UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, ~~2020~~2021

☐	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)

~~Cell Source, Inc.~~

~~(Exact name of registrant as specified in its charter)~~

Nevada

32-0379665

(State or other jurisdiction of

of incorporation or organization)

(I.R.S. Employer

Identification No.)

57 West 57^th57th Street, Suite 400

New York, NY10019

(Address of principal executive offices)

(646)416-7896

(~~Issuer's~~Issuer’s telephone number)

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

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

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

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

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

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

	Emerging growth company	☐

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

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

As of November ~~9, 2020,~~10, 2021, the registrant had ~~31,960,419~~33,723,554 shares of $0.001 par value common stock outstanding.

CELL SOURCE, INC. AND SUBSIDIARY

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, ~~2020~~2021

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements.		3

	Condensed Consolidated Balance Sheets as of September 30, ~~2020~~2021 (Unaudited) and December 31, ~~2019~~2020		3

	Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, ~~2020~~2021 and ~~2019~~2020		4

	Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Deficiency for the Nine Months Ended September 30, ~~2020~~2021 and ~~2019~~2020		5

	Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2020~~2021 and ~~2019~~2020		7

	Notes to Unaudited Condensed Consolidated Financial Statements		8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.		16

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.		20	22

Item 4.	Controls and Procedures.		20	22

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings.		21	23

Item 1A.	Risk Factors.		21	23

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.		21	23

Item 3.	Defaults Upon Senior Securities.		22	24

Item 4.	Mine Safety Disclosures.		22	24

Item 5.	Other Information.		22	24

Item 6. Exhibits.	~~Exhibits.~~		22	24

SIGNATURES		23	25

~~Table of Contents~~

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

CELL SOURCE, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

December 31,

2020

2019

(Unaudited)

Assets

Current Assets:

Cash

$ 54,736

$ 27,908

Prepaid expenses

135,269

57,196

Other current assets

20,324

29,679

Total Assets

$ 210,329

$ 114,783

Liabilities and Stockholders' Deficiency

Current Liabilities:

Accounts payable

$ 376,346

$ 135,415

Accrued expenses

1,037,866

1,051,961

Accrued expenses - related parties

148,737

195,334

Accrued interest

404,285

426,516

Accrued interest - related parties

183,199

146,491

Accrued compensation

642,401

603,520

Advances payable

225,500

235,500

Advances payable - related party

100,000

100,000

Notes payable, net of debt discount of $0 and $1,292,

as of September 30, 2020 and December 31, 2019, respectively

1,013,000

1,111,708

Notes payable - related parties

150,000

150,000

Convertible notes payable, net of debt discount of $108,451 and

$1,467 as of September 30, 2020 and December 31, 2019, respectively

2,492,105

966,533

Convertible notes payable - related parties

225,000

225,000

Derivative liabilities

-

351,900

Accrued dividend payable

230,321

11,846

Total Current Liabilities

7,228,760

5,711,724

Convertible notes payable - non-current portion

-

145,000

Total Liabilities

7,228,760

5,856,724

Commitments and contingencies (Note 9)

-

-

Stockholders' Deficiency:

Convertible Preferred Stock, $0.001 par value, 10,000,000 shares

authorized; Series A Convertible Preferred Stock, 1,335,000 shares

designated, 1,342,195 and 1,245,083 shares issued and outstanding

as of September 30, 2020 and December 31, 2019, respectively;

liquidation preference of $10,296,784 and $9,349,969
as of September 30, 2020 and December 31, 2019, respectively

1,342

1,245

Common Stock, $0.001 par value, 200,000,000 shares authorized;

29,965,043 and 27,076,762 shares issued and outstanding

as of September 30, 2020 and December 31, 2019, respectively

29,965

27,077

Additional paid-in capital

17,382,155

15,375,565

Accumulated deficit

(24,431,893 )

(21,145,828 )
Total Stockholders' Deficiency

(7,018,431 )

(5,741,941 )

Total Liabilities and Stockholders' Deficiency

$ 210,329

$ 114,783

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

~~Table of Contents~~

CELL SOURCE, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

For the Three Months Ended
September 30,

For the Nine Months Ended
September 30,

2020

2019

2020

2019

Operating Expenses:

Research and development

$ 257,546

$ 1,158,757

$ 675,017

$ 2,269,269

Research and development - related party

-

33,333

111,667

83,333

General and administrative

908,099

168,906

2,015,624

909,334

Total Operating Expenses

1,165,645

1,360,996

2,802,308

3,261,936

Loss From Operations

(1,165,645 )

(1,360,996 )

(2,802,308 )

(3,261,936 )

Other (Expense) Income:

Interest expense

(114,040 )

(53,209 )

(271,687 )

(185,993 )
Interest expense - related parties

(12,827 )

(49,595 )

(36,708 )

(50,889 )
Amortization of debt discount

(146,109 )

(3,566 )

(190,639 )

(10,095 )
Change in fair value of derivative liabilities

-

33,500

16,977

118,500

Warrant modification expense

-

(54,100 )

-

(283,500 )
Loss on exchange of notes payable for Series A Convertible Preferred Stock

-

-

-

(262,470 )
Loss on extinguishment of notes payable

(1,511 )

-

(134,202 )

(1,504 )
Gain on exchange of accrued interest for common stock

132,502

-

132,502

-

Gain on forgiveness of accrued expenses

-

-

-

38,427

Total Other Expense

(141,985 )

(126,970 )

(483,757 )

(637,524 )

Net Loss

(1,307,630 )

(1,487,966 )

(3,286,065 )

(3,899,460 )
Dividend attributable to Series A preferred stockholders

(226,191 )

(197,911 )

(649,381 )

(534,919 )
Net Loss Applicable to Common Stockholders

$ (1,533,821 )

$ (1,685,877 )

$ (3,935,446 )

$ (4,434,379 )

Net Loss Per Common Share - Basic and Diluted

$ (0.05 )

$ (0.06 )

$ (0.13 )

$ (0.16 )

Weighted Average Common Shares Outstanding -

Basic and Diluted

31,846,661

28,523,306

30,334,852

28,262,759

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

~~Table of Contents~~

CELL SOURCE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
(Unaudited)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 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 )

Issuance of Series A Convertible

Preferred Stock for cash

3,333

3

-

-

24,997

-

25,000

Issuance of common stock in connection

with extension of notes payable

-

-

525,000

525

130,725

-

131,250

Issuance of warrants in connection

with issuance of notes payable

-

-

-

-

161,256

-

161,256

Issuance of warrants in connection

with issuance of advance payable

-

-

-

-

24,386

-

24,386

Series A Convertible Preferred Stock dividends:

Accrual of earned dividends

-

-

-

-

(211,885 )

-

(211,885 )
Payment of dividends in kind

-

-

574,576

574

430,331

-

430,905

Stock-based compensation:

Common stock

-

-

1,270,000

1,270

316,230

-

317,500

Warrants

-

-

-

-

16,129

-

16,129

Net loss

-

-

-

-

-

(1,164,688 )

(1,164,688 )

Balance, June 30, 2020

1,261,749

$ 1,261

29,699,509

$ 29,699

$ 16,565,286

$ (23,124,263 )

$ (6,528,017 )

Issuance of Series A Convertible

Preferred Stock for cash

80,446

81

-

-

603,266

-

603,347

Issuance of common stock in exchange

of accrued interest

-

-

265,534

266

66,383

-

66,649

Issuance of warrants in connection

with issuance of notes payable

-

-

-

-

20,098

-

20,098

Series A Convertible Preferred Stock dividends:
Accrual of earned dividends

-

-

-

-

(226,191 )

-

(226,191 )

Stock-based compensation:

Options

-

-

-

-

103,600

-

103,600

Warrants

-

-

-

-

249,713

-

249,713

Net loss

-

-

-

-

-

(1,307,630 )

(1,307,630 )

Balance, September 30, 2020

1,342,195

$ 1,342

29,965,043

$ 29,965

$ 17,382,155

$ (24,431,893 )

$ (7,018,431 )

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

~~Table of Contents~~

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 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 )

Issuance of Series A Convertible

Preferred Stock for cash

106,437

107

-

-

798,162

-

798,269

Series A Convertible Preferred Stock dividends:

Accrual of earned dividends

-

-

-

-

(188,973 )

-

(188,973 )
Payment of dividends in kind

-

-

401,860

401

300,978

-

301,379

Net loss

-

-

-

-

-

(952,985 )

(952,985 )

Balance, June 30, 2019

1,155,426

$ 1,155

26,479,471

$ 26,479

$ 13,900,422

$ (19,081,827 )

$ (5,153,771 )

Issuance of Series A Convertible

Preferred Stock for cash

13,333

14

-

-

99,986

-

100,000

Series A Convertible Preferred Stock dividends:

Accrual of earned dividends

-

-

-

-

(197,911 )

-

(197,911 )

Stock-based compensation:

Options

-

-

-

-

825,100

-

825,100

Net loss

-

-

-

-

-

(1,487,966 )

(1,487,966 )

Balance, September 30, 2019

1,168,759

$ 1,169

26,479,471

$ 26,479

$ 14,627,597

$ (20,569,793 )

$ (5,914,548 )

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

~~Table of Contents~~

CELL SOURCE, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30, December 31,
2021 2020
(Unaudited)
Assets
Current Assets:
Cash $ 599,454 $ 241,619
Prepaid expenses 243,876 177,569
Other current assets 17,344 29,651
Total Current Assets 860,674 448,839
Restricted cash - 3,500
Total Assets $ 860,674 $ 452,339

Liabilities and Stockholders’ Deficiency

Current Liabilities:
Accounts payable $ 285,162 $ 193,095
Accrued expenses 949,933 1,159,950
Accrued expenses - related parties 101,201 198,701
Accrued interest 863,296 671,968
Accrued interest - related parties 395,125 325,276
Accrued compensation 760,941 724,185
Advances payable 195,500 195,500
Advances payable - related party 100,000 100,000
Notes payable 809,912 1,013,000
Notes payable - related parties 150,000 150,000
Convertible notes payable, net of debt discount of $236,091 and $157,720 as of September 30, 2021 and December 31, 2020, respectively 5,841,730 3,417,836
Convertible notes payable - related parties 225,000 225,000
Financing liability for directors and officers insurance 124,581 -
Accrued dividend payable 246,192 25,210
Total Current Liabilities 11,048,573 8,399,721

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, 1,342,195 shares issued and outstanding as of September 30, 2021 and December 31, 2020; liquidation preference of $10,294,818 and $10,091,672 as of September 30, 2021 and December 31, 2020, respectively 1,342 1,342
Series C Convertible Preferred Stock, 500,000 shares designated,
163,296 and 0 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively; liquidation preference of $1,242,550 and $0 as of September 30, 2021 and December 31, 2020, respectively
163 -
Convertible preferred stock, value
Common Stock, $0.001 par value, 200,000,000 shares authorized;
33,588,578 and 32,538,411 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively
33,589 32,538
Additional paid-in capital 20,120,422 17,724,731
Accumulated deficit (30,343,415 ) (25,705,993 )
Total Stockholders’ Deficiency (10,187,899 ) (7,947,382 )
Total Liabilities and Stockholders’ Deficiency $ 860,674 $ 452,339
The accompanying notes are an integral part of these condensed consolidated financial statements.
3

CELL SOURCE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2021 2020 2021 2020

Operating Expenses:
Research and development $ 446,773 $ 257,546 $ 1,037,588 $ 675,017
Research and development - related party 12,500 - 60,475 111,667
General and administrative 856,059 908,099 2,333,724 2,015,624
Total Operating Expenses 1,315,332 1,165,645 3,431,787 2,802,308
Loss From Operations (1,315,332 ) (1,165,645 ) (3,431,787 ) (2,802,308 )

Other (Expense) Income:
Interest expense (191,626 ) (114,040 ) (588,314 ) (271,687 )
Interest expense - related parties (22,805 ) (12,827 ) (69,849 ) (36,708 )
Amortization of debt discount (269,805 ) (146,109 ) (547,737 ) (190,639 )
Change in fair value of derivative liabilities - - - 16,977
Gain on forgiveness of accrued interest - - 49,983 -
Gain on exchange of accrued interest for common stock - 132,502 - 132,502
Loss on extinguishment of notes payable - (1,511 ) (49,718 ) (134,202 )
Total Other Expense (484,236 ) (141,985 ) (1,205,635 ) (483,757 )
Net Loss (1,799,568 ) (1,307,630 ) (4,637,422 ) (3,286,065 )
Dividend attributable to Series A and Series C preferred stockholders (246,192 ) (226,191 ) (695,456 ) (649,381 )
Net Loss Applicable to Common Stockholders $ (2,045,760 ) $ (1,533,821 ) $ (5,332,878 ) $ (3,935,446 )

