As filed with the Securities and Exchange Commission on , 1995.
Registration No. 33-97962
SECURITIES AND EXCHANGE COMMISSION Washington,
D.C. 20549
FORM S-l
Registration Statement
Under
THE SECURITIES ACT OF 1933
CEL-SCI Corporation
(Exact name of registrant as specified in charter)
Colorado 283l
(State or other (Primary Standard Classi-
jurisdiction of fication Code Number)
incorporation)
66 Canal Center Plaza, Suite 510
Alexandria, Virginia 223l4
84-09l6344 (703) 549-5293
(IRS Employer (Address, including zip code, and
I.D. Number) telephone number including area of
principal executive offices)
Geert Kersten
66 Canal Center Plaza, Suite 510
(703) 549-5293
(Name and address, including zip code, and
telephone number, including area code, of
agent for service)
Copies of all communications, including all
communications sent to the agent for service,
should be sent to:
William T. Hart, Esq. John G. Herbert, P.C.
Hart & Trinen One Barclay Plaza
1624 Washington Street 1675 Larimer Street
Denver, Colorado 80203 Denver, CO 80202
(303) 839-0061 (303) 534-0522
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE
PUBLIC: As soon as practicable after the effective
date
of this Registration Statement
Page 1 of Pages Exhibit Index Begins on
Page
CALCULATION OF REGISTRATION FEE
Title of each Proposed Proposed
Class of Maximum Maximum
Securities Securities Offering Aggregate Amount of
to be to be Price Per Offering Registration
Registered Registered Unit Price Fee
Common Stock (1) 159,170 $4.94 $786,300 $ 272
Total $786,300 $272
(1) Offering price computed in accordance with Rule 457(c).
The registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective date
until the registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of
l933 or until the Registration Statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a), may
determine.
CEL-SCI CORPORATION
CROSS REFERENCE SHEET
Item in Form S-l Location
in
Prospectus
Item 1 Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus .............................. Facing Page;
Outside Front
Cover Page
Item 2 Inside Front and Outside Back Cover
Pages of Prospectus ..................... Inside Front
Cover Page;
Outside Back
Cover Page
Item 3 Summary Information, Risk Factors and
Ratio of Earnings to Fixed Changes ...... Prospectus
Summary; Risk
Factors
Item 4 Use of Proceeds ......................... Not
Applicable.
Item 5 Determination of Offering Price ......... Plan of
Distribution
Item 6 Dilution ................................ Dilution
Item 7 Selling Security Holders ................ Plan of
Distribution
Item 8 Plan of Distribution .................... Plan of
Distribution
Item 9 Description of Securities to be
Registered .............................. Description
of Securities
Item l0 Interest of Named Experts and Counsel ... Experts
Item 11 Information with Respect to the
Registrant
(a) Description of Business ................. Business (b)
Description of Property ................. Business
(c) Legal Proceedings ....................... Legal Proceedings
(d) Certain Market Information .............. Market
Information,
Description of
Securities
(e) Financial Statements .................... Financial Statements
(f) Selected Financial Data ................. Selected Financial
Data (g) Supplementary Financial Information .....
Not applicable
(h) Management's Discussion and Analysis ....
Management's Discussion and Analysis of Financial Condition
and Results of Operation
(i) Disagreements with Accountants .......... Not
applicable (j) Directors and Executive Officers
........ Management
(k) Executive Compensation ..................
Management (l) Security Ownership of Certain
Beneficial
Owners and Management ........
Principal Shareholders
(m) Certain Relationships and Related
Transactions ............................ Management
Item l2. Disclosure of Commission Position
on Indemnification for Securities Act
Liabilities ............................. Not applicable
-iv-
PRELIMINARY PROSPECTUS DATED OCTOBER , 1995
SUBJECT TO COMPLETION
PROSPECTUS CEL-SCI CORPORATION
159,170 Shares of Common Stock
This Prospectus relates to the sale of 159,170 shares of Common
Stock by the Company to ALPHA 1 Biomedicals, Inc.
Prior to this offering, the Company owned 50% of the capital
stock of Viral Technologies, Inc. ("VTI"). The other 50% of VTI was
owned by ALPHA 1 Biomedicals, Inc. ("ALPHA 1"). In September l995,
the Company and ALPHA 1 entered into an agreement whereby the Company
would acquire ALPHA 1's interest in VTI in exchange for l59,l70
shares of the Company's common stock. The agreement between the
Company and ALPHA 1 provides that the closing of this transaction
will occur after the l59,l70 shares of the Company's common stock to
be issued to ALPHA 1 are registered with the Securities and Exchange
Commission. Accordingly, the Company is registering the l59,l70
shares to be issued to ALPHA 1 by means of this Registration
Statement.
THESE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE
OF RISK AND SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD TO
LOSE THEIR ENTIRE INVESTMENT. FOR A DESCRIPTION OF CERTAIN IMPORTANT
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS, SEE "RISK
FACTORS" AND "DILUTION AND COMPARATIVE SHARE DATA".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED
UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
On April 28, 1995, the shareholders of the Company approved
a ten for one reverse split of the Company's Common Stock. All
information in this Prospectus relating to shares of the Company's
Common Stock has been adjusted to reflect this reverse stock split.
On September 25, 1995 the closing prices of the Company's Common
Stock and Warrants on the NASDAQ National Market System were $ and
$ , respectively. See
"Market Information".
The Date of this Prospectus is , 1995
[The following statement will be printed in red ink and
will appear on the left-hand margin of the outside front
cover page.]
Information contained herein is subject to completion or
amendment.
A registration statement relating to these securities has been filed
with the Securities and Exchange Commission. These securities may
not be sold nor may offers to buy be accepted prior to the time the
registration statement becomes effective. This Prospectus shall not
constitute an offer to sell or the solicitation of an offer to buy
nor shall there be any sale of these securities in any State in which
such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such
state.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Se curities Exchange Act of l934 and in accordance therewith is
required to file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Copies of
any such reports, proxy statements and other information filed by the
Company can be inspected and copied at the public reference facility
maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. and at the Commission's Regional offices in New York
(Room 1028, 26 Federal Plaza, New York, New York 10278) and Chicago
(Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chi
cago, Illinois 606612511). Copies of such material can be obtained
from the Public Reference Section of the Commission at its office in
Washington, D.C. 20549 at prescribed rates. The Company has filed
with the Commission a Registration Statement on Form S-1 (together
with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Act"),
with respect to the Units offered hereby. This Prospectus does not
contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further
information, reference is made to the Registration Statement.
PROSPECTUS SUMMARY
THIS SUMMARY SHOULD BE READ IN CONJUNCTION WITH, AND IS
QUALIFIED IN ITS ENTIRETY BY, THE MORE DETAILED INFORMATION AND
FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS.
The Company
CEL-SCI Corporation (the "Company") was formed as a Colorado
corporation in l983 to acquire and finance research and development of
natural human interleukin-2 ("IL-2") and related products and
processes using the Company's proprietary cell culture technologies.
The Company's proprietary product, which is a combination, or
"cocktail", of IL-2 and certain lymphokines and cytokines, is
sometimes referred to by the Company
as MULTIKINETM. The Company was initially formed under the name
Interleukin2, Inc. and changed its name to CEL-SCI Corporation in
March, 1988. The compounds, compositions and processes, to which the
Company has acquired an exclusive world-wide license, are being tested
to determine if they are effective in improving the immune response of
advanced cancer patients.
Before human testing can begin with respect to a drug or
biological product, preclinical studies are conducted in laboratory
animals to evaluate the potential efficacy and the safety of a
product. Human clinical studies generally involve a three-phase
process. The initial clinical evaluation, Phase I, consists of
administering the product and testing for safe and tolerable dosage
levels. Phase II trials continue the evaluation of immunogenicity and
determine the appropriate dosage for the product, identify possible
side effects and risks in a larger group of subjects, and provide
preliminary indications of efficacy. Phase III trials consist of
testing for actual clinical efficacy for safety within an expanded
group of patients at geographically dispersed test sites. See
"Business Government Regulation" for a more detailed description of
the foregoing.
Between 1983 and 1986 the Company was primarily involved in
funding pre-clinical and Phase I clinical trials of MULTIKINE. These
trials were con ducted at St. Thomas's Hospital Medical School in
London, England pursuant to authority granted by England's Department
of Health and Social Security. In July, 1991 physicians at a southern
Florida medical institution began human clinical trials using
MULTIKINE. The focus of these trials was the treatment of metastatic
malignant melanoma and unresectable head and neck cancer using
MULTIKINE. The clinical trials in Florida were conducted pursuant to
approvals obtained by the medical institution from the Florida
Department of Health and Rehabilitative Services. In July, 1994, the
Company filed an Investigational New Drug Application ("IND") with the
U.S. Food and Drug Administration. See "Business Research and
Development". In December l994 the FDA notified the Company that the
Company's IND application was placed on clinical hold pending receipt
of additional data and modifications to the Company's manufacturing
process. The Company plans to meet with the FDA to discuss the issues
raised by the FDA.
In March 1995, the Canadian Health Protection Branch, Health
and Welfare Ministry gave clearance to the Company to start a phase
I/II cancer study using Multikine. The study, which will enroll up to
30 head and neck cancer patients who have failed conventional
treatments, is expected to be conducted at the Ottawa Regional Cancer
Center and HotelDieu de Montreal Hospital. The study is designed to
evaluate safety, tumor responses and immune responses in patients
treated with multiple courses of Multikine. The length of time that
each patient will remain on the investigational treatment will depend
on the patient's response to treatment. In May l995, the U.S. Food
and Drug Administration (FDA) authorized the export of the Company's
Multikine drug to Canada for purposes of this study.
Prior to this offering, Viral Technologies, Inc., ("VTI") a
Delaware corporation, was 50% owned by the Company and 50% owned by
Alpha
1 Biomedicals, Inc. VTI owns the rights to certain biomedical
technology which is being tested to determine its effectiveness in the
development of a vaccine against, treatment for and a diagnostic test
to detect evidence of the Acquired Immune Deficiency Syndrome ("AIDS")
virus. In September l995, the Company and ALPHA 1 entered into an
agreement whereby the Company would acquire ALPHA 1's interest in VTI
in exchange for l59,l70 shares of the Company's common stock. The
agreement between the Company and ALPHA 1 provides that the closing of
this transaction will occur after the l59,l70 shares of the Company's
common stock to be issued to ALPHA 1 are registered with the
Securities and Exchange Commission. See "Plan of Distribution". In
1993, VTI completed its Phase I clinical trials in California using
VTI's prototype AIDS vaccine. In April 1995 VTI started a new
clinical study with the HGP-30 AIDS vaccine. The study will involve
approximately fifteen HIV negative volunteers who participated in the
1993 Phase I study. No assurance can be given that the vaccine being
developed by VTI will be effective in treating the AIDS virus or that
if effective, that it will be effective as to all persons. VTI's
Phase I clinical trials were conducted pursuant to approvals obtained
from the California Department of Health Services Food and Drug
Branch. See "Business Viral Technologies, Inc.".
None of the Company's or VTI's clinical trials to date have
been conducted under the approval of the FDA and there are no
assurances that clinical trials conducted under approvals from state
authorities or conducted in foreign countries will be accepted by the
FDA. Product licensure in a foreign country or under state authority
does not mean that the product will be licensed by the FDA and there
are no assurances that the Company or VTI will receive any approval of
the FDA or any other governmental entity for the manufacturing and/or
marketing of a product. Consequently, the commencement of the
manufacturing and
marketing by the Company or VTI of any product is, in all likelihood,
many years away. See "Business".
The lack of FDA approval for the Company's or VTI's products
will prevent the Company and VTI from generally marketing their
products on an interstate basis in the United States. Delays in
obtaining FDA approval or the failure to obtain FDA approval may have
a material adverse impact upon the Company's operations.
All of the Company's products are in the early stages of
development. The Company does not expect to develop commercial
products for several years, if at all. The Company has had operating
losses since its inception, has an accumulated deficit of
approximately $23,098,000 through June 30, 1995, and expects to incur
substantial losses for the foreseeable future.
The Company's new research laboratory (PRAL Laboratories,
Inc.) was completed in October 1994 and will be used to conduct
research for the Company and third parties. The Company began
marketing the laboratory's services to third parties in early 1995.
Although the laboratory has, as of September 30, 1995, performed only
limited commercial work for third parties, any revenues generated by
the laboratory for services to third parties will serve to offset the
Company's other expenses.
The Company's executive offices are located at 66 Canal
Center Plaza, Suite 510, Alexandria, Virginia 22314, and its
telephone number is (703) 5495293.
THE OFFERING
Securities Offered
by the Selling
Shareholders: 159,170 shares of Common Stock are being
offered
to
ALPHA 1 Biomedicals, Inc. See "Plan of
Distribution".
Common Stock Outstanding
Prior To and After
Offering: As of the date of this Prospectus, the Company
had
5,338,244 shares of Common Stock issued and
outstanding. Following this offering, there
will
be 5,497,414 shares of Common Stock issued and
outstanding. The number of outstanding shares
before and after this Offering does not give
effect to the issuance of Common Stock upon the
exercise of Warrants and options previously
issued by the Company. See "Management", "Plan
of Distribution" and "Description of
Securities".
NASDAQ Symbols: Common Stock: CELI
Warrants: CELIW
Summary Financial Data
The following sets forth certain financial data with respect
to the Company and is qualified in its entirety by reference to the
more detailed financial statements and notes thereto included elsewhere
in this Prospectus.
Balance Sheet Data
June 30, September 30,
1995 1994 1993
Working Capital $4,048,923 $5,809,149 ,$10,296,472
Total Assets 6,184,492 8,086,670 11,633,090
Total Liabilities 1,394,786 1,407,602 688,231
Shareholders' Equity 4,789,706 6,679,068 10,944,859
No dividends have been declared by the Company since its inception.
