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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~September~~March 3031, ~~2023~~2024

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

For the transition period from _______ to _______

Commission file number: 000-55413

Cell Source, Inc.

(Exact name of registrant as specified in its charter)

Nevada

32-0379665

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

57 West 57^th Street, Suite 400

New York, NY 10019

(Address of principal executive offices)

(646) 416-7896

(Issuer’s telephone number)

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

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

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

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

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

Large accelerated filer ☐	Accelerated filer ☐

Non-accelerated filer ☒	Smaller reporting company ☒

	Emerging growth company ☐

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

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

As of ~~November~~July 623, ~~2023~~2024, the registrant had 3841,~~546~~941,~~231~~397 shares of $0.001 par value common stock outstanding.

CELL SOURCE, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED ~~SEPTEMBER~~MARCH 3031, ~~2023~~2024

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.	3
Condensed Consolidated Balance Sheets as of September 30, 2023 (Unaudited) and December 31, 2022	3
Condensed Consolidated Balance Sheets as of March 31, 2024 (Unaudited) and December 31, 2023	3
Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and 2022	4
Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 2023	4
Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Deficiency for the Three and Nine Months Ended September 30, 2023 and 2022	5
Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Deficiency for the Three Months Ended March 31, 2024 and 2023	5
Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022	6
Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023	6
Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	1413
Item 3. Quantitative and Qualitative Disclosures About Market Risk.	1817
Item 4. Controls and Procedures.	1817
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.	1918
Item 1A. Risk Factors.	1918
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities.	19
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	18
Item 3. Defaults Upon Senior Securities.	19
Item 4. Mine Safety Disclosures.	19
Item 5. Other Information.	19
Item 6. Exhibits.	2019
SIGNATURES	2120

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

CELL SOURCE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30,			December 31,
	March 31,			December 31,
	2023			2022
	2024			2023
	(Unaudited)
Assets
Current Assets:
Cash	$	~~2,582~~23		$	~~222~~22,~~665~~203
Prepaid expenses		~~242~~80,~~375~~373			~~164~~160,~~175~~750
Other current assets		32,~~400~~193			2312,~~005~~218
Total Assets	$	~~248~~82,~~357~~589		$	~~409~~195,~~845~~171
Liabilities and Stockholders’ Deficiency
Current Liabilities:
Accounts payable	$	1,~~580~~882,~~863~~402		$	~~680~~1,~~325~~467,052
Accrued expenses		1,~~126~~321,~~536~~469			1,~~485~~225,~~857~~195
Accrued expenses - related party		~~130~~159,000			86144,500
Accrued expenses		~~130~~159,000			86144,500
Accrued interest		~~962~~938,~~183~~432			~~809~~939,~~426~~549
Accrued interest - related parties		1,~~443~~620,~~452~~097			~~987~~1,~~310~~480,117
Accrued interest		1,~~443~~620,~~452~~097			~~987~~1,~~310~~480,117
Accrued compensation		~~885~~973,~~665~~658			~~849~~960,~~898~~554
Notes payable, net of debt discount of $0 and $12,968 as of September 30, 2023 and December 31, 2022, respectively		681,093			768,126
Notes payable, net of debt discount of $0 and $776 as of March 31, 2024 and December 31, 2023, respectively		711,093			710,317
Notes payable - related parties		150,000			150,000
Notes payable		150,000			150,000
Convertible notes payable, net of debt discount of $21,954 and $41,650 as of September 30, 2023 and December 31, 2022, respectively		1,328,006			908,311
Convertible notes payable, net of debt discount of $12,001 and $16,179 as of March 31, 2024 and December 31, 2023, respectively		982,999			1,078,821
Convertible notes payable - related parties, net of debt discount of $0 and $147,230 as of September 30, 2023 and December 31, 2022, respectively		7,315,036			6,077,770
Convertible notes payable - related parties, net of debt discount of $5,664 and $0 as of March 31, 2024 and December 31, 2023, respectively		7,456,044			7,315,036
Convertible notes payable		7,~~315~~456,~~036~~044			67,~~077~~315,~~770~~036
Financing liability		130,040			-
Derivative liabilities		32,300			33,000
Financing liability		22,033			42,033
Advances payable		135,000			135,000
Advances payable - related party		100,000			100,000
Advances payable		100,000			100,000
Accrued dividend payable		~~310~~352,~~630~~205			525,~~217~~540
Total Liabilities		16,~~278~~836,~~504~~732			1315,~~043~~806,~~740~~714
Commitments and contingencies (Note 8)		-			-
Stockholders’ Deficiency:
Preferred stock, $0.001 par value, 10,000,000 shares authorized
Convertible Preferred Stock, $0.001 par value, 10,000,000 shares authorized;
Series A Convertible Preferred Stock, 1,350,000 shares designated, 1,342,195 shares issued and outstanding as of September 30, 2023 and December 31, 2022; liquidation preference of $10,294,818 and $10,066,463 and as of September 30, 2023 and December 31, 2022, respectively		1,342			1,342
Series A Convertible Preferred Stock, 1,350,000 shares designated, 1,342,195 shares issued and outstanding as of March 31, 2024 and December 31, 2023; liquidation preference of $10,292,336 and $10,066,463 as of March 31, 2024 and December 31, 2023, respectively		1,342			1,342
Series B Convertible Preferred Stock, 2,000,000 shares designated, 0 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively; liquidation preference of $0 as of September 30, 2023 and December 31, 2022		-			-
Series B Convertible Preferred Stock, 2,000,000 shares designated, 110,001 and 106,668 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively; liquidation preference of $852,104 and $806,805 as of March 31, 2024 and December 31, 2023, respectively		110			107
Series C Convertible Preferred Stock, 1,000,000 shares designated, 532,110 and 502,776 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively; liquidation preference of $4,073,102 and $3,776,039 as of September 30, 2023 and December 31, 2022, respectively		532			503
Series C Convertible Preferred Stock, 1,000,000 shares designated, 550,815 and 537,482 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively; liquidation preference of $4,230,348 and $4,049,861 as of March 31, 2024 and December 31, 2023, respectively		550			537
Preferred stock, value
Common stock, $0.001 par value, 200,000,000 shares authorized; 38,495,617 and 36,081,758 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively		38,495			36,082
Common Stock, $0.001 par value, 200,000,000 shares authorized; 41,019,348 and 39,830,802 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively		41,019			39,831
Additional paid-in capital		2426,~~546~~145,~~969~~630			2326,~~674~~014,~~354~~028
Accumulated deficit		(4042,~~617~~942,~~485~~794	)		(3641,~~346~~667,~~176~~388	)
Total Stockholders’ Deficiency		(16,~~030~~754,~~147~~143	)		(1215,~~633~~611,~~895~~543	)
Total Liabilities and Stockholders’ Deficiency	$	~~248~~82,~~357~~589		$	~~409~~195,~~845~~171

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

CELL SOURCE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

		2023			2022			2023			2022
					-
	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	For the Three Months Ended March 31,
		2023			2022			2023			2022
		2024			2023
Operating Expenses:
Research and development	$	~~500~~341,~~005~~713		$	~~468~~324,~~005~~000		$	~~1,175,093~~		$	~~1,487,520~~
Research and development - related party		14,500			14,500			~~43,500~~			~~43,500~~
Research and development		14,500			14,500			~~43,500~~			~~43,500~~
General and administrative		~~480~~781,~~875~~916			~~533~~1,~~538~~077,049			~~2,097,801~~			~~1,571,572~~
Total Operating Expenses		~~995~~1,~~380~~138,129			1,~~016~~415,~~043~~549			~~3,316,394~~			~~3,102,592~~
Loss From Operations		(~~995~~1,~~380~~138,129	)		(1,~~016~~415,~~043~~549	)		~~(3,316,394~~	)		~~(3,102,592~~	)
Other (Expense) Income:
Interest expense		(6230,~~463~~983	)		(4119,~~581~~939	)		~~(138,937~~	)		~~(153,306~~	)
Interest expense - related parties		(~~199~~106,~~628~~138	)		(~~138~~115,~~373~~831	)		~~(496,206~~	)		~~(386,775~~	)
Interest expense		(~~199~~106,~~628~~138	)		(~~138~~115,~~373~~831	)		~~(496,206~~	)		~~(386,775~~	)
Amortization of debt discount		(29,912	)		(23,561	)		(107,487	)		(113,249	)
Interest expense - amortization of debt discount		(4,954	)		(35,721	)
Amortization of debt discount - related party		(50,755	)		(32,748	)		(254,205	)		(74,553	)
Interest expense - amortization of debt discount - related party		(1,002	)		(104,527	)
Amortization of debt discount		(50,755	)		(32,748	)		(254,205	)		(74,553	)
Interest expense - amortization of debt discount		(1,002	)		(104,527	)
Gain on extinguishment of note payable		-			-			41,920			-
Change in fair value of derivative liabilities		5,800			-
Total Other Expense		(~~342~~137,~~758~~277	)		(~~236~~276,~~263~~018	)		~~(954,915~~	)		~~(727,883~~	)
Net Loss		(1,~~338~~275,~~138~~406	)		(1,~~252~~691,~~306~~567	)		~~(4,271,309~~	)		~~(3,830,475~~	)
Dividend attributable to Series A and Series C preferred stockholders		(309,150	)		(299,827	)		(907,516	)		(869,715	)
Dividend attributable to Series A, B, and C preferred stockholders		(326,665	)		(297,517	)
Net Loss Applicable to Common Stockholders	$	(1,~~647~~602,~~288~~071	)	$	(1,~~552~~989,~~133~~084	)	$	~~(5,178,825~~	)	$	~~(4,700,190~~	)
Net Loss Per Common Share - Basic and Diluted	$	(0.04	)	$	(0.0405	)	$	~~(0.14~~	)	$	~~(0.14~~	)
Weighted Average Common Shares Outstanding -
Basic and Diluted		3840,~~191~~507,~~731~~352			3537,~~240~~059,~~745~~766			~~37,492,478~~			~~34,696,011~~

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

CELL SOURCE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIENCY

(Unaudited)