Net Loss Per Common Share - Basic and Diluted $ (0.06 ) $ (0.05 ) $ (0.16 ) $ (0.13 )

Weighted Average Common Shares Outstanding -
Basic and Diluted 33,461,141 31,846,661 32,897,010 30,334,852
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
CELL SOURCE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIENCY
(Unaudited)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
Convertible Preferred Convertible Preferred Additional Total
Stock - Series A Stock - Series C Common Stock
Paid- In
Accumulated Stockholders’
Shares Amount Shares Amount Shares Amount Capital Deficit Deficiency

Balance, January 1, 2021 1,342,195 $ 1,342 - $ - 32,538,411 $ 32,538 $ 17,724,731 $ (25,705,993 ) $ (7,947,382 )
Series A Convertible Preferred Stock dividends:
Accrual of earned dividends - - - - - - (223,391 ) - (223,391 )
Payment of dividends in kind
Payment of dividends in kind, shares

Issuance of common stock pursuant to cashless warrant exercise - - - - 125,071 125 (125 ) - -

Issuance of warrants in connection with issuance of convertible notes payable - - - - - - 196,966 - 196,966

Issuance of warrants in connection with exchange of convertible notes payable - - - - - - 139,728 - 139,728

Warrants issued in satisfaction of accrued interest - - - - - - 82,350 - 82,350

Stock-based compensation:
Common stock
Common stock, shares
Options - - - - - - 206,400 - 206,400
Warrants - - - - - - 31,276 - 31,276
Conversion of convertible notes payable and accrued interest into Series C Convertible Preferred Stock and common stock
Conversion of convertible notes payable and accrued interest into Series C Convertible Preferred Stock and common stock, shares
Conversion of Series C Convertible Preferred Stock into common stock
Conversion of Series C Convertible Preferred Stock into common stock, shares
Warrants modification expense
Common stock issued in satisfaction of accrued compensation
Common stock issued in satisfaction of accrued compensation , shares
Issuance of common stock in connection with extension of notes payable
Issuance of common stock in connection with extension of notes payable, shares
Reclassification of derivative liabilities to equity
Issuance of warrants in connection with issuance of notes payable
Issuance of common stock in exchange of accrued interest
Issuance of common stock in exchange of accrued interest
Issuance of Series A Convertible Preferred Stock for cash
Issuance of Series A Convertible Preferred Stock for cash, shares
Issuance of warrants in connection with issuance of advance payable

Net loss - - - - - - - (1,524,741 ) (1,524,741 )

Balance, March 31, 2021 1,342,195 1,342 - - 32,663,482 32,663 18,157,935 (27,230,734 ) (9,038,794 )

Series A Convertible Preferred Stock dividends:
Accrual of earned dividends - - - - - - (225,873 ) - (225,873 )
Payment of dividends in kind - - - - 632,677 633 473,842 - 474,475

Issuance of warrants in connection with issuance of convertible notes payable - - - - - - 37,512 - 37,512

Stock-based compensation:
Common stock - - - - 5,405 5 2,535 - 2,540
Warrants - - - - - - 36,343 - 36,343

Net loss - - - - - - - (1,313,113 ) (1,313,113 )

Balance, June 30, 2021 1,342,195 1,342 - - 33,301,564 33,301 18,482,294 (28,543,847 ) (10,026,910 )

Series A and C Convertible Preferred Stock dividends:
Accrual of earned dividends - - - - - - (246,192 ) - (246,192 )

Conversion of convertible notes payable and accrued interest into Series C Convertible Preferred Stock and common stock - - 168,296 168 71,915 72 1,315,918 - 1,316,158

Conversion of Series C Convertible Preferred Stock into common stock - - (5,000 ) (5 ) 50,000 50 (45 ) - -

Warrants issued in satisfaction of accrued interest - - - - - - 165,216 - 165,216

Warrants modification expense - - - - - - 29,000 - 29,000

Common stock issued in satisfaction of accrued compensation - - - - 15,099 16 7,081 - 7,097

Issuance of warrants in connection with issuance of convertible notes payable - - - - - - 226,791 - 226,791

Stock-based compensation:
Common stock - - - - 150,000 150 70,350 - 70,500
Warrants - - - - - - 70,009 - 70,009

Net loss - - - - - - - (1,799,568 ) (1,799,568 )

Balance, September 30, 2021 1,342,195 $ 1,342 163,296 $ 163 33,588,578 $ 33,589 $ 20,120,422 $ (30,343,415 ) $ (10,187,899 )
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
CELL SOURCE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIENCY
(Unaudited)
1
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020
Convertible Preferred Convertible Preferred Additional Total
Stock - Series A Stock - Series C Common Stock Paid- In Accumulated Stockholders’
Shares Amount Shares Amount Shares Amount Capital Deficit Deficiency

Balance, January 1, 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 )

Issuance of Series A Convertible Preferred Stock for cash 3,333 3 - - 24,997 - 25,000

Issuance of common stock in connection with extension of notes payable - - 525,000 525 130,725 - 131,250

Issuance of warrants in connection with issuance of notes payable - - - - - - 161,256 - 161,256

Issuance of warrants in connection with issuance of advance payable - - - - 24,386 - 24,386

Series A Convertible Preferred Stock dividends:
Accrual of earned dividends - - - - (211,885 ) - (211,885 )
Payment of dividends in kind - - 574,576 574 430,331 - 430,905

Stock-based compensation:
Common stock - - 1,270,000 1,270 316,230 - 317,500
Warrants - - - - 16,129 - 16,129

Net loss - - - - - - - (1,164,688 ) (1,164,688 )

Balance, June 30, 2020 1,261,749 1,261 - - 29,699,509 29,699 16,565,286 (23,124,263 ) (6,528,017 )

Balance 1,261,749 1,261 - - 29,699,509 29,699 16,565,286 (23,124,263 ) (6,528,017 )
Issuance of Series A Convertible Preferred Stock for cash 80,446 81 - - 603,266 - 603,347

Issuance of common stock in exchange of accrued interest - - 265,534 266 66,383 - 66,649

Issuance of warrants in connection with issuance of notes payable - - - - 20,098 - 20,098

Series A Convertible Preferred Stock dividends:
Accrual of earned dividends - - - - (226,191 ) - (226,191 )

Stock-based compensation:
Options - - - - 103,600 - 103,600
Warrants - - - - 249,713 - 249,713

Net loss - - - - - - - (1,307,630 ) (1,307,630 )

Balance, September 30, 2020 1,342,195 $ 1,342 - - 29,965,043 $ 29,965 $ 17,382,155 $ (24,431,893 ) $ (7,018,431 )
Balance 1,342,195 $ 1,342 - - 29,965,043 $ 29,965 $ 17,382,155 $ (24,431,893 ) $ (7,018,431 )
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
CELL SOURCE, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

For The Nine Months Ended
September 30,

2020

2019

Cash Flows From Operating Activities:

Net loss

$ (3,286,065 )

$ (3,899,460 )
Adjustments to reconcile net loss to net cash used in operating activities:

Change in fair value of derivative liabilities

(16,977 )

(118,500 )
Warrant modification expense

-

283,500

Amortization of debt discount

190,639

10,095

Loss on exchange of notes payable for preferred shares

-

262,470

Loss on extinguishment of debt

134,202

1,504

Gain on forgiveness of accrued expenses

-

(38,427 )
Gain on exchange of accrued interest for common stock

(132,502 )

-

Non-cash interest expense - warrants

60,769

75,769

Stock-based compensation:

Warrants

263,476

3,684

Common stock

319,396

1,750

Options

103,600

825,100

Changes in operating assets and liabilities:

Prepaid expenses

(72,687 )

(1,389 )
Other current assets

9,355

(20,369 )
Accounts payable

240,931

170,737

Accrued expenses

(46,990 )

455,602

Accrued expenses - related parties

(46,597 )

33,333

Accrued interest

207,889

159,127

Accrued interest - related parties

2,252

1,775

Accrued compensation

51,290

69,827

Net Cash Used In Operating Activities

(2,018,019 )

(1,723,872 )

Cash Flows From Financing Activities:

Proceeds from advances payable

100,000

275,500

Proceeds from issuance of notes payable

100,000

120,000

Proceeds from issuance of convertible notes payable [1]

1,572,500

165,000

Proceeds from issuance of Series A Preferred Stock

728,347

1,223,269

Repayment of notes payable

(200,000 )

(70,000 )
Repayment of convertible notes payable

(146,000 )

-

Repayment of advances payable

(110,000 )

-

Net Cash Provided By Financing Activities

2,044,847

1,713,769

Net Increase (Decrease) In Cash

26,828

(10,103 )

Cash - Beginning of Period

27,908

18,934

Cash - End of Period

$ 54,736

$ 8,831

[1] The amount for the nine months ended September 30, 2020 includes gross proceeds of $1,575,000, less issuance costs of $2,500 deducted directly from the proceeds.

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

$ 58,556

$ 6,000

Common stock issued in connection with payment of Series A Convertible Preferred Stock dividends in-kind

$ -

$ 301,379

Preferred stock issued in exchange for notes and advances payable

$ -

$ 1,090,254

Accrual of earned preferred stock dividends

$ (649,381 )

$ (534,919 )
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

$ 188,125

$ -

Repayment of convertible note payable and accrued interest by third party

$ 100,896

$ 133,488

Warrants and conversion options issued in connection with issuance and extension of notes payable

$ 181,354

$ 15,600

Warrants issued in connection with issuance of advance payable

$ 24,386

$ -

Extinguishment of conversion option in connection with repayment of notes payable

$ -

$ 1,000

Issuance of common stock in exchange of accrued interest

$ 66,649

$ -

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


	For The Nine Months Ended
	September 30,
	2021			2020

Cash Flows From Operating Activities:
Net loss	$	(4,637,422	)	$	(3,286,065	)
Adjustments to reconcile net loss to net cash used in operating activities:
Change in fair value of derivative liabilities		-			(16,977	)
Amortization of debt discount		547,737			190,639
Gain on forgiveness of accrued interest		(49,983	)		-
Loss on extinguishment of notes payable		49,718			134,202
Gain on exchange of accrued interest for common stock		-			(132,502	)
Non-cash interest expense - warrants		286,639			60,769
Stock-based compensation:
Options		206,400			103,600
Warrants		137,735			263,476
Common stock		80,137			319,396
Changes in operating assets and liabilities:
Prepaid expenses		254,193			(72,687	)
Other current assets		12,307			9,355
Accounts payable		92,067			240,931
Accrued expenses		(210,019	)		(46,990	)
Accrued expenses - related parties		(97,500	)		(46,597	)
Accrued interest		369,619			207,889
Accrued interest - related parties		2,244			2,252
Accrued compensation		36,650			51,290
Net Cash Used In Operating Activities		(2,919,478	)		(2,018,019	)

Cash Flows From Financing Activities:
Proceeds from advances payable		-			100,000
Proceeds from issuance of notes payable		-			100,000
Proceeds from issuance of convertible notes payable		3,797,820			1,572,500
Proceeds from issuance of Series A Preferred Stock		-			728,347
Repayment of financing liability		(195,919	)		-
Repayment of notes payable		(203,088	)		(200,000	)
Repayment of convertible notes payable		(125,000	)		(146,000	)
Repayment of advances payable		-			(110,000	)
Net Cash Provided By Financing Activities		3,273,813			2,044,847

Net Increase In Cash and Restricted Cash		354,335			26,828

Cash and Restricted Cash - Beginning of Period		245,119			27,908

Cash and Restricted Cash - End of Period	$	599,454		$	54,736

Cash and restricted cash consisted of the following:
Cash	$	599,454		$	54,736
Restricted cash		-			-
Cash and Restricted cash	$	599,454		$	54,736

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	$	-		$	58,556
Common stock issued in connection with payment of Series A Convertible Preferred Stock dividends in-kind	$	474,475		$	-
Conversion of convertible notes payable and accrued interest into Series C Preferred Stock and common stock	$	1,316,158		$	-
Reclassification of derivative liabilities to equity	$	-		$	345,830
Conversion of Series C Convertible Preferred Stock into common stock	$	50		$	-
Issuance of common stock pursuant to cashless warrant exercise	$	125		$	-
Common stock issued in satisfaction of accrued compensation	$	7,097		$	-
Financing of Directors and Officer’s insurance	$	320,500		$	-
Accrued interest converted into notes payable	$	41,950		$	-
Issuance of warrants in connection with the issuance of notes payable	$	461,269		$	-
Issuance of warrants in satisfaction of accrued interest	$	247,566		$	66,649
Accrual of earned preferred stock dividends	$	(695,456	)	$	(649,381	)
Issuance of placement agent warrants	$	-		$	10,907
Issuance of common stock as debt discount in in connection with extension of notes payable	$	-		$	188,125
Repayment of convertible note payable and accrued interest by third party	$	-		$	100,896
Warrants and conversion options issued in connection with issuance and extension of notes payable	$	-		$	181,354
Warrants issued in connection with issuance of advance payable	$	-		$	24,386

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

~~Table of Contents~~

CELL SOURCE, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Organization and Operations

Cell Source, Inc. (“Cell Source”, “CSI” or the “Company”) is a Nevada corporation formed on June 6, 2012 that is the parent company of Cell Source Limited (“CSL”), a wholly owned subsidiary which was founded in Israel in 2011 in order to commercialize a suite of inventions relating to certain cancer treatments. The Company is a biotechnology company focused on developing cell therapy treatments based on the management of immune tolerance. The Company’s lead prospective product is its patented Veto Cell immune system management technology, which is an immune tolerance biotechnology that enables the selective blocking of immune responses. CSL’s Veto Cell immune system management technology is based on technologies patented, owned, and licensed to CSL by Yeda Research and Development Company Limited, an Israeli corporation ~~("Yeda"~~(“Yeda”) (see Note 8, ~~Related Party Transactions~~Commitments and Contingencies). The Company’s target indications include: lymphoma, leukemia and multiple myeloma through the facilitation of both safer and more accessible stem cell (e.g. bone marrow) transplantation acceptance and effective allogeneic CAR-T cell therapy, 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.~~diseases (e.g. sickle cell disease, diabetes).

