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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 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 13, 2024, the registrant had 43,468,184 shares of $0.001 par value common stock outstanding.

CELL SOURCE, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.	3

Condensed Consolidated Balance Sheets as of September 30, 2024 (Unaudited) and December 31, 2023	3

Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2024 and 2023	4

Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Deficiency for the Three and Nine Months Ended September 30, 2024 and 2023	5

Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2024 and 2023	7

Notes to Unaudited Condensed Consolidated Financial Statements	8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	14

Item 3. Quantitative and Qualitative Disclosures About Market Risk.	17

Item 4. Controls and Procedures.	17

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.	18

Item 1A. Risk Factors.	18

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	18

Item 3. Defaults Upon Senior Securities.	18

Item 4. Mine Safety Disclosures.	18

Item 5. Other Information.	18

Item 6. Exhibits.	19

SIGNATURES	20

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

CELL SOURCE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30,			December 31,
	2024			2023
	(Unaudited)
Assets
Current Assets:
Cash	$	22,992		$	22,203
Prepaid expenses		241,125			160,750
Other current assets		543			12,218
Total Assets	$	264,660		$	195,171

Liabilities and Stockholders’ Deficiency

Current Liabilities:
Accounts payable	$	2,036,128		$	1,467,052
Accrued expenses		1,153,100			1,225,195
Accrued expenses - related party		188,000			144,500
Accrued expenses		188,000			144,500
Accrued interest		1,070,144			939,549
Accrued interest - related parties		2,065,948			1,480,117
Accrued interest		2,065,948			1,480,117
Accrued compensation		1,048,592			960,554
Notes payable, net of debt discount of $42,259 and $776 as of September 30, 2024 and December 31, 2023, respectively		932,584			710,317
Notes payable - related parties, net of debt discount of $42,259 and $0 as of September 30, 2024 and December 31, 2023, respectively		401,491			150,000
Notes payable		401,491			150,000
Convertible notes payable, net of debt discount of $9,188 and $16,179 as of September 30, 2024 and December 31, 2023, respectively		985,812			1,078,821
Convertible notes payable - related parties		7,461,708			7,315,036
Convertible notes payable		7,461,708			7,315,036
Derivative liabilities		609,207			33,000
Derivative liabilities - related party		178,064			-
Derivative liabilities		178,064			-
Financing liability		314,985			42,033
Advances payable		194,375			135,000
Advances payable - related party		200,000			100,000
Advances payable		200,000			100,000
Accrued dividend payable		365,078			25,540
Total Liabilities		19,205,216			15,806,714

Commitments and contingencies (Note 9)		-			-

Stockholders’ Deficiency:
Convertible Preferred Stock, $0.001 par value, 10,000,000 shares authorized;
Series A Convertible Preferred Stock, 1,350,000 shares designated, 1,342,195 shares issued and outstanding as of September 30, 2024 and December 31, 2023; liquidation preference of $10,294,818 and $10,066,463 as of September 30, 2024 and December 31, 2023, respectively		1,342			1,342
Series B Convertible Preferred Stock, 2,000,000 shares designated, 210,132 and 106,668 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively; liquidation preference of $1,628,150 and $806,805 as of September 30, 2024 and December 31, 2023, respectively		210			107
Series C Convertible Preferred Stock, 1,000,000 shares designated, 550,815 and 537,482 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively; liquidation preference of $4,214,414 and $4,049,861 as of September 30, 2024 and December 31, 2023, respectively		550			537
Preferred stock, value
Common Stock, $0.001 par value, 200,000,000 shares authorized; 43,253,897 and 39,830,802 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively		43,254			39,831
Additional paid-in capital		26,862,811			26,014,028
Accumulated deficit		(45,848,723	)		(41,667,388	)
Total Stockholders’ Deficiency		(18,940,556	)		(15,611,543	)
Total Liabilities and Stockholders’ Deficiency	$	264,660		$	195,171

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

CELL SOURCE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	2024			2023			2024			2023
	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2024			2023			2024			2023

Operating Expenses:
Research and development	$	346,357		$	500,005		$	1,493,581		$	1,175,093
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		470,768			480,875			1,626,352			2,097,801
Total Operating Expenses		831,625			995,380			3,163,433			3,316,394
Loss From Operations		(831,625	)		(995,380	)		(3,163,433	)		(3,316,394	)