	Shares		Amount		Shares			Amount			Shares		Amount		~~Paid-In Capital~~Shares			~~Deficit~~Amount			~~Deficiency~~Capital			Deficit			Deficiency
	FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023
	FOR THE THREE MONTHS ENDED MARCH 31, 2024
	Convertible Preferred				Convertible Preferred						Convertible Preferred										~~Total~~Additional						Total
	Stock - Series A				Stock - Series CB						~~Common~~ Stock - Series C				~~Additional~~Common Stock			~~Accumulated~~			~~Stockholders’~~Paid-In			Accumulated			Stockholders’
	Shares		Amount		Shares			Amount			Shares		Amount		~~Paid-In Capital~~Shares			~~Deficit~~Amount			~~Deficiency~~Capital			Deficit			Deficiency
Balance, January 1, 2023		1,342,195	$	1,342		502,776		$	503			36,081,758	$	36,082	$	23,674,354		$	(36,346,176	)	$	(12,633,895	)
Balance, January 1, 2024		1,342,195	$	1,342		106,668		$	107			537,482	$	537		39,830,802		$	39,831		$	26,014,028		$	(41,667,388	)	$	(15,611,543	)
Conversion of convertible notes payable and accrued interest into Series C Convertible Preferred Stock and common stock		-		-		~~6,667~~-			7-			213,~~747~~333		313		526,~~050~~546			-6			52104,~~060~~891			-			104,910
Series A and Series C Convertible Preferred Stock dividends:
Series A, B and C Convertible Preferred Stock dividends:
Accrual of earned dividends		-		-		-			-			-		-		~~(297,517~~-	)		-			(~~297~~326,~~517~~665	)		-			(326,665	)
Issuance of warrants in connection with issuance of convertible notes payable		-		-		-			-			-		-		21,202			-			21,202
Common stock issued in satisfaction of accrued compensation		-		-		-			-			-		-		180,000			180			44,820			-			45,000
Conversion of Series C Convertible Preferred Stock into common stock		-		-		(10,000	)		(10	)		100,000		100		(90	)		-			-
Issuance of Series B Convertible Preferred Stock for cash, net		-		-		3,333			3			-		-		-			-			19,897			-			19,900
Stock-based compensation:
Common stock issued in satisfaction of convertible note payable interest		-		-		-			-			-		-		2,000			2			518			-			520
Common stock		-		-		-			-			1,000,000		1,000		329,000			-			330,000
Stock-based compensation:
Net loss		-		-		-			-			-		-		-			(1,691,567	)		(1,691,567	)
Warrants		-		-		-			-			-		-		-			-			29,141			-			29,141
Balance, March 31, 2023		1,342,195	$	1,342		499,443		$	500			37,184,505	$	37,185	$	23,778,999		$	(38,037,743	)	$	(14,219,717	)
Common stock		-		-		-			-			-		-		1,000,000			1,000			259,000			-			260,000
Series A and Series C Convertible Preferred Stock dividends:
Net loss		-		-		-			-			-		-		-			-			-			(1,275,406	)		(1,275,406	)
Accrual of earned dividends		-		-		-			-			-		-		(300,849	)		-			(300,849	)
Balance, March 31, 2024		1,342,195	$	1,342		110,001		$	110			550,815	$	550		41,019,348		$	41,019		$	26,145,630		$	(42,942,794	)	$	(16,754,143	)
Payment of dividends in kind		-		-		-			-			802,880		802		601,300			-			602,102
Issuance of common stock in connection with extinguishment of note payable		-		-		-			-			176,000		176		57,904			-			58,080
Issuance of warrants in connection with:
Satisfaction of accrued interest		-		-		-			-			-		-		40,167			-			40,167
Issuance of convertible notes payable		-		-		-			-			-		-		75,462			-			75,462
Stock-based compensation:
Warrants		-		-		-			-			-		-		40,600			-			40,600
Net loss		-		-		-			-			-		-		-			(1,241,604	)		(1,241,604	)
Balance, June 30, 2023		1,342,195	$	1,342		499,443		$	500			38,163,385	$	38,163	$	24,293,583		$	(39,279,347	)	$	(14,945,759	)
Conversion of convertible notes payable and accrued interest into Series C Convertible Preferred Stock and common stock		-		-		62,667			62			32,232		32		494,040			-			494,134
Issuance of warrants in connection with issuance of convertible notes payable		-		-		-			-			-		-		45,008			-			45,008
Conversion of Series C Convertible Preferred Stock into common stock		-		-		(30,000	)		(30	)		300,000		300		(270	)		-			-
Series A and Series C Convertible Preferred Stock dividends:
Accrual of earned dividends		-		-		-			-			-		-		(309,150	)		-			(309,150	)
Stock-based compensation:
Warrants		-		-		-			-			-		-		23,758			-			23,758
Options		-		-		-			-			-		-		-			-			-
Net loss		-		-		-			-			-		-		-			(1,338,138	)		(1,338,138	)
Balance, September 30, 2023		1,342,195	$	1,342		532,110		$	532			38,495,617	$	38,495	$	24,546,969		$	(40,617,485	)	$	(16,030,147	)

	FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022
	Shares		Amount		Shares			Amount			Shares		Amount		Capital			Deficit			Deficiency
	Convertible Preferred				Convertible Preferred																Total
	FOR THE THREE MONTHS ENDED MARCH 31, 2023
	Stock - Series A				Stock - Series C						Common Stock				Additional			Accumulated			Stockholders’
	Convertible Preferred				Convertible Preferred										Additional						Total
	Shares		Amount		Shares			Amount			Shares		Amount		Paid-In Capital			Deficit			Deficiency
	Stock - Series A				Stock - Series C						Common Stock				Paid-In			Accumulated			Stockholders’
Balance, January 1, 2022		1,342,195	$	1,342		272,021		$	272			34,360,546	$	34,361	$	21,316,318		$	(31,178,428	)	$	(9,826,135	)
	Shares		Amount		Shares			Amount			Shares		Amount		Capital			Deficit			Deficiency
Conversion of convertible notes payable and accrued interest into Series C Convertible Preferred Stock and common stock		-		-		183,422			183			76,530		76		1,432,836			-			1,433,095
Balance, January 1, 2023		1,342,195	$	1,342		502,776		$	503			36,081,758	$	36,082	$	23,674,354		$	(36,346,176	)	$	(12,633,895	)
Balance		1,342,195	$	1,342		502,776		$	503			36,081,758	$	36,082	$	23,674,354		$	(36,346,176	)	$	(12,633,895	)
Conversion of convertible notes payable and accrued interest into Series C Convertible Preferred Stock and common stock		-		-		6,667			7			2,747		3		52,050			-			52,060
Series A and C Convertible Preferred Stock dividends:
Accrual of earned dividends		-		-		-			-			-		-		(~~324~~297,~~917~~517	)		-			(~~324~~297,~~917~~517	)
Issuance of warrants in connection with issuance of convertible notes payable		-		-		-			-			-		-		821,~~043~~202			-			821,~~043~~202
Conversion of Series C Convertible Preferred Stock into common stock		-		-		(10,000	)		(10	)		100,000		100		(90	)		-			-
Stock-based compensation:
Warrants		-		-		-			-			-		-		5,372			-			5,372
Common stock		-		-		-			-			1,000,000		1,000		329,000			-			330,000
Net loss		-		-		-			-			-		-		-			(1,~~292~~691,~~575~~567	)		(1,~~292~~691,~~575~~567	)
Balance, March 31, 2022		1,342,195		1,342		455,443			455			34,437,076		34,437		22,437,652			(32,471,003	)		(9,997,117	)
Balance, March 31, 2023		1,342,195	$	1,342		499,443		$	500			37,184,505	$	37,185	$	23,778,999		$	(38,037,743	)	$	(14,219,717	)
Conversion of convertible notes payable and accrued interest into Series C Convertible Preferred Stock and common stock		-		-		14,666			15			5,964		6		114,452			-			114,473
Balance		1,342,195	$	1,342		499,443		$	500			37,184,505	$	37,185	$	23,778,999		$	(38,037,743	)	$	(14,219,717	)
Series A and C Convertible Preferred Stock dividends:
Accrual of earned dividends		-		-		-			-			-		-		(244,971	)		-			(244,971	)
Payment of dividends in kind		-		-		-			-			796,629		797		596,634			-			597,431
Issuance of warrants in connection with issuance of convertible notes payable		-		-		-			-			-		-		49,219			-			49,219
Net loss		-		-		-			-			-		-		-			(1,285,594	)		(1,285,594	)
Balance, June 30, 2022		1,342,195		1,342		470,109			470			35,239,669		35,240		22,952,986			(33,756,597	)		(10,766,559	)
Balance		1,342,195		1,342		470,109			470			35,239,669		35,240		22,952,986			(33,756,597	)		(10,766,559	)
Conversion of convertible notes payable and accrued interest into Series C Convertible Preferred Stock and common stock		-		-		12,667			13			5,181		5		98,868			-			98,886
Series A and C Convertible Preferred Stock dividends:
Accrual of earned dividends		-		-		-			-			-		-		(299,827	)		-			(299,827	)
Issuance of warrants in connection with issuance of convertible notes payable		-		-		-			-			-		-		76,509			-			76,509
Warrants issued in satisfaction of accrued interest		-		-		-			-			-		-		114,727			-			114,727
Stock-based compensation:
Options		-		-		-			-			-		-		74,600			-			74,600
Net loss		-		-		-			-			-		-		-			(1,252,306	)		(1,252,306	)
Balance, September 30, 2022		1,342,195	$	1,342		482,776		$	483			35,244,850	$	35,245	$	23,017,863		$	(35,008,903	)	$	(11,953,970	)
Balance		1,342,195	$	1,342		482,776		$	483			35,244,850	$	35,245	$	23,017,863		$	(35,008,903	)	$	(11,953,970	)