Risks and Uncertainties

In March 2020, the World Health Organization declared ~~the outbreak of~~COVID-19, a novel strain of coronavirus, ~~(“COVID-19”) as~~ a ~~pandemic which~~pandemic. During 2020 and continuing into 2021, the global economy has been, and continues to ~~spread throughout~~be, affected by COVID-19. While the ~~United States.~~Company continues to see signs of economic recovery as certain governments began to gradually ease restrictions, provide economic stimulus and vaccine distribution accelerated, the rate of recovery on a global basis has been affected by resurgence of the virus or its variants in certain jurisdictions causing reinstatement of restrictions in certain jurisdictions. The Company ~~is closely monitoring~~continues to monitor the ~~outbreak~~effects of COVID-19 and its impact on the Company’s operations, financial position, cash flows and its industry in general. The Company considered the impact of COVID-19 on its business and operational assumptions and estimates, and determined there were no material adverse impacts on the Company’s results of operations and financial position at September 30, ~~2020.~~2021.

The full extent of ~~COVID-19~~the future ~~impacts~~impact of COVID-19 on the Company’s operations and financial condition is uncertain. ~~A prolonged~~Accordingly, COVID-19 ~~outbreak~~ could have a material adverse ~~impact~~effect on the Company’s business, results of operations, financial condition and ~~liquidity,~~prospects during 2021 and beyond, including the timing and ability of the Company to initiate and/or complete current and/or future preclinical studies and/or clinical trials, disrupt the Company’s regulatory activities, and/or have other adverse effects on the Company’s clinical development. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the condensed consolidated financial position of the Company as of September 30, ~~2020~~2021 and the condensed consolidated results of its operations and cash flows for the three and nine months ended September 30, ~~2020~~2021 and ~~2019.~~2020. The results of operations for the three and nine months ended September 30, ~~2020~~2021 are not necessarily indicative of the operating results for the full year ending December 31, ~~2020~~2021 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~~2020 and for the year then ended which were included in the ~~Company's~~Company’s Annual Report on Form 10-K that was filed with the Securities and Exchange Commission (“SEC”) on ~~March 30, 2020.~~April 15, 2021.

Note 2 - Going Concern and Management Plans

During the nine months ended September 30, ~~2020,~~2021, the Company had not generated any revenues, had a net loss of approximately ~~$3,286,000~~$4,637,000 and had used cash in operations of approximately ~~$2,018,000.~~$2,919,000. As of September 30, ~~2020,~~2021, the Company had a working capital deficiency of approximately ~~$7,018,000~~$10,188,000 and an accumulated deficit of approximately ~~$24,432,000. Subsequent to September 30, 2020 and as more fully described in Note 10,~~ ~~Subsequent Events~~~~, the Company received proceeds of $150,000 through the issuance of convertible notes.~~$30,343,000. These conditions raise substantial doubt about the Company’s ability to continue as a going concern ~~within~~for at least one year ~~after~~from the date ~~that~~ these financial statements are issued.

~~Table of Contents~~

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.

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,~~2020, 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 and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 includes the weighted average impact of warrants to purchase an aggregate of 0 and 2,043,835 shares, respectively, 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:

September 30,

2020

2019

Options

4,832,004

3,782,004

Warrants

6,250,676

6,459,157

Convertible notes

3,958,756

1,172,144

Convertible preferred stock

13,421,950

11,687,590

Total

28,463,386

23,100,895

Schedule of Weighted Average Dilutive Common Shares Anti-dilutive

	September 30,
	2021		2020

Options		6,182,004		4,832,004
Warrants		11,201,946		6,250,676
Convertible notes [1] [2]		3,521,885		3,958,756
Convertible preferred stock		15,054,910		13,421,950
Total		35,960,745		28,463,386

~~Convertible notes are assumed to be converted at the rate of $0.75 per common share, which is the conversion price.~~

[1]

Convertible notes are assumed to be converted at the rate of $0.75 per common share, which is the conversion price as of September 30, 2021. 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~~

[2]	Excludes shares of common stock underlying convertible notes that are expected to become convertible into shares of Series B Convertible Preferred Stock since such stock had not been designated by the Company as of September 30, 2021.

Reclassifications

Certain prior period balance sheet amounts have been reclassified ~~in order~~ to conform to the fiscal 2020 presentation, including certain accrued liabilities that have been reclassified from accrued compensation to accrued interest as well as certain operating expenses that have been reclassified to other expenses.2021 presentation. These reclassifications have no impact on the previously reported net loss.

Recently Issued Accounting Standards

On May 3, 2021, the Financial Accounting Standards Board (the “FASB”) issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. This new standard provides clarification and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (such as warrants) that remain equity classified after modification or exchange. This standard is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Issuers should apply the new standard prospectively to modifications or exchanges occurring after the effective date of the new standard. Early adoption is permitted, including adoption in an interim period. If an issuer elects to early adopt the new standard in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes that interim period. The Company is currently evaluating this new standard and its impact on the Company’s condensed consolidated financial statements and related disclosures.

Note 4 - Fair Value

~~During~~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 nine months ended September 30, 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 6, Notes Payable and Convertible Notes Payable for additional details.2021:

~~Table of Contents~~

~~The following table summarizes the Company’s instruments recorded~~Schedule of Changes in Fair Value of Liabilities Measured at ~~fair value as of September 30, 2020 and December 31, 2019:~~Fair Value on Recurring Basis

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

$ 38,624

$ -

$ -

$ 38,624

Accrued compensation - warrants

6,919

-

-

6,919

Accrued interest - warrants

83,655

-

-

83,655

Accrued interest - warrants - related party

150,388

-

-

150,388

Balance - September 30, 2020

$ 279,586

$ -

$ -

$ 279,586

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

	Accrued			Accrued
	Interest			Compensation			Total

Balance - January 1, 2021	$	539,836		$	84,953		$	624,789

Change in fair value		41,607			97			41,704
Issuance of warrants		(82,350	)		-			(82,350	)

Balance - March 31, 2021		499,093			85,050			584,143

Change in fair value		37,994			(9	)		37,985
Accrual of warrant obligation		164,857			-			164,857
Accrual of common stock obligation		-			7,097			7,097

Balance - June 30, 2021		701,944			92,138			794,082

Change in fair value		39,012			20			39,032
Issuance of common stock		-			(7,097	)		(7,097	)
Issuance of warrants		(165,216	)		-			(165,216	)

Balance - September 30, 2021	$	575,740		$	85,061		$	660,801

Financial ~~assets~~liabilities 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 September 30, 2020, the~~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 was unable to determine that it had 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

For the Nine Months Ended

September 30,

September 30,

2020

2019

2020

2019

Risk-free interest rate

0.22% - 0.28
%

1.55%-1.91
%

0.15% - 1.55
%

1.17% - 2.44
%
Expected term (years)

4.00 - 5.00

0.11 - 5.00

0.52 - 5.00

0.02 - 5.00

Expected volatility

110 %

110 %

110 %

110 %
Expected dividends

0.00 %

0.00 %

0.00 %

0.00 %

Schedule of Valuation of Level 3 Liabilities

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020

Risk-free interest rate		0.28%-0.87	%		0.22% - 0.28	%		0.28%-0.92	%		0.15% - 1.55	%
Expected term (years)		4.00-5.00			4.00-5.00			4.00-5.00			0.52 - 5.00
Expected volatility		90	%		110	%		90	%		110	%
Expected dividends		0.00	%		0.00	%		0.00	%		0.00	%

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

~~Table of Contents~~

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 nine months ended September 30, 2020:

Accrued

Accrued

Derivative

Interest

Compensation

Liability

Total

Balance - December 31, 2019

$ 173,275

$ 57,952

$ 351,900

$ 583,127

Accrued compensation - common stock

-

10,021

-

10,021

Accrued interest - common stock

56,875

-

-

56,875

Accrued interest - warrants

26,661

-

-

26,661

Accrued interest - warrants - related party

35,350

-

-

35,350

Change in fair value

(1,243 )

(135 )

(16,977 )

(18,355 )
Issuance of warrants

-

(10,877 )

10,907

30

Issuance of common stock

(56,875 )

(11,418 )

-

(68,293 )
Reclassification of derivative liabilities to equity

-

-

(345,830 )

(345,830 )

Balance - September 30, 2020

$ 234,043

$ 45,543

$ -

$ 279,586

As of September 30, 2021 and December 31, 2020, the Company had an obligation to issue 154,495 shares of common stock to service providers that had a fair value of ~~$38,624,~~$72,613, which was a component of accrued compensation on the condensed consolidated balance ~~sheet.~~sheets.

See Note 7, 6, Stockholders’ Deficiency – Common Stock and Stock Warrantsfor additional details associated with the issuance of common stock and warrants.

Note 5 – ~~Advances Payable~~

On May 6, 2020, the Company received proceeds of $100,000 through an advance. In connection with the advance, the Company issued a five-year immediately vested warrant to purchase 200,000 shares of common stock at $0.75 per share. The warrant had an issuance date relative fair value of $24,386, which was recorded as interest expense on the condensed consolidated statement of operations. On June 1, 2020, the Company repaid the advance in full.

~~On June 18, 2020, the Company paid $5,000 in partial repayment of an outstanding advance.~~

~~On September 28, 2020, the Company paid $5,000 in partial repayment of an outstanding advance.~~

~~Note 6 –~~ Notes Payable ~~and Convertible Notes Payable~~

As of September 30, ~~2020~~2021 and through the date of this filing, notes and convertible notes payable with principal amounts totaling ~~$1,538,000~~ $2,012,162 and ~~$3,038,000,~~ $5,762,162, respectively, were past due and are classified as current liabilities on the condensed consolidated balance sheet as of September 30, ~~2020.~~2021. Such notes continue to accrue interest and all relevant penalties have been accrued as of September 30, ~~2020.~~2021. Of such past due notes payable, a holder of a note with principal amount of ~~$250,000~~ $250,000 issued a notice of default. See Note 9, 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 September 30, ~~2020~~2021 and ~~2019,~~2020, the Company recorded interest expense of ~~$126,867~~$214,431 and ~~$102,804,~~$126,867, respectively, and amortization of debt discount of ~~$146,109~~$269,805 and ~~$3,566,~~$146,109, respectively. During the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, the Company recorded interest expense of ~~$308,395~~$658,163 and ~~$236,882,~~$308,395, respectively, and amortization of debt discount of ~~$190,639~~$547,737 and ~~$10,095,~~$190,639, respectively. As of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had ~~$587,484~~$1,258,421 and ~~$573,007,~~$997,244, 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

During the nine months ended September 30, 2021, the Company issued convertible notes payable in the aggregate principal amount of $2,297,947 which have maturity dates ranging from July 7, 2021 through March 21, 2022. The notes accrue interest at 8% per annum and are convertible at any time at the option of the holder into the Company’s Series C Convertible Preferred Stock (the “Series C Preferred Stock”) at a conversion price of $7.50. The notes automatically convert into Series C Convertible Preferred Stock on the maturity date. In connection with the issuances, the Company issued five-year immediately vested warrants to purchase an aggregate of 1,868,358 shares of common stock at an exercise price $1.25 per share. The warrants had an issuance date relative fair value of $461,269 which will be amortized over the term of the notes. A portion of the convertible notes payable were (a) converted during nine months ended September 30, 2021 (see elsewhere in this Note for details) and (b) converted subsequent to September 30, 2021 (see Note 9 for details).

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 to the third party as of September 30, 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.