Other (Expense) Income:
Interest expense		(95,865	)		(62,463	)		(136,213	)		(138,937	)
Interest expense - related parties		(260,921	)		(199,628	)		(594,326	)		(496,206	)
Interest expense		(260,921	)		(199,628	)		(594,326	)		(496,206	)
Interest expense - amortization of debt discount		(74,718	)		(29,912	)		(112,218	)		(107,487	)
Interest expense - amortization of debt discount - related parties		(73,355	)		(50,755	)		(111,434	)		(254,205	)
Interest expense - amortization of debt discount		(73,355	)		(50,755	)		(111,434	)		(254,205	)
Change in fair value of derivative liabilities		(62,851	)		-			(50,034	)		-
Change in fair value of derivative liabilities - related party		(35,699	)		-			(31,570	)		-
Change in fair value of derivative liabilities		(35,699	)		-			(31,570	)		-
Gain on extinguishment of note payable		17,893			-			17,893			41,920
Total Other Expense		(585,516	)		(342,758	)		(1,017,902	)		(954,915	)
Net Loss		(1,417,141	)		(1,338,138	)		(4,181,335	)		(4,271,309	)
Dividend attributable to Series A, B, and C preferred stockholders		(350,984	)		(309,150	)		(1,017,520	)		(907,516	)
Net Loss Applicable to Common Stockholders	$	(1,768,125	)	$	(1,647,288	)	$	(5,198,855	)	$	(5,178,825	)

Net Loss Per Common Share - Basic and Diluted	$	(0.04	)	$	(0.04	)	$	(0.13	)	$	(0.14	)

Weighted Average Common Shares Outstanding -
Basic and Diluted		42,426,449			38,191,731			41,321,759			37,492,478

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		Shares		Amount		Capital			Deficit			Deficiency
	FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024
	Convertible Preferred				Convertible Preferred				Convertible Preferred								Additional						Total
	Stock - Series A				Stock - Series B				Stock - Series C				Common Stock				Paid-In			Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Capital			Deficit			Deficiency

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		-		-		-		-		13,333		13		6,546		6		104,891			-			104,910

Series A, B and C Convertible Preferred Stock dividends:
Accrual of earned dividends		-		-		-		-		-		-		-		-		(326,665	)		-			(326,665	)
Payment of dividends in kind
Payment of dividends in kind, shares

Common stock issued in satisfaction of accrued compensation		-		-		-		-		-		-		180,000		180		44,820			-			45,000

Issuance of Series B Convertible Preferred Stock for cash, net		-		-		3,333		3		-		-		-		-		19,897			-			19,900

Common stock issued in satisfaction of convertible note payable interest		-		-		-		-		-		-		2,000		2		518			-			520

Issuance of common stock in connection with extinguishment of note payable
Issuance of common stock in connection with extinguishment of note payable, shares
Issuance of warrants in connection with:
Satisfaction of accrued interest
Issuance of convertible notes payable
Conversion of Series C Convertible Preferred Stock into common stock
Conversion of Series C Convertible Preferred Stock into common stock, shares
Stock-based compensation:
Warrants		-		-		-		-		-		-		-		-		29,141			-			29,141
Common stock		-		-		-		-		-		-		1,000,000		1,000		259,000			-			260,000

Net loss		-		-		-		-		-		-		-		-		-			(1,275,406	)		(1,275,406	)

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	)

Series A, B and C Convertible Preferred Stock dividends:
Accrual of earned dividends		-		-		-		-		-		-		-		-		(339,871	)		-			(339,871	)
Payment of dividends in kind		-		-		-		-		-		-		904,049		904		677,078			-			677,982

Issuance of Series B Convertible Preferred Stock for cash, net		-		-		96,798		97		-		-		-		-		571,704			-			571,801

Common stock issued in satisfaction of convertible note payable interest		-		-		-		-		-		-		18,000		18		4,662			-			4,680

Stock-based compensation:
Warrants		-		-		-		-		-		-		-		-		8,838			-			8,838

Net loss		-		-		-		-		-		-		-		-		-			(1,488,788	)		(1,488,788	)

Balance, June 30, 2024		1,342,195	$	1,342		206,799	$	207		550,815	$	550		41,941,397	$	41,941	$	27,068,041		$	(44,431,582	)	$	(17,319,501	)

Series A, B and C Convertible Preferred Stock dividends:
Accrual of earned dividends		-		-		-		-		-		-		-		-		(350,984	)		-			(350,984	)

Issuance of Series B Convertible Preferred Stock for cash, net		-		-		3,333		3		-		-		-		-		17,797			-			17,800

