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 March 31, 2020

 

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 x      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 x      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

x  

Smaller reporting company

x

 

 

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 x

 

As of May 12, 2020, the registrant had 27,329,933 shares of $0.001 par value common stock outstanding.

  

 

 

CELL SOURCE, INC. AND SUBSIDIARY

 

FORM 10-Q

 

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2020

 

TABLE OF CONTENTS

 

PART I - FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

Item 1.

Financial Statements.

 

 

3

 

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2020 (Unaudited) and December 31, 2019

 

 

3

 

 

 

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2020 and 2019

 

 

4

 

 

 

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Deficiency for the Three Months Ended March 31, 2020 and 2019

 

 

5

 

 

 

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019

 

 

6

 

 

 

 

 

 

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

 

7

 

 

 

 

 

 

 

Item 2.

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

 

 

13

 

 

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

 

 

16

 

 

 

 

 

 

 

Item 4.

Controls and Procedures.

 

 

16

 

 

 

 

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

 

 

 

 

 

 

Item 1.

Legal Proceedings.

 

 

17

 

 

 

 

 

 

 

Item 1A.

Risk Factors.

 

 

17

 

 

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

 

 

17

 

 

 

 

 

 

 

Item 3.

Defaults Upon Senior Securities.

 

 

17

 

 

 

 

 

 

 

Item 4.

Mine Safety Disclosures.

 

 

17

 

 

 

 

 

 

 

Item 5.

Other Information.

 

 

17

 

 

 

 

 

 

 

Item 6.

Exhibits.

 

 

18

 

 

 

 

 

 

 

SIGNATURES

 

 

19

 

 

 
2

Table of Contents

                                                                                                                                                                                                                               

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

CELL SOURCE, INC. AND SUBSIDIARY

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

 March 31,

 

 

 December 31,

 

 

 

2020

 

 

2019

 

 

 

(Unaudited)

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash

 

$ 16,522

 

 

$ 27,908

 

Prepaid expenses

 

 

85,713

 

 

 

57,196

 

Other current assets

 

 

29,425

 

 

 

29,679

 

Total Assets

 

$ 131,660

 

 

$ 114,783

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Deficiency

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$ 312,794

 

 

$ 135,415

 

Accrued expenses

 

 

1,145,457

 

 

 

1,051,961

 

Accrued expenses - related parties

 

 

81,501

 

 

 

195,334

 

Accrued interest

 

 

470,103

 

 

 

426,516

 

Accrued interest - related parties

 

 

157,657

 

 

 

146,491

 

Accrued compensation

 

 

605,257

 

 

 

603,520

 

Advances payable

 

 

235,500

 

 

 

235,500

 

Advances payable - related party

 

 

100,000

 

 

 

100,000

 

Notes payable, net of debt discount of $0 and $1,292, as of March 31, 2020 and December 31, 2019, respectively

 

 

1,113,000

 

 

 

1,111,708

 

Notes payable - related parties

 

 

150,000

 

 

 

150,000

 

Convertible notes payable, net of debt discount of $52,890 and $1,467 as of March 31, 2020 and December 31, 2019, respectively

 

 

1,570,110

 

 

 

966,533

 

Convertible notes payable - related parties

 

 

225,000

 

 

 

225,000

 

Derivative liabilities

 

 

-

 

 

 

351,900

 

Accrued dividend payable

 

 

223,151

 

 

 

11,846

 

Total Current Liabilities

 

 

6,389,530

 

 

 

5,711,724

 

Convertible notes payable - non-current portion

 

 

-

 

 

 

145,000

 

Total Liabilities

 

 

6,389,530

 

 

 

5,856,724

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 8)

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Stockholders' Deficiency:

 

 

 

 

 

 

 

 

Convertible Preferred Stock, $0.001 par value, 10,000,000 shares authorized; Series A Convertible Preferred Stock, 1,335,000 shares designated, 1,258,416 and 1,245,083 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively; liquidation preference of $9,661,271 and $9,349,969 as of March 31, 2020 and December 31, 2019, respectively

 

 

1,258

 

 

 

1,245

 

Common Stock, $0.001 par value, 200,000,000 shares authorized; 27,329,933 and 27,076,762 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively

 

 

27,330

 

 

 

27,077

 

Additional paid-in capital

 

 

15,673,117

 

 

 

15,375,565

 

Accumulated deficit

 

 

(21,959,575 )

 

 

(21,145,828 )

Total Stockholders' Deficiency

 

 

(6,257,870 )

 

 

(5,741,941 )

 

 

 

 

 

 

 

 

 

Total Liabilities and Stockholders' Deficiency

 

$ 131,660

 

 

$ 114,783

 

 

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

 

 
3

Table of Contents

 

CELL SOURCE, INC. AND SUBSIDIARY

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

(Unaudited)

 

 

 

 For the Three Months Ended
March 31,

 

 

 

2020

 

 

2019

 

Operating Expenses:

 

 

 

 

 

 

Research and development

 

$ 257,545

 

 

$ 724,742

 

Research and development - related party

 

 

61,667

 

 

 

25,000

 

General and administrative

 

 

414,120

 

 

 

421,290

 

Total Operating Expenses

 

 

733,332

 

 

 

1,171,032

 

 

 

 

 

 

 

 

 

 

Loss From Operations

 

 

(733,332 )

 

 

(1,171,032 )

 

 

 

 

 

 

 

 

 

Other (Expense) Income:

 

 

 

 

 

 

 

 

Interest expense

 

 

(76,483 )

 

 

(76,867 )

Interest expense - related parties

 

 

(11,166 )

 

 

(740 )

Amortization of debt discount

 

 

(8,302 )

 

 

-

 

Change in fair value of derivative liabilities

 

 

16,977

 

 

 

52,600

 

Loss on extinguishment of debt

 

 

(1,441 )

 

 

-

 

Loss on exchange of notes payable for Series A Convertible Preferred Stock

 

 

-

 

 

 

(262,470 )

Total Other Expense

 

 

(80,415 )

 

 

(287,477 )

 

 

 

 

 

 

 

 

 

Net Loss

 

 

(813,747 )

 

 

(1,458,509 )

Dividend attributable to Series A preferred stockholders

 

 

(211,305 )

 

 

(148,035 )

Net Loss Applicable to Common Stockholders

 

$ (1,025,052 )

 

$ (1,606,544 )

 

 

 

 

 

 

 

 

 

Net Loss Per Common Share - Basic and Diluted

 

$ (0.04 )

 

$ (0.06 )

 

 

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding -

 

 

 

 

 

 

 

 

Basic and Diluted

 

 

29,120,597

 

 

 

28,121,446

 

 

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

 

 
4

Table of Contents

 

CELL SOURCE, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY

(Unaudited)

 

 

 

FOR THE THREE MONTHS ENDED MARCH 31, 2020

 

 

 

 Convertible Preferred

 

 

 

 

 

 

 

 

 Additional

 

 

 

 

 

 Total

 

 

 

 Stock - Series A

 

 

 Common Stock

 

 

Paid-In  

 

 

 Accumulated

 

 

 Stockholders'

 

 

 

 Shares

 

 

 Amount

 

 

 Shares

 

 

 Amount

 

 

 Capital

 

 

 Deficit

 

 

 Deficiency

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, January 1, 2020

 

 

1,245,083

 

 

$ 1,245

 

 

 

27,076,762

 

 

$ 27,077

 

 

$ 15,375,565

 

 

$ (21,145,828 )

 

$ (5,741,941 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Series A Convertible

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred Stock for cash

 

 

13,333

 

 

 

13

 

 

 

-

 

 

 

-

 

 

 

99,987

 

 

 

-

 

 

 

100,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A Convertible Preferred Stock dividends:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accrual of earned dividends

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(211,305 )

 

 

-

 

 

 

(211,305 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock in connection

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

with extension of notes payable

 

 

-

 

 

 

-

 

 

 

227,500

 

 

 

227

 

 

 

56,648

 

 

 

-

 

 

 

56,875

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reclassification of derivative liabilities to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

equity

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

345,830

 

 

 

-

 

 

 

345,830

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

-

 

 

 

-

 

 

 

25,671

 

 

 

26

 

 

 

6,392

 

 

 

-

 

 

 

6,418

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(813,747 )

 

 

(813,747 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2020

 

 

1,258,416

 

 

$ 1,258

 

 

 

27,329,933

 

 

$ 27,330

 

 

$ 15,673,117

 

 

$ (21,959,575 )

 

$ (6,257,870 )

 

 

 

FOR THE THREE MONTHS ENDED MARCH 31, 2019

 

 

 

 Convertible Preferred

 

 

 

 

 

 

Additional

 

 

 

 

 Total

 

 

 

 Stock - Series A

 

 

 Common Stock

 

 

Paid-In  

 

