UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

FOR THE QUARTERLY PERIOD ENDED: MARCH 31, 2016

 

☐ 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: 000-55016

 

Amarantus Bioscience Holdings, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada   26-0690857

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

655 Montgomery Street, Suite 900, San Francisco, CA 94111

(415) 688-4484

(Address and telephone number of principal executive offices)

 

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files). Yes ☒     No ☐

 

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

 

Large accelerated filer ☐   Accelerated filer   ☐
Non-accelerated filer ☐   Smaller reporting company   ☒
(Do not check if a smaller reporting company)    

 

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 May 25, 2016, there were 68,272,000 shares of common stock outstanding.

 

 

  

 

 

TABLE OF CONTENTS

 

    PAGE
   PART I. FINANCIAL INFORMATION  
     
Item 1. Condensed Consolidated Financial Statements (Unaudited) 1
     
  Condensed Consolidated Balance Sheets at March 31, 2016 and December 31, 2015 1
  Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2016 and 2015 2
  Condensed Consolidated Statement of Stockholders’ Equity (Deficit) for the Three Months Ended March 31, 2016 3
  Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2016 and 2015 4
  Notes to Condensed Consolidated Financial Statements 6
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 15
     
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 18
     
  SIGNATURES 19

 

 

 

AMARANTUS BIOSCIENCE HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data) 

(Unaudited)

 

    March 31, 2016     December 31, 2015  
ASSETS            
Current assets:            
Cash and cash equivalents   $ 100     $ 176  
Related party convertible notes receivable at fair value     500       -  
Prepaid expenses and other current assets     342       567  
Total current assets     942       743  
                 
Non-current assets:                
Property and equipment, net     95       115  
Intangible assets     2,861       2,861  
Goodwill     7,967       7,967  
Total non-current assets     10,923       10,943  
                 
TOTAL ASSETS   $ 11,865     $ 11,686  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)                
                 
Current liabilities:                
Accounts payable and accrued liabilities   $ 7,620     $ 7,723  
Related party liabilities and accrued interest     258       257  
Accrued interest     322       195  
Notes payable (net of deferred financing cost of $0 and $3 as of March 31, 2016 and December 31, 2015, respectively)     600       997  
Senior secured convertible notes payable (net of debt discount of $2,963 and $3,854, and deferred financing cost of $0 and $82 as of March 31, 2016 and December 31, 2015, respectively)     2,389       1,316  
Derivative liability     4,165       5,098  
Share-settled debt     476       521  
Total current liabilities     15,830       16,107  
                 
Deferred tax liability     1,113       1,113  
Total liabilities     16,943       17,220  
                 
Series E, $1,000 stated value; 13,335 shares designated; 8,568 issued and outstanding as of March 31, 2016; aggregate liquidation preference of $10,774     10,774       -  
Series H, $1,000 stated value; 25,000 shares designated; 6,042 and 2,816 issued and outstanding as of March 31, 2016 and December 31, 2015, respectively; aggregate liquidation preference of $9,977     9,977       3,154  
                 
COMMITMENTS AND CONTINGENCIES                
                 
STOCKHOLDERS’ EQUITY (DEFICIT):                
Convertible preferred stock, $0.001 par value, 10,000,000 shares authorized:                
Series A, $0.001 par value, 250,000 shares designated, -0- shares issued and outstanding as of March 31, 2016 and December 31, 2015     -       -  
Series B, $0.001 par value, 3,000,000 shares designated, -0- shares issued and outstanding as of March 31, 2016 and December 31, 2015     -       -  
Series C, $0.001 par value, 750,000 shares designated, 750,000 shares issued and outstanding as of March 31, 2016 and December 31, 2015     1       1  

Series E, $1,000 stated value; 13,335 shares designated, 9,766 issued and outstanding as of December 31, 2015;

    -       8,764  
Common stock, $0.001 par value, 150,000,000 authorized; 57,640,958 and 21,177,353 shares issued and outstanding at March 31, 2016 and December 31, 2015, respectively     58       21  
Additional paid-in capital     78,985       74,767  
Accumulated deficit     (104,873 )     (92,241 )
Total stockholders' equity (deficit)     (25,829 )     (8,688 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) AND TEMPORARY EQUITY   $ 11,865     $ 11,686  

 

See notes to condensed consolidated financial statements.

 

  1  

 

 

AMARANTUS BIOSCIENCE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(Unaudited)

 

    For the three months ended  
    March 31,  
    2016     2015  
Net revenues:   $ -     $ -  
                 
Operating expenses:                
Research and development     1,357       2,477  
General and administrative     1,295       4,061  
Total operating costs and expenses     2,652       6,538  
Loss from operations     (2,652 )     (6,538 )
Other income (expense):                
Interest Expense     (1,278 )     (42 )
Change in fair value of warrants & derivatives liabilities     2,459       -  
Change in fair value of share-settled debt     20       -  
Loss on extinguishment of convertible debt     (74 )     -  
Other expense     (51 )     -  
Total other income (expense)     1,076       (42 )
Net loss     (1,576 )     (6,580 )
Dividends declared on convertible preferred stock     (749 )     (828 )
Deemed dividends on convertible preferred stock     (10,307 )     -  
Net loss applicable to common stockholders   $ (12,632 )   $ (7,408 )
                 
Net loss per share applicable to common stockholders - basic and diluted   $ (0.37 )   $ (1.02 )
Weighted average shares used in computing basic and diluted loss per share     33,720,000       7,232,000  

 

See notes to condensed consolidated financial statements.