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

CELL SOURCE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	2023			2022
	2024			2023
	For Nine Months Ended
	For Three Months Ended
	September 30,
	March 31,
	2023			2022
	2024			2023
Cash Flows From Operating Activities:
Net loss	$	(41,~~271~~275,~~309~~406	)	$	(31,~~830~~691,~~475~~567	)
Adjustments to reconcile net loss to net cash used in operating activities:
Gain on extinguishment of note payable		(41,920	)		-
Amortization of debt discount		4,954			35,721
Amortization of debt discount		361,692			187,802
Amortization of debt discount - related party		1,002			104,527
Non-cash interest expense - warrants		28,695			96,896
Amortization of debt discount		1,002			104,527
Change in fair value of derivative liabilities		(5,800	)		-
Non-cash interest expense - warrants		(74,315	)		(46,131	)
Stock-based compensation:
Options		-			74,600
Common stock		262,351			330,000
Warrants		6326,~~709~~544			5(1,~~190~~095	)
Common stock		341,269			-
Stock-based compensation		26,544			(1,095	)
Stock-based compensation		341,269			-
Changes in operating assets and liabilities:
Prepaid expenses		~~243~~80,~~300~~377			~~(70~~79,~~568~~338	)
Other current assets		1910,~~605~~025			(38,~~431~~434	)
Accounts payable		~~900~~415,~~538~~350			~~451~~506,~~179~~867
Accrued expenses		5396,~~697~~273			~~187~~139,~~597~~948
Accrued expenses - related parties		4314,500			-14,500
Accrued expenses		5314,~~697~~500			~~187~~14,~~597~~500
Accrued interest		~~165~~32,~~030~~738			7577,~~892~~252
Accrued interest - related parties		~~441~~178,~~446~~685			~~346~~104,~~061~~731
Accrued interest		~~165~~178,~~030~~685			75104,~~892~~731
Accrued compensation		2558,~~147~~870			6327,~~846~~862
Net Cash Used In Operating Activities		(1173,~~625,601~~852	)		(2309,~~415,411~~613	)
Cash Flows From Financing Activities:
Proceeds from issuance of convertible notes payable		919,960			395,000
Proceeds from issuance of Series B Convertible Preferred Stock and warrants		25,000			-
Proceeds from issuance of convertible notes payable - related party		677,018			2,000,000
Proceeds from issuance of convertible notes payable		-			219,960
Proceeds from issuance of convertible notes payable		919,960			395,000
Proceeds from issuance of convertible notes payable - related party		146,672			-
Proceeds from issuance of notes payable		-			168,094
Proceeds from issuance of convertible notes payable		146,672			-
Repayment of notes payable		-			(146,912	)
Repayment of financing liability		(20,000	)		-
Repayment of financing liability		(191,460	)		(27,926	)
Net Cash Provided By Financing Activities		151,672			219,960
Net Cash Provided By Financing Activities		1,405,518			2,388,256
Net Decrease In Cash		(22,180	)		(89,653	)
Net Decrease In Cash		(220,083	)		(27,155	)
Cash - Beginning of Period		22,203			222,665
Cash - Beginning of Period		222,665			93,095
Cash - End of Period	$	23		$	133,012
Cash - End of Period	$	2,582		$	65,940
Supplemental Disclosures of Cash Flow Information:
Cash paid for:
Interest	$	-		$	-
Income taxes	$	~~949~~-		$	-945
Non-cash investing and financing activities:
Accrual of earned preferred stock dividends	$	(907,516	)	$	(869,715	)
Issuance of warrants in connection with the issuance of notes payable	$	-		$	21,202
Common stock issued in connection with payment of Series A and C Convertible Preferred Stock dividends in-kind	$	602,102		$	597,431
Accrual of warrant obligations in connection with issuance of convertible notes payable	$	6,666		$	40,167
Financing of Directors and Officer’s insurance	$	321,500		$	-
Common stock issued in satisfaction of accrued compensation	$	(45,000	)	$	-
Conversion of Series C Convertible Preferred Stock into common stock	$	400		$	-
Conversion of accrued expenses into note principal	$	-		$	413,018
Conversion of accrued expenses into note principal	$	413,018		$	-
Accrual of earned preferred stock dividends	$	(326,665	)	$	(297,517	)
Accrual of warrant obligations in connection with issuance of notes payable	$	40,167		$	232,697
Conversion of convertible notes payable and accrued interest into Series C Preferred Stock and common stock	$	104,910		$	52,060
Warrants issued in satisfaction of accrued warrant obligation	$	(40,167	)	$	-
Issuance of warrants in connection with issuance of Series B Preferred Stock	$	3,200		$	-
Issuance of warrants in connection with the issuance of notes payable	$	141,672		$	133,771
Issuance of embedded derivative liabilities in connection with issuance of Series B Preferred Stock	$	1,900		$	-
Issuance of warrants in satisfaction of accrued interest	$	-		$	114,727
Conversion of convertible notes payable and accrued interest into Series C Preferred Stock and common stock	$	546,194		$	1,646,454
Extinguishment of note payable into common stock	$	58,080		$	-

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

CELL SOURCE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Organization and Operations

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

Risks and Uncertainties

On October 7, 2023, a conflict arose between Israel and Hamas militants on Israel’s southern border from the Gaza Strip. The intensity and duration of Israel’s current war against Hamas is difficult to predict, and as are such war’s economic implications on the Company’s business and operations. To the extent that any of these negative developments do occur, they may have an adverse effect on the Company’s business, results of operations and its ability to raise additional funds. As of March 31, 2024, the Company considered the impact of the war on its business and operational assumptions and estimates and determined there were no material adverse impacts on the Company’s condensed consolidated results of operations and financial position as of March 31, 2024.

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~~March 31, ~~2023~~2024 and the condensed consolidated results of its operations and cash flows for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023. The results of operations for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2023~~2024 are not necessarily indicative of the operating results for the full year ending December 31, ~~2023~~2024 or any other period. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related disclosures of the Company as of December 31, ~~2022~~2023 and for the year then ended which were included in the Company’s Annual Report on Form 10-K that was filed with the Securities and Exchange Commission (“SEC”) on ~~August~~June 824, ~~2023~~2024. Risks and Uncertainties On October 7, 2023, a conflict arose between Israel and Hamas militants on Israel’s southern border from the Gaza Strip. The intensity and duration of Israel’s current war against Hamas is difficult to predict, and as are such war’s economic implications on the Company’s business and operations. To the extent that any of these negative developments do occur, they may have an adverse effect on the Company’s business, results of operations and its ability to raise additional funds. As of September 30, 2023, the Company considered the impact of the war on its business and operational assumptions and estimates and determined there were no material adverse impacts on the Company’s condensed consolidated results of operations and financial position as of September 30, 2023.

Note 2 - Going Concern and Management Plans

During the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024, the Company had not generated any revenues, had a net loss of approximately $41,~~271~~275,000 and ~~had~~ used cash in operations of approximately $1174,~~626,~~000. As of ~~September~~March 3031, ~~2023~~2024, the Company had a working capital deficiency of approximately $16,~~030~~754,000 and an accumulated deficit of approximately $4042,~~617~~943,000. As of ~~September~~March 3031, ~~2023~~2024 and through the date of this filing, notes payable with principal amounts totaling approximately $5,~~246~~643,000 and $1,~~726~~956,000, respectively, were past due ~~and are classified as current liabilities on the condensed consolidated balance sheet as of September 30, 2023~~. The Company will continue to incur net operating losses to fund operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for at least one year from the date these financial statements are issued. ~~Subsequent to September 30, 2023 and as more fully described in Note 9, Subsequent Events, the Company received aggregate proceeds of $450,000 from equity financings.~~

The Company is currently funding its operations on a month-to-month basis. While there can be no assurance that it will be successful, the Company is in active negotiations to raise additional capital. The Company’s primary sources of operating funds since inception have been equity and debt financings. Management’s plans include continued efforts to raise additional capital through debt and equity financings. There is no assurance that these funds will be sufficient to enable the Company to fully complete its development activities or attain profitable operations. If the Company is unable to obtain such additional financing on a timely basis or, notwithstanding any request the Company may make, if the Company’s debt holders do not agree to convert their notes into equity or extend the maturity dates of their notes, the Company may have to curtail its development, marketing and promotional activities, which would have a material adverse effect on the Company’s business, financial condition and results of operations, and ultimately the Company could be forced to discontinue its operations and liquidate. Subsequent to March 31, 2024 and as more fully described in Note 9, Subsequent Events, the Company received aggregate proceeds of $500,000 from the issuance of notes payable and $726,000 from the issuance of Series B Convertible Preferred Stock.

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

Note 3 - Summary of Significant Accounting Policies

CELL SOURCE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 3 - Summary of Significant Accounting Policies

Stock-Based Compensation

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

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

● Establishment of total enterprise or equity value;

● Analysis of equity rights for each class of security;

● Selection of appropriate model for valuation purposes;

● Determination of key valuation inputs; and

● Computation of the fair value of the subject security.

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

Loss Per Share

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

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

	September 30,
	March 31,
	2023		2022
	2024		2023
Options		6,932,004		6,932,004
Warrants		1315,~~541~~693,~~107~~445		1314,~~204~~084,~~079~~493
Convertible notes [1] [2]		13,~~493~~656,~~270~~427		13,~~529~~199,~~683~~169
Convertible preferred stock		1820,~~743~~030,~~053~~110		18,~~249~~416,~~713~~383
Total		5256,~~709~~311,~~434~~986		3942,~~915~~632,~~479~~049

[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~~March 3031, ~~2023~~2024 and ~~2022~~2023. However, such conversion rates are subject to adjustment under certain circumstances such as stock splits and stock dividends, which may result in the issuance of common shares greater than the amount indicated.

[2] As of ~~September~~March 3031, ~~2022~~2023, excludes shares of common stock underlying convertible notes that ~~are~~eventually ~~expected~~became ~~to become~~ convertible into shares of Series B Convertible Preferred Stock since such stock had not been designated by the Company as of ~~September~~March 3031, ~~2022~~2023.

Recent Accounting Standards

In October 2023, the FASB issued ASU 2023-06, “Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative,” to amend certain disclosure and presentation requirements for a variety of topics within the ASC. These amendments align the requirements in the ASC to the removal of certain disclosure requirements set out in Regulation S-X and Regulation S-K, announced by the SEC. The effective date for each amended topic in the ASC is either the date on which the SEC’s removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, or on June 30, 2027, if the SEC has not removed the requirements by that date. Early adoption is prohibited. The Company is currently evaluating the impact of this standard but does not expect it to have a material impact on its condensed consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segments Disclosures (Topic 280), which updates reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses on both an annual and interim basis. The guidance becomes effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. Since this new ASU addresses only disclosures, the Company does not expect the adoption of this ASU to have any material effects on its financial condition, results of operations or cash flows. The Company is currently evaluating any new disclosures that may be required upon adoption of ASU 2023-07.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this update address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This update also includes certain other amendments to improve the effectiveness of income tax disclosures. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024 with early adoption permitted. The Company is currently evaluating the impact of this standard but does not expect it to have a material impact on its condensed consolidated financial statements.