~~Table of Contents~~

~~On January 10, 2020,~~28, 2021, the Company issued a convertible note payable in the amount of $647,222 which matures on July 28, 2021 in exchange for another note in the principal amount of ~~$78,000.~~$555,556 that accrued interest at 13% per annum and had accrued interest of $41,948. The new note accrues interest at ~~12%~~8% per annum and ~~matures on January 10, 2021. Any amount of principal or~~such interest ~~which~~ is ~~not paid~~payable at maturity, ~~shall accrue interest~~ at ~~22%~~ the Company’s option, in cash or as payment-in-kind in common stock at a rate of $0.75 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.~~ share. The note is convertible at the holder’s option into Series C Preferred Stock at a price of $7.50 per share and automatically converts into Series C Convertible Preferred Stock on 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~~maturity date. In connection with the issuance ~~date~~ of the convertible note, the Company issued a five-year immediately vested warrant to purchase 517,778 shares of common stock at an exercise price $1.25 per share. The warrants had an issuance date fair value of $106,183 that was recognized immediately. The Company determined the transaction was an extinguishment and, ~~ending~~ as a result, recognized a loss on extinguishment of notes payable of $49,718 on the ~~later~~condensed consolidated statement of ~~(i) January 10,~~operations during the nine months ended September 30, 2021. This convertible note payable was converted during the nine months ended September 30, 2021 ~~or (ii),~~(see elsewhere in this Note for details).

On March 2, 2021, the Company amended a previously issued convertible note in the ~~event~~principal amount of ~~default,~~$2,000,000. In connection with this amendment, during the three months ended March 31, 2021, the Company (i) received further proceeds of $500,000, (ii) increased the principal amount from $2,000,000 to $4,000,000 and (iii) issued five-year immediately vested warrants for the purchase of 800,000 shares of common stock at an exercise price of $1.25 per share, of which, warrants to purchase 400,000 shares of common stock were accrued for as December 31, 2020, and had an issuance date fair value of ~~the payment of the default amount. The convertible note contained an original issuance discount of $3,000~~ $164,700 which ~~was recorded as a debt discount and~~ will be amortized over the term of the note. On ~~July 6, 2020,~~June 18, 2021, the Company ~~repaid~~amended and restated the ~~convertible~~ note in full, which payment included a prepayment penalty, for an aggregate total payment of $115,483 (principal and interest of $78,000 and $37,483, respectively). In connection with the repayment, the Company recorded a loss on extinguishment of $1,511 in the condensed consolidated statements of operations.

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. The notes had previous maturity dates ranging from January 2017 to February 2018. 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 Company determined the transaction was a note modification and 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 dated October 28, 2019~~ in the principal amount of ~~up to $1,500,000, such that~~$4,000,000. In connection with this amendment, during the three months ended June 30, 2021, the Company ~~had now received aggregate proceeds of $1,000,000 under the convertible note.~~

~~On June 18, 2020, the Company~~(i) received further proceeds of ~~$500,000 through a previously issued convertible~~$1,000,000 in connection with the note ~~dated October 28, 2019 in~~by means of the payment by the lender of outstanding obligations to third parties, (ii) increased the principal amount ~~of up~~ from $4,000,000 to ~~$1,500,000, such that the Company had now received aggregate proceeds of $1,500,000 under the convertible note. The convertible note had~~$6,000,000 and (iii) agreed to issue a maturity date of October 31, 2020 and the Company is in discussions with the holder to extend the maturity date of the note. In connection with the receipt of these proceeds, the Company issued a five-yearfive-year immediately vested warrant ~~for the~~to purchase ~~of 1,200,000~~ 800,000 shares of common stock ~~at an exercise price of $1.25 per share. The warrant had~~with an issuance date ~~relative~~ fair value of ~~$153,790,~~ $164,857 which ~~was recorded as a debt discount and will amortized over the term of the note.~~

On July 29, 2020, the Company issued a convertible note payable in the principal amount of $555,556 for net proceeds of $497,500 (gross proceeds of $500,000 less $2,500 of issuance costs) which matures on January 29, 2021. The note accrues interest at 13% per annum and is convertible into common stock at the lower of (i) a conversion price of $0.75 per share (the “Fixed Conversion Price”) or (ii) in the event of a default, as defined in the note, a conversion price of 65% of the lowest volume weighted average price for the ten consecutive trading days ending on the trading day that is immediately prior to the applicable conversion date (the “Default Conversion Price”). The Default Conversion Price shall not apply before March 29, 2021. So long as the convertible note is outstanding, upon any issuance by the Company of any equity at an effective price lower than the conversion price (the “Base Conversion Price”), then the conversion price shall be reduced to equal such Base Conversion Price. The Company determined the embedded conversion option in connection with the Default Conversion Price should not be bifurcated and accounted for as a derivative liability. The original issuance discount of $55,556 and debt issuance costs of $2,500 were each recorded as a debt discount and will be amortized over the term of the note. ~~In connection~~The Company may elect to convert the ~~issuance~~amended and restated note into shares of Series B Convertible Preferred Stock at a conversion price of $7.50 per share at any time after the creation of the ~~convertible note payable,~~Series B Convertible Preferred Stock and before the ~~Company~~ ~~issued a five-year immediately vested~~maturity date. As of September 30, 2021, an aggregate of $3,500,000 of proceeds were outstanding under the note. The warrant to purchase ~~146,199~~ 800,000 shares of common stock ~~at an exercise price of $0.95 per share, which~~ ~~may be exercised on a cashless basis. The warrant had an~~was issued during the three months ended September 30, 2021, such that the Company recognized the $165,216 issuance date ~~relative~~ fair value ~~of $20,098, which was recorded as a debt discount and will amortized over the term of the note.~~

~~Notes Payable~~by crediting additional paid-in capital.

On ~~April 15, 2020,~~March 11, 2021, the ~~maturity dates~~Company entered into convertible note purchase agreements with two noteholders whereby the Company agreed to repurchase an aggregate of ~~two promissory~~$125,000 of convertible notes payable for the same amount in cash, at which time the ~~aggregate principal amount of $350,000, originally due in 2015 and 2016,~~notes were ~~extended to April 15, 2021.~~cancelled. In connection with ~~these extensions,~~the repayment, the parties agreed that the Company ~~issued an aggregate of 525,000 shares of common stock~~was no longer required to pay accrued interest associated with the ~~holders with a fair value of $131,250. The Company determined the extensions were note extinguishments and recorded a loss on extinguishment of $131,250~~notes payable in the amount of $49,983. As a result, the Company recognized a gain on forgiveness of accrued interest of $49,983 on its condensed consolidated ~~statements~~statement of operations during the nine months ended September 30, ~~2020.~~2021.

On ~~June 3, 2020,~~April 27, 2021, the Company ~~issued a note payable~~amended the following terms of two convertible notes in the aggregate principal amount of ~~$100,000.~~$150,000: (i) the maturity dates were extended to October 15, 2021, (ii) the interest rate was amended from 8% per annum to 10% per annum and (iii) the shares into which the notes may be converted was amended from Series B Preferred Stock to Series C Preferred Stock. The ~~note does not accrue interest and matures on December 3, 2020. The note was repaid in full by~~Company determined the Company on June 18, 2020. In connection with the note issuance, the Company issued a five-year immediately vested warrant to purchase 50,000 shares of common stock at an exercise price of $0.75 per share. The warrant had an issuance date relative fair value of $7,466, which was recorded asamendment represented a debt ~~discount and was to be amortized over the term of the note, however, was recognized during the nine months ended September 30, 2020 as a result of the repayment of the note.~~

~~On July 29, 2020, the Company fully repaid the principal of a promissory note in the amount of $100,000.~~

~~Table of Contents~~

~~Note 7 – Stockholders’ Deficiency~~

~~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 May 27, 2020, the Board of Directors extended the expiration date of the PPM to July 29, 2020. On July 27, 2020, the Company’s PPM was now fully subscribed.modification.

During the nine months ended September 30, ~~2020,~~2021, convertible notes payable in the ~~Company received~~ aggregate ~~proceeds of $728,347 through the sale of 97,112~~ principal amount $1,262,222 were converted into 168,296 shares of Series AC Convertible Preferred Stock at ~~$7.50~~an effective conversion price of $7.50 per share. The Company elected to convert accrued interest on the same convertible notes payable in the aggregate amount of $53,936 into 71,915 shares of common stock at an effective conversion price of $0.75 per share.

~~During the three and nine months ended September~~

Through June 30, ~~2020,~~2021, the Company ~~accrued and recorded cumulative~~had not designated the Series AC Preferred Stock. As a result, the Company did not analyze the notes for a potential beneficial conversion feature as the definition of a firm commitment had not been met since the notes were not yet convertible. On July 26, 2021, the required Certificate of Designation was filed (see Note 6 – Stockholders’ Deficiency – Series C Convertible Preferred ~~Stock dividends~~Stock). Accordingly, a firm commitment was achieved. The Company analyzed the notes for a beneficial conversion feature and determined that there was none because the notes have an effective conversion price of ~~$226,191 and $649,381, respectively, with an increase in liabilities and a corresponding decrease in additional paid-in capital. During~~$0.75 per share of underlying common stock, which exceeds the ~~three and nine months ended September 30, 2019,~~$0.47 per share commitment date closing market price of the Company accrued and recorded cumulative Series A Convertible Preferred Stock dividends of $197,911 and $534,919, respectively, with an increase in liabilities and a corresponding decrease in additional paid-in capital.common stock.

Notes Payable

During the nine months ended September 30, 2021, the Company paid $100,000 to a noteholder as a partial repayment of principal such that the note had $150,000 outstanding as of September 30, 2021 after the partial repayment.

See Note 8, Commitments and Contingencies – Litigation for details associated with the partial repayment of a note payable during the nine months ended September 30, 2021.

Note 6 – Stockholders’ Deficiency

Preferred Stock Dividends

During the three months ended September 30, 2021 and 2020, the Company accrued additional preferred dividends related to Series A and Series C Preferred Stock of $246,192 and $226,191, respectively. During the nine months ended September 30, 2021 and 2020, the Company accrued additional preferred dividends related to Series A and Series C Preferred Stock of $695,456 and $649,381, respectively.

During the nine months ended September 30, 2021, the Company issued ~~574,576~~632,677 shares of common stock ~~valued~~ at ~~$0.75~~the stated value of $0.75 per share for aggregate value of ~~$430,905,~~$474,475, pursuant to the terms of the Series A Convertible Preferred Stock Certificate of Designation, in connection with the partial payment of accrued dividends for Series A Convertible Preferred Stock.

~~Common~~Series C Convertible Preferred Stock

On July 26, 2021, the Company’s Board of Directors approved the designation of 500,000 shares of the 10,000,000authorized shares of preferred stock as Series C Convertible Preferred Stock, par value $0.001 per share. On July 26, 2021, the Company filed the Certificate of Designation with the State of Nevada related to the Series C Preferred Stock. The Series C Preferred stock has a stated value of $7.50 per share.

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

Mandatory Conversion. On ~~March~~the earlier of (i) July 27, 2025 or (ii) any of the Company’s treatment candidates receiving approval from the U.S. or European agencies, all of the outstanding shares of Series C Preferred Stock will automatically convert to common stock.

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

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

Dividends.Holders of shares of Series C Preferred Stock will be entitled to receive cumulative dividends at an annual rate of 8% of the stated value. Dividends are payable semi-annually on June 30 and December 31, ~~2020,~~commencing on December 31, 2022, either by (i) issuance of shares of common stock at the rate of $0.75 per share of common stock or (ii) in cash, at the Company’s option.

During the three months ended September 30, 2021, 5,000 shares of Series C Preferred Stock were converted into 50,000 shares of common stock at the shareholder’s election. The Company analyzed the Series C Preferred Stock for a beneficial conversion feature and determined that there was none because the Series C Preferred Stock has an effective conversion price of $0.75per share of underlying common stock, which exceeds the $0.47per share commitment date closing market price of the common stock.

See Note 5, Notes Payable – Convertible Notes Payable for details associated with note conversions.

Common Stock

During the nine months ended September 30, 2021, the Company issued ~~25,671~~5,405 shares of immediately vested common stock to a service provided with a grant date fair value of ~~$6,418~~$2,540 which was recognized immediately.

During the three months ended September 30, 2021, the Company issued 15,099 shares of common stock to a ~~service provider~~consultant in ~~connection~~satisfaction of accrued compensation with ~~consulting services provided.~~an issuance date fair value of $7,097.

During the three months ended September 30, 2021, the Company issued 150,000 shares of common stock to consultants which had an issuance date fair value of $70,500 which was recognized immediately.

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

See elsewhere in this note, Stock Warrants for additional details.

Stock Warrants

On January 5, 2021, the Company issued 125,000five-year immediately vested warrants to a note holder in satisfaction of certain noteholder rights with an exercise price $0.95 per share. The warrant had an issuance date fair value of $33,545 which was recognized immediately.