 

  2  

 

 

AMARANTUS BIOSCIENCE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

(Unaudited)

(in thousands, except share and per share data)

 

    Convertible
Preferred Stock 		    Common Stock    

Additional

Paid-in

    Accumulated    

Total

Stockholders'

Equity

 
    Shares     Par value     Shares     Par value     Capital     Deficit     (Deficit)  
Balance as of January 1, 2016     759,766       8,765       21,177,353       21       74,767       (92,241 )     (8,688 )
Reclass Series E convertible stock to temporary equity     (9,766 )     (8,764 )     -       -       -       -       (8,764 )
Beneficial conversion feature of Series H convertible preferred stock     -       -       -       -       610       -       610  
Deemed dividends related to immediate accretion of beneficial conversion feature of Series H convertible preferred stock     -       -       -       -       -       (610 )     (610 )
Common stock issued in conversion of Series H convertible preferred stock     -       -       18,426,595       18       1,336       -       1,354  
Deemed dividend on conversion of Series H convertible preferred stock to common stock     -       -       -       -       -       (923 )     (923 )
Deemed dividends related to repurchase of Series H convertible preferred stock                                             (259 )     (259 )
Deemed dividends related to accretion of redemption value of Series H convertible preferred stock     -       -       -       -       -      

(5,095

)    

(5,095

)
Common stock issued in conversion of Series E convertible preferred stock     -       -       10,262,957       10       1,195       -       1,205  
Deemed dividend on conversion of Series E convertible preferred stock to common stock                                             (130 )     (130 )
Deemed dividends related to repurchase of Series E convertible preferred stock                                             (153 )     (153 )
Deemed dividends related to accretion of redemption value of Series E convertible preferred stock     -       -       -       -       -       (3,137 )     (3,137 )
Common stock issued for note conversion     -       -       2,484,857       3       196       -       199  
Common stock issued for accrued interest conversion     -       -       1,326,192       1       74       -       75  
Common stock issued for Series E convertible preferred stock quarterly dividend     -       -       1,852,453       2       323       -       325  
Common stock issued for Series H convertible preferred stock quarterly dividend     -       -       1,630,499       2       146       -       148  
Series E dividend accrued     -       -       -       -       -       (601 )     (601 )
Series H dividend accrued     -       -       -       -       -       (148 )     (148 )
Common stock issued for services     -       -       480,000       1       217       -       218  
Stock-based compensation expense     -       -       -       -       161       -       161  
Legal fees related to stock financing     -       -       -       -       (40 )     -       (40 )
Fractional shares related to rounding     -       -       52       -       -       -       -  
Net loss     -       -       -       -       -       (1,576 )     (1,576 )
Balance as of March 31, 2016     750,000     $ 1       57,640,958     $ 58     $ 78,985     $

(104,873

)   $

(25,829

)

 

See notes to condensed consolidated financial statements.

 

  3  

 

 

AMARANTUS BIOSCIENCE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

 

    For the three months ended  
    March 31,  
    2016     2015  
Cash flows from operating activities            
Net loss   $ (1,576 )   $ (6,580 )
Adjustments to reconcile net loss to net cash used in operating activities                
Depreciation and amortization     20       19  
Amortization of debt discount     961       -  
Amortization of deferred financing fees     85       -  
Amortization of intangible assets     -       32  
Non-cash financing expense     -       14  
Loss on extinguishment of convertible debt     74          
Change in fair value of warrants and derivative liability     (2,459 )     -  
Change in fair value of share-settled debt     (20 )     -  
Common stock issued for services     218       106  
Stock-based compensation expense     161       488  
Changes in assets and liabilities:                
Prepaid expenses and other current assets     225       (62 )
Accounts payable and accrued expenses     (304 )     (1,851 )
Related party liabilities and accrued interest     1       -  
Accrued interest     127       29  
Net cash used in operating activities     (2,487 )     (7,805 )
                 
Cash flows from investing activities                
Acquisition of DioGenix, Inc, net of non-cash portion     -       (900 )
Investment in convertible note receivable     (500 )     -  
Acquisition other assets     -       (1 )
Net cash used in investing activities     (500 )     (901 )
                 
Cash flows from financing activities                
Proceeds from senior secured convertible promissory notes     -       2,850  
Sale of Series E convertible preferred stock     230       2,950  
Sale of Series H convertible preferred stock     3,890       -  
Repurchase of Series E preferred stock     (384 )     -  
Repurchase of Series H convertible preferred stock     (634 )     -  
Repayment of notes payable     (100 )     -  
Legal fees related to stock financing     (91 )     (19 )
Proceeds from issuance of common stock     -       2,820  
Net cash provided by financing activities     2,911       8,601  
                 
Net increase in cash and cash equivalents     (76 )     (105 )
Cash and cash equivalents, beginning of the year     176       214  
Cash and cash equivalents, end of period   $ 100     $ 109  

 

See notes to condensed consolidated financial statements.

 

  4  

 

 

AMARANTUS BIOSCIENCE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued

(Unaudited)

(in thousands)

 

    For the three months ended  
    March 31,  
    2016     2015  
Supplemental schedule of non-cash investing and financing activities:            
Series E convertible preferred stock activities:            
Reclass Series E convertible preferred stock to temporary equity   $ 8,764     $ -  
Common stock issued in conversion of Series E convertible preferred stock   $ 1,205     $ 172  
Deemed dividends on conversion of Series E convertible preferred stock to common stock   $ 130     $ -  
Deemed dividends on repurchase of Series E convertible preferred stock   $ 27     $ -  
Deemed dividends related to accretion of Series E convertible preferred stock redemption value   $ 3,137     $ -  
                 
Series H convertible preferred stock activities:                
Beneficial conversion feature of Series H convertible preferred stock   $ 610     $ -  
Deemed dividends related to immediate accretion of beneficial conversion feature of Series H convertible preferred stock   $ 610     $ -  
Fair Value of derivative liability common stock warrant issued with Series H convertible preferred stock   $ 1,456     $ -  
Common stock issued in conversion of Series H convertible preferred stock   $ 1,354     $ -  
Deemed dividends on conversion of Series H convertible preferred stock to common stock   $ 923     $ -  
Deemed dividends on repurchase of Series H convertible preferred stock   $ 48     $ -  
Deemed dividends related to accretion of Series H convertible preferred stock redemption value   $ 5,095     $ -  
Series H preferred stock issued for note conversion   $ 100     $ -  
                 
