x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Nevada
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32-0379665
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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5 Kineret Street
Bnei Brak, Israel
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5126237
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
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o
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Accelerated filer
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o
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Non-accelerated filer
(Do not check if a smaller reporting company)
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o
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Smaller reporting company
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x
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PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements.
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1 | |
Condensed Consolidated Balance Sheets as of
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June 30, 2016 (Unaudited) and December 31, 2015
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1
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Unaudited Condensed Consolidated Statements of Operations for the
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Three and Six Months Ended June 30, 2016 and 2015
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2
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Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Deficiency for the
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Six Months Ended June 30, 2016
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3
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Unaudited Condensed Consolidated Statements of Cash Flows for the
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Six Months Ended June 30, 2016 and 2015
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4
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Notes to Unaudited Condensed Consolidated Financial Statements
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5
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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15
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
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21
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Item 4. Controls and Procedures.
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21
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PART II - OTHER INFORMATION
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Item 1. Legal Proceedings.
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22
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Item 1A. Risk Factors.
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22
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
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22
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Item 3. Defaults Upon Senior Securities.
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22
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Item 4. Mine Safety Disclosures.
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22
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Item 5. Other Information.
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22
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Item 6. Exhibits.
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22
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SIGNATURES
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23
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June 30,
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December 31,
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|||||||
2016
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2015
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|||||||
(Unaudited)
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||||||||
Assets
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||||||||
Current Assets:
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||||||||
Cash
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$ | 3,736 | $ | 6,944 | ||||
Prepaid expenses
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108,077 | 71,882 | ||||||
Other current assets
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135,989 | 134,736 | ||||||
Total Current Assets | 247,802 | 213,562 | ||||||
Property and equipment, net
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837 | 1,267 | ||||||
Total Assets | $ | 248,639 | $ | 214,829 | ||||
Liabilities and Stockholders' Deficiency
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||||||||
Current Liabilities:
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||||||||
Accounts payable and accrued expenses, current portion
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$ | 727,058 | $ | 586,485 | ||||
Accounts payable and accrued expenses - related parties
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208,798 | 214,629 | ||||||
Accrued compensation
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465,703 | 324,672 | ||||||
Derivative liabilities
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3,508,850 | 3,279,600 | ||||||
Notes payable, net of debt discount of $35,600 and $41,600
at June 30, 2016 and December 31, 2015, respectively
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1,367,400 | 708,400 | ||||||
Notes payable - related party, net of debt discount of $1,900 and $19,300
at June 30, 2016 and December 31, 2015, respectively
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148,100 | 180,700 | ||||||
Convertible notes payable, current portion, net of debt discount of $286,807
and $214,550 at June 30, 2016 and December 31, 2015, respectively
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690,693 | 180,450 | ||||||
Advances payable
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200,000 | 450,000 | ||||||
Total Current Liabilities | 7,316,602 | 5,924,936 | ||||||
Convertible notes payable, non-current portion, net of debt discount of $241,400
and $288,832 at June 30, 2016 and December 31, 2015, respectively
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148,600 | 43,668 | ||||||
Accounts payable and accrued expenses, non-current portion
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15,384 | 4,474 | ||||||
Total Liabilities | 7,480,586 | 5,973,078 | ||||||
Commitments and contingencies
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||||||||
Stockholders' Deficiency:
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||||||||
Preferred stock, $0.001 par value; 10,000,000 shares authorized;
no shares issued and outstanding at June 30, 2016 and December 31, 2015
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- | - | ||||||
Common stock, $0.001 par value; 200,000,000 shares authorized;
23,929,256 shares issued and outstanding at June 30, 2016 and December 31, 2015
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23,929 | 23,929 | ||||||
Additional paid-in capital
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4,767,947 | 4,720,417 | ||||||
Accumulated deficit
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(12,023,823 | ) | (10,502,595 | ) | ||||
Total Stockholders' Deficiency | (7,231,947 | ) | (5,758,249 | ) | ||||