Statement of Operations Data:
Nine Months Ended
June 30, Years Ended September 30,
1995 1994 1994 1993
Investment Income and
Other Revenues $ 313,005 $ 629,034 $ 624,670 $997,964
Expenses:
Research and
Development 1,378,005 2,192,645 2,896,l09 1,307,042
Depreciation and
Amortization 201,197 76,494 138,755 55,372
General and
Administrative 1,304,585 1,184,716 1,62l,990 1,696,119
Equity in loss of
joint venture 395,224 335,416 394,692 344,423
Net Loss $(2,966,006) $(3,160,237) $(4,426,876) $(2,404,992)
Net Loss per
Common Share $(0.70) $(0.75) $(1.06) $(0.58)
Weighted average
common shares
outstanding 4,194,563 4,184,634 4,185,240 4,155,431
GLOSSARY OF TECHNICAL TERMS
AIDS. Acquired Immune Deficiency Syndrome. A severe viral
di-
sease of the immune system leading to other lethal
infec tions and malignancies.
Amino acids. Building blocks of proteins.
Antibody. A protein produced by certain white blood cells in
humans
and animals in response to a substance seen as non
self, that is a foreign antigen (such as a virus or
bacteria). An antibody binds specifically to a
single antigen.
Antigen. Any substance seen as foreign by the immune system
and
which triggers an antibody or cell-mediated response
from the body's immune system.
B-Cells. A type of lymphocyte which produces antibodies in
response
to antigens.
Cytokines. Peptides which regulate the functions and/or growth
of
other cells. Lymphokines are a type of cytokine.
HIV. Human Immunodeficiency Virus. The virus responsible
for
AIDS and related diseases.
Lymphocytes. A type of white blood cells divided into two
classes,
B-cells and T-cells.
Lymphyokine. A specific group of hormones which regulate and
modify
the
various functions of both T-cells and B-cells. There
are
many lymphokines, each of which is thought to have distinctive chemical
and functional properties. IL-2 is but one of these lymphokines.
Macrophage. A cell found in the body that has the ability to kill
vir-
uses, bacteria, fungi and cancer cells, often by
engulfing the targeted organism or cell.
Peptide. Two or more amino acids joined by a linkage called a
pep-
tide bond.
Proteins. A molecule composed of amino acids. There are many
types
of proteins, all carrying out a number of different
func tions essential for cell growth.
T-Cells. A type of lymphocyte which will amplify or suppress
anti-
body formation by B-cells, and can also directly
destroy "foreign" cells by activating "killer cells".
Virus. A submicroscopic organism that contains genetic
information
but cannot reproduce itself. To replicate, it must
invade another cell and use parts of that cell's
reproductive machinery.
RISK FACTORS
An investment in the Company's Securities involves a high
degree of risk. Prospective investors are advised that they may lose
all or part of their investment. Prospective investors should carefully
review the following risk factors.
Lack of Revenues and History of Loss. The Company has had only
limited revenues since it was formed in 1983. Since the date of its
formation and through June 30, 1995, the Company has incurred net losses
of approximately $23,098,000. During the years ended September 30, 1992,
1993 and 1994, the Company suffered losses of $1,650,916, $2,404,992 and
$4,426,876 respectively. During the nine months ended June 30, 1995 the
Company lost $2,966,006. The Company has relied principally upon the
proceeds of public and private sales of securities to finance its
activities to date. See "Management's Discussion and Analysis". All of
the Company's potential products are in the early stages of development,
and any commercial sale of these products will be many years away.
Accordingly, the Company expects to incur substantial losses for the
foreseeable future.
Need for Additional Capital. Clinical and other studies
necessary to obtain approval of a new drug can be time consuming and
costly, especially in the United States, but also in foreign countries.
The different steps necessary to obtain regulatory approval, especially
that of the Food and Drug Administration ("FDA"), involve significant
costs. The Company expects that it will need additional financing in
order to fund the costs of future clinical trials, related research, and
general and administrative expenses. The Company may be forced to delay
or postpone development and research expenditures if the Company is
unable to secure adequate sources of funds. These delays in development
may have an adverse effect on the Company's ability to produce a timely
and competitive product. There can be no assurance that the Company
will be able to obtain additional funding from other sources. See
"Manage ment's Discussion and Analysis".
Cost Estimates. The Company's estimates of the costs
associated
with future clinical trials and research may be substantially lower
than the actual costs of these activities. If the Company's cost
estimates are
incorrect, the Company will need additional funding for its research
efforts. See "Management's Discussion and Analysis".
Government Regulation FDA Approval. Products which may be de
veloped by the Company or Viral Technologies, Inc. (or which may be
developed by affiliates or licensees) will require regulatory approvals
prior to sale. In particular, therapeutic agents and diagnostic
products are subject to approval, prior to general marketing, by the
FDA in the United States and by comparable agencies in most foreign
countries. The process of obtaining FDA and corresponding foreign
approvals is costly and time consuming, particularly for pharmaceutical
products such as those which might ultimately be developed by the
Company, Viral Technologies, Inc. or its licensees, and there can be no
assurance that such approvals will be granted. Any failure to obtain
or any delay in obtaining such approvals may adversely affect the
ability of potential licensees or the Company to successfully market
any products developed. Also, the extent of adverse government
regulations which might arise from future legislative or administrative
action cannot be predicted. The clinical trial which the Company's
affiliate, Viral Technologies, Inc., is conducting in California is
regulated by government agencies in California and obtaining approvals
from states for clinical
trials is likewise expensive and time consuming. None of the Company's
clinical trials have been approved by the FDA and there can be no
assurance that the results of such trials will be accepted for any
purpose by the FDA. See "Business Government Regulation."
Dependence on Others to Manufacture Product. The Company has
an agreement with an unrelated corporation for the production, until
1997, of MULTIKINE for research and testing purposes. If this
corporation was unable to supply the Company with MULTIKINE, the
Company would be unable to obtain supplies of MULTIKINE until
alternative manufacturing arrangements were secured.
Licensed Technology Potential Conflicts of Interest. The Com
pany's clinical studies and research have been focused on compounds,
compositions and processes which were licensed to the Company by
Sittona Company, B.V. ("Sittona") in 1983. Maximilian de Clara, the
Company's president and a
director, acquired control of Sittona in 1985. Any commercial products
developed by the Company and based upon the technology licensed by
Sittona will belong to Sittona, subject to the Company's right to
manufacture and sell such products in accordance with the terms of the
licensing agreement. The Company's license remains in effect until the
expiration or abandonment of all patent rights or until the compounds,
compositions and processes subject to the license enter into the public
domain, whichever is later. The license may be terminated earlier for
other reasons, including the insolvency of the Company. Accordingly, a
conflict of interest may arise between the Company and Mr. de Clara
concerning the Company's continued rights to the licensed technology.
Any future transactions
between the Company and Sittona will be subject to the review and
approval by a majority of the Company's disinterested directors. See
"Business Compounds and Processes Licensed to the Company", and
"Management Transactions with Related Parties".
Technological Change. The biomedical field in which the
Company
is involved is undergoing rapid and significant technological change.
The suc cessful development of therapeutic agents and diagnostic
products from the compounds, compositions and processes licensed to the
Company, through Company financed research or as a result of possible
licensing arrangements with pharmaceutical or other companies, will
depend on its ability to be in the technological forefront of this
field. There can be no assurance that the Company will achieve or
maintain such a competitive position or that other technological
developments will not cause the Company's proprietary technologies to
become uneconomical or obsolete.
Patents. Since 1983 the Company, on behalf of the owners of
the compounds, compositions and processes licensed to the Company, has
filed applications for United States and foreign patents covering
certain aspects of the technology. Although the Company has paid the
costs of applying for and obtaining patents, the technology covered by
the patents is not owned by the Company, but by an affiliated party
which has licensed the technology to the Company. As of the date of
this Prospectus nine patents have been issued in the United States and
three patents have been issued in Europe. There is no assurance that
the applications still pending or which may be filed in the future will
result in the issuance of any patents. Furthermore, there is no as
surance as to the breadth and degree of protection any issued patents
might afford the owners of the patents and the Company. Disputes may
arise between the owners of the patents or the Company and others as to
the scope, validity and ownership rights of these or other patents.
Any defense of the patents could prove costly and time consuming and
there can be no assurance that the Company or the owners of the patents
will be in a position, or will deem it advisable, to carry on such a
defense. Other private and public concerns, including universities, may
have filed applications for, or may have been issued, patents and are
expected to obtain additional patents and other proprietary rights to
technology potentially useful or necessary to the Company. The scope
and validity of such patents, if any, the extent to which the Company
or the owners of the patents may wish or need to acquire the rights to
such patents, and the cost and availability of such rights are
presently unknown. Also, as far as
the Company relies upon unpatented proprietary technology, there is no
assurance that others may not acquire or independently develop the same
or similar technology. The first patent licensed to the Company will
ex pire in the year 2000. See "Business Compounds and Processes
Licensed to the Company".
Product Liability and Lack of Insurance. At the present time,
the
Company does not have product liability insurance for MULTIKINE. The
successful prosecution of a product liability case against the Company
could have a materially adverse effect upon its business.
Dependence on Management. The Company is dependent for its
success on the continued availability of its executive officers. The
loss of the services of any of the Company's executive officers could
have an adverse ef fect on the Company's business. The Company does
not carry key man life in surance on any of its officers. See
"Management".
Shares Available for Resale. As of September 30, 1995, there
were 5,338,244 shares of the Company's Common Stock issued and
outstanding. Approximately 200,000 of these shares have not been
registered under the Securities Act of l933, as amended (the "Act"),
and are "restricted securities" as defined by Rule l44 of the Act.
Rule l44 provides, in essence, that shareholders, after holding
restricted securities for a period of two years may, every three
months, sell in ordinary brokerage transactions an amount equal to the
greater of l% of the Company's then outstanding Common stock or the
average weekly trading volume, if any, of the stock during the four
calendar weeks preceding the sale. Nonaffiliates of the Company who
hold restricted securities for a period of three years may, under
certain prescribed conditions, sell their securities without regard to
any of the requirements of the Rule. As of the date of this Offering
Memorandum, substantially all shares of restricted stock were available
for resale pursuant to Rule l44. Sales of restricted stock may have a
depressive effect on the market price of the Company's Common Stock.
Such sales
might also impede future financing by the Company.
Options and Warrants. In March, 1991 the Company granted a
finan cial public relations consultant an option to purchase 50,000
shares of the Company's Common Stock. The option is exercisable at
$13.80 per share and expires in March, l996. The holder of the option
has the right to have the shares issuable upon the exercise of the
option included in any registration statement filed by the Company.
In connection with the Company's l992
Public Offering, the Company issued Underwriter's Warrants that
entitle the holders of the Warrants to purchase 45,000 shares of the
Company's Common Stock plus Warrants which allow for the purchase of
an additional 90,000 shares of the Company's Common Stock. The
Underwriter's Warrants provide that the Company, at its expense, will
make appropriate filings with the Securities and Exchange Commission
so that the securities underlying the Underwriter's Warrants will be
available for public sale. Such filings could result in substantial
expense to the Company and could hinder future financings by the
Company.
In connection with the Company's June and September l995
Private Of ferings, the Company issued warrants which allow the
holders to purchase up to 1,150,000 shares of Common Stock at any time
prior to June 30, l997 at a price of $3.25 per share.
The Company issued to Neidiger/Tucker/Bruner, Inc., the sales
agent for these offerings, warrants to purchase 115,000 shares of the
Company's Common Stock at $2.00 per share and an additional 115,000
shares at $3.25 per share. The Warrants issued to the Sales Agent
provide that the Company, at its expense, will make appropriate
filings with the Securities and Exchange Commission so that the
securities underlying these Warrants will be available for public
sale. Such filings could result in substantial expense to the Company
and could hinder future financings by the Company.
In addition to the foregoing, the Company has granted other
options and warrants to certain persons which would allow such persons
to purchase up to 531,250 shares of Common Stock at prices ranging
from $2.87 to $19.70 per share. The Company may also grant options to
purchase
approximately 98,750 additional shares under its Incentive Stock
Option and Non-Qualified Stock Option Plans.
For the terms of the options and warrants referred to above,
the holders thereof will have an opportunity to profit from any
increase in the market price of the Company's Common Stock without
assuming the risks of ownership. Holders of such options and warrants
may exercise them at a time when the Company could obtain additional
capital on terms more favorable than those provided by the options and
warrants which may adversely affect the ability of the Company to
obtain additional capital in the future. The exercise of the options
and warrants and the sale of the underlying shares of Common Stock
could adversely affect the market price of the Company's stock.
Competition. The competition in the research, development
and com mercialization of products which may be used in the prevention
or treatment of cancer and AIDS is intense. Major pharmaceutical and
chemical companies, as well as specialized genetic engineering firms,
are developing products for these diseases. Many of these companies
have substantial financial, research
and development, and marketing resources and are capable of providing
significant long-term competition either by establishing in-house
research groups or by forming collaborative ventures with other
entities. In addition, both smaller companies and non-profit
institutions are active in research relating to cancer and AIDS and
are expected to become more active in the future.
The clinical trials sponsored to date by the Company and VTI
have not been approved by the FDA, but rather have been conducted
pursuant to approvals obtained from regulatory agencies in England,
Canada and certain states. Since the results of these clinical trials
may not be accepted by the FDA, companies which are conducting
clinical trials approved by the FDA may have a competitive advantage
in that the products of such companies are further advanced in the
regulatory process than those of the Company or VTI.
Lack of Dividends. There can be no assurance that the
operations of the Company will result in any revenues or will be
profitable. At the present time, the Company intends to use available
funds to finance any possible growth of the Company's business.
Accordingly, while payment of dividends rests within the discretion of
the Board of Directors, no dividends have been declared or paid by the
Company. The Company does not presently intend to pay dividends and
there can be no assurance that dividends will ever be paid. Pursuant
to the terms of a loan agreement with a bank, the Company may not
pay any dividends without the consent
of the
bank.