Series D convertible preferred stock activities:                
Common stock issued in conversion of Series D convertible preferred stock   $ -     $ 9  
Common stock issued for Series D preferred quarterly dividend   $ -     $ 35  
                 
Debt related activities:                
Debt discount associated with convertible promissory note - derivative liability   $ 105     $ -  
Reversal of unamortized debt discount related to debt conversion   $ 35   $ -  
Common stock issued for accrued interest conversion   $ 75     $ -  
Common stock issued for share-settled debt and convertible promissory notes conversion   $ 125     $ -  
Reclass between notes payable and senior convertible notes   $ 300     $ -  
Common stock issued as fee for debt financing arrangement   $ -     $ 102  
                 
Preferred stock dividend activities:                
Common stock issued for Series E preferred quarterly dividend   $ 325     $ 237  
Common stock issued for Series H preferred quarterly dividend   $ 148     $ -  
Series D preferred stock dividend accrued at period end   $ -     $ 15  
Series E preferred stock dividend accrued at period end   $ 601     $ 192  
Series H preferred stock dividend accrued at period end   $ 148     $ -  

 

See notes to condensed consolidated financial statements.

 

  5  

 

 

AMARANTUS BIOSCIENCE HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1. GENERAL

 

Amarantus Bioscience Holdings, Inc. (“Amarantus” or the “Company”) is a California based biopharmaceutical company founded in January 2008. We own or have exclusive licenses to various product candidates in the biopharmaceutical and diagnostic areas of the healthcare industry. We are developing our diagnostic product candidates in the field of neurology, and our therapeutic product candidates in the areas of neurology, psychiatry, ophthalmology and regenerative medicine. Our business model is to develop our product candidates through various de-risking milestones that we believe will be accretive to shareholder value, and will position them to be strategically partnered with pharmaceutical companies, diagnostic companies and/or other stakeholders in order to more efficiently achieve regulatory approval and commercialization.

 

Amarantus Bioscience has three operating divisions: the diagnostics division; the therapeutics division; and the drug discovery division.

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.  All significant intercompany balances and transactions have been eliminated in consolidation.

 

The unaudited condensed consolidated financial statements (Financial Statements) have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and reflect all adjustments (consisting of normal recurring adjustments unless otherwise indicated) which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. Certain prior year amounts have been reclassified to conform to current year presentation.

 

Certain information in footnote disclosures normally included in the financial statements prepared in conformity with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the SEC rules and regulations for interim reporting. The financial results for the periods presented may not be indicative of the full year’s results. The Company believes the disclosures are adequate to make the information presented not misleading.

 

These financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the fiscal year ended December 31, 2015 included in the Company’s Annual Report on Form 10K filed in May 2016.

 

Significant Accounting Policies

 

There have been no material changes in the Company’s significant accounting policies to those previously disclosed in the 2015 Annual Report.

 

Reclassification - Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period financial statements. These reclassifications had no effect on the previously reported net loss.

  

Use of Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Significant estimates include the fair value of derivatives, the fair value of stock-based compensation and warrants, the carrying value of intangible assets (patents and licenses), valuation allowance against deferred tax assets, and related disclosure of contingent assets and liabilities. Actual results could differ from those estimates.

 

Research and Development Expenditures - Research and development costs are expensed as incurred. Research and development costs include salaries and personnel-related costs, consulting fees, fees paid for contract research services, fees paid to clinical research organizations and other third parties associated with clinical trials, the costs of laboratory equipment and facilities, and other external costs. The Company incurred approximately $1.4 million and $2.5 million research and development costs for the three months ended March 31, 2016 and 2015, respectively. 

 

Related Party, Fair Value Convertible Notes Receivable - The Company’s convertible note receivable as of March 31, 2016 was valued, taking into consideration, cost of the investment, market participant inputs, market conditions, liquidity, operating results and other qualitative and quantitative factors. The values at which the Company’s convertible note receivable are carried on its books are adjusted to estimated fair value at the end of each quarter taking into account general economic and stock market conditions and those characteristics specific to the underlying investments.  Due to the short term nature of convertible note receivable, cost approximates fair value.

 

  6  

 

 

AMARANTUS BIOSCIENCE HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

  

Recent Accounting Pronouncements

 

In January 2016, FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities . ASU 2016-01 requires equity investments to be measured at fair value with changes in fair value recognized in net income; simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; requires separate presentation of financial assets and financial liabilities by measurement category and form of financial assets on the balance sheet or the accompanying notes to the financial statements; and clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. ASU 2016-01 will be effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company is currently evaluating the impact that ASU 2016-01 will have on its condensed consolidated financial statements and related disclosures.

 

In February 2016, FASB issued ASU No. 2016-02, Leases (Topic 842) which supersedes FASB ASC Topic 840, Leases (Topic 840) and provides principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than twelve months regardless of classification. Leases with a term of twelve months or less will be accounted for similar to existing guidance for operating leases. The standard will be effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted upon issuance. The Company is currently evaluating the impact that ASU 2016-02 will have on its condensed consolidated financial statements and related disclosures.

 

In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). The amendment is to simplify several aspects of the accounting for share-based payment transactions including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public entities, the amendments in ASU 2016-09 are effective for interim and annual reporting periods beginning after December 15, 2016. The Company is currently assessing the impact of ASU 2016-09 on its condensed consolidated financial statements and related disclosures.  

 

2. LIQUIDITY AND GOING CONCERN

 

The Company’s activities since inception have consisted principally of acquiring product and technology rights, raising capital, and performing research and development. Successful completion of the Company’s development programs and, ultimately, the attainment of profitable operations are dependent on future events, including, among other things, its ability to access potential markets; secure financing, develop a customer base; attract, retain and motivate qualified personnel; and develop strategic alliances. From inception, the Company has been funded by a combination of equity and debt financings. Although management believes that the Company will be able to successfully fund its operations, there can be no assurance that the Company will be able to do so or that the Company will ever operate profitably. The Company’s activities since inception have consisted principally of acquiring product and technology rights, raising capital, and performing research and development. Historically, we have incurred net losses and negative cash flows from operations.