Total Liabilities and Stockholders' Deficiency | $ | 248,639 | $ | 214,829 |
For the Three Months Ended
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For The Six Months Ended
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|||||||||||||||
June 30,
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June 30,
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|||||||||||||||
2016
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2015
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2016
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2015
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|||||||||||||
Revenues
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$ | - | $ | - | $ | - | $ | - | ||||||||
Operating Expenses
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||||||||||||||||
Research and development
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110,167 | 124,472 | 223,588 | 177,219 | ||||||||||||
Research and development - related party
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198,820 | 200,000 | 398,820 | 400,000 | ||||||||||||
Selling, general and administrative
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221,179 | 243,261 | 552,437 | 576,778 | ||||||||||||
Total Operating Expenses | 530,166 | 567,733 | 1,174,845 | 1,153,997 | ||||||||||||
Loss From Operations | (530,166 | ) | (567,733 | ) | (1,174,845 | ) | (1,153,997 | ) | ||||||||
Other Income (Expense)
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||||||||||||||||
Change in fair value of derivative liabilities
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209,900 | 79,200 | 370,850 | 112,700 | ||||||||||||
Interest expense
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(55,232 | ) | (5,277 | ) | (118,557 | ) | (6,756 | ) | ||||||||
Amortization of debt discount
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(325,288 | ) | (77,100 | ) | (598,676 | ) | (79,500 | ) | ||||||||
Total Other (Expense) Income | (170,620 | ) | (3,177 | ) | (346,383 | ) | 26,444 | |||||||||
Net Loss
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$ | (700,786 | ) | $ | (570,910 | ) | $ | (1,521,228 | ) | $ | (1,127,553 | ) | ||||
Net Loss Per Share
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||||||||||||||||
- Basic and Diluted
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$ | (0.03 | ) | $ | (0.02 | ) | $ | (0.06 | ) | $ | (0.04 | ) | ||||
Weighted Average Number of
Common Shares Outstanding
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||||||||||||||||
- Basic and Diluted
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25,973,091 | 25,623,091 | 25,973,091 | 25,623,091 |
Additional
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||||||||||||||||||||
Common Stock
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Paid-In
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Accumulated
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||||||||||||||||||
Shares
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Amount
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Capital
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Deficit
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Total
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||||||||||||||||
Balance - December 31, 2015
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23,929,256 | $ | 23,929 | $ | 4,720,417 | $ | (10,502,595 | ) | $ | (5,758,249 | ) | |||||||||
Stock-based compensation:
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||||||||||||||||||||
- warrants
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- | - | 47,530 | - | 47,530 | |||||||||||||||
Net loss
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- | - | - | (1,521,228 | ) | (1,521,228 | ) | |||||||||||||
Balance - June 30, 2016
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23,929,256 | $ | 23,929 | $ | 4,767,947 | $ | (12,023,823 | ) | $ | (7,231,947 | ) |
For The Six Months Ended
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||||||||
June 30,
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||||||||
2016
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2015
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|||||||
Cash Flows From Operating Activities
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||||||||
Net loss
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$ | (1,521,228 | ) | $ | (1,127,553 | ) | ||
Adjustments to reconcile net loss to net cash
used in operating activities:
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||||||||
Change in fair value of derivative liabilities
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(370,850 | ) | (112,700 | ) | ||||
Amortization of debt discount
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598,676 | 79,500 | ||||||
Depreciation
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430 | 430 | ||||||
Stock-based compensation:
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||||||||
Warrants
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91,962 | (33,400 | ) | |||||
Changes in operating assets and liabilities:
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||||||||
Prepaid expenses
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(36,195 | ) | (68,395 | ) | ||||
Other current assets
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(1,253 | ) | (42,701 | ) | ||||
Accounts payable and accrued expenses
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286,825 | 190,515 | ||||||
Net Cash Used in Operating Activities
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(951,633 | ) | (1,114,304 | ) | ||||
Cash Flows From Financing Activities
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||||||||
Proceeds from issuance of notes payable
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1,043,000 | 750,000 | ||||||
Repayment of note payable, related party
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(50,000 | ) | - | |||||
Payment of debt issuance costs
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(44,575 | ) | - | |||||
Proceeds from cash advances
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- | 450,000 | ||||||
Net Cash Provided by Financing Activities
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948,425 | 1,200,000 | ||||||
Net (Decrease) Increase In Cash
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(3,208 | ) | 85,696 | |||||
Cash - Beginning
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6,944 | 19,480 | ||||||
Cash - Ending
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$ | 3,736 | $ | 105,176 | ||||
Supplemental Disclosures of Cash Flow Information:
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||||||||
Non-cash investing and financing transactions:
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||||||||
Warrants and conversion options issued in
connection with issuance of notes payable
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$ | 600,100 | $ | 265,800 | ||||
Advance exchanged for a convertible note payable
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$ | 250,000 | $ | - |
June 30,
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||||||||
2016
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2015
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|||||||
Warrants
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11,374,324 | 7,629,324 | ||||||
Convertible notes
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3,203,450 | - | ||||||
