10-Q: Cell Source Inc. Reports Continued Losses in Q2 2024, Citing Going Concern Uncertainty

Cell Source Inc. reports a net loss of $2.76 million for the first six months of 2024 and expresses substantial doubt about its ability to continue as a going concern.

Summary

• Cell Source Inc. reported its financial results for the quarterly period ended June 30, 2024.
• The company is a biotechnology firm focused on developing cell therapy treatments.
• For the six months ended June 30, 2024, Cell Source had no revenues and a net loss of approximately $2.76 million.
• Cash used in operations during the same period was approximately $1.3 million.
• As of June 30, 2024, the company had a working capital deficiency of approximately $17.32 million and an accumulated deficit of approximately $44.43 million.
• Notes payable with principal amounts totaling approximately $1.83 million were past due as of June 30, 2024.
• The company is actively negotiating to raise additional capital through debt and equity financings.
• Management's plans include continued efforts to secure additional funding.
• The company's lead product is its patented Veto Cell immune system management technology.
• The company is developing a clinical protocol for allogeneic VETO CAR-T HSCT combined therapy for blood cancer treatment, planned for submission by the end of 2024.
• The Phase 1/2 clinical trial at MD Anderson Cancer Center has completed the first five treatment cohorts, showing no toxicity associated with the Veto Cells and successful stem cell engraftment.
• From October 2023 through the date of filing, the Company has sold an aggregate of 206,799 units for gross proceeds of $1,551,000 and issued warrants to purchase 2,326,500 shares of the Company's common stock.

Sentiment

Score: 3

Explanation: The sentiment is low due to the company's significant losses, working capital deficiency, going concern uncertainty, and reliance on additional financing. However, the ongoing clinical trial and development of Veto Cell technology provide some positive aspects.

Positives

• The Phase 1/2 clinical trial at MD Anderson Cancer Center has shown no toxicity associated with the Veto Cells and successful stem cell engraftment.
• The company is actively pursuing additional capital to fund operations.
• The company is progressing with the development of its Veto Cell technology and plans to submit a clinical protocol by the end of 2024.
• 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.

Negatives

• The company had no revenues for the six months ended June 30, 2024.
• The company has a significant working capital deficiency of $17.32 million.
• The company has an accumulated deficit of $44.43 million.
• A substantial amount of notes payable, totaling $1.83 million, are past due.
• The company's auditors have raised substantial doubt about its ability to continue as a going concern.

Risks

• The company's ability to continue as a going concern is uncertain.
• The company may be forced to curtail its development, marketing, and promotional activities if it cannot obtain additional financing.
• The company's business, financial condition, and results of operations could be materially adversely affected if it cannot secure additional funding.
• The conflict between Israel and Hamas militants on Israel's southern border from the Gaza Strip could have an adverse effect on the Company's business, results of operations and its ability to raise additional funds.

Future Outlook

The company plans to submit a clinical protocol for allogeneic VETO CAR-T HSCT combined therapy for blood cancer treatment by the end of 2024 and is actively negotiating to raise additional capital.

Industry Context

The company operates in the competitive biotechnology industry, focusing on cell therapy and immunotherapy. The company's Veto Cell technology aims to address challenges in immune tolerance, which is relevant to stem cell transplantation, organ transplantation, and cancer treatment. The company is collaborating with MD Anderson Cancer Center, a leading cancer research and treatment institution.

Comparison to Industry Standards

• It is difficult to compare Cell Source's results directly to industry standards due to its early stage of development and lack of revenue.
• Many biotechnology companies in the cell therapy and immunotherapy space are also operating at a loss while investing heavily in research and development.
• Companies like Juno Therapeutics (acquired by Celgene) and Kite Pharma (acquired by Gilead) achieved significant valuations based on their CAR-T cell therapies, highlighting the potential in this field.
• However, Cell Source's focus on Veto Cell technology and immune tolerance represents a unique approach compared to standard CAR-T therapies.

Legal Proceedings

• 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.
• 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.

Related Party Transactions

• 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.

Stakeholder Impact

• Shareholders face significant risk due to the company's financial difficulties and going concern uncertainty.
• Employees and consultants may be affected by potential curtailment of operations.
• Patients may benefit from the development of Veto Cell technology, but clinical trials are still in early stages.
• Creditors face risk of non-payment due to the company's financial situation.

Next Steps

• The company plans to submit a clinical protocol for allogeneic VETO CAR-T HSCT combined therapy for blood cancer treatment by the end of 2024.
• The company will continue to pursue additional capital through debt and equity financings.

Key Dates

Keywords

Veto Cell, Cell therapy, Immunotherapy, Clinical trial, Convertible notes, Going concern, Financial results, Cell Source