 

The Company expects to continue to incur substantial losses over the next several years during its development phase. To fully execute its business plan, the Company will need to complete certain research and development activities and clinical studies. Further, the Company’s product candidates will require regulatory approval prior to commercialization. These activities may span many years and require substantial expenditures to complete and may ultimately be unsuccessful. Any delays in completing these activities could adversely impact the Company. The Company plans to meet its capital requirements primarily through issuances of debt and equity securities and, in the longer term, revenue from product sales.

 

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which contemplate continuation of the Company as a going concern.

 

  7  

 

 

AMARANTUS BIOSCIENCE HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Historically, the Company has incurred net losses and negative cash flows from operations. The Company believes its current capital resources are not sufficient to support its operations. Management intends to continue its research efforts and to finance operations of the Company through debt and/or equity financings. Management plans to seek additional debt and/or equity financing through private or public offerings or through a business combination or strategic partnership. There can be no assurance that the Company will be successful in obtaining additional financing on favorable terms, or at all. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

 

3. NET LOSS PER SHARE

 

The following table sets forth the computation of the basic and diluted net loss per share attributable to the Company’s common stockholders for the periods indicated (dollars in thousands, except per share amounts):

 

    For the three months ended  
    March 31,  
    2016     2015  
Numerator:            
Net loss   $ (1,576 )   $ (6,580 )
Preferred stock dividend     (749 )     (828 )
Deemed dividends on convertible preferred stock    

(10,307

)     -  
Net loss attributable to common stockholders   $

(12,632

)   $ (7,408 )
                 
Denominator:                
Common stock outstanding     33,720,000       7,232,000  
                 
Basic and diluted net loss per share   $

(0.37

)   $ (1.02 )

 

Potentially dilutive securities consist of:

 

    For the three months ended  
    March 31,  
    2016     2015  
Outstanding common stock options     308,000       379,000  
Outstanding preferred stock option     829,000       829,000  
Common stock purchase warrants     52,839,000       306,000  
Related party liability and accrued interest     5,159,000       34,000  
Notes payable     10,060,000       -  
Convertible senior secured promissory notes and accrued interest     94,803,000       -  
Share-settled debt and accrued interest     6,936,000       -  
Convertible preferred stock Series C     5,000       5,000  
Convertible preferred stock Series E     95,204,000       -  
Convertible preferred stock Series H       100,696,000       -  
Potentially dilutive securities     366,839,000       1,553,000  

 

All of the listed dilutive securities are excluded from the computation of fully diluted loss per share as they are anti-dilutive.

  

  8  

 

 

AMARANTUS BIOSCIENCE HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

4. RELATED PARTY CONVERTIBLE NOTES RECEIVABLE, AT FAIR VALUE

 

Notes receivable are stated at fair value, as the Company has elected to fair value its notes receivable using the fair value option permitted to the Company. The following is a summary of outstanding related party convertible notes receivable as of March 31, 2016 (amount in thousands):

 

            Stated     Conversion     Carrying  
    Issue Date   Maturity Date   Interest Rate     Terms     Value  
Avant Diagnostics, Inc   3/7/2016   3/7/2017     12 %   $ 0.20     $ 100,000  
Theranostics Health, Inc   2/29/2016   2/28/2017     8 %   $ 40.64       400,000  
Ending balance as of March 31, 2016                           $ 500,000  

 

On March 1, 2016, the Company loaned $400,000 to Theranostic Health, Inc. (“THI”) which is evidenced by a convertible note issued by THI (the “THI Note”). The Company provided the financing evidenced by the Note in order to facilitate the proposed acquisition by Avant Diagnostics, Inc. (“Avant”) of the assets and certain liabilities of THI. In a concurrent transaction, the Company has entered into a non-binding letter of intent to sell its wholly-owned subsidiary, Amarantus Diagnostics, Inc. to Avant for 80 million shares of common stock of Avant.

 

The THI Note matures on February 28, 2017 and bears interest at 8% per annum payable at maturity in cash. The THI Note is convertible at any time at the option of the Company into shares of common stock of THI at a conversion price of $40.64 per share. The THI Note shall automatically convert into shares of common stock of THI upon a change of control of THI. It is expected that the THI Note will be assumed by Avant upon consummation of the transaction with THI. The conversion price of the THI Note is subject to weighted average anti-dilution price protection if the dilutive issuances are for less than $1 million and full ratchet anti-dilution protection if the dilutive issuances are for more than $1 million. The THI Note has events of default in for any default in the payment of principal or interest when due and for bankruptcy.

 

On March 7, 2016, the Company loaned $100,000 to Avant which is evidenced by a convertible note (the “Avant Note”). The Avant Note matures on March 7, 2017 and bears interest at 12% per annum payable at maturity in cash. The Avant Note is convertible at any time at the option of the Company into shares of common stock of Avant at a conversion price of $0.20 per share. The Avant Note shall automatically convert into shares of common stock of Avant upon a change of control of Avant.

 

5. NOTES PAYABLE

   

On March 9, 2016 two investors assigned their 12% Promissory notes issued by the Company to a third investor. The third investor, on the same day, entered into two separate Exchange Agreements with the Company.  The Exchange Agreements allow the third investor to exchange the 12% Promissory Notes for two separate 12% Senior Secured Convertible Promissory Notes in the principal amounts of $100,000 and $200,000 respectively.

 

During the quarter ended March 31, 2016, the Company made payment of $100,000 on outstanding notes payable, and $30,000 on accrued interest.

 

As of March 31, 2016, the Company had notes payable in the aggregate amount of $600,000 outstanding.

 

The Company is in default under the terms of all of its outstanding notes payables.

