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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended September 30, 2023

 

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

 

For the transition period from _______ to _______

 

Commission file number: 000-55413

 

Cell Source, Inc. 

 

(Exact name of registrant as specified in its charter)

 

Nevada   32-0379665

(State or other jurisdiction

of incorporation or organization)

  

(I.R.S. Employer

Identification No.)

 

57 West 57th Street, Suite 400

New York, NY 10019

(Address of principal executive offices)

 

(646) 416-7896

(Issuer’s telephone number)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading symbol(s)   Name of each exchange on which registered
None   N/A   N/A

 

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

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ☐ Accelerated filer ☐
   
Non-accelerated filer ☒ Smaller reporting company ☒
   
  Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any news or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

As of November 6, 2023, the registrant had 38,546,231 shares of $0.001 par value common stock outstanding.

 

 

 

   

 

 

CELL SOURCE, INC.

 

FORM 10-Q

 

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

 

TABLE OF CONTENTS

 

PART I - FINANCIAL INFORMATION
 
Item 1. Financial Statements. 3
   
Condensed Consolidated Balance Sheets as of September 30, 2023 (Unaudited) and December 31, 2022 3
   
Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and 2022 4
   
Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Deficiency for the Three and Nine Months Ended September 30, 2023 and 2022 5
   
Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022 6
   
Notes to Unaudited Condensed Consolidated Financial Statements 7
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 14
   
Item 3. Quantitative and Qualitative Disclosures About Market Risk. 18
   
Item 4. Controls and Procedures. 18
   
PART II - OTHER INFORMATION  
   
Item 1. Legal Proceedings. 19
   
Item 1A. Risk Factors. 19
   
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities. 19
   
Item 3. Defaults Upon Senior Securities. 19
   
Item 4. Mine Safety Disclosures. 19
   
Item 5. Other Information. 19
   
Item 6. Exhibits. 20
   
SIGNATURES 21

 

   

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

CELL SOURCE, INC.

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   September 30,   December 31, 
   2023   2022 
   (Unaudited)     
Assets        
Current Assets:          
Cash  $2,582   $222,665 
Prepaid expenses   242,375    164,175 
Other current assets   3,400    23,005 
Total Assets  $248,357   $409,845 
           
Liabilities and Stockholders’ Deficiency          
           
Current Liabilities:          
Accounts payable  $1,580,863   $680,325 
Accrued expenses   1,126,536    1,485,857 
Accrued expenses - related party   130,000    86,500 
Accrued interest   962,183    809,426 
Accrued interest - related parties   1,443,452    987,310 
Accrued compensation   885,665    849,898 
Notes payable, net of debt discount of $0 and $12,968 as of September 30, 2023 and December 31, 2022, respectively   681,093    768,126 
Notes payable - related parties   150,000    150,000 
Convertible notes payable, net of debt discount of $21,954 and $41,650 as of September 30, 2023 and December 31, 2022, respectively   1,328,006    908,311 
Convertible notes payable - related parties, net of debt discount of $0 and $147,230 as of September 30, 2023 and December 31, 2022, respectively   7,315,036    6,077,770 
Financing liability   130,040    - 
Advances payable   135,000    135,000 
Advances payable - related party   100,000    100,000 
Accrued dividend payable   310,630    5,217 
Total Liabilities   16,278,504    13,043,740 
           
Commitments and contingencies (Note 8)   -    - 
           
Stockholders’ Deficiency:          
Preferred stock, $0.001 par value, 10,000,000 shares authorized          
Series A Convertible Preferred Stock, 1,350,000 shares designated,
1,342,195 shares issued and outstanding as of September 30, 2023 and December 31, 2022; liquidation preference of $10,294,818 and $10,066,463 and as of September 30, 2023 and December 31, 2022, respectively		   1,342    1,342 
Series B Convertible Preferred Stock, 2,000,000 shares designated,
0 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively; liquidation preference of $0 as of September 30, 2023 and December 31, 2022		   -    - 
Series C Convertible Preferred Stock, 1,000,000 shares designated,
532,110 and 502,776 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively; liquidation preference of $4,073,102 and $3,776,039 as of September 30, 2023 and December 31, 2022, respectively		   532    503 
Common stock, $0.001 par value, 200,000,000 shares authorized;
38,495,617 and 36,081,758 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively		   38,495    36,082 
Additional paid-in capital   24,546,969    23,674,354 
Accumulated deficit   (40,617,485)   (36,346,176)
Total Stockholders’ Deficiency   (16,030,147)   (12,633,895)
Total Liabilities and Stockholders’ Deficiency  $248,357   $409,845 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

3

 

 

 

CELL SOURCE, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

(Unaudited)

 

    2023    2022    2023    2022 
   For the Three Months Ended
September 30,		   For the Nine Months Ended
September 30,		 
    2023    2022    2023    2022 
                     
Operating Expenses:                    
Research and development  $500,005   $468,005   $1,175,093   $1,487,520 
Research and development - related party   14,500    14,500    43,500    43,500 
General and administrative   480,875    533,538    2,097,801    1,571,572 
Total Operating Expenses   995,380    1,016,043    3,316,394    3,102,592 
Loss From Operations   (995,380)   (1,016,043)   (3,316,394)   (3,102,592)
                     
Other (Expense) Income:                    
Interest expense   (62,463)   (41,581)   (138,937)   (153,306)
Interest expense - related parties   (199,628)   (138,373)   (496,206)   (386,775)
Amortization of debt discount   (29,912)   (23,561)   (107,487)   (113,249)
Amortization of debt discount - related party   (50,755)   (32,748)   (254,205)   (74,553)
Gain on extinguishment of note payable   -    -    41,920    - 
Total Other Expense   (342,758)   (236,263)   (954,915)   (727,883)
Net Loss   (1,338,138)   (1,252,306)   (4,271,309)   (3,830,475)
Dividend attributable to Series A and Series C preferred stockholders   (309,150)   (299,827)   (907,516)   (869,715)
Net Loss Applicable to Common Stockholders  $(1,647,288)  $(1,552,133)  $(5,178,825)  $(4,700,190)
                     
Net Loss Per Common Share - Basic and Diluted  $(0.04)  $(0.04)  $(0.14)  $(0.14)
                     
Weighted Average Common Shares Outstanding -                    
Basic and Diluted   38,191,731    35,240,745    37,492,478    34,696,011 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

4

 

 

 

CELL SOURCE, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIENCY

 

(Unaudited)

 

   Shares   Amount   Shares   Amount   Shares   Amount   Paid-In Capital   Deficit  

Deficiency

 
   FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 
   Convertible Preferred   Convertible Preferred                   Total 
   Stock - Series A   Stock - Series C   Common Stock   Additional   Accumulated   Stockholders’ 
   Shares   Amount   Shares   Amount   Shares   Amount   Paid-In Capital   Deficit  

Deficiency

 
                                     
Balance, January 1, 2023    1,342,195   $1,342    502,776   $503    36,081,758   $36,082   $       23,674,354   $(36,346,176)  $(12,633,895)
                                              
Conversion of convertible notes payable and accrued interest into Series C Convertible Preferred Stock and common stock   -    -    6,667    7    2,747    3    52,050    -    52,060 
                                              
Series A and Series C Convertible Preferred Stock dividends:                                             
Accrual of earned dividends   -    -    -    -    -    -    (297,517)   -    (297,517)
                                              
Issuance of warrants in connection with issuance of convertible notes payable   -    -    -    -    -    -    21,202    -    21,202 
                                              
Conversion of Series C Convertible Preferred Stock into common stock   -    -    (10,000)   (10)   100,000    100    (90)   -    - 
                                              
Stock-based compensation:                                             
Common stock   -    -    -    -    1,000,000    1,000    329,000    -    330,000 
                                              
Net loss   -    -    -    -    -    -    -    (1,691,567)   (1,691,567)
                                              
Balance, March 31, 2023   1,342,195   $1,342    499,443   $500    37,184,505   $37,185   $23,778,999   $(38,037,743)  $(14,219,717)
                                              
Series A and Series C Convertible Preferred Stock dividends:                                             
Accrual of earned dividends   -    -    -    -    -    -    (300,849)   -    (300,849)
Payment of dividends in kind   -    -    -    -    802,880    802    601,300    -    602,102 
                                             
Issuance of common stock in connection with extinguishment of note payable   -    -    -    -    176,000    176    57,904    -    58,080 
                                              
Issuance of warrants in connection with:                                             
Satisfaction of accrued interest   -    -    -    -    -    -    40,167    -    40,167 
Issuance of convertible notes payable   -    -    -    -    -    -    75,462    -    75,462 
                                              
Stock-based compensation:                                             
Warrants   -    -    -    -    -    -    40,600    -    40,600 
                                              
Net loss   -    -    -    -    -    -    -    (1,241,604)   (1,241,604)
                                              
Balance, June 30, 2023   1,342,195   $1,342    499,443   $500    38,163,385   $38,163   $24,293,583   $(39,279,347)  $(14,945,759)
                                              
Conversion of convertible notes payable and accrued interest into Series C Convertible Preferred Stock and common stock   -    -    62,667    62    32,232    32    494,040    -    494,134 
                                              
Issuance of warrants in connection with issuance of convertible notes payable   -    -    -    -    -    -    45,008    -    45,008 
                                              
Conversion of Series C Convertible Preferred Stock into common stock   -    -    (30,000)   (30)   300,000    300    (270)   -    - 
                                              
Series A and Series C Convertible Preferred Stock dividends:                                             
Accrual of earned dividends   -    -    -    -    -    -    (309,150)   -    (309,150)
                                              
Stock-based compensation:                                             
Warrants   -    -    -    -    -    -    23,758    -    23,758 
                                              
Net loss   -    -    -    -    -    -    -    (1,338,138)   (1,338,138)
                                              
Balance, September 30, 2023   1,342,195   $1,342    532,110   $532    38,495,617   $38,495   $24,546,969   $(40,617,485)  $(16,030,147)

 

 

 

  FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 
   Convertible Preferred   Convertible Preferred                   Total 
   Stock - Series A   Stock - Series C   Common Stock   Additional   Accumulated   Stockholders’ 
   Shares   Amount   Shares   Amount   Shares   Amount   Paid-In Capital  

Deficit

  

Deficiency

 
                                     
Balance, January 1, 2022    1,342,195   $1,342    272,021   $272    34,360,546   $34,361   $       21,316,318   $(31,178,428)  $(9,826,135)
                                             
Conversion of convertible notes payable and accrued interest into Series C Convertible Preferred Stock and common stock   -    -    183,422    183    76,530    76    1,432,836    -    1,433,095 
                                              
Series A and C Convertible Preferred Stock dividends:                                             
Accrual of earned dividends   -    -    -    -    -    -    (324,917)   -    (324,917)
                                             
Issuance of warrants in connection with issuance of convertible notes payable   -    -    -    -    -    -    8,043    -    8,043 
                                              
Stock-based compensation:                                             
Warrants   -    -    -    -    -    -    5,372    -    5,372 
                                              
Net loss   -    -    -    -    -    -    -    (1,292,575)   (1,292,575)
                                              
Balance, March 31, 2022   1,342,195    1,342    455,443    455    34,437,076    34,437    22,437,652    (32,471,003)   (9,997,117)
                                              
Conversion of convertible notes payable and accrued interest into Series C Convertible Preferred Stock and common stock   -    -    14,666    15    5,964    6    114,452    -    114,473 
                                              
Series A and C Convertible Preferred Stock dividends:                                             
Accrual of earned dividends   -    -    -    -    -    -    (244,971)   -    (244,971)
Payment of dividends in kind   -    -    -    -    796,629    797    596,634    -    597,431 
                                              
Issuance of warrants in connection with issuance of convertible notes payable   -    -    -    -    -    -    49,219    -    49,219 
                                              
Net loss   -    -    -    -    -    -    -    (1,285,594)   (1,285,594)
                                              
Balance, June 30, 2022   1,342,195    1,342    470,109    470    35,239,669    35,240    22,952,986    (33,756,597)   (10,766,559)
                                              
Conversion of convertible notes payable and accrued interest into Series C Convertible Preferred Stock and common stock   -    -    12,667    13    5,181    5    98,868    -    98,886 
                                              
Series A and C Convertible Preferred Stock dividends:                                             
Accrual of earned dividends   -    -    -    -    -    -    (299,827)   -    (299,827)
                                              
Issuance of warrants in connection with issuance of convertible notes payable   -    -    -    -    -    -    76,509    -    76,509 
                                              
Warrants issued in satisfaction of accrued interest   -    -    -    -    -    -    114,727    -    114,727 
                                              
Stock-based compensation:                                             
Options   -    -    -    -    -    -    74,600    -    74,600 
                                              
Net loss   -    -    -    -    -    -    -    (1,252,306)   (1,252,306)
Balance, September 30, 2022   1,342,195   $1,342    482,776   $483    35,244,850   $35,245   $23,017,863   $(35,008,903)  $(11,953,970)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

5

 

 

 

CELL SOURCE, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(Unaudited)

 

   2023   2022 
   For Nine Months Ended 
   September 30, 
   2023   2022 
         
Cash Flows From Operating Activities:          
Net loss  $(4,271,309)  $(3,830,475)
Adjustments to reconcile net loss to net cash used in operating activities:          
Gain on extinguishment of note payable   (41,920)   - 
Amortization of debt discount   361,692    187,802 
Non-cash interest expense - warrants   28,695    96,896 
Stock-based compensation:          
Options   -    74,600 
Warrants   63,709    5,190 
Common stock   341,269    - 
Changes in operating assets and liabilities:          
Prepaid expenses   243,300    (70,568)
Other current assets   19,605    (3,431)
Accounts payable   900,538    451,179 
Accrued expenses   53,697    187,597 
Accrued expenses - related parties   43,500    - 
Accrued interest   165,030    75,892 
Accrued interest - related parties   441,446    346,061 
Accrued compensation   25,147    63,846 
Net Cash Used In Operating Activities   (1,625,601)   (2,415,411)
           
Cash Flows From Financing Activities:          
Proceeds from issuance of convertible notes payable   919,960    395,000 
Proceeds from issuance of convertible notes payable - related party   677,018    2,000,000 
Proceeds from issuance of notes payable   -    168,094 
Repayment of notes payable   -    (146,912)
Repayment of financing liability   (191,460)   (27,926)
Net Cash Provided By Financing Activities   1,405,518    2,388,256 
           
Net Decrease In Cash   (220,083)   (27,155)
Cash - Beginning of Period   222,665    93,095 
Cash - End of Period  $2,582   $65,940 
           
Supplemental Disclosures of Cash Flow Information:          
Cash paid for:          
Interest  $-   $- 
Income taxes  $949   $- 
           
Non-cash investing and financing activities:          
Accrual of earned preferred stock dividends  $(907,516)  $(869,715)
Common stock issued in connection with payment of Series A and C Convertible Preferred Stock dividends in-kind  $602,102   $597,431 
Financing of Directors and Officer’s insurance  $321,500   $- 
Conversion of Series C Convertible Preferred Stock into common stock  $400   $- 
Conversion of accrued expenses into note principal  $413,018   $- 
Accrual of warrant obligations in connection with issuance of notes payable  $40,167   $232,697 
Warrants issued in satisfaction of accrued warrant obligation  $(40,167)  $- 
Issuance of warrants in connection with the issuance of notes payable  $141,672   $133,771 
Issuance of warrants in satisfaction of accrued interest  $-   $114,727 
Conversion of convertible notes payable and accrued interest into Series C Preferred Stock and common stock  $546,194   $1,646,454 
Extinguishment of note payable into common stock  $58,080   $- 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

6

 

 

 

CELL SOURCE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 1 - Business Organization, Nature of Operations, Risks and Uncertainties and Basis of Presentation

 

Organization and Operations

 

Cell Source, Inc. (“Cell Source”, “CSI” or the “Company”) is a Nevada corporation formed on June 6, 2012 that is the parent company of Cell Source Limited (“CSL”), a wholly owned subsidiary which was founded in Israel in 2011 in order to commercialize a suite of inventions relating to certain cancer treatments. The Company is a biotechnology company focused on developing cell therapy treatments based on the management of immune tolerance. The Company’s lead prospective product is its patented Veto Cell immune system management technology, which is an immune tolerance biotechnology that enables the selective blocking of immune responses. CSL’s Veto Cell immune system management technology is based on technologies patented, owned, and licensed to CSL by Yeda Research and Development Company Limited, an Israeli corporation (“Yeda”) (see Note 8, Commitments and Contingencies). The Company’s target indications include: lymphoma, leukemia and multiple myeloma through the facilitation of safer and more accessible stem cell (e.g. bone marrow) transplantation acceptance, treatment of end stage kidney disease and other non-malignant organ diseases through improved organ transplantation (broadened donor pool, reduced dependence on post-transplant anti-rejection therapy), and ultimately treating a variety of cancers and non-malignant diseases.

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the condensed consolidated financial position of the Company as of September 30, 2023 and the condensed consolidated results of its operations and cash flows for the three and nine months ended September 30, 2023 and 2022. The results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the operating results for the full year ending December 31, 2023 or any other period. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related disclosures of the Company as of December 31, 2022 and for the year then ended which were included in the Company’s Annual Report on Form 10-K that was filed with the Securities and Exchange Commission (“SEC”) on August 8, 2023.

 

Risks and Uncertainties

 

On October 7, 2023, a conflict arose between Israel and Hamas militants on Israel’s southern border from the Gaza Strip. The intensity and duration of Israel’s current war against Hamas is difficult to predict, and as are such war’s economic implications on the Company’s business and operations. To the extent that any of these negative developments do occur, they may have an adverse effect on the Company’s business, results of operations and its ability to raise additional funds. As of September 30, 2023, the Company considered the impact of the war on its business and operational assumptions and estimates and determined there were no material adverse impacts on the Company’s condensed consolidated results of operations and financial position as of September 30, 2023.

 

Note 2 - Going Concern and Management Plans

 

During the nine months ended September 30, 2023, the Company had not generated any revenues, had a net loss of approximately $4,271,000 and had used cash in operations of approximately $1,626,000. As of September 30, 2023, the Company had a working capital deficiency of approximately $16,030,000 and an accumulated deficit of approximately $40,617,000. As of September 30, 2023 and through the date of this filing, notes payable with principal amounts totaling approximately $5,246,000 and $1,726,000, respectively, were past due and are classified as current liabilities on the condensed consolidated balance sheet as of September 30, 2023. The Company will continue to incur net operating losses to fund operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for at least one year from the date these financial statements are issued. Subsequent to September 30, 2023 and as more fully described in Note 9, Subsequent Events, the Company received aggregate proceeds of $450,000 from equity financings.