Common stock issued for cash		-		-		-		-		-		-		1,312,500		1,313		126,857			-			128,170

Warrant modification expense		-		-		-		-		-		-		-		-		1,100			-			1,100

Net loss		-		-		-		-		-		-		-		-		-			(1,417,141	)		(1,417,141	)

Balance, September 30, 2024		1,342,195	$	1,342		210,132	$	210		550,815	$	550		43,253,897	$	43,254	$	26,862,811		$	(45,848,723	)	$	(18,940,556	)

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

Balance, January 1, 2023		1,342,195	$	1,342		502,776		$	503			36,081,758	$	36,082	$	23,674,354		$	(36,346,176	)	$	(12,633,895	)

Conversion of convertible notes payable and accrued interest into Series C Convertible Preferred Stock and common stock		-		-		6,667			7			2,747		3		52,050			-			52,060

Series A and Series C Convertible Preferred Stock dividends:
Accrual of earned dividends		-		-		-			-			-		-		(297,517	)		-			(297,517	)

Issuance of warrants in connection with:
Issuance of warrants in connection with issuance of convertible notes payable		-		-		-			-			-		-		21,202			-			21,202

Conversion of Series C Convertible Preferred Stock into common stock		-		-		(10,000	)		(10	)		100,000		100		(90	)		-			-

Stock-based compensation: Common stock		-		-		-			-			1,000,000		1,000		329,000			-			330,000
Common stock		-		-		-			-			1,000,000		1,000		329,000			-			330,000

Net loss		-		-		-			-			-		-		-			(1,691,567	)		(1,691,567	)

Balance, March 31, 2023		1,342,195	$	1,342		499,443		$	500			37,184,505	$	37,185	$	23,778,999		$	(38,037,743	)	$	(14,219,717	)

Series A and Series C Convertible Preferred Stock dividends:
Accrual of earned dividends		-		-		-			-			-		-		(300,849	)		-			(300,849	)
Payment of dividends in kind		-		-		-			-			802,880		802		601,300			-			602,102

Issuance of common stock in connection with extinguishment of note payable		-		-		-			-			176,000		176		57,904			-			58,080

Issuance of warrants in connection with:
Satisfaction of accrued interest		-		-		-			-			-		-		40,167			-			40,167
Issuance of convertible notes payable		-		-		-			-			-		-		75,462			-			75,462

Stock-based compensation:
Warrants		-		-		-			-			-		-		40,600			-			40,600

Net loss		-		-		-			-			-		-		-			(1,241,604	)		(1,241,604	)

Balance, June 30, 2023		1,342,195	$	1,342		499,443		$	500			38,163,385	$	38,163	$	24,293,583		$	(39,279,347	)	$	(14,945,759	)
Balance		1,342,195	$	1,342		499,443		$	500			38,163,385	$	38,163	$	24,293,583		$	(39,279,347	)	$	(14,945,759	)

Conversion of convertible notes payable and accrued interest into Series C Convertible Preferred Stock and common stock		-		-		62,667			62			32,232		32		494,040			-			494,134

Issuance of warrants in connection with issuance of convertible notes payable		-		-		-			-			-		-		45,008			-			45,008

Conversion of Series C Convertible Preferred Stock into common stock		-		-		(30,000	)		(30	)		300,000		300		(270	)		-			-

Series A and Series C Convertible Preferred Stock dividends:
Accrual of earned dividends		-		-		-			-			-		-		(309,150	)		-			(309,150	)

Stock-based compensation:
Warrants		-		-		-			-			-		-		23,758			-			23,758

Net loss		-		-		-			-			-		-		-			(1,338,138	)		(1,338,138	)

Balance, September 30, 2023		1,342,195	$	1,342		532,110		$	532			38,495,617	$	38,495	$	24,546,969		$	(40,617,485	)	$	(16,030,147	)
Balance		1,342,195	$	1,342		532,110		$	532			38,495,617	$	38,495	$	24,546,969		$	(40,617,485	)	$	(16,030,147	)

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

CELL SOURCE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	2024			2023
	For Nine Months Ended
	September 30,
	2024			2023

