UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996.
OR
( ) 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 0-11503
CEL-SCI CORPORATION
Colorado 84-0916344
State or other jurisdiction (IRS) Employer
incorporation Identification Number
66 Canal Center Plaza, Suite 510
Alexandria, Virginia 22314
_____________________________
Address of principal executive offices
(703) 549-5293
_____________________________
Registrant's telephone number, including area code
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) had been
subject to such filing requirements for the past 90 days.
Yes ____X_____ No __________
Class of Stock No. Shares Outstanding Date
Common 7,046,902 July 15, 1996
Page 1 of ___ pages
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Page
Balance Sheets 3-4
Statements of Operations 5-6
Statements of Cash Flow 7-8
Notes to Financial Statements 9
Item 2.
Management's Discussion and Analysis 11
PART II
Item 6.
Exhibits and Reports on Form 8-K 12
Signatures 13
CEL-SCI CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1996 AND 1995
(unaudited)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements have been prepared
in accordance with rules established by the Securities and
Exchange Commission for Form 10-Q. Not all financial
disclosures required to present the financial position and
results of operations in accordance with generally accepted
accounting principles are included herein. The reader is
referred to the Company's Financial Statements included in
the registrant's Annual Report on Form 10-K for the year
ended September 30, 1995. In the opinion of management,
all accruals and adjustments (each of which is of a normal
recurring nature) necessary for a fair presentation of the
financial position as of June 30, 1996 and the results of
operations for the nine-month period then ended have been
made. Significant accounting policies have been
consistently applied in the interim financial statements
and the annual financial statements.
Investments
Effective September 30, 1994, the Company adopted, on a
prospective basis, Statement of Financial Accounting
Standard No. 115, "Accounting for Certain Debt and Equity
Securities" (SFAS 115) and revised its policy for
investments. Investments that may be sold as part of the
liquidity management of the Company or for other factors
are classified as available-for-sale and are carried at
fair market value. Unrealized gains and losses on such
securities are reported as a separate component of
stockholders' equity. Realized gains and losses on sales
of securities are reported in earnings and computed using
the specific identified cost basis. As of June 30, 1996,
there is no effect on the Company's financial statements.
Loss per Share
Net loss per common share is based on the weighted average
number of common shares outstanding during the period.
Common stock equivalents, including options to purchase
common stock, are excluded from the calculation as they are
antidilutive.
Long-lived Assets
Statement of Accounting Standards No. 121, "Accounting for
the Impairment of Long-lived Assets and for Long-lived
Assets to be Disposed of" is effective for financial
statements for fiscal years beginning after December 15,
1995. It is the Company's opinion that the adoption of the
statement would have no material effect on its Financial
Statements.
CEL-SCI CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1996 AND 1995
(unaudited)
(continued)
B. JOINT VENTURE
On October 30, 1995, the Company announced it had
acquired Alpha 1 Biomedical's interest in Viral
Technologies, Inc. ("VTI"). VTI was formed by the two
companies in 1986. This transaction gives CEL-SCI 100%
ownership of VTI. Under the terms of the agreement,
CEL-SCI gave Alpha 1 Biomedicals, Inc. 159,170 shares of
CEL-SCI common stock as the purchase price for net
assets with a fair value of approximately $170,000. The
acquisition was accounted for under the purchase
method of accounting; and as the acquisition
represents primarily research and development costs,
the purchase price was expensed and is included as research
and development expense for the nine months ended June 30,
1996. Effective October 31, 1995, the Company has
consolidated CELSCI's and VTI's financial statements and
the consolidated financial statements reflect the results
of VTI's operations since the date of acquisition.
This results in a significant increase in patent
costs on the consolidated balance sheet. Intercompany
accounts are eliminated upon consolidation.
C. CONSTRUCTION OF NEW LABORATORY AND FUNDING
On January 31, 1994, the Company entered into a leasing
agreement with a nonaffiliated landlord for 7,800 square
feet in Baltimore, Maryland. In the spring of 1994 the
Company commenced construction of the new laboratory.
The cost of the laboratory buildout and equipment was
approximately $1,100,000. To fund this laboratory,
the Company borrowed funds from a bank at a rate of
prime plus 2%. The outstanding loan balance at June 30,
1996 is $628,729.
D. CONVERTIBLE DEBENTURES
On March 28, 1996, the Company raised $1,250,000 in
a private placement. The placement was structured
as a convertible debenture. It is convertible into
Cel-Sci common stock prior to December 1, 1996. The
money will be used for research and development and
clinical trials with the Company's cancer and HIV
products. As of June 30, 1996, $825,000 of the
debentures were converted into 165,000 shares of the
Company's common stock.
CEL-SCI CORPORATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Liquidity and Capital Resources
The Company has had only limited revenues from
operations since its inception in March 1983. The Company
has relied upon proceeds realized from the public and private
sale of its Common Stock and short-term borrowings to meet
its funding requirements. Funds raised by the Company have
been expended primarily in connection with the acquisition
of an exclusive worldwide license to certain patented and
unpatented proprietary technology and know-how relating to
the human immunological defense system, the funding of
VTI's research and development program, patent
applications, the repayment of debt, the continuation of
Companysponsored research and development and administrative
costs, and the construction of laboratory facilities.