 

6. SENIOR SECURED CONVERTIBLE PROMISSORY NOTES

 

The following is a summary of outstanding senior secured convertible notes as of March 31, 2016 (amount in thousands):

 

            Stated                 Accumulated        
    Issue
Date 		  Maturity
Date 		  Interest Rate     Conversion
Terms 		    Face Value     Debt
Discount 		    Carrying
Value 		 
Delafeild Investments Ltd   9/30/2015   9/29/2016     12 %   $ 0.06     $ 3,056     $ (1,716 )   $ 1,340  
Dominion Capital LLC   9/30/2015   9/29/2016     12 %   $ 0.06       2,096       (1,177 )     919  
GEMG LLC   3/9/2016   7/1/2016     12 %   $ 0.06       200       (70 )     130  
Ending balance as of March 31, 2016                           $ 5,352     $ (2,963 )   $ 2,389  

 

Dominion Notes

  

During the quarter ended March 31, 2016, the Company entered into a conversion agreement with Dominion Capital for the conversion of an aggregate amount of $75,000 in accrued interest on notes issued to Dominion Capital to 1.3 million shares of common stock.

 

Other Convertible Notes

 

On March 9, 2016, an individual investor exchanged its note payable of $300,000 for 12% senior secured convertible notes. The Company recorded additional embedded conversion feature of $105,000 as debt discount on the issuance date.

 

  9  

 

 

AMARANTUS BIOSCIENCE HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

During March 2016, an outstanding $100,000 note was converted into 2.0 million shares of common stock, and the Company wrote off $35,000 debt discount associated with the note. The Company recorded a loss of $40,000 on the conversion based on the fair value of the common stock recorded.

 

During the quarter ended March 31, 2016, the Company entered into a conversion agreement with an investor to covert an aggregate amount of $100,000 to 110 shares of Series H convertible preferred stock including a 10% OID.

 

The Company is in default under the terms of all of its senior secured convertible promissory notes.

 

7. SHARE-SETTLED DEBT

 

During the quarter ended March 31, 2016, the Company converted $25,000 share-settled debt into 495,188 shares of common stock at $0.12 per share. The Company also recorded an extinguishment loss of $34,000 on the conversion.

 

The Company is in default under the terms of its share-settled debt.

 

8. FAIR VALUE MEASUREMENTS

 

The Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2016 by level within the fair value hierarchy, are as follows (in thousands): 

 

    Fair value measured at March 31, 2016  
    Fair value
at
March 31, 		    Quoted
prices
in active
markets 		    Significant
other
observable
inputs 		    Significant 
unobservable inputs 		 
    2016     (Level 1)     (Level 2)     (Level 3)  
Assets:                                
Related party convertible notes receivable   $ 500     $ -     $ -     $ 500  
Total fair value   $ 500     $ -     $ -     $ 500  
                                 
Liabilities:                                
Embedded conversion feature   $ 2,092     $ -     $ -     $ 2,092  
Warrant liability     2,073       -       -       2,073  
Share-settled debt     476       -       -       476  
Total fair value   $ 4,641     $ -     $ -     $ 4,641  

   

There were no transfers between Level 1, 2 or 3 during the three months ended March 31, 2016.

 

The following table presents additional information about Level 3 liabilities measured at fair value. Both observable and unobservable inputs may be used to determine the fair value of positions that the Company has classified within the Level 3 category. As a result, the unrealized gains and losses for assets and liabilities within the Level 3 category may include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities) inputs.

 

Changes in Level 3 liabilities measured at fair value for the three months ended March 31, 2016 were as follows (dollars in thousands):

 

          Embedded              
    Warrant
Liability 		    Conversion
Feature 		    Share-settled Debt     Total  
January 1, 2016     3,025       2,073       521       5,619  
Issuance of warrants     1,456       -       -       1,456  
Issuance of convertible notes     -       105       -       105  
Conversion of 12% senior convertible debentures to common stock     -       -       -       -  
Conversion of share-settled debt to common stock     -       (35 )     (25 )     (60 )
Change in fair value     (2,408 )     (51 )     (20 )     (2,479 )
March 31, 2016   $ 2,073     $ 2,092     $ 476     $ 4,641  

 

The Company’s warrant liabilities, derivative liabilities and share-settled debt are measured at fair value using the Monte Carlo simulation valuation methodology. A summary of weighted average (in aggregate) about significant unobservable inputs (Level 3 inputs) used in measuring the Company’s warrant liabilities that are categorized within Level 3 of the fair value hierarchy for the years ended December 31, 2015 is as follows:

 

  10  

 

 

AMARANTUS BIOSCIENCE HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

    As of March 31, 2016  
          Embedded        
    Warrant
Liability 		    Conversion Feature     Share-settled Debt  
Contractual life (years)     4.63       0.50       0.10  
Annualized volatility     72 %     72 %     72 %
Conversion price   $ 0.29     $ 0.06     $ 0.30  
Expected dividends     0 %     0 %     0 %
Risk-free investment rate     1.1 %     0.4 %     0.4 %

 

* The Company uses comparable companies within the same industry to derive at the 72% annualized volatility. 

 

9. TEMPORARY EQUITY

 

Series E Preferred Stock

 

The following table summarizes the Company’s Series E Preferred Stock activities for the three months ended March 31, 2016 (amount in thousands):

 

    Series E convertible
preferred stock 		 
    Shares     Value  
Balances as of January 1, 2016     -     $ -  
Reclass Series E to temporary equity     9,766       8,764  
Proceeds from sale of Series E preferred stock     256       230  
Common stock issued in conversion of Series E convertible preferred stock     (1,205 )     (1,205 )
Deemed dividends on conversion of Series E convertible preferred stock to common stock     -       130  
Repurchase of Series E preferred stock     (248 )     (248 )
Offering cost related to repurchase of Series E preferred stock     -       (10 )
Deemed dividends on repurchase of Series E convertible preferred stock     -       27  
Deemed dividends related to accretion of redemption value     -       3,137  
Legal fees related to stock financing     -       (51 )
Balance as of March 31, 2016     8,569     $ 10,774  

 

Securities Purchase Agreement

 

On February 8, 2016, the Company entered into a Securities Purchase Agreement with institutional investors for the sale of 255.56 (including 10% OID) shares of the Company’s 12% Series E Preferred Stock (the “Series E Preferred Stock”) in a registered direct offering, subject to customary closing conditions. The gross proceeds to the Company from the offering were $230,000. Each share of Series E Preferred Stock has a stated value of $1,000 and is convertible into shares of common stock at a conversion price of $7.50 provided if the Holder delivers a conversion notice within 5 trading days following a period that the average of 3 consecutive VWAPs is less than $9.00, the conversion price shall be equal to lesser of the then conversion price and 65% of the lowest 2 consecutive VWAPs out of the prior 10 consecutive trading days prior to the delivery of the conversion notice.