Cash Flows From Operating Activities:
Net loss	$	(4,181,335	)	$	(4,271,309	)
Adjustments to reconcile net loss to net cash used in operating activities:
Gain on extinguishment of note payable		(17,893	)		(41,920	)
Interest expense - amortization of debt discount		112,218			107,487
Interest expense - amortization of debt discount - related parties		111,434			254,205
Interest expense - amortization of debt discount		111,434			254,205
Change in fair value of derivative liabilities - related party		31,570			-
Change in fair value of derivative liabilities		50,034			-
Non-cash interest expense - warrants		72,473			28,695
Warrant modification expense		1,100			-
Stock-based compensation:
Common stock		272,493			341,269
Warrants		36,804			63,709
Stock-based compensation		36,804			63,709
Changes in operating assets and liabilities:
Prepaid expenses		241,125			243,300
Other current assets		11,675			19,605
Accounts payable		569,076			900,538
Accrued expenses		(72,095	)		53,697
Accrued expenses - related party		43,500			43,500
Accrued expenses		43,500			43,500
Accrued interest		108,716			165,030
Accrued interest - related parties		546,349			441,446
Accrued interest		546,349			441,446
Accrued compensation		126,920			25,147
Net Cash Used In Operating Activities		(1,935,836	)		(1,625,601	)

Cash Flows From Financing Activities:
Proceeds from issuance of common stock and warrants		415,625			-
Proceeds from issuance of Series B Convertible Preferred Stock and warrants		776,001			-
Proceeds from issuance of convertible notes payable		-			919,960
Proceeds from issuance of convertible notes payable - related party		146,672			677,018
Proceeds from issuance of convertible notes payable		146,672			677,018
Proceeds from issuance of notes payable		250,000			-
Proceeds from issuance of notes payable - related party		250,000			-
Proceeds from issuance of notes payable		250,000			-
Proceeds from advances payable		59,375			-
Proceeds from advances payable - related party		100,000			-
Proceeds from advances payable		100,000			-
Repayment of notes payable		(6,250	)		-
Repayment of notes payable - related party		(6,250	)		-
Repayment of notes payable		(6,250	)		-
Repayment of financing liability		(48,548	)		(191,460	)
Net Cash Provided By Financing Activities		1,936,625			1,405,518

Net Increase (Decrease) In Cash		789			(220,083	)

Cash - Beginning of Period		22,203			222,665
Cash - End of Period	$	22,992		$	2,582

Supplemental Disclosures of Cash Flow Information:
Cash paid for:
Interest	$	-		$	-
Income taxes	$	-		$	949

Non-cash investing and financing activities:
Common stock issued in satisfaction of accrued compensation	$	(45,000	)	$	-
Common stock issued in connection with payment of Series A, B, and C Convertible Preferred Stock dividends in-kind	$	677,982		$	602,102
Financing of Director and Officer insurance	$	321,500		$	321,500
Conversion of Series C Convertible Preferred Stock into common stock	$	-		$	400
Conversion of accrued expenses into note principal	$	-		$	413,018
Accrual of warrant obligations in connection with issuance of notes payable	$	-		$	40,167
Warrants issued in satisfaction of accrued warrant obligation	$	-		$	(40,167	)
Issuance of warrants in connection with the issuance of notes payable	$	200,404		$	141,672
Issuance of warrants in connection with the exchange of notes payable	$	12,107		$	-
Accrual of earned preferred stock dividends	$	(1,017,520	)	$	(907,516	)
Conversion of convertible notes payable and accrued interest into Series C Preferred Stock and common stock	$	104,910		$	546,194
Issuance of warrants in connection with issuance of Series B Preferred Stock	$	103,900		$	-
Issuance of embedded derivative liabilities in connection with issuance of Series B Preferred Stock	$	62,600		$	-
Issuance of embedded derivative liabilities in connection with issuance of Series C Preferred Stock	$	1,700		$	-
Extinguishment of note payable for 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 9, 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 September 30, 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.

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, 2024 and the condensed consolidated results of its operations and cash flows for the three and nine months ended September 30, 2024 and 2023. The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the operating results for the full year ending December 31, 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, 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 June 24, 2024.

Note 2 - Going Concern and Management Plans

During the nine months ended September 30, 2024, the Company had not generated any revenues, had a net loss of approximately $4,181,000 and used cash in operations of approximately $1,936,000. As of September 30, 2024, the Company had a working capital deficiency of approximately $18,941,000 and an accumulated deficit of approximately $45,849,000. As of September 30, 2024 and through the date of this filing, notes payable with principal amounts totaling approximately $5,663,000 and $1,926,000, respectively, were past due. 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.

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 September 30, 2024 and as more fully described in Note 10, Subsequent Events, the Company received aggregate proceeds of $75,000 from the issuance of common stock and $300,000 from the sale of Series B Convertible Preferred Stock. The Company will continue to incur net operating losses to fund operations.