During the nine months ended September 30, ~~2020,~~2021, the Company issued ~~an aggregate of 1,270,000~~125,071 shares of common stock ~~with an issuance date fair value~~pursuant to a cashless warrant exercise by a noteholder of ~~$317,500 to service providers in connection with consulting services provided.~~ In connection with the issuances, the Company expects to recognize the fair value of the common stock over the service period, such that it recognized stock-based compensation expense of $9,375 and $314,375 during the three and nine months ended September 30, 2020, respectively, which amount ~~was included within general and administrative expenses on the condensed consolidated statements of operations.~~

During the three and nine months ended September 30, 2020, the Company issued an aggregate of 265,534 shares of common stock with a fair value of $66,649 in exchange for accrued interest in the aggregate amount of $199,151. The Company recognized the difference of $132,502 as a gain on exchange of accrued interest for common stock on the condensed consolidated statements of operations.

~~See Note 6,~~ ~~Notes Payable and Convertible Notes Payable~~ ~~for additional details associated with the issuance of common stock.~~

~~Stock Warrants~~

~~On February 13, 2020, the Company issued five-year placement agent~~ warrants to purchase ~~66,653~~221,275 shares of common stock at an exercise price of ~~$0.75~~$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.~~share.

~~On May 20, 2020,~~During the three months ended September 30, 2021, the Company issued 125,000five-year immediately vested warrants to a ~~five-year warrant to purchase 100,000 shares of common stock~~ atconsultant with an exercise price of $0.75 per ~~share~~ ~~to a service provider in connection with consulting services to be provided.~~ share. The warrant had an issuance date fair value of ~~$16,129. In connection with the issuance,~~ ~~the Company expects to recognize the fair value of the warrants over the service period, such that it~~$36,200 which was recognized ~~stock-based compensation expense of $4,322 during the nine months ended September 30, 2020, which amount~~ ~~was included within general and administrative expenses on the condensed consolidated statements of operations.~~immediately.

OnIn August ~~19, 2020,~~2021, the Company ~~issued five-year immediately vested warrants~~extended the expiration date of a warrant to purchase ~~an aggregate of 1,598,000~~75,000 shares of common stock at an exercise price of ~~$0.75~~$0.75 per share from August 4, 2021 to ~~members~~August 4, 2025 and extended the expiration date of the Company’s Scientific Advisory Board. The warrants had an aggregate issuance date fair value of $247,700 which was recognized immediately within general and administrative expenses on the condensed consolidated statement of operations.

~~On August 20, 2020, the Company issued~~ a ~~five-year~~ warrant to purchase ~~200,000~~37,500 shares of common stock at an exercise price of ~~$0.75~~$0.75 per share from August 26, 2021 to ~~a service provider in connection with consulting services to be provided.~~August 26, 2025. The ~~warrant vests in equal monthly installments~~Company determined the transactions represented award modifications and recognized incremental expense of $29,000 within interest expense on the condensed consolidated statement of operations during the ~~sixteen-month period commencing one month after the date of the issuance. The warrant had an issuance date fair value of $32,200, which will be recognized over the service period.~~three and nine months September 30, 2021.

See Note 5, ~~Advances Payable~~ ~~and Note 6,~~ Notes Payable ~~and Convertible Notes Payable~~ for additional details associated with the issuance of stock warrants.

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Stock Options

On ~~August 19, 2020,~~March 8, 2021, the Company granted ~~five-year~~1,350,000five-year immediately vested ~~stock~~ options under the Company’s Equity Incentive Plan to ~~purchase an aggregate~~the Chief Executive Offer of ~~1,050,000 shares of common stock at~~the Company (of which, 750,000 were granted for service as Chief Executive Officer and 600,000 were granted for service as a director) with an exercise price ~~of $0.75~~$1.00 per ~~share to directors of the Company under the 2019 Equity Incentive Plan~~.share. The ~~stock~~ options had a grant date fair value of ~~$103,600~~$218,600 which was recognized ~~immediately.~~during the nine months ended September 30, 2021.

Stock-Based Compensation

~~Stock-Based Compensation~~During the three months ended September 30, 2021, the Company recognized stock-based compensation expense of $140,528 (consisting of $70,028 of expense related to warrants (of which, $70,009 has been included within stockholders’ deficiency and $19 has been included within accrued compensation) and $70,500 of expense related to common stock which has been included within stockholder’s deficiency) which was included within general and administrative expenses.

During the nine months ended September 30, 2021, the Company recognized stock-based compensation expense of $424,272 (consisting of $137,735 of expense related to warrants (of which, $137,628 has been included within stockholders’ deficiency and $107 has been included within accrued compensation), $206,400 of expense related to options which has been included within stockholders’ deficiency and $80,137 of expense related to common stock which has been included within stockholders’ deficiency) which was included within general and administrative expenses.

During the three and nine months ended September 30, 2020, the Company recognized stock-based compensation expense of ~~$349,050~~ $349,050 and ~~$686,472,~~$686,472, respectively, related to common stock ~~options~~ and warrants, which amounts were included within general and administrative expenses on the condensed consolidated statements of operations. During the three and nine months ended September 30, 2019, the Company recognized stock-based compensation expense of $826,785 (of which $825,100 was included within research and development and $1,695 was included within general and administrative expenses on the condensed consolidated statements of operations) and $830,534 (of which $825,100 was included within research and development and $5,434 was included within general and administrative expenses on the condensed consolidated statements of operations), respectively, related to warrants, common stock and options.

As of September 30, ~~2020,~~2021, there was ~~$35,574~~$38,471 of unrecognized stock-based compensation expense ~~which the Company expects~~ to ~~recognize~~be recognized over a weighted average period of ~~0.7~~0.24 years.

Note 87 – 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 September 30, 2020 and 2019, the Company recorded research and development expense of $0 and $33,333, respectively, and during the nine months ended September 30, 2020 and 2019, the Company recorded research and development expense of $111,667 and $83,333, respectively, in connection with the agreement with Yeda.

As of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company was required to issue warrants to purchase an aggregate of ~~981,500~~1,281,500 and ~~756,500,~~1,056,500, respectively, shares of common stock at an exercise price of ~~$0.75~~$0.75 per share to directors of the Company in connection with loans made to the Company in the aggregate amount of ~~$459,000~~$459,000 which required certain penalties in the form of warrants. As a result, the Company had accrued ~~$150,388~~$359,314 and ~~$115,932~~$291,708 associated with the fair value of the obligations as of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, which amount is included in accrued interest – related parties on the condensed consolidated balance sheets.

~~See~~ Note 108 – ~~Subsequent Events – Stock Warrants~~ ~~for additional details associated with the exercise of a stock warrant by a related party.~~

~~Note 9 –~~ Commitments and Contingencies

Yeda Research and License Agreement

During the three months September 30, 2021 and 2020, the Company recorded research and development expenses of approximately $12,500 and $0, respectively, related to its Research and License Agreement with Yeda (the “Agreement”). During the nine months September 30, 2021 and 2020, the Company recorded research and development expenses of approximately $60,000 and $112,000, respectively, related to the Agreement. As of September 30, 2021 and December 31, 2020, the Company had $39,419 and $136,919, respectively, of accrued research and development expenses pursuant to the Agreement with Yeda, which are included within current liabilities on the condensed consolidated balance sheets.

MD Anderson Sponsored Research Agreements

The Company recognized ~~$237,546~~ $411,773 and ~~$600,017~~ $237,546 of research and development expenses during the three months ended September 30, 2021 and 2020, respectively, and $925,921 and $600,017 of research and development expenses during the nine months ended September 30, 2021 and 2020,, 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~~2018 and February 2019, respectively. The Company recognized $249,171 and $1,230,411 of research and development expenses during the three and nine months ended September 30, 2019, respectively, associated with services provided by MD Anderson in those periods. As of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had ~~$462,785~~ $211,009 and ~~$382,398,~~$462,785, respectively, of accrued research and development expenses pursuant to the agreements with MD Anderson. Subsequent to September 30, 2021, the Company and MD Anderson ~~which are included within accrued expenses on~~agreed to extend the ~~condensed consolidated balance sheets.~~Sponsored Research Agreement by one year to November 27, 2022. Under the amendment, the research budget for the additional year is approximately $1,300,000.

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.

~~Table of Contents~~

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 condensed 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~~$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. AOn June 12, 2019, the plaintiff served a motion for summary ~~judgement~~judgment through the Secretary of State which was heard on ~~March 7,~~July 12, 2019 and granted. The Company contends that it was not given sufficient notice under the ~~Company~~applicable statute and did not have an opportunity to oppose the motion. Judgment was entered in October 2019 in the amount of $267,680. The Company brought a motion to vacate based on the jurisdictional defect of the motion in not providing the required amount of time, but that motion was denied in February 2021 without properly addressing the jurisdictional issues raised by the Company. The Company has ~~had discussion with respect~~appealed the denial and then filed a motion to ~~entering into~~Renew and Reargue the motion to vacate based on the Court's failure to address critical issues. That motion was also denied on April 15, 2021 without addressing the Company's arguments. The Company has appealed the second denial as well and is pursuing both appeals in a consolidated manner so as to resolve all issues together. While the Company's motions were pending, the plaintiff has commenced steps to collect judgment. During the nine months ended September 30, 2021, $103,088 was released to an ~~agreement providing~~officer of the court and has been accounted for as partial note repayment, such that, as of September 30, 2021, there was $146,912 outstanding under the note. During the nine months ended September 30, 2021, on behalf of the Company, a ~~payment plan~~third party deposited the full amount of the unpaid judgment with the ~~holder~~court, which created an automatic stay of enforcement of this matter and which will be used to resolve the underlying note ~~but no agreement has yet been reached.~~in the event of an adverse outcome on appeal.

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 September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company ~~has~~had not accrued any amounts for contingencies.

Note 109 – Subsequent Events

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

Series C Preferred Stock Conversion

In October 2021, a holder of Series C Preferred Stock elected to convert 10,000 of such shares into 100,000 shares of common stock.

Convertible Notes Payable Conversions

In November 2021, an aggregate of $557,250 of principal outstanding under convertible notes automatically converted into an aggregate of 82,060 shares of Series C Convertible Preferred Stock and the Company elected to pay an aggregate of $26,233 of interest accrued under such notes by the issuance of an aggregate of 34,976 shares of common stock. The aggregate note principal had a conversion price of $7.50 per share and the common stock was valued at $0.75 per share for purposes of the interest payment.

See Note 5, Notes Payable for details associated with past due notes.

Stock Warrants

~~Convertible Notes Payable~~

~~On October 16, 2020,~~In November 2021, in connection with the ~~Company issued~~conversion of a certain convertible note payable in the principal amount of $100,000 which matures on April 15, 2021. The note accrues interest at 8% per annum and is convertible into the Company’s Series B Convertible Preferred Stock (the “Series B Preferred Stock”) at a conversion price of $7.50. The note shall be become convertible at (i) the holder’s option beginning on the date that the Company first issues any shares of its Series B Preferred Stock (ii) automatically on the maturity date. It is anticipated that the Series B Preferred Stock shall convert into the Company’s common stock at a fixed rate of ten shares of common stock for each share of Series B Preferred Stock. In connection with the issuance of the convertible note,$50,000, the Company issued a ~~five-year~~five-year immediately vested warrant to purchase ~~80,000~~144,290 shares of ~~common stock at an exercise price $1.25 per share.~~

On October 20, 2020, the Company issued a convertible note payable in the amount of $50,000 which matures on April 20, 2021. The note accrues interest at 8% per annum and is convertible into Series B Preferred Stock at a conversion price of $7.50. The note shall be become convertible at (i) the holder’s option beginning on the date that the Company first issues any shares of its Series B Preferred Stock (ii) automatically on the maturity date. It is anticipated that the Series B Preferred Stock shall convert into the Company’s common stock at a fixed rate of ten shares of common stock for each share of Series B Preferred Stock. In connection with the issuance of the convertible note payable, the Company issued a five-year immediately vested warrant to purchase 40,000 shares of common stock at an exercise price $1.25 per share.

~~Stock Warrants~~

~~On October 15, 2020, the Company issued a five-year warrant to purchase 200,000 shares of~~ common stock at an exercise price of ~~$0.75~~$1.25 per share to a service provider in connection with consulting services to be provided. The warrant vests in equal monthly installments during the sixteen-month period commencing one month after the date of the issuance.share.

~~On November 1, 2020, Yeda exercised a warrant to purchase 1,995,376 shares of common stock for proceeds of $1,995, which resulted in the issuance of 1,995,376 shares of common stock.~~

~~Stock Options~~

On October 7, 2020, the Company granted five-year immediately vested stock options to purchase 500,000 shares of common stock at an exercise price of $0.75 per share to a nonemployee under the 2019 Equity Incentive Plan.