 

The Company is currently funding its operations on a month-to-month basis. While there can be no assurance that it will be successful, the Company is in active negotiations to raise additional capital. The Company’s primary sources of operating funds since inception have been equity and debt financings. Management’s plans include continued efforts to raise additional capital through debt and equity financings. There is no assurance that these funds will be sufficient to enable the Company to fully complete its development activities or attain profitable operations. If the Company is unable to obtain such additional financing on a timely basis or, notwithstanding any request the Company may make, if the Company’s debt holders do not agree to convert their notes into equity or extend the maturity dates of their notes, the Company may have to curtail its development, marketing and promotional activities, which would have a material adverse effect on the Company’s business, financial condition and results of operations, and ultimately the Company could be forced to discontinue its operations and liquidate.

 

The accompanying condensed consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values. The condensed consolidated financial statements do not include any adjustment that might result from the outcome of these uncertainties.

 

 

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CELL SOURCE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 3 - Summary of Significant Accounting Policies

 

Stock-Based Compensation

 

Because the Company’s common stock historically was not actively traded on a public market, the fair value of the Company’s restricted equity instruments is estimated by management based on observations of the sales prices of both restricted and freely tradable common stock, or instruments convertible into common stock. The Company obtained a third-party valuation of its common stock as of July 1, 2023 and December 31, 2022. The third-party valuation was performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. The estimates used by management are considered highly complex and subjective. The Company anticipates that once its shares become more actively traded, the use of such estimates will no longer be necessary to determine the fair value of its common stock.

 

The independent appraisal utilized the market approach, specifically the Backsolve method. The Backsolve method utilizes the economics from a direct transaction in the Company’s securities in determining fair value. The Backsolve method utilizes the Black-Scholes option pricing method (“OPM”) which allocated a probability-weighted present value to the Company’s convertible securities. The following steps were applied under the OPM:

 

  ●   Establishment of total enterprise or equity value;
  ●   Analysis of equity rights for each class of security;
  ●   Selection of appropriate model for valuation purposes;
  ●   Determination of key valuation inputs; and
  ●   Computation of the fair value of the subject security.

 

Under the OPM, it was determined the Company’s common stock had a fair value of $0.34 and $0.33 as of July 1, 2023 and December 31, 2022, respectively, which included a discount for lack of marketability of 25%. Furthermore, the independent appraisal determined the Company’s expected volatility was 80% as of July 1, 2023 and December 31, 2022 by evaluating historical and implied volatilities of guideline companies.

 

Loss Per Share

 

The Company computes basic net loss per share by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding for the period and excludes the effects of any potentially dilutive securities. Diluted earnings per share includes the dilution that would occur upon the exercise or conversion of all dilutive securities into common stock using the “treasury stock” and/or “if converted” methods, as applicable.

 

The common stock equivalents associated with the following securities are excluded from the calculation of weighted average dilutive common shares because their inclusion would have been anti-dilutive:

 

   September 30, 
   2023   2022 
         
Options   6,932,004    6,932,004 
Warrants   13,541,107    13,204,079 
Convertible notes [1] [2]   13,493,270    1,529,683 
Convertible preferred stock   18,743,053    18,249,713 
Total   52,709,434    39,915,479 

 

[1] Convertible notes are assumed to be converted at the rate of $0.75 per common share, which is the conversion price as of September 30, 2023 and 2022. However, such conversion rates are subject to adjustment under certain circumstances such as stock splits and stock dividends, which may result in the issuance of common shares greater than the amount indicated.

 

[2] As of September 30, 2022, excludes shares of common stock underlying convertible notes that are expected to become convertible into shares of Series B Convertible Preferred Stock since such stock had not been designated by the Company as of September 30, 2022.

 

 

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CELL SOURCE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 4 - Fair Value

 

The following table provides a summary of the changes in fair value, including net transfers in and/or out, of all Level 3 liabilities measured at fair value on a recurring basis using unobservable inputs during the three and nine months ended September 30, 2023 and 2022:

 

   Accrued   Accrued     
   Interest   Compensation   Total 
             
Balance - January 1, 2023  $504,700   $59,220   $563,920 
                
Accrual of warrant obligation   40,167    -    40,167 
Change in fair value   (46,131)   (1,095)   (47,226)
                
Balance - March 31, 2023   498,736    58,125    556,861 
Accrual of common stock obligation   -    9,438    9,438 
Satisfaction of warrant obligation   (40,167)   -    (40,167)
Change in fair value   27,272    73    27,345 
                
Balance - June 30, 2023   485,841    67,636    553,477 
Change in fair value   47,554    2,204    49,758 
Balance - September 30, 2023  $533,395   $69,840   $603,235 

 

    Accrued    Accrued      
    Interest    Compensation    Total 
                
Balance - January 1, 2022  $402,344   $61,306   $463,650 
                
Change in fair value   33,609    (412)   33,197 
Accrual of warrant obligation   114,727    -    114,727 
                
Balance - March 31, 2022   550,680    60,894    611,574 
                
Change in fair value   29,658    74    29,732 
                
Balance - June 30, 2022   580,338    60,968    641,306 
Change in fair value   33,630    156    33,786 
Accrual of warrant obligation   58,985    -    58,985 
Satisfaction of warrant obligation   (114,727)   -    (114,727)
Balance - September 30, 2022  $558,226   $61,124   $619,350 

 

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable. The Company’s Level 3 liabilities shown in the above table consist of accrued obligations to issue warrants and common stock to non-employees and is recorded at fair value at inception and subsequent changes in fair value are charged to the condensed consolidated statement of operations at each reporting period.

 

In applying the Black-Scholes option pricing model utilized in the valuation of Level 3 liabilities, the Company used the following approximate assumptions:

 

   For the Three Months Ended   For the Nine Months Ended 
   September 30,   September 30, 
   2023   2022   2023   2022 
                 
Risk-free interest rate   4.60% - 4.70%    4.06% - 4.15%    3.60% - 4.70%    2.42% - 4.15% 
Expected term (years)   4.00 - 5.00    4.00 - 5.00    4.00-5.00    4.00 - 5.00 
Expected volatility   80%    90%    80%    90% 
Expected dividends   0.00%    0.00%    0.00%    0.00% 

 

The expected term used is the contractual life of the instrument being valued. Since the Company’s stock does not have significant trading volume, the Company is utilizing an expected volatility based on a review of the historical volatilities, over a period of time, equivalent to the expected life of the instrument being valued, of similarly positioned public companies within its industry. The risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent with the expected term of the instrument being valued.

 

As of September 30, 2023 and December 31, 2022, the Company had an obligation to issue 183,095 and 154,495 shares of common stock to service providers that had a fair value of $62,252 and $50,983, respectively, which was a component of accrued compensation on the condensed consolidated balance sheets. The fair value of the common stock underlying this obligation has a per share value of $0.34 as of September 30, 2023 and $0.33 as of December 31, 2022.

 

See Note 6, Stockholders’ Deficiency – Common Stock and Stock Warrants for additional details associated with the issuance of common stock and warrants.

 

 

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CELL SOURCE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 5 – Notes Payable

 

As of September 30, 2023 and through the date of this filing, notes and convertible notes payable with principal amounts totaling $5,246,129 and $1,726,093, respectively, were past due and are classified as current liabilities on the condensed consolidated balance sheet as of September 30, 2023. Such notes continue to accrue interest and all relevant penalties have been accrued as of September 30, 2023. Of such past due notes payable, a holder of a note with principal amount of $250,000 issued a notice of default. See Note 8, Commitments and Contingencies – Litigation for additional details. The Company is in negotiations with certain holders of notes payable to extend the maturity dates of such notes or to convert the principal and accrued interest into equity. As of September 30, 2023, the Company had an accrued interest balance of $599,427 related to notes past due.

 

During the three months ended September 30, 2023 and 2022, the Company recorded interest expense of $262,091 and $179,954, respectively, and amortization of debt discount of $80,667 and $56,309, respectively. During the nine months ended September 30, 2023 and 2022, the Company recorded interest expense of $635,143 and $540,081, respectively, and amortization of debt discount of $361,692 and $187,802, respectively. As of September 30, 2023 and December 31, 2022, the Company had $2,405,635 and $1,796,736, respectively, of accrued interest (including interest in the form of warrants (see Note 4, Fair Value) and penalties related to notes payable, which is included with accrued interest and accrued interest – related parties on the condensed consolidated balance sheets.

 

Notes Payable

 

On June 12, 2023, the Company issued 176,000 shares of common stock to the holder of a promissory note issued by the Company in the principal amount of $100,000 that matured in May 2018 in exchange for the cancellation of the note. The exchange was accounted for as debt extinguishment and the Company recorded a gain on extinguishment of $41,920 which is included in other income on the condensed consolidated statements of operations. See Note 6, Stockholders’ Deficiency – Common Stock for additional details.

 

Convertible Notes Payable

 

During the nine months ended September 30, 2023, the Company issued convertible notes payable in the aggregate principal amount of $494,960 with maturity dates ranging from July 3, 2023 to February 17, 2024. The notes accrue interest at 8% per annum and are convertible at any time at the option of the holder into the Company’s Series C Convertible Preferred Stock at a conversion price of $7.50 per share. The notes automatically convert into Series C Convertible Preferred Stock on the maturity date. In connection with the issuances, the Company issued five-year immediately vested warrants to purchase 396,000 shares of common stock at an exercise price of $1.25 per share. The warrants had an issuance date relative fair value of $48,164 and was recorded as a discount to the face value of the notes, which will be amortized over the term of the notes.

 

During the nine months ended September 30, 2023, the Company issued convertible notes payable in the aggregate principal amount of $425,000 with maturity dates ranging from November 8, 2023 to July 28, 2024. The notes accrue 8% interest per annum and are convertible at any time at the option of the holder into the Company’s common stock at a conversion price of $0.75 per share. In connection with the issuances, the Company issued five-year immediately vested warrants to purchase an aggregate of 212,500 shares of common stock at an exercise price of $1.25 per share. The warrants had an issuance date relative fair value of $26,700 and was recorded as a discount to the face value of the notes, which will be amortized over the term of the notes. These notes are guaranteed by a director of the Company.

 

During the nine months ended September 30, 2023, $519,960 of principal outstanding under convertible notes automatically converted into 69,334 shares of Series C Convertible Preferred Stock and the Company elected to convert $26,234 of interest accrued under such notes into an aggregate of 34,979 shares of common stock. The note principal had a conversion price of $7.50 per share and the common stock was valued at $0.75 per share for purposes of the interest payment.

 

Convertible Notes Payable - Related Parties

 

The Company and George Verstraete, a director of the Company, entered into a promissory note agreement dated March 10, 2022 (the “Verstraete Note”), whereby Mr. Verstraete, at his discretion, can loan up to $6,000,000 to the Company. Mr. Verstraete has agreed to loan an aggregate of $2,500,000 to the Company under the note. The note bears interest at a rate of 10% per annum and, prior to its amendment in November 2023, provided that it would mature twelve months from the date of issuance. Mr. Verstraete has the right, at his option, to convert the note into shares of the Company’s Series B Convertible Preferred Stock at a conversion price of $7.50 per share at any time after the Company first issues any shares of the Series B Convertible Preferred Stock. Interest accruing under the note will be payable upon the maturity of the note and may be paid at the Company’s option in either cash or shares of the Company’s common stock (calculated based upon $0.75 per share for purposes of calculating the number of shares of common stock to be issued). For each $500,000 advanced under the Verstraete Note, Mr. Verstraete will be issued a warrant to purchase 400,000 shares of the Company’s common stock at an exercise price of $1.25 per share. Each warrant will have a five-year term.

 

In February 2023, $413,018 of payments made by Mr. Verstraete to third parties on behalf of the Company in June 2022 were characterized as convertible notes payable – related parties under the Verstraete Note. The Company received additional advances of $250,000, $100,000, $150,000, $72,018 and $105,000 in April 2023, May 2023, July 2023, August 2023 and September 2023, respectively, and, as a result, increased the outstanding principal balance of the Verstraete Note to $3,590,036 as of September 30, 2023. In connection with the advances, the Company issued five-year immediately vested warrants to purchase an aggregate of 872,029 shares of common stock at an exercise price of $1.25 per share. The warrants had an issuance date relative fair value of $106,973 which was recorded as a discount to the face value of the note and has been amortized over the term of the note.

 

Mr. Verstraete has assigned the Verstraete Note to a trust for which Darlene Soave, a director of the Company, serves as trustee. On March 10, 2023, the Company and the trust agreed to extend the maturity date of the Verstraete Note to September 10, 2023. See Note 9, Subsequent Events - Convertible Notes Payable - Related Parties for details of an additional extension of the maturity date of the Verstraete Note.

 

On April 28, 2023, the Company and Ms. Soave agreed to extend the maturity date of the convertible promissory note dated October 28, 2019 issued to Ms. Soave (“Soave Note”) from April 28, 2023 to October 28, 2023. Under the terms of the Soave Note, Ms. Soave, at her discretion, can loan up to $6,000,000 to the Company. As of September 30, 2023, $3,500,000 was outstanding under the Soave Note. See Note 9, Subsequent Events - Convertible Notes Payable - Related Parties for details of an additional extension of the maturity date of the Soave Note.

 

 

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CELL SOURCE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 6 – Stockholders’ Deficiency

 

Authorized Capital

 

Effective July 26, 2023, the Company amended the certificates of designation which established the Series A Convertible Preferred Stock and Series C Convertible Preferred Stock to increase the number of shares designated from 1,335,000 to 1,350,000 shares for the Series A Convertible Preferred Stock and from 500,000 to 1,000,000 shares for the Series C Convertible Preferred Stock.

 

As of September 30, 2023, the Company was authorized to issue 200,000,000 shares of common stock, par value of $0.001 per share, and 10,000,000 shares of preferred stock, par value of $0.001 per share. The holders of the Company’s common stock are entitled to one vote per share. The preferred stock was designated as follows: 1,350,000 shares of Series A Convertible Preferred Stock and 1,000,000 shares of Series C Convertible Preferred Stock.

 

Series B Convertible Preferred Stock

 

On September 21, 2023, the Company’s Board of Directors approved the designation of 2,000,000 shares of the 10,000,000 authorized shares of preferred stock as Series B Convertible Preferred Stock, par value $0.001 per share. See Note 9, Subsequent Events for details of the Company’s filing of the Certificate of Designation of its Series B Convertible Preferred Stock subsequent to September 30, 2023.

 

Preferred Stock Dividends

 

During the three months ended September 30, 2023 and 2022, the Company accrued additional preferred dividends of $309,150 and $299,827, respectively. During the nine months ended September 30, 2023 and 2022, the Company accrued additional preferred dividends of $907,516 and $869,715, respectively. As of September 30, 2023 and December 31, 2022, the Company accrued preferred stock dividends of $310,630 and $5,217, respectively.

 

During the nine months ended September 30, 2023, the Company issued 802,880 shares of common stock at the stated value of $0.75 per share for aggregate value of $602,102, pursuant to the terms of the Series A and C Convertible Preferred Stock Certificate of Designation, in connection with the partial payment of accrued dividends for Series A and Series C Convertible Preferred Stock.

 

Series C Convertible Preferred Stock

 

See Note 5, Notes Payable – Convertible Notes Payable for details associated with conversions of notes payable into 69,334 shares of Series C Convertible Preferred Stock.

 

Common Stock

 

See Note 5, Notes Payable – Convertible Notes Payable for details associated with conversions of accrued interest into 34,979 shares of common stock.

 

During the nine months ended September 30, 2023, certain investors converted an aggregate of 40,000 shares of Series C Convertible Preferred Stock into an aggregate of 400,000 shares of the Company’s common stock.

 

During the nine months ended September 30, 2023, the Company issued 1,000,000 immediately-vested shares of the Company’s common stock to a consultant with a grant date fair value of $330,000 which was immediately recognized in the condensed consolidated statement of operations.

 

See Note 5, Notes Payable for details associated with the issuance of 176,000 shares of common stock in connection with the extinguishment of a note payable.

 

Stock Warrants

 

On May 25, 2023, the Company issued immediately vested 3.75 year warrants to an investor to purchase an aggregate amount of 300,000 shares of the Company’s common stock at an exercise price of $0.75 per share. The warrants had an issuance date fair value of $40,600, which was recognized immediately.

 

On August 9, 2023, the Company issued immediately vested four-year warrants to a former director of the Company to purchase an aggregate amount of 160,000 shares of the Company’s common stock at an exercise price of $0.75 per share. The warrants had an issuance date fair value of $23,758, which was recognized immediately.

 

See Note 5, Notes Payable for additional details associated with the issuance of stock warrants.

 

 

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CELL SOURCE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Stock-Based Compensation

 

During the three months ended September 30, 2023, the Company recognized stock-based compensation expense of $25,962, consisting of $24,130 of expense related to warrants (of which, $23,758 was included within stockholder’s deficiency and $372 was included within accrued compensation), and $1,832 of expense related to common stock issued or to be issued for consulting services (which has been included within accrued compensation) which was included within general and administrative expenses. During the three months ended September 30, 2022, the Company recognized stock-based compensation expense of $74,756 (of which, $74,600 has been included within stockholders’ deficiency and $156 has been included within accrued compensation) which was included within general and administrative expenses.

 

During the nine months ended September 30, 2023, the Company recognized stock-based compensation expense of $404,978 (consisting of $63,709 of expense related to warrants (of which, $64,358 was included within stockholder’s deficiency and $(649) was included within accrued compensation and $341,269 of expense related to common stock issued or to be issued for consulting services described above (of which, $330,000 has been included within stockholder’s deficiency and $11,269 has been included within accrued compensation) which was included within general and administrative expenses. During the nine months ended September 30, 2022, the Company recognized stock-based compensation expense of $79,790 (of which, $79,972 has been included within stockholders’ deficiency and $(182) has been included within accrued compensation) which was included within general and administrative expenses.

 

There was no unrecognized stock-based compensation expense as of September 30, 2023.