 

Repurchase agreement of Series E Preferred Stock

 

The Company entered into repurchase agreements with one of its institutional investors pursuant to which the Company repurchased an aggregate of 248 shares of Series E Preferred Stock at a price of $385,000, including offering costs of $10,000.

 

Conversion of Series E Preferred Stock

 

During the quarter ended March 31, 2016, 1,205 shares of Series E Preferred were converted to 10.3 million shares of common stock. Upon conversion, the Company recorded an additional deemed dividend of $130,000.

 

Temporary equity

 

The Series E Preferred Stock is being classified as temporary equity because it has redemption features that are outside of the Company’s control upon certain triggering events, such as the failure of the Company to at all times have an effective registration statement or usable prospectus that would allow for the resale the Conversion Shares.

 

  11  

 

 

AMARANTUS BIOSCIENCE HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Redemption value

 

The Company is carrying the Series E at its maximum redemption amount at March 31, 2016 as the security is not currently redeemable, but is redeemable subsequent to March 31, 2016. The Company recognized the change immediately as if the redemption was to occur as of March 31, 2016. The current redemption amount is $10.8 million as of March 31, 2016.

 

Series H Preferred Stock

 

The following table summarizes the Company’s Series H Preferred Stock activities for the three months ended March 31, 2016 (amount in thousands):

 

    Series H convertible
preferred stock 		 
    Shares     Value  
Balance as of January 1, 2016     2,816     $ 3,154  
Series H preferred stock issued for note conversion     110       100  
Proceeds from sale of Series H preferred stock, net of issuance cost of $0.5 million     4,883       3,890  
Beneficial conversion feature of Series H convertible preferred stock     -       (610 )
Deemed dividends related to immediate accretion of beneficial conversion feature of Series H convertible preferred stock     -       610  
Fair Value of common stock warrant issued with Series H convertible preferred stock     -       (1,456 )
Common stock issued in conversion of Series H convertible preferred stock     (1,354 )     (1,354 )
Deemed dividends on conversion of Series H convertible preferred stock to common stock     -       923  
Repurchase of Series H convertible preferred stock     (413 )     (413 )
Offering cost related to repurchase of Series H convertible preferred stock     -       (10 )
Deemed dividends on repurchase of Series H convertible preferred stock     -       48  
Deemed dividends related to accretion of redemption value     -       5,095  
Balance as of March 31, 2016     6,042     $ 9,977  

 

Securities Purchase Agreement

 

During the quarter ended March 31, 2016, the Company entered into multiple Securities Purchase with accredited investors for sale of an aggregate of 4,883 (including 10% OID) shares of 12% Series H Preferred Stock and warrants to purchase 13,920,000 shares of common stock in registered direct offerings. The warrants are immediately exercisable, expire on the five-year anniversary from issuance and have an exercise price of $0.40 per share. The aggregate gross proceeds to the Company were $4.4 million. The Company also incurred $535,000 related offering cost. Each share of Series H Preferred Stock has a stated value of $1,000 and is convertible into shares of common stock $0.06 as of March 31, 2016.

 

During the quarter ended March 31, 2016, the Company recorded a deemed dividend of $610,000 related to the beneficial conversion feature of the Series H Convertible Preferred stock.

 

The Company entered into repurchase agreements with one of its institutional investor pursuant to which the Company repurchased an aggregate 413 shares of Series H Preferred Stock at a price of $635,000, including offering costs of $10,000.

 

Conversion of Series H Preferred Stock

 

During the quarter ended March 31, 2016, 1,354 shares of Series H Preferred were converted to 18.4 million shares of common stock. Upon conversion the Company recorded an additional deemed dividend of $923,000 associated with the make-whole provision .

 

Redemption value

 

The Company is carrying the Series H at its maximum redemption amount at March 31, 2016 as the security is currently redeemable. The Company recognized the change immediately as if the redemption was to occur as of March 31, 2016. The current redemption amount is $10.0 million as of March 31, 2016.

 

  12  

 

 

AMARANTUS BIOSCIENCE HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

10. STOCKHOLDERS' EQUITY

 

Warrants

 

Common Stock Purchase Warrants

 

The following table summarizes the Company’s warrant activities for the three months ended March 31, 2016:

 

                Weighted Average  
        Weighted     Remaining  
    Number of
Warrants 		    Average
Exercise Price 		    Contractual Term  
Outstanding as of December 31, 2015     12,809,950     $ 1.14       4.52  
Issued in connection with various financings (1)     14,744,666       0.48          
Reset warrants (2)     25,284,713       0.24          
Outstanding as of March 31, 2016     52,839,329     $ 0.39       4.63  

 

(1) The warrants contain “down round protection” and the Company classifies these warrant instruments as liabilities at their fair value and adjusts the instruments to fair value at each reporting period.

 

(2) Certain warrants contain aggregate exercise provisions, and upon a reset the exercise price is decreased and the amount of common stock available under the warrant agreement increases.  During the 1st quarter a reset occurred decreasing the exercise price from $2.00 to $0.24, and increasing the amount of common stock available to be issued from 12,727,000 to 38,011,000

 

11. STOCK OPTION PLANS

 

Stock-based compensation expense for all plans is classified in the statements of operations as follows (dollars in thousands):

 

   

Three Months Ended

March 31,

 
    2016     2015  
Research and development   $ 39     $ 184  
General and administrative     122       304  
Total   $ 161     $ 488  

 

At March 31, 2016, there was a total of approximately $1.9 million of unrecognized compensation cost, related to non-vested stock option awards, which is expected to be recognized over a weighted-average period of approximately 2.1 years.