Inasmuch as the Company does not anticipate realizing
significant revenues until such time as it enters into
licensing arrangements regarding the technology and know-
how licensed to it or until such time it receives
permission to sell its product (which could take a number
of years), the Company is mostly dependent upon short-term
borrowings and the proceeds from the sale of its securities
to meet all of its liquidity and capital resource
requirements.
In February, 1992, the Company sold 1,035,000 Units
at $15.50 per Unit in a public offering. Each unit
consisted of five shares of Common Stock and five Common
Stock Purchase Warrants. Ten Warrants entitle the holder
to purchase one additional share of Common Stock at a price
of $46.50 per share prior to February 7, 1997.
In June and September, 1995, the Company completed
private offerings whereby it sold a total of 1,150,000 units
at $2.00 per unit. Each unit consisted of one share of
Common Stock and one Warrant. Each Warrant entitles the
holder to purchase one additional share of Common Stock at
a price of $3.25 per share at any time prior to June 30, 1997.
The net proceeds to the Company from these offerings,
after the payment of Sales Agent's commissions and
other offering expenses, were approximately $2,000,000.
On November 30, 1995 the Company and the investors in these
Private Offerings agreed to reduce the exercise price of the
Warrants to $1.60 per share in return for the commitment on
the part of the investors to exercise 312,500 Warrants
($500,000) prior to December 23, 1995 and an additional
312,500 Warrants ($500,000) prior to January 31, 1996. All
of these warrants were exercised.
Results of Operations
Interest income during the nine months ending June 30,
1996 reflects interest accrued on investments. The interest
income has declined from the previous year because the
interest income from the loans to VTI is eliminated upon
consolidation. Research and development expenses increased
because of the consolidation of Cel-Sci and Viral
Technologies research and development expenses. In
addition, the purchase of the second 50% of VTI from Alpha 1
was expensed as research and development cost. (See Note B.)
Research and development expenses have also increased due to
new research on the TB vaccine, increased work to follow up on
positive findings with the AIDS vaccine and the commencement
of three clinical studies with cancer and AIDS patients.
General and administrative expenses increased due to interest
expense on the note and due to the consolidation of Cel-
Sci and Viral Technologies general and administrative
expenses and increased expenses related to corporate
development and money raising.
PART II
Item 6.
(a) Exhibits
EX-27, Financial Data Schedule
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during
the fiscal quarter ended June 30, 1996.
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.
CEL-SCI Corporation
Date:_______________, 1996 Geert Kersten
Chief Executive Officer*
*Also signing in the capacity of the Chief Accounting Officer
and Principal Financial Officer.
Item 1. FINANCIAL STATEMENTS
CEL-SCI CORPORATION
CONSOLIDATED CONDENSED BALANCE
SHEETS
ASSETS
(unaudited)
June 30, September
30,
1996 1995
CURRENT ASSETS:
Cash and cash equivalents $6,646,257 $3,886,950
Investments, net 170,000 170,000
Interest receivable 75,405 64,080
Accounts receivable 46,342
Prepaid expenses 267,933 341,295
Advances to officer/shareholder
and employees 129,722 13,234
7,335,659 4,475,559
RECEIVABLE FROM JOINT VENTURE 0 522,695
RESEARCH AND OFFICE EQUIPMENT-
Less accumulated depreciation
of $801,874 and $589,897 935,090 1,102,038
DEPOSITS 18,178 18,178
PATENT COSTS- less accumulated
amortization of
$333,098 and $239,490 435,007 240,541
$8,723,934 $6,359,011
See notes to condensed financial statements.
CEL-SCI CORPORATION
CONSOLIDATED CONDENSED BALANCE
SHEETS
(continued)
LIABILITIES AND STOCKHOLDERS'
EQUITY
(unaudited)
June 30, September 30,
1996 1995
CURRENT LIABILITIES:
Accounts payable $112,312 $248,488
Current portion note payable 243,372 243,372
Total current liabilities 355,684 491,860
NOTE PAYABLE 385,357 567,891
CONVERTIBLE DEBENTURE (Note D) 425,000 -
DEFERRED RENT 24,959 24,959
EQUITY IN SUBSIDIARY 0 432,268
Total liabilities 1,191,000 1,516,978
STOCKHOLDERS' EQUITY
Preferred stock, Series A 3,325,000 -
Common stock, $.01 par
value; authorized,
100,000,000 shares;
issued and outstanding,
7,046,902 and
5,338,244 shares 70,469 53,382
Additional paid-in capital 32,723,024 28,799,198
Deficit (28,499,459) (24,010,547)
Short-term note receivable from (86,100) -
shareholder
TOTAL STOCKHOLDERS'
EQUITY 7,532,934 4,842,033
$8,723,934 $6,359,011
See notes to condensed financial statements.