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 this uncertainty.

Note 3 - Summary of Significant Accounting Policies

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

Valuation of Common Stock Price

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, 2024 and December 31, 2023, which was considered in management’s estimation of fair value during the three and nine months ended September 30, 2024. The third-party valuation was performed in accordance with regulation of Section 409A of the Internal Revenue Code (“IRC”) as well as FASB ASC Topic 718. 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 $0.28 and $0.26 as of July 1, 2024 and December 31, 2023, respectively, which included a discount for lack of marketability of 25%. Furthermore, the independent appraisal determined the Company’s expected volatility was 75% and 65% as of July 1, 2024 and December 31, 2023, respectively, 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,
	2024		2023

Options		6,932,004		6,932,004
Warrants		19,434,945		13,541,107
Convertible notes [1]		14,977,347		13,493,270
Convertible preferred stock		21,031,420		18,743,053
Total		62,375,716		52,709,434

[1]

Convertible notes are assumed to be converted at the rate of $0.75 per common share, which is the conversion price as of September 30, 2024 and 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.

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 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 on its condensed consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” The standard is intended to require more detailed disclosures about specified categories of expenses (including employee compensation, depreciation, and amortization) included in certain expense captions presented on the face of the income statement. This ASU is effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments may be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of this ASU or (2) retrospectively to all prior periods presented in the financial statements. This ASU is applicable to entities with a single operating segment. The Company is currently evaluating the potential impact of this adoption on the condensed consolidated financial statements and related disclosures.

Note 4 - Fair Value

The following table provides a summary of the changes in fair value, including net transfers in and/or out, of all Level 3 liabilities measured at fair value on a recurring basis using unobservable inputs during the three and nine months ended September 30, 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
Accrual of common stock obligation		-			-			-			-
Reclassification of warrant obligation to derivative liabilities		-			-			-			-
Issuance of warrants and conversion option		-			-			5,100			5,100
Issuance of warrants		-
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

Reclassification of warrant obligation to derivative liabilities		(6,666	)		-			6,666			-
Issuance of warrants and conversion option		-			-			349,638			349,638
Change in fair value		12,502			1,815			(11,146	)		3,171

Balance - June 30, 2024	$	294,696		$	53,151		$	377,458		$	725,305

Issuance of warrants and conversion option		-			-			311,263			311,263
Change in fair value		129,783			3,284			98,550			231,617

Balance - September 30, 2024	$	424,479		$	56,435		$	787,271		$	1,268,185

	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

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

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

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2024			2023			2024			2023

Risk-free interest rate		3.58% - 5.33	%		4.60% - 4.70	%		3.58% - 5.33	%		3.60% - 4.70	%
Expected term (years)		0.82 - 10.00			4.00 - 5.00			0.82 - 10.00			4.00-5.00
Expected volatility		75	%		80	%		65% - 75	%		80	%
Expected dividends		0.00	%		0.00	%		0.00	%		0.00	%

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

As of September 30, 2024 and December 31, 2023, the Company had an obligation to issue 183,095 and 363,095 shares of common stock to service providers that had a fair value of $51,267 and $90,774, respectively, which was a component of accrued compensation in the condensed consolidated balance sheets. The fair value of the common stock underlying this obligation has a per share value of $0.28 and $0.26 as of September 30, 2024 and December 31, 2023, respectively. Furthermore, as of September 30, 2024 and December 31, 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 $5,168 and $6,328, respectively, which was a component of accrued compensation in the condensed consolidated balance sheets.

See Note 6, Notes Payable and Note 7, Stockholders’ Deficiency for additional details associated with the issuances of common stock, warrants and embedded conversion options.

Note 5 – Advances Payable

Advances payable and advances payable – related party represent cash received from investors for working capital purposes.

During the three months ended September 30, 2024, the Company received aggregate proceeds of $159,375 which were included in advances payable and advances payable – related party on the condensed consolidated balance sheet.

Note 6 – Notes Payable

As of September 30, 2024 and through the date of this filing, notes and convertible notes payable with principal amounts totaling approximately $5,663,000 and $1,926,000, respectively, were past due. Such notes continue to accrue interest and all relevant penalties have been accrued as of September 30, 2024. The Company is in negotiations with certain holders of notes payable to extend the maturity dates of such notes or to convert the principal and accrued interest into equity. As of September 30, 2024, the Company had an accrued interest balance of $840,663 related to notes and convertible notes payable that were past due.