Dilution. Persons purchasing the securities offered by this
Pros pectus will suffer an immediate dilution in the per share net
tangible book value of their Common Stock. See "Dilution and
Comparative Share Data."
Preferred Stock. The Company's Articles of Incorporation
authorize
the Company's Board of Directors to issue up to 200,000 shares of
Preferred Stock. Although no Preferred Stock has been issued to date,
the provisions in the Company's Articles of Incorporation relating to
the Preferred Stock would allow the Company's directors to issue
Preferred Stock with multiple votes per share and dividends rights
which would have priority over any dividends paid with respect to the
Company's Common Stock. The issuance of Preferred Stock with such
rights may make the removal of management difficult even if such re
moval would be considered beneficial to shareholders generally, and
will have the effect of limiting shareholder participation in certain
transactions such as mergers or tender offers if such transactions are
not favored by incumbent management.
DILUTION AND COMPARATIVE SHARE DATA
As of the date of this Prospectus, the present shareholders
of the Company owned 5,338,244 shares of Common Stock, which had a net
tangible book value of approximately $0.67 per share.
The following table illustrates the comparative stock
ownership of the other stockholders of the Company as compared to the
investors in this Offering assuming all shares offered are sold.
Shares outstanding
5,338,244
Shares to be sold to ALPHA 1
Biomedicals, Inc. (1)
159,170
Net tangible book value per share at
June 30, 1995
$0.85
Equity ownership by present shareholders
after this offering 97%
Equity ownership by ALPHA 1 Biomedicals, Inc. 3%
(1) See "Plan of Distribution".
(2) Amount excludes options and warrants previously issued by the
Company. The purchasers of the securities offered by this
Prospectus will
suffer an immediate dilution if the price paid for the securities
offered is greater than the net tangible book value of the
Company's Common Stock.
"Net tangible book value" is the amount that results from
subtracting the total liabilities and intangible assets of the Company
from its total assets. "Dilution" is the difference between the
offering price and the net tangible book value of shares immediately
after the Offering.
MARKET INFORMATION
As of September 30, 1995, there were approximately 3,000
record holders of the Company's Common Stock. The Company has not
issued any shares of preferred stock. The Company's Common Stock and
Warrants are traded on the National Association of Securities Dealers
Automatic Quotation ("NASDAQ") System. Set forth below are the range
of high and low bid quotations for the periods indicated as reported
by NASDAQ, and as adjusted for the 10 for 1 reverse stock split which
was approved by the Company's shareholders on April 28, 1995. The
market quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commissions and may not necessarily represent actual
transactions.
Quarter
Ending Common Stock Warrants
High Low High Low
12/31/92 $12.80 $12.50 $ 0.93
$0.53
3/31/93 $20.60 $13.70 $ 0.81
$0.50
6/30/93 $18.10 $12.50 $ 0.75
$0.47
9/30/93 $15.60 $12.20 $ 0.63
$0.38
12/31/93 $20.00 $13.40 $ 0.94
$0.41
3/31/94 $18.10 $10.30 $ 0.75
$0.28
6/30/94 $10.90 $ 8.10 $ 0.31
$0.19
9/30/94 $10.30 $ 5.60 $ 0.21
$0.12
12/31/94 $ 7.50 $ 3.40 $ 0.25
$0.09
3/31/95 $ 4.00 $ 3.75 $ 0.22
$0.13
6/30/95 $ 5.30 $ 2.78 $ 0.15
$0.06
Holders of Common Stock are entitled to receive such
dividends as may be declared by the Board of Directors out of funds
legally available therefor and, in the event of liquidation, to share
pro rata in any distribution of the Company's assets after payment of
liabilities. The Board of Directors is not obligated to declare a
dividend. The Company has not paid any dividends and the Company does
not have any current plans to pay any dividends. Pursuant to the
terms of a loan agreement with a bank, the Company may not pay any
dividends without the consent of the bank. See Note 5 to the Company's
September 30, 1994 financial statements.
The provisions in the Company's Articles of Incorporation
relating to the Company's Preferred Stock would allow the Company's
directors to issue Preferred Stock with rights to multiple votes per
share and dividends
rights which would have priority over any dividends paid with respect
to the Company's Common Stock. The issuance of Preferred Stock with
such rights may
make more difficult the removal of management even if such removal
would be considered beneficial to shareholders generally, and will
have the effect of limiting shareholder participation in certain
transactions such as mergers or tender offers if such transactions are
not favored by incumbent management.
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction
with the more detailed financial statements, related notes and other
financial information included herein. See also "Management's
Discussion and Analysis".
For the Years Ended September 30,
1994 1993 1992 1991 1990
Investment Income and
Other Revenues $ 624,670 $ 997,964 $ 434,180 $ 35,972
$
13,208
Expenses:
Research and
Development 2,896,l09 1,307,042 481,697 108,771
96,489
Depreciation
and Amortization 138,755 55,372 33,536
32,582
30,664
General and
Administrative 1,621,990 1,696,119 1,309,475 795,015
646,157
Equity in loss of
joint venture 394,692 344,423 260,388 290,166
170,976
Net Loss $(4,426,876) $(2,404,992) $(1,650,916)
$(1,190,562) $(931,078)
Loss per common share $(1.06) $(0.58) $(0.42) $(0.35)
$(0.29)
Weighted average
common shares
outstanding 4,185,240 4,155,431 3,953,233 3,400,546
3,162,393
Nine Months
Ended June
30,
1995
1994 Investment Income and Other Revenues $ 313,005
$
629,034
Expenses:
Research and Development 1,378,005
2,192,645
Depreciation and Amortization 201,197
76,494
General and Administrative 1,304,585
1,184,716
Equity in loss of joint venture 395,224
335,416
Net Loss $(2,966,006)
$(3,160,237)
Net Loss per Common Share $(0.70)
$(0.75)
Weighted average common shares outstanding 4,194,563
4,184,634
Balance Sheet Data:
September 30,
1994 1993 1992
1991
1990
Working Capital
(Deficiency) $5,809,149 $10,296,472 $13,043,012 $
682,831 $(295,930) Total Assets 8,086,670
11,633,090 13,769,504 1,611,899 515,740
Total Liabilities l,407,602 688,231 467,086
672,595
493,650
Shareholders' Equity 6,679,068 10,944,859 13,302,4l8
939,304 22,090
No dividends have been declared by the Company since its
inception.
June 30, 1995
Working Capital $4,048,923
Total Assets
6,184,492
Total Liabilities
1,394,786
Shareholders' Equity
4,789,706 MANAGEMENT'S
DISCUSSION AND
ANALYSIS Results of Operations
Nine Months Ended June 30, 1995
Revenues for the nine months ended June 30, 1995 consisted of
interest accrued on loans made by the Company to VTI plus interest
earned on funds received from the February 1992 public offering
($273,417) as well as revenues earned by the Company's new research
laboratory ($39,588), which began offering laboratory services to
third parties in early 1995. The interest income and investment
balances have declined from the previous year as funds were used for
ongoing expenses and equipping the Company's new laboratory. Research
and development expenses decreased due to the completion of a research
and development project relating to the Company's manufacturing
process. General and administrative expenses increased as the result
of more employees.
Fiscal 1994
Interest income during the year ending September 30, 1994
decreased from the prior year as a portion of the Company's
investments were sold to pay for operating expenses. Research and
development expenses increased due to the commencement of several new
research projects, all of which pertained to the Company's MULTIKINE
product. Significant components of general and administrative expenses
during this year were salaries and
employee benefits ($442,039), travel and expense reimbursements
($294,217), shareholder communications and investor relations
($267,070), legal and accounting ($151,879), and officers and
directors liability insurance ($147,564).
Fiscal 1993
Investment income during the year ending September 30, 1993
increased as the Company had use of the funds from its February, 1992
public offering for twelve months in fiscal 1993 as opposed to six
months in fiscal 1992. Research and development expenses increased
due to the commencement of several new research projects, all of which
pertained to the Company's MULTIKINE drug. General and administrative
expenses increased due to an increase in the cost of Directors and
Officers insurance, the implementation of an employee 401(K) plan, and
the addition of new employees during the year. Significant components
of general and administrative expenses during this year were salaries
and employee benefits ($342,150), travel and expense reimbursements
($266,007), shareholder communications and investor relations
($341,024), legal and accounting ($107,254), officers and directors
liability insurance ($113,690), and the cost of indemnifying an
officer and director for losses sustained as the
result of actions taken on behalf of the Company ($202,500). Losses
associated with the Company's joint venture interest in VTI increased
due to an increase in VTI's research and development expenditures.
Fiscal 1992
Investment income increased as the result of income earned on
funds received from the Company's February, 1992 public offering.
Research and Development expenses reflect the costs associated with
the Florida human clinical trials (see Notes to Financial Statements)
and the Company's new research program with a New England hospital.
General and administrative expenses increased by approximately
$500,000 due to (i) legal fees associated with de-
fending the Company's European patent, (ii) an initial fee of $5l,200
paid for the inclusion of the Company's securities on the NASDAQ
National Market System, (iii) expenses associated with the Company's
September 30, l992 meeting of shareholders, (iv) additional employees
and consultants, and (v) a $200,000 payment made to Maximilian de
Clara to indemnify him for losses incurred as a result of actions
taken on behalf of the Company. Significant categories of general and
administrative expenses during this fiscal year were salaries and
employee benefits ($l68,000), travel and expense reimbursements
($l47,000), shareholder communications, annual meeting, and investor
relations expenses ($258,000), legal and accounting fees ($l88,000),
and the indemnification payment made to Mr. de Clara ($200,000).
Liquidity and Capital Resources
The Company has had only limited revenues from operations
since its inception in March l983. The Company has relied upon
proceeds realized from the public and private sale of its Common Stock
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 acquisition of a 50% interest in
Viral Technologies, Inc. (a company engaged in the research and
development of a possible AIDS technology), patent applications, the
repayment of debt, the continuation of Companysponsored research and
development, administrative costs and construction of laboratory
facilities. Inasmuch as the Company does not anticipate realizing
revenues until such time as it enters into
licensing arrangements regarding the technology and know-how licensed
to it (which could take a number of years), the Company is mostly
dependent upon the proceeds from the sale of its securities to meet
all of its liquidity and capital resource requirements.
In February, 1992, the Company received net proceeds of
approximately $13,800,000 from the sale, in a public offering, of
517,500 shares of Common Stock and 5,175,000 Warrants. Every 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, 1996.
In June and September, l995, 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.
The Company filed an Investigational New Drug ("IND")
Application with the FDA in July, 1994. In connection with this
filing the Company has been funding a research program designed to
refine the manufacturing process for the Company's MULTIKINE product
so that MULTIKINE will meet anticipated regulatory requirements.
During fiscal 1995 the Company also plans to provide VTI with the
funding needed to extend VTI's Phase I trials involving HIV-negative
volunteers. It should be noted that substantial additional funds will
be needed for more extensive clinical trials which will be necessary
before the Company or VTI will be able to apply to the FDA for
approval to sell any products which may be developed on a commercial
basis throughout the United States.
There can be no assurance that either the Company or VTI will
be successful in obtaining approvals from any state, the FDA or any
foreign country to conduct further clinical trials or to manufacture
and sell their products. The lack of FDA approval for the Company's or
VTI's products will prevent the Company and VTI from generally
marketing their products on an interstate basis in the United States.
Delays in obtaining FDA approval or
the failure to obtain FDA approval may have a material adverse impact
upon the Company's operations.
In October, 1994, the Company completed the construction of
its own research laboratory in a facility leased by the Company. The
cost of modifying the leased space and providing the equipment for the
research laboratory was approximately $1,200,000. In August 1994 the
Company obtained a credit line in the principal amount of $1,000,000
to fund the majority of the costs for the research laboratory. As of
June 30, 1995 the Company had borrowed approximately $789,000 against
this credit line. The loan is due in 1999 and bears interest at 2%
plus the prime lending rate.
The Company's research laboratory (PRAL Laboratories, Inc.)
will be used to conduct research for the Company and third parties.
The Company began marketing the laboratory's services to third parties
in early 1995. Although the laboratory has, as of June 30, 1995,
performed only limited commercial work for third parties, any revenues
generated by the laboratory for services to third parties will serve
to offset the Company's other expenses.
The Company expects that it will spend approximately
$2,500,000 on research and development during the twelve month period
ending September 30, 1996. The Company plans to use its existing
financial
resources to fund its research and development program during
this period. Other than funding its research and development
program and the
costs associated with its research laboratory, the Company does not
have any material capital commitments.
The Company expects that its existing financial resources
will satisfy the Company's capital requirements at least through
September 1996. In the absence of revenues, the Company will be
required to raise additional funds through the sale of securities,
debt financing or other arrangements in order to continue with its
research efforts after that date. However, there can be no assurance
that such financing will be available or be available on favorable
terms.
The Company has the ability to significantly control the
amount and timing of its research and development expenditures. In
general, the Company attempts to coordinate its research projects so
as to match expenditures with available funding. The Company has in
the past and may in the future delay or postpone development and
research expenditures if the Company is unable to secure adequate
sources of funds from internal and external sources. These delays in
development may have an adverse effect on the Company's ability to
produce a timely and competitive product. The Company plans to
continue its research projects on a scale consistent with funds
available to the Company.
BUSINESS
CEL-SCI Corporation (the "Company") was formed as a Colorado
corporation during March l983, to acquire and finance research and
development of natural human interleukin-2 ("IL-2") and lymphokine
related products and processes using the Company's proprietary cell
culture
technologies. The Company's proprietary product is sometimes referred
to as MULTIKINETM, or buffy-coat interleukins, which is a combination,
or "cocktail" of IL-2 and certain lymphokines and cytokines.