 

 Accumulated

 

 

 Stockholders'

 

 

 

 Shares

 

 

 Amount

 

 

 Shares

 

 

 Amount

 

 

 Capital

 

 

 Deficit

 

 

 Deficiency

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, January 1, 2019

 

 

860,291

 

 

$ 860

 

 

 

26,077,611

 

 

$ 26,078

 

 

$ 11,723,224

 

 

$ (16,670,333 )

 

$ (4,920,171 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Series A Convertible

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred Stock for cash

 

 

43,331

 

 

 

43

 

 

 

-

 

 

 

-

 

 

 

324,957

 

 

 

-

 

 

 

325,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Series A Convertible

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred Stock in exchange for

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

notes payable

 

 

145,367

 

 

 

145

 

 

 

-

 

 

 

-

 

 

 

1,090,109

 

 

 

-

 

 

 

1,090,254

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A Convertible Preferred Stock dividends:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accrual of earned dividends

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(148,035 )

 

 

-

 

 

 

(148,035 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,458,509 )

 

 

(1,458,509 )

Balance, March 31, 2019

 

 

1,048,989

 

 

$ 1,048

 

 

 

26,077,611

 

 

$ 26,078

 

 

$ 12,990,255

 

 

$ (18,128,842 )

 

$ (5,111,461 )

 

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

 

 
5

Table of Contents

 

CELL SOURCE, INC. AND SUBSIDIARY

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(Unaudited)

  

 

 

 For The Three Months Ended
March 31,

 

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

Cash Flows From Operating Activities:

 

 

 

 

Net loss

 

$ (813,747 )

 

$ (1,458,509 )

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Change in fair value of derivative liabilities

 

 

(16,977 )

 

 

(52,600 )

Amortization of debt discount

 

 

8,302

 

 

 

-

 

Loss on exchange of notes payable for preferred shares

 

 

-

 

 

 

262,470

 

Loss on extinguishment of debt

 

 

1,441

 

 

 

-

 

Non-cash interest expense - warrants

 

 

18,668

 

 

 

33,016

 

Stock-based compensation:

 

 

 

 

 

 

 

 

Warrants

 

 

(98 )

 

 

(9 )

Common stock

 

 

4,626

 

 

 

-

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses

 

 

(28,517 )

 

 

4,009

 

Other current assets

 

 

254

 

 

 

(2,560 )

Accounts payable

 

 

177,379

 

 

 

492,501

 

Accrued expenses

 

 

60,601

 

 

 

193,431

 

Accrued expenses - related parties

 

 

(113,833 )

 

 

25,000

 

Accrued interest

 

 

68,233

 

 

 

76,861

 

Accrued interest - related parties

 

 

748

 

 

 

740

 

Accrued compensation

 

 

14,534

 

 

 

20,206

 

Net Cash Used In Operating Activities

 

 

(618,386 )

 

 

(405,444 )

 

 

 

 

 

 

 

 

 

Cash Flows From Financing Activities:

 

 

 

 

 

 

 

 

Proceeds from cash advances

 

 

-

 

 

 

75,000

 

Proceeds from issuance of convertible notes payable

 

 

575,000

 

 

 

-

 

Proceeds from issuance of Series A Preferred Stock

 

 

100,000

 

 

 

325,000

 

Repayment of convertible notes payable

 

 

(68,000 )

 

 

-

 

Net Cash Provided By Financing Activities

 

 

607,000

 

 

 

400,000

 

Net Decrease In Cash

 

 

(11,386 )

 

 

(5,444 )

 

 

 

 

 

 

 

 

 

Cash - Beginning of Period

 

 

27,908

 

 

 

18,934

 

Cash - End of Period

 

$ 16,522

 

 

$ 13,490

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosures of Cash Flow Information:

 

 

 

 

 

 

 

 

Cash paid for:

 

 

 

 

 

 

 

 

Interest

 

$ -

 

 

$ -

 

Income taxes

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Original issue discount in connection with convertible note payable

 

$ 3,000

 

 

$ -

 

Preferred stock issued in exchange for notes and advances payable

 

$ -

 

 

$ 1,090,254

 

Accrual of earned preferred stock dividends

 

$ (211,305 )

 

$ (148,035 )

Reclassification of derivative liabilities to equity

 

$ 345,830

 

 

$ -

 

Issuance of placement agent warrants

 

$ 10,907

 

 

$ -

 

Issuance of common stock as debt discount in connection with extension of notes payable

 

$ 56,875

 

 

$ -

 

Repayment of convertible note payable and accrued interest by third party

 

$ 100,896

 

 

$ -

 

 

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

 

 
6

Table of Contents

   

CELL SOURCE, INC. AND SUBSIDIARY

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(Unaudited)

 

Note 1 - Business Organization, Nature of Operations 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 7, Related Party Transactions). 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 March 31, 2020 and the condensed consolidated results of its operations and cash flows for the three months ended March 31, 2020 and 2019. The results of operations for the three months ended March 31, 2020 are not necessarily indicative of the operating results for the full year ending December 31, 2020 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, 2019 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 March 30, 2020.

 

Note 2 - Going Concern and Management Plans

 

During the three months ended March 31, 2020, the Company had not generated any revenues, had a net loss of approximately $814,000 and had used cash in operations of approximately $618,000. As of March 31, 2020, the Company had a working capital deficiency of approximately $6,258,000 and an accumulated deficit of approximately $21,960,000. Subsequent to March 31, 2020 and as more fully described in Note 9, Subsequent Events, the Company received proceeds of $100,000 through a non-interest-bearing advance. These conditions raise substantial doubt about the Company’s ability to continue as a going concern within twelve months from the date these financial statements are issued.

 

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 this uncertainty.

 

 
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Note 3 - Summary of Significant Accounting Policies

 

Since the date of the Annual Report on Form 10-K for the year ended December 31, 2019, there have been no material changes to the Company’s significant accounting policies.

 

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. Weighted average shares outstanding for the three months ended March 31, 2020 and 2019 includes the weighted average impact of warrants to purchase an aggregate of 2,043,835 shares of common stock because their exercise price was determined to be nominal.

 

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: 

 

 

 

 March 31,

 

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

Options

 

 

3,782,004

 

 

 

-

 

Warrants

 

 

4,125,810

 

 

 

6,374,157

 

Convertible notes

 

 

2,555,477

 

 

 

1,069,101

 

Convertible preferred stock

 

 

12,584,160

 

 

 

10,489,890

 

Total

 

 

23,047,451

 

 

 

17,933,148

 

 

Convertible notes are assumed to be converted at the rate of $0.75 per common share, which is the conversion price. However, such conversion rates are subject to adjustment under certain circumstances, which may result in the issuance of common shares greater than the amount indicated.

   

Reclassifications

 

Certain prior period accrued liabilities have been reclassified from accrued compensation to accrued interest to conform to the fiscal 2020 presentation. These reclassifications have no impact on the previously reported net loss.

 

 
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Note 4 - Fair Value

 

During the three months ended March 31, 2020, in connection with the extension of certain convertible notes payable that previously contained a variable conversion price with no floor and, a result, triggered sequencing, the parties agreed to amend the conversion terms such that a conversion price floor of $0.75 per share was established. As a result, the Company had no remaining outstanding instruments with a variable conversion price with no floor and, accordingly, the Company reclassified derivative liabilities with an aggregate fair value of $345,830 to additional paid-in capital. See Note 5, Notes Payable and Convertible Notes Payable for additional details.

 

The following table summarizes the Company’s instruments recorded at fair value as of March 31, 2020 and December 31, 2019:

 

 

 

 

 

 

Quoted Prices

 

 

 

 

 

 

 

 

 

 

 

 

In Active

 

 

Significant

 

 

 

 

 

 

 

 

 

Markets for

 

 

Other

 

 

Significant

 

 

 

 

 

 

Identical

 

 

Observable

 

 

Unobservable

 

 

 

 

 

 

Liabilities

 

 

Inputs

 

 

Inputs

 

 

 

Total

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accrued compensation - common stock

 

$ 38,229

 

 

$ -

 

 

$ -

 

 

$ 38,229

 

Accrued compensation - warrants

 

 

6,926

 

 

 

-

 

 

 

-

 

 

 

6,926

 

Accrued interest - warrants

 

 

65,592

 

 

 

-

 

 

 

-

 

 

 

65,592

 

Accrued interest - warrants - related party

 

 

126,350

 

 

 

-

 

 

 

-

 

 

 

126,350

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - March 31, 2020

 

$ 237,097

 

 

$ -

 

 

$ -

 

 

$ 237,097

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accrued compensation - common stock

 

$ 40,021

 

 

$ -

 

 

$ -

 

 

$ 40,021

 

Accrued compensation - warrants

 

 

17,931

 

 

 

-

 

 

 

-

 

 

 

17,931

 

Accrued interest - warrants

 

 

57,343

 

 

 

-

 

 

 

-

 

 

 

57,343

 

Accrued interest - warrants - related party

 

 

115,932

 

 

 

-

 

 

 

-

 

 

 

115,932

 

Derivative liabilities

 

 

351,900

 

 

 

-

 

 

 

-

 

 

 

351,900

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - December 31, 2019

 

$ 583,127

 

 

$ -

 

 

$ -

 

 

$ 583,127

 

 

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. As of March 31, 2020, the Company’s Level 3 liabilities shown in the above table consist of accrued obligations to issue warrants and common stock. As of December 31, 2019, the Company’s Level 3 liabilities shown in the above table consist of sequenced warrants with no price floor as the Company is unable to determine if it will have sufficient authorized common stock to settle such arrangements, warrants deemed to be derivative liabilities according to the Company’s sequencing policy in accordance with ASC 815-40-35-12, the embedded conversion options within its convertible notes payable and an accrued obligation to issue warrants and common stock.