During the three months ended September 30, 2024 and 2023, the Company recorded interest expense of $356,786 and $262,091, respectively, and amortization of debt discount of $148,073 and $80,667, respectively. During the nine months ended September 30, 2024 and 2023, the Company recorded interest expense of $730,539 and $635,143, respectively, and amortization of debt discount of $223,652 and $361,692, respectively. As of September 30, 2024 and December 31, 2023, the Company had $3,136,092 and $2,419,666, 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

In May 2024, the Company received proceeds of $250,000 from investors and issued notes payable in the aggregate principal amount of $300,000 with a maturity date of November 22, 2024. The notes bear interest at 10% per annum and have an aggregate original issue discount of $50,000 which was recorded as a debt discount and will be amortized over the term of the note. In connection with the issuances, the Company issued ten-year immediately vested warrants to purchase an aggregate of 625,000 shares of common stock at an exercise price of $0.75 per share. The warrants had an issuance date fair value of $96,710 which was included within derivative liabilities, recorded as a debt discount and will be amortized over the term of the notes. During the nine months ended September 30, 2024, the Company repaid $6,250 of the outstanding principal balance, such that $293,750 was outstanding as of September 30, 2024.

On July 15, 2024, the Company entered into an exchange agreement with a note holder, whereby the parties agreed to exchange a note payable with a principal amount of $30,000 for a warrant to purchase 100,000 shares of the Company’s common stock at an exercise price of $0.75 per share. The exchange resulted in a gain on extinguishment of notes payable of $17,893 during the three and nine months ended September 30, 2024. The warrant had an issuance date fair value of $12,107 and was recorded as a derivative liability under the Company’s sequencing policy on the condensed consolidated balance sheet as of September 30, 2024.

Notes Payable - Related Parties

In May 2024, the Company received proceeds of $250,000 from an investor and issued a note payable in the principal amount of $300,000 with a maturity date of November 22, 2024. The note bears interest at 10% per annum and has an original issue discount of $50,000 which was recorded as a debt discount and will be amortized over the term of the note. In connection with the issuance, the Company issued ten-year immediately vested warrants to purchase 625,000 shares of common stock at an exercise price of $0.75 per share. The warrants had an issuance date fair value of $96,710 which was included within derivative liabilities - related parties, recorded as a debt discount and will be amortized over the term of the note. During the nine months ended September30, 2024, the Company repaid $6,250 of the outstanding principal balance, such that $293,750 was outstanding as of September 30, 2024.

Convertible Notes Payable

During the three months ended March 31, 2024, a convertible note with $100,000 of principal outstanding was automatically converted into 13,333 shares of Series C Convertible Preferred Stock at a price of $7.50 per share and the Company elected to convert $4,910 of accrued interest under such note into 6,546 shares of common stock at a price of $0.75 per share. The embedded conversion option attributable to the Series C Convertible Preferred Stock was accounted for as derivative liability and had an issuance date fair value of $1,700.

On March 22, 2024, the Company completed its private offering of 8% Convertible Notes that are convertible into shares of the Company’s Series C Convertible Preferred Stock at a conversion price of $7.50 per share. Since the inception of the private offering in 2020, the Company sold $4,760,170 aggregate principal amount of notes in the offering and issued investors warrants to purchase 4,321,926 shares of common stock at an exercise price of $1.25 per share. There were no issuances during the nine months ended September 30, 2024.

On July 24, 2024, the Company entered into a note amendment agreement with a note holder to (i) extend the maturity date of a note in the principal amount of $50,000 from December 23, 2023 to December 23, 2024 and (ii) increase the interest rate from 8% to 10% effective July 2024. Further, in the event of an equity or debt financing transaction resulting in gross proceeds of at least $2,000,000, the Company or guarantor of the note shall repay the note in full within five days after completing the transaction. If the note is not repaid in full by December 23, 2024, any further extension will require the issuance of an additional five-year warrant to purchase 50,000 shares of the Company’s common stock at an exercise price of $0.75 per share. Contemporaneous with the execution of this amendment, the Company (i) issued to the lender an additional five-year warrant to purchase 25,000 shares of the Company’s common stock at an exercise price of $0.75 per share and (ii) amended the holder’s previously outstanding warrant to reduce the exercise price to $0.75 per share. This transaction was accounted for as a debt modification. The warrants had an issuance date fair value of $3,000 and were accounted for as derivative liabilities under the Company’s sequencing policy on the condensed consolidated balance sheet as of September 30, 2024.