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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"~~(“CSI”, “Cell Source”,the “Company”, “us,” “we,” “our,”) as of September 30, ~~2020~~2021 and for the three and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 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~~2020 as filed with the Securities and Exchange Commission (“SEC”) on ~~March 30, 2020.~~April 15, 2021.

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~~2020, filed with the SEC on ~~March 30, 2020.~~April 15, 2021.

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

The unique advantage of Cell Source technology lies in the ability to induce sustained tolerance of transplanted cells (or organs) by the recipient’s immune system in a setting that requires only mild immune suppression, while avoiding the most common post-transplant complications. The scientific term for the result of successfully inducing such tolerance in a transplantation setting is chimerism, where the recipient’s immune system tolerates the co-existence of the (genetically different) donor type and host ~~(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 and initial clinical 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.

~~Table of Contents~~

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

●

The broader set of cancers, including solid tumors, that can potentially be treated effectively using genetically modified cells such as CAR-T cell therapy, but also face efficacy and economic constraints due to limited persistence based on immune system issues (i.e., the need to be able to safely and efficiently deliver allogeneic CAR-T therapy). Inducing sustained tolerance to CAR-T cells may bring reduced cost and increased efficacy by allowing for off-the-shelf (vs. patient-derived) treatments with more persistent cancer killing capability.

	●
	·	Organ failure and transplantation. A variety of conditions can be treated by the transplantation of vital organs. However, transplantation is limited both by the insufficient supply of available donor organs and the need for lifelong, daily anti-rejection treatments post-transplant. Haploidentical organ transplants, with sustained chimerism, have the potential to make life saving transplants accessible to the majority of patients, with the prospect of improved life quality and expectancy.

	· ●	Non-malignant hematological conditions (such as type one diabetes and sickle cell anemia) which could, in many cases, also be more effectively treated by stem cell transplantation if the procedure could be made safer and more accessible by inducing sustained tolerance in the stem cell transplant recipient.

Human Capital Resources

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

Recent Developments

~~COVID-19~~Preclinical Results and Clinical Results

After two years of intensive collaboration with Professor Zelig Eshhar, the inventor of CAR-T cell therapy, data confirmed that Veto Cells can markedly extend persistence of genetically modified T cells from the same donor and that genetically modified Veto Cells can effectively inhibit tumors expressing an antigen recognized by the transgenic T cell receptor. Furthermore, human Veto Cells transfected with CAR exhibit anti-tumor activity in-vitro without losing their veto activity. These preclinical results form the basis of our current development of a clinical protocol for allogeneic VETO CAR-T HSCT combined therapy for blood cancer treatment. Cell Source plans to submit this protocol for approval in 2022. The Phase 1/2 clinical trial at the University of Texas MD Anderson Cancer Center, using Cell Source’s Anti-viral Veto Cells, has successfully completed the first treatment cohort, with 3 patients each receiving a haploidentical HSCT under reduced intensity conditioning with Veto Cells. This first in human dose optimization trial has thus far shown that the initial dose is in fact the optimal dose, as all three patients had successful stem cell engraftment after 42 days, in the absence of GvHD. Cell Source is now continuing the trial as it proceeds with the subsequent cohorts of patients, using the same dose level.

COVID-19

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.

Designation of Series C Convertible Preferred Stock

On July 26, 2021, the Company’s Board of Directors approved the designation of 500,000 shares of the 10,000,000 authorized shares of preferred stock as Series C Convertible Preferred Stock, par value $0.001 per share. On July 26, 2021, the Company filed the Certificate of Designation with the State of Nevada related to the Series C Preferred Stock. The Series C Preferred stock has a stated value of $7.50 per share.

Mandatory Conversion. On the earlier of (i) July 26, 2025 or (ii) any of the Company’s treatment candidates receiving approval from the U.S. or European agencies, all of the outstanding shares of Series C Preferred Stock will automatically convert to common stock.

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

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

Dividends. Holders of shares of Series C Preferred Stock will be entitled to receive cumulative dividends at an annual rate of 8% of the stated value. Dividends are payable semi-annually on June 30 and December 31, commencing on December 31, 2022, either by (i) issuance of shares of common stock at the rate of $0.75 per share of common stock or (ii) in cash.

Condensed Consolidated Results of Operations

Three Months Ended September 30, ~~2020~~2021 Compared with the Three Months Ended September 30, ~~2019~~2020

Research and Development

Research and development expense was ~~$257,546~~$459,273 and ~~$1,192,090~~$257,546 for the three months ended September 30, 2021 and 2020, ~~and 2019,~~ respectively, ~~a decrease~~an increase of ~~$934,544,~~$201,727, or 78%,. The increase was primarily attributable to a clinical trial milestone reached during the third quarter of 2021 which resulted in additional expense recognized related to ~~the recognition of non-cash stock-based compensation expense of $825,100 in connection to a stock option grant to a consultant during the three months ended September 30, 2019.~~our agreement with MD Anderson.

General and Administrative

General and administrative expense, which is associated with external consulting and professional fees, payroll and stock-based compensation expenses, was ~~$908,099~~$856,059 and ~~$168,906~~$908,099 for the three months ended September 30, 2021 and 2020, ~~and 2019,~~ respectively, ~~an increase~~a decrease of ~~$739,193,~~$52,040, or ~~438%,~~6%. Such decrease was primarily ~~related~~attributable to increases in the 2020 period of approximately $350,000 in non-cash stock-based compensation expenses in connection with stock option grants to directors and stock warrant issuances to Scientific Advisory Board members in 2020, approximately $110,000 of legaldecreased professional fees ~~and approximately $266,000 of consulting and marketing fees.~~

~~Change in Fair Value of Derivative Liabilities~~

The change in fair value of derivative liabilities for the three months ended September 30, 2019, was a gain of $33,500, primarily due to the warrants and conversion options, which were deemed to be derivative liabilities, either drawing closer to their expiration dates or were no longer outstanding. There was no change in fair value of derivative liabilities during the ~~three months ended September 30, 2020 as a result of the reclassification of our derivative liabilities to additional paid-in capital during the first quarter of 2020.~~2021 period.

Interest Expense

Interest expense for the three months ended September 30, 2021 and 2020 was $214,431 and ~~2019 was~~ $126,867, ~~and $102,804,~~ respectively, an increase of ~~$24,063,~~$87,564, or ~~23%,~~69%. The increase was primarily as a result of increases in convertible notes payable outstanding during the ~~2020 period.~~2021 period as well as the fair value of warrants issued as interest.

~~Table of Contents~~

Amortization of Debt Discount

Amortization of debt discount was ~~$146,109~~$269,805 and ~~$3,566~~$146,109 for the three months ended September 30, 2021 and 2020, ~~and 2019,~~ respectively, ~~which~~an increase of $123,696, or 85%. The increase is primarily associated with increased levels of warrants and ~~original issuance~~common stock issued as debt discounts ~~issued~~ in connection with convertible notes ~~payable.~~payable in the 2021 period.

~~Warrant Modification Expense~~Loss on Exchange of Accrued Interest for Common Stock

During the three months ended September 30, ~~2019,~~2021 and 2020, we recognized ~~$54,100~~$0 and $132,502 of ~~warrant modification expense related~~loss on extinguishment of notes payable which represents the excess carrying value of the $199,151 of accrued interest as compared to the ~~extension~~issuance date fair value of the ~~expiration date~~common stock of ~~a certain warrant.~~$66,649.

Loss on Extinguishment of ~~Debt~~Notes Payable

During the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, we recognized ~~$1,511~~$0 and $0$1,511 of loss on extinguishment of ~~debt~~notes payable in connection with the extension and repayment of notes payable.

Nine Months Ended September 30, 2021 Compared with the Nine Months Ended September 30, 2020

Research and Development

Research and development expense was $1,098,063 and $786,684 for the nine months ended September 30, 2021 and 2020, respectively, an increase of $311,379, or 40%. The increase was primarily attributable to a clinical trial milestone reached during the second and third quarters of 2021 which resulted in additional expense recognized related to our agreement with MD Anderson as well as an increase in the budget for sponsored research there.

General and Administrative

General and administrative expense, which is associated with external consulting and professional fees, payroll and stock-based compensation expenses, was $2,333,724 and $2,015,624 for the nine months ended September 30, 2021 and 2020, respectively, an increase of $318,100, or 16%. The increase was primarily related to additional expenses recognized in the 2021 period as follows: approximately $97,000 of accounting fees, approximately $396,000 of legal and consulting fees, approximately $82,000 of insurance expenses, partially offset by a decrease of approximately $262,000 in stock based compensation.

Interest Expense

Interest expense for the nine months ended September 30, 2021 and 2020 was $658,163 and $308,395, respectively, an increase of $349,768, or 113%. The increase was primarily a result of increases in convertible notes payable outstanding during the 2021 period as well as the fair value of warrants issued as interest.

Amortization of Debt Discount

Amortization of debt discount was $547,737 and $190,639 for the nine months ended September 30, 2021 and 2020, respectively, an increase of $357,098, or 187%. The increase is primarily associated with increased levels of warrants and common stock issued as debt discounts in connection with convertible notes payable in the 2021 period.

Gain on Forgiveness of Accrued Interest

During the nine months ended September 30, 2021, we recognized a gain on forgiveness of accrued interest of $49,983 in connection with the repayment of certain notes payable.

Gain on Exchange of Accrued Interest for Common Stock

During the ~~three~~nine months ended September 30, 2020, we recognized a $132,502 gain on exchange of accrued interest for common stock which represents the excess carrying value of the $199,151 of accrued interest as compared to ~~$66,649 of~~ the issuance date fair value of the common ~~stock.~~stock of $66,649.

~~Nine Months Ended September 30,~~ ~~2020 Compared with the Nine Months Ended September 30, 2019~~

~~Research and Development~~

Research and development expense was $786,684 and $2,352,602 for the nine months ended September 30, 2020 and 2019, respectively, a decrease of $1,565,918, or -67%, primarily related to the recognition of non-cash stock-based compensation expense of $825,100 in connection with a stock option grant to a consultant, expense in connection with milestone payments to MD Anderson in the amount of approximately $731,000 associated with the initial upfront payment as well as with validation runs and depletions performed during the nine months ended September 30, 2019.

~~General and Administrative~~

General and administrative expense was $2,015,624 and $909,334 for the nine months ended September 30, 2020 and 2019, respectively, an increase of $1,106,290, or 122%, primarily related to increases in the 2020 period of approximately $682,000 in non-cash stock-based compensation expenses in connection with stock option grants to directors, common stock and stock warrant issuances to consultants and Scientific Advisory Board members in 2020, approximately $165,000 of legal fees, approximately $202,000 of consulting and marketing fees and approximately $69,000 of insurance expenses.

Change in Fair Value of Derivative Liabilities

The change in fair value of derivative liabilities for the nine months ended September 30, 2020 ~~and 2019~~ was a gain of $16,977 ~~and a gain of $118,500, respectively, primarily~~ due to the reduction in fair value of warrants and conversion options ~~which are deemed to be derivative liabilities, either~~as a result of drawing closer to their expiration ~~dates or were no longer outstanding.~~dates.

~~Interest Expense~~Loss on Extinguishment of Notes Payable

Interest expense for the nine months ended September 30, 2020 and 2019 was $308,395 and $236,882, respectively, an increase of $71,513, or 30%, primarily as a result of increases in convertible notes payable outstanding during the 2020 period.

~~Amortization of Debt Discount~~

Amortization of debt discount was $190,639 and $10,095 for the nine months ended September 30, 2020 and 2019, respectively, which is associated with warrants and conversion options issued in connection with convertible notes payable.

~~Warrant Modification Expense~~

During the nine months ended September 30, ~~2019,~~2021 and 2020, we recognized ~~$283,500 of warrant modification expense on the extension of an expiration date of a certain warrant.~~

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

During the nine ended September 30, 2019, we recognized a loss on exchange of notes payable for Series A Convertible Preferred Stock of $262,470, which represents the value of the preferred shares in excess of the carrying value of notes payable.

~~Loss on Extinguishment of Debt~~

~~During the nine months ended September 30, 2020~~$49,718 and ~~2019, we recognized~~ $134,202 ~~and $1,504, respectively,~~ of loss on extinguishment of ~~debt~~notes payable in connection with the extension and repayment of notes payable.

~~Gain on Exchange of Accrued Interest for Common Stock~~

During the nine months ended September 30, 2020, we recognized a $132,502 gain on exchange of accrued interest for common stock, which represents the excess carrying value of the accrued interest as compared to the issuance date fair value of the common stock.

~~Gain on Forgiveness of Accrued Expenses~~

During the nine months ended September 30, 2019, we recognized $38,427 of gain on forgiveness of accrued expenses. The gain recognized represents the forgiveness of accrued payroll expenses and director fees due by a former member of the Board of Directors.