 

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

 

 

 

 March 31,

 

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

Risk-free interest rate

 

0.33% - 1.55

%

 

2.21% - 2.44

%

Expected term (years)

 

0.52 - 5.00

 

 

0.02 - 5.00

 

Expected volatility

 

 

110 %

 

 

110 %

Expected dividends

 

 

0.00 %

 

 

0.00 %

 

 
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The expected term used is the contractual life of the instrument being valued. Since the Company’s stock has not been publicly traded for a sufficiently long period of time or with significant 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.

 

The following table provides a summary of the changes in fair value, including net transfers in and/or out, of all Level 3 liabilities measured at fair value on a recurring basis using unobservable inputs during the three months ended March 31, 2020:

 

 

 

Accrued

 

 

Accrued

 

 

Derivative

 

 

 

 

 

 

Interest

 

 

Compensation

 

 

Liability

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - December 31, 2019

 

$ 173,275

 

 

$ 57,952

 

 

$ 351,900

 

 

$ 583,127

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accrued compensation - common stock

 

 

-

 

 

 

4,626

 

 

 

-

 

 

 

4,626

 

Accrued interest - common stock

 

 

56,875

 

 

 

-

 

 

 

-

 

 

 

56,875

 

Accrued interest - warrants

 

 

8,571

 

 

 

-

 

 

 

-

 

 

 

8,571

 

Accrued interest - warrants - related party

 

 

11,243

 

 

 

-

 

 

 

-

 

 

 

11,243

 

Change in fair value

 

 

(1,147 )

 

 

(128 )

 

 

(16,977 )

 

 

(18,252 )

Issuance of warrants

 

 

-

 

 

 

(10,877 )

 

 

10,907

 

 

 

30

 

Issuance of common stock

 

 

(56,875 )

 

 

(6,418 )

 

 

-

 

 

 

(63,293 )

Reclassification of derivative liabilities to equity

 

 

-

 

 

 

-

 

 

 

(345,830 )

 

 

(345,830 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - March 31, 2020

 

$ 191,942

 

 

$ 45,155

 

 

$ -

 

 

$ 237,097

 

 

As of March 31, 2020, the Company had an obligation to issue 152,916 shares of common stock to service providers that had a fair value of $38,229, which was a component of accrued compensation on the condensed consolidated balance sheet. See Note 6, Stockholders’ Deficiency – Stock Warrants for additional details associated with the issuance of warrants.

 

Note 5 – Notes Payable and Convertible Notes Payable

 

As of March 31, 2020 and through the date of this filing, notes payable with principal amounts totaling $1,888,000 were past due and are classified as current liabilities on the condensed consolidated balance sheet as of March 31, 2020. Such notes continue to accrue interest and all relevant penalties have been accrued as of March 31, 2020. 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 all holders of notes payable to extend the maturity dates of such notes or to convert the principal and accrued interest into equity.

 

During the three months ended March 31, 2020 and 2019, the Company recorded interest expense of $87,649 and $77,607, respectively, and amortization of debt discount of $8,302 and $0, respectively. As of March 31, 2020 and December 31, 2019, the Company had $627,760 and $573,007, respectively, of accrued interest (including interest in the form of warrants (see Note 4)) and penalties related to notes payable, which is included with accrued interest and accrued interest – related parties on the condensed consolidated balance sheets.

 

Convertible Notes Payable

 

On January 3, 2020, a third party repaid a convertible note in full on behalf of the Company, which payment included a prepayment penalty for an aggregate total payment of $100,896 (principal and interest of $68,000 and $32,896, respectively), which was fully repaid by the Company as of March 31, 2020. The Company determined the transaction was a note extinguishment and recorded a loss on extinguishment of $1,441 in the condensed consolidated statements of operations.

 

On January 10, 2020, the Company issued a convertible note payable in the principal amount of $78,000. The note accrues interest at 12% per annum and matures on January 10, 2021. Any amount of principal or interest which is not paid at maturity shall accrue interest at 22% per annum. The note also includes certain prepayment penalties that provide for payments ranging from 115% to 140% of the then-outstanding principal and interest. The note is convertible at the option of the holder into common stock at 61% of the lowest trading price during the ten (10) consecutive trading days prior to the conversion date at any time during the period which is 180 days following the issuance date of the convertible note and ending on the later of (i) January 10, 2021 or (ii), in the event of default, the date of the payment of the default amount. The convertible note contained an original issuance discount of $3,000 which was recorded as a debt discount and will be amortized over the term of the note.

 

 
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On various dates from February 20, 2020 through February 24, 2020, the maturity dates of three convertible notes in the aggregate principal amount of $145,000 were extended to February 15, 2021. In connection with these extensions, the parties agreed that (i) the Company would issue an aggregate of 227,500 shares of common stock to the holders with a fair value of $56,875 and (ii) a conversion price floor of $0.75 per share would be established. The fair value of the common stock was setup as a debt discount and will be amortized over the amended term of the notes. On March 31, 2020, the Company issued the shares of common stock.

 

On March 2, 2020, the Company received further proceeds of $500,000 through a previously issued convertible note in the principal amount of $1,500,000, such that the Company had now received aggregate proceeds of $1,000,000 under the convertible note.

 

Note 6 – Stockholders’ Deficiency

 

Common Stock

 

On March 31, 2020, the Company issued 25,671 shares of immediately vested common stock with a fair value of $6,418 to a service provider in connection with consulting services provided.

 

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

 

Series A Convertible Preferred Stock

 

On January 29, 2020, the Board of Directors extended the expiration date of the Private Placement Memorandum (“PPM”) to March 31, 2020 and has authorized two sixty-day extensions beyond that date at management’s discretion, under which the Company continues to raise up to $10,000,000 via the sale of up to 1,333,333 shares of Series A Convertible Preferred Stock at $7.50 per share. On March 25, 2020, the Board of Directors extended the expiration date of the PPM to May 30, 2020.

 

On various dates from January 14, 2020 through January 24, 2020, the Company received proceeds of $100,000 through the sale of 13,333 shares of Series A Convertible Preferred Stock at $7.50 per share.

 

During the three months ended March 31, 2020 and 2019, the Company accrued and recorded cumulative Series A Convertible Preferred Stock dividends of $211,305 and $148,035, respectively, with an increase in liabilities and a corresponding decrease in additional paid-in capital.

 

Stock Warrants

 

On February 13, 2020, the Company issued five-year placement agent warrants to purchase 66,653 shares of common stock at $0.75 per share in satisfaction of accrued liabilities of $10,907 that were earned in connection with the sale of Series A Convertible Preferred Stock during the year ended December 31, 2019.

 

Stock-Based Compensation

 

During the three months ended March 31, 2020 and 2019, the Company recognized expense (benefit) of $4,528 and $(9), respectively, of stock-based compensation related to common stock and warrants. As of March 31, 2020, there was no unrecognized stock-based compensation expense.

 

Note 7 – Related Party Transactions

 

In 2011, the Company entered into a Research and License Agreement with Yeda for Veto Cell technology. As Yeda is a founder and a significant shareholder of the Company, it is a related party.

 

During the three months ended March 31, 2020 and 2019, the Company recorded research and development expense of $61,667 and $25,000 respectively, in connection with the agreement with Yeda.

 

As of March 31, 2020 and December 31, 2019, the Company was required to issue warrants to purchase an aggregate of 831,500 and 756,500, respectively, shares of common stock at an exercise price of $0.75 per share to directors of the Company in connection with loans made to the Company. As a result, the Company had accrued $126,350 and $115,932 associated with the fair value of the obligations as of March 31, 2020 and December 31, 2019, respectively, which amount is included in accrued interest – related parties on the condensed consolidated balance sheets.