On July 24, 2024, the Company entered into a note amendment agreement with a note holder to (i) extend the maturity date of a note in the principal amount of $25,000 from December 26, 2023 to December 26, 2024 and (ii) increase the interest rate from 8% to 10% effective July 2024. Further, in the event of an equity or debt financing transaction resulting in gross proceeds of at least $2,000,000, the Company or guarantor of the note shall repay the note in full within five days after completing the transaction. If the note is not repaid in full by December 26, 2024, any further extension will require the issuance of an additional five-year warrant to purchase 25,000 shares of the Company’s common stock at an exercise price of $0.75 per share. Contemporaneous with the execution of this amendment, the Company (i) issued to the lender an additional five-year warrant to purchase 12,500 shares of the Company’s common stock at an exercise price of $0.75 per share and (ii) amended the holder’s previously outstanding warrant to reduce the exercise price to $0.75 per share. The warrants had an issuance date fair value of $1,500 and were accounted for as derivative liabilities under the Company’s sequencing policy on the condensed consolidated balance sheet as of September 30, 2024.

On November 29, 2023, the Company and a certain investor agreed to extend the maturity date of a certain convertible note payable in the principal amount of $100,000 from December 31, 2022 to July 1, 2024. In addition, the note provides repayment terms as follows: $10,000 per month from January 1, 2024 through March 1, 2024 and $20,000 per month from April 1, 2024 through June 1, 2024. A final payment of $10,000 and all accrued and unpaid interest is due on July 1, 2024. As of September 30, 2024 and through the date of filing these payments have not been made.

Convertible Notes Payable - Related Parties

In March 2024, the Company received additional advances of $146,672 under a note originally issued to George Verstraete, a director of the Company, and assigned to a trust controlled by Darlene Soave, a director of the Company, (the “Verstraete Note”), and, as a result, increased the outstanding principal balance of the Verstraete Note to $3,736,708. In connection with the advances, the Company issued five-year immediately vested warrants to purchase an aggregate of 117,338 shares of common stock at an exercise price of $1.25 per share to the trust controlled by Ms. Soave, the holder of the note. The warrants had an issuance date fair value of $6,666 which was included within derivative liabilities - related parties, recorded as a debt discount and will be amortized over the term of the note.

In April 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 (the “Soave Note”) and the Verstraete Note to October 28, 2024 and September 10, 2024, respectively. See Note 10- Subsequent Events, for additional information related to the note extensions.

Note 7 – Stockholders’ Deficiency

Preferred Stock Dividends

During the three months ended September 30, 2024 and 2023, the Company accrued additional preferred dividends of $350,984 and $309,150, respectively. During the nine months ended September 30, 2024 and 2023, the Company accrued additional preferred dividends of $1,017,520 and $907,516, respectively. As of September 30, 2024 and December 31, 2023, there were accrued preferred stock dividends of $365,078 and $25,540, respectively.

During the three months ended June 30, 2024, the Company issued an aggregate of 904,049 shares of common stock at the stated value of $0.75 per share for aggregate value of $677,982, pursuant to the terms of the Series A, B and C Convertible Preferred Stock Certificates of Designation, in connection with the partial payment of accrued dividends for Series A, Series B, and Series C Convertible Preferred Stock.

Series B Convertible Preferred Stock

During the nine months ended September 30, 2024, the Company received gross proceeds of $776,001 from investors in connection with the issuance of an aggregate of 103,464 shares of its Series B Convertible Preferred Stock and five-year warrants to purchase an aggregate of 1,164,000 shares of the Company’s common stock at an exercise price of $0.75 per share. The warrants and embedded conversion options were accounted for as derivative liabilities under the Company’s sequencing policy and had an aggregate issuance date fair value of $166,500.

Series C Convertible Preferred Stock

See Note 6, Notes Payable – Convertible Notes Payable for details associated with conversions of notes payable into 13,333 shares of Series C Convertible Preferred Stock. The embedded conversion option of the Series C Convertible Preferred Stock was accounted for as a derivative liability under the Company’s sequencing policy and had an issuance date fair value of $1,700.

Common Stock

See Note 6, Notes Payable – Convertible Notes Payable for details associated with conversions of accrued interest into 6,546 shares of common stock.

During the three months ended March 31, 2024, the Company issued 180,000 shares of the Company’s common stock with an issuance date fair value of $45,000 in connection with a legal settlement that was included within accrued compensation as of December 31, 2023.