Since the date of the Annual Report on Form 10-K for the year ended December 31, 2023, there have been no material changes to the Company’s significant accounting policies, except as disclosed herein.

Note 4 - Fair Value

The following table provides a summary of the changes in fair value, including net transfers in and/or out, of all Level 3 liabilities measured at fair value on a recurring basis using unobservable inputs during the three months ended March 31, 2024 and 2023:

	Accrued			Accrued			Derivative
	Interest			Compensation			Liabilities			Total

Balance - January 1, 2024	$	356,510		$	97,102		$	33,000		$	486,612
Accrual of warrant obligation		6,666			-			-			6,666
Issuance of warrants and conversion option		-			-			5,100			5,100
Common stock issued in satisfaction of accrued compensation		-			(45,000	)		-			(45,000	)
Change in fair value		(74,316	)		(766	)		(5,800	)		(80,882	)
Balance - March 31, 2024	$	288,860		$	51,336		$	32,300		$	372,496

	Accrued			Accrued
	Interest			Compensation			Total

Balance - January 1, 2023	$	504,700		$	59,220		$	563,920
Accrual of warrant obligation		40,167			-			40,167
Change in fair value		(46,131	)		(1,095	)		(47,226	)
Balance - March 31, 2023	$	498,736		$	58,125		$	556,861

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

CELL SOURCE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 4 - Fair Value

Schedule of Changes in Fair Value of Liabilities Measured at Fair Value on a Recurring Basis

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

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

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,
	March 31,
	2023			2022			2023		2022
	2024			2023
Risk-free interest rate		43.6084% - 4.~~70%~~35	%		43.0660% - 43.~~15%~~71	%		~~3.60% - 4.70%~~		~~2.42% - 4.15%~~
Expected term (years)		43.0058 - 5.00			4.00 - 5.00			~~4.00-5.00~~		~~4.00 - 5.00~~
Expected volatility		~~80%~~65	%		~~90%~~80	%		~~80%~~		~~90%~~
Expected dividends		0%-10.00%	%		0.00%	%		~~0.00%~~		~~0.00%~~

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

As of ~~September~~March 3031, ~~2023~~2024 and December 31, ~~2022~~2023, the Company had an obligation to issue 183,095 and ~~154~~363,~~495~~095 shares of common stock to service providers that had a fair value of $6247,~~252~~605 and $5090,~~983~~774, respectively, which was a component of accrued compensation on the condensed consolidated balance sheets. The fair value of the common stock underlying this obligation has a per share value of $0.3426 as of ~~September~~March 3031, ~~2023~~2024 and $0December 31, 2023.33 Furthermore, as of March 31, 2024 and December 31, ~~2022~~2023, the Company has an obligation to issue warrants to purchase 42,930 shares of the Company’s common stock to service providers that had a fair value of $3,731 and $6,328, respectively, which was a component of accrued compensation on the condensed consolidated balance sheets.

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

CELL SOURCE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 5 – Notes Payable

As of ~~September~~March 3031, ~~2023~~2024 and through the date of this filing, notes and convertible notes payable with principal amounts totaling $5,~~246~~642,~~129~~801 and $1,~~726~~956,~~093~~000, respectively, were past due ~~and are classified as current liabilities on the condensed consolidated balance sheet as of September 30, 2023~~. Such notes continue to accrue interest and all relevant penalties have been accrued as of ~~September~~March 3031, ~~2023~~2024. Of ~~such past due notes payable, a holder of a note with principal amount of $250,000 issued a notice of default. See Note 8, Commitments and Contingencies – Litigation for additional details.~~ The Company is in negotiations with certain holders of notes payable to extend the maturity dates of such notes or to convert the principal and accrued interest into equity. As of ~~September~~March 3031, ~~2023~~2024, the Company had an accrued interest balance of $~~599~~829,~~427~~894 related to notes and convertible notes payable that were past due.

During the three months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023, the Company recorded interest expense of $~~262~~137,~~091~~121 and $~~179~~135,~~954~~770, respectively, and ~~amortization~~ ~~of debt discount of $80,667 and $56,309, respectively. During the nine months ended September 30, 2023 and 2022, the Company~~amortization ~~recorded interest expense~~ of ~~$635,143 and $540,081, respectively, and amortization of~~ debt discount of $~~361~~5,~~692~~956 and $~~187~~140,~~802~~248, respectively. As of ~~September~~March 3031, ~~2023~~2024 and December 31, ~~2022~~2023, the Company had $2,~~405~~558,~~635~~529 and $12,~~796~~419,~~736~~666, respectively, of accrued interest (including interest in the form of warrants (see Note 4, Fair Value) and penalties related to notes payable, which is included with accrued interest and accrued interest – related parties on the condensed consolidated balance sheets.

Notes Payable

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

Convertible Notes Payable

During the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024, ~~the~~a ~~Company issued~~ convertible ~~notes~~note ~~payable~~with ~~in the aggregate principal amount of~~ $~~494~~100,~~960 with~~000 ~~maturity~~of ~~dates~~principal ~~ranging~~outstanding ~~from~~was ~~July~~automatically 3,converted ~~2023~~into ~~to February 17~~13, ~~2024. The notes accrue interest at 8% per annum and are convertible at~~333 ~~any~~shares ~~time at the option~~ of ~~the holder into the Company’s~~ Series C Convertible Preferred Stock at a ~~conversion~~ price of $7.50 per share. ~~The~~and ~~notes automatically convert into Series C Convertible Preferred Stock on~~ the ~~maturity~~Company ~~date.~~elected Into ~~connection~~convert ~~with the issuances~~$4, ~~the~~910 ~~Company~~of ~~issued~~accrued ~~five-year~~interest under ~~immediately~~such ~~vested~~note ~~warrants~~into ~~to purchase 396~~6,~~000~~546 shares of common stock at ana ~~exercise~~ price of $10.2575 per share. ~~The warrants had an issuance date relative fair value of $48,164 and was recorded as a discount to the face value of the notes, which will be amortized over the term of the notes.~~

~~During~~On ~~the~~March ~~nine months ended September 30~~22, ~~2023~~2024, the Company ~~issued~~completed ~~convertible~~its ~~notes~~private ~~payable~~offering ~~in the aggregate principal amount~~ of ~~$425,000 with maturity dates ranging from November~~ 8~~, 2023 to July 28, 2024. The notes accrue 8~~% ~~interest~~Convertible ~~per~~Notes ~~annum~~that ~~and~~ are convertible atinto ~~any time~~shares ~~at the option~~ of the ~~holder into the~~ Company’s Series ~~common~~C ~~stock~~Convertible Preferred Stock at a conversion price of $07.7550 per share. InThe ~~connection~~Company ~~with~~sold ~~the issuances~~$4,760,170 ~~the~~aggregate ~~Company~~principal ~~issued~~amount of ~~five-year~~notes ~~immediately~~in ~~vested~~the ~~warrants~~offering toand ~~purchase~~issued aninvestors ~~aggregate~~warrants ofto ~~212~~purchase 4,~~500~~321,926 shares of common stock at an exercise price of $1.25 per share. ~~The~~Additional ~~warrants~~subscriptions ~~had an issuance date relative fair value of $26,700 and was recorded as a discount to the face value of the notes, which~~ will not be ~~amortized over the term of the notes~~accepted. ~~These notes are guaranteed by a director of the Company.~~

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

Convertible Notes Payable - Related Parties

~~The~~In March 2024, the Company ~~and~~received additional advances of $146,672 under a note originally issued to George Verstraete, a director of the Company, ~~entered~~and ~~into~~assigned to a ~~promissory~~trust ~~note~~controlled ~~agreement~~by ~~dated~~Darlene ~~March 10~~Soave, a ~~2022~~director of the Company, (the “Verstraete Note”), ~~whereby Mr. Verstraete~~and, atas ~~his~~a ~~discretion~~result, ~~can~~increased ~~loan~~the upoutstanding toprincipal ~~$6,000,000 to~~balance ~~the~~of ~~Company. Mr.~~ the Verstraete ~~has~~Note ~~agreed~~ to ~~loan an aggregate of~~ $23,~~500~~736,~~000~~708. toIn ~~the~~connection ~~Company~~with ~~under~~ the ~~note. The note bears interest at a rate of 10% per annum and~~advances, ~~prior to its amendment in November 2023, provided that it would mature twelve months from~~ the ~~date~~Company ofaccrued ~~issuance.~~an ~~Mr.~~obligation ~~Verstraete~~to ~~has~~issue ~~the~~five-year ~~right,~~immediately atvested ~~his~~warrants ~~option,~~ to ~~convert~~purchase ~~the~~an ~~note~~aggregate ~~into~~of 117,338 shares of ~~the~~common ~~Company’s~~stock ~~Series B Convertible Preferred Stock~~ at aan ~~conversion~~ exercise price of $71.5025 per share atto ~~any time after~~ the ~~Company~~trust ~~first~~controlled ~~issues~~by ~~any shares of the Series B Convertible Preferred Stock~~Ms. ~~Interest~~Soave, ~~accruing under~~ the ~~note~~holder ~~will be payable upon the maturity~~ of the note. ~~and~~The ~~may~~warrants behad ~~paid~~an atissuance ~~the~~date ~~Company’s~~relative ~~option~~fair invalue ~~either cash or shares~~ of ~~the~~ ~~Company’s common stock (calculated based upon~~ $~~0.75~~6,666 ~~per~~which ~~share~~was ~~for~~included ~~purposes~~within ofaccrued ~~calculating~~interest-related ~~the~~parties ~~number~~and ofrecorded ~~shares~~as ofa ~~common~~debt ~~stock~~discount toand ~~be issued). For each $500,000 advanced under the Verstraete Note, Mr. Verstraete~~ will be ~~issued~~amortized aover ~~warrant to purchase 400,000 shares of~~ the ~~Company’s~~term ~~common stock at an exercise price~~ of ~~$1.25~~ ~~per~~the ~~share~~note. ~~Each warrant will have a five-year term.~~

