggregate of $4 million in development milestones through NDA submission, (iii) pay a research support payment
to PGI as partial reimbursement for costs incurred for earlier research and management of CIAS, ADHD and levodopa induced dyskinesia
(LID) clinical trials totaling up to $650,000 to be paid in a mixture of cash and stock, and (iv) reimburse PGI for the Eltoprazine
clinical supply inventory up to $500,000 payable upon the earlier of the initiation of a Phase IIb clinical study or 6 months
after the date of the License Agreement. As further consideration for the License Agreement, the Company shall pay a single digit
royalty to PGI of the annual worldwide aggregate net sales by the Company.
Simultaneous with the execution of the
License Agreement, the Company and PGI entered into a Services Agreement pursuant to which PGI will provide certain services to
the Company related to PGI’s proprietary analytical systems as will be set forth in certain study plans. The Company agreed
to a payment commitment of $450,000 at a minimum annual rate of $150,000 for each of three years. The Services Agreement is for
a term of the later of 3 years or the completion of any study plan accepted by the parties under the Services Agreement.
As partial consideration of the research
support payment by the Company to PGI, the Company entered into a Securities Purchase Agreement with PGI, pursuant to which PGI
subscribed for 4,000,000 shares of the Company’s common stock. In connection with the 4,000,000 shares, the Company granted
PGI certain piggy-back registration rights.
MANF In-License Option Agreement
On February 28, 2014, the “Company
entered into an Option Agreement (the “Agreement”) with the University of Massachusetts (“UMass”) pursuant
to which the Company was granted an option to obtain an exclusive license (with the right to sublicense) in the patent applications
to be filed based upon UMA 14-006 titled “MANF as a Therapeutic Agent for the production of Mammalian Sensory Cells”.
The term of the option is 18 months, which may be extended by the Company for an additional six months upon demonstration to UMass
of continued progress evaluating the business opportunity with respect to the patent rights and payment of a fee to the University.
In consideration for the grant of the option, the Company paid an option fee of $1,000 and shall pay a retainer fee of $15,000
to cover initial patent expenses to be incurred in connection with obtaining the patent rights.
Common Stock Purchase Agreement
On March 7, 2014, the “Company signed a $20 million
purchase agreement with Lincoln Park Capital Fund, LLC (“LPC”), an Illinois limited liability company. Upon signing
the purchase agreement LPC agreed to purchase 4,000,000 shares of our common stock for $400,000 as an initial purchase under the
agreement. We also entered into a registration rights agreement with LPC whereby we agreed to file a registration statement related
to the transaction with the SEC covering the shares that may be issued to LPC under the purchase agreement within ten days after
the date the Company files with the SEC its annual report on Form 10-K for the fiscal year ended December 31, 2013. After the
SEC has declared effective the registration statement related to the transaction, we have the right, in our sole discretion, over
a 30-month period to sell up to an additional $19.6 million of our common stock to LPC in amounts up to $500,000 per sale, depending
on certain conditions as set forth in the purchase agreement. There are no upper limits to the price LPC may pay to purchase our
common stock and the purchase price of shares of Common Stock sold pursuant to the Purchase Agreement will be based on prevailing
market prices of our Common Stock at the time of sales without any fixed discount, and the Company will control the timing and
amount of any sales of Common Stock to LPC. In addition, the Company may direct LPC to purchase additional amounts as accelerated
purchases if on the date of a regular purchase the closing sale price of the Common Stock is not below the threshold price as
set forth in the Purchase Agreement. LPC shall not have the right or the obligation to purchase any shares of our common stock
on any business day that the price of our common stock is below the floor price as set forth in the Purchase Agreement.
The Purchase Agreement contains customary representations,
warranties, covenants, closing conditions and indemnification and termination provisions by, among and for the benefit of the
parties. LPC has covenanted not to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of
the Company’s shares of common stock. In consideration for entering into the $20 million agreement, we issued to LPC 6,000,000
shares of our common stock and may issue up to an additional 3,500,000 shares pro rata if and when we sell to LPC up to an additional
$19.6 million of our common stock. The agreement may be terminated by us at any time at our discretion without any monetary cost
to us. Actual sales of shares of Common Stock to LPC under the agreement will depend on a variety of factors to be determined
by the Company from time to time, including (among others) market conditions, the trading price of the Common Stock and determinations
by the Company as to available and appropriate sources of funding for the Company and its operations. The proceeds received by
the Company under the agreement are expected to be used for product development, commercialization, strategic acquisitions, and
general corporate purposes.
If the registration statement at any time ceases to be effective
or if the Investors are not permitted to utilize the prospectus related to the registration statement to resell securities intended
to be registered therein for more than 10 consecutive calendar days or for more than an aggregate of 15 calendar days during any
twelve month period, then the Company is obligated to pay the affected Investors an amount in cash, as partial liquidated damages,
equal to 2% multiplied by the aggregate subscription amount paid by the Investors each month until such condition is cured, plus
interest if any such liquidated damages are paid beyond a specified payment date as provided for in the agreement.
Demand Promissory Note Payable Term Extension
On March 12, 2014, the Company opted to extend the maturity
date of the $500,000 Demand Promissory Note issued to Dominion Capital LLC on February 14, 2014 to August 14, 2014.
Appointment of the Company’s New Chief Financial Officer
On April 1, 2014,
Amarantus Bioscience Holdings, Inc., a Nevada corporation (the “Company”) appointed Robert Farrell, J.D. to serve
as the Company’s Chief Financial Officer (the “CFO”). Mr. Marc Faerber will now serve as the Company’s
Corporate Controller and Vice President of Financial Operations.
Mr. Farrell served
as Chief Financial Officer of Titan Pharmaceuticals from 1996 to 2008, and as President and CEO from 2008 to 2010. During his
tenure at Titan Mr. Farrell was responsible for all SEC filings, fund raising, financial and tax planning strategies, mergers
& acquisitions, corporate partnerships, licensing transactions and financial operations. Mr. Farrell most recently served
as CFO at Sanovas, Inc. Mr. Farrell previously served as CFO, Corporate Group Vice President and General Counsel at Fresenius
USA and Fresenius Medical Care. Mr. Farrell also previously served as the CFO for the Institute for One World Health in San Francisco
and currently serves on the Board of Directors of Prime Genomics, Inc. Mr. Farrell holds a J.D. from the University of California's
Hastings School of Law.
Mr. Farrell will initially
be engaged as a contract consultant but is expected to be a full-time employee by the end of April 2014 upon execution of an employment
agreement.