CEL-SCI CORPORATION
CONSOLIDATED CONDENSED STATEMENTS
OF OPERATIONS
(unaudited)
Nine Months
Ended June 30,
1996 1995
REVENUES:
Gross Sales $51,605 $-
Interest income 136,651 273,417
Other income - 39,588
TOTAL INCOME 188,256 313,005
EXPENSES:
Research and development 2,350,600 1,383,978
Depreciation and
amortization 208,912 201,197
General and administrative 2,113,884 1,268,677
TOTAL OPERATING EXPENSES 4,673,396 2,853,852
EQUITY IN LOSS OF JOINT VENTURE (3,772) (395,224)
4,677,168 3,249,076
NET LOSS $4,488,912 $2,936,071
LOSS PER COMMON SHARE $0.74 $0.70
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 6,086,492 4,194,563
See notes to condensed financial statements.
CEL-SCI CORPORATION
CONSOLIDATED CONDENSED STATEMENTS
OF OPERATIONS
(unaudited)
Three Months
Ended June 30,
1996 1995
REVENUES:
Gross Sales $44,280 $-
Interest Income 51,737 83,111
Other Income - 21,977
TOTAL INCOME 96,017 105,088
EXPENSES:
Research and development 617,987 234,035
Depreciation and
amortization 68,950 67,211
General and administrative 894,165 490,429
TOTAL OPERATING EXPENSES 1,581,102 791,675
EQUITY IN LOSS OF JOINT VENTURE 0 (104,884)
1,581,102 896,559
NET LOSS $1,485,085 $791,471
LOSS PER COMMON SHARE $0.22 $0.19
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 6,612,293 4,207,200
See notes to condensed financial statements.
CEL-SCI CORPORATION
CONSOLIDATED CONDENSED STATEMENTS
OF CASH FLOW
(unaudited)
Nine Months
Ended June 30,
1996 1995
CASH FLOWS FROM OPERATING
ACTIVITIES:
NET LOSS
$(4,488,912) $(2,936,071)
Adjustments to reconcile net loss
to
net cash used in operating
activities:
Depreciation and amortization 208,912 201,197
Equity in loss of joint venture 3,772 395,224
Research and development
expense related
to purchase of Viral 515,617
Technologies, Inc.
Amortization of premium on - 60,954
investments
Realized loss on sale of 13,422
investments
Changes in assets and
liabilities, net of effect from
purchase
of Viral Technologies, Inc.:
Decrease (increase) in interest (11,325) -
receivable
Decrease (increase) in accounts (46,342) 38,128
receivable
Decrease (increase) in prepaid 73,362 (225,853)
expenses
Decrease (increase) in advances (116,488) (19,472)
Decrease (increase) in
receivable from
joint venture - (123,952)
Increase (decrease) in accounts (136,176) (203,594)
payable
NET CASH USED IN OPERATING (3,997,580) (2,800,017)
ACTIVITIES
CASH FLOWS PROVIDED BY (USED IN)
INVESTING ACTIVITY:
Sales of investments - 2,906,132
Purchase of investments - (400,000)
Advance to Joint Venture - (287,952)
Payment on note payable (182,534) (121,689)
Note receivable from (114,800)
employee/shareholder
Payments received on note 28,700
receivable from
employee/shareholder
Laboratory construction - (10,135)
Purchase of research and office (17,808) (128,750)
equipment
Patent costs (30,800) -
NET CASH USED IN INVESTING (317,242) 1,957,606
ACTIVITY
Continued on next page
CASH FLOW, CONTINUED FROM
PREVIOUS PAGE
CASH FLOWS PROVIDED BY FINANCING
ACTIVITIES:
Issuance of convertible 1,250,000 -
debenture
Issuance of note payable - 205,195
Issuance of preferred stock 3,325,000 -
Issuance of common stock 2,499,129 990,890
NET CASH PROVIDED BY FINANCING 7,074,129 1,196,085
ACTIVITIES
NET (DECREASE) INCREASE IN CASH 2,759,307 353,674
CASH AND CASH EQUIVALENTS:
Beginning of period 3,886,950 3,370,713
End of period $6,646,257 $3,724,387
NON-CASH TRANSACTION: In October
1995, Cel-Sci issued 159,170
shares of common stock as
consideration for
the purchase of the remaining 50%
of Viral Technology, Inc. In
conjunction with the acquisition,
CEL-SCI obtained
net assets with a fair value of
approximately $170,000.
NON-CASH TRANSACTION: In March,
1996, a shareholder of the
corporation exercised options to
purchase
40,000 shares of common stock.
The shareholder signed a note for
the stock, agreeing to pay the
note by the
end of June, 1996.
NON-CASH TRANSACTION: $825,000
of the convertible debenture was
converted into 165,000 shares of
common stock during
the three monts ended June 30,
1996.
See notes to
condensed financial statements.
8
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