Total
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14,577,774 | 7,629,324 |
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Quoted Prices
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|||||||||||||||
In Active
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Significant
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|||||||||||||||
Markets for
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Other
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Significant
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||||||||||||||
Identical
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Observable
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Unobservable
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||||||||||||||
Liabilities
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Inputs
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Inputs
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||||||||||||||
Total
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(Level 1)
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(Level 2)
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(Level 3)
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|||||||||||||
Accrued compensation
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$ | 104,431 | $ | - | $ | - | $ | 104,431 | ||||||||
Derivative liability
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3,508,850 | - | - | 3,508,850 | ||||||||||||
Balance - June 30, 2016
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$ | 3,613,281 | $ | - | $ | - | $ | 3,613,281 | ||||||||
Accrued compensation
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$ | 60,000 | $ | - | $ | - | $ | 60,000 | ||||||||
Derivative liability
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3,279,600 | - | - | 3,279,600 | ||||||||||||
Balance - December 31, 2015
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$ | 3,339,600 | $ | - | $ | - | $ | 3,339,600 |
For the Three Months Ended
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For the Six Months Ended
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|||||||||||||||
June 30,
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June 30,
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|||||||||||||||
2016
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2015
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2016
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2015
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|||||||||||||
Risk-free interest rate
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0.26% - 0.86 | % | 1.01% - 1.63 | % | 0.21% - 1.04 | % | 1.01% - 1.63 | % | ||||||||
Expected term (years)
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0.04 - 4.19 | 3.33 - 4.37 | 0.04 - 5.00 | 3.33 - 4.62 | ||||||||||||
Expected volatility
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152 | % | 166% - 172 | % | 152% - 159 | % | 166% - 172 | % | ||||||||
Expected dividends
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0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % |
Accrued
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Derivative
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|||||||||||
Compensation
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Liability
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Total
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||||||||||
Balance - December 31, 2015
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$ | 60,000 | $ | 3,279,600 | $ | 3,339,600 | ||||||
Change in fair value
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(674 | ) | (370,850 | ) | (371,524 | ) | ||||||
Issuance of warrants and conversion options
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- | 600,100 | 600,100 | |||||||||
Accrual of obligations
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45,105 | - | 45,105 | |||||||||
Balance - June 30, 2016
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$ | 104,431 | $ | 3,508,850 | $ | 3,613,281 |
June 30,
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December 31,
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|||||||
2016
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2015
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|||||||
(unaudited)
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||||||||
Accrued research and development
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$ | 117,949 | $ | 186,815 | ||||
Accrued legal fees
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194,940 | 216,956 | ||||||
Accrued other professional fees
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100,502 | 75,164 | ||||||
Accrued director compensation
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12,000 | 12,000 | ||||||
Accrued Scientified Advisory Board compensation
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57,000 | 31,000 | ||||||
Accrued interest, current portion
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130,660 | 25,139 | ||||||
Other accrued expenses
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114,007 | 39,411 | ||||||
Accounts payable and accrued expenses, current portion
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727,058 | 586,485 | ||||||
Non-current portion of accrued interest
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15,384 | 4,474 | ||||||
Total accounts payable and accrued expenses
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$ | 742,442 | $ | 590,959 |
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1.
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Complete development of human treatment protocol (2-5 years)
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2.
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Apply for and receive approval to commence human trials (9-18 months)
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3.
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Recruit patients (1-6 months)
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4.
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Conduct Phase I trials showing safety of product (1-2 years)
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5.
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Apply for and receive approval to conduct trials showing product efficacy (6-12 months)
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6.
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Data collecting and analysis (6-12 months)
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7.
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Conduct Phase II efficacy trials (2-3 years)
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8.
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Data collecting and analysis (6-12 months)
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9.
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Apply for and receive approval to conduct trials showing efficacy in larger numbers of patients (6-12 months)
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10.
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Conduct Phase III efficacy trials with larger numbers of patients (2-4 years)
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11.
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Data collecting and analysis (6-12 months)
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12.