MULTIKINE is a trade name of the Company. The Company was initially
formed under the name Interleukin-2, Inc. and changed its name to CEL-
SCI Corporation in March, 1988. The compounds, compositions and
processes, to which the Company has acquired an exclusive world-wide
license, are being tested to determine if they are effective in
improving the immune response of advanced cancer patients.
Since its inception the focus of the Company's product
development efforts has been on conducting clinical trials to test its
proprietary tech nologies. The Company intends to continue testing
its MULTIKINE product in clinical trials with the objective of
establishing its efficacy as a treatment for solid tumors and possibly
other diseases. An additional aim of the Company is to further
corroborate the present data (obtained in connection with the
Company's research programs and human clinical trials) in regard to
the ability of MULTIKINE to restore the immune system of people
suffering from certain illnesses.
The cost of acquiring its exclusive license and the costs
associated with the clinical trials relating to the Company's
MULTIKINE technologies, the cost of research at various institutions
and the Company's administrative expenses have been funded with the
public and private sales of shares of the Company's Common Stock and
borrowings from third parties, including affiliates of the Company.
Upon the completion of this offering, the Company will own
all of the issued and outstanding capital stock of Viral Technologies,
Inc. ("VTI"), a privately-held company engaged in the development of a
possible vaccine for AIDS. VTI's technology may also have application
in the treatment of AIDSinfected individuals and the diagnosis of
AIDS. VTI's AIDS vaccine, HGP-30, has completed Phase I human clinical
testing. In the Phase I trials, the vaccine was administered to
volunteers who were not infected with the HIV virus in an effort to
determine safe and tolerable dosage levels.
PRODUCT DEVELOPMENT PLAN
The Company filed an Investigational New Drug ("IND")
Application for MULTIKINE with the FDA in late July, 1994. In
December 1994 the FDA notified the Company that the Company's IND
application was placed on clinical hold pending receipt of additional
data and modifications to the Company's manufacturing process. The
Company plans to meet with the FDA to discuss the issues raised by the
FDA. If the Company's IND application is approved by the FDA (of
which there is no assurance), the Company will begin human clinical
trials in accordance with protocols approved by the FDA. The Company
does not know when the FDA will approve or reject the
Company's IND application.
In March l995, the Canadian Health Protection Branch, Health
and Welfare Ministry gave clearance to the Company to start a phase
I/II cancer study using Multikine. The study, which will enroll up to
30 head and neck cancer patients who have failed conventional
treatments, is expected to be conducted at the Ottawa Regional Cancer
Center and HotelDieu de Montreal Hospital. The study is designed to
evaluate safety, tumor responses and immune responses in patients
treated with multiple courses of Multikine. The length of time that
each patient will remain on the investigational
treatment will depend on the patient's response to treatment. In May
l995, the U.S. Food and Drug Administration (FDA) authorized the
export of the Company's Multikine drug to Canada for purposes of this
study.
Viral Technologies, Inc. ("VTI") completed its Phase I trials
in
California and in April 1995 started a new clinical study with the HGP-
30 AIDS vaccine. The study will involve approximately fifteen HIV
negative volunteers who participated in the 1993 Phase I study.
Following vaccinations with HGP30, certain volunteers will be asked to
donate blood for a SCID mouse HIV challenge study. VTI also plans to
request permission from the California Food and Drug Branch ("FDB") or
one or more foreign countries (none of which have been selected) to
begin Phase I/II human clinical trials with HIV-infected volunteers.
See "Interest in Viral Technologies" in this section of the Prospectus
for additional information concerning VTI's product development plan.
There can be no assurance that either the Company or VTI will
be successful in obtaining approvals from the FDA or any foreign
country to conduct further clinical trials or to manufacture and sell
their products. The lack of FDA approval for the Company's or VTI's
products will prevent the Company and VTI from generally marketing
their products on an interstate basis in the United States. Delays in
obtaining FDA approval or the failure to obtain FDA approval may have
a material adverse impact upon the Company's operations. BACKGROUND OF
HUMAN IMMUNOLOGICAL SYSTEM
The function of the immunological system is to protect the body
against infectious agents, including viruses, bacteria, parasites and
malig nant (cancer) cells. An individual's ability to respond to
infectious agents and to other substances (antigens) recognized as
foreign by the body's immune system is critical to health and
survival. When the immune response is adequate, infection is usually
combatted effectively and recovery follows. Severe infection can occur
when the immune response is inadequate. Such immune deficiency can be
present from birth but, in adult life, it is frequently acquired as a
result of intense sickness or as a result of the administration of
chemotherapeutic drugs and/or radiation. It is also recognized that,
as people reach middle age and thereafter, the immune system
grows weaker.
Two classes of white blood cells, macrophages and lymphocytes,
are believed to be primarily responsible for immunity. Macrophages are
large cells whose principal immune activity is to digest and destroy
infectious agents. Lymphocytes are divided into two sub-classes. One
subclass of lymphocytes, B-cells, produces antibodies in response to
antigens. Antibodies have unique combining sites (specificities) that
recognize the shape of particular antigens and bind with them. The
combination of an antibody with an antigen sets in motion a chain of
events which may neutralize the effects of the foreign substance. The
other sub-class of lymphocytes, T-cells, regulates immune responses. T
cells, for example, amplify or suppress antibody formation by Bcells,
and can also directly destroy "foreign" cells by activating "killer
cells."
It is generally recognized that the interplay among T-cells, B
cells and the macrophages determines the strength and breadth of the
body's response to infection. It is believed that the activities of T
cells, B cells and macrophages are controlled, to a large extent, by a
specific group of hormones called lymphokines. Lymphokines regulate
and modify the various functions of both T-cells and B-cells. There
are many lymphokines, each of which is thought to have distinctive
chemical and functional properties. IL-2 is but one of these
lymphokines and it is on IL-2 and its synergy with other lymphokines
that the Company has focused its attention. Scientific and medical
investigation has established that IL-2 enhances immune responses by
causing activated T-cells to proliferate. Without such proliferation
no immune response can be mounted. Other lymphokines and cytokines
support T-cell and B-cell proliferation. However, IL-2 is the only
known lymphokine or cytokine
which causes the proliferation of Tcells. IL-2 is also known to
activate Bcells in the absence of B-cell growth factors.
Although IL-2 is one of the best characterized lymphokines
with anticancer potential, the Company is of the opinion that to have
optimum therapeutic value, IL-2 should be administered not as a single
substance but
rather as a mixture of IL-2 and certain lymphokines and cytokines,
i.e. as a "cocktail". This approach, which was pioneered by the
Company,
makes use of the synergism between these lymphokines. It should be
noted however that neither the FDA or any other agency has determined
that the Company's MULTIKINE product will be effective against any
form of cancer.
It has been reported by researchers in the field of
lymphokine re search that IL-2 can increase the number of killer T-
cells produced by the body, which improves the body's capacity to
selectively destroy specific tumor cells. Research and human clinical
trials sponsored by the Company have indicated a correlation between
administration of MULTIKINE to advanced cancer patients and
immunological responses. On the basis of these experimental results,
the Company believes that MULTIKINE may have application for the
treatment of solid tumors in humans.
The Company foresees three potential anti-cancer therapeutic
uses for MULTIKINE: (i) direct administration into the human body (in
vivo) as a modulator of the immune system, (ii) activation of a
patient's white blood cells outside the body with MULTIKINE, followed
by returning these activated cells to the patient; and (iii) a
combination of (i) and (ii). RESEARCH AND DEVELOPMENT
In the past, the Company conducted its research pursuant to
arrangements with various universities and research organizations.
The Company provided grants to these institutions for the conduct of
specific research projects as suggested by the Company's scientists
based upon the results of previously completed projects.
More recently the Company has decided to consolidate its
research activities in a Company-owned laboratory. The Company
believes that this new approach will be more effective in terms of
both cost and performance.
Between 1983 and 1986 the Company was primarily involved in funding
pre-clinical and Phase I clinical trials of its proprietary MULTIKINE
tech nologies. These trials were conducted at St. Thomas's Hospital
Medical School located in London, England under the direction of
Dudley C. Dumonde, M.D., PhD., a former member of the SAB, and
pursuant to approvals obtained from England's Department of Health and
Social Security.
In the Phase I trial in England (completed in 1987), forty
nine patients suffering with various forms of solid cancers, including
malignant melanoma, breast cancer, colon cancer, and other solid tumor
types were treated with MULTIKINE. The product was administered
directly into the lymphatic system in a number of patients.
Significant and lasting lymphnode responses, which are considered to
be an indication of improvement in the patient's immune responses,
were observed in these patients. A principal conclusion of the Phase
I trials was that the side effects of the Company's products in forty
nine patients were not severe, the treatment was well tolerated and
there was no long-term toxicity.
The results of the Phase I clinical study were encouraging,
and
as a result the Company, through members of its SAB and consulting
experts, established protocols for future clinical trials. In
November, 1990, the Florida Department of Health and Rehabilitative
Services ("DHRS") gave the physicians at a southern Florida medical
institution approval to start a clinical cancer trial in Florida using
the Company's
MULTIKINE product. The focus of the trial was unresectable head and
neck cancer (which is presently untreatable) and was the first time
that the natural MULTIKINE was administered to cancer patients in a
clinical trial in the United States.
Four patients with regionally advanced squamous cell cancer
of the head and neck were treated with the Company's MULTIKINE
product. The patients had previously received radical surgery followed
by x-ray therapy but developed recurrent tumors at multiple sites in
the neck
and were diagnosed with terminal cancer. The patients had low levels
of lymphocytes and evidence of immune deficiency (generally a
characteristic of this type of cancer).
Three of the four patients treated with the Company's
MULTIKINE pro duct generated significant biological responses as a
result of the treatment. Negligible side effects were observed and the
patients were treated as outpatients. Notwithstanding the above, it
should be noted that these trials were only preliminary and were only
conducted on a small number
of patients. It remains to be seen if MULTIKINE will be effective in
treating any form of cancer.
See "Product Development Plan" above for information
concerning the Company's future research and development plans.
Proof of efficacy for anti-cancer drugs is a lengthy and
complex process. At this early stage of clinical investigation, it
remains to be proven that MULTIKINE will be effective against any form
of cancer. Even if some form of MULTIKINE is found to be effective in
the treatment of cancer, commercial use of MULTIKINE may be several
years away due to extensive safety and effectiveness tests that would
be necessary before required government approvals are obtained. It
should be noted that other companies and research teams are actively
involved in developing treatments and/or cures for cancer, and ac
cordingly, there can be no assurance that the Company's research
efforts, even if successful from a medical standpoint, can be
completed before those of its competitors.
Since 1983, and through the nine months ended June 30, 1995,
approximately $9,058,000 has been expended on Company-sponsored
research and development, including approximately $2,896,000,
$1,307,000, and $48l,700 during the years ended September 30, 1994,
1993 and 1992, respectively. The foregoing amounts do not include
amounts spent by Viral Technologies, Inc. on research and development.
Since May, 1986 (the inception of VTI) and through June 30, 1995, VTI
has spent approximately $3,000,000 on research and development.
The Company has established a Scientific Advisory Board
("SAB") com prised of scientists distinguished in biomedical research
in the field of lymphokines and related areas. From time to time,
members of the SAB advise the Company on its research activities and
keep the Company informed of current developments in the area of
lymphokine research. Institutions with which members of the SAB are
affiliated have and may in the future conduct Companysponsored
research. The SAB has in the past and may in the future, at its
discretion, invite other scientists to opine in confidence on the
merits of
the Company-sponsored research. Members of the SAB receive $500 per
month from the Company and have also been granted options (for serving
as members of
the SAB) which collectively allow for the purchase of up to 15,000
shares of the Company's Common Stock. The options are exercisable at
prices ranging from $13.80 to $16.50 per share.
The Company has reached an understanding with its SAB members
which permits them to publish in scientific publications the results
of research sponsored by the Company. Members of the SAB have agreed
to bring to the attention of the Company potentially patentable
aspects of technology and know
how developed from the Company-sponsored research and to consult with
the Company prior to publishing results of such research. The Company
in turn has agreed, if it is determined to be beneficial to do so, to
apply for
patent protection as promptly as practicable so as to avoid or keep to
a minimum any delay in publishing material of scientific importance.
The members of the Company's SAB are:
Dr. Michael Chirigos former head of the Virus and Disease
Modifi cation Section, National Institutes of Health (NIH),
National Cancer Institute (NCI) from 1966-1981 and the Immuno
Pharmacology Section, NHI, NCI, Biological Response Modifier
Program until 1985.
Dr. Evan M. Hersh Vice-Chairman, Department of Internal
Medicine, Chief, Section of Hematology/Oncology, Department of Internal
Medicine, Tucson, AZ. Director of Clinical Research, Arizona Cancer
Center, Tucson.
Dr. Michael J. Mastrangelo Director, Division of Medical
Oncolo gy, and Professor of Medicine, Jefferson Medical College,
Philadelphia, Penn sylvania.
Dr. Alan B. Morris, PhD. Professor, Department of Biological
Sciences, University of Warwick, Coventry, U.K.
VIRAL TECHNOLOGIES, INC.
Prior to this offering, Viral Technologies, Inc., ("VTI") a
Delaware corporation, was 50% owned by the Company and 50% owned by
Alpha 1 Biomedicals, Inc. VTI is developing a vaccine technology,
originally developed by Alpha 1 Biomedicals, that may prove of
commercial value in the prevention, diagnosis and treatment of AIDS.
VTI holds the proprietary rights to certain synthesized components of
the p17 gag protein, which is the outer core region of the AIDS virus
(HIV-1).
In September l995, the Company and ALPHA 1 entered into an
agreement whereby the Company would acquire ALPHA 1's interest in VTI
in exchange for l59,l70 shares of the Company's common stock. The
agreement between the Company and ALPHA 1 provides that the closing of
this transaction will occur after the l59,l70 shares of the Company's
common stock to be issued to ALPHA 1 are registered with the Securities
and Exchange Commission. See "Plan of Distribution".