InNote ~~February~~6 ~~2023, $413,018 of payments made by Mr. Verstraete to third parties on behalf of the Company in June 2022 were characterized as convertible notes payable~~ – ~~related~~Stockholders’ parties under the Verstraete Note. The Company received additional advances of $250,000, $100,000, $150,000, $72,018 and $105,000 in April 2023, May 2023, July 2023, August 2023 and September 2023, respectively, and, as a result, increased the outstanding principal balance of the Verstraete Note to $3,590,036 as of September 30, 2023. In connection with the advances, the Company issued five-year immediately vested warrants to purchase an aggregate of 872,029 shares of common stock at an exercise price of $1.25 per share. The warrants had an issuance date relative fair value of $106,973 which was recorded as a discount to the face value of the note and has been amortized over the term of the note.Deficiency

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

OnDuring ~~April 28, 2023,~~ the ~~Company~~three ~~and~~months ~~Ms.~~ended ~~Soave~~March ~~agreed to extend the maturity date of the convertible promissory note dated October 28~~31, ~~2019~~ ~~issued~~2024 toand ~~Ms. Soave (“Soave Note”) from April 28,~~ 2023 ~~to October 28~~, ~~2023. Under~~ the ~~terms~~Company ofaccrued ~~the~~additional ~~Soave~~preferred ~~Note,~~dividends ~~Ms. Soave,~~of ~~at her discretion~~$326,665 ~~can~~and ~~loan up to~~ $6297,~~000~~517,~~000~~ ~~to the Company~~respectively. As of ~~September~~March 3031, ~~2023,~~2024 ~~$3,500,000 was~~and ~~outstanding~~December ~~under~~31, ~~the Soave Note. See Note 9~~2023, ~~Subsequent~~there ~~Events~~were -accrued ~~Convertible~~preferred ~~Notes~~stock ~~Payable~~dividends ~~- Related Parties for details~~ of an$352,205 ~~additional~~and ~~extension~~$25,540, ~~of the maturity date of the Soave Note~~respectively.

109

CELL SOURCE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 6 – Stockholders’ Deficiency

Authorized Capital

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

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

Series B Convertible Preferred Stock

OnDuring ~~September~~the 21three months ended March 31, ~~2023~~2024, the Company’s ~~Board~~received proceeds of ~~Directors~~$25,000 ~~approved~~from ~~the~~investors ~~designation~~in ofconnection ~~2,000,000~~with ~~shares~~the issuance of ~~the 10~~3,~~000,000 authorized~~333 shares of ~~preferred~~its ~~stock as~~ Series B Convertible Preferred Stock and five-year warrants to purchase an aggregate of 37,500 ~~par~~shares ~~value~~of the Company’s common stock at an exercise price of $0.~~001~~75 per share. ~~See~~The ~~Note~~warrants 9,and ~~Subsequent~~embedded ~~Events~~conversion option were accounted for ~~details~~ ofas derivative liabilities under the Company’s ~~filing~~sequencing ofpolicy ~~the~~and ~~Certificate~~had ofan ~~Designation~~aggregate ofissuance ~~its~~date ~~Series~~fair Bvalue ~~Convertible~~of ~~Preferred Stock subsequent to September 30~~$5, ~~2023~~100.

Preferred Stock Dividends

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

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

Series C Convertible Preferred Stock

See Note 5, Notes Payable – Convertible Notes Payable for details associated with conversions of notes payable into 6913,~~334~~333 shares of Series C Convertible Preferred Stock.

Common Stock

See Note 5, Notes Payable – Convertible Notes Payable for details associated with conversions of accrued interest into 346,~~979~~546 shares of common stock.

During the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024, ~~certain~~the ~~investors~~Company ~~converted~~issued ~~an aggregate of 40~~180,000 shares of ~~Series~~the CCompany’s ~~Convertible~~common ~~Preferred Stock~~stock ~~into~~with an ~~aggregate~~issuance date fair value of ~~400~~$45,000 ~~shares~~in ofconnection ~~the~~with ~~Company’s~~a ~~common~~legal ~~stock~~settlement that was included within accrued compensation as of December 31, 2023.

During the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024, the Company issued 12,000~~,000~~ ~~immediately-vested~~ shares of the Company’s common stock to a ~~consultant~~certain investor ~~with~~on aJanuary ~~grant~~1, ~~date~~2024 ~~fair~~in ~~value~~satisfaction of ~~$330,000~~convertible ~~which~~note ~~was~~payable ~~immediately~~late ~~recognized~~fees. inThe ~~the~~shares ~~condensed~~had ~~consolidated~~an ~~statement~~issuance date fair value of $520 ~~operations~~which was recognized immediately.

~~See~~During ~~Note~~the 5,three ~~Notes~~months ~~Payable~~ended ~~for~~March ~~details~~31, ~~associated~~2024, ~~with~~ the ~~issuance~~Company ofissued ~~176~~1,000,000 immediately vested shares of the Company’s common stock into a ~~connection~~certain ~~with~~consultant ~~the~~as ~~extinguishment of~~compensation for services performed. The shares had a ~~note~~grant ~~payable~~date fair value of $260,000 which was recognized immediately.

Stock Warrants

OnDuring ~~May~~the 25three months ended March 31, ~~2023~~2024, the Company ~~issued~~entered ~~immediately~~into ~~vested~~an ~~3.75~~advisory ~~year~~agreement ~~warrants~~with a certain advisor to anperform ~~investor~~independent advisory services in connection with business operations from January 5, 2024 to ~~purchase~~June an4, ~~aggregate~~2024. ~~amount~~In consideration of ~~300~~services to be performed, the Company issued five-year warrants to purchase 100,000 shares of common stock, which vest 20% monthly during the ~~Company’s~~term ~~common~~of ~~stock~~the agreement at an exercise price of $01.7525 per share. The warrants had ana ~~issuance~~grant date fair value of $406,~~600,~~ 590 which ~~was~~will be recognized ~~immediately~~over the vesting term.

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

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

11Stock-Based Compensation

During the three months ended March 31, 2024, the Company recognized stock-based compensation expense of $288,895, consisting of $26,544 of expense related to warrants (of which, $29,141 was included within stockholder’s deficiency and $(2,597) was included within accrued compensation) and $262,351 of expense related to common stock to be issued for consulting services (of which, $260,520 was included within stockholder’s deficiency and $1,831 was included within accrued compensation), which was included within general and administrative expenses on the condensed consolidated statement of operations. During the three months ended March 31, 2023, the Company recognized stock-based compensation expense of $328,905 (consisting of $(1,095) of expense related to warrants which has been included within accrued compensation and $330,000 of expense related to common stock issued for consulting services) which was included within general and administrative expenses on the condensed consolidated statement of operations.

As of March 31, 2024, there was $6,159 of unrecognized stock-based compensation expense which will be recognized over a weighted average remaining amortization period of 0.09 years.

Note 7 – Related Party Transactions

As of March 31, 2024 and December 31, 2023, the Company was required to issue warrants to purchase an aggregate of 2,031,500 and 1,956,500, respectively, shares of common stock at an exercise price of $0.75 per share to a director and former director of the Company in connection with loans made to the Company in the aggregate amount of $459,000 which required certain penalties be paid in the form of warrants. As a result, the Company accrued $169,680 and $215,050 associated with the fair value of the obligations as of March 31, 2024 and December 31, 2023, respectively, which amount is included in accrued interest – related parties on the condensed consolidated balance sheets. The obligations to issue warrants are subject to changes in fair value at each reporting period. See Note 4, Fair Value for additional details.

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

CELL SOURCE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Stock-Based Compensation

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

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

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

Note 7 – Related Party Transactions

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

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

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

Note 8 – Commitments and Contingencies

Yeda Research and License Agreement

During the three months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023, the Company recorded research and development expenses of $14,500, related to its ~~Research~~ Research and License Agreement with Yeda (the “Agreement”). ~~During the nine months ended September 30, 2023 and 2022, the Company recorded research and development expenses of $43,500, related to the Agreement with Yeda.~~ As of ~~September~~March 3031, ~~2023~~2024 and December 31, ~~2022~~2023, the Company had $5887,000 and $1472,500, respectively, of accrued research and development expenses pursuant to the Agreement with Yeda.

MD Anderson Sponsored Research Agreements

The Company recognized $~~429~~324,~~505~~000 of research and development expenses during the three months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022, and $1,082,193 and $1,394,020 of research and development expenses during the nine months ended September 30,~~ 2023 ~~and 2022, respectively,~~ associated ~~with~~ with services provided by The University of Texas M.D. Anderson Cancer Center (“MD Anderson”) under the two agreements with MD MD Anderson dated November 2018 and February 2019, respectively. As of ~~September~~March 3031, ~~2023~~2024, ~~and~~the Company had a liability to MD Anderson of approximately $1,249,000 which was included within accounts payable on the condensed consolidated balance sheet. As of December 31, ~~2022~~2023, the Company had noa ~~accrued research~~liability ~~and~~to ~~development~~MD ~~expenses~~Anderson ~~pursuant~~of toapproximately ~~the~~$924,705 ~~agreements~~which ~~with~~was MDincluded ~~Anderson~~within accounts payable on the consolidated balance sheet.

Litigation

In January 2019, the holder of a promissory note in the principal amount of $250,000 due on March 16, 2016 instituted a collection action in the Supreme Court of the State of New York, County of New York. On June 12, 2019, the plaintiff served a motion for summary judgment through the Secretary of State which was heard on July 12, 2019 and granted. The Company contended that it was not given sufficient notice under the applicable statute and did not have an opportunity to oppose the motion. Judgment was entered in October 2019 in the amount of $267,680. The Company brought a motion to vacate based on the jurisdictional defect of the motion in not providing the required amount of time, but that motion was denied in February 2021 without properly addressing the jurisdictional issues raised by the Company. The Company appealed the denial and then filed a motion to Renew and Reargue the motion to vacate based on the Court’s failure to address critical issues. That motion was also denied on April 15, 2021 without addressing the Company’s arguments. The Company appealed the second denial as well and pursued both appeals in a consolidated manner so as to resolve all issues together. Each of the appeals was denied ~~and there is no further opportunity to appeal~~. While the Company’s motions were pending, the plaintiff commenced steps to collect judgment. During the year ended December 31, 2021, $103,088 of a ~~$250,000~~ deposit made with the court by a third party on behalf of the Company was released to an officer of the court and has been accounted for as partial note repayment, with an additional $146,912 due under the note repaid by a release of the remaining deposit to an officer of the court and garnishment of Company funds during the year ended December 31, 2022, which was also accounted for as a note repayment. In August 2023, a supplemental judgment of $38,838 was entered against the Company. Inasmuch, as there ~~are~~were no further opportunities to appeal, the Company iswas ~~arranging~~required to pay the remaining amount due, which was estimated to be approximately $113,000 and recorded as a liability as of ~~the date~~December 31, 2023. As of ~~this~~May ~~Report~~31, is2024, ~~estimated~~after totaking beinto account accrued and unpaid interest, approximately $~~106~~117,000 was owed to the plaintiff and the plaintiff was seeking, among other things, additional monetary sanctions. In June 2024, the Company resolved this matter by making a final payment of $135,000, which was ~~recorded~~accrued for as aof March 31, ~~liability~~2024, asand the plaintiff agreed to cease the pursuit of ~~September~~additional ~~30,~~sanctions ~~2023~~against the Company and file a satisfaction of judgment.