 

 
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Note 8 – Commitments and Contingencies

 

MD Anderson Sponsored Research Agreements

 

The Company recognized $237,545 and $684,255 of research and development expenses during the three months ended March 31, 2020 and 2019, respectively, associated with services provided by The University of Texas M.D. Anderson Cancer Center (“MD Anderson”) in the periods, under the two agreements with MD Anderson dated November 2019 and February 2019. As of March 31, 2020 and December 31, 2019, the Company had $495,018 and $382,398, respectively, of accrued research and development expenses pursuant to the agreements with MD Anderson, which are included within accrued expenses on the condensed consolidated balance sheets.

 

Litigation

 

Certain conditions may exist as of the date the condensed consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company, or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein.

 

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potential material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability and an estimate of the range of possible losses, if determinable and material, would be disclosed.

 

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. A motion for summary judgement was heard on March 7, 2019 and the Company did not oppose the motion. The Company has had discussion with respect to entering into an agreement providing for a payment plan with the holder of the note, but no agreement has yet been reached.

 

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. As of March 31, 2020 and December 31, 2019, the Company has not accrued any amounts for contingencies.

 

Note 9 – Subsequent Events

 

The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Management is currently evaluating the impact of the COVID-19 pandemic on the industry and has concluded that, while it is reasonably possible that COVID-19 could have a negative effect on the Company's financial position and results of operations, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Advances

 

On May 6, 2020, the Company received proceeds of $100,000 through a non-interest-bearing advance.

 

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

 

The following discussion and analysis of the condensed consolidated results of operations and financial condition of Cell Source, Inc. (“CSI”, “Cell Source”, the “Company”, “us,” “we,” “our,”) as of March 31, 2020 and for the three months ended March 31, 2020 and 2019 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, 2019 as filed with the Securities and Exchange Commission (“SEC”) on March 30, 2020.

 

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, 2019 filed with the SEC on March 30, 2020.

 

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 recently 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 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 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 (recipient) 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 show that Cell Source’s Veto Cell technology (currently in clinical trials in the US) 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 of 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.

 

 
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·

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.

 

Recent Developments

 

Recently, the outbreak of the novel coronavirus, or COVID-19, around the world has adversely impacted global commercial activity and contributed to significant volatility in financial markets and disrupted normal business operations. The global impact of the outbreak has been rapidly evolving, and many countries have reacted by instituting quarantines and restrictions on travel, and many businesses and other institutions have temporarily closed or reduced work activities at their facilities. Such actions are creating disruption in global supply chains, and adversely impacting a number of industries, such as transportation, hospitality and entertainment. The outbreak could have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of the novel coronavirus. Nevertheless, the novel coronavirus presents material uncertainty and its disruption of the capital markets may have a material adverse impact on our ability to raise additional capital and may slow down the pace at which research and clinical trials may be conducted on our behalf.

 

Condensed Consolidated Results of Operations

 

Three Months Ended March 31, 2020 Compared with the Three Months Ended March 31, 2019

 

Research and Development

 

Research and development expense was $319,212 and $749,742 for the three months ended March 31, 2020 and 2019, respectively, a decrease of $430,530, or 57%, primarily related to the recognition of a milestone pursuant to an agreement with MD Anderson in the amount of approximately $473,000 during the three months ended March 31, 2019.

 

General and Administrative

 

General and administrative expense, which is associated with external consulting and professional fees, payroll and stock-based compensation expenses, was $414,120 and $421,290 for the three months ended March 31, 2020 and 2019, respectively, a decrease of $7,170, or 2%.

 

Change in Fair Value of Derivative Liabilities

 

The change in fair value of derivative liabilities for the three months ended March 31, 2020 and 2019 was a gain of $16,977 and $52,600, respectively, a decrease of $35,623 or 68%, due to the reduction in fair value of warrants and conversion options as a result of drawing closer to their expiration dates.

 

Interest Expense

 

Interest expense for the three months ended March 31, 2020 and 2019 was $87,649 and $77,607, respectively, an increase of $10,042, or 13%, due to an increase in notes payable outstanding.

 

Amortization of Debt Discount

 

Amortization of debt discount was $8,302 and $0 for the three months ended March 31, 2020 and 2019, respectively, which is associated with common stock, warrants and original issuance discounts issued in connection with notes payable.

 

Loss on Extinguishment of Debt

 

During the three months ended March 31, 2020, we recognized a loss on extinguishment of debt of $1,441 in connection with the repayment of a convertible note payable.

 

 
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Table of Contents

 

Loss on Exchange of Notes Payable for Series A Convertible Preferred Stock

 

During the three months ended March 31, 2019, we recognized a $262,470 loss on exchange of notes payable for Series A Convertible Preferred Stock. The loss recognized represents the value of the preferred shares in excess of the carrying value of the notes payable.

 

Liquidity and Going Concern

 

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

 

 

 

 March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$ 16,522

 

 

$ 27,908

 

Working capital deficiency

 

$ (6,257,870 )

 

$ (5,596,941 )

  

During the three months ended March 31, 2020, the Company had not generated any revenues, had a net loss of approximately $814,000 and had used cash in operations of approximately $618,000. As of March 31, 2020, the Company had a working capital deficiency of approximately $6,258,000 and an accumulated deficit of approximately $21,960,000. Subsequent to March 31, 2020, the Company received proceeds of $100,000 through a non-interest-bearing advance. These conditions raise substantial doubt about the Company’s ability to continue as a going concern within twelve months from the date these financial statements are issued.

  

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.

 

During the three months ended March 31, 2020 and 2019, 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 three months ended March 31, 2020 and 2019 in the amounts of approximately $618,000 and $405,000, respectively. The net cash used in operating activities for the three months ended March 31, 2020 was primarily due to cash used to fund a net loss of approximately $814,000, adjusted for net non-cash expenses in the aggregate amount of approximately $16,000, partially offset by $179,000 of net cash provided by changes in the levels of operating assets and liabilities. The net cash used in operating activities for the three months ended March 31, 2019 was primarily due to cash used to fund a net loss of approximately $1,459,000, adjusted for net non-cash expenses in the aggregate amount of approximately $243,000, partially offset by $810,000 of net cash provided by changes in the levels of operating assets and liabilities.

 

Net Cash Provided by Financing Activities

 

Net cash provided by financing activities for the three months ended March 31, 2020 and 2019 was $607,000 and $400,000, respectively. The net cash provided by financing activities during the three months ended March 31, 2020 was attributable to $575,000 of proceeds from the issuance of convertible notes payable and $100,000 of proceeds from the issuance of Series A preferred stock, offset by a $68,000 repayment of a convertible note payable. The net cash provided by financing activities during the three months ended March 31, 2019 was attributable to $325,000 of proceeds from the issuance of Series A preferred stock and $75,000 of proceeds received from cash advances.

 

Off-Balance Sheet Arrangements 

 

We do not have any off-balance sheet arrangements.

 

 
15

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Critical Accounting Policies and Estimates

 

For a description of our critical accounting policies, see Note 3, Summary of Significant Accounting Policies, in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

 

Item 3. Quantitative And Qualitative Disclosures About Market Risk.

 

Not applicable.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

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

 

In connection with the preparation of this Quarterly Report, management, with the participation of our Principal Executive and Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)). Based upon that evaluation, our Principal Executive and Financial Officer concluded that, as of March 31, 2020, our disclosure controls and procedures were effective.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 
16

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PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

Except as described below, we are not involved in any pending legal proceeding or litigations and, to the best of our knowledge, no governmental authority is contemplating any proceeding to which we are a party or to which any of our properties is subject, which would reasonably be likely to have a material adverse effect on us.

 

In January 2019, the holder of a promissory note in the principal amount of $250,000 due on March 16, 2016 instituted a collection action in the Supreme Court of the State of New York, County of New York. A motion for summary judgement was heard on March 7, 2019 and the Company did not oppose the motion. The Company has had discussion with respect to entering into an agreement providing for a payment plan with the holder of the note, but no agreement has yet been reached.

 

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, 2019, which was filed with the SEC on March 30, 2020.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

In January 2020, we issued a convertible note payable in the principal amount of $78,000 which contained an original issuance discount of $3,000. The note accrues interest at 12% per annum and matures on January 10, 2021. Any amount of principal or interest which is not paid at maturity shall accrue interest at 22% per annum. The note also includes certain prepayment penalties that provide for payments ranging from 115% to 140% of the then-outstanding principal and interest. The note is convertible at the option of the holder into common stock at 61% of the lowest trading price during the ten (10) consecutive trading days prior to the conversion date at any time during the period which is 180 days following the issuance date of the convertible note and ending on the later of (i) January 10, 2021 or (ii), in the event of default, the date of the payment of the default amount. 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 transaction.