 

Note 7 – Related Party Transactions

 

As of September 30, 2023 and December 31, 2022, the Company was required to issue warrants to purchase an aggregate of 1,881,500 and 1,656,500, respectively, shares of common stock at an exercise price of $0.75 per share to a director and former director of the Company in connection with loans made to the Company in the aggregate amount of $459,000 which required certain penalties in the form of warrants. As a result, the Company had accrued $322,813 and $308,117 associated with the fair value of the obligations as of September 30, 2023 and December 31, 2022, respectively, which amount is included in accrued interest – related parties on the condensed consolidated balance sheets. The obligations to issue warrants are subject to changes in fair value at each reporting period. See Note 4, Fair Value for additional details.

 

See Note 5, Notes Payable – Convertible Notes Payable – Related Parties for details of the issuance of a convertible note to a director of the Company.

 

See Note 5 – Stockholders’ Deficiency – Stock Warrants for additional details related to a grant to a former director of the Company.

 

Note 8 – Commitments and Contingencies

 

Yeda Research and License Agreement

 

During the three months ended September 30, 2023 and 2022, the Company recorded research and development expenses of $14,500, related to its Research and License Agreement with Yeda (the “Agreement”). During the nine months ended September 30, 2023 and 2022, the Company recorded research and development expenses of $43,500, related to the Agreement with Yeda. As of September 30, 2023 and December 31, 2022, the Company had $58,000 and $14,500, respectively, of accrued research and development expenses pursuant to the Agreement with Yeda.

 

MD Anderson Sponsored Research Agreements

 

The Company recognized $429,505 of research and development expenses during the three months ended September 30, 2023 and 2022, and $1,082,193 and $1,394,020 of research and development expenses during the nine months ended September 30, 2023 and 2022, respectively, associated with services provided by The University of Texas M.D. Anderson Cancer Center (“MD Anderson”) under the two agreements with MD Anderson dated November 2018 and February 2019, respectively. As of September 30, 2023 and December 31, 2022, the Company had no accrued research and development expenses pursuant to the agreements with MD Anderson.

 

Litigation

 

In January 2019, the holder of a promissory note in the principal amount of $250,000 due on March 16, 2016 instituted a collection action in the Supreme Court of the State of New York, County of New York. On June 12, 2019, the plaintiff served a motion for summary judgment through the Secretary of State which was heard on July 12, 2019 and granted. The Company contended that it was not given sufficient notice under the applicable statute and did not have an opportunity to oppose the motion. Judgment was entered in October 2019 in the amount of $267,680. The Company brought a motion to vacate based on the jurisdictional defect of the motion in not providing the required amount of time, but that motion was denied in February 2021 without properly addressing the jurisdictional issues raised by the Company. The Company appealed the denial and then filed a motion to Renew and Reargue the motion to vacate based on the Court’s failure to address critical issues. That motion was also denied on April 15, 2021 without addressing the Company’s arguments. The Company appealed the second denial as well and pursued both appeals in a consolidated manner so as to resolve all issues together. Each of the appeals was denied and there is no further opportunity to appeal. While the Company’s motions were pending, the plaintiff commenced steps to collect judgment. During the year ended December 31, 2021, $103,088 of a $250,000 deposit made with the court by a third party on behalf of the Company was released to an officer of the court and has been accounted for as partial note repayment, with an additional $146,912 due under the note repaid by a release of the remaining deposit to an officer of the court during the year ended December 31, 2022, which was also accounted for as a note repayment. In August 2023, a supplemental judgment of $38,838 was entered against the Company. Inasmuch, as there are no further opportunities to appeal, the Company is arranging to pay the remaining amount due, which, as of the date of this Report, is estimated to be approximately $106,000, which was recorded as a liability as of September 30, 2023.

 

 

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CELL SOURCE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

In August 2022, a holder of 360,000 shares of the Company’s common stock filed a complaint against the Company, its President and legal counsel in the United States District Court, Southern District of New York, claiming unspecified damages for an alleged wrongful refusal to authorize the Company’s transfer agent to remove restrictive legends from the shares held by the shareholder. The Company has filed a motion to dismiss the complaint which is pending. The complaints against the Company’s legal counsel and President were dismissed by the Court. In October 2023, the Company reached an agreement in principle with the plaintiff to settle the matter. The settlement is subject to the execution of a formal settlement agreement.

 

Loss contingencies considered remote are generally not disclosed, unless they involve guarantees, in which case the guarantees would be disclosed. There can be no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows. Aside from the matters discussed elsewhere in this note, there are no other known contingencies through the date of this filing.

 

Note 9 – Subsequent Events

 

The Company has evaluated events that have occurred after the balance sheet and through the date the financial statements were issued. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the financial statements, except as disclosed below.

 

Common Stock

 

Subsequent to September 30, 2023, a certain investor converted 4,000 shares of Series C Convertible Preferred Stock into 40,000 shares of the Company’s common stock.

 

Series B Convertible Preferred Stock

 

On October 30, 2023, the Company filed the Certificate of Designation with the Office of the Secretary of State for the State of Nevada, which established the Series B Convertible Preferred Stock. The Series B Convertible Preferred Stock has a stated value of $7.50 per share. The Series B Convertible Preferred Stock contains the following terms:

 

Conversion. Each share of Series B Convertible Preferred Stock is convertible into shares of common stock (subject to adjustment as provided in the related certificate of designation of preferences, rights and limitations) at the option of the holder at any time. The number of shares of common stock which are issuable upon conversion of the Series B Convertible Preferred Stock shall be equal to the number of shares of Series B Convertible Preferred Stock to be converted, multiplied by the stated value of $7.50 per share, divided by the conversion price in effect at the time of conversion, initially at $0.75 per share.

 

Mandatory Conversion. On the earlier of (i) October 30, 2027 or (ii) any of the Company’s treatment candidates receiving approval from the U.S. or European agencies, all of the outstanding shares of Series B Convertible Preferred Stock will automatically convert to common stock.

 

Liquidation Preference. In the event of the liquidation, dissolution or winding-up of the Company, the Series B Convertible Preferred Stock will rank senior to common stock and any other class of capital stock which does not expressly rank senior to or parri passu with the Series B Preferred Stock and will rank parri passu with the Series A and Series C Convertible Preferred Stock.

 

Voting Rights. The holders of Series B Convertible Preferred Stock have the right to vote on any matter submitted to a vote of holders of common stock, voting together with the common stock as one class, on an as-converted basis.

 

Dividends. Holders of shares of Series B Convertible Preferred Stock will be entitled to receive cumulative dividends at an annual rate of 10% of the stated value. Dividends are payable semi-annually on June 30 and December 31, commencing on December 31, 2023, either by (i) issuance of shares of common stock at the rate of $0.75 per share of common stock or (ii) in cash, at the Company’s option.

 

Beginning in October 2023, the Company entered into subscription agreements with certain accredited investors in a private placement offering. Each unit, which is sold at a price of $7.50 per unit, consists of one (1) share of Series B Convertible Preferred Stock and a five-year warrant to purchase a certain number of shares of common stock at an exercise price of $0.75 per share. For every $100,000 of units acquired, the investor will receive warrants to purchase an aggregate of 150,000 shares of common stock.

 

From October 2023 through the date of filing, the Company sold 60,000 units for gross proceeds of $450,000 and issued warrants to purchase 675,000 shares of the Company’s common stock.

 

Convertible Notes Payable - Related Parties

 

On November 8, 2023, the Company and the trust which holds the Soave Note entered into an amendment to the Soave Note whereby the parties agreed to extend the maturity date from October 28, 2023 to April 28, 2024.

 

On November 8, 2023, the Company and the trust which holds the Verstraete Note entered into an agreement to the Verstraete Note whereby the parties agreed to extend the maturity date from September 10, 2023 to March 10, 2024.

 

Conversion of Convertible Notes Payable

 

Subsequent to September 30, 2023, certain investors converted convertible notes payable with aggregate principal amount of $180,000 and aggregate accrued interest of $7,961 into an aggregate of 24,000 shares of Series C Convertible Preferred Stock and 10,614 shares of common stock.

 

MD Anderson Sponsored Research Agreements

 

On November 6, 2023, the Company and MD Anderson agreed to extend the Sponsored Research Agreement by one year to November 27, 2024. Under the amendment, the research budget for the additional year is approximately $1,296,000.

 

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

The following discussion and analysis of the condensed consolidated results of operations and financial condition of Cell Source, Inc. (“CSI”, “Cell Source”, the “Company”, “us,” “we,” “our,”) as of September 30, 2023 and for the three and nine months ended September 30, 2023 and 2022 should be read in conjunction with our unaudited financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022 as filed with the Securities and Exchange Commission (“SEC”) on August 8, 2023.

 

This Quarterly Report contains forward-looking statements as that term is defined in the federal securities laws. The events described in forward-looking statements contained in this Quarterly Report may not occur. Generally, these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of our plans or strategies, projected or anticipated benefits from acquisitions to be made by us, or projections involving anticipated revenues, earnings or other aspects of our operating results. The words “may,” “will,” “expect,” “believe,” “anticipate,” “project,” “plan,” “intend,” “estimate,” and “continue,” and their opposites and similar expressions, are intended to identify forward-looking statements. We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based. Factors that may affect our results include, but are not limited to, the risks and uncertainties discussed in Item 1A (“Risk Factors”) of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on August 8, 2023.

 

Overview

 

We are a cell therapy company focused on immunotherapy. Since our inception, we have been involved with the development of proprietary immune system management technology licensed from Yeda Research & Development Company Limited (“Yeda”), the commercial arm of the Weizmann Institute. We have since shifted the focus of our research and development efforts to MD Anderson.

 

This technology addresses one of the most fundamental challenges within human immunology: how to tune the immune response such that it tolerates selected desirable foreign cells, but continues to attack all other (undesirable) targets. In simpler terms, a number of potentially life-saving treatments have limited effectiveness today because the patient’s immune system rejects them. For example, while HSCT – hematopoietic stem cell transplantation (e.g. bone marrow transplantation) has become a preferred therapeutic approach for treating blood cell cancer, most patients do not have a matched family donor. Although matched unrelated donors and cord blood can each provide an option for such patients, haploidentical stem cell transplants (sourced from partially mismatched family members) are rapidly gaining favor as a treatment of choice. This is still a risky and difficult procedure primarily because of potential conflicts between host (recipient) and donor immune systems and also due to viral infections that often follow even successful HSCT while the compromised new immune system works to reconstitute itself by using the transplanted stem cells. Today, rejection is partially overcome using aggressive immune suppression treatments that leave the patient exposed to many dangers by compromising their immune system.

 

The unique advantage of Cell Source technology lies in the ability to induce sustained tolerance of transplanted cells (or organs) by the recipient’s immune system in a setting that requires only mild immune suppression, while avoiding the most common post-transplant complications. The scientific term for the result of successfully inducing such tolerance in a transplantation setting is chimerism, where the recipient’s immune system tolerates the co-existence of the (genetically different) donor type and host type cells. Attaining sustained chimerism is an important prerequisite to achieving the intrinsic GvL (graft versus leukemia) effect of HSCT and supporting the reconstitution of normal hematopoiesis (generation of blood cells, including those that protect healthy patients from cancer) in blood cancer patients. Preclinical data and initial clinical data show that Cell Source’s Veto Cell technology can provide superior results in allogeneic (donor-derived) HSCT by allowing for haploidentical stem cell transplants under a mild conditioning regimen, while avoiding the most common post-transplant complications. Combining this with CAR (Chimeric Antigen Receptor) T cell therapy as a unified VETO CAR-T treatment, we will be able to treat patients in relapse as well as those in remission and use the cancer killing power of CAR-T to protect the patient while their immune system fully reconstitutes, thus providing an end-to-end solution for blood cancer treatment by potentially delivering a fundamentally safer and more effective allogeneic HSCT: prevention of relapse; avoidance GvHD; prevention of viral infections; and enhanced persistence of GvL effect. This means that the majority of patients will be able to find a donor, and will have access to a potentially safer procedure with higher long term survival rates than what either donor-derived HSCT or autologous CAR-T each on their own currently provide.

 

The ability to induce permanent chimerism (and thus sustained tolerance) in patients – which allows the transplantation to overcome rejection without having to compromise the rest of the immune system – may open the door to effective treatment of a number of severe medical conditions, in addition to blood cancers, which are characterized by this need. These include:

 

  ● The broader set of cancers, including solid tumors, that can potentially be treated effectively using genetically modified cells such as CAR-T cell therapy, but also face efficacy and economic constraints due to limited persistence based on immune system issues (i.e., the need to be able to safely and efficiently deliver allogeneic CAR-T therapy). Inducing sustained tolerance to CAR-T cells may bring reduced cost and increased efficacy by allowing for off-the-shelf (vs. patient-derived) treatments with more persistent cancer killing capability.
     
  ● Organ failure and transplantation. A variety of conditions can be treated by the transplantation of vital organs. However, transplantation is limited both by the insufficient supply of available donor organs and the need for lifelong, daily anti-rejection treatments post-transplant. Haploidentical organ transplants, with sustained chimerism, have the potential to make life saving transplants accessible to the majority of patients, with the prospect of improved life quality and expectancy.
     
  ● Non-malignant hematological conditions (such as type one diabetes and sickle cell anemia) which could, in many cases, also be more effectively treated by stem cell transplantation if the procedure could be made safer and more accessible by inducing sustained tolerance in the stem cell transplant recipient.

 

Human Capital Resources

 

Other than our Chief Executive Officer, we currently do not have any full-time employees, but retain the services of independent contractors/consultants on a contract-employment basis.

 

 

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Recent Developments

 

Preclinical Results and Clinical Results

 

Following on a successful, intensive collaboration with Professor Zelig Eshhar, the inventor of CAR-T cell therapy, data confirmed that Veto Cells can markedly extend persistence of genetically modified T cells from the same donor and that genetically modified Veto Cells can effectively inhibit tumors expressing an antigen recognized by the transgenic T cell receptor. Furthermore, human Veto Cells transfected with CAR exhibit anti-tumor activity in-vitro without losing their veto activity. These preclinical results form the basis of our current development of a clinical protocol for allogeneic VETO CAR-T HSCT combined therapy for blood cancer treatment. Cell Source plans to submit this protocol for approval in 2023. The Phase 1/2 clinical trial at the University of Texas MD Anderson Cancer Center, using Cell Source’s Anti-viral Veto Cells, has successfully treated 12 patients each receiving a haploidentical HSCT under reduced intensity conditioning with Veto Cells. The primary endpoints of the trial are to achieve engraftment of the T-cell depleted transplant, under a mild immune suppression regimen, without the incidence of severe GvHD by using Veto cells. Having attained these endpoints thus far, we have structured the balance of the trial to both determine maximum Veto cell dose tolerance and also to ensure that we can avoid certain antibody-related issues that appeared with some of the initial patients treated. If it continues to succeed in human clinical trials, we believe that this novel treatment may have a meaningful and potentially broad impact on the field of stem cell transplantation:

 

  1) Significantly improve outcomes of transplantations by reducing the host (transplant recipient) rejection rate of T-cell depleted stem cells (e.g. from bone marrow) – thus supporting successful engraftment of the transplanted cells, which is the treatment for the blood cancer itself. In order to improve the safety of this cancer treatment, Veto Cell technology has shown in both preclinical studies and initial clinical data that it can markedly reduce both the risk of GvHD and the need for using aggressive amounts of immunosuppression treatments. We have shown in preclinical studies, and are seeing in the clinic, the reduction of viral infections that typically threaten patients post transplantation. This safer means of delivering stem cell transplants would significantly reduce the HSCT mortality rate and therefore lead to broader use of this treatment. Furthermore, by adding CAR-T to the HSCT protocol, which we have already done successfully in preclinical studies, we can bridge between the initial transplantation and the conclusion of immune reconstitution, thus providing both short-term and ongoing protection against remission. This has the potential to significantly improve efficacy beyond that of the current outcomes of either CAR-T or HSCT on their own.
     
  2) Substantively increase the number of transplantations by enabling successful engraftment under lower levels of immune suppression and therefore making the therapy accessible to older and sicker patients (who today may not survive ablation).
     
  3) Further increase the number of transplantations by making transplantation appropriate for other indications (for which today transplantation would be considered an inappropriately risky treatment). See, e.g. BMT 2021 Correction of Sickle Cell Disease by Allogeneic Hematopoietic Cell Transplantations with Anti-3rd Party Veto Cells, Bone Marrow Transplantation, March 3, 2021.

 

In addition, our Veto Cell technology may possibly play a role in the treatment of a number of additional serious and currently poorly treated non-malignant diseases. Finally, based on preclinical studies using genetically modified cells, we believe that Veto Cells will be able to act as critical enabler for other cell therapies, most notably CAR-T cell therapy, which has recently shown strong initial indications of being effective in the near term in treating blood cancer.

 

Private Placement of Series B Convertible Preferred Stock

 

Beginning in October 2023, the Company entered into subscription agreements with certain accredited investors in a private placement offering. Each unit, which is sold at a price of $7.50 per unit, consists of one (1) share of Series B Convertible Preferred Stock and a five-year warrant to purchase a certain number of shares of common stock at an exercise price of $0.75 per share. For every $100,000 of units acquired, the investor will receive warrants to purchase an aggregate of 150,000 shares of common stock.

 

From October 2023 through the date of filing, the Company sold 60,000 units for gross proceeds of $450,000 and issued warrants to purchase 675,000 shares of the Company’s common stock.

 

Condensed Consolidated Results of Operations

 

Three Months Ended September 30, 2023 Compared with the Three Months Ended September 30, 2022

 

Research and Development

 

Research and development expense was $514,505 and $482,505 for the three months ended September 30, 2023 and 2022, respectively, an increase of $32,000, or 7%. This increase is primarily attributable to increased research and development activities performed by consultants during the 2023 period.

 

General and Administrative

 

General and administrative expense, which is associated with external consulting and professional fees, payroll and stock-based compensation expenses, was $480,875 and $533,538 for the three months ended September 30, 2023 and 2022, respectively, a decrease of $52,663, or 10%. The decrease was primarily attributable to a decrease in stock-based compensation of $49,000, a decrease in legal expenses of $25,000, partially offset by an increase in accounting and audit expenses of $67,000 and an increase in consulting expenses of $50,000.

 

Interest Expense

 

Interest expense for the three months ended September 30, 2023 and 2022 was $262,091 and $179,954, respectively, an increase of $82,137, or 46%. This increase is primarily associated with increased convertible notes and the fair value of warrants issued in connection with convertible notes payable during the 2023 period.