VTI is involved in the development of a prototype preventive
and therapeutic vaccine against AIDS that is based on HGP-30, a thirty
amino acid synthetic peptide derived from the p17 region of the AIDS
virus. Evidence compiled by scientists at George Washington University
from toxicology studies with different animal species indicates that
the HGP-30 prototype vaccine does not appear to be toxic in animals.
The HGP-30 vaccine being tested differs from most other vaccines
candidates in that its active component, the HGP-30 peptide, is derived
from the p17 core protein particles of the virus. Since HGP-30 is a
totally synthetic molecule containing no live virus, it cannot cause
infection. Unlike the envelope (i.e. outside) proteins, the p17 region
of the AIDS virus appears to be relatively nonchanging. As a result,
and as reported in the May, 1986 issue of Science magazine, the
development of an AIDS vaccine that would protect against all
strains may be possible. In January, 1991, VTI was issued a United
States patent covering the production, use and sale of HGP-30. HGP-30
may also be effective in treating persons infected with the AIDS virus.
Approval to start Phase I human clinical trials in Great
Britain using VTI's prototype AIDS vaccine HGP-30 was granted in April
1988. The trial, the first in the European common market, began in May
1989 with 18 healthy (HIVnegative) volunteers given three different
dosages and was completed in December 1990. The trial results
indicated that five of eight volunteers vaccinated with HGP-30, and
whose blood samples were able to be tested, produced "killer" T-cell
responses. The vaccine also elicited proliferative responses in 7 out
of 9 vaccinated volunteers and antibody responses in 15 out of 18
vaccinated volunteers.
In March, 1990, the California Department of Health Services
Food and Drug Branch (FDB) approved the first human testing (Phase I
trials) in
the United States of HGP-30. The trials were conducted by scientists
at the University of Southern California and San Francisco General
Hospital. Twenty-one healthy HIV-negative volunteers at medical centers
in Los Angeles and San Francisco received escalating doses of HGP-30
with no clinically significant adverse side effects. The clinical
studies confirmed earlier clinical trials in London. Further, in a
pilot experiment in a SCID mouse model (a genetically engineered mouse
able to accept a human immune system, e.g., blood), animals given blood
cells from one vaccinated volunteer showed that 75% of the SCID mice
were protected from live HIV virus challenge compared to 25% of the
mice receiving cells from a normal donor. While this is a promising
observation, more studies need to be conducted before any conclusions
can be drawn from this test.
In April 1995 VTI began another clinical trial using
volunteers who will receive two vaccinations. The volunteers who
originally received the two lowest dosage levels will be asked to
donate blood for a SCID mouse HIV challenge study. In 1995, VTI also
plans to request regulatory approval for an HIV-positive clinical
trial. No assurance can be given that approvals to conduct additional
clinical trials will be obtained in a timely fashion, if at all. In
addition, VTI's AIDS vaccine/treatment is only in the initial stages of
testing and it remains to be seen if the vaccine/treatment will be
effective against the AIDS virus.
Although there has been important independent research showing
the possible significance of the p17 region of HIV-1, there can be no
assurance that any of VTI's technology will be effective in the
prevention, diagnosis or treatment of AIDS. There can be no assurance
that other companies will not develop a product that is more effective
or that VTI ultimately will be able to develop and bring a product to
market in a timely manner that would enable it to derive commercial
benefits.
VTI's research and development efforts are presently focused
on the evaluation of second generation formulations and delivery
systems for HGP-30 and related peptides to enhance HIV-specific
cellular immune responses.
COMPOUNDS AND PROCESSES LICENSED TO THE COMPANY
The Company has acquired from Sittona Company, B.V., a
Netherlands corporation ("Sittona"), the exclusive worldwide rights to
patented IL-2 compounds, compositions and other processes and other
lymphokine-related compounds, compositions and processes which are the
subject of various patents, patent applications and disclosure
documents filed with the United States Pa
tent and Trademark Office as well as similar agencies of various
foreign countries. Sittona acquired its rights in the foregoing
products and technology from Hooper Trading Company N.V., and
Shanksville Corporation N.V., both Netherland Antilles corporations.
Pursuant to the terms of the license, the Company must pay to Sittona a
royalty of l0% of all net sales received by the Company in connection
with the manufacture, use or sale of the licensed compounds,
compositions and processes and a royalty of l5% of all license fees and
royalties received by the Company in connection with the grant by the
Com-
pany of any sublicenses for the manufacture, use or sale of the
licensed compounds, compositions and processes. On November 30, l983,
a $l.4 million advance royalty was paid by the Company to Sittona to
acquire the license. The license also requires the Company to bear the
expense of preparing, filing and processing patent applications and to
obtain and maintain patents in the United States and foreign countries
on all inventions, developments and improvements made by or on behalf
of the Company relating to the licensed compounds, compositions and
processes. In this regard the Company has caused patent applications to
be filed in several foreign countries and has undertaken the processing
of previously filed patent applications. The exclusive license is to
remain in effect until the expiration or abandonment of all patent
rights or until the compounds, compositions and processes enter into
the public domain, whichever is later. Sittona may also terminate the
license for breach of the agreement, fraud on the part of the Company,
or the bankruptcy or insolvency of the Company. Sittona, Hooper
Trading Company and Shanksville Corporation are all controlled by
Maximilian de Clara,
the Company's President. See Item 13 of this report.
In 1987 a German company filed an opposition with the European
Patent Office with respect to one of the Company's European patents,
alleging that certain aspects of the patent in question were previously
disclosed by the inventors during a conference held in Germany. A
hearing on the opposition was held and on October 12, 1990 the European
Patent Office rejected the opposition. The German company filing the
opposition has appealed the decision of the European Patent Office. In
1992 the Company's process claims in the patent were upheld, while two
minor claims were denied. The Company does not believe that the
European Patent Office denial of these two minor claims impairs the
value of this patent in any significant degree.
Process for the Production of IL-2 and IL-2 Product
The Company's exclusive license includes processes for the
production in high yields of natural human IL-2 using cell culture
techniques applied to normal human cells. The Company believes that
these production methods have advantages to those currently in use.
Based upon the results of the Company's research and human clinical
trials, the Company believes that "natural" IL-2 produced by cell
culture technologies, such as the Company's proprietary products, may
have advantages over genetically engineered, bacteria-produced IL-2
("recombinant IL-2")
manufactured by other companies. There are basically two ways to
produce IL2 on a commercial scale: (1) applying genesplicing
techniques using bacteria or other micro-organisms to produce
recombinant IL-2; or, (2) applying cell culture technology using
mammalian cells. Substantive differences exist between recombinant IL-
2 and IL-2 produced through cell culture technology. For example: (1)
cell cultured IL-2 is glycosylated (has sugars attached). Sugar
attachments play a crucial role in cell recognition and have a
significant effect on how fast a body clears out proteins. Proteins
produced through bacteria have no sugar attachments and while
recombinant IL-2 products produced from recombinant yeast or insect
cells are glycosylated, they are not so to the right degree, or at the
right locations. Cell cultured IL-2 has the "right" sugar attachments
at the right places; (2) there are also structural differences related
to folding (the way human proteins work
depends on their sequence folding); and (3) the cell cultured IL-2
"cocktail" is administered in small dosages as pioneered by Company
researchers. This formulation and dosage mimics the way immune
regulators are naturally found and function within the body. This
stands in stark contrast to the huge dosages required when recombinant
IL-2 is administered to patients. In addition, patients treated with
recombinant IL-2 usually suffer severe side effects.
Although mammalian cells (other than human cells) could be
genetically engineered to produce glycosylated IL-2 in larger
quantities than are produced by the Company's method, such mammalian
cells could not be genetically engineered to produce the combination of
human lymphokines and cytokines, which together with human glycosylated
IL-2 form the MULTIKINE product used
by the Company. The Company is of the opinion that glycosylated IL-2
genetically produced from mammalian cells must be administered in large
dosages before any benefits are observed. Even then, the Company
believes that only a small percentage of patients will benefit from
treatments consisting only of glycosylated IL-2. In addition, large
dosages of glycosylated IL-2 can, as with recombinant IL-2, result in
severe toxic reactions. In contrast, the Company believes the synergy
between glycosylated IL-2 and certain other lymphokines/ cytokines
allows MULTIKINE to be administered in low dosages, thereby avoiding
the severe toxic reactions which often result when IL-2 is administered
in large dosages.
The technology licensed to the Company includes the basic
production method employing the use of normal white blood cells, an
improved production method based in part on this basic production
method, a serum-free and mitogenfree IL-2 product, and a method for
using this product in humans. Mitogens are used to stimulate cells to
produce specific materials (in this case, IL-2). Mitogens remaining in
the product of cell stimulation can cause allergic and
anaphylactic reactions if not removed from the cell product prior to
introduction into the body.
The Company's license also pertains to a cell culture process
for producing interleukin-2 and another type of cell process for
producing serum free and mitogen-free interleukin-2 preparations which
avoids a mitogen stimulation step and uses interleukin-1 and white
blood cells.
The Company's license further includes a process for
suppressing graft rejection in organ transplantation. This process
employs the use of an agent which blocks the activity of IL-2 in
proliferating T-cells which would otherwise destroy the transplanted
organ. The Company regards further research and development of this
process to involve a financial commitment beyond its present ability;
thus while the Company intends to attempt to enter into licensing
arrangements with third parties concerning this process, it does not
presently intend to conduct further research into, or development of,
this process.
Patent Position of Viral Technologies, Inc.'s HGP-30. In
January, 1991, VTI was awarded a U.S. patent covering the exclusive
production, use and sale of HGP-30. This patent is thought to be the
first U.S. patent for a portion of a "core" protein of the HIV virus.
In February, 1993, VTI was awarded a European patent covering HGP-30
and certain other peptides.
GOVERNMENT REGULATION
The investigational agents and future products of the Company
are regulated in the United States under the Federal Food, Drug and
Cosmetic Act, the Public Health Service Act, and the laws of certain
states. The Federal Food and Drug Administration (FDA) exercises
significant regulatory control over the clinical investigation and
manufacture of pharmaceutical products.
Prior to the time a pharmaceutical product can be marketed in
the United States for therapeutic use, approval of the FDA must
normally be ob tained. Certain states however have passed laws which
allow a state agency having functions similar to the FDA to approve
the testing and use of pharma ceutical products within the state. In
the case of either FDA or state regu lation, preclinical testing
programs on animals, followed by three phases of clinical testing on
humans, are typically required in order to establish pro duct safety
and efficacy.
The first stage of evaluation, preclinical testing, must be
conducted in animals. After lack of toxicity has been demonstrated,
the test results are submitted to the FDA (or state regulatory agency)
along with a request for approval for further testing which includes
the protocol that will be followed in the initial human clinical
evaluation. If the applicable regulatory authority does not object to
the proposed experiments, the investigator can proceed with Phase I
trials. Phase I trials consist of
pharmacological studies on a relatively few number of humans under
rigidly controlled conditions in order to establish lack of toxicity
and a safe dosage range.
After Phase I testing is completed, one or more Phase II
trials are conducted in a limited number of patients to test the
product's ability to treat or prevent a specific disease, and the
results are analyzed for clinical efficacy and safety. If the results
appear to warrant confirmatory studies, the data is submitted to the
applicable regulatory authority along with the protocol for a Phase
III trial. Phase
III trials consist of extensive studies in large populations designed
to assess the safety of the product and the most desirable dosage in
the treatment or prevention of a specific disease. The results of the
clinical trials for a new biological drug are submitted to the FDA as
part of a product license application ("PLA").
In addition to obtaining FDA approval for a product, a
biologics establishment license application ("ELA") must be filed in
order to obtain FDA approval of the testing and manufacturing
facilities in which the product is produced. To the extent all or a
portion of the manufacturing process for a
product is handled by an entity other than the Company, the Company
must similarly receive FDA approval for the other entity's
participation in the manufacturing process. Domestic manufacturing
establishments are subject to inspections by the FDA and by other
Federal, state and local agencies and must comply with Good
Manufacturing Practices ("GMP") as appropriate for production. In
complying with GMP regulations, manufacturers must continue to expend
time, money and effort in the area of production and quality
control to ensure full technical compliance.
The process of drug development and regulatory approval
requires substantial resources and many years. There can be no
assurance that regulatory approval will ever be obtained for products
developed by the Company. Approval of drugs and biologicals by
regulatory authorities of most foreign countries must also be obtained
prior to initiation of marketing in those countries. The approval
process varies from country to country and the time period required in
each foreign country to obtain approval may be longer or shorter than
that required for regulatory approval in the United States.
The human clinical trials in Florida were authorized pursuant
to ap plications filed by physicians at a southern Florida medical
institution with the Florida Department of Health and Rehabilitative
Services ("DHRS"). VTI's Phase I clinical trials were conducted
pursuant to approvals obtained from the California Department of
Health Services Food and Drug Branch. None of the clinical trials
involving the Company's MULTIKINE product (including the prior trials
conducted in London, England) have been conducted under the approval
of the FDA and there are no assurances that clinical trials conducted
under approval from state authorities or conducted in foreign
countries will be accepted by the FDA. Product licensure in a foreign
country or under state authority does not mean that the product will
be licensed by the FDA and there are no assurances that the Company
will receive any approval of the FDA or any other governmental entity
for the manufacturing and/or marketing of a product. Consequently,
the commencement of the manufacturing and marketing of any Company
product is, in all likelihood, many years away.
COMPETITION AND MARKETING
Many companies, nonprofit organizations and governmental
institutions are conducting research on lymphokines. Competition in
the development of therapeutic agents and diagnostic products
incorporating lymphokines is in-
tense. Large, well-established pharmaceutical companies are engaged
in lymphokine research and development and have considerably greater
resources than the Company has to develop products. The establishment
by these large companies of in-house research groups and of joint
research ventures with other entities is already occurring in these
areas and will probably become even more
prevalent. In addition, licensing and other collaborative
arrangements be tween governmental and other nonprofit institutions
and commercial enterpris es, as well as the seeking of patent
protection of inventions by nonprofit institutions and researchers,
could result in strong competition for the Com pany. Any new
developments made by such organizations may render the Com pany's
licensed technology and know-how obsolete.