During the three months ended March 31, 2024, the Company issued 1,000,000 immediately vested shares of the Company’s common stock to a certain consultant as compensation for services performed. The shares had a grant date fair value of $260,000 which was recognized immediately.

During the three and six months ended June 30, 2024, the Company issued 18,000 and 2,000 shares of the Company’s common stock to a certain investor in satisfaction of convertible note payable late fees. The shares had an issuance date fair value of $5,200 which was recognized immediately.

During the three months ended September 30, 2024, the Company received gross proceeds of $415,625 from investors in connection with the issuance of an aggregate of 1,312,500 shares of its common stock and ten-year warrants to purchase an aggregate of 1,312,500 shares of the Company’s common stock at an exercise price of $0.35 per share. The warrants had an issuance date fair value of $287,455 and were accounted for as derivative liabilities under the Company’s sequencing policy on the condensed consolidated balance sheet as of September 30, 2024.

Stock Warrants

During the three months ended March 31, 2024, the Company entered into an advisory agreement with a certain advisor to perform independent advisory services in connection with business operations from January 5, 2024 to June 4, 2024. In consideration of services to be performed, the Company issued five-year warrants to purchase 100,000 shares of common stock, which vest 20% monthly during the term of the agreement at an exercise price of $1.25 per share. The warrants had a grant date fair value of $6,590 which will be recognized over the vesting term.

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

Stock-Based Compensation

During the three months ended September 30, 2024, the Company recognized stock-based compensation expense of $5,070, consisting of $1,408 of expense related to warrants which was included within accrued compensation and $3,662 related to common stock which 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 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 nine months ended September 30, 2024, the Company recognized stock-based compensation expense of $309,297, consisting of $36,804 of expense related to warrants (of which, $37,979 was included within stockholder’s deficiency and $(1,175) was included within accrued compensation) and $272,493 of expense related to common stock to be issued for consulting services (of which, $265,200 was included within stockholder’s deficiency and $7,293 was included within accrued compensation), which was included within general and administrative expenses on the condensed consolidated statement of operations. 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.

There was no unrecognized stock-based compensation expense as of September 30, 2024.

Note 8 – Related Party Transactions

As of September 30, 2024 and December 31, 2023, the Company was required to issue warrants to purchase an aggregate of 2,181,500 and 1,956,500, respectively, shares of common stock at an exercise price of $0.75 per share to former directors 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 $254,532 and $215,050 associated with the fair value of the obligations as of September 30, 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 6, Notes Payable – Convertible Notes Payable – Related Parties for details related to convertible notes held by directors of the Company. See Note 5, Advances Payable for details related to advances received from related parties.

Note 9 – Commitments and Contingencies

Yeda Research and License Agreement

During the three months ended September 30, 2024 and 2023, the Company recorded research and development expenses of $14,500 related to its Research and License Agreement with Yeda (the “Agreement”). During the nine months ended September 30, 2024 and 2023, the Company recorded research and development expenses of $43,500 related to the Agreement with Yeda. As of September 30, 2024 and December 31, 2023, the Company had $116,000 and $72,500, respectively, of accrued research and development expenses pursuant to the Agreement with Yeda.

MD Anderson Agreements

During the nine months ended September 30, 2024, the Company commenced work under the February 2019 clinical trial agreement, as amended in May 2023, under which MD Anderson agreed to perform cell production and conduct Phase 1/2 human clinical trials with a second set of 12 patients for a total of approximately $1,816,000, with payments becoming due as certain specified milestones are met by MD Anderson.

The Company recognized $324,000 and $429,505 of research and development expenses during the three months ended September 30, 2024 and 2023, respectively, and $1,435,872 and $1,082,193 of research and development expenses during the nine months ended September 30, 2024 and 2023, respectively, associated with services provided by The University of Texas M.D. Anderson Cancer Center (“MD Anderson”) under the two agreements with MD Anderson dated November 2018 and February 2019, respectively. As of September 30, 2024 and December 31, 2023, the Company had a liability to MD Anderson of $1,365,372 and $924,705, respectively, which was included within accounts payable on the condensed consolidated balance sheets.

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. 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 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 were no further opportunities to appeal, the Company was required to pay the remaining amount due, which was estimated to be 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 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, and the plaintiff agreed to cease the pursuit of additional sanctions against the Company and has since filed a satisfaction of judgment.

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 above, there are no other known contingencies through the date of this filing.

Note 10 – 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.

Subsequent to September 30, 2024, the Company received gross proceeds of $

Cell Source, Inc. 10-Q