12Loss contingencies considered remote are generally not disclosed, unless they involve guarantees, in which case the guarantees would be disclosed. There can be no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows. Aside from the matters discussed above, there are no other known contingencies through the date of this filing.

CELL SOURCE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

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

Note 9 – Subsequent Events

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

~~Common~~Subsequent to March 31, 2024, the Company received gross proceeds of $726,000 from investors in connection with the issuance of an aggregate of 96,798 shares of its Series B Convertible Preferred Stock and five-year warrants to purchase an aggregate of 1,089,000 shares of the Company’s common stock at an exercise price of $0.75 per share.

Subsequent to ~~September~~March 3031, ~~2023~~2024, athe ~~certain~~Company ~~investor~~received ~~converted 4~~proceeds of $500,000 ~~shares~~ from investors and issued notes payable in the aggregate principal amount of ~~Series~~$600,000 Cwith ~~Convertible~~a ~~Preferred~~maturity ~~Stock~~date ~~into~~of 40November 22,~~000~~ ~~shares~~2024. The notes bear interest at 10% per annum and have an aggregate original issue discount of $100,000. In connection with the issuances, the Company’s issued ten-year immediately vested warrants to purchase an aggregate of 1,250,000 shares of common stock at an exercise price of $0.75 per share.

~~Series~~Subsequent Bto ~~Convertible~~March ~~Preferred~~31, ~~Stock~~2024, the Company entered into note amendment agreements with a trust controlled by Darlene Soave to extend the maturity dates of a note originally issued to Ms. Soave and assigned to the trust and the Verstraete Note, which had an outstanding principal amount of $3,736,708 as of March 31, 2024, to October 28, 2024 and September 10, 2024, respectively.

OnSubsequent ~~October~~to 30March 31, ~~2023~~2024, the Company ~~filed~~entered ~~the~~into ~~Certificate~~an ofexchange ~~Designation~~agreement with ~~the~~a ~~Office~~note ofholder, whereby the ~~Secretary~~noteholder ofand ~~State for~~ the ~~State~~Company ofagreed ~~Nevada,~~to ~~which~~exchange ~~established~~a ~~the~~note ~~Series~~payable Bwith ~~Convertible~~a ~~Preferred~~principal ~~Stock.~~amount ~~The~~of ~~Series~~$30,000 Bfor ~~Convertible~~a ~~Preferred~~warrant ~~Stock~~to ~~has~~purchase aan ~~stated~~aggregate ~~value~~ of ~~$7.50~~100,000 ~~per share.~~shares ~~The~~of ~~Series~~the BCompany’s common ~~Convertible~~stock ~~Preferred~~at ~~Stock~~an ~~contains~~exercise ~~the~~price ~~following~~$0.75 ~~terms:~~per share.

~~Conversion.~~Subsequent ~~Each share of Series B Convertible Preferred Stock is convertible into shares of common stock (subject~~ to ~~adjustment~~March as31, ~~provided in~~2024, the ~~related~~Company ~~certificate~~issued ~~of designation of preferences~~18,000 ~~rights~~shares ~~and limitations) at the option~~ of the ~~holder~~Company’s ~~at any time. The number of shares of~~ common stock ~~which are issuable upon conversion of the Series B Convertible Preferred Stock shall be equal~~ to ~~the~~a ~~number of~~certain ~~shares~~investor ofas ~~Series~~payment Bfor ~~Convertible Preferred Stock to be converted, multiplied by the stated value of $7.50 per share, divided by the~~convertible ~~conversion~~note ~~price~~payable inlate ~~effect~~fees ~~at the time of conversion, initially at $0~~incurred.~~75 per share.~~

~~Mandatory~~Subsequent ~~Conversion.~~to OnMarch ~~the~~31, ~~earlier~~2024, ofthe ~~(i)~~Company ~~October~~issued ~~30,~~an ~~2027~~aggregate orof ~~(ii)~~904,049 ~~any~~shares of ~~the~~its ~~Company’s~~common ~~treatment~~stock ~~candidates~~as ~~receiving~~payment-in-kind ~~approval~~dividends ~~from the~~to ~~U.S.~~holders ~~or European agencies, all~~ of ~~the~~its Series ~~outstanding~~A ~~shares~~Convertible ofPreferred Stock, Series B Convertible Preferred Stock, ~~will~~and ~~automatically~~Series ~~convert~~C toConvertible ~~common stock~~Preferred Stock.

~~Liquidation~~Subsequent to March 31, 2024, the Company ~~Preference.~~entered Ininto a note amendment agreement with a note holder to extend the ~~event~~maturity date of a note in the ~~liquidation~~principal amount of $50,000 from ~~dissolution~~December or23, ~~winding-up~~2023 to December 23, 2024, and to increase the interest rate from 8% to 10% from June 23, 2024 through the remaining term of the note. The Company included in this agreement that in the event of an equity or debt financing transaction resulting in gross proceeds of $2,000,000, the Company or guarantor of the ~~Series~~note Bshall ~~Convertible~~repay ~~Preferred~~the ~~Stock~~note in full within five days after completing the transaction. If the note is not repaid in full by the new maturity date stated above, any further extension will require the issuance of an additional five ~~rank~~year ~~senior~~warrant to purchase 50,000 shares of the Company’s common stock ~~and~~at ~~any~~an ~~other~~exercise ~~class~~price of ~~capital~~$0.75 per ~~stock~~share. ~~which~~Contemporaneous ~~does~~with ~~not~~the ~~expressly~~execution ~~rank~~of ~~senior~~this toamendment, orthe ~~parri~~Company ~~passu~~issued ~~with~~to the ~~Series~~lender an additional five Byear ~~Preferred~~warrant ~~Stock~~to purchase 25,000 shares of the Company’s common stock at an exercise price of $0.75 per share and ~~will~~amended ~~rank~~the ~~parri~~warrant ~~passu~~issued ~~with~~pursuant to the ~~Series~~note Ato ~~and~~reduce ~~Series~~the Cexercise ~~Convertible~~price ~~Preferred~~to ~~Stock~~$0.75 per share.

~~Voting~~Subsequent to March 31, 2024, the Company ~~Rights~~entered into a note amendment agreement with a note holder to extend the maturity date of a note in the principal amount of $25,000 from December 26, 2023 to December 26, 2024, and to increase the interest rate from 8% to 10% from June 26, 2023 through the remaining term of the note. The ~~holders~~Company included in this agreement that in the event of ~~Series~~an Bequity ~~Convertible~~or ~~Preferred~~debt ~~Stock~~financing transaction ~~have~~resulting in gross proceeds of $2,000,000, the ~~right~~Company toor ~~vote~~guarantor onof the note shall repay the note in full within five days after completing the transaction. If the note is not repaid in full by the new maturity date stated above, any ~~matter~~further ~~submitted~~extension towill arequire ~~vote~~the issuance of ~~holders~~an ofadditional five year warrant to purchase 25,000 shares of the Company’s common stock, ~~voting~~at ~~together~~an exercise price of $0.75 per share. Contemporaneous with the ~~common~~execution ~~stock~~of asthis ~~one~~amendment, ~~class~~the Company issued to the lender an additional five year warrant to purchase 12,500 shares onof the Company’s common stock at an ~~as-converted~~exercise ~~basis~~price of $0.75 per share and amended the warrant issued pursuant to the note to reduce the exercise price to $0.75 per share.

Dividends. Holders of shares of Series B Convertible Preferred Stock will be entitled to receive cumulative dividends at an annual rate of 10% of the stated value. Dividends are payable semi-annually on June 30 and December 31, commencing on December 31, 2023, either by (i) issuance of shares of common stock at the rate of $0.75 per share of common stock or (ii) in cash, at the Company’s option.12

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

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

Convertible Notes Payable - Related Parties

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

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

Conversion of Convertible Notes Payable

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

MD Anderson Sponsored Research Agreements

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

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

The following discussion and analysis of the condensed consolidated results of operations and financial condition of Cell Source, Inc. (“CSI”, “Cell Source”, the “Company”, “us,” “we,” “our,”) as of ~~September~~March 3031, ~~2023 and~~2024 and for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023 should be read in conjunction with our unaudited financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023 as filed with the Securities and Exchange Commission (“SEC”) on ~~August~~June 824, ~~2023~~2024.

This Quarterly Report contains forward-looking statements as that term is defined in the federal securities laws. The events described in forward-looking statements contained in this Quarterly Report may not occur. Generally, these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of our plans or strategies, projected or anticipated benefits from acquisitions to be made by us, or projections involving anticipated revenues, earnings or other aspects of our operating results. The words “may,” “will,” “expect,” “believe,” “anticipate,” “project,” “plan,” “intend,” “estimate,” and “continue,” and their opposites and similar expressions, are intended to identify forward-looking statements. We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based. Factors that may affect our results include, but are not limited to, the risks and uncertainties discussed in Item 1A (“Risk Factors”) of our Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023, filed with the SEC on ~~August~~June 824, ~~2023~~2024.