Several biotechnology companies are producing IL-2-like
compounds. The Company believes, however, that it is the only producer
of a patented IL 2 product using a patented cell-culture technology
with normal human cells. The Company foresees that its principle
competition will come from producers of genetically-engineered IL-2-
like products. However, it is the Company's belief, based upon growing
scientific evidence, that its natural IL-2 products have advantages
over the genetically engineered, IL-2-like products. Evidence
indicates that genetically engineered, IL-2-like products, which lack
sugar molecules and are typically not water soluble, may be recognized
by the immunological system as a foreign agent, leading to a
measurable antibody build-up and thereby possibly voiding their
therapeutic value. Furthermore, the Company's research has established
that to have optimum therapeutic value IL2 should be administered not
as a single substance but rather as an IL-2 rich mixture of certain
lymphokines and other proteins, i.e. as a "cocktail". If these
differences prove to be of importance, and if the therapeutic value of
its MULTIKINE product is conclusively established, the Company
believes it will be able to establish a strong competitive position in
a future market.
The Company has not established a definitive plan for
marketing nor has it established a price structure for the Company's
saleable products. However, the Company intends, if the Company is in
a position to begin commercialization of its products, to enter into
written marketing agreements with various major pharmaceutical firms
with established sales forces. The sales forces in turn would
probably target the Company's products to cancer centers, physicians
and clinics involved in immunotherapy.
Competition to develop treatments for the control of AIDS is
intense. Virtually all of the pharmaceutical and biotechnology
companies around the world are devoting substantial sums to the
exploration and development of technologies useful in these areas.
VTI's development of its experimental HGP-30 AIDS Vaccine, if
successful, would likely face intense competition from other companies
seeking to find alternative or better ways to prevent and treat AIDS.
Both the Company and VTI may encounter problems, delays and
additional expenses in developing marketing plans with outside firms.
In addition, the Company and VTI may experience other limitations
involving the proposed sale of their products, such as uncertainty of
third-party reimbursement. There is no assurance that the Company or
VTI can successfully market any products which they may develop or
market them at competitive prices.
The clinical trials funded to date by the Company and VTI
have not been approved by the FDA, but rather have been conducted
pursuant to approvals obtained from regulatory agencies in England and
certain states. Since the results of these clinical trials may not be
accepted by the FDA, companies which are conducting clinical trials
approved by the FDA may have a competitive advantage in that the
products of such companies are further advanced in the regulatory
process than those of the Company or VTI. PROPERTIES
The Company's MULTIKINE product used in its pre-clinical and
Phase I clinical trials in England was manufactured at a pilot plant
at St. Thomas' Hospital Medical School using the Company's patented
production methods and equipment owned by the Company. The MULTIKINE
product used in the Florida clinical trials was manufactured in
Florida. In February, 1993, the Company signed an agreement with a
third party whereby the third party constructed a facility designed to
produce the Company's MULTIKINE product. The Company paid the third
party the cost of constructing this facility (approximately $200,000)
in accordance with the Company's specifications.
In October, 1994 the Company completed the construction of a
research laboratory in space leased by the Company. The cost of
modifying and equipping this space for the Company's purposes was
approximately $1,200,000.
The Company leases office space at 66 Canal Center Plaza,
Alexandria, Virginia at a monthly rental of approximately $8,000
per month. The Company
believes this arrangement is
adequate for the conduct of
its present business.
MANAGEMENT
Officers and Directors
Name Age Position
Maximilian de Clara 65 Director and President
Geert R. Kersten, Esq. 36 Director, Chief
Executive
Officer, Secretary and
Treasurer Patricia B. Prichep 42 Vice President of
Operations
M. Douglas Winship 45 Vice President of
Regulatory
Affairs and Quality
Assurance Dr. Eyal Talor 37 Vice President of
Research
and
Manufac-
turing
Dr. Suzanne Beckner 44 Vice President of
Clinical
Development
Mark V. Soresi 41 Director
F. Donald Hudson 61 Director
Edwin A. Shalloway 60 Director
The directors of the Company serve in such capacity until the
next annual meeting of the Company's shareholders and until their
successors have been duly elected and qualified. The officers of the
Company serve at the discretion of the Company's directors.
Mr. Maximilian de Clara, by virtue of his position as an
officer
and director of the Company and his stock ownership, may be deemed to
be the "parent" and "founder" of the Company as those terms are
defined under applicable rules and regulations of the Securities and
Exchange Commission.
The principal occupations of the Company's officers and
directors,
during the past several years, are as follows:
Maximilian de Clara. Mr. de Clara has been a director of the
Com pany since its inception in March, l983, and has been president of
the Company since July, l983. Prior to his affiliation with the
Company, and since at least l978, Mr. de Clara was involved in the
management of his personal investments and personally funding research
in the fields of biotechnology and biomedicine. Mr. de Clara attended
the medical school of the University of Munich from l949 to l955, but
left before he received a medical degree. During the summers of l954
and l955, he worked as a research assistant at the University of
Istanbul in the field of cancer research. For his efforts and
dedication to research and development in the fight against cancer and
AIDS, Mr. de Clara was awarded the "Pour le Merit" honorary medal of
the Austrian Military Order "Merito Navale" as well as the honor cross
of the Austrian Albert Schweitzer Society.
Geert R. Kersten, Esq. Mr. Kersten was Director of Corporate
and Investment Relations for the Company between February, 1987 and
October, 1987. In October of 1987, he was appointed Vice President of
Operations. In December, 1988, Mr. Kersten was appointed director of
the Company. Mr. Kersten also became the Company's secretary and
treasurer in 1989. In May, 1992, Mr. Kersten was appointed Chief
Operating Officer and in February, 1995, Mr. Kersten became the
Company's Chief Executive Officer. In previous years, Mr. Kersten
worked as a financial analyst with Source Capital, Ltd., an investment
advising firm in McLean, Virginia. Mr. Kersten is a stepson of
Maximilian de Clara, who is the President and a Director of the
Company. Mr. Kersten
attended George Washington
University in Washington, D.C. where he earned a B.A. in Accounting
and an M.B.A. with emphasis on International Finance. He also
attended law school at American University in Washington, D.C. where
he received a Juris Doctor degree.
Patricia B. Prichep has been the Company's Vice President of
Opera-
tions since March, 1994. Between December, 1992 and March, 1994, Ms.
Prichep was the Company's Director of Operations. From June, 1990 to
December, 1992, Ms. Prichep was the Manager of Quality and
Productivity for the NASD's Management, Systems and Support
Department. Between 1982 and 1990, Ms. Prichep was Vice President and
Operations Manager for Source Capital, Ltd.
M. Douglas Winship has been the Company's Vice President of
Regula tory Affairs and Quality Assurance since April, 1994. Between
1988 and April, 1994, Mr. Winship held various positions with Curative
Technologies, Inc., including Vice President of Regulatory Affairs and
Quality Assurance (1991-1994).
Dr. Eyal Talor has been the Company's Vice President of
Research and Manufacturing since March, 1994. From October, 1993
until March, 1994, Dr. Talor was Director of Research, Manufacturing
and Quality Control, as well
as the Director of the Clinical Laboratory, for Chesapeake Biological
Laboratories, Inc. From 1991 to 1993, Dr. Talor was a scientist with
SRA Technologies, Inc., as well as the director of SRA's Flow
Cytometry Laboratory (19911993) and Clinical Laboratory (1992-1993).
During 1992 and 1993, Dr. Talor was also the Regulatory Affairs and
Safety Officer For SRA. Since 1987, Dr. Talor has held various
positions with the John Hopkins University, including course
coordinator for the School of Continuing Studies (1989-Present),
research associate and lecturer in the Department of Immunology and
Infectious Diseases (1987-1991), and associate professor (1991-
Present).
Dr. Suzanne Beckner has been the Company's Vice President of
Clini cal Development since July 1994. From 1993 until joining the
Company Dr. Beckner served as Vice President of Development at Alpha I
Biomedical. From 1989 to 1992, she held positions with Life
Technologies, Inc. as Research Director and then as Business Director
of the Cellular Biochemistry Products business segment. From 1988 to
1989, she held a research management position with Biotherapeutics,
Inc.
Mark V. Soresi. Mr. Soresi became a director of the Company
in
July, 1989. In 1982, Mr. Soresi founded, and since that date has been
the president of the Soresi Chemical Group, Inc., operating as Eastern
Chemical Waste Systems. Eastern Chemical Waste Systems is involved in
the clean-up of hazardous and toxic waste dump sites. Mr. Soresi
attended George Washington University in Washington, D.C. where he
earned a Bachelor of Science in Chemistry.
F. Donald Hudson. F. Donald Hudson has been a director of
the Com pany since May, 1992. Between 1990 and 1993, Mr. Hudson was
President and Chief Executive Officer of Neuromedica, Inc., a
development stage company engaged in neurological research. Until
January, 1989, Mr. Hudson served as Chairman and Chief Executive
Officer of Transgenic Sciences, Inc. (now TSI Corporation), a publicly
held biotechnology corporation which he founded in January, 1987.
From October, 1985 until January, 1987, Mr.
Hudson was a director of Organogenesis, Inc., a publicly held
biotechnology corporation of which he was a founder, and for five
years prior thereto was Executive Vice President and a director of
Integrated Genetics, Inc., a corporation also engaged in biotechnology
which he co founded and which was publicly traded until its
acquisition in 1989 by Genzyme, Inc. Mr. Hudson is also a director of
VIMRx Pharmaceuticals, Inc.
Edwin A. Shalloway, Esq. Mr. Shalloway has been a director
of the Company since May, 1992. Mr. Shalloway is and has been since
1964, a partner in the law firm of Sherman and Shalloway which
specializes in matters of patent law. Mr. Shalloway attended the
University of Georgia
where he earned a Bachelor of Science and Bachelor of Arts degrees.
Mr. Shalloway received his law degree from the American University in
Washington, D.C. Mr. Shalloway is also the President of the
International Licensing Society.
All of the Company's officers devote substantially all of
their time on the Company's business. Messrs. Soresi, Hudson and
Shalloway, as direc-
tors, devote only a minimal amount of time to the Company.
The Company has an audit committee whose members are Geert
R. Kersten, F. Donald Hudson and Edwin A. Shalloway.
Executive Compensation
The following table sets forth in summary form the compensation
re ceived by (i) the Chief Executive Officer of the Company and (ii) by
each other executive officer of the Company who received in excess of
$100,000 during the fiscal year ended September 30, 1994.
Annual Compensation Long Term
Compensation ReAll Other
stric-
Other
Annual ted
LTIP Com-
Compen Stock Options
Paypensa-
Name and Princi Fiscal Salary Bonus sation Awards Granted
outs tion pal Position Year (1) (2)
(3) (4) (5) (6)
(7)
Maximilian de Clara, 1994 - $93,752 70,000
- -
- -
President 1993 - $59,376 -
- -
- -
1992 - $21,791 70,000
- -
- -
Geert R. Kersten, 1994 $182,539 $ 8,183 50,000
- -
$4,497
Chief Operating 1993 $163,204 $ 6,046 -
- -
$3,289
Officer, Secretary 1992 $126,304 $ 6,133 50,000
- -
- -
and Treasurer
(1) The dollar value of base salary (cash and non-cash) received.
(2) The dollar value of bonus (cash and non-cash) received.
(3) Any other annual compensation not properly categorized as salary or
bonus, including perquisites and other personal benefits, securities
or property. Amounts in the table represent automobile, parking and
other transportation expenses.
(4) During the period covered by the Table, no shares of restricted stock
were issued as compensation for services to the persons listed in the
table. As of September 30, 1994, the number of shares of the
Company's common stock, owned by the officers included in the table
above, and the value of such shares at such date, based upon the
market price of the Company's common stock were:
Name Shares
Value Maximilian de Clara 30,370
$
200,500 Geert R. Kersten 161,536
$1,066,000
(5) The shares of Common Stock to be received upon the exercise of all
stock options granted during the period covered by the Table.
(6) "LTIP" is an abbreviation for "Long-Term Incentive Plan". An LTIP
is any plan that is intended to serve as an incentive for
performance to occur over a period longer than one fiscal year.
Amounts reported in this column represent payments received during
the applicable fiscal year by the named officer pursuant to an
LTIP.
(7) All other compensation received that the Company could not
properly report in any other column of the Table including annual
Company contributions or other allocations to vested and unvested
defined
contribution plans, and the dollar value of any insurance premiums
paid by, or on behalf of, the Company with respect to term life
insurance
for the benefit of the named executive officer, and the full dollar
value of the remainder of the premiums paid by, or on behalf of,
the Company. Amounts in the table represent contributions made by
the Company to a 401(k) pension plan on behalf of Mr. Kersten.
Long Term Incentive Plans Awards in Last Fiscal Year
None.
Employee Pension, Profit Sharing or Other Retirement Plans
During 1993 the Company implemented a defined contribution
retire ment plan, qualifying under Section 401(k) of the Internal
Revenue Code and covering substantially all the Company's employees.
The employer contribution per year is equal to the lesser of up to 3%
of each participant's salary or 50% of the employee's contribution.
The 1994 expenses for this plan were $16,160. Other than the 401(k)
Plan, the Company does not have a defined benefit, pension plan,
profit sharing or other retirement plan.
Compensation of Directors
Standard Arrangements. The Company currently pays its
directors $1,000, plus expenses, for each meeting of the Board of
Directors which they attended. The Company has no standard
arrangement pursuant to which directors of the Company are compensated
for any services provided as a director or for committee participation
or special assignments.
Other Arrangements. The Company has from time to time
granted options to its outside directors, Mr. Soresi, Mr. Hudson and
Mr. Shalloway. See Stock Options below for additional information
concerning options granted to the Company's directors.