 

During January 2020, we sold 13,333 shares of Series A Convertible Preferred Stock to accredited investors at a price of $7.50 per share for gross proceeds of $100,000. We relied upon the exemption provided by Rule 506 and Section 4(2) of the Securities Act in connection with these transactions.

 

In February 2020, we issued five-year placement agent warrants to purchase 66,653 shares of common stock at $0.75 per share in satisfaction of accrued liabilities of $10,907. We relied upon the exemption provided by Section 4(2) of the Securities Act in connection with this transaction.

 

In March 2020, we issued an aggregate of 227,500 shares of common stock to three holders of convertible notes in the aggregate principal amount of $145,000 in consideration of their agreement to extend the maturity dates of the notes until February 15, 2021 and establish a conversion price floor of $0.75 per share. We relied upon the exemption provided by Section 4(2) of the Securities Act in connection with these transactions.

 

In March 2020, we issued 25,671 shares of common stock to a consultant in consideration of consulting services provided. We relied upon the exemption provided by Section 4(2) of the Securities Act in connection with this transaction.

  

Item 3. Defaults Upon Senior Securities.

 

As of March 31, 2020 and through the date of this filing, notes payable and convertible notes payable with face values totaling $1,888,000 were past due and are classified as current liabilities on the condensed consolidated balance sheet as of March 31, 2020. Such notes continue to accrue interest and all relevant penalties have been accrued as of March 31, 2020. 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.

 

 
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Table of Contents

 

Item 6. Exhibits.

 

31

Certification of principal executive and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32

Certification of principal executive and principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

10.49

Convertible Promissory Note dated January 10, 2020

10.50

Form of Placement Agent Warrant dated February 13, 2020

101.INS

XBRL Instance Document

101.SCH

XBRL Schema Document

101.CAL

XBRL Calculation Linkbase Document

101.DEF

XBRL Definition Linkbase Document

101.LAB

XBRL Label Linkbase Document

101.PRE

XBRL Presentation Linkbase Document

 

 
18

Table of Contents

 

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: May 15, 2020

By:

/s/ Itamar Shimrat

 

Name:

 Itamar Shimrat

 

Title:

Chief Executive Officer and

Chief Financial Officer (Principal

Executive, Financial and Accounting

Officer)

 

 

19

EXHIBIT 10.49

 

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

Principal Amount: $78,000.00

Purchase Price: $78,000.00

Issue Date: January 10, 2020

 

 

CONVERTIBLE PROMISSORY NOTE

 

FOR VALUE RECEIVED, CELL SOURCE, INC., a Nevada corporation (hereinafter called the “Borrower”), hereby promises to pay to the order of POWER UP LENDING GROUP LTD., a Virginia corporation, or registered assigns (the “Holder”) the sum of $78,000.00 together with any interest as set forth herein, on January 10, 2021 (the “Maturity Date”), and to pay interest on the unpaid principal balance hereof at the rate of twelve percent (12%)(the “Interest Rate”) per annum from the date hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid (“Default Interest”). Interest shall be computed on the basis of a 365 day year and the actual number of days elapsed. Interest shall commence accruing on the Issue Date but shall not be payable until the Note becomes payable (whether at Maturity Date or upon acceleration or by prepayment). All payments due hereunder (to the extent not converted into common stock, $0.001 par value per share (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement dated the date hereof, pursuant to which this Note was originally issued (the “Purchase Agreement”).

 

This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.

 

The following terms shall apply to this Note:

 

 

 

 

ARTICLE I. CONVERSION RIGHTS

 

1.1 Conversion Right. The Holder shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount (as defined in Article III), each in respect of the remaining outstanding amount of this Note to convert all or any part of the outstanding and unpaid amount of this Note into fully paid and non- assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the conversion price (the “Conversion Price”) determined as provided herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso. The beneficial ownership limitations on conversion as set forth in the section may NOT be waived by the Holder. The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New York, New York time on such conversion date (the “Conversion Date”); however, if the Notice of Conversion is sent after 6:00pm, New York, New York time the Conversion Date shall be the next business day. The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.4 hereof.

 

1.2 Conversion Price. The Conversion Price shall equal the Variable Conversion Price (as defined herein)(subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The “Variable Conversion Price” shall mean 61% multiplied by the Market Price (as defined herein) (representing a discount rate of 39%). “Market Price” means the lowest Trading Price (as defined below) for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “Trading Price” means, for any security as of any date, the closing bid price on the OTCQB, OTCQX, Pink Sheets electronic quotation system or applicable trading market (the “OTC”) as reported by a reliable reporting service (“Reporting Service”) designated by the Holder (i.e. Bloomberg) or, if the OTC is not the principal trading market for such security, the closing bid price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no closing bid price of such security is available in any of the foregoing manners, the average of the closing bid prices of any market makers for such security that are listed in the “pink sheets”. If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as mutually determined by the Borrower and the holders of a majority in interest of the Notes being converted for which the calculation of the Trading Price is required in order to determine the Conversion Price of such Notes. “Trading Day” shall mean any day on which the Common Stock is tradable for any period on the OTC, or on the principal securities exchange or other securities market on which the Common Stock is then being traded.

 

 
2

 

 

1.3 Authorized Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note issued pursuant to the Purchase Agreement. The Borrower is required at all times to have authorized and reserved six times the number of shares that would be issuable upon full conversion of the Note (assuming that the 4.99% limitation set forth in Section 1.1 is not in effect)(based on the respective Conversion Price of the Note (as defined in Section 1.2) in effect from time to time, initially 767,213 shares)(the “Reserved Amount”). The Reserved Amount shall be increased (or decreased with the written consent of the Holder) from time to time in accordance with the Borrower’s obligations hereunder. The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which the Notes shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Note. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note.

 

If, at any time the Borrower does not maintain the Reserved Amount it will be considered an Event of Default under Section 3.2 of the Note.

 

1.4 Method of Conversion.

 

(a) Mechanics of Conversion. As set forth in Section 1.1 hereof, from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount, this Note may be converted by the Holder in whole or in part at any time from time to time after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower (upon payment in full of any amounts owed hereunder).

 

(b) Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion.

 

 
3

 

 

(c) Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common Stock issuable upon such conversion within three (3) business days after such receipt (the “Deadline”) (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof and the Purchase Agreement. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations hereunder, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion.

 

(d) Delivery of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions set forth herein, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system.

 

(e) Failure to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline due to action and/or inaction of the Borrower, the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock (the “Fail to Deliver Fee”); provided; however that the Fail to Deliver Fee shall not be due if the failure is a result of a third party (i.e., transfer agent; and not the result of any failure to pay such transfer agent) despite the best efforts of the Borrower to effect delivery of such Common Stock. Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly, the parties acknowledge that the liquidated damages provision contained in this Section

1.4(e) are justified.

 

 
4

 

 

1.5 Concerning the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless: (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration (such as Rule 144 or a successor rule) (“Rule 144”); or (iii) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined in the Purchase Agreement).

 

Any restrictive legend on certificates representing shares of Common Stock issuable upon conversion of this Note shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if the Borrower or its transfer agent shall have received an opinion of counsel from Holder’s counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that (i) a public sale or transfer of such Common Stock may be made without registration under the Act, which opinion shall be accepted by the Company so that the sale or transfer is effected; or (ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the Act; or otherwise may be sold pursuant to an exemption from registration. In the event that the Company does not reasonably accept the opinion of counsel provided by the Holder with respect to the transfer of Securities pursuant to an exemption from registration (such as Rule 144), at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

 

1.6 Effect of Certain Events.

 

(a) Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which more than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article III). “Person” shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization.

 

(b) Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all of the Note, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not affect any transaction described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, ten (10) days prior written notice (but in any event at least five (5) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Note. The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.

 

 
5

 

 

(c) Adjustment Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.

 

1.7 Prepayment. Notwithstanding anything to the contrary contained in this Note, at any time during the periods set forth on the table immediately following this paragraph (the “Prepayment Periods”), the Borrower shall have the right, exercisable on not more than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.7. Any notice of prepayment hereunder (an “Optional Prepayment Notice”) shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the “Optional Prepayment Date”), the Borrower shall make payment of the Optional Prepayment Amount (as defined below) to Holder, or upon the direction of the Holder as specified by the Holder in a writing to the Borrower (which shall direction to be sent to Borrower by the Holder at least one (1) business day prior to the Optional Prepayment Date). If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash equal to the percentage (“Prepayment Percentage”) as set forth in the table immediately following this paragraph opposite the applicable Prepayment Period, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Section 1.4 hereof (the “Optional Prepayment Amount”). If the Borrower delivers an Optional Prepayment Notice and fails to pay the Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section

1.7.

 

Prepayment Period

Prepayment Percentage

1. The period beginning on the Issue Date and ending on the date which is thirty (30) days following the Issue Date.

115%

2. The period beginning on the date which is thirty-one (31) days following the Issue Date and ending on the date which is sixty (60) days following the Issue Date.