 

 

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Amortization of Debt Discount

 

Amortization of debt discount was $80,667 and $56,309 for the three months ended September 30, 2023 and 2022, respectively, an increase of $24,358, or 43%. This increase is primarily associated with an increased convertible notes and the fair value of warrants issued in connection with convertible notes payable during the 2023 period.

 

Nine Months Ended September 30, 2023 Compared with the Nine Months Ended September 30, 2022

 

Research and Development

 

Research and development expense was $1,218,593 and $1,531,020 for the nine months ended September 30, 2023 and 2022, respectively, a decrease of $312,427, or 20%. This decrease is mainly attributable to the achievement of $317,000 of patient enrollment milestones achieved in 2022 under the sponsored research agreement with MD Andersen whereas one $106,000 milestone was achieved in the 2023 period, furthermore there were additional research and development activities performed during the 2022 period.

 

General and Administrative

 

General and administrative expense, which is associated with external consulting and professional fees, payroll and stock-based compensation expenses, was $2,097,801 and $1,571,572 for the nine months ended September 30, 2023 and 2022, respectively, an increase of $526,229, or 33%. The increase was primarily attributable to an increase in stock-based compensation of $325,000 during the 2023 period, an increase in consulting expenses of $219,000, and an increase of $13,000 in legal expenses, and a $43,000 reduction in other miscellaneous expenses.

 

Interest Expense

 

Interest expense for the nine months ended September 30, 2023 and 2022 was $635,143 and $540,081, respectively, an increase of $95,062, or 18%. This increase is primarily associated with increased convertible notes and the fair value of warrants issued in connection with convertible notes payable during the 2023 period.

 

Amortization of Debt Discount

 

Amortization of debt discount was $361,692 and $187,802 for the nine months ended September 30, 2023 and 2022, respectively, an increase of $173,890, or 93%. The increase is primarily associated with the increased levels of warrants issued as debt discounts in connection with convertible notes payable in the 2023 period.

 

Gain on Extinguishment of Note Payable

 

Gain on extinguishment of note payable was $41,920 and $0 for the nine months ended September 30, 2023 and 2022, respectively. The gain on extinguishment of note payable is attributable to the exchange of a promissory note in the principal amount of $100,000 for 176,000 shares of common stock.

 

Liquidity and Going Concern

 

We measure our liquidity in a number of ways, including the following:

 

   September 30, 2023   December 31, 2022 
         
Cash  $2,582   $222,665 
Working capital deficiency  $(16,030,147)  $(12,633,895)

 

During the nine months ended September 30, 2023, we had not generated any revenues, had a net loss of approximately $4,271,000 and had used cash in operations of approximately $1,626,000. As of September 30, 2023, we had a working capital deficiency of $16,030,000 and an accumulated deficit of approximately $40,617,000. As of September 30, 2023 and through the date of this filing, notes payable with principal amounts totaling $5,246,129 and $1,726,093, respectively, were past due and are classified as current liabilities on the condensed consolidated balance sheet as of September 30, 2023. We will continue to incur net operating losses to fund operations. These conditions raise substantial doubt about our ability to continue as a going concern for at least one year from the date these financial statements are issued. Subsequent to September 30, 2023 and as more fully described in Note 9, Subsequent Events, the Company received aggregate proceeds of $450,000 from equity financings.

 

We are currently funding our operations on a month-to-month basis. Our ability to continue our operations is dependent on the execution of management’s plans, which include the raising of capital through the debt and/or equity markets, until such time that funds provided by operations are sufficient to fund working capital requirements. We may need to incur additional liabilities with certain related parties to sustain our existence. If we were not to continue as a going concern, we would likely not be able to realize our assets at values comparable to the carrying value or the fair value estimates reflected in the balances set out in the preparation of our financial statements.

 

There can be no assurances that we will be successful in generating additional cash from equity or debt financings or other sources to be used for operations. Should we not be successful in obtaining the necessary financing to fund our operations, we would need to curtail certain or all operational activities and/or contemplate the sale of our assets, if necessary.

 

 

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During the nine months ended September 30, 2023 and 2022, our sources and uses of cash were as follows:

 

Net Cash Used in Operating Activities

 

We experienced negative cash flows from operating activities for the nine months ended September 30, 2023 and 2022 in the amounts of approximately $1,626,000 and $2,415,000, respectively. The net cash used in operating activities for the nine months ended September 30, 2023 was primarily due to cash used to fund a net loss of approximately $4,271,000, adjusted for non-cash expenses in the aggregate amount of approximately $753,000, partially offset by $1,892,000 of net cash provided by changes in the levels of operating assets and liabilities. The net cash used in operating activities for the nine months ended September 30, 2022, was primarily due to cash used to fund a net loss of approximately $3,830,000 adjusted for non-cash expenses in the aggregate amount of approximately $364,000, partially offset by $1,051,000 of net cash provided by changes in the levels of operating assets and liabilities.

 

Net Cash Provided by Financing Activities

 

Net cash provided by financing activities for the nine months ended September 30, 2023 and 2022 was approximately $1,406,000 and $2,388,000, respectively. The net cash provided by financing activities during the nine months ended September 30, 2023 was attributable to $677,000 of proceeds from the issuance of convertible notes to a related party director and $920,000 of proceeds from the issuance of convertible notes payable, partially offset by $191,000 of repayments towards the financing of the Company’s Director’s and Officer’s Insurance. The net cash provided by financing activities during the nine months ended September 30, 2022, was attributable to $2,000,000 of proceeds from the issuance of convertible notes to a related party director and $395,000 of proceeds from the issuance of convertible notes payable, proceeds from the issuance of notes payable of $168,000 partially offset by the repayments of the insurance financing liability in the amount of $28,000 and the repayment of notes payable of $147,000.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements.

 

Critical Accounting Policies and Estimates

 

The preparation of financial statements and related disclosures are in conformity with U.S. GAAP. These accounting principles require us to make estimates and judgments that can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenue and expense during the periods presented. We believe that the estimates and judgments upon which it relies are reasonably based upon information available to us at the time that it makes these estimates and judgments. To the extent that there are material differences between these estimates and actual results, our financial results will be affected. The accounting policies that reflect our more significant estimates and judgments and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results are described below.

 

The following critical accounting policies and estimates are not intended to be a comprehensive list of all of our accounting policies or estimates. Our accounting policies are more fully described in Note 3 – Summary of Significant Accounting Policies, in our financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on August 8, 2023, as well as in our financial statements included elsewhere in this quarterly report.

 

Convertible Instruments


The Company evaluates its convertible instruments to determine if those contracts or embedded components of those contracts qualify as derivative financial instruments to be separately accounted for in accordance with Topic 815 of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). The accounting treatment of derivative financial instruments requires that the Company record embedded conversion options and any related freestanding instruments at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. The Company reassesses the classification of its derivative instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. Embedded conversion options and any related freestanding instruments are recorded as a discount to the host instrument and are amortized as interest expense over the term of the related debt instrument.

 

The Black-Scholes option pricing model was used to estimate the fair value of the Company’s warrants. The Black-Scholes option pricing model includes subjective input assumptions that can materially affect the fair value estimates.

 

Fair Value of Financial Instruments

 

The Company measures the fair value of financial assets and liabilities based on ASC 820 “Fair Value Measurements and Disclosures” (“ASC 820”), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

 

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

 

Level 1 — quoted prices in active markets for identical assets or liabilities;

 

Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable; and

 

Level 3 — inputs that are unobservable (for example, cash flow modeling inputs based on assumptions).

 

 

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The carrying amounts of the Company’s financial instruments, such as cash, other current assets, accounts payable, accrued expenses and other current liabilities approximate fair values due to the short-term nature of these instruments. The carrying amounts of Company’s credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates, are comparable to rates of returns for instruments of similar credit risk.

 

Stock-Based Compensation

 

The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. The fair value of the award is measured on the grant date and is then recognized over the period the services are required to be provided in exchange for the award, usually the vesting period. Upon the exercise of an option or warrant, the Company issues new shares of common stock out of its authorized shares.

 

Because the Company’s common stock historically was not actively traded on a public market, the fair value of the Company’s restricted equity instruments is estimated by management based on observations of the sales prices of both restricted and freely tradable common stock, or instruments convertible into common stock. The Company obtained a third-party valuation of its common stock as of July 1, 2023 and December 31, 2022, which was considered in management’s estimation of fair value during the three and nine months ended September 30, 2023 and year ended December 31, 2022. The third-party valuation was performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. The estimates used by management are considered highly complex and subjective. The Company anticipates that once its shares become more actively traded, the use of such estimates will no longer be necessary to determine the fair value of its common stock.

 

The independent appraisal utilized the market approach, specifically the Backsolve method. The Backsolve method utilizes the economics from a direct transaction in the Company’s securities in determining fair value. The Backsolve method utilizes the Black-Scholes option pricing method (“OPM”) which allocated a probability-weighted present value to the Company’s convertible securities. The following steps were applied under the OPM:

 

  ● Establishment of total enterprise or equity value;
  ● Analysis of equity rights for each class of security;
  ● Selection of appropriate model for valuation purposes;
  ● Determination of key valuation inputs; and
  ● Computation of the fair value of the subject security.

 

Under the OPM, it was determined the Company’s common stock had a fair value of $0.34 and $0.33 per share as of July 1, 2023 and December 31, 2022, respectively, which included a discount for lack of marketability of 25%. Furthermore, the independent appraisal determined the Company’s expected volatility was 80% as of July 1, 2023 and December 31, 2022 by evaluating historical and implied volatilities of guideline companies.

 

Item 3. Quantitative And Qualitative Disclosures About Market Risk.

 

Not applicable.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Annual Report, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the Principal Executive and Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Internal controls are procedures which are designed with the objective of providing reasonable assurance that (1) our transactions are properly authorized, recorded and reported; and (2) our assets are safeguarded against unauthorized or improper use, to permit the preparation of our condensed consolidated financial statements in conformity with United States generally accepted accounting principles.

 

In connection with the preparation of this Quarterly Report, management, with the participation of our Principal Executive and Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)). Based upon that evaluation, our Principal Executive and Financial Officer concluded that, as of September 30, 2023, our disclosure controls and procedures were effective.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

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PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

In January 2019, the holder of a promissory note in the principal amount of $250,000 due on March 16, 2016 instituted a collection action in the Supreme Court of the State of New York, County of New York. On June 12, 2019, the plaintiff served a motion for summary judgment through the Secretary of State which was heard on July 12, 2019 and granted. The Company contended that it was not given sufficient notice under the applicable statute and did not have an opportunity to oppose the motion. Judgment was entered in October 2019 in the amount of $267,680. The Company brought a motion to vacate based on the jurisdictional defect of the motion in not providing the required amount of time, but that motion was denied in February 2021 without properly addressing the jurisdictional issues raised by the Company. The Company appealed the denial and then filed a motion to Renew and Reargue the motion to vacate based on the Court’s failure to address critical issues. That motion was also denied on April 15, 2021 without addressing the Company’s arguments. The Company appealed the second denial as well and pursued both appeals in a consolidated manner so as to resolve all issues together. Each of the appeals was denied and there is no further opportunity to appeal. While the Company’s motions were pending, the plaintiff commenced steps to collect judgment. During the year ended December 31, 2021, $103,088 of a $250,000 deposit made with the court by a third party on behalf of the Company was released to an officer of the court and has been accounted for as partial note repayment, with an additional $146,912 due under the note repaid by a release of the remaining deposit to an officer of the court during the year ended December 31, 2022, which was also accounted for as a note repayment. In August 2023, a supplemental judgment of $38,838 was entered against the Company. Inasmuch, as there are no further opportunities to appeal, the Company is arranging to pay the remaining amount due, which, as of the date of this Report, is estimated to be approximately $106,000, which was recorded as a liability as of September 30, 2023.

 

In August 2022, a holder of 360,000 shares of the Company’s common stock filed a complaint against the Company, its President and legal counsel in the United States District Court, Southern District of New York, claiming unspecified damages for an alleged wrongful refusal to authorize the Company’s transfer agent to remove restrictive legends from the shares held by the shareholder. The Company has filed a motion to dismiss the complaint which is pending. The complaints against the Company’s legal counsel and President were dismissed by the Court. In October 2023, the Company reached an agreement in principle with the plaintiff to settle this matter. The settlement is subject to the execution of a formal settlement agreement.

 

Item 1A. Risk Factors.

 

There have been no material changes to the risk factors discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on August 8, 2023 except as described below.

 

On October 7, 2023, a conflict arose between Israel and Hamas militants on Israel’s southern border from the Gaza Strip. The intensity and duration of Israel’s current war against Hamas is difficult to predict, and as are such war’s economic implications on the Company’s business and operations. To the extent that any of these negative developments do occur, they may have an adverse effect on the Company’s business, results of operations and its ability to raise additional funds. As of September 30, 2023, the Company considered the impact of the war on its business and operational assumptions and estimates and determined there were no material adverse impacts on the Company’s condensed consolidated results of operations and financial position as of September 30, 2023.

 

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities.

 

During the three months ended September 30, 2023, we issued a convertible note in the principal amount of $100,000 to an accredited investor. The note matures six months from the date of issuance, accrues interest at a rate of 8% per annum and is convertible at any time at the option of the holder into the Company’s Series C Preferred Stock at a conversion price of $7.50 per share. The note automatically converts into Series C Preferred Stock on the maturity date. In connection with the issuance, we issued a five-year warrant to purchase an aggregate of 80,000 shares of common stock at an exercise price of $1.25 per share. We relied upon the exemption provided by Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), in connection with this transactions.

 

During the three months ended September 30, 2023, we issued a convertible note in the principal amount of $25,000 to an accredited investor. The note matures six months from the date of issuance, accrues interest at a rate of 8% per annum and is convertible at any time at the option of the holder into the Company’s common stock at a conversion price of $0.75 per share. In connection with the issuance, we issued a five-year warrant to purchase 12,500 shares of common stock at an exercise price of $1.25 per share. We relied upon the exemption provided by Section 4(2) of the Securities Act in connection with this transaction.

 

In August 2023, we issued a four-year warrant to a former director of the Company to purchase 160,000 shares of the Company’s common stock at an exercise price of $0.75 per share. We relied upon the exemption provided by Section 4(2) of the Securities Act in connection with this transaction.

 

In September 2023, we issued 300,000 shares of common stock to an accredited investor upon the conversion of 30,000 shares of the Company’s Series C Convertible Preferred Stock. We relied upon the exemption provided by Section 3(a)(9) of the Securities Act in connection with this transaction.

 

During the three months ended September 30, 2023, $469,960 of principal outstanding under convertible notes automatically converted into 62,667 shares of our Series C Convertible Preferred Stock and we elected to issue 32,232 shares of common stock in lieu of the payment of $24,000 of cash interest due under such notes. We relied upon the exemption provided by Section 4(2) of the Securities Act in connection with these transactions.

 

Item 3. Defaults Upon Senior Securities.

 

As of September 30, 2023 and through the date of this filing, notes payable and convertible notes payable with face values totaling $5,246,129 and $1,726,093, respectively, were past due and are classified as current liabilities on the condensed consolidated balance sheet as of September 30, 2023. Such notes continue to accrue interest and all relevant penalties have been accrued as of September 30, 2023. Of such past due notes payable, a holder of a note with principal amount of $250,000 issued a notice of default. See Item 1 above for additional details. We are in negotiations with all holders to extend the maturity dates of such notes or to convert the principal and accrued interest into equity.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

 

19

 

 

 

Item 6. Exhibits.

 

3.6*   Certificate of Designation with respect to Series B Preferred Stock dated October 30, 2023.
     
10.39(c)*   Amendment No. 3 to Sponsored Research Agreement dated November 15, 2022 between the University of Texas MD Anderson Cancer Center and Cell Source Ltd.
     
10.39(d)*   Amendment No. 4 to Sponsored Research Agreement dated November 6, 2023 between the University of Texas MD Anderson Cancer Center and Cell Source Ltd.
     
10.64(d)*   Amendment No. 4 to Third Amended and Restated Note’
     
10.68(b)*   Amendment No. 2 to 10% Convertible Note.
     
31*   Certification of principal executive officer and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
32*   Certification of principal executive officer and principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

* Filed herewith

 

 

20

 

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  CELL SOURCE, INC.
     
