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 December 31, 1995.
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 5,809,914 February
20,
1996
Page 1 of
___ pages
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Page
Balance Sheets 3-4
Statements of Operations 5
Statements of Cash Flow 6
Notes to Financial Statements 7
Item 2.
Management's Discussion and
Analysis
9
PART II
Item 5.
Other Information 10
Item 6.
Exhibits and Reports on Form 8-K 10
Signatures 11
CEL-SCI CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1995
AND 1994 (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 December
31, 1995 and the results of operations for the three-
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 December 31, 1995, 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
THREE MONTHS ENDED DECEMBER 31, 1995
AND 1994 (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 three months
ended December 31, 1995. The contract also contains
provisions allowing for the repurchase of the shares
by CEL-SCI and limits the amount of shares that can be
sold in the open market at any given time.
Effective October 31, 1995, the Company has
consolidated CEL-SCI'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 non-affiliated landlord for 7,800 square feet
at 4820 Seton Drive, Baltimore, Maryland.
In the spring of 1994 the 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 December 31, 1995 is
$750,418. 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.
Results of Operations
Interest income during the three months ending December
31, 1995 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.)
Before consolidation, Cel-Sci's research and development costs
decreased by approximately $100,000 due to cost savings
achieved from the consolidation of research in the
Company's new lab. General and administrative expenses
increased due to interest expense on the note
and because of the
consolidation of Cel-Sci and Viral Technologies general
and administrative expenses.
PART II
Item 5. Other Information
In December, 1995, Cel-Sci's subsidiary, Viral
Technologies, (VTI) began phase I human testing in HIV-positive
individuals in a clinical trial in California. The trial will
involve injecting 22 individuals with CD4 counts between 50 and
600 with VTI's HGP30 HIV immunogen in a series of three
injections over a period of six months.
On January 4, 1996, the Company announced that it had acquired
a new patented medical technology which directs the body to
chose a specific immune response. This new T-cell Modulation
Process using "heteroconjugates" was acquired from CELL MED,
Inc. of Columbia, Maryland.
Item 6.
(a) Exhibits
No exhibits are filed with this document.
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during
the fiscal quarter ended December 31, 1995.
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)
December 31, September
30,
1995 1995
CURRENT ASSETS:
Cash and cash equivalents $3,040,412 $3,886,950
Investments, net 170,000 170,000
Interest receivable 66,143 64,080
Prepaid expenses 303,962 341,295
Advances to officer/shareholder
and employees 6,930 13,234
3,587,447 4,475,559
RECEIVABLE FROM JOINT VENTURE 0 522,695
RESEARCH AND OFFICE EQUIPMENT-
Less accumulated depreciation
of $678,605 and $589,897 1,040,549 1,102,038
DEPOSITS 18,178 18,178
PATENT COSTS- less accumulated
amortization of
$318,723 and $239,490 423,467 240,541
$5,069,641 $6,359,011
See notes to
condensed financial statements.
3
CEL-SCI CORPORATION
- -------------------
CONSOLIDATED CONDENSED BALANCE
SHEETS
- ------------------------
(continued)
LIABILITIES AND STOCKHOLDERS'
EQUITY
(unaudited)
December 31, September
30,
1995 1995
CURRENT LIABILITIES:
Accounts payable $64,071.00 $248,488.00
Current portion note payable 243,372 243,372
Total current liabilities 307,443 491,860
NOTE PAYABLE 507,046 567,891
DEFERRED RENT 24,959 24,959
EQUITY IN SUBSIDIARY 0 432,268
Total liabilities 839,448 1,516,978
STOCKHOLDERS' EQUITY
Preferred stock, $.01
par value; authorized,
200,000 shares; none issued
- -
Common stock, $.01 par
value; authorized,
100,000,000 shares;
issued and outstanding,
5,809,914 and
5,338,244 shares 58,099 53,382
Additional paid-in capital 29,911,265 28,799,198
Deficit (25,739,171) (24,010,547)
TOTAL STOCKHOLDERS'
EQUITY 4,230,193 4,842,033
$5,069,641 $6,359,011
See notes to
condensed financial statements.
4
CEL-SCI CORPORATION
- -------------------
CONSOLIDATED CONDENSED STATEMENTS
OF OPERATIONS
- ---------------------------------
(unaudited)
Three Months
Ended
December 31,
1995 1994
REVENUES:
Interest income $44,421 $116,701
Other income 18,080 -
TOTAL INCOME 62,501 116,701
EXPENSES:
Research and development 1,238,197 618,636
Depreciation and
amortization 71,268 66,775
General and administrative 477,888 398,281
TOTAL OPERATING EXPENSES 1,787,353 1,083,692
EQUITY IN LOSS OF JOINT VENTURE (3,772) (181,578)
1,791,125 1,265,270
NET LOSS $1,728,624 $1,148,569
LOSS PER COMMON SHARE $0.32 $0.27
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 5,457,431 4,188,244
See notes to
condensed financial statements.
5
CEL-SCI CORPORATION
- -------------------
CONSOLIDATED CONDENSED STATEMENTS
OF CASH FLOW
- ---------------------------------
(unaudited)
Three Months
Ended
December 31,
1995 1994
CASH FLOWS FROM OPERATING
ACTIVITIES:
NET LOSS
$(1,728,624) $(1,148,569)
Adjustments to reconcile net loss
to
net cash used in operating
activities:
Depreciation and amortization 71,268 66,775
Equity in loss of joint venture 3,772 181,578
Amortization of premium on - -
investments
Realized loss on sale of 5,962
investments
Changes in assets and
liabilities:
Decrease (increase) in interest (2,063) 23,999
receivable
Decrease (increase) in prepaid 37,333 78
expenses
Decrease (increase) in advances 6,304 (844)
Decrease (increase) in
receivable from
joint venture - (38,292)
Increase (decrease) in equity 432,268
in subsidiary
Increase (decrease) in accounts (184,417) (255,546)
payable
NET CASH USED IN OPERATING (1,364,159) (1,164,859)
ACTIVITIES
CASH FLOWS PROVIDED BY (USED IN)
INVESTING ACTIVITY:
Purchase of 50% of Viral (533,433) -
Technologies from Alpha 1
Sales of investments - 690,900
Advance to Joint Venture - (34,455)
Payment on note (60,845) (797)
Purchase of research and office - (112,211)
equipment
Patent costs (4,885) -
NET CASH USED IN INVESTING (599,163) 543,437
ACTIVITY
CASH FLOWS PROVIDED BY FINANCING
ACTIVITIES:
Issuance of common stock 1,116,784 -
NET CASH PROVIDED BY FINANCING 1,116,784 -
ACTIVITIES
NET INCREASE IN CASH (846,538) (621,422)
CASH AND CASH EQUIVALENTS:
Beginning of period 3,886,950 3,370,713
End of period $3,040,412 $2,749,291
See notes to
condensed financial statements.
6
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