120%

3. The period beginning on the date which is sixty-one (61) days following the Issue Date and ending on the date which is ninety (90) days following the Issue Date.

125%

4. The period beginning on the date that is ninety-one (91) day from the Issue Date and ending one hundred twenty (120) days following the Issue Date.

130%

5. The period beginning on the date that is one hundred twenty-one (121) day from the Issue Date and ending one hundred fifty (150) days following the Issue Date.

135%

6. The period beginning on the date that is one hundred fifty-one (151) day from the Issue Date and ending one hundred eighty (180) days following the Issue Date.

140%

 

 
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After the expiration of one hundred eighty (180) days following the Issue Date, the Borrower shall have no right of prepayment.

 

ARTICLE II. CERTAIN COVENANTS

 

2.1 Sale of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.

 

ARTICLE III. EVENTS OF DEFAULT

 

If any of the following events of default (each, an “Event of Default”) shall occur:

 

3.1 Failure to Pay Principal and Interest. The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity or upon acceleration and such breach continues for a period of five (5) days after written notice from the Holder.

 

3.2 Conversion and the Shares. The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for three (3) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation of the Borrower to remain current in its obligations to its transfer agent. It shall be an event of default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower’s transfer agent in order to process a conversion, such advanced funds shall be paid by the Borrower to the Holder within forty-eight (48) hours of a demand from the Holder.

 

 
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3.3 Breach of Covenants. The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents including but not limited to the Purchase Agreement and such breach continues for a period of twenty (20) days after written notice thereof to the Borrower from the Holder.

 

3.4 Breach of Representations and Warranties. Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement), shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

 

3.5 Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.

 

3.6 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower.

 

3.7 Delisting of Common Stock. The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTC (which specifically includes the quotation platforms maintained by the OTC Markets Group) or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock Exchange.

 

3.8 Failure to Comply with the Exchange Act. The Borrower shall fail to comply with the periodic reporting requirements of the Exchange Act (annual and quarterly reports (Form 10Q and Form 10K’s)); and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act (the filing of a Form 15 with the SEC is an immediate Event of Default).

 

3.9 Liquidation. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.

 

3.10 Cessation of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.

 

3.11 Financial Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC at any time after 180 days after the Issuance Date for any date or period until this Note is no longer outstanding, if the result of such restatement would, by

comparison to the un-restated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

 

 
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3.12 Replacement of Transfer Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.

 

3.13 Cross-Default. Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default by the Borrower of any covenant or other term or condition contained in any of the Other Agreements, after the passage of all applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the Other Agreements, in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder. “Other Agreements” means, collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the benefit of, (2) the Holder and any affiliate of the Holder, including, without limitation, promissory notes; provided, however, the term “Other Agreements” shall not include the related or companion documents to this Note. Each of the loan transactions will be cross-defaulted with each other loan transaction and with all other existing and future debt of Borrower to the Holder.

 

Upon the occurrence and during the continuation of any Event of Default specified in Section 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due at the Maturity Date), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Default Amount (as defined herein). UPON THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2 (no cure period), THE NOTE SHALL BECOME IMMEDIATELY DUE AND PAYABLE AND THE BORROWER SHALL PAY TO THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO: (Y) THE DEFAULT AMOUNT (AS DEFINED HEREIN); MULTIPLIED BY (Z) TWO (2). Upon the occurrence and during the continuation of any Event of Default specified in Sections 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due on this Note upon acceleration), 3.3, 3.4 (to the extent not cured within five (5) days after written notice thereof to the Borrower from the Holder), 3.7, 3.8 (to the extent not cured within five (5) days after written notice thereof to the Borrower from the Holder), 3.10, 3.11, 3.12 (to the extent not cured within five (5) days after written notice thereof to the Borrower from the Holder), and/or 3.13 (to the extent not cured within five (5) days after written notice thereof to the Borrower from the Holder) exercisable through the delivery of written notice to the Borrower by such Holders (the “Default Notice”), and upon the occurrence of an Event of Default specified the remaining sections of Articles III (other than failure to pay the principal hereof or interest thereon at the Maturity Date specified in Section 3,1 hereof), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to 150% times the sum of (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the date of payment (the “Mandatory Prepayment Date”) plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof (the then outstanding principal amount of this Note to the date of payment plus the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the “Default Amount”) and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity.

 

 
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If the Borrower fails to pay the Default Amount within five (5) business days of written notice that such amount is due and payable, then the Holder shall have the right at any time, so long as the Borrower remains in default (and so long and to the extent that there are sufficient authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect.

 

ARTICLE IV. MISCELLANEOUS

 

4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

 

4.2 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, facsimile or email, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery, delivery by email or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

 

If to the Borrower, to:

 

CELL SOURCE, INC.

57 West 57th Street, Suite 400

New York, New York 10019

Attn: Itamar Shimrat, Chief Executive Officer

Fax:

Email: ishimrat@cell-source.com

 

If to the Holder:

 

POWER UP LENDING GROUP LTD.

111 Great Neck Road, Suite 214

Great Neck, NY 11021

Attn: Curt Kramer, Chief Executive Officer

e-mail: info@poweruplending.com

 

 
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With a copy by fax only to (which copy shall not constitute notice):

 

Naidich Wurman LLP

111 Great Neck Road, Suite 216

Great Neck, NY 11021

Attn: Allison Naidich

facsimile: 516-466-3555

e-mail: allison@nwlaw.com

 

4.3 Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument (and the other Notes issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then as so amended or supplemented.

 

4.4 Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Each transferee of this Note must be an “accredited investor” (as defined in Rule 501(a) of the Securities and Exchange Commission). Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement; and may be assigned by the Holder without the consent of the Borrower.

 

4.5 Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees.

 

4.6 Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of Virginia without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the state courts of New York or in the federal courts located in the Eastern District of New York. The parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Borrower and Holder waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Note, any agreement or any other document delivered in connection with this Note by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

 

4.7 Purchase Agreement. By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement.

 

 
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4.8 Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.

 

IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer this on January 10, 2020

 

CELL SOURCE, INC.
     
By: /s/ Itamar Shimrat

 

Itamar Shimrat  
  Chief Executive Officer  

 

 
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EXHIBIT A -- NOTICE OF CONVERSION

 

The undersigned hereby elects to convert $_______________  principal amount of the Note (defined below) into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of CELL SOURCE, INC., a Nevada corporation (the “Borrower”) according to the conditions of the convertible note of the Borrower dated as of January 10,

2020 (the “Note”), as of the date written below. No fee will be charged to the Holder for any conversion,

except for transfer taxes, if any.

 

Box Checked as to applicable instructions:

 

 

The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent At Custodian (“DWAC Transfer”).

 

 

 

 

Name of DTC Prime Broker:

Account Number:

 

 

 

 

The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:

 

POWER UP LENDING GROUP LTD.

111 Great Neck Road, Suite 214

Great Neck, NY 11021

Attention: Certificate Delivery

e-mail: info@poweruplendinggroup.com

 

 

Date of conversion:

_____________

Applicable Conversion Price:

$                             

Number of shares of common stock to be issued

pursuant to conversion of the Notes:

_____________

Amount of Principal Balance due remaining

under the Note after this conversion:

 _____________

 

 

POWER UP LENDING GROUP LTD.

 

 

 

By:                                                                      

 

Name: Curt Kramer

 

Title: Chief Executive Officer

 

Date:                                              

 

 

 

13

 

EXHIBIT 10.50

 

 

WARRANT

 

NO. CLCS ADV __

 

_____ Shares

WARRANT TO PURCHASE COMMON STOCK

 

VOID AFTER 5:30 P.M., EASTERN

TIME, ON THE EXPIRATION DATE

 

THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

FOR VALUE RECEIVED, Cell Source, Inc. a Nevada corporation (the “Company”), hereby agrees to sell upon the terms and on the conditions hereinafter set forth, but no later than 5:30 p.m., Eastern Time, on the Expiration Date (as hereinafter defined) to __________ or registered assigns (the “Holder”), under the terms as hereinafter set forth, __________________ (______) fully paid and non-assessable shares of the Company’s common stock (the “Common Stock”), par value $.001 per share (the “Warrant Stock”), at a purchase price of $0.75 per share (the “Warrant Price”), pursuant to this warrant (this “Warrant”). The number of shares of Warrant Stock to be so issued and the Warrant Price are subject to adjustment in certain events as hereinafter set forth. The term “Common Stock” shall mean, when used herein, unless the context otherwise requires, the stock and other securities and property at the time receivable upon the exercise of this Warrant.