Dated: November 9, 2023 By: /s/ Itamar Shimrat
  Name: Itamar Shimrat
  Title:

Chief Executive Officer and

Chief Financial Officer (Principal

Executive, Financial and Accounting

Officer)

 

 

21

 

 

 

Exhibit 3.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit 10.39(c)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit 10.39(d)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit 10.64(d)

 

 

 

 

Exhibit 10.68(b)

 

 

 
 

 

 

 

 

 

Exhibit 31

 

CERTIFICATION OF

CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

 

I, Itamar Shimrat, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of Cell Source, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15I and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: November 9, 2023  
   
/s/ Itamar Shimrat  
Itamar Shimrat  
Chief Executive Officer and Chief Financial Officer  
(Principal Executive, Financial, and Accounting Officer)  

 

   

 

 

 

Exhibit 32

 

CERTIFICATION OF

CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED

PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

 

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of Cell Source, Inc., a Nevada corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:

 

The Quarterly Report for the quarter ended September 30, 2023 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: November 9, 2023  
   
/s/ Itamar Shimrat  
Itamar Shimrat  
Chief Executive Officer and Chief Financial Officer  
(Principal Executive, Financial, and Accounting Officer)  

 

   

 

 

 

 

v3.23.3
Cover - shares
 9 Months Ended
Sep. 30, 2023
Nov. 06, 2023
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Sep. 30, 2023  
Document Fiscal Period Focus Q3  
Document Fiscal Year Focus 2023  
Current Fiscal Year End Date --12-31  
Entity File Number 000-55413  
Entity Registrant Name Cell Source, Inc.  
Entity Central Index Key 0001569340  
Entity Tax Identification Number 32-0379665  
Entity Incorporation, State or Country Code NV  
Entity Address, Address Line One 57 West 57th Street  
Entity Address, Address Line Two Suite 400  
Entity Address, City or Town New York  
Entity Address, State or Province NY  
Entity Address, Postal Zip Code 10019  
City Area Code (646)  
Local Phone Number 416-7896  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   38,546,231
v3.23.3
Condensed Consolidated Balance Sheets - USD ($)
Sep. 30, 2023
Dec. 31, 2022
Current Assets:    
Cash $ 2,582 $ 222,665
Prepaid expenses 242,375 164,175
Other current assets 3,400 23,005
Total Assets 248,357 409,845
Current Liabilities:    
Accounts payable 1,580,863 680,325
Accrued compensation 885,665 849,898
Financing liability 130,040
Accrued dividend payable 310,630 5,217
Total Liabilities 16,278,504 13,043,740
Commitments and contingencies (Note 8)
Stockholders’ Deficiency:    
Common stock, $0.001 par value, 200,000,000 shares authorized; 38,495,617 and 36,081,758 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively 38,495 36,082
Additional paid-in capital 24,546,969 23,674,354
Accumulated deficit (40,617,485) (36,346,176)
Total Stockholders’ Deficiency (16,030,147) (12,633,895)
Total Liabilities and Stockholders’ Deficiency 248,357 409,845
Series A Convertible Preferred Stock [Member]    
Stockholders’ Deficiency:    
Preferred stock, value 1,342 1,342
Series B Convertible Preferred Stock [Member]    
Stockholders’ Deficiency:    
Preferred stock, value
Series C Convertible Preferred Stock [Member]    
Stockholders’ Deficiency:    
Preferred stock, value 532 503
Nonrelated Party [Member]    
Current Liabilities:    
Accrued expenses 1,126,536 1,485,857
Accrued interest 962,183 809,426
Notes payable 681,093 768,126
Convertible notes payable 1,328,006 908,311
Advances payable 135,000 135,000
Related Party [Member]    
Current Liabilities:    
Accrued expenses 130,000 86,500
Accrued interest 1,443,452 987,310
Notes payable 150,000 150,000
Convertible notes payable 7,315,036 6,077,770
Advances payable $ 100,000 $ 100,000
v3.23.3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)
Sep. 30, 2023
Dec. 31, 2022
Preferred stock, par value $ 0.001 $ 0.001
Preferred stock, shares designated 10,000,000 10,000,000
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 200,000,000 200,000,000
Common stock, shares issued 38,495,617 36,081,758
Common stock, shares outstanding 38,495,617 36,081,758
Series A Convertible Preferred Stock [Member]    
Preferred stock, shares designated 1,350,000 1,350,000
Preferred stock, shares issued 1,342,195 1,342,195
Preferred stock, shares outstanding 1,342,195 1,342,195
Preferred stock liquidation preference value $ 10,294,818 $ 10,066,463
Series B Convertible Preferred Stock [Member]    
Preferred stock, shares designated 2,000,000 2,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Preferred stock liquidation preference value $ 0 $ 0
Series C Convertible Preferred Stock [Member]    
Preferred stock, shares designated 1,000,000 1,000,000
Preferred stock, shares issued 532,110 502,776
Preferred stock, shares outstanding 532,110 502,776
Preferred stock liquidation preference value $ 4,073,102 $ 3,776,039
Notes Payable [Member] | Nonrelated Party [Member]    
Debt discount 0 12,968
Convertible Notes Payable [Member] | Nonrelated Party [Member]    
Debt discount 21,954 41,650
Convertible Notes Payable [Member] | Related Party [Member]    
Debt discount $ 0 $ 147,230
v3.23.3
Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Operating Expenses:        
General and administrative $ 480,875 $ 533,538 $ 2,097,801 $ 1,571,572
Total Operating Expenses 995,380 1,016,043 3,316,394 3,102,592
Loss From Operations (995,380) (1,016,043) (3,316,394) (3,102,592)
Other (Expense) Income:        
Gain on extinguishment of note payable 41,920
Total Other Expense (342,758) (236,263) (954,915) (727,883)
Net Loss (1,338,138) (1,252,306) (4,271,309) (3,830,475)
Dividend attributable to Series A and Series C preferred stockholders (309,150) (299,827) (907,516) (869,715)
Net Loss Applicable to Common Stockholders $ (1,647,288) $ (1,552,133) $ (5,178,825) $ (4,700,190)
Net Loss Per Common Share - Basic $ (0.04) $ (0.04) $ (0.14) $ (0.14)
Net Loss Per Common Share - Diluted $ (0.04) $ (0.04) $ (0.14) $ (0.14)
Weighted Average Common Shares Outstanding - Basic 38,191,731 35,240,745 37,492,478 34,696,011
Weighted Average Common Shares Outstanding - Diluted 38,191,731 35,240,745 37,492,478 34,696,011
Nonrelated Party [Member]        
Operating Expenses:        
Research and development $ 500,005 $ 468,005 $ 1,175,093 $ 1,487,520
Other (Expense) Income:        
Interest expense (62,463) (41,581) (138,937) (153,306)
Amortization of debt discount (29,912) (23,561) (107,487) (113,249)
Related Party [Member]        
Operating Expenses:        
Research and development 14,500 14,500 43,500 43,500
Other (Expense) Income:        
Interest expense (199,628) (138,373) (496,206) (386,775)
Amortization of debt discount $ (50,755) $ (32,748) $ (254,205) $ (74,553)
v3.23.3
Condensed Consolidated Statements of Changes in Stockholders' Deficiency (Unaudited) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Jun. 30, 2023
Mar. 31, 2023
Sep. 30, 2022
Jun. 30, 2022
Mar. 31, 2022
Sep. 30, 2023
Sep. 30, 2022
Balance $ (14,945,759) $ (14,219,717) $ (12,633,895) $ (10,766,559) $ (9,997,117) $ (9,826,135) $ (12,633,895) $ (9,826,135)
Conversion of convertible notes payable and accrued interest into Series C Convertible Preferred Stock and common stock 494,134   52,060 98,886 114,473 1,433,095    
Series A and C Convertible Preferred Stock dividends:                
Accrual of earned dividends (309,150) (300,849) (297,517) (299,827) (244,971) (324,917)    
Issuance of warrants in connection with issuance of convertible notes payable 45,008   21,202 76,509 49,219 8,043    
Conversion of Series C Convertible Preferred Stock into common stock            
Stock-based compensation:                
Common stock     330,000          
Net loss (1,338,138) (1,241,604) (1,691,567) (1,252,306) (1,285,594) (1,292,575) (4,271,309) (3,830,475)
Payment of dividends in kind   602,102     597,431      
Issuance of common stock in connection with extinguishment of note payable   58,080            
Warrants issued in satisfaction of accrued interest   40,167   114,727        
Issuance of convertible notes payable   75,462            
Warrants 23,758 40,600       5,372    
Options     74,600        
Balance (16,030,147) (14,945,759) (14,219,717) (11,953,970) (10,766,559) (9,997,117) (16,030,147) (11,953,970)
Common Stock [Member]                
Balance $ 38,163 $ 37,185 $ 36,082 $ 35,240 $ 34,437 $ 34,361 $ 36,082 $ 34,361
Balance, shares 38,163,385 37,184,505 36,081,758 35,239,669 34,437,076 34,360,546 36,081,758 34,360,546
Conversion of convertible notes payable and accrued interest into Series C Convertible Preferred Stock and common stock $ 32   $ 3 $ 5 $ 6 $ 76    
Conversion of convertible notes payable and accrued interest into Series C Convertible Preferred Stock and common stock, shares 32,232   2,747 5,181 5,964 76,530    
Series A and C Convertible Preferred Stock dividends:                
Accrual of earned dividends    
Issuance of warrants in connection with issuance of convertible notes payable      
Conversion of Series C Convertible Preferred Stock into common stock $ 300   $ 100          
Conversion of Series C Convertible Preferred Stock into common stock, shares 300,000   100,000          
Stock-based compensation:                
Common stock     $ 1,000          
Common stock, shares     1,000,000          
Net loss    
Payment of dividends in kind   $ 802     $ 797      
Payment of dividends in kind, shares   802,880     796,629      
Issuance of common stock in connection with extinguishment of note payable   $ 176            
Issuance of common stock in connection with extinguishment of note payable, shares   176,000            
Warrants issued in satisfaction of accrued interest            
Issuance of convertible notes payable              
Warrants          
Options            
Balance $ 38,495 $ 38,163 $ 37,185 $ 35,245 $ 35,240 $ 34,437 $ 38,495 $ 35,245
Balance, shares 38,495,617 38,163,385 37,184,505 35,244,850 35,239,669 34,437,076 38,495,617 35,244,850
Additional Paid-in Capital [Member]                
Balance $ 24,293,583 $ 23,778,999 $ 23,674,354 $ 22,952,986 $ 22,437,652 $ 21,316,318 $ 23,674,354 $ 21,316,318
Conversion of convertible notes payable and accrued interest into Series C Convertible Preferred Stock and common stock 494,040   52,050 98,868 114,452 1,432,836    
Series A and C Convertible Preferred Stock dividends:                
Accrual of earned dividends (309,150) (300,849) (297,517) (299,827) (244,971) (324,917)    
Issuance of warrants in connection with issuance of convertible notes payable 45,008   21,202 76,509 49,219 8,043    
Conversion of Series C Convertible Preferred Stock into common stock (270)   (90)          
Stock-based compensation:                
Common stock     329,000          
Net loss    
Payment of dividends in kind   601,300     596,634      
Issuance of common stock in connection with extinguishment of note payable   57,904            
Warrants issued in satisfaction of accrued interest   40,167   114,727        
Issuance of convertible notes payable   75,462            
Warrants 23,758 40,600       5,372    
Options     74,600        
Balance 24,546,969 24,293,583 23,778,999 23,017,863 22,952,986 22,437,652 24,546,969 23,017,863
Retained Earnings [Member]                
Balance (39,279,347) (38,037,743) (36,346,176) (33,756,597) (32,471,003) (31,178,428) (36,346,176) (31,178,428)
Conversion of convertible notes payable and accrued interest into Series C Convertible Preferred Stock and common stock      
Series A and C Convertible Preferred Stock dividends:                
Accrual of earned dividends    
Issuance of warrants in connection with issuance of convertible notes payable      
Conversion of Series C Convertible Preferred Stock into common stock            
Stock-based compensation:                
Common stock              
Net loss (1,338,138) (1,241,604) (1,691,567) (1,252,306) (1,285,594) (1,292,575)    
Payment of dividends in kind            
Issuance of common stock in connection with extinguishment of note payable              
Warrants issued in satisfaction of accrued interest            
Issuance of convertible notes payable              
Warrants          
Options            
Balance (40,617,485) (39,279,347) (38,037,743) (35,008,903) (33,756,597) (32,471,003) (40,617,485) (35,008,903)
Series A Convertible Preferred Stock [Member] | Preferred Stock [Member]                
Balance $ 1,342 $ 1,342 $ 1,342 $ 1,342 $ 1,342 $ 1,342 $ 1,342 $ 1,342
Balance, shares 1,342,195 1,342,195 1,342,195 1,342,195 1,342,195 1,342,195 1,342,195 1,342,195
Conversion of convertible notes payable and accrued interest into Series C Convertible Preferred Stock and common stock      
Series A and C Convertible Preferred Stock dividends:                
Accrual of earned dividends    
Issuance of warrants in connection with issuance of convertible notes payable      
Conversion of Series C Convertible Preferred Stock into common stock            
Stock-based compensation:                
Common stock              
Net loss    
Payment of dividends in kind            
Issuance of common stock in connection with extinguishment of note payable              
Warrants issued in satisfaction of accrued interest            
Issuance of convertible notes payable              
Warrants          
Options            
Balance $ 1,342 $ 1,342 $ 1,342 $ 1,342 $ 1,342 $ 1,342 $ 1,342 $ 1,342
Balance, shares 1,342,195 1,342,195 1,342,195 1,342,195 1,342,195 1,342,195 1,342,195 1,342,195
Series C Convertible Preferred Stock [Member] | Preferred Stock [Member]                
Balance $ 500 $ 500 $ 503 $ 470 $ 455 $ 272 $ 503 $ 272
Balance, shares 499,443 499,443 502,776 470,109 455,443 272,021 502,776 272,021
Conversion of convertible notes payable and accrued interest into Series C Convertible Preferred Stock and common stock $ 62   $ 7 $ 13 $ 15 $ 183    
Conversion of convertible notes payable and accrued interest into Series C Convertible Preferred Stock and common stock, shares 62,667   6,667 12,667 14,666 183,422    
Series A and C Convertible Preferred Stock dividends:                
Accrual of earned dividends    
Issuance of warrants in connection with issuance of convertible notes payable      
Conversion of Series C Convertible Preferred Stock into common stock $ (30)   $ (10)          
Conversion of Series C Convertible Preferred Stock into common stock, shares (30,000)   (10,000)          
Stock-based compensation:                
Common stock              
Net loss    
Payment of dividends in kind            
Issuance of common stock in connection with extinguishment of note payable              
Warrants issued in satisfaction of accrued interest            
Issuance of convertible notes payable              
Warrants          
Options            
Balance $ 532 $ 500 $ 500 $ 483 $ 470 $ 455 $ 532 $ 483
Balance, shares 532,110 499,443 499,443 482,776 470,109 455,443 532,110 482,776
v3.23.3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Cash Flows From Operating Activities:    
Net loss $ (4,271,309) $ (3,830,475)
Adjustments to reconcile net loss to net cash used in operating activities:    
Gain on extinguishment of note payable (41,920)
Amortization of debt discount 361,692 187,802
Non-cash interest expense - warrants 28,695 96,896
Changes in operating assets and liabilities:    
Prepaid expenses 243,300 (70,568)
Other current assets 19,605 (3,431)
Accounts payable 900,538 451,179
Accrued compensation 25,147 63,846
Net Cash Used In Operating Activities (1,625,601) (2,415,411)
Cash Flows From Financing Activities:    
Proceeds from issuance of notes payable 168,094
Repayment of notes payable (146,912)
Repayment of financing liability (191,460) (27,926)
Net Cash Provided By Financing Activities 1,405,518 2,388,256
Net Decrease In Cash (220,083) (27,155)
Cash - Beginning of Period 222,665 93,095
Cash - End of Period 2,582 65,940
Supplemental Disclosures of Cash Flow Information:    
Interest
Income taxes 949
Non-cash investing and financing activities:    
Accrual of earned preferred stock dividends (907,516) (869,715)
Common stock issued in connection with payment of Series A and C Convertible Preferred Stock dividends in-kind 602,102 597,431
Financing of Directors and Officer’s insurance 321,500
Conversion of Series C Convertible Preferred Stock into common stock 400
Conversion of accrued expenses into note principal 413,018
Accrual of warrant obligations in connection with issuance of notes payable 40,167 232,697
Warrants issued in satisfaction of accrued warrant obligation (40,167)
Issuance of warrants in connection with the issuance of notes payable 141,672 133,771
Issuance of warrants in satisfaction of accrued interest 114,727
Conversion of convertible notes payable and accrued interest into Series C Preferred Stock and common stock 546,194 1,646,454
Extinguishment of note payable into common stock 58,080
Nonrelated Party [Member]    
Changes in operating assets and liabilities:    
Accrued expenses 53,697 187,597
Accrued interest 165,030 75,892
Cash Flows From Financing Activities:    
Proceeds from issuance of convertible notes payable 919,960 395,000
Related Party [Member]    
Changes in operating assets and liabilities:    
Accrued expenses 43,500
Accrued interest 441,446 346,061
Cash Flows From Financing Activities:    
Proceeds from issuance of convertible notes payable 677,018 2,000,000
Options Held [Member]    
Stock-based compensation:    
Stock-based compensation 74,600
Warrant [Member]    
Stock-based compensation:    
Stock-based compensation 63,709 5,190
Common Stock [Member]    
Stock-based compensation:    
Stock-based compensation $ 341,269
v3.23.3
Business Organization, Nature of Operations, Risks and Uncertainties and Basis of Presentation
 9 Months Ended
Sep. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Business Organization, Nature of Operations, Risks and Uncertainties and Basis of Presentation

Note 1 - Business Organization, Nature of Operations, Risks and Uncertainties and Basis of Presentation

 

Organization and Operations

 

Cell Source, Inc. (“Cell Source”, “CSI” or the “Company”) is a Nevada corporation formed on June 6, 2012 that is the parent company of Cell Source Limited (“CSL”), a wholly owned subsidiary which was founded in Israel in 2011 in order to commercialize a suite of inventions relating to certain cancer treatments. The Company is a biotechnology company focused on developing cell therapy treatments based on the management of immune tolerance. The Company’s lead prospective product is its patented Veto Cell immune system management technology, which is an immune tolerance biotechnology that enables the selective blocking of immune responses. CSL’s Veto Cell immune system management technology is based on technologies patented, owned, and licensed to CSL by Yeda Research and Development Company Limited, an Israeli corporation (“Yeda”) (see Note 8, Commitments and Contingencies). The Company’s target indications include: lymphoma, leukemia and multiple myeloma through the facilitation of safer and more accessible stem cell (e.g. bone marrow) transplantation acceptance, treatment of end stage kidney disease and other non-malignant organ diseases through improved organ transplantation (broadened donor pool, reduced dependence on post-transplant anti-rejection therapy), and ultimately treating a variety of cancers and non-malignant diseases.

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the condensed consolidated financial position of the Company as of September 30, 2023 and the condensed consolidated results of its operations and cash flows for the three and nine months ended September 30, 2023 and 2022. The results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the operating results for the full year ending December 31, 2023 or any other period. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related disclosures of the Company as of December 31, 2022 and for the year then ended which were included in the Company’s Annual Report on Form 10-K that was filed with the Securities and Exchange Commission (“SEC”) on August 8, 2023.

 

Risks and Uncertainties

 

On October 7, 2023, a conflict arose between Israel and Hamas militants on Israel’s southern border from the Gaza Strip. The intensity and duration of Israel’s current war against Hamas is difficult to predict, and as are such war’s economic implications on the Company’s business and operations. To the extent that any of these negative developments do occur, they may have an adverse effect on the Company’s business, results of operations and its ability to raise additional funds. As of September 30, 2023, the Company considered the impact of the war on its business and operational assumptions and estimates and determined there were no material adverse impacts on the Company’s condensed consolidated results of operations and financial position as of September 30, 2023.

 
v3.23.3
Going Concern and Management Plans
 9 Months Ended
Sep. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Going Concern and Management Plans

Note 2 - Going Concern and Management Plans

 

During the nine months ended September 30, 2023, the Company had not generated any revenues, had a net loss of approximately $4,271,000 and had used cash in operations of approximately $1,626,000. As of September 30, 2023, the Company had a working capital deficiency of approximately $16,030,000 and an accumulated deficit of approximately $40,617,000. As of September 30, 2023 and through the date of this filing, notes payable with principal amounts totaling approximately $5,246,000 and $1,726,000, respectively, were past due and are classified as current liabilities on the condensed consolidated balance sheet as of September 30, 2023. The Company will continue to incur net operating losses to fund operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for at least one year from the date these financial statements are issued. Subsequent to September 30, 2023 and as more fully described in Note 9, Subsequent Events, the Company received aggregate proceeds of $450,000 from equity financings.