Liquidity and Going Concern

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

	September 30,			December 31,
	2020			2019
	(unaudited)						September 30, 2021			December 31, 2020

Cash	$	54,736		$	27,908		$	599,454		$	241,619
Restricted cash							$	-		$	3,500
Working capital deficiency	$	(7,018,431	)	$	(5,596,941	)	$	(10,187,899	)	$	(7,950,882	)

During the nine months ended September 30, ~~2020,~~2021, we had not generated any revenues, had a net loss of approximately ~~$3,286,000~~$4,637,000 and had used cash in operations of approximately ~~$2,018,000.~~$2,919,000. As of September 30, ~~2020,~~2021, we had a working capital deficiency of approximately ~~$7,018,000~~$10,188,000 and an accumulated deficit of approximately ~~$24,432,000. Subsequent to September 30, 2020, we received proceeds of $150,000 through the issuance of convertible notes payable.~~$30,343,000. These conditions raise substantial doubt about our ability to continue as a going concern ~~within~~for at least one year ~~after~~from the date these financial statements are issued.

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

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

During the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, our sources and uses of cash were as follows:

Net Cash Used in Operating Activities

We experienced negative cash flows from operating activities for the nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 in the amounts of ~~$2,018,019~~approximately $2,919,000 and ~~$1,723,872,~~$2,018,000, respectively. The net cash used in operating activities for the nine months ended September 30, 2021 was primarily due to cash used to fund a net loss of approximately $4,637,000, adjusted for net non-cash expenses in the aggregate amount of approximately $1,258,000, partially offset by $460,000 of net cash provided by changes in the levels of operating assets and liabilities. The net cash used in operating activities for the nine months ended September 30, 2020 was primarily due to cash used to fund a net loss of approximately ~~$3,286,065,~~$3,286,000, adjusted for net non-cash expenses in the aggregate amount of ~~$922,603,~~approximately $923,000, partially offset by ~~$345,443~~$345,000 of net cash provided by changes in the levels of operating assets and liabilities. The net cash used in operating activities for the nine months ended September 30, 2019 was primarily due to cash used to fund a net loss of $3,899,460, adjusted for net non-cash income in the aggregate amount of $1,306,945, and by $868,643 of net cash provided by changes in the levels of operating assets and liabilities.

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Net Cash Provided by Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2021 and 2020 was approximately $3,274,000 and ~~2019~~$2,045,000, respectively. The net cash provided by financing activities during the nine months ended September 30, 2021 was ~~$2,044,847~~attributable to $3,797,820 of proceeds from the issuance of convertible notes payable, offset by the repayments of notes payable, convertible notes payable, and ~~$1,713,769, respectively.~~the insurance financing liability in the amount of $524,007. The net cash provided by financing activities during the nine months ended September 30, 2020 was attributable to $1,572,500 of proceeds from the issuance of convertible notes payable, $728,347 of proceeds from the issuance of Series A preferred stock, $100,000 of proceeds from the issuance of notes payable and $100,000 of proceeds from advances payable, offset by the ~~repayments~~repayment of ~~notes~~a note payable in the amount of $200,000, $110,000 of repayments of advances payable and a $146,000 repayment of ~~repayments~~a convertible note payable.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Critical Accounting Policies and Estimates

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

The following is not intended to be a comprehensive list of all of our accounting policies or estimates. Our accounting policies are more fully described in Note 3 – Summary of Significant Accounting Policies, in our financial statements included elsewhere in this quarterly report.

Convertible Instruments

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

If the instrument is determined to not be a derivative liability, the Company then evaluates for the existence of a beneficial conversion feature by comparing the commitment date fair value to the effective conversion price of the instrument.

The Black-Scholes option pricing model was used to estimate the fair value of the Company’s warrants and embedded conversion options. The Black-Scholes option pricing model includes subjective input assumptions that can materially affect the fair value estimates. The Company determined the fair value under the Binomial Lattice model and the Black-Scholes option pricing model to be materially the same.

Embedded conversion options within notes ~~payable.~~ payable are recorded as a debt discount and are amortized as interest expense over the term of the related debt instrument.

Fair Value of Financial Instruments

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

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

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

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

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

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

Stock-Based Compensation

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

Because the Company’s common stock historically was not actively traded on a public market, the fair value of the Company’s restricted equity instruments is estimated by ~~financing activities~~management based on observations of the sales prices of both restricted and freely tradable common stock, or instruments convertible into common stock. The Company obtained a third-party valuation of its common stock as of December 31, 2020, which was considered in management’s estimation of fair value during the nine months ended September 30, ~~2019~~2021. The third-party valuation was ~~attributable~~performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. The estimates used by management are considered highly complex and subjective. The Company anticipates that once its shares become more actively traded, the use of such estimates will no longer be necessary to ~~$1,223,269~~determine the fair value of ~~proceeds received from~~its common stock.

The December 2020 independent appraisal utilized the ~~issuance~~option pricing method, or OPM, as the most reliable method with the following steps being applied:

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

Under the OPM, it was determined the Company’s common stock a fair value of ~~Series A preferred stock, $275,500~~$0.47 per share, which included a discount for lack of ~~proceeds from advances payable~~marketability of 30%. Furthermore, the independent appraisal determined the Company’s expected volatility was 90% by evaluating historical and ~~$215,000~~implied volatilities of ~~net proceeds from debt financings.~~guideline companies.

~~Off-Balance Sheet Arrangements~~

~~We do not have any off-balance sheet arrangements.~~

~~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 September 30, ~~2020,~~2021, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, ~~2020~~2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~Table of Contents~~

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. AOn June 12, 2019, the plaintiff served a motion for summary ~~judgement~~judgment through the Secretary of State which was heard on ~~March 7,~~July 12, 2019 and granted. The Company contends that it was not given sufficient notice under the ~~Company~~applicable statute and did not have an opportunity to oppose the motion. Judgment was entered in October 2019 in the amount of $267,680. The Company brought a motion to vacate based on the jurisdictional defect of the motion in not providing the required amount of time, but that motion was denied in February 2021 without properly addressing the jurisdictional issues raised by the Company. The Company has ~~had discussion with respect~~appealed the denial and then filed a motion to ~~entering into~~Renew and Reargue the motion to vacate based on the Court's failure to address critical issues. That motion was also denied on April 15, 2021 without addressing the Company's arguments. The Company has appealed the second denial as well and is pursuing both appeals in a consolidated manner so as to resolve all issues together. While the Company's motions were pending, the plaintiff has commenced steps to collect judgment. During the nine months ended September 30, 2021, $103,088 was released to an ~~agreement providing~~officer of the court and has been accounted for as partial note repayment, such that, as of September 30, 2021, there was $146,912 outstanding under the note. During the nine months ended September 30, 2021, on behalf of the Company, a ~~payment plan~~third party deposited the full amount of the unpaid judgment with the ~~holder~~court, which created an automatic stay of enforcement of this matter and which will be used to resolve the underlying note ~~but no agreement has yet been reached.~~in the event of an adverse outcome on appeal.

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,~~2020, which was filed with the SEC on ~~March 30, 2020.~~April 15, 2021.

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

In ~~July 2020,~~August 2021, we issued a convertible note payable in the principal amount of $555,556 for net proceeds of $497,500 (gross proceeds of $500,000 less $2,500 of issuance costs) which matures on January 29, 2021. The note accrues interest at 13% per annum and is convertible into common stock at the lower of (i) a conversion price of $0.75 per share (the “Fixed Conversion Price”) or (ii) in the event of a default, as defined in the note, a conversion price of 65% of the lowest volume weighted average price for the ten consecutive trading days ending on the trading day that is immediately prior to the applicable conversion date (the “Default Conversion Price”). The Default Conversion Price shall not apply before March 29, 2021. So long as the convertible note is outstanding, upon any issuance of our equity at an effective price lower than the conversion price (the “Base Conversion Price”), then the conversion price shall be reduced to equal such Base Conversion Price. In connection to the issuance of the convertible note payable, we ~~issued a~~ five-year ~~immediately vested~~ warrant to purchase ~~146,199~~a total of 800,000 shares of common stock at an exercise price of ~~$0.95~~$1.25 per share ~~which~~ ~~may be exercised on~~to a ~~cashless basis.~~lender in accordance with the terms of a convertible note. 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 the three months ended September 30, 2020, we sold 80,446 shares of Series A Preferred Stock to accredited investors at a price of $7.50 per share for gross proceeds of $603,345. We relied upon the exemptions ~~provided by Rule 506 and Section 4(2) of the Securities Act in connection with these transactions.~~

In August 2019, we issued five year warrants to purchase an aggregate of 1,598,000 shares of common stock at an exercise price of $.75 per share to members of our Scientific Advisory Board. We relied upon the exemption provided by Section 4(2) of the Securities Act in connection with ~~these transactions.~~this transaction.

From July 26, 2021 through November 2021, convertible notes in the aggregate principal amount of $1,769,472 automatically converted into 235,929 shares of our Series C Convertible Preferred Stock on the maturity dates of the convertible notes. In August ~~2020,~~2021, a holder of the Series C Preferred Stock elected to convert 5,000 of such shares into 50,000 shares of common stock. We relied upon the exemption provided by Section 3(a)(9) of the Securities Act in connection with these transactions.

In July 2021, we issued an aggregate of 71,915 shares of our common stock to holders of convertible notes in lieu of cash interest upon the maturity of the notes. We relied upon the exception provided by Section 4(2) of the Securities Act in connection with this transaction.

In August 2021, we issued a ~~five year~~five-year warrant to purchase ~~200,000~~125,000 shares of common stock at an exercise price of $.75 per share to a service provider in connection with consulting services to be provided. The warrant vests in equal monthly installments during the sixteen-month period commencing one month after the date of the issuance.consultant. We relied upon the ~~exemption provided by Section 4(2) of the Securities Act in connection with this transaction.~~

In August 2020, we issued options to purchase an aggregate of 1,050,000 shares of common stock at an exercise price of $.75 per share to members of our Board of Directors under our 2019 Equity Incentive Plan. We relied upon the exemptionexception provided by Section 4(2) of the Securities Act in connection with these transactions.

In ~~October 2020,~~August 2021, we ~~issued~~extended the expiration date of a ~~five year~~ warrant to purchase ~~200,000~~150,000 shares of our common stock at an exercise price of $0.75 per share from August 4, 2021 to August 4, 2025 and extended the expiration date of a warrant to purchase 37,500 shares of common stock at an exercise price of ~~$.75~~$0.75 per share from August 26, 2021 to a service provider in connection with consulting services to be provided. The warrant vests in equal monthly installments during the sixteen-month period commencing one month after the date of the issuance.August 26, 2025. We relied upon the exemption provided by Section ~~4(2)~~3(a)(9) of the Securities Act in connection with these transactions.

In October 2021, a holder of Series C Preferred Stock elected to convert 10,000 of such shares into 100,000 shares of common stock. We relied upon the exemption provided by Section 3(a)(9) of the Securities Act in connection with this transaction.

~~In October 2020,~~During the three months ended September 30, 2021, we issued ~~five year immediately vested options to purchase 500,000~~165,099 shares of common stock ~~at an exercise price of $.75 per share~~ to ~~a consultant under our 2019 Equity Incentive Plan.~~consultants. We relied upon the ~~exemption provided by Section 4(2) of the Securities Act in connection with this transaction.~~

In October 2020, we issued convertible notes in the aggregate principal amount of $150,000 to two accredited investors. The notes mature six months from the date of issuance and accrue interest at a rate of eight percent (8%) per annum. The notes are convertible into shares of our Series B Preferred Stock at a conversion price of $7.50 per share at the holder’s option beginning on the date we first issue any shares of Series B Preferred Stock and automatically on the maturity date. It is anticipated that the Series B Preferred Stock will convert into shares of our common stock at a rate of ten shares of common stock for each share of Series B Preferred Stock. In connection with the issuance of the notes, we issued five year warrants to purchase an aggregate of 120,000 shares of common stock at an exercise price of $1.25 per share. We relied upon the exemptionexception provided by Section 4(2) of the Securities Act in connection with these transactions.

In November ~~2020,~~2021, we issued ~~1,995,376~~14,429 shares of Series C Preferred Stock and a five-year warrant to purchase 144,290 shares of common stock ~~to Yeda~~at an exercise price of $1.25 per share in connection with ~~its exercise~~the conversion of a ~~warrant having an aggregate exercise price~~convertible note in the principal amount of ~~$1,995.~~$50,000. We relied upon the exemption provided by Section ~~4(2)~~3(a)(9) of the Securities Act in connection with this ~~transactions.~~transaction.

Item 3. Defaults Upon Senior Securities.