 

1. Exercise of Warrant and Redemption of Warrant.

 

a. The Holder may exercise this Warrant according to its terms by surrendering this Warrant to the Company at the address set forth in Section 10, the Notice of Exercise attached hereto having then been duly executed by the Holder, accompanied by cash, certified check or bank draft in payment of the purchase price, in lawful money of the United States of America, for the number of shares of the Warrant Stock specified in the Notice of Exercise, or as otherwise provided in this Warrant, prior to 5:30 p.m., Eastern Time, on February 13, 2025 (the “Expiration Date”).

 

Notwithstanding anything to the contrary herein, if at any time commencing beginning after the date of this Warrant, there is no effective registration statement registering, or no current prospectus available for the resale of the Warrant Stock by the Holder, then this Warrant may also be exercised at the Holder’s election, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Stock equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

 

(A) = the 3 day VWAP on the Trading Day immediately preceding the date on which Holder elects to exercise this Warrant by means of a “cashless exercise,” as set forth in the applicable Notice of Exercise;

 

(B) = the Warrant Price of this Warrant, as adjusted hereunder; and

 

(X) = the number of Warrant Stock that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.

 

 
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“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if the OTC Bulletin Board is not a Trading Market or OTCQB, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board, (c) if the Common Stock is not then listed or quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Board of Directors of the Company.

 

“Trading Day” means a day on which the principal Trading Market is open for trading.

 

“Trading Market” means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, the OTC Bulletin Board, the OTCQB or the OTCQX.

 

This Warrant may be exercised in whole or in part so long as any exercise in part hereof would not involve the issuance of fractional shares of Warrant Stock. If exercised in part, the Company shall deliver to the Holder a new Warrant, identical in form, in the name of the Holder, evidencing the right to purchase the number of shares of Warrant Stock as to which this Warrant has not been exercised, which new Warrant shall be signed by the Chairman, Chief Executive Officer or President and the Secretary or Assistant Secretary of the Company. The term Warrant as used herein shall include any subsequent Warrant issued as provided herein.

 

b. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. The Company shall pay cash in lieu of fractions with respect to the Warrants based upon the fair market value of such fractional shares of Common Stock (which shall be the closing price of such shares on the exchange or market on which the Common Stock is then traded) at the time of exercise of this Warrant.

 

c. In the event of any exercise of the rights represented by this Warrant, a certificate or certificates for the Warrant Stock so purchased, registered in the name of the Holder, shall be delivered to the Holder within three (3) trading days after such rights shall have been so exercised (the “Warrant Stock Delivery Date”). The person or entity in whose name any certificate for the Warrant Stock is issued upon exercise of the rights represented by this Warrant shall for all purposes be deemed to have become the holder of record of such shares immediately prior to the close of business on the date on which the Warrant was surrendered and payment of the Warrant Price and any applicable taxes was made, irrespective of the date of delivery of such certificate, except that, if the date of such surrender and payment is a date when the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of such shares at the opening of business on the next succeeding date on which the stock transfer books are open. The Company shall pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Common Stock on exercise of this Warrant.

 

d. In addition to any other rights available to the Holder, if the Company fails to cause its transfer agent to transmit to the Holder a certificate or the certificates representing the Warrant Stock pursuant to an exercise on or prior to the Warrant Stock Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Stock which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of shares of Warrant Stock that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of shares of Warrant Stock for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.

 

 
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2. Disposition of Warrant Stock and Warrant.

 

a. The Holder hereby acknowledges that this Warrant and any Warrant Stock purchased pursuant hereto are, as of the date hereof, not registered: (i) under the Securities Act of 1933, as amended (the “Securities Act”), on the ground that the issuance of this Warrant is exempt from registration under Section 4a(2) of the Securities Act as not involving any public offering or (ii) under any applicable state securities law because the issuance of this Warrant does not involve any public offering; and that the Company’s reliance on the Section 4a(2) exemption of the Act, as the case may be, and under applicable state securities laws is predicated in part on the representations hereby made to the Company by the Holder that it is acquiring this Warrant and will acquire the Warrant Stock for investment for its own account, with no present intention of dividing its participation with others or reselling or otherwise distributing the same, subject, nevertheless, to any requirement of law that the disposition of its property shall at all times be within its control.

 

The Holder hereby agrees that it will not sell or transfer all or any part of this Warrant and/or Warrant Stock unless and until it shall first have given notice to the Company describing such sale or transfer and furnished to the Company either (i) an opinion, reasonably satisfactory to counsel for the Company, of counsel (skilled in securities matters, selected by the Holder) to the effect that the proposed sale or transfer may be made without registration under the Securities Act and without registration or qualification under any state law, or (ii) an interpretative letter from the Securities and Exchange Commission to the effect that no enforcement action will be recommended if the proposed sale or transfer is made without registration under the Securities Act.

 

b. If, at the time of issuance of the shares issuable upon exercise of this Warrant, no registration statement is in effect with respect to such shares under applicable provisions of the Securities Act, the Company may at its election require that the Holder provide the Company with written reconfirmation of the Holder’s investment intent and that any stock certificate delivered to the Holder of a surrendered Warrant shall bear legends reading substantially as follows:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.”

 

 
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In addition, so long as the foregoing legend may remain on any stock certificate delivered to the Holder, the Company may maintain appropriate “stop transfer” orders with respect to such certificates and the shares represented thereby on its books and records and with those to whom it may delegate registrar and transfer functions.

 

3. Exchange, Transfer or Assignment of Warrant. This Warrant is exchangeable, without expense, at the option of the Holder, upon presentation and surrender hereof to the Company or at the office of its stock transfer agent, if any, for other Warrants of different denominations, entitling the Holder or Holders thereof to purchase in the aggregate the same number of shares of Common Stock purchasable hereunder. Upon surrender of this Warrant to the Company or at the office of its stock transfer agent, if any, with the Assignment Form annexed hereto duly executed and funds sufficient to pay any transfer tax, the Company shall, without charge, execute and deliver a new Warrant in the name of the assignee named in such instrument of assignment and this Warrant shall promptly be canceled. This Warrant may be divided or combined with other Warrants that carry the same rights upon presentation hereof at the office of the Company or at the office of its stock transfer agent, if any, together with a written notice specifying the names and denominations in which new Warrants are to be issued and signed by the Holder hereof.

 

4. Capital Adjustments. This Warrant is subject to the following further provisions:

 

a. Subdivision or Combination of Shares. If the Company at any time while this Warrant remains outstanding and unexpired shall subdivide or combine its Common Stock, the number of shares of Warrant Stock purchasable upon exercise of this Warrant and the Warrant Price shall be proportionately adjusted.

 

b. Stock Dividends and Distributions. If the Company at any time while this Warrant is outstanding and unexpired shall issue or pay the holders of its Common Stock, or take a record of the holders of its Common Stock for the purpose of entitling them to receive, a dividend payable in, or other distribution of, Common Stock, then (i) the Warrant Price shall be adjusted in accordance with Section 5(f) and (ii) the number of shares of Warrant Stock purchasable upon exercise of this Warrant shall be adjusted to the number of shares of Common Stock that the Holder would have owned immediately following such action had this Warrant been exercised immediately prior thereto.

 

d. Stock and Rights Offering to Shareholders. If the Company shall at any time after the date of issuance of this Warrant distribute to all holders of its Common Stock any shares of capital stock of the Company (other than Common Stock) or evidences of its indebtedness or assets (excluding cash dividends or distributions paid from retained earnings or current year’s or prior year’s earnings of the Company) or rights or warrants to subscribe for or purchase any of its securities (excluding those referred to in the immediately preceding paragraph) (any of the foregoing being hereinafter in this paragraph called the “Securities”), then in each such case, the Company shall reserve shares or other units of such Securities for distribution to the Holder upon exercise of this Warrant so that, in addition to the shares of the Common Stock to which such Holder is entitled, such Holder will receive upon such exercise the amount and kind of such Securities which such Holder would have received if the Holder had, immediately prior to the record date for the distribution of the Securities, exercised this Warrant.

 

d. Intentionally Omitted.

 

e. Warrant Price Adjustment. Except as otherwise provided herein, whenever the number of shares of Warrant Stock purchasable upon exercise of this Warrant is adjusted, as herein provided, the Warrant Price payable upon the exercise of this Warrant shall be adjusted to that price determined by multiplying the Warrant Price immediately prior to such adjustment by a fraction (i) the numerator of which shall be the number of shares of Warrant Stock purchasable upon exercise of this Warrant immediately prior to such adjustment, and (ii) the denominator of which shall be the number of shares of Warrant Stock purchasable upon exercise of this Warrant immediately thereafter.

 

f. Certain Shares Excluded. The number of shares of Common Stock outstanding at any given time for purposes of the adjustments set forth in this Section 5 shall exclude any shares then directly or indirectly held in the treasury of the Company.