Employment Contracts
Effective August 1, 1994, the Company entered into a three-
year em ployment agreement with Mr. Kersten. The employment agreement
provides that during the period between August 1, 1994 and July 31,
1995, the Company will pay Mr. Kersten an annual salary of $198,985.
During the years ending August 31, 1996 and 1997, the Company will pay
Mr. Kersten a salary of $218,883 and $240,771 respectively. In the
event that there is a material reduction in Mr. Kersten's authority,
duties or activities, or in the event there is a change
in the control of the Company, then the agreement allows Mr. Kersten
to resign from his position at the Company and receive a lump-sum
payment from the Company equal to 18 months salary. For purposes of
the employment agreement, a change in the control of the Company means
the sale of more than 50% of the outstanding shares of the Company's
Common Stock, or a
change in a majority of the Company's directors. Pursuant to the
agreement, the Company also agreed to grant Mr. Kersten, in accordance
with the Company's 1994 Incentive Stock Option Plan, options to
purchase 50,000 shares of the Company's Common Stock.
Compensation Committee Interlocks and Insider Participation
The Company has a compensation committee comprised of all of
the Com-
pany's directors, with the exception of Mr. Kersten. During the year
ended September 30, 1994, Mr. de Clara was the only officer
participating in deli berations of the Company's compensation
committee concerning
executive officer compensation. See "Transactions with Related
Parties" in this section of the Prospectus for information concerning
transactions between the Company and Mr. de Clara.
During the year ended September 30, 1994, no director of the
Company was also an executive officer of another entity, which had an
executive officer of the Company serving as a director of such entity
or as a member of the compensation committee of such entity.
Stock Options
The following tables set forth information concerning the
options granted, during the fiscal year ended September 30, 1994, to
the Company's President and Chief Operating Officer, and the fiscal
year-end value of all unexercised options (regardless of when granted)
held by these persons.
Options Granted During Fiscal Year Ending September 30, l994
Potential
Individual Grants Realizable Value
at
% of Total Assumed Annual Rates Options of
Stock
Price
Granted to Exercise Appreciation for
Options Employees in Price Per Expiration Option Term
(2)
Name Granted (#) Fiscal Year Share (1) Date 5% 10%
Maximilian
de Clara 70,000 44% $2.87 7/29/04 $110,600 $272,811
Geert R.
Kersten 50,000 32% $2.87 7/29/04 $ 79,000 $194,865
(1) In June 1995 the Company's directors lowered the exercise price of
these options from $8.70 per share to $2.87 per share.
(2) The potential realizable value of the options shown in the table
assuming the market price of the Company's Common Stock
appreciates in value from the date of the grant to the end of the
option term at 5% or
10%.
Option Exercises and Year End Option Values
Value
of
Unexer
ci se
d
IntheM
on ey
Number of
Options
Unexercised at
Fiscal
Options Year-
End
Shares (3) (4)
Acquired Value
on Exercise Realized Exercisable/Exercisable/
Name (1) (2) Unexercisable
Unexercisable
Maximilian de Clara 85,000/70,000 $313,650/$258,300
Geert R. Kersten -108,250/66,500 $399,442/$245,385
(1) The number of shares received upon exercise of options during the
fiscal year ended September 30, 1994.
(2) With respect to options exercised during the Company's fiscal year
ended September 30, 1994, the dollar value of the difference
between the option exercise price and the market value of the
option shares purchased on the date of the exercise of the
options.
(3) The total number of unexercised options held as of September 30,
1994, separated between those options that were exercisable and
those options that were not exercisable.
(4) For all unexercised options held as of September 30, 1994, the
aggregate dollar value of the excess of the market value of the
stock underlying those options (as of September 30, 1994) over the
exercise price of those unexercised options. Values are shown
separately for those options that were exercisable, and those
options that were not yet exercisable, on Sep-
tember 30, 1994. In June 1995 the Company lowered the exercise
price on all options granted to Mr. de Clara and Mr. Kersten to
$2.87 per share. The amounts in this column have been computed
using the assumption that the $2.87 exercise price was in effect
at September 30, 1994.
Stock Option and Bonus Plans
The Company has two Incentive Stock Option Plans, three
NonQualified Stock Option Plans and a Stock Bonus Plan. A summary
description of these Plans follows. In some cases these Plans are
collectively referred to as the "Plans".
Incentive Stock Option Plan. The two Incentive Stock Option
Plans collectively authorize the issuance of up to 200,000 shares of
the Company's Common Stock to persons that exercise options granted
pursuant to the Plan. Only Company employees may be granted options
pursuant to the Incentive Stock Option Plan.
To be classified as incentive stock options under the
Internal Reve nue Code, options granted pursuant to the Plans must be
exercised prior to the following dates:
(a) The expiration of three months after the date on which an
option holder's employment by the Company is terminated
(except if such termination is due to the death or
permanent and total disability);
(b) The expiration of 12 months after the date on which an
option holder's employment by the Company is terminated,
if such termination is due to the Employee's permanent
and total disability;
(c) In the event of an option holder's death while in the
employ of the Company, his executors or administrators
may exercise, within three months following the date of
his death, the option as to any of the shares not
previously exercised;
The total fair market value of the shares of Common Stock
(determined at the time of the grant of the option) for which any
employeemay be granted options which are first exercisable in any
calendar year may not exceed $100,000.
Options may not be exercised until one year following the
date of grant. Options granted to an employee then owning more than
10% of the Common Stock of the Company may not be exercisable by its
terms after five years from the date of grant. Any other option
granted pursuant to the Plan may not be exercisable by its terms after
ten years from the date of grant.
The purchase price per share of Common Stock purchasable under an
option is determined by the Committee but cannot be less than the fair
market value of the Common Stock on the date of the grant of the
option (or 110% of the fair market value in the case of a person
owning more than 10% of the Company's outstanding shares).
Non-Qualified Stock Option Plan. The three Non-Qualified
Stock Op tion Plans collectively authorize the issuance of up to
360,000 shares of the Company's Common Stock to persons that exercise
options granted pursuant to the Plans. The Company's employees,
directors, officers, consultants and advisors are eligible to be
granted options pursuant to the Plans, provided however that bona fide
services must be rendered by such consultants or ad visors and such
services must not be in connection with the offer or sale of
securities in a capital-raising transaction. The option exercise price
is determined by the Committee but cannot be less than the market
price of the Company's Common Stock on the date the option is granted.
Stock Bonus Plan. Up to 40,000 shares of Common Stock may be
granted under the Stock Bonus Plan. Such shares may consist, in whole
or
in part, of authorized but unissued shares, or treasury shares. Under
the Stock Bonus Plan, the Company's employees, directors, officers,
consultants and advisors are eligible to receive a grant of the
Company's shares, provided however that bona fide services must be
rendered by consultants or advisors and such services must not be in
connection with the offer or sale of securities in a capital-raising
transaction.
Other Information Regarding the Plans. The Plans are
administered by the Company's Compensation Committee ("the
Committee"), each member of which is a director of the Company. The
members of the Committee were selected by the Company's Board of
Directors and serve for a one-year tenure and until their successors
are elected. A member of the Committee may be removed at any time by
action of the Board of Directors. Any vacancies which may occur on the
Committee will be filled by the Board of Directors. The Committee
is vested with the authority to interpret the provisions of the Plans
and supervise the administration of the Plans. In addition, the
Committee is empowered to select those persons to whom shares or
options are to be granted, to determine the number of shares subject
to each grant of a stock bonus or an option and to determine when, and
upon what conditions, shares or options granted under the Plans will
vest or otherwise be subject to forfeiture and cancellation.
In the discretion of the Committee, any option granted
pursuant to the Plans may include installment exercise terms such that
the option becomes fully exercisable in a series of cumulating
portions. The Committee may also accelerate the date upon which any
option (or any part of any options) is first exercisable. Any shares
issued pursuant to the Stock Bonus Plan and any options granted
pursuant to the Incentive Stock Option Plan or the NonQualified Stock
Option Plan will be forfeited if the "vesting" schedule established by
the Committee administering the Plan at the time of the grant is not
met. For this purpose, vesting means the period during which the
employee must remain an employee of the Company or the period of time
a nonemployee must provide services to the Company. At the time an
employee ceases working for the Company (or at the time a nonemployee
ceases to perform services for the Company), any shares or options not
fully vested will be forfeited and cancelled. At the discretion of the
Committee payment for the shares of Common Stock underlying options
may be paid through the delivery of shares of the Company's Common
Stock having an aggregate fair market value equal to the option price,
provided such shares have been owned by the option holder for at least
one year prior to such exercise. A combination of cash and
shares of Common Stock may also be permitted at the discretion of the
Committee.
Options are generally non-transferable except upon death of
the op tion holder. Shares issued pursuant to the Stock Bonus Plan
will generally not be transferable until the person receiving the
shares satisfies the vest ing requirements imposed by the Committee
when the shares were issued.
The Board of Directors of the Company may at any time, and
from time to time, amend, terminate, or suspend one or more of the
Plans in any manner they deem appropriate, provided that such
amendment, termination or suspension
will not adversely affect rights or obligations with respect to shares
or op tions previously granted. The Board of Directors may not,
without shareholder approval: make any amendment which would
materially modify the eligibility requirements for the Plans; increase
or decrease the total number of shares of Common Stock which may be
issued pursuant to the Plans except in the case of a reclassification
of the Company's capital stock or a consolidation or merger of the
Company; reduce the minimum option price per share; extend the period
for granting options; or materially increase in any other way the
benefits accruing to employees who are eligible to participate in the
Plans.
Prior Stock Option and Bonus Plan. The Company previously
had in effect a Stock Option and Bonus Plan ("the 1987 Plan") which
provided for the grant to the Company's officers, directors, employees
and consultants of either (i) shares of the Company's Common Stock for
services rendered or (ii) options to purchase shares of Common Stock.
The 1987 Plan was terminated by the Company in 1992. Since the 1987
Plan was terminated, no further options
will be granted and no further bonus shares will be issued pursuant to
the 1987 Plan. However, options previously granted may nevertheless
still be exercised according to the terms of the options. Prior to
the termination of the 1987 Plan, the Company granted options to
purchase 189,250 shares of the Company's Common Stock. To date,
options to purchase 6,000 shares have been exercised. In June, 1995
the Company cancelled options to purchase 113,250 shares that had
previously been granted under this Plan and reissued options for the
same number of shares under the Company's other stock option plans.
See "Option Summary" below.
Option Summary. The following sets forth certain
information,
as of June 15, 1995, concerning the stock options granted by the
Company. Each option represents the right to purchase one share of the
Company's Common Stock.
Total Shares
Shares Reserved for
Remaining Reserved
Outstanding Options
Name of Plan Under Plan Options Under
Plan
1987 Stock Option and Bonus Plan 200,000 70,000 (1)
1992 Incentive Stock Option Plan 100,000 49,500 50,500
1992 Non-Qualified Stock Option Plan 60,000 60,000 -
1994 Incentive Stock Option Plan 100,000 100,000 -
1994 Non-Qualified Stock Option Plan 100,000 94,750 5,250
1995 Non-Qualified Stock Option Plan 200,000 157,000
43,000
TOTAL: 531,250
(1) This Plan was terminated in 1992 and as a result, no new options
will be granted pursuant to this Plan.
In June 1995 the Company (i) cancelled options to purchase
113,250 shares that were previously granted under the Company's 1987
Stock Option and Bonus Plans, (ii) reissued options for the same
number of shares under the Company's other stock option plans, and
(iii) lowered the exercise price on options previously granted to the
Company's officers, directors and employees to $2.87 per share.
In March, 1991 the Company granted a financial relations
consultant
an option to purchase 50,000 shares of the Company's common stock.
The op tion is exercisable at $13.80 per share and expires in March,
1996. The holder of the option has the right to have the shares
issuable upon the exer cise of the option included in any registration
statement filed by the Company.
As of May 15, 1995, 1,500 shares had been issued pursuant to
the Company's 1992 Stock Bonus Plan. All of these shares were issued
during the fiscal year ending September 30, l994.
Transactions with Related Parties
The technology and know-how licensed to the Company was
developed by a group of researchers under the direction of Dr. Hans-
Ake Fabricius and was assigned, during l980 and l98l, to Hooper
Trading Company, N.V., a Netherlands Antilles' corporation ("Hooper"),
and Shanksville Corporation, also a Netherlands Antilles corporation
("Shanksville"). Mr. de Clara and Dr. Fabricius own 50% and 30%,
respectively, of each of these companies. The technology and know-how
assigned to Hooper and Shanksville was licensed to Sittona Company,
B.V., a Netherlands corporation ("Sittona"), effective September, l982
pursuant to a licensing agreement which requires Sittona to pay to
Hooper and Shanksville royalties on income received by Sittona
respecting the technology and know-how licensed to Sittona. In l983,
Sittona licensed this technology to the Company and received from the
Company a $1,400,000 advance royalty payment. At such time as the
Company generates revenues from the sale or sublicense of this
technology, the Company will be required to pay royalties to Sittona
equal to l0% of net sales and l5% of the licensing royalties received
from third parties. In that event, Sittona, pursuant to its licensing
agreements with Hooper and Shanksville, will be required to pay to
those companies a minimum of l0% of any royalty payments
received from the Company.
In l985, Mr. de Clara acquired all of the issued and
outstanding stock of Sittona. Mr. de Clara and Dr. Fabricius, because
of their ownership interests in Hooper and Shanksville, could receive
approximately 50% and 30% respectively of any royalties paid by
Sittona to Hooper and Shanksville, and Mr. de Clara, through his
interest in all three companies (Hooper, Shanksville and Sittona),
will receive up to 95% of any royalties paid by the Company.
See "Legal Matters" below for information concerning
expenses in curred by the Company in indemnifying an officer and
director. Legal Matters
The Company is not a party to any pending legal proceedings.