 

12. RELATED-PARTY TRANSACTIONS

 

Convertible Notes Receivable

 

See footnote 4 for a discussion of related party convertible notes receivable.

 

Notes Payable

 

The Company has a demand promissory note with Neurotrophics, which is due 365 days upon demand of the holder. At the option of the Company, the note and the accrued interest owed can be repaid by issuing shares of its common stock based on the closing price of the Company’s common stock on the day of the conversion. The conversion price if converted on March 31, 2016 would be $0.05 related to the note and accrued interest on the note and would convert to approximately 5.2 million shares.

 

  13  

 

 

AMARANTUS BIOSCIENCE HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

13. SUBSEQUENT EVENTS

 

Subsequent to April 1, 2016, the Company issued shares of its common stock as follows:

 

  ● 3.4 million shares of common stock upon conversion of 80 shares of Series E Preferred Stock in accordance with the original terms;

 

  ● 10.3 million shares of common stock upon conversion of 251 of Series H Preferred Stock in accordance with the original terms;  
     
  ● 0.8 million shares of common stock as payment of dividends on its Series H Preferred Stock;

 

See below for more detail regarding certain debt and equity related transactions.

 

Debt Financing

 

On April 14, 2016, the Company entered into a Securities Purchase Agreement (the “Notes SPA”) with three institutional investors for the sale of an aggregate principal amount $1,500,000 (including 10% OID) 10% Senior Secured Convertible Promissory Notes due April 17, 2017 (the “Senior Secured Notes”) with an annual interest rate of 12% and a warrant to purchase 1,350,000 shares of common stock (the “Warrant”) in a private placement offering (the “Offering”). The gross proceeds to the Company from the Offering were $1,350,000

 

Pursuant to the terms of the Notes SPA, the investors agreed to purchase additional aggregate principal amount of $1,555,556 (including 10% OID) of Senior Secured Notes with an annual interest rate of 12% and Warrants to purchase 1,400,000 shares of the Company’s common stock on the first trading date after the registration statement which is the subject of the registration rights agreement is filed, and an additional $1,388,889 (including 10% OID) of Senior Secured Notes and Warrants to purchase 1,250,000 shares of the Company’s common stock on the 61st day after such registration statement is declared effective or such earlier date as mutually agreed to among the investors, subject to the satisfaction of customary closing conditions. 

 

In connection with the issuance of the Senior Secured Notes and Warrants, the Company entered into a Security Agreement and an Intellectual Property Security Agreement with the investor (the “Security Agreement”) pursuant to which the Company agreed to grant a security interest in all of its assets to the investor in order to secure the prompt payment, performance and discharge in full of all of the Company’s obligations under the Senior Secured Notes. 

 

In addition, each of the Company’s wholly owned subsidiaries entered into a Subsidiary Guarantee, pursuant to which each of the subsidiaries, jointly and severally, agreed to guarantee the obligations of the Company under the Senior Secured Notes.

 

Acquisition of Amarantus Diagnostics by Avant Diagnostics, Inc.

 

On May 11, 2016 (the “Effective Date”), Amarantus, Amarantus Diagnostics, Inc., a wholly-owned subsidiary of Amarantus (“AMDX”), and Avant Diagnostics, Inc. (“Avant”) entered into a Share Exchange Agreement (the “Exchange Agreement”). Pursuant to the terms of the Exchange Agreement, Avant purchased 100% of the outstanding capital stock of AMDX from Amarantus (the “AMDX Acquisition”). The AMDX Acquisition closed upon the execution of the Exchange Agreement. Gerald Commissiong, President and Chief Executive Officer of Amarantus, became a member of Avant’s Board of Directors upon closing of the AMDX Acquisition.

 

Avant paid to Amarantus aggregate consideration of 80,000,000 shares of Avant’s common stock for the AMDX Acquisition, subject to the issuance of additional shares upon the occurrence of certain events set forth in the Exchange Agreement (the “AMDX Consideration”). Each share of Avant common stock received in connection with the AMDX Acquisition shall be subject to a lock-up beginning on the Effective Date and ending on the earlier of (i) eighteen (18) months after such date or (ii) a Change in Control (as defined in the Exchange Agreement).

 

In connection with the Exchange Agreement, on the Effective Date, the Avant issued to Amarantus a convertible promissory note in the principal amount of $50,000 (the "Note"). The Note bears interest at 12% per annum and matures one year from the date of issuance. The Note will be convertible at the option of the Amarantus at any time into shares of Avant’s common stock, at an initial conversion price equal to $0.20, subject to adjustment. The conversion price of the Note is subject to customary adjustments provisions for stock splits, stock dividends, recapitalizations and the like. Amarantus has contractually agreed to restrict its ability to convert the Note such that the number of shares of Avant’s common stock held by Amarantus and its affiliates after such conversion does not exceed 4.99% of Avant's then issued and outstanding shares of common stock.

 

Note Receivable from Theranostics Health Acquisition

 

On May 11, 2016, Avant entered into an Asset Purchase Agreement with Theranostics Health, Inc. (“THI”). Pursuant to the terms of the purchase agreement between Avant and THI, the note receivable in the principal amount of $400,000 issued by THI to the Company on March 1, 2016 was assumed by Avant. The note is currently an obligation of Avant and is convertible into shares of common stock of Avant upon its original terms.

 

  14  

 

  

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

 

Forward-Looking Statements

 

Amarantus Bioscience Holdings, Inc. (”the Company”) is a California-based development-stage biopharmaceutical company founded in January 2008. We focus on developing our intellectual property and proprietary technologies to develop drug and diagnostic product candidates to treat human disease. We own or have exclusive licenses to various product candidates in the biopharmaceutical and diagnostic areas of the healthcare industry, with a specific focus on bringing these candidates to market in the areas of Alzheimer’s disease, Parkinson’s disease, Retinal Degenerative disorders, and other ailments of the human body, with a particular focus on the nervous system. Our business model is to develop our product candidates through various de-risking milestones that we believe will be accretive to shareholder value and strategically partner with biopharmaceutical companies, diagnostic companies, investors, private foundations and other key stakeholders in the specific sub-sector of the healthcare industry in which we are developing our products in order to achieve regulatory approval in key jurisdictions and thereafter successfully market and distribute our products.