 

 
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g. Deferral and Cumulation of De Minimis Adjustments. The Company shall not be required to make any adjustment pursuant to this Section 5 if the amount of such adjustment would be less than one percent (1%) of the Warrant Price in effect immediately before the event that would otherwise have given rise to such adjustment. In such case, however, any adjustment that would otherwise have been required to be made shall be made at the time of and together with the next subsequent adjustment which, together with any adjustment or adjustments so carried forward, shall amount to not less than one percent (1%) of the Warrant Price in effect immediately before the event giving rise to such next subsequent adjustment.

 

h. Duration of Adjustment. Following each computation or readjustment as provided in this Section 5, the new adjusted Warrant Price and number of shares of Warrant Stock purchasable upon exercise of this Warrant shall remain in effect until a further computation or readjustment thereof is required.

 

5. Limitation on Exercises.

 

a. Notwithstanding anything to the contrary set forth in this Warrant, at no time may all or a portion of the Warrant be exercised if the number of shares of Common Stock to be issued pursuant to such exercise would exceed, when aggregated with all other shares of Common Stock owned by the Holder at such time, the number of shares of Common Stock which would result in the Holder beneficially owning (as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules thereunder) more than 4.99% of all of the Common Stock outstanding at such time; provided, however, that upon the Holder providing the Corporation with sixty-one (61) days’ advance notice (the “4.99% Waiver Notice”) that the Holder would like to waive this Section 6 (a) with regard to any or all shares of Common Stock issuable upon exercise of this Warrant, this Section 6 (a) will be of no force or effect with regard to all or a portion of this Warrant referenced in the 4.99% Waiver Notice.

 

b. Notwithstanding anything to the contrary set forth in this Warrant, at no time may all or a portion of this Warrant be exercised if the number of shares of Common Stock to be issued pursuant to such exercise, when aggregated with all other shares of Common Stock owned by the Holder at such time, would result in the Holder beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act and the rules thereunder) in excess of 9.99% of the then issued and outstanding shares of Common Stock outstanding at such time (the “9.99% Beneficial Ownership Limitation” and the lower of the 9.99% Beneficial Ownership Limitation and the 4.99% Beneficial Ownership Limitation then in effect, the “Maximum Percentage”).

 

c. By written notice to the Company, the Holder may from time to time decrease the Maximum Percentage to any other percentage specified in such notice

 

d. For purposes of this Warrant, in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (1) the Company's most recent Form 10-K, Form 10-Q, Current Report on Form 8-K or other public filing with the Securities and Exchange Commission, as the case may be, (2) a more recent public announcement by the Company or (3) any other notice by the Company setting forth the number of shares of Common Stock outstanding. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one (1) business day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder and its affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 6 to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation.

 

6. Notice to Holders.

 

a. Notice of Record Date. In case:

 

 
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(i) the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time receivable upon the exercise of this Warrant) for the purpose of entitling them to receive any dividend (other than a cash dividend payable out of earned surplus of the Company) or other distribution, or any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right;

 

(ii) of any capital reorganization of the Company, any reclassification of the capital stock of the Company, any consolidation with or merger of the Company into another corporation, or any conveyance of all or substantially all of the assets of the Company to another corporation; or

 

(iii) of any voluntary dissolution, liquidation or winding-up of the Company;

 

then, and in each such case, the Company will mail or cause to be mailed to the Holder hereof at the time outstanding a notice specifying, as the case may be, (i) the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (ii) the date on which such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up is to take place, and the time, if any, is to be fixed, as of which the holders of record of Common Stock (or such stock or securities at the time receivable upon the exercise of this Warrant) shall be entitled to exchange their shares of Common Stock (or such other stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, conveyance, dissolution or winding-up. Such notice shall be mailed at least thirty (30) days prior to the record date therein specified, or if no record date shall have been specified therein, at least thirty (30) days prior to such specified date, provided, however, failure to provide any such notice shall not affect the validity of such transaction.

 

b. Certificate of Adjustment. Whenever any adjustment shall be made pursuant to Section 5 hereof, the Company shall promptly make a certificate signed by its Chairman, Chief Executive Officer, President, Vice President, Chief Financial Officer or Treasurer, setting forth in reasonable detail the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated and the Warrant Price and number of shares of Warrant Stock purchasable upon exercise of this Warrant after giving effect to such adjustment, and shall promptly cause copies of such certificates to be mailed (by first class mail, postage prepaid) to the Holder of this Warrant.

 

7. Loss, Theft, Destruction or Mutilation. Upon receipt by the Company of evidence satisfactory to it, in the exercise of its reasonable discretion, of the ownership and the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, of indemnity reasonably satisfactory to the Company and, in the case of mutilation, upon surrender and cancellation thereof, the Company will execute and deliver in lieu thereof, without expense to the Holder, a new Warrant of like tenor dated the date hereof.

 

8. Warrant Holder Not a Stockholder. The Holder of this Warrant, as such, shall not be entitled by reason of this Warrant to any rights whatsoever as a stockholder of the Company.

 

9. Notices. Any notice required or contemplated by this Warrant shall be deemed to have been duly given if transmitted by registered or certified mail, return receipt requested, or nationally recognized overnight delivery service, to the Company at its principal executive offices located at 5 Kineret St. Bnei Brak 5126237 Israel, Attn: Chief Executive Officer, or to the Holder at the name and address set forth in the Warrant Register maintained by the Company.

 

10. Choice of Law. THIS WARRANT IS ISSUED UNDER AND SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.

 

 
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11. Jurisdiction and Venue. The Company and Holder hereby agree that any dispute which may arise between them arising out of or in connection with this Warrant shall be adjudicated before a court located in New York County, New York and they hereby submit to the exclusive jurisdiction of the federal and state courts of the State of York located in New York County with respect to any action or legal proceeding commenced by any party, and irrevocably waive any objection they now or hereafter may have respecting the venue of any such action or proceeding brought in such a court or respecting the fact that such court is an inconvenient forum, relating to or arising out of this Warrant or any acts or omissions relating to the sale of the securities hereunder, and consent to the service of process in any such action or legal proceeding by means of registered or certified mail, return receipt requested, in care of the address set forth herein or such other address as either party shall furnish in writing to the other.

 

12. Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent signed by both (a) the Company and (b) holders of Warrants representing a majority of the Warrant Stock then outstanding and not exercised.

 

[Signature Page Follows]

 

 
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IN WITNESS WHEREOF, the Company has duly caused this Warrant to be signed on its behalf, in its corporate name and by its duly authorized officers, as of this 13th day of February, 2020.

 

By:

 

Name:

Itamar Shimrat  
  Title: Chief Executive Officer  

  

 
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NOTICE OF EXERCISE

 

TO:

Tel: (___) ___-____

Fax: (___) ___-____

 

(1) The undersigned hereby elects to purchase ______________ shares of Warrant Stock of the Company pursuant to the terms of the attached Warrant to Purchase Common Stock, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

 

(2) Payment shall take the form of:

 

☐ in lawful money of the United States

 

☐ the cancellation of such number of Warrant Stock as is necessary, in accordance with the formula set forth in Section 1(a) to exercise this Warrant with respect to the maximum number of Warrant Stock purchasable pursuant to the cashless exercise procedure set forth in subsection 1(a).

 

Please issue a certificate or certificates representing said shares of Warrant Stock in the name of the undersigned or in such other name as is specified below:

 

 

 

 

The shares of Warrant Stock shall be delivered to the following DWAC Account Number, if permitted, or by physical delivery of a certificate to:

 

 

 

 

(3) Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.

 

[SIGNATURE OF HOLDER]

 

Name of Investing Entity:

 

Signature of Authorized Signatory of Investing Entity:

 

Name and Title of Authorized Signatory:

 

Date:

 

 
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ASSIGNMENT FORM

 

(To assign the foregoing warrant, execute

 

this form and supply required information.

Do not use this form to exercise the warrant.)

 

FOR VALUE RECEIVED, all of or _________ shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

________________________________whose address is

_____________________________________________

_____________________________________________

Dated: _________,

 

Holder’s Name:

 

Holder’s Signature:

 

Name and Title of Signatory:

 

Holder’s Address:

 

Signature Guaranteed:

 

NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

 

 
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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-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: May 15, 2020

 

/s/ Itamar Shimrat                                                                                
Itamar Shimrat

Chief Executive Officer and Chief Financial Officer
(Principal Executive, Financial, and Accounting Officer)

EXHIBIT 32

 

CERTIFICATION OF

CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

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

PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

 

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

 

The Quarterly Report for the quarter ended March 31, 2020 (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: May 15, 2020

                                              

 

 /s/ Itamar Shimrat                                                                         

Itamar Shimrat

Chief Executive Officer and Chief Financial Officer

(Principal Executive, Financial, and Accounting Officer)