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Apply for and receive approval for production scale manufacturing facilities (6-12 months)
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13.
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Contract third party or establish own production facilities (6-30 months)
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14.
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Contract third party or establish own distribution platform (6-18 months)
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15.
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Commence manufacturing and distribution (6-12 months)
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For The Three Months Ended
|
||||||||
June 30,
|
||||||||
2016
|
2015
|
|||||||
Revenues
|
$ | - | $ | - | ||||
Operating Expenses
|
||||||||
Research and development
|
110,167 | 124,472 | ||||||
Research and development - related party
|
198,820 | 200,000 | ||||||
Selling, general and administrative
|
221,179 | 243,261 | ||||||
Total Operating Expenses | 530,166 | 567,733 | ||||||
Loss From Operations | (530,166 | ) | (567,733 | ) | ||||
Other Income (Expense)
|
||||||||
Change in fair value of derivative liabilities
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209,900 | 79,200 | ||||||
Interest expense
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(55,232 | ) | (5,277 | ) | ||||
Amortization of debt discount
|
(325,288 | ) | (77,100 | ) | ||||
Total Other Expense | (170,620 | ) | (3,177 | ) | ||||
Net Loss
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$ | (700,786 | ) | $ | (570,910 | ) |
For The Six Months Ended
|
||||||||
June 30,
|
||||||||
2016
|
2015
|
|||||||
Revenues
|
$ | - | $ | - | ||||
Operating Expenses
|
||||||||
Research and development
|
223,588 | 177,219 | ||||||
Research and development - related party
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398,820 | 400,000 | ||||||
Selling, general and administrative
|
552,437 | 576,778 | ||||||
Total Operating Expenses | 1,174,845 | 1,153,997 | ||||||
Loss From Operations | (1,174,845 | ) | (1,153,997 | ) | ||||
Other Income (Expense)
|
||||||||
Change in fair value of derivative liabilities
|
370,850 | 112,700 | ||||||
Interest expense
|
(118,557 | ) | (6,756 | ) | ||||
Amortization of debt discount
|
(598,676 | ) | (79,500 | ) | ||||
Total Other (Expense) Income | (346,383 | ) | 26,444 | |||||
Net Loss
|
$ | (1,521,228 | ) | $ | (1,127,553 | ) |
June 30,
|
December 31,
|
|||||||
2016
|
2015
|
|||||||
(unaudited)
|
||||||||
Cash
|
$ | 3,736 | $ | 6,944 | ||||
Working capital deficiency
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$ | (7,068,800 | ) | $ | (5,711,374 | ) |
Exhibit
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||||
Number
|
Description
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|||
10.1
|
*
|
Form of May 2016 Note
|
||
31.1
|
*
|
Certificate of the Chief Executive Officer
|
||
31.2
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*
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Certificate of the Chief Financial Officer
|
||
32
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**
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Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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||
101.INS
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*
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XBRL Instance Document
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||
101.SCH
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*
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XBRL Schema Document
|
||
101.CAL
|
*
|
XBRL Calculation Linkbase Document
|
||
101.DEF
|
*
|
XBRL Definition Linkbase Document
|
||
101.LAB
|
*
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XBRL Label Linkbase Document
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||
101.PRE
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*
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XBRL Presentation Linkbase Document
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||
* |
Filed herewith
|
|
**
|
This certification is being furnished and shall not be deemed "filed" with the SEC for purposes of Section 18 of the Exchange Act, or otherwise be subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.
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CELL SOURCE, INC.
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Dated: August 15, 2016
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By:
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/s/ Itamar Shimrat
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Name: Itamar Shimrat
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|||
Title: Chief Executive Officer and
Chief Financial Officer (Principal
Executive, Financial and Accounting
Officer)
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US$53,000
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May 10, 2016
|
MAKER:
|
HOLDER:
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CELL SOURCE, INC.
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MAIN STREET RESTAURANT ASSOCIATES INC.
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By:
|
By:
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|
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Name: Itamar Shimrat
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Name: Ligor Shubashi
|
||
Title: CEO
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Title: Secretary
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1.
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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-15(e) 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.
|
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-15(e) 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: August 15, 2016
|
By:
|
/s/ Itamar Shimrat
|
Itamar Shimrat
|
||
Chief Executive Officer and Chief Financial Officer
|
||
(Principal Executive and Financial Officer)
|