 

Overview

 

The Company’s philosophy is to acquire in-license, discover and develop drug candidates and diagnostics with the potential to address critically important biological pathways involved in human disease.

 

Principal Products in Development

 

Amarantus Bioscience has three operating divisions: the diagnostics division; the therapeutics division; and the drug discovery division.

 

  15  

 

 

The Three Months Ended March 31, 2016 compared to Three Months Ended March 31, 2015

 

During the three months ended March 31, 2016 and 2015, we generated no revenue.

 

Research and development costs for the three months ended March 31, 2016 decreased approximately $1.1 million to approximately $1.4 million from approximately $2.5 million for the three months ended March 31, 2015 primarily due to scaled back operations, clinical related costs and research arrangements.

 

General and administrative expenses decreased approximately $2.8 million to approximately $1.3 million for the three months ended March 31, 2016 from approximately $4.1 million for the three months ended March 31, 2015 primarily due to reduced spending on headcount with related compensation expense.

 

For the three months ended March 31, 2016, other income (expense) increased approximately $1.1 million from approximately $42,000 in the three months ended March 31, 2015. The increase was due to the decrease in warrant liabilities of approximately $2.5 million, which was due to the price of common stock declining during the quarter ended March 31, 2016, and offset by an increase of $1.2 million in interest expense.

 

Net loss for the three months ended March 31, 2016 was approximately $1.6 million as compared to a net loss of $6.6 million for the three months ended March 31, 2015 with the decrease in loss driven by scaled back operations, reduced costs, reduced compensation and derivative related income.

 

Inflation adjustments have had no material impact on us.

    

Liquidity and Capital Resources

 

As of March 31, 2016, we had total current assets of approximately $942,000 consisting of approximately $100,000 in cash and cash equivalents, $500,000 in related party convertible notes receivable and $342,000 in prepaid expenses and other current assets. As of March 31, 2016, we had current liabilities in the amount of $15.8 million consisting of (dollars in thousands): 

  

Accounts payable and accrued expenses   $ 7,620  
Related party liabilities and accrued interest   $ 258  
Accrued interest   $ 322  
Notes payable   $ 600  
Senior secured convertible promissory notes, net of discount $2.9 million   $ 2,389  
Derivative liability   $ 4,165  
Share-settled debt   $ 476  

 

As of March 31, 2016, the Company had a working capital deficit in the amount of approximately $14.9 million compared to a deficit of approximately $15.4 million at December 31, 2015. The decrease in the working capital deficit is primarily driven by the decrease in the derivative liabilities.

 

The table below sets forth selected cash flow data for the periods presented (dollars in thousands):

 

   

Three Months Ended

March 31,

 
    2016     2015  
Net cash used in operating activities   $ (2,487 )   $ (7,805 )
Net cash used in investing activities     (500 )     (901 )
Net cash provided by financing activities     2,911       8,601  
Net decrease in cash and cash equivalents   $ (76 )   $ (105 )

 

The success of our business plan during the next 12 months and beyond is contingent upon us generating sufficient revenue to cover our costs of operations, or upon us obtaining additional financing. We believe that our current capital resources are not sufficient to support our operations. We intend to finance our operations through debt and/or equity financings. There can be no assurance that such additional financing will be available to us on acceptable terms, or at all. We intend to use all commercially-reasonable efforts at our disposal to raise sufficient capital to run our operations on a go forward basis.

 

Off Balance Sheet Arrangements

 

Not applicable

 

  16  

 

 

Going Concern

 

We are a development stage company engaged in biotechnology research and development. We have recorded recurring losses from operations since inception; we have a negative working capital and have generated negative cash flow from operations. There is substantial doubt about our ability to continue as a going concern.

   

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of March 31, 2016. This evaluation was carried out under the supervision and with the participation of Gerald Commissiong, our Principal Executive Officer, and Robert Farrell, our Principal Financial and Accounting Officer. Based upon that evaluation, our Chief Executive Officer and Principal Accounting Officer concluded that, as of March 31, 2016, our disclosure controls and procedures were ineffective as of the end of the period covered, due to the following material weaknesses which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both United States generally accepted accounting principles and Securities and Exchange Commission guidelines. Management anticipates that such disclosure controls and procedures will not be effective until the material weaknesses are remediated. We have hired additional staff and added additional resources and expect to remediate the material weakness in our disclosure controls and procedures by the end of our fiscal quarter June 30, 2016.

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Principal Executive Officer, and Principal Financial and Accounting Officer, to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

There was no change in our internal control over financial reporting during the three months ended March 31, 2016 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

  17  

 

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are not currently involved in any litigation that we believe could have a material adverse effect on our financial conditions and result of operations.

 

Item 1A. Risk Factors.

 

There are no material changes to the risk factors in our most recent Annual Report on Form 10-K.

 

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

 

None.

 

Item 3. Defaults upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

Not applicable.

 

Item 6. Exhibits

 

Exhibit Number   Description of Exhibit
31.1   Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2   Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1   Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2   Certification of Principal Accounting Office pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS   XBRL Instance Document
101.SCH   XBRL Schema Document
101.CAL   XBRL Calculation Linkbase Document
101.DEF   XBRL Definition Linkbase Document
101.LAB   XBRL Label Linkbase Document
101.PRE   XBRL Presentation Linkbase Document

 

  18  

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  Amarantus Bioscience Holdings, Inc.
     
  Date: June 1, 2016
     
  By: /s/ Gerald E. Commissiong
    Gerald E. Commissiong
    Title: Chief Executive Officer
    (Principal Executive Officer,
President and Director)
     
  By: /s/ Robert Farrell
    Robert Farrell
   

Chief Financial Officer

(Principal Financial and Accounting Officer)

 

 

19

 

 

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