Overview

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

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

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

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

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

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

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

Human Capital Resources

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

1413

Recent Developments

Preclinical Results and Clinical Results

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

	1)	Significantly improve outcomes of transplantations by reducing the host (transplant recipient) rejection rate of T-cell depleted stem cells (e.g. from bone marrow) – thus supporting successful engraftment of the transplanted cells, which is the treatment for the blood cancer itself. In order to improve the safety of this cancer treatment, Veto Cell technology has shown in both preclinical studies and initial clinical data that it can markedly reduce both the risk of GvHD and the need for using aggressive amounts of immunosuppression treatments. We have shown in preclinical studies, and are seeing in the clinic, the reduction of viral infections that typically threaten patients post transplantation. This safer means of delivering stem cell transplants would significantly reduce the HSCT mortality rate and therefore lead to broader use of this treatment. Furthermore, by adding CAR-T to the HSCT protocol, which we have already done successfully in preclinical studies, we can bridge between the initial transplantation and the conclusion of immune reconstitution, thus providing both short-term and ongoing protection against remission. This has the potential to significantly improve efficacy beyond that of the current outcomes of either CAR-T or HSCT on their own.

	2)	Substantively increase the number of transplantations by enabling successful engraftment under lower levels of immune suppression and therefore making the therapy accessible to older and sicker patients (who today may not survive ablation).

	3)	Further increase the number of transplantations by making transplantation appropriate for other indications (for which today transplantation would be considered an inappropriately risky treatment). See, e.g. BMT 2021 Correction of Sickle Cell Disease by Allogeneic Hematopoietic Cell Transplantations with Anti-3^rd Party Veto Cells, Bone Marrow Transplantation, March 3, 2021.

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

Recent Developments

Preclinical Results and Clinical Results

After two years of intensive collaboration with Professor Zelig Eshhar, the inventor of CAR-T cell therapy, preclinical 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 have formed 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 by the end of 2024. 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 three treatment cohorts, with 12 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 nine patients had successful stem cell engraftment after 42 days, in the absence of severe GvHD. Cell Source has continued the trial as it proceeds with the next cohorts of patients, using the higher dose level, in order to complete the dose finding process.

Private Placement of Series B Convertible Preferred Stock

From October 2023 through the date of filing, the Company sold 60206,~~000~~799 units for gross proceeds of $~~450~~1,551,000 and issued warrants to purchase ~~675~~ 2,~~000~~326,500 shares of the Company’s common stock.

Condensed Consolidated Results of Operations

Three Months Ended ~~September~~March 3031, ~~2023~~2024 Compared with the Three Months Ended ~~September~~March 3031, ~~2022~~2023

Research and Development

Research and development expense was $~~514~~356,~~505~~213 and $~~482~~338,~~505~~500 for the three months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023, respectively, an increase of $3217,~~000~~713, or 75%. This increase is primarily attributable to increased research and development activities performed by ~~consultants~~Doctor Yair Reisner during the ~~2023~~2024 period.

General and Administrative

General and administrative expense, which is associated with external consulting and professional fees, payroll and stock-based compensation expenses, was $~~480~~781,~~875~~916 and $~~533~~1,~~538~~077,049 for the three months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023, respectively, a decrease of $52295,~~663~~133, or 1027%. The decrease was primarily attributable to adecreases ~~decrease~~ in ~~stock-based~~legal ~~compensation~~expenses of $49222,000, astock-based ~~decrease~~compensation inexpense ~~legal expenses~~ of $2540,000, ~~partially~~and ~~offset~~consulting expenses byof an$30,000. ~~increase~~The decrease in ~~accounting~~activity ~~and~~during ~~audit~~the ~~expenses~~2024 ofperiod ~~$67,000~~is ~~and~~primarily anrelated ~~increase~~to inthe ~~consulting~~Company’s ~~expenses~~limited ~~of $50,000~~liquidity.

Interest Expense

Interest expense for the three months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023 was $~~262~~137,~~091~~121 and $~~179~~135,~~954~~770, respectively, an increase of $821,~~137~~351, or 461%. ~~This increase is primarily associated with increased convertible notes and the fair value of warrants issued in connection with convertible notes payable during the 2023 period.~~

15Interest Expense - Amortization of Debt Discount

Amortization of ~~Debt~~debt ~~Discount~~discount was $5,956 and $140,248 for the three months ended March 31, 2024 and 2023, respectively, a decrease of $134,292, or 96%. This decrease is primarily associated with a majority of the debt discount being fully amortized during 2023.

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

~~Nine~~During ~~Months~~the ~~Ended~~three ~~September~~months 30ended March 31, ~~2023~~2024, ~~Compared~~we ~~with~~recognized a gain on the ~~Nine~~change ~~Months~~in ~~Ended~~fair ~~September~~value ~~30,~~of ~~2022~~derivative liability of $5,800.

Research and Development

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

General and Administrative

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

Interest Expense

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

Amortization of Debt Discount

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

Gain on Extinguishment of Note Payable

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

Liquidity and Going Concern

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

	September 30, 2023			December 31, 2022
	March 31, 2024			December 31,2023
Cash	$	~~2,582~~23		$	~~222~~22,~~665~~203
Working capital deficiency	$	(16,~~030~~754,~~147~~143	)	$	(1215,~~633~~611,~~895~~543	)

During the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024, we had not generated any revenues, had a net loss of approximately $41,~~271~~275,000 and had used ~~cash~~ cash in operations of approximately $1174,~~626,~~000. As of ~~September~~March 3031, ~~2023~~2024, we had a working capital deficiency of approximately $16,~~030~~754,000 and an ~~accumulated~~ accumulated deficit of approximately $4042,~~617~~943,000. As of ~~September~~March 3031, ~~2023~~2024 and through the date of this filing, notes payable with principal ~~amounts~~ amounts totaling $5,~~246~~643,~~129~~000 and $1,~~726~~956,~~093~~000, respectively, were past due ~~and are classified as current liabilities on the condensed consolidated balance sheet as of September 30, 2023~~. We will continue to incur net operating losses to fund operations. These conditions raise substantial doubt about our ability to continue as a going concern for at least one year from the date these financial statements are issued. ~~Subsequent to September 30, 2023 and as more fully described in Note 9, Subsequent Events, the Company received aggregate proceeds of $450,000 from equity financings.~~

We are currently funding our operations on a month-to-month basis. ~~Our~~While ~~ability~~there tocan ~~continue~~be ~~our~~no ~~operations~~assurance isthat ~~dependent~~we onwill ~~the~~be ~~execution~~successful, we are in active negotiations to raise additional capital. Our primary sources of ~~management~~operating funds since inception have been equity and debt financings. Management’s plans, ~~which~~ include ~~the~~continued ~~raising~~efforts ofto raise additional capital through ~~the~~ debt and~~/or~~ equity ~~markets,~~financings. ~~until~~There ~~such~~is ~~time~~no assurance that these funds ~~provided~~ bywill ~~operations~~be ~~are~~ sufficient to ~~fund~~enable ~~working~~us ~~capital~~to ~~requirements~~fully complete our development activities or attain profitable operations. WeIf ~~may~~we are ~~need~~unable to ~~incur~~obtain such additional ~~liabilities~~financing ~~with~~on ~~certain related~~a ~~parties~~timely tobasis ~~sustain~~or, ~~our~~notwithstanding ~~existence.~~any Ifrequest we ~~were~~may make, if our debt holders do not agree to ~~continue~~convert astheir anotes ~~going~~into ~~concern~~equity or extend the maturity dates of their notes, we may have to curtail our development, marketing and promotional activities, which would ~~likely~~have ~~not~~a bematerial ~~able~~adverse toeffect ~~realize~~on our ~~assets~~business, financial condition and results of operations, atand ~~values~~ultimately ~~comparable~~we could be forced to ~~the~~discontinue ~~carrying~~our ~~value~~operations orand ~~the~~liquidate. ~~fair~~Subsequent ~~value~~to ~~estimates~~March ~~reflected~~31, in2024 ~~the~~and ~~balances~~as ~~set~~more ~~out~~fully described in Note 9, Subsequent Events, we received aggregate proceeds of $500,000 from the ~~preparation~~issuance of ~~our~~notes ~~financial~~payable and $726,000 from ~~statements~~the issuance of Series B Convertible Preferred Stock.

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.

16During the three months ended March 31, 2024, our sources and uses of cash were as follows:

~~During the nine months ended September 30, 2023 and 2022, our sources and uses of cash were as follows:~~15

Net Cash Used in Operating Activities

We experienced negative cash flows from operating activities for the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023 in the amounts of approximately $1174,~~626,~~000 and $2310,~~415,~~000, respectively. The net cash used in operating activities for the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024 was primarily due to cash used to fund a net loss of approximately $41,~~271~~275,000, adjusted for non-cash expenses in the aggregate amount of approximately $~~753~~215,000, partially offset by $1887,~~892,~~000 of net cash provided by changes in the levels of operating assets and liabilities. The net cash used in operating activities for the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2023, was primarily due to cash used to fund a net loss of approximately $31,~~830~~692,000 adjusted for non-cash expenses in the aggregate amount of approximately $~~364~~423,000, partially offset by $1959,~~051,~~000 of net cash provided by changes in the levels of operating assets and liabilities.

Net Cash Provided by Financing Activities

Net cash provided by financing activities for the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023 was approximately $1152,~~406,~~000 and $2220,~~388,~~000, respectively. The net cash provided by financing activities during the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024 was attributable to $~~677~~25,000 of proceeds from the issuance of ~~convertible~~Series ~~notes~~B toconvertible apreferred ~~related~~stock ~~party~~and ~~director~~warrants and approximately $~~920~~147,000 of proceeds from ~~the~~ issuance of convertible notes payable to a related party, partially offset by $~~191~~20,000 of ~~repayments~~repayment ~~towards~~of ~~the~~ financing ~~of the Company’s Director’s and Officer’s Insurance~~liability. The net cash provided by financing activities during the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2023, was attributable to $2219,~~000,000 of~~960 ~~proceeds from the issuance~~ of ~~convertible notes to a related party director and $395,000 of~~ proceeds from the issuance of convertible ~~notes~~ ~~payable, proceeds from the issuance of~~ notes ~~payable of $168,000 partially offset by the repayments of the insurance financing~~ ~~liability in the amount of $28,000 and the repayment of notes~~ payable ~~of $147,000~~.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Critical Accounting ~~Policies and~~ Estimates

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

The following critical accounting policies and estimates are not intended to be a comprehensive list of all of our accounting policies or estimates. Our accounting policies are more fully described in Note 3 – Summary of Significant Accounting Policies, in our financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on August 8, 2023, as well as in our financial statements included elsewhere in this quarterly report.16

~~Convertible~~We ~~Instruments~~consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.