 

The Company is currently funding its operations on a month-to-month basis. While there can be no assurance that it will be successful, the Company is in active negotiations to raise additional capital. The Company’s primary sources of operating funds since inception have been equity and debt financings. Management’s plans include continued efforts to raise additional capital through debt and equity financings. There is no assurance that these funds will be sufficient to enable the Company to fully complete its development activities or attain profitable operations. If the Company is unable to obtain such additional financing on a timely basis or, notwithstanding any request the Company may make, if the Company’s debt holders do not agree to convert their notes into equity or extend the maturity dates of their notes, the Company may have to curtail its development, marketing and promotional activities, which would have a material adverse effect on the Company’s business, financial condition and results of operations, and ultimately the Company could be forced to discontinue its operations and liquidate.

 

The accompanying condensed consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values. The condensed consolidated financial statements do not include any adjustment that might result from the outcome of these uncertainties.

 

 

CELL SOURCE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 
v3.23.3
Summary of Significant Accounting Policies
 9 Months Ended
Sep. 30, 2023
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

Note 3 - Summary of Significant Accounting Policies

 

Stock-Based Compensation

 

Because the Company’s common stock historically was not actively traded on a public market, the fair value of the Company’s restricted equity instruments is estimated by management based on observations of the sales prices of both restricted and freely tradable common stock, or instruments convertible into common stock. The Company obtained a third-party valuation of its common stock as of July 1, 2023 and December 31, 2022. The third-party valuation was performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. The estimates used by management are considered highly complex and subjective. The Company anticipates that once its shares become more actively traded, the use of such estimates will no longer be necessary to determine the fair value of its common stock.

 

The independent appraisal utilized the market approach, specifically the Backsolve method. The Backsolve method utilizes the economics from a direct transaction in the Company’s securities in determining fair value. The Backsolve method utilizes the Black-Scholes option pricing method (“OPM”) which allocated a probability-weighted present value to the Company’s convertible securities. The following steps were applied under the OPM:

 

  ●   Establishment of total enterprise or equity value;
  ●   Analysis of equity rights for each class of security;
  ●   Selection of appropriate model for valuation purposes;
  ●   Determination of key valuation inputs; and
  ●   Computation of the fair value of the subject security.

 

Under the OPM, it was determined the Company’s common stock had a fair value of $0.34 and $0.33 as of July 1, 2023 and December 31, 2022, respectively, which included a discount for lack of marketability of 25%. Furthermore, the independent appraisal determined the Company’s expected volatility was 80% as of July 1, 2023 and December 31, 2022 by evaluating historical and implied volatilities of guideline companies.

 

Loss Per Share

 

The Company computes basic net loss per share by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding for the period and excludes the effects of any potentially dilutive securities. Diluted earnings per share includes the dilution that would occur upon the exercise or conversion of all dilutive securities into common stock using the “treasury stock” and/or “if converted” methods, as applicable.

 

The common stock equivalents associated with the following securities are excluded from the calculation of weighted average dilutive common shares because their inclusion would have been anti-dilutive:

 

   September 30, 
   2023   2022 
         
Options   6,932,004    6,932,004 
Warrants   13,541,107    13,204,079 
Convertible notes [1] [2]   13,493,270    1,529,683 
Convertible preferred stock   18,743,053    18,249,713 
Total   52,709,434    39,915,479 

 

[1] Convertible notes are assumed to be converted at the rate of $0.75 per common share, which is the conversion price as of September 30, 2023 and 2022. However, such conversion rates are subject to adjustment under certain circumstances such as stock splits and stock dividends, which may result in the issuance of common shares greater than the amount indicated.

 

[2] As of September 30, 2022, excludes shares of common stock underlying convertible notes that are expected to become convertible into shares of Series B Convertible Preferred Stock since such stock had not been designated by the Company as of September 30, 2022.

 

 

CELL SOURCE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 
v3.23.3
Fair Value
 9 Months Ended
Sep. 30, 2023
Fair Value Disclosures [Abstract]  
Fair Value

Note 4 - Fair Value

 

The following table provides a summary of the changes in fair value, including net transfers in and/or out, of all Level 3 liabilities measured at fair value on a recurring basis using unobservable inputs during the three and nine months ended September 30, 2023 and 2022:

 

   Accrued   Accrued     
   Interest   Compensation   Total 
             
Balance - January 1, 2023  $504,700   $59,220   $563,920 
                
Accrual of warrant obligation   40,167    -    40,167 
Change in fair value   (46,131)   (1,095)   (47,226)
                
Balance - March 31, 2023   498,736    58,125    556,861 
Accrual of common stock obligation   -    9,438    9,438 
Satisfaction of warrant obligation   (40,167)   -    (40,167)
Change in fair value   27,272    73    27,345 
                
Balance - June 30, 2023   485,841    67,636    553,477 
Change in fair value   47,554    2,204    49,758 
Balance - September 30, 2023  $533,395   $69,840   $603,235 

 

    Accrued    Accrued      
    Interest    Compensation    Total 
                
Balance - January 1, 2022  $402,344   $61,306   $463,650 
                
Change in fair value   33,609    (412)   33,197 
Accrual of warrant obligation   114,727    -    114,727 
                
Balance - March 31, 2022   550,680    60,894    611,574 
                
Change in fair value   29,658    74    29,732 
                
Balance - June 30, 2022   580,338    60,968    641,306 
Change in fair value   33,630    156    33,786 
Accrual of warrant obligation   58,985    -    58,985 
Satisfaction of warrant obligation   (114,727)   -    (114,727)
Balance - September 30, 2022  $558,226   $61,124   $619,350 

 

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable. The Company’s Level 3 liabilities shown in the above table consist of accrued obligations to issue warrants and common stock to non-employees and is recorded at fair value at inception and subsequent changes in fair value are charged to the condensed consolidated statement of operations at each reporting period.

 

In applying the Black-Scholes option pricing model utilized in the valuation of Level 3 liabilities, the Company used the following approximate assumptions:

 

   For the Three Months Ended   For the Nine Months Ended 
   September 30,   September 30, 
   2023   2022   2023   2022 
                 
Risk-free interest rate   4.60% - 4.70%    4.06% - 4.15%    3.60% - 4.70%    2.42% - 4.15% 
Expected term (years)   4.00 - 5.00    4.00 - 5.00    4.00-5.00    4.00 - 5.00 
Expected volatility   80%    90%    80%    90% 
Expected dividends   0.00%    0.00%    0.00%    0.00% 

 

The expected term used is the contractual life of the instrument being valued. Since the Company’s stock does not have significant trading volume, the Company is utilizing an expected volatility based on a review of the historical volatilities, over a period of time, equivalent to the expected life of the instrument being valued, of similarly positioned public companies within its industry. The risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent with the expected term of the instrument being valued.

 

As of September 30, 2023 and December 31, 2022, the Company had an obligation to issue 183,095 and 154,495 shares of common stock to service providers that had a fair value of $62,252 and $50,983, respectively, which was a component of accrued compensation on the condensed consolidated balance sheets. The fair value of the common stock underlying this obligation has a per share value of $0.34 as of September 30, 2023 and $0.33 as of December 31, 2022.

 

See Note 6, Stockholders’ Deficiency – Common Stock and Stock Warrants for additional details associated with the issuance of common stock and warrants.

 

 

CELL SOURCE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 
v3.23.3
Notes Payable
 9 Months Ended
Sep. 30, 2023
Debt Disclosure [Abstract]  
Notes Payable

Note 5 – Notes Payable

 

As of September 30, 2023 and through the date of this filing, notes and convertible notes payable with principal amounts totaling $5,246,129 and $1,726,093, respectively, were past due and are classified as current liabilities on the condensed consolidated balance sheet as of September 30, 2023. Such notes continue to accrue interest and all relevant penalties have been accrued as of September 30, 2023. Of such past due notes payable, a holder of a note with principal amount of $250,000 issued a notice of default. See Note 8, Commitments and Contingencies – Litigation for additional details. The Company is in negotiations with certain holders of notes payable to extend the maturity dates of such notes or to convert the principal and accrued interest into equity. As of September 30, 2023, the Company had an accrued interest balance of $599,427 related to notes past due.

 

During the three months ended September 30, 2023 and 2022, the Company recorded interest expense of $262,091 and $179,954, respectively, and amortization of debt discount of $80,667 and $56,309, respectively. During the nine months ended September 30, 2023 and 2022, the Company recorded interest expense of $635,143 and $540,081, respectively, and amortization of debt discount of $361,692 and $187,802, respectively. As of September 30, 2023 and December 31, 2022, the Company had $2,405,635 and $1,796,736, respectively, of accrued interest (including interest in the form of warrants (see Note 4, Fair Value) and penalties related to notes payable, which is included with accrued interest and accrued interest – related parties on the condensed consolidated balance sheets.

 

Notes Payable

 

On June 12, 2023, the Company issued 176,000 shares of common stock to the holder of a promissory note issued by the Company in the principal amount of $100,000 that matured in May 2018 in exchange for the cancellation of the note. The exchange was accounted for as debt extinguishment and the Company recorded a gain on extinguishment of $41,920 which is included in other income on the condensed consolidated statements of operations. See Note 6, Stockholders’ Deficiency – Common Stock for additional details.

 

Convertible Notes Payable

 

During the nine months ended September 30, 2023, the Company issued convertible notes payable in the aggregate principal amount of $494,960 with maturity dates ranging from July 3, 2023 to February 17, 2024. The notes accrue interest at 8% per annum and are convertible at any time at the option of the holder into the Company’s Series C Convertible Preferred Stock at a conversion price of $7.50 per share. The notes automatically convert into Series C Convertible Preferred Stock on the maturity date. In connection with the issuances, the Company issued five-year immediately vested warrants to purchase 396,000 shares of common stock at an exercise price of $1.25 per share. The warrants had an issuance date relative fair value of $48,164 and was recorded as a discount to the face value of the notes, which will be amortized over the term of the notes.

 

During the nine months ended September 30, 2023, the Company issued convertible notes payable in the aggregate principal amount of $425,000 with maturity dates ranging from November 8, 2023 to July 28, 2024. The notes accrue 8% interest per annum and are convertible at any time at the option of the holder into the Company’s common stock at a conversion price of $0.75 per share. In connection with the issuances, the Company issued five-year immediately vested warrants to purchase an aggregate of 212,500 shares of common stock at an exercise price of $1.25 per share. The warrants had an issuance date relative fair value of $26,700 and was recorded as a discount to the face value of the notes, which will be amortized over the term of the notes. These notes are guaranteed by a director of the Company.

 

During the nine months ended September 30, 2023, $519,960 of principal outstanding under convertible notes automatically converted into 69,334 shares of Series C Convertible Preferred Stock and the Company elected to convert $26,234 of interest accrued under such notes into an aggregate of 34,979 shares of common stock. The note principal had a conversion price of $7.50 per share and the common stock was valued at $0.75 per share for purposes of the interest payment.

 

Convertible Notes Payable - Related Parties

 

The Company and George Verstraete, a director of the Company, entered into a promissory note agreement dated March 10, 2022 (the “Verstraete Note”), whereby Mr. Verstraete, at his discretion, can loan up to $6,000,000 to the Company. Mr. Verstraete has agreed to loan an aggregate of $2,500,000 to the Company under the note. The note bears interest at a rate of 10% per annum and, prior to its amendment in November 2023, provided that it would mature twelve months from the date of issuance. Mr. Verstraete has the right, at his option, to convert the note into shares of the Company’s Series B Convertible Preferred Stock at a conversion price of $7.50 per share at any time after the Company first issues any shares of the Series B Convertible Preferred Stock. Interest accruing under the note will be payable upon the maturity of the note and may be paid at the Company’s option in either cash or shares of the Company’s common stock (calculated based upon $0.75 per share for purposes of calculating the number of shares of common stock to be issued). For each $500,000 advanced under the Verstraete Note, Mr. Verstraete will be issued a warrant to purchase 400,000 shares of the Company’s common stock at an exercise price of $1.25 per share. Each warrant will have a five-year term.

 

In February 2023, $413,018 of payments made by Mr. Verstraete to third parties on behalf of the Company in June 2022 were characterized as convertible notes payable – related parties under the Verstraete Note. The Company received additional advances of $250,000, $100,000, $150,000, $72,018 and $105,000 in April 2023, May 2023, July 2023, August 2023 and September 2023, respectively, and, as a result, increased the outstanding principal balance of the Verstraete Note to $3,590,036 as of September 30, 2023. In connection with the advances, the Company issued five-year immediately vested warrants to purchase an aggregate of 872,029 shares of common stock at an exercise price of $1.25 per share. The warrants had an issuance date relative fair value of $106,973 which was recorded as a discount to the face value of the note and has been amortized over the term of the note.

 

Mr. Verstraete has assigned the Verstraete Note to a trust for which Darlene Soave, a director of the Company, serves as trustee. On March 10, 2023, the Company and the trust agreed to extend the maturity date of the Verstraete Note to September 10, 2023. See Note 9, Subsequent Events - Convertible Notes Payable - Related Parties for details of an additional extension of the maturity date of the Verstraete Note.

 

On April 28, 2023, the Company and Ms. Soave agreed to extend the maturity date of the convertible promissory note dated October 28, 2019 issued to Ms. Soave (“Soave Note”) from April 28, 2023 to October 28, 2023. Under the terms of the Soave Note, Ms. Soave, at her discretion, can loan up to $6,000,000 to the Company. As of September 30, 2023, $3,500,000 was outstanding under the Soave Note. See Note 9, Subsequent Events - Convertible Notes Payable - Related Parties for details of an additional extension of the maturity date of the Soave Note.

 

 

CELL SOURCE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 
v3.23.3
Stockholders’ Deficiency
 9 Months Ended
Sep. 30, 2023
Equity [Abstract]  
Stockholders’ Deficiency

Note 6 – Stockholders’ Deficiency

 

Authorized Capital

 

Effective July 26, 2023, the Company amended the certificates of designation which established the Series A Convertible Preferred Stock and Series C Convertible Preferred Stock to increase the number of shares designated from 1,335,000 to 1,350,000 shares for the Series A Convertible Preferred Stock and from 500,000 to 1,000,000 shares for the Series C Convertible Preferred Stock.

 

As of September 30, 2023, the Company was authorized to issue 200,000,000 shares of common stock, par value of $0.001 per share, and 10,000,000 shares of preferred stock, par value of $0.001 per share. The holders of the Company’s common stock are entitled to one vote per share. The preferred stock was designated as follows: 1,350,000 shares of Series A Convertible Preferred Stock and 1,000,000 shares of Series C Convertible Preferred Stock.

 

Series B Convertible Preferred Stock

 

On September 21, 2023, the Company’s Board of Directors approved the designation of 2,000,000 shares of the 10,000,000 authorized shares of preferred stock as Series B Convertible Preferred Stock, par value $0.001 per share. See Note 9, Subsequent Events for details of the Company’s filing of the Certificate of Designation of its Series B Convertible Preferred Stock subsequent to September 30, 2023.

 

Preferred Stock Dividends

 

During the three months ended September 30, 2023 and 2022, the Company accrued additional preferred dividends of $309,150 and $299,827, respectively. During the nine months ended September 30, 2023 and 2022, the Company accrued additional preferred dividends of $907,516 and $869,715, respectively. As of September 30, 2023 and December 31, 2022, the Company accrued preferred stock dividends of $310,630 and $5,217, respectively.

 

During the nine months ended September 30, 2023, the Company issued 802,880 shares of common stock at the stated value of $0.75 per share for aggregate value of $602,102, pursuant to the terms of the Series A and C Convertible Preferred Stock Certificate of Designation, in connection with the partial payment of accrued dividends for Series A and Series C Convertible Preferred Stock.

 

Series C Convertible Preferred Stock

 

See Note 5, Notes Payable – Convertible Notes Payable for details associated with conversions of notes payable into 69,334 shares of Series C Convertible Preferred Stock.

 

Common Stock

 

See Note 5, Notes Payable – Convertible Notes Payable for details associated with conversions of accrued interest into 34,979 shares of common stock.

 

During the nine months ended September 30, 2023, certain investors converted an aggregate of 40,000 shares of Series C Convertible Preferred Stock into an aggregate of 400,000 shares of the Company’s common stock.

 

During the nine months ended September 30, 2023, the Company issued 1,000,000 immediately-vested shares of the Company’s common stock to a consultant with a grant date fair value of $330,000 which was immediately recognized in the condensed consolidated statement of operations.

 

See Note 5, Notes Payable for details associated with the issuance of 176,000 shares of common stock in connection with the extinguishment of a note payable.

 

Stock Warrants

 

On May 25, 2023, the Company issued immediately vested 3.75 year warrants to an investor to purchase an aggregate amount of 300,000 shares of the Company’s common stock at an exercise price of $0.75 per share. The warrants had an issuance date fair value of $40,600, which was recognized immediately.

 

On August 9, 2023, the Company issued immediately vested four-year warrants to a former director of the Company to purchase an aggregate amount of 160,000 shares of the Company’s common stock at an exercise price of $0.75 per share. The warrants had an issuance date fair value of $23,758, which was recognized immediately.

 

See Note 5, Notes Payable for additional details associated with the issuance of stock warrants.

 

 

CELL SOURCE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Stock-Based Compensation

 

During the three months ended September 30, 2023, the Company recognized stock-based compensation expense of $25,962, consisting of $24,130 of expense related to warrants (of which, $23,758 was included within stockholder’s deficiency and $372 was included within accrued compensation), and $1,832 of expense related to common stock issued or to be issued for consulting services (which has been included within accrued compensation) which was included within general and administrative expenses. During the three months ended September 30, 2022, the Company recognized stock-based compensation expense of $74,756 (of which, $74,600 has been included within stockholders’ deficiency and $156 has been included within accrued compensation) which was included within general and administrative expenses.