As of September 30, ~~2020~~2021 and through the date of this filing, notes payable and convertible notes payable with face values totaling ~~$1,538,000~~$2,012,162 and ~~$3,038,000,~~$5,762,162, respectively, were past due and are classified as current liabilities on the condensed consolidated balance sheet as of September 30, ~~2020.~~2021. Such notes continue to accrue interest and all relevant penalties have been accrued as of September 30, ~~2020.~~ 2021. Of such past due notes payable, a holder of a note with principal amount of $250,000 issued a notice of default. See Item 1 above for additional details. We are in negotiations with all holders to extend the maturity dates of such notes or to convert the principal and accrued interest into equity.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

~~10.54~~ 10.39(b)*	~~Form~~Amendment No. 2 to Sponsored Research Agreement dated October 18, 2021 between The University of ~~Warrant issued to Members of Scientific Advisory Board.~~Texas M.D. Anderson Cancer Center and Cell Source Limited.
31*
~~10.55~~		~~Form of Warrant issued to Service Providers.~~

~~10.56~~		~~Form of Director Stock Option Agreement.~~

~~10.57~~		~~Form of Consultant Stock Option Agreement.~~

~~10.58~~		~~Form of 8% Convertible Promissory Note.~~

~~10.59~~		~~Form of Warrant issued to Purchasers of 8% Convertible Promissory Note.~~

31		Certification of principal executive officer and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32*
32		Certification of principal executive officer and principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Filed herewith

~~Table of Contents~~24

~~SIGNATURES~~

SIGNATURES

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

	CELL SOURCE, INC.

Dated: November ~~13, 2020~~ 15, 2021	By:	/s/Itamar Shimrat
	Name:	Itamar Shimrat
	Title:	Chief Executive Officer and Chief Financial Officer (Principal Executive, Financial and Accounting Officer)

2325

CELL SOURCE, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2020			2019			2020			2019
Operating Expenses:
Research and development	$	257,546		$	1,158,757		$	675,017		$	2,269,269
Research and development - related party		-			33,333			111,667			83,333
General and administrative		908,099			168,906			2,015,624			909,334
Total Operating Expenses		1,165,645			1,360,996			2,802,308			3,261,936

Loss From Operations		(1,165,645	)		(1,360,996	)		(2,802,308	)		(3,261,936	)

Other (Expense) Income:
Interest expense		(114,040	)		(53,209	)		(271,687	)		(185,993	)
Interest expense - related parties		(12,827	)		(49,595	)		(36,708	)		(50,889	)
Amortization of debt discount		(146,109	)		(3,566	)		(190,639	)		(10,095	)
Change in fair value of derivative liabilities		-			33,500			16,977			118,500
Warrant modification expense		-			(54,100	)		-			(283,500	)
Loss on exchange of notes payable for Series A Convertible Preferred Stock		-			-			-			(262,470	)
Loss on extinguishment of notes payable		(1,511	)		-			(134,202	)		(1,504	)
Gain on exchange of accrued interest for common stock		132,502			-			132,502			-
Gain on forgiveness of accrued expenses		-			-			-			38,427
Total Other Expense		(141,985	)		(126,970	)		(483,757	)		(637,524	)

Net Loss		(1,307,630	)		(1,487,966	)		(3,286,065	)		(3,899,460	)
Dividend attributable to Series A preferred stockholders		(226,191	)		(197,911	)		(649,381	)		(534,919	)
Net Loss Applicable to Common Stockholders	$	(1,533,821	)	$	(1,685,877	)	$	(3,935,446	)	$	(4,434,379	)

Net Loss Per Common Share - Basic and Diluted	$	(0.05	)	$	(0.06	)	$	(0.13	)	$	(0.16	)

Weighted Average Common Shares Outstanding -
Basic and Diluted		31,846,661			28,523,306			30,334,852			28,262,759

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

	FOR THE NINE MONTHS ENDED SEPTEMBER 30, 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	)

Issuance of Series A Convertible
Preferred Stock for cash			106,437		107		-		-		798,162			-			798,269

Series A Convertible Preferred Stock dividends:
Accrual of earned dividends			-		-		-		-		(188,973	)		-			(188,973	)
Payment of dividends in kind			-		-		401,860		401		300,978			-			301,379

Net loss			-		-		-		-		-			(952,985	)		(952,985	)

Balance, June 30, 2019			1,155,426	$	1,155		26,479,471	$	26,479	$	13,900,422		$	(19,081,827	)	$	(5,153,771	)

Issuance of Series A Convertible
Preferred Stock for cash			13,333		14		-		-		99,986			-			100,000

Series A Convertible Preferred Stock dividends:
Accrual of earned dividends			-		-		-		-		(197,911	)		-			(197,911	)

Stock-based compensation:
Options			-		-		-		-		825,100			-			825,100

Net loss			-		-		-		-		-			(1,487,966	)		(1,487,966	)

Balance, September 30, 2019			1,168,759	$	1,169		26,479,471	$	26,479	$	14,627,597		$	(20,569,793	)	$	(5,914,548	)

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

	September 30,			December 31,
	2021			2020
	(Unaudited)
Assets
Current Assets:
Cash	$	599,454		$	241,619
Prepaid expenses		243,876			177,569
Other current assets		17,344			29,651
Total Current Assets		860,674			448,839
Restricted cash		-			3,500
Total Assets	$	860,674		$	452,339

Liabilities and Stockholders’ Deficiency

Current Liabilities:
Accounts payable	$	285,162		$	193,095
Accrued expenses		949,933			1,159,950
Accrued expenses - related parties		101,201			198,701
Accrued interest		863,296			671,968
Accrued interest - related parties		395,125			325,276
Accrued compensation		760,941			724,185
Advances payable		195,500			195,500
Advances payable - related party		100,000			100,000
Notes payable		809,912			1,013,000
Notes payable - related parties		150,000			150,000
Convertible notes payable, net of debt discount of $236,091 and $157,720 as of September 30, 2021 and December 31, 2020, respectively		5,841,730			3,417,836
Convertible notes payable - related parties		225,000			225,000
Financing liability for directors and officers insurance		124,581			-
Accrued dividend payable		246,192			25,210
Total Current Liabilities		11,048,573			8,399,721

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, 1,342,195 shares issued and outstanding as of September 30, 2021 and December 31, 2020; liquidation preference of $10,294,818 and $10,091,672 as of September 30, 2021 and December 31, 2020, respectively		1,342			1,342
Series C Convertible Preferred Stock, 500,000 shares designated, 163,296 and 0 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively; liquidation preference of $1,242,550 and $0 as of September 30, 2021 and December 31, 2020, respectively		163			-
Convertible preferred stock, value
Common Stock, $0.001 par value, 200,000,000 shares authorized; 33,588,578 and 32,538,411 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		33,589			32,538
Additional paid-in capital		20,120,422			17,724,731
Accumulated deficit		(30,343,415	)		(25,705,993	)
Total Stockholders’ Deficiency		(10,187,899	)		(7,947,382	)
Total Liabilities and Stockholders’ Deficiency	$	860,674		$	452,339


	FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
	Convertible Preferred				Convertible Preferred										Additional						Total
	Stock - Series A				Stock - Series C						Common Stock				Paid- In			Accumulated			Stockholders’
	Shares		Amount		Shares			Amount			Shares		Amount		Capital			Deficit			Deficiency

Balance, January 1, 2021		1,342,195	$	1,342		-		$	-			32,538,411	$	32,538	$	17,724,731		$	(25,705,993	)	$	(7,947,382	)
Series A Convertible Preferred Stock dividends:
Accrual of earned dividends		-		-		-			-			-		-		(223,391	)		-			(223,391	)
Payment of dividends in kind
Payment of dividends in kind, shares

Issuance of common stock pursuant to cashless warrant exercise		-		-		-			-			125,071		125		(125	)		-			-

Issuance of warrants in connection with issuance of convertible notes payable		-		-		-			-			-		-		196,966			-			196,966

Issuance of warrants in connection with exchange of convertible notes payable		-		-		-			-			-		-		139,728			-			139,728

Warrants issued in satisfaction of accrued interest		-		-		-			-			-		-		82,350			-			82,350

Stock-based compensation:
Common stock
Common stock, shares
Options		-		-		-			-			-		-		206,400			-			206,400
Warrants		-		-		-			-			-		-		31,276			-			31,276
Conversion of convertible notes payable and accrued interest into Series C Convertible Preferred Stock and common stock
Conversion of convertible notes payable and accrued interest into Series C Convertible Preferred Stock and common stock, shares
Conversion of Series C Convertible Preferred Stock into common stock
Conversion of Series C Convertible Preferred Stock into common stock, shares
Warrants modification expense
Common stock issued in satisfaction of accrued compensation
Common stock issued in satisfaction of accrued compensation , shares
Issuance of common stock in connection with extension of notes payable
Issuance of common stock in connection with extension of notes payable, shares
Reclassification of derivative liabilities to equity
Issuance of warrants in connection with issuance of notes payable
Issuance of common stock in exchange of accrued interest
Issuance of common stock in exchange of accrued interest
Issuance of Series A Convertible Preferred Stock for cash
Issuance of Series A Convertible Preferred Stock for cash, shares
Issuance of warrants in connection with issuance of advance payable

Net loss		-		-		-			-			-		-		-			(1,524,741	)		(1,524,741	)

Balance, March 31, 2021		1,342,195		1,342		-			-			32,663,482		32,663		18,157,935			(27,230,734	)		(9,038,794	)

Series A Convertible Preferred Stock dividends:
Accrual of earned dividends		-		-		-			-			-		-		(225,873	)		-			(225,873	)
Payment of dividends in kind		-		-		-			-			632,677		633		473,842			-			474,475

Issuance of warrants in connection with issuance of convertible notes payable		-		-		-			-			-		-		37,512			-			37,512

Stock-based compensation:
Common stock		-		-		-			-			5,405		5		2,535			-			2,540
Warrants		-		-		-			-			-		-		36,343			-			36,343

Net loss		-		-		-			-			-		-		-			(1,313,113	)		(1,313,113	)

Balance, June 30, 2021		1,342,195		1,342		-			-			33,301,564		33,301		18,482,294			(28,543,847	)		(10,026,910	)

Series A and C Convertible Preferred Stock dividends:
Accrual of earned dividends		-		-		-			-			-		-		(246,192	)		-			(246,192	)

Conversion of convertible notes payable and accrued interest into Series C Convertible Preferred Stock and common stock		-		-		168,296			168			71,915		72		1,315,918			-			1,316,158

Conversion of Series C Convertible Preferred Stock into common stock		-		-		(5,000	)		(5	)		50,000		50		(45	)		-			-

Warrants issued in satisfaction of accrued interest		-		-		-			-			-		-		165,216			-			165,216

Warrants modification expense		-		-		-			-			-		-		29,000			-			29,000

Common stock issued in satisfaction of accrued compensation		-		-		-			-			15,099		16		7,081			-			7,097

Issuance of warrants in connection with issuance of convertible notes payable		-		-		-			-			-		-		226,791			-			226,791

Stock-based compensation:
Common stock		-		-		-			-			150,000		150		70,350			-			70,500
Warrants		-		-		-			-			-		-		70,009			-			70,009

Net loss		-		-		-			-			-		-		-			(1,799,568	)		(1,799,568	)

Balance, September 30, 2021		1,342,195	$	1,342		163,296		$	163			33,588,578	$	33,589	$	20,120,422		$	(30,343,415	)	$	(10,187,899	)

			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	$	38,624	$	-	$	-	$	38,624
Accrued compensation - warrants		6,919		-		-		6,919
Accrued interest - warrants		83,655		-		-		83,655
Accrued interest - warrants - related party		150,388		-		-		150,388

Balance - September 30, 2020	$	279,586	$	-	$	-	$	279,586

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

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2020			2019			2020			2019

Risk-free interest rate	0.22% - 0.28		%	1.55%-1.91		%	0.15% - 1.55		%	1.17% - 2.44		%
Expected term (years)	4.00 - 5.00			0.11 - 5.00			0.52 - 5.00			0.02 - 5.00
Expected volatility		110	%		110	%		110	%		110	%
Expected dividends		0.00	%		0.00	%		0.00	%		0.00	%

	Accrued			Accrued			Derivative
	Interest			Compensation			Liability			Total

Balance - December 31, 2019	$	173,275		$	57,952		$	351,900		$	583,127

Accrued compensation - common stock		-			10,021			-			10,021
Accrued interest - common stock		56,875			-			-			56,875
Accrued interest - warrants		26,661			-			-			26,661
Accrued interest - warrants - related party		35,350			-			-			35,350
Change in fair value		(1,243	)		(135	)		(16,977	)		(18,355	)
Issuance of warrants		-			(10,877	)		10,907			30
Issuance of common stock		(56,875	)		(11,418	)		-			(68,293	)
Reclassification of derivative liabilities to equity		-			-			(345,830	)		(345,830	)

Balance - September 30, 2020	$	234,043		$	45,543		$	-		$	279,586