There ~~The~~have ~~Company~~been ~~evaluates~~no ~~its~~material ~~convertible~~changes ~~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~~Company’s ~~Accounting~~critical ~~Standards Board (“FASB”) Accounting Standards Codification (“ASC”). The~~ accounting ~~treatment~~estimates ofsince ~~derivative financial instruments requires that~~ the ~~Company~~2023 ~~record~~Form 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 non10-~~operating, non-cash income or expense for each reporting period at each balance sheet date~~K. The Company reassesses the classification of its derivative instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. Embedded conversion options and any related freestanding instruments are recorded as a discount to the host instrument and are amortized as interest expense over the term of the related debt instrument.

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

Fair Value of Financial Instruments

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

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

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

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

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

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

Stock-Based Compensation

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

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

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

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

Item 3. Quantitative And Qualitative Disclosures About Market Risk.

Not applicable.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

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

In connection with the preparation of this Quarterly Report, management, with the participation of our Principal Executive and Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)). Based upon that evaluation, our Principal Executive and Financial Officer concluded that, as of ~~September~~March 3031, ~~2023~~2024, 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~~March 3031, ~~2023~~2024 that have materially affected, or are reasonably likely to materially affect, our internal ~~control~~ control over financial reporting.

1817

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

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

In ~~August~~January ~~2022~~2019, athe holder of ~~360,000~~a ~~shares~~promissory ofnote in the ~~Company’s~~principal ~~common~~amount ~~stock~~of ~~filed~~$250,000 adue ~~complaint~~on ~~against~~March ~~the Company~~16, ~~its~~2016 ~~President~~instituted ~~and legal~~a ~~counsel~~collection action in the ~~United~~Supreme ~~States~~Court ~~District~~of ~~Court,~~the ~~Southern~~State ~~District~~of New York, County of New York. On June 12, ~~claiming~~2019, ~~unspecified~~the ~~damages~~plaintiff served a motion for ansummary ~~alleged~~judgment ~~wrongful~~through ~~refusal~~the Secretary of State which was heard on July 12, 2019 and granted. The Company contended that it was not given sufficient notice under the applicable statute and did not have an opportunity to ~~authorize~~oppose the motion. Judgment was entered in October 2019 in the amount of $267,680. The Company’s ~~transfer~~brought ~~agent~~a motion to ~~remove~~vacate ~~restrictive~~based ~~legends~~on ~~from~~the jurisdictional defect of the ~~shares~~motion ~~held~~in bynot providing the required amount ~~shareholder~~of time, but that motion was denied in February 2021 without properly addressing the jurisdictional issues raised by the Company. The Company ~~has~~appealed the denial and then filed a motion to ~~dismiss~~Renew and Reargue the ~~complaint~~motion ~~which~~to isvacate ~~pending~~based on the Court’s failure to address critical issues. ~~The~~That ~~complaints~~motion ~~against~~was also denied on April 15, 2021 without addressing the Company’s arguments. The Company appealed ~~legal~~the ~~counsel~~second denial as well and ~~President~~pursued both appeals in a consolidated manner so as to resolve all issues together. Each of the appeals was denied. While the Company’s motions were ~~dismissed~~pending, the plaintiff commenced steps to collect judgment. During the year ended December 31, 2021, $103,088 of a deposit made with the court by a third party on behalf of the ~~Court~~Company was released to an officer of the court and has been accounted for as partial note repayment, with an additional $146,912 due under the note repaid by a release of the remaining deposit to an officer of the court and garnishment of Company funds during the year ended December 31, 2022, which was also accounted for as a note repayment. In ~~October~~August 2023, a supplemental judgment of $38,838 was entered against the Company. ~~reached~~Inasmuch, as anthere ~~agreement~~were inno ~~principle~~further ~~with~~opportunities to appeal, the Company was required to pay the remaining amount due, which was estimated to be ~~plaintiff~~approximately $113,000 and recorded as a liability as of December 31, 2023. As of May 31, 2024, after taking into account accrued and unpaid interest, approximately $117,000 was owed to ~~settle~~the plaintiff and the plaintiff was seeking, among other things, additional monetary sanctions. In June 2024, the Company resolved this matter. ~~The~~by ~~settlement~~making isa ~~subject~~final payment of $135,000, which was accrued for as of March 31, 2024, and the plaintiff agreed to cease the ~~execution~~pursuit of additional sanctions against the Company and file a ~~formal~~satisfaction ~~settlement~~of ~~agreement~~judgment.

Item 1A. Risk Factors.

There have been no material changes to the risk factors discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023, which was filed with the SEC on ~~August~~June 824, ~~2023 except as described below~~2024.

~~On October 7, 2023, a conflict arose between Israel and Hamas militants~~Item ~~on Israel’s southern border from the Gaza Strip~~2. ~~The~~Unregistered ~~intensity~~Sales ~~and duration~~ of ~~Israel’s~~Equity ~~current war~~Securities ~~against Hamas is difficult to predict,~~ and asUse ~~are such war’s economic implications on the Company’s business and operations. To the extent that any~~ of ~~these negative developments do occur, they may have an adverse effect on the Company’s business, results of operations and its ability to raise additional funds~~Proceeds. As of September 30, 2023, the Company considered the impact of the war on its business and operational assumptions and estimates and determined there were no material adverse impacts on the Company’s condensed consolidated results of operations and financial position as of September 30, 2023.

~~Item~~In January 2024, we issued 2,000 shares of the Company’s common stock to a certain investor as payment for convertible note payable late fees incurred. ~~Unregistered~~We ~~Sales~~relied upon the exemption provided by Section 4(a)(2) of ~~Equity~~the Securities, ~~Use~~Act of ~~Proceeds~~1933, ~~and~~as ~~Issuer~~amended ~~Purchases~~(the of“Securities Act”) ~~Equity~~in ~~Securities~~connection with this transaction.

During the three months ended September 30, 2023, we issued a convertible note in the principal amount of $100,000 to an accredited investor. The note matures six months from the date of issuance, accrues interest at a rate of 8% per annum and is convertible at any time at the option of the holder into the Company’s Series C Preferred Stock at a conversion price of $7.50 per share. The note automatically converts into Series C Preferred Stock on the maturity date. In ~~connection~~ ~~with~~February ~~the issuance~~2024, we issued ~~a five-year warrant to purchase an aggregate of 80~~1,000,000 shares ofto ~~common~~a ~~stock~~consultant atfor anservices ~~exercise price of $1~~rendered.~~25 per~~ ~~share.~~ We relied upon the exemption provided by Section 4(a)(2) of the Securities Act ~~of 1933, as amended (the “Securities Act”),~~ in connection with this ~~transactions~~transaction.

During the three months ended September 30, 2023, we issued a convertible note in the principal amount of $25,000 to an accredited investor. The note matures six months from the date of issuance, accrues interest at a rate of 8% per annum and is convertible at any time at the option of the holder into the Company’s common stock at a conversion price of $0.75 per share. In connection with the issuance, we issued a five-year warrant to purchase 12,500 shares of common stock at an exercise price of $1.25 per share. We relied upon the exemption provided by Section 4(2) of the Securities Act in connection with this transaction.18

In February ~~August 2023~~2024, we issued a3,333 ~~four-year~~units ~~warrant~~ to an accredited investors at a ~~former~~price ~~director~~of $7.50 per unit. Each unit consisted of ~~the~~one share of Series ~~Company~~B Preferred Stock and a warrant to purchase ~~160,000~~11.25 shares of ~~the Company’s~~ common stock at an exercise price of $0.75 per share. We relied upon the ~~exemption~~ exemption provided by Section 4(a)(2) of the Securities Act in connection with this transaction.

In ~~September~~March ~~2023~~2024, wea ~~issued~~note ~~300~~in the principal amount of $100,000 automatically converted into 13,333 shares of ~~common~~our ~~stock~~Series toC anConvertible ~~accredited~~Preferred Stock ~~investor~~and ~~upon~~we ~~the~~elected ~~conversion~~to ofissue 306,~~000~~546 shares of common stock in lieu of the ~~Company’s~~ ~~Series~~payment Cof ~~Convertible~~$4,910 ~~Preferred~~of ~~Stock~~cash interest due under such note. We relied upon the exemption provided by Section 34(a)(92) of the Securities Act in connection with ~~this~~these ~~transaction~~transactions.

~~During~~In July ~~the three months ended September 30~~2024, ~~2023,~~we ~~$469,960~~issued ofa ~~principal outstanding~~five ~~under~~year ~~convertible~~warrant ~~notes~~to ~~automatically~~purchase ~~converted into 62~~100,~~667~~000 shares of our ~~Series~~common Cstock ~~Convertible~~at ~~Preferred~~an ~~Stock~~exercise ~~and~~price weof ~~elected to~~$0.75 ~~issue~~per ~~32,232~~share ~~shares~~in ofexchange for ~~common~~a ~~stock~~note inheld ~~lieu~~by ofan accredited investor in the ~~payment~~principal amount of $2430,000 ~~of cash interest due under such notes~~. We relied upon the exemption provided by Section 43(2a) (9) of the Securities Act in connection with ~~these~~this ~~transactions~~transaction.

Item 3. Defaults Upon Senior Securities.

As of ~~September~~March 3031, ~~2023~~2024 and through the date of this filing, notes payable and convertible notes payable with face values totaling approximately $5,~~246~~643,~~129~~ 000 and $1,~~726~~956,~~093~~000, respectively, were past due ~~and are classified as current liabilities on the condensed consolidated balance sheet as of September 30, 2023~~. Such notes continue to accrue interest and all relevant penalties have been accrued as of ~~September~~March 3031, ~~2023~~2024. 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~~ 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.

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

101.INS*	Inline XBRL Instance Document
101.SCH*	Inline XBRL Taxonomy Extension Schema Document
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*	Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Filed herewith

2019

SIGNATURES

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

	CELL SOURCE, INC.
Dated: November 9, 2023	By:	/s/ Itamar Shimrat
Dated: July 29, 2024	By:	/s/ Itamar Shimrat
	Name:	Itamar Shimrat
	Title:	Chief Executive Officer and Chief Financial Officer (Principal Executive, Financial and Accounting Officer)

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