 

During the nine months ended September 30, 2023, the Company recognized stock-based compensation expense of $404,978 (consisting of $63,709 of expense related to warrants (of which, $64,358 was included within stockholder’s deficiency and $(649) was included within accrued compensation and $341,269 of expense related to common stock issued or to be issued for consulting services described above (of which, $330,000 has been included within stockholder’s deficiency and $11,269 has been included within accrued compensation) which was included within general and administrative expenses. During the nine months ended September 30, 2022, the Company recognized stock-based compensation expense of $79,790 (of which, $79,972 has been included within stockholders’ deficiency and $(182) has been included within accrued compensation) which was included within general and administrative expenses.

 

There was no unrecognized stock-based compensation expense as of September 30, 2023.

 
v3.23.3
Related Party Transactions
 9 Months Ended
Sep. 30, 2023
Related Party Transactions [Abstract]  
Related Party Transactions

Note 7 – Related Party Transactions

 

As of September 30, 2023 and December 31, 2022, the Company was required to issue warrants to purchase an aggregate of 1,881,500 and 1,656,500, respectively, shares of common stock at an exercise price of $0.75 per share to a director and former director of the Company in connection with loans made to the Company in the aggregate amount of $459,000 which required certain penalties in the form of warrants. As a result, the Company had accrued $322,813 and $308,117 associated with the fair value of the obligations as of September 30, 2023 and December 31, 2022, respectively, which amount is included in accrued interest – related parties on the condensed consolidated balance sheets. The obligations to issue warrants are subject to changes in fair value at each reporting period. See Note 4, Fair Value for additional details.

 

See Note 5, Notes Payable – Convertible Notes Payable – Related Parties for details of the issuance of a convertible note to a director of the Company.

 

See Note 5 – Stockholders’ Deficiency – Stock Warrants for additional details related to a grant to a former director of the Company.

 
v3.23.3
Commitments and Contingencies
 9 Months Ended
Sep. 30, 2023
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

Note 8 – Commitments and Contingencies

 

Yeda Research and License Agreement

 

During the three months ended September 30, 2023 and 2022, the Company recorded research and development expenses of $14,500, related to its Research and License Agreement with Yeda (the “Agreement”). During the nine months ended September 30, 2023 and 2022, the Company recorded research and development expenses of $43,500, related to the Agreement with Yeda. As of September 30, 2023 and December 31, 2022, the Company had $58,000 and $14,500, respectively, of accrued research and development expenses pursuant to the Agreement with Yeda.

 

MD Anderson Sponsored Research Agreements

 

The Company recognized $429,505 of research and development expenses during the three months ended September 30, 2023 and 2022, and $1,082,193 and $1,394,020 of research and development expenses during the nine months ended September 30, 2023 and 2022, respectively, associated with services provided by The University of Texas M.D. Anderson Cancer Center (“MD Anderson”) under the two agreements with MD Anderson dated November 2018 and February 2019, respectively. As of September 30, 2023 and December 31, 2022, the Company had no accrued research and development expenses pursuant to the agreements with MD Anderson.

 

Litigation

 

In January 2019, the holder of a promissory note in the principal amount of $250,000 due on March 16, 2016 instituted a collection action in the Supreme Court of the State of New York, County of New York. On June 12, 2019, the plaintiff served a motion for summary judgment through the Secretary of State which was heard on July 12, 2019 and granted. The Company contended that it was not given sufficient notice under the applicable statute and did not have an opportunity to oppose the motion. Judgment was entered in October 2019 in the amount of $267,680. The Company brought a motion to vacate based on the jurisdictional defect of the motion in not providing the required amount of time, but that motion was denied in February 2021 without properly addressing the jurisdictional issues raised by the Company. The Company appealed the denial and then filed a motion to Renew and Reargue the motion to vacate based on the Court’s failure to address critical issues. That motion was also denied on April 15, 2021 without addressing the Company’s arguments. The Company appealed the second denial as well and pursued both appeals in a consolidated manner so as to resolve all issues together. Each of the appeals was denied and there is no further opportunity to appeal. While the Company’s motions were pending, the plaintiff commenced steps to collect judgment. During the year ended December 31, 2021, $103,088 of a $250,000 deposit made with the court by a third party on behalf of the Company was released to an officer of the court and has been accounted for as partial note repayment, with an additional $146,912 due under the note repaid by a release of the remaining deposit to an officer of the court during the year ended December 31, 2022, which was also accounted for as a note repayment. In August 2023, a supplemental judgment of $38,838 was entered against the Company. Inasmuch, as there are no further opportunities to appeal, the Company is arranging to pay the remaining amount due, which, as of the date of this Report, is estimated to be approximately $106,000, which was recorded as a liability as of September 30, 2023.

 

 

CELL SOURCE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

In August 2022, a holder of 360,000 shares of the Company’s common stock filed a complaint against the Company, its President and legal counsel in the United States District Court, Southern District of New York, claiming unspecified damages for an alleged wrongful refusal to authorize the Company’s transfer agent to remove restrictive legends from the shares held by the shareholder. The Company has filed a motion to dismiss the complaint which is pending. The complaints against the Company’s legal counsel and President were dismissed by the Court. In October 2023, the Company reached an agreement in principle with the plaintiff to settle the matter. The settlement is subject to the execution of a formal settlement agreement.

 

Loss contingencies considered remote are generally not disclosed, unless they involve guarantees, in which case the guarantees would be disclosed. There can be no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows. Aside from the matters discussed elsewhere in this note, there are no other known contingencies through the date of this filing.

 
v3.23.3
Subsequent Events
 9 Months Ended
Sep. 30, 2023
Subsequent Events [Abstract]  
Subsequent Events

Note 9 – Subsequent Events

 

The Company has evaluated events that have occurred after the balance sheet and through the date the financial statements were issued. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the financial statements, except as disclosed below.

 

Common Stock

 

Subsequent to September 30, 2023, a certain investor converted 4,000 shares of Series C Convertible Preferred Stock into 40,000 shares of the Company’s common stock.

 

Series B Convertible Preferred Stock

 

On October 30, 2023, the Company filed the Certificate of Designation with the Office of the Secretary of State for the State of Nevada, which established the Series B Convertible Preferred Stock. The Series B Convertible Preferred Stock has a stated value of $7.50 per share. The Series B Convertible Preferred Stock contains the following terms:

 

Conversion. Each share of Series B Convertible Preferred Stock is convertible into shares of common stock (subject to adjustment as provided in the related certificate of designation of preferences, rights and limitations) at the option of the holder at any time. The number of shares of common stock which are issuable upon conversion of the Series B Convertible Preferred Stock shall be equal to the number of shares of Series B Convertible Preferred Stock to be converted, multiplied by the stated value of $7.50 per share, divided by the conversion price in effect at the time of conversion, initially at $0.75 per share.

 

Mandatory Conversion. On the earlier of (i) October 30, 2027 or (ii) any of the Company’s treatment candidates receiving approval from the U.S. or European agencies, all of the outstanding shares of Series B Convertible Preferred Stock will automatically convert to common stock.

 

Liquidation Preference. In the event of the liquidation, dissolution or winding-up of the Company, the Series B Convertible Preferred Stock will rank senior to common stock and any other class of capital stock which does not expressly rank senior to or parri passu with the Series B Preferred Stock and will rank parri passu with the Series A and Series C Convertible Preferred Stock.

 

Voting Rights. The holders of Series B Convertible Preferred Stock have the right to vote on any matter submitted to a vote of holders of common stock, voting together with the common stock as one class, on an as-converted basis.

 

Dividends. Holders of shares of Series B Convertible Preferred Stock will be entitled to receive cumulative dividends at an annual rate of 10% of the stated value. Dividends are payable semi-annually on June 30 and December 31, commencing on December 31, 2023, either by (i) issuance of shares of common stock at the rate of $0.75 per share of common stock or (ii) in cash, at the Company’s option.

 

Beginning in October 2023, the Company entered into subscription agreements with certain accredited investors in a private placement offering. Each unit, which is sold at a price of $7.50 per unit, consists of one (1) share of Series B Convertible Preferred Stock and a five-year warrant to purchase a certain number of shares of common stock at an exercise price of $0.75 per share. For every $100,000 of units acquired, the investor will receive warrants to purchase an aggregate of 150,000 shares of common stock.

 

From October 2023 through the date of filing, the Company sold 60,000 units for gross proceeds of $450,000 and issued warrants to purchase 675,000 shares of the Company’s common stock.

 

Convertible Notes Payable - Related Parties

 

On November 8, 2023, the Company and the trust which holds the Soave Note entered into an amendment to the Soave Note whereby the parties agreed to extend the maturity date from October 28, 2023 to April 28, 2024.

 

On November 8, 2023, the Company and the trust which holds the Verstraete Note entered into an agreement to the Verstraete Note whereby the parties agreed to extend the maturity date from September 10, 2023 to March 10, 2024.

 

Conversion of Convertible Notes Payable

 

Subsequent to September 30, 2023, certain investors converted convertible notes payable with aggregate principal amount of $180,000 and aggregate accrued interest of $7,961 into an aggregate of 24,000 shares of Series C Convertible Preferred Stock and 10,614 shares of common stock.

 

MD Anderson Sponsored Research Agreements

 

On November 6, 2023, the Company and MD Anderson agreed to extend the Sponsored Research Agreement by one year to November 27, 2024. Under the amendment, the research budget for the additional year is approximately $1,296,000.
v3.23.3
Summary of Significant Accounting Policies (Policies)
 9 Months Ended
Sep. 30, 2023
Accounting Policies [Abstract]  
Stock-Based Compensation

Stock-Based Compensation

 

Because the Company’s common stock historically was not actively traded on a public market, the fair value of the Company’s restricted equity instruments is estimated by management based on observations of the sales prices of both restricted and freely tradable common stock, or instruments convertible into common stock. The Company obtained a third-party valuation of its common stock as of July 1, 2023 and December 31, 2022. The third-party valuation was performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. The estimates used by management are considered highly complex and subjective. The Company anticipates that once its shares become more actively traded, the use of such estimates will no longer be necessary to determine the fair value of its common stock.

 

The independent appraisal utilized the market approach, specifically the Backsolve method. The Backsolve method utilizes the economics from a direct transaction in the Company’s securities in determining fair value. The Backsolve method utilizes the Black-Scholes option pricing method (“OPM”) which allocated a probability-weighted present value to the Company’s convertible securities. The following steps were applied under the OPM:

 

  ●   Establishment of total enterprise or equity value;
  ●   Analysis of equity rights for each class of security;
  ●   Selection of appropriate model for valuation purposes;
  ●   Determination of key valuation inputs; and
  ●   Computation of the fair value of the subject security.

 

Under the OPM, it was determined the Company’s common stock had a fair value of $0.34 and $0.33 as of July 1, 2023 and December 31, 2022, respectively, which included a discount for lack of marketability of 25%. Furthermore, the independent appraisal determined the Company’s expected volatility was 80% as of July 1, 2023 and December 31, 2022 by evaluating historical and implied volatilities of guideline companies.

 
Loss Per Share

Loss Per Share

 

The Company computes basic net loss per share by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding for the period and excludes the effects of any potentially dilutive securities. Diluted earnings per share includes the dilution that would occur upon the exercise or conversion of all dilutive securities into common stock using the “treasury stock” and/or “if converted” methods, as applicable.

 

The common stock equivalents associated with the following securities are excluded from the calculation of weighted average dilutive common shares because their inclusion would have been anti-dilutive:

 

   September 30, 
   2023   2022 
         
Options   6,932,004    6,932,004 
Warrants   13,541,107    13,204,079 
Convertible notes [1] [2]   13,493,270    1,529,683 
Convertible preferred stock   18,743,053    18,249,713 
Total   52,709,434    39,915,479 

 

[1] Convertible notes are assumed to be converted at the rate of $0.75 per common share, which is the conversion price as of September 30, 2023 and 2022. However, such conversion rates are subject to adjustment under certain circumstances such as stock splits and stock dividends, which may result in the issuance of common shares greater than the amount indicated.

 

[2] As of September 30, 2022, excludes shares of common stock underlying convertible notes that are expected to become convertible into shares of Series B Convertible Preferred Stock since such stock had not been designated by the Company as of September 30, 2022.

 

 

CELL SOURCE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 
v3.23.3
Summary of Significant Accounting Policies (Tables)
 9 Months Ended
Sep. 30, 2023
Accounting Policies [Abstract]  
Schedule of Weighted Average Dilutive Common Shares

The common stock equivalents associated with the following securities are excluded from the calculation of weighted average dilutive common shares because their inclusion would have been anti-dilutive:

 

   September 30, 
   2023   2022 
         
Options   6,932,004    6,932,004 
Warrants   13,541,107    13,204,079 
Convertible notes [1] [2]   13,493,270    1,529,683 
Convertible preferred stock   18,743,053    18,249,713 
Total   52,709,434    39,915,479 

 

[1] Convertible notes are assumed to be converted at the rate of $0.75 per common share, which is the conversion price as of September 30, 2023 and 2022. However, such conversion rates are subject to adjustment under certain circumstances such as stock splits and stock dividends, which may result in the issuance of common shares greater than the amount indicated.

 

[2] As of September 30, 2022, excludes shares of common stock underlying convertible notes that are expected to become convertible into shares of Series B Convertible Preferred Stock since such stock had not been designated by the Company as of September 30, 2022.
v3.23.3
Fair Value (Tables)
 9 Months Ended
Sep. 30, 2023
Fair Value Disclosures [Abstract]  
Schedule of Changes in Fair Value of Liabilities Measured at Fair Value on a Recurring Basis

The following table provides a summary of the changes in fair value, including net transfers in and/or out, of all Level 3 liabilities measured at fair value on a recurring basis using unobservable inputs during the three and nine months ended September 30, 2023 and 2022:

 

   Accrued   Accrued     
   Interest   Compensation   Total 
             
Balance - January 1, 2023  $504,700   $59,220   $563,920 
                
Accrual of warrant obligation   40,167    -    40,167 
Change in fair value   (46,131)   (1,095)   (47,226)
                
Balance - March 31, 2023   498,736    58,125    556,861 
Accrual of common stock obligation   -    9,438    9,438 
Satisfaction of warrant obligation   (40,167)   -    (40,167)
Change in fair value   27,272    73    27,345 
                
Balance - June 30, 2023   485,841    67,636    553,477 
Change in fair value   47,554    2,204    49,758 
Balance - September 30, 2023  $533,395   $69,840   $603,235 

 

    Accrued    Accrued      
    Interest    Compensation    Total 
                
Balance - January 1, 2022  $402,344   $61,306   $463,650 
                
Change in fair value   33,609    (412)   33,197 
Accrual of warrant obligation   114,727    -    114,727 
                
Balance - March 31, 2022   550,680    60,894    611,574 
                
Change in fair value   29,658    74    29,732 
                
Balance - June 30, 2022   580,338    60,968    641,306 
Change in fair value   33,630    156    33,786 
Accrual of warrant obligation   58,985    -    58,985 
Satisfaction of warrant obligation   (114,727)   -    (114,727)
Balance - September 30, 2022  $558,226   $61,124   $619,350 
Schedule of Assumptions Used for Valuation of Level 3 Liabilities

In applying the Black-Scholes option pricing model utilized in the valuation of Level 3 liabilities, the Company used the following approximate assumptions:

 

   For the Three Months Ended   For the Nine Months Ended 
   September 30,   September 30, 
   2023   2022   2023   2022 
                 
Risk-free interest rate   4.60% - 4.70%    4.06% - 4.15%    3.60% - 4.70%    2.42% - 4.15% 
Expected term (years)   4.00 - 5.00    4.00 - 5.00    4.00-5.00    4.00 - 5.00 
Expected volatility   80%    90%    80%    90% 
Expected dividends   0.00%    0.00%    0.00%    0.00% 
v3.23.3
Going Concern and Management Plans (Details Narrative) - USD ($)
 1 Months Ended 3 Months Ended 9 Months Ended
Oct. 31, 2023
Sep. 30, 2023
Jun. 30, 2023
Mar. 31, 2023
Sep. 30, 2022
Jun. 30, 2022
Mar. 31, 2022
Sep. 30, 2023
Sep. 30, 2022
Nov. 14, 2023
Dec. 31, 2022
Dec. 31, 2021
Short-Term Debt [Line Items]                        
Net loss   $ 1,338,138 $ 1,241,604 $ 1,691,567 $ 1,252,306 $ 1,285,594 $ 1,292,575 $ 4,271,309 $ 3,830,475      
Cash used in operations               1,625,601 2,415,411      
Working capital deficiency   16,030,147 $ 14,945,759 $ 14,219,717 $ 11,953,970 $ 10,766,559 $ 9,997,117 16,030,147 $ 11,953,970   $ 12,633,895 $ 9,826,135
Accumulated deficit   40,617,485           40,617,485     $ 36,346,176  
Subsequent Event [Member]                        
Short-Term Debt [Line Items]                        
Proceeds from equity financing $ 450,000                      
Convertible Notes Payable [Member] | Current Liabilities [Member]                        
Short-Term Debt [Line Items]                        
Notes payable, principal amount   $ 5,246,129           $ 5,246,129        
Convertible Notes Payable [Member] | Current Liabilities [Member] | Subsequent Event [Member]                        
Short-Term Debt [Line Items]                        
Notes payable, principal amount                   $ 1,726,093    
v3.23.3
Schedule of Weighted Average Dilutive Common Shares (Details) - shares
 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Weighted average dilutive common shares 52,709,434 39,915,479
Options Held [Member]    
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Weighted average dilutive common shares 6,932,004 6,932,004
Warrant [Member]    
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Weighted average dilutive common shares 13,541,107 13,204,079
Convertible Notes Payable [Member]    
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Weighted average dilutive common shares [1],[2] 13,493,270 1,529,683
Convertible Preferred Stock [Member]    
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Weighted average dilutive common shares 18,743,053 18,249,713
[1] As of September 30, 2022, excludes shares of common stock underlying convertible notes that are expected to become convertible into shares of Series B Convertible Preferred Stock since such stock had not been designated by the Company as of September 30, 2022.
[2] Convertible notes are assumed to be converted at the rate of $0.75 per common share, which is the conversion price as of September 30, 2023 and 2022. However, such conversion rates are subject to adjustment under certain circumstances such as stock splits and stock dividends, which may result in the issuance of common shares greater than the amount indicated.
v3.23.3
Schedule of Weighted Average Dilutive Common Shares Anti-dilutive (Details) (Parenthetical) - $ / shares
Sep. 30, 2023
Sep. 30, 2022
Convertible Notes Payable [Member]    
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Conversion price per share $ 0.75 $ 0.75
v3.23.3
Summary of Significant Accounting Policies (Details Narrative)
 12 Months Ended
Jul. 01, 2023
$ / shares
Dec. 31, 2022
$ / shares
Measurement Input, Discount for Lack of Marketability [Member]    
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]    
Options pricing method discount rate 0.25 0.25
Measurement Input, Option Volatility [Member]    
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]    
Options pricing method discount rate 0.80 0.80
Option Pricing Method [Member]    
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]    
Common stock fair value per share $ 0.34 $ 0.33
v3.23.3
Schedule of Changes in Fair Value of Liabilities Measured at Fair Value on a Recurring Basis (Details) - USD ($)
 3 Months Ended
Sep. 30, 2023
Jun. 30, 2023
Mar. 31, 2023
Sep. 30, 2022
Jun. 30, 2022
Mar. 31, 2022
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]            
Beginning balance $ 553,477 $ 556,861 $ 563,920 $ 641,306 $ 611,574 $ 463,650
Accrual of warrant obligation     40,167 58,985   114,727
Change in fair value 49,758 27,345 (47,226) 33,786 29,732 33,197
Accrual of common stock obligation   9,438        
Satisfaction of warrant obligation   (40,167)   (114,727)    
Ending balance 603,235 553,477 556,861 619,350 641,306 611,574
Accrued Interest [Member] | Fair Value, Inputs, Level 3 [Member] | Fair Value, Recurring [Member]            
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]            
Beginning balance 485,841 498,736 504,700 580,338 550,680 402,344
Accrual of warrant obligation     40,167 58,985   114,727
Change in fair value 47,554 27,272 (46,131) 33,630 29,658 33,609
Accrual of common stock obligation          
Satisfaction of warrant obligation   (40,167)   (114,727)    
Ending balance 533,395 485,841 498,736 558,226 580,338 550,680
Accrued Compensation [Member] | Fair Value, Inputs, Level 3 [Member] | Fair Value, Recurring [Member]            
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]            
Beginning balance 67,636 58,125 59,220 60,968 60,894 61,306
Accrual of warrant obligation      
Change in fair value 2,204 73 (1,095) 156 74 (412)
Accrual of common stock obligation   9,438        
Satisfaction of warrant obligation        
Ending balance $ 69,840 $ 67,636 $ 58,125 $ 61,124 $ 60,968 $ 60,894
v3.23.3
Schedule of Assumptions Used for Valuation of Level 3 Liabilities (Details)
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Measurement Input, Risk Free Interest Rate [Member] | Minimum [Member]        
Fair Value Measurement Inputs and Valuation Techniques [Line Items]        
Derivative liabilities , Risk-free interest rate 4.60% 4.06% 3.60% 2.42%
Measurement Input, Risk Free Interest Rate [Member] | Maximum [Member]        
Fair Value Measurement Inputs and Valuation Techniques [Line Items]        
Derivative liabilities , Risk-free interest rate 4.70% 4.15% 4.70% 4.15%
Measurement Input, Expected Term [Member] | Minimum [Member]        
Fair Value Measurement Inputs and Valuation Techniques [Line Items]        
Derivative liability, Expected term (years) 4 years 4 years 4 years 4 years
Measurement Input, Expected Term [Member] | Maximum [Member]        
Fair Value Measurement Inputs and Valuation Techniques [Line Items]        
Derivative liability, Expected term (years) 5 years 5 years 5 years 5 years
Measurement Input, Price Volatility [Member]        
Fair Value Measurement Inputs and Valuation Techniques [Line Items]        
Derivative liability, Expected volatility 80.00% 90.00% 80.00% 90.00%
Measurement Input, Expected Dividend Rate [Member]        
Fair Value Measurement Inputs and Valuation Techniques [Line Items]        
Derivative liability, Expected dividends 0.00% 0.00% 0.00% 0.00%
v3.23.3
Fair Value (Details Narrative) - USD ($)
 9 Months Ended 12 Months Ended
Sep. 30, 2023
Dec. 31, 2022
Fair Value Disclosures [Abstract]    
Obilgation to issue common stock to service providers, shares 183,095 154,495
Obilgation to issue common stock to service providers, value $ 62,252 $ 50,983
Fair value per share of common stock $ 0.34 $ 0.33
v3.23.3
Notes Payable (Details Narrative) - USD ($)
 1 Months Ended 3 Months Ended 9 Months Ended
Nov. 08, 2023
Jun. 12, 2023
Sep. 30, 2023
Aug. 31, 2023
Jul. 31, 2023
May 31, 2023
Apr. 30, 2023
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Nov. 14, 2023
Oct. 31, 2023
Oct. 30, 2023
Apr. 28, 2023
Feb. 28, 2023
Dec. 31, 2022
Mar. 10, 2022
Short-Term Debt [Line Items]                                    
Gain on extinguishment               $ 41,920              
Mr. Verstraete [Member]                                    
Short-Term Debt [Line Items]                                    
Warrants term                                   5 years
Mr. Verstraete [Member]                                    
Short-Term Debt [Line Items]                                    
Outstanding principal balance     $ 3,590,036         $ 3,590,036   $ 3,590,036                
Conversion price                                   $ 7.50
Warrants to purchase common stock                                   400,000
Exercise price of warrants                                   $ 1.25
Share price                                   $ 0.75
Loan maximum borrowing capacity                                   $ 6,000,000
Laon amount                                   $ 2,500,000
Interest rate                                   10.00%
Advances payable                               $ 413,018   $ 500,000
Additional advances     $ 105,000 $ 72,018 $ 150,000 $ 100,000 $ 250,000                      
Common Stock [Member]                                    
Short-Term Debt [Line Items]                                    
Debt conversion, converted shares                   34,979                
Warrant [Member] | Mr. Verstraete [Member]                                    
Short-Term Debt [Line Items]                                    
Warrants to purchase common stock     872,029         872,029   872,029                
Exercise price of warrants     $ 1.25         $ 1.25   $ 1.25                
Fair value of warrants                   $ 106,973                
Warrants term     5 years         5 years   5 years                
Notes Payable [Member]                                    
Short-Term Debt [Line Items]                                    
Outstanding principal balance     $ 250,000         $ 250,000   $ 250,000                
Accrued interest     599,427         599,427   599,427                
Interest expense               262,091 179,954 635,143 540,081              
Amortization of debt discount               80,667 $ 56,309 361,692 $ 187,802              
Accrued interest and penalties     2,405,635         2,405,635   2,405,635             $ 1,796,736  
Convertible Notes Payable One [Member]                                    
Short-Term Debt [Line Items]                                    
Outstanding principal balance     $ 494,960         $ 494,960   $ 494,960                
Maturity date, beginning                   Jul. 03, 2023                
Maturity date, ending                   Feb. 17, 2024                
Accrue interest rate     8.00%         8.00%   8.00%                
Conversion price     $ 7.50         $ 7.50   $ 7.50                
Warrants to purchase common stock     396,000         396,000   396,000                
Exercise price of warrants     $ 1.25         $ 1.25   $ 1.25                
Fair value of warrants                   $ 48,164                
Convertible Notes Payable Two [Member]                                    
Short-Term Debt [Line Items]                                    
Outstanding principal balance     $ 425,000         $ 425,000   $ 425,000                
Maturity date, beginning                   Nov. 08, 2023                
Maturity date, ending                   Jul. 28, 2024                
Accrue interest rate     8.00%         8.00%   8.00%                
Conversion price     $ 0.75         $ 0.75   $ 0.75                
Warrants to purchase common stock     212,500         212,500   212,500                
Exercise price of warrants     $ 1.25         $ 1.25   $ 1.25                
Fair value of warrants                   $ 26,700                
Convertible Notes Payable Three [Member]                                    
Short-Term Debt [Line Items]                                    
Conversion price     7.50         7.50   $ 7.50                
Debt conversion, original debt, amount                   $ 519,960                
Debt conversion accrued interest                   $ 26,234                
Share price     $ 0.75         $ 0.75   $ 0.75                
Convertible Notes Payable Three [Member] | Common Stock [Member]                                    
Short-Term Debt [Line Items]                                    
Debt conversion, converted shares                   34,979                
Convertible Notes Payable Three [Member] | Series C Preferred Stock [Member]                                    
Short-Term Debt [Line Items]                                    
Debt conversion, converted shares                   69,334                
Soave Note [Member]                                    
Short-Term Debt [Line Items]                                    
Outstanding principal balance     $ 3,500,000         $ 3,500,000   $ 3,500,000         $ 6,000,000      
Maturity date, beginning Oct. 28, 2023                                  
Maturity date, ending Apr. 28, 2024                                  
Subsequent Event [Member] | Common Stock [Member]                                    
Short-Term Debt [Line Items]                                    
Warrants to purchase common stock                         150,000          
Exercise price of warrants                         $ 0.75          
Subsequent Event [Member] | Warrant [Member]                                    
Short-Term Debt [Line Items]                                    
Warrants to purchase common stock                           675,000        
Convertible Notes Payable [Member] | Current Liabilities [Member]                                    
Short-Term Debt [Line Items]                                    
Outstanding principal balance     $ 5,246,129         5,246,129   $ 5,246,129                
Convertible Notes Payable [Member] | Current Liabilities [Member] | Subsequent Event [Member]                                    
Short-Term Debt [Line Items]                                    
Outstanding principal balance                       $ 1,726,093            
Loans Payable [Member]                                    
Short-Term Debt [Line Items]                                    
Outstanding principal balance   $ 100,000                                
Number of stock issued   176,000                                
Gain on extinguishment               $ 41,920                    
v3.23.3
Stockholders’ Deficiency (Details Narrative) - USD ($)
 3 Months Ended 9 Months Ended
Aug. 09, 2023
May 25, 2023
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Sep. 21, 2023
Sep. 20, 2023
Jul. 26, 2023
Dec. 31, 2022
Class of Stock [Line Items]                    
Preferred stock, shares authorized     10,000,000   10,000,000         10,000,000
Common stock, shares authorized     200,000,000   200,000,000         200,000,000
Common stock par value     $ 0.001   $ 0.001         $ 0.001
Preferred stock shares par value     $ 0.001   $ 0.001         $ 0.001
Preferred stock voting rights         one vote per share          
Stockholder's deficiency     $ 23,758 $ 74,600 $ 64,358 $ 79,972        
Accrued compensation     372 156 649 182        
Former Director [Member]                    
Class of Stock [Line Items]                    
Warrants to purchase common stock 160,000                  
Exercise price of warrants $ 0.75                  
Fair value of warrants $ 23,758                  
Warrant [Member]                    
Class of Stock [Line Items]                    
Warrant vested   3 years 9 months                
Warrants to purchase common stock   300,000                
Exercise price of warrants   $ 0.75                
Fair value of warrants   $ 40,600                
Share-Based Payment Arrangement, Option [Member]                    
Class of Stock [Line Items]                    
Stock-based compensation expense     25,962 74,756 404,978 79,790        
Consulting Services [Member]                    
Class of Stock [Line Items]                    
Stock-based compensation expense     1,832   341,269          
Stockholder's deficiency         330,000          
Accrued compensation         $ 11,269          
Promissory Note [Member]                    
Class of Stock [Line Items]                    
Shares issued in notes conversion         176,000          
Preferred Stock [Member]                    
Class of Stock [Line Items]                    
Additional accrued dividend payable     309,150 $ 299,827 $ 907,516 $ 869,715        
Accrued dividend payable     310,630   $ 310,630         $ 5,217
Common Stock [Member]                    
Class of Stock [Line Items]                    
Shares issued in notes conversion         34,979          
Warrant [Member]                    
Class of Stock [Line Items]                    
Stock-based compensation expense     $ 24,130   $ 63,709          
Director [Member]                    
Class of Stock [Line Items]                    
Warrants to purchase common stock     1,881,500   1,881,500         1,656,500
Exercise price of warrants     $ 0.75   $ 0.75         $ 0.75
Consultant [Member]                    
Class of Stock [Line Items]                    
Number of options vested         1,000,000          
Number of options granted, value         $ 330,000          
Series A Convertible Preferred Stock [Member]                    
Class of Stock [Line Items]                    
Preferred stock, shares authorized     1,350,000   1,350,000       1,335,000 1,350,000
Series C Convertible Preferred Stock [Member]                    
Class of Stock [Line Items]                    
Preferred stock, shares authorized     1,000,000   1,000,000       500,000 1,000,000
Number of shares of common stock         40,000          
Shares issued in notes conversion         69,334          
Converted shares         4,000          
Series C Convertible Preferred Stock [Member] | Common Stock [Member]                    
Class of Stock [Line Items]                    
Number of shares of common stock         400,000          
Converted shares         40,000          
Series B Convertible Preferred Stock [Member]                    
Class of Stock [Line Items]                    
Preferred stock, shares authorized     2,000,000   2,000,000         2,000,000
Series B Convertible Preferred Stock [Member] | Director [Member]                    
Class of Stock [Line Items]                    
Preferred stock, shares authorized             10,000,000 2,000,000    
Preferred stock shares par value             $ 0.001      
Series A and C Convertible Preferred Stock [Member]                    
Class of Stock [Line Items]                    
Common stock par value     $ 0.75   $ 0.75          
Number of shares of common stock         802,880          
Aggregate value         $ 602,102          
v3.23.3
Related Party Transactions (Details Narrative) - Director [Member] - USD ($)
Sep. 30, 2023
Dec. 31, 2022
Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items]    
Warrants issued to purchase for common stock 1,881,500 1,656,500
Warrant exercise price per share $ 0.75 $ 0.75
Loan amount $ 459,000 $ 459,000
Accrued fair value of obligations $ 322,813 $ 308,117
v3.23.3
Commitments and Contingencies (Details Narrative) - USD ($)
 1 Months Ended 3 Months Ended 9 Months Ended 12 Months Ended
Aug. 31, 2023
Oct. 31, 2019
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Dec. 31, 2022
Dec. 31, 2021
Aug. 31, 2022
Jan. 31, 2019
Defined Benefit Plan Disclosure [Line Items]                    
Litigation, sought value   $ 267,680                
Repayments of notes payable         $ 146,912        
Repayments of related party debt             $ 146,912      
Settlement expense $ 38,838                  
Loss contingency liability     $ 106,000   $ 106,000          
Common Stock, Shares, Issued     38,495,617   38,495,617   36,081,758   360,000  
Court Officer [Member]                    
Defined Benefit Plan Disclosure [Line Items]                    
Repayments of notes payable               $ 103,088    
Third Party [Member]                    
Defined Benefit Plan Disclosure [Line Items]                    
Repayments of notes payable               $ 250,000    
Promissory Note [Member]                    
Defined Benefit Plan Disclosure [Line Items]                    
Debt instrument face amount                   $ 250,000
Yeda Research and License Agreement [Member]                    
Defined Benefit Plan Disclosure [Line Items]                    
Accrued research and development expenses     $ 58,000   $ 58,000   $ 14,500      
MD Anderson Sponsored Research Agreements [Member]                    
Defined Benefit Plan Disclosure [Line Items]                    
Research and development expense     429,505 $ 429,505 1,082,193 1,394,020        
Accrued research and development expenses             0      
Related Party [Member]                    
Defined Benefit Plan Disclosure [Line Items]                    
Research and development expense     14,500 $ 14,500 43,500 $ 43,500        
Accrued research and development expenses     $ 130,000   $ 130,000   $ 86,500      
v3.23.3
Subsequent Events (Details Narrative) - USD ($)
 1 Months Ended 9 Months Ended
Nov. 08, 2023
Nov. 06, 2023
Oct. 31, 2023
Oct. 31, 2023
Sep. 30, 2023
Oct. 30, 2023
Oct. 25, 2023
Oct. 01, 2023
Dec. 31, 2022
Subsequent Event [Line Items]                  
Preferred stock, stated value         $ 0.001       $ 0.001
MD Anderson Sponsored Research Agreements [Member]                  
Subsequent Event [Line Items]                  
Research budget   $ 1,296,000              
Soave Note [Member]                  
Subsequent Event [Line Items]                  
Maturity date, ending Oct. 28, 2023                
Maturity date, ending Apr. 28, 2024                
Verstraete Note [Member]                  
Subsequent Event [Line Items]                  
Maturity date, ending Sep. 10, 2023                
Maturity date, ending Mar. 10, 2024                
Common Stock [Member]                  
Subsequent Event [Line Items]                  
Debt Conversion, Converted Instrument, Shares Issued         34,979        
Subsequent Event [Member]                  
Subsequent Event [Line Items]                  
Number of shares issued     60,000            
Proceeds from issuance of common stock     $ 450,000            
Subsequent Event [Member] | Investor [Member]                  
Subsequent Event [Line Items]                  
Payments to acquire businesses, gross     $ 100,000            
Subsequent Event [Member] | Investors [Member] | Convertible Notes Payable [Member]                  
Subsequent Event [Line Items]                  
Debt Conversion, Original Debt, Amount       $ 180,000          
Accrued interest               $ 7,961  
Subsequent Event [Member] | Common Stock [Member]                  
Subsequent Event [Line Items]                  
Exercise price     $ 0.75 $ 0.75          
Warrant purchase shares     150,000 150,000          
Subsequent Event [Member] | Common Stock [Member] | Investors [Member] | Convertible Notes Payable [Member]                  
Subsequent Event [Line Items]                  
Debt Conversion, Converted Instrument, Shares Issued       10,614          
Subsequent Event [Member] | Warrant [Member]                  
Subsequent Event [Line Items]                  
Warrant purchase shares           675,000      
Series C Convertible Preferred Stock [Member]                  
Subsequent Event [Line Items]                  
Converted shares         4,000        
Number of shares of common stock         40,000        
Debt Conversion, Converted Instrument, Shares Issued         69,334        
Series C Convertible Preferred Stock [Member] | Common Stock [Member]                  
Subsequent Event [Line Items]                  
Converted shares         40,000        
Number of shares of common stock         400,000        
Series C Convertible Preferred Stock [Member] | Subsequent Event [Member] | Investors [Member] | Convertible Notes Payable [Member]                  
Subsequent Event [Line Items]                  
Debt Conversion, Converted Instrument, Shares Issued       24,000          
Series B Convertible Preferred Stock [Member] | Subsequent Event [Member]                  
Subsequent Event [Line Items]                  
Preferred stock, stated value           $ 7.50      
Issue price     $ 7.50 $ 7.50          
Convertible Preferred Stock [Member] | Subsequent Event [Member]                  
Subsequent Event [Line Items]                  
Conversion price per share           $ 0.75 $ 0.75    
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