Maxi milian de Clara, the president and a director of the Company,
has been in volved in legal proceedings concerning shares of the
Company's Common Stock.
During the three year period ended September 30, 1993, the
Company paid Mr. de Clara approximately $96,000 for legal expenses
incurred by Mr. de Clara in defending a legal action brought against
Mr. de Clara by an unrelated third party who claimed that Mr. de
Clara owed the third party 25,000 shares of the Company's Common
Stock as a fee for introducing the Company (in 1985)
to persons who allegedly were willing to (but did not) provide funds
to the Company. Although the Company was not a party to this
proceeding, the Com pany's Board of Directors has determined, based
upon information supplied by Mr. de Clara, that the third party's
claims against Mr. de Clara arose as a result of Mr. de Clara's
efforts to obtain funding for the Company. Accordingly, the Board of
Directors determined that Mr. de Clara was entitled by law to
indemnification and in October, 1993, the
Company issued 25,000 shares of its common stock to the third party
claiming the shares from Mr. de Clara.
In a separate matter, Milford Trading, Ltd. ("Milford
Trading"), a corporation controlled by Mr. de Clara, filed a lawsuit
against an unrelated third party seeking the recovery of 40,000
shares of the Company's Common Stock which were registered in the
name of Milford Trading but which are held by the third party. The
third party filed a counterclaim against Milford Trading and a
crossclaim against Mr. de Clara seeking title to the 40,000 shares
and other damages. Although Mr. de Clara denied the claim of the
third party, the case was settled by Mr. de
Clara paying $200,000 and delivering 3,000 shares to the third party.
The Company's Board of Directors determined, based upon information
supplied by Mr. de Clara, that the third party's claims against Mr.
de Clara arose as a result of Mr. de Clara's efforts to obtain
funding for the Company in 1985 and that Mr. de Clara was therefore
entitled by law to indemnification. Accordingly, during fiscal 1992
the Company paid Mr. de Clara's legal fees in connection with this
matter (approximately $28,000), reimbursed Mr. de Clara the $200,000
paid to the third party, and during fiscal 1993 issued 3,000 shares
of the Company's common stock to Mr. de Clara to replace the shares
which Mr. de Clara issued to the third party.
The Securities and Exchange Commission found that between
1988 and 1991 Mr. de Clara failed to timely file reports of
beneficial ownership re quired by the Securities Exchange Act of
1934. In May, 1992, the Commission entered an order requiring Mr. de
Clara to file reports of beneficial ownership on a timely basis.
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of September 30, 1995,
information with respect to the only persons owning beneficially 5%
or more of the outstanding Common Stock and the number and percentage
of outstanding shares owned by each director and officer and by the
officers and directors as a group. Unless otherwise indicated, each
owner has sole voting and investment powers over his shares of Common
Stock.
Number of Percent
of Name and Address Shares (1) Class
(4)
Maximilian de Clara 90,000 (2) 1.4%
Bergstrasse 79
6078 Lungern,
Obwalden, Switzerland
Geert R. Kersten 193,186 (3) 3.5%
66 Canal Center Plaza
Suite 510
Alexandria, VA 223l4
Number of
Percent of Name and Address Shares (1)
Class
(4)
Patricia B. Prichep 4,530 *
66 Canal Center Plaza
Suite 510
Alexandria, VA 223l4
M. Douglas Winship 5,000 *
66 Canal Center Plaza
Suite 510
Alexandria, VA 223l4
Dr. Eyal Talor 4,667 *
66 Canal Center Plaza
Suite 510
Alexandria, VA 223l4
Dr. Suzanne Beckner 2,667 *
66 Canal Center Plaza
Suite 510
Alexandria, VA 223l4
Mark Soresi 14,375
* l0l0 Wayne Ave., 8th Floor
Silver Spring, MD 209l0
F. Donald Hudson 10,500
* 53 Mt. Vernon Street
Boston, MA 02108
Edwin A. Shalloway 10,500
* 413 North Washington Street
Alexandria, VA 22314
Delton Trading SA
758,668
13.3%
15 Market Square
Belize City, Belize
Mueller Trading, Limited 758,668 13.3%
120 Madison Avenue
Lakewood, NJ
All Officers and Directors
as a Group (9 persons) 335,425 6.0%
*Less than 1%
(1) Includes shares issuable prior to November 30, 1995 upon the
exercise of options or warrants granted to the following persons:
Options or Warrants
Exercisable Name Prior to November 30,
1995
Maximilian de Clara 85,000
Geert R. Kersten
108,250
Patricia B. Prichep
4,500
M. Douglas Winship
5,000
Dr. Eyal Talor
3,167
Dr. Suzanne Beckner
2,667
Mark Soresi
12,500
F. Donald Hudson
10,500 Edwin A. Shalloway
10,500 Delton Trading SA
379,334 Mueller Trading, Limited
379,334
See "Management" for information concerning outstanding stock
options.
(2) All shares are held of record by Milford Trading, Ltd., a
corporation organized pursuant to the laws of Liberia. All of
the issued and outstanding shares of Milford Trading, Ltd. are
owned beneficially by Mr. de Clara.
(3) Amount includes shares held in trust for the benefit of Mr.
Kersten's minor children. Geert R. Kersten is the stepson of
Maximilian de Clara.
(4) Amount excludes shares which may be issued upon the exercise of
options and warrants previously issued by the Company.
PLAN OF DISTRIBUTION
Prior to this offering, the Company owned 50% of the capital
stock of Viral Technologies, Inc. ("VTI"). The other 50% of VTI was
owned by ALPHA 1 Biomedicals, Inc. ("ALPHA 1"). In September l995,
the Company and ALPHA 1 entered into an agreement whereby the Company
would acquire ALPHA 1's interest in VTI in exchange for l59,l70
shares of the Company's common stock. The agreement between the
Company and ALPHA 1 provides that the closing of this transaction
will occur after the l59,l70 shares of the
Company's common stock to be issued to ALPHA 1 are registered with
the Securities and Exchange Commission. Accordingly, the Company is
registering the l59,l70 shares to be issued to ALPHA 1 by means of
this Registration Statement.
The shares of Common Stock owned, or which may be acquired,
by ALPHA 1 may be offered and sold by means of this Prospectus from
time to time as market conditions permit in the over-the-counter
market, or otherwise, at prices and terms then prevailing or at
prices related to the then-current market price, or in negotiated
transactions. These shares may be sold by one or more of the
following methods, without limitation: (a) a block trade in which a
broker or dealer so engaged will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to
facilitate the transaction; (b) purchases by a broker or dealer as
principal and resale by such broker or dealer for its account
pursuant to this Prospectus; (c) ordinary brokerage transactions and
transactions in which the broker solicits purchasers; and (d) face-to-
face transactions between sellers and purchasers without a broker/
dealer. In effecting sales, brokers or dealers engaged by ALPHA 1
may arrange for other brokers or dealers to participate. Such
brokers or dealers may receive commissions or discounts from ALPHA 1
in amounts to be negotiated. Such brokers and dealers and any other
participating brokers or dealers may be deemed to be "underwriters"
within the meaning of the Securities Act in connection with such
sales.
DESCRIPTION OF SECURITIES
Common Stock
The Company is authorized to issue 100,000,000 shares of
Common Stock, (the "Common Stock"). Holders of Common Stock are each
entitled to cast one vote for each share held of record on all matters
presented to shareholders. Cumulative voting is not allowed; hence,
the holders of a majority of the outstanding Common Stock can elect all
directors.
Holders of Common Stock are entitled to receive such dividends
as
may be declared by the Board of Directors out of funds legally
available therefor and, in the event of liquidation, to share pro rata
in any distribution of the Company's assets after payment of
liabilities. The board is not obligated to declare a dividend. It is
not anticipated that dividends will be paid in the foreseeable future.
Holders of Common Stock do not have preemptive rights to
subscribe to additional shares if issued by the Company. There are no
conversion, redemption, sinking fund or similar provisions regarding
the Common Stock. All of the outstanding shares of Common Stock are
fully paid and nonassessable and all of the shares of Common Stock
offered as a component of the Units will be, upon issuance, fully paid
and nonassessable. Preferred Stock
The Company is authorized to issue up to 200,000 shares of
Preferred Stock. The Company's Articles of Incorporation provide that
the Board of Directors has the authority to divide the Preferred Stock
into series and, within the limitations provided by Colorado statute,
to fix by resolution the voting power, designations, preferences, and
relative participation, special rights, and the qualifications,
limitations or restrictions of the shares of any series so established.
As the Board of Directors has authority to establish the terms of, and
to issue, the Preferred Stock without shareholder approval, the
Preferred Stock could be issued to defend against any attempted
takeover of the Company.
The Company has no plans respecting the issuance of its
Preferred Stock.
Publicly Traded Warrants
In connection with the Company's February, 1992 public
offering, the Company issued 5,175,000 Warrants. Every ten Warrants
entitle the holder to purchase one share of the Company's Common Stock
at a price of $46.50 per share prior to February 7, 1996. The
Company, upon 30-days notice, may accel-
erate the expiration date of the Warrants, provided, however, that at
the time the Company gives such notice of acceleration (1) the Company
has in effect a current registration statement covering the shares of
Common Stock
issuable upon the exercise of the Warrants and (2) at any time during
the 30 day period preceding such notice, the average closing bid price
of the Company's Common Stock has been at least 20% higher than the
warrant exercise price for 15 consecutive trading days. If the
expiration date is accelerated, all Warrants not exercised within the
30day period will expire.
Other provisions of the Warrants are set forth below. This
information is subject to the provisions of the Warrant Certificate
representing the Warrants.
1. Holders of the Warrants may sell the Warrants rather than
exer cise them. However, there can be no assurance that a market will
develop or continue as to the Warrants.
2. Unless exercised within the time provided for exercise,
the Warrants will automatically expire.
3. The exercise price of the Warrants may not be increased
during the term of the Warrants, but the exercise price may be
decreased at the dis cretion of the Company's Board of Directors by
giving each Warrant holder no tice of such decrease. The exercise
period for the Warrants may be extended by the Company's Board of
Directors giving notice of such extension to each Warrant holder of
record.
4. There is no minimum number of shares which must be
purchased upon exercise of the Warrants.
5. The holders of the Warrants in certain instances are
protected against dilution of their interests represented by the
underlying shares of Common Stock upon the occurrence of stock
dividends, stock splits, reclassifications, and mergers.
6. The holders of the Warrants have no voting power and are
not entitled to dividends. In the event of a liquidation, dissolution,
or winding up of the Company, holders of the Warrants will not be
entitled to participate in the distribution of the Company's assets.
Transfer Agent
American Securities Transfer, Inc., of Denver, Colorado, is the
transfer agent for the Company's Common Stock.
LITIGATION
The Company is not a party to any pending legal proceedings.
INDEMNIFICATION
The Company's Bylaws authorize indemnification of a director,
officer, employee or agent of the Company against expenses incurred by
him
in connection with any action, suit, or proceeding to which he is named
a party by reason of his having acted or served in such capacity,
except for liabilities arising from his own misconduct or negligence in
performance of his duty. In addition, even a director, officer,
employee, or agent of the Company who was found liable for misconduct
or negligence in the performance of his duty may obtain such
indemnification if, in view of all the circumstances in the case, a
court of competent jurisdiction determines such person is fairly and
reasonably entitled to indemnification. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted
to directors, officers, or persons controlling the Company pursuant to
the foregoing provisions, the Company has been informed that in the
opinion of the Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Act and is therefore
unenforceable.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange
Commission, 450 5th Street, N.W., Washington, D.C. 20001, a
Registration Statement under the Securities Act of l933, as amended,
with respect to the securities offered hereby. This Prospectus does
not contain all of the information set forth in the Registration
Statement. For further information with respect to the Company and
such securities, reference is made to the Registration Statement and to
the Exhibits filed therewith. Statements contained in this Prospectus
as to the contents of any contract or other documents are summaries
which are not necessarily complete, and in each instance reference is
made to the copy of such contract or other document filed as an Exhibit
to the Registration State ment, each such statement being qualified in
all respects by such reference. Copies of each document may be
inspected at the Commission's offices at 450 Fifth Street, N.W.,
Washington, D.C., 20549, and at the Northeast Regional Office, 7 World
Trade Center, 13th Floor, New York, New York 10048 and the Midwest
Regional Office, Suite 1400, 500 West Madison Street, Chicago, Illinois
60681-2511. Copies may be obtained at the Washington, D.C. office upon
payment of the charges prescribed by the Commission.
1943D
No dealer, salesman or other person has been authorized to
give any information or to make any representations, other than those
contained in this Prospectus. Any information or representation not
contained in this Prospectus must not be relied upon as having been
authorized by the Company. This Prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy, the securities
offered hereby in any state or other jurisdiction to any person to whom
it is unlawful to make such offer or solicitation. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under
any circumstances, create an implication that there has been no change
in the affairs of the Company since the date hereof.
TABLE OF CONTENTS
Page Prospectus Summary ...........................................
Glossary of Technical Terms
.................................. Risk Factors
.................................................
Dilution and Comparative Share Data
.......................... Use of Proceeds
..............................................
Market Information
...........................................
Selected Financial Data
...................................... Management's
Discussion and Analysis .........................
Business
...................................................
.. Management
...................................................
Principal Shareholders
....................................... Plan of
Distribution
.........................................
Description of Securities
.................................... Litigation
...................................................
Legal
Matters
................................................
Experts
...................................................
.. . Indemnification
..............................................
Additional Information
....................................... Financial
Statements
.........................................
159,170 Shares of
Common Stock CELSCI
CORPORATION
PROSPECTUS
PART II
Information Not Required in
Prospectus
Item 24. Indemnification of Officers and Directors.
It is provided by Section 7-l09-l02 of the Colorado Revised
Statutes and the Company's Bylaws that the Company may indemnify any
and all of its officers, directors, employees or agents or former
officers, directors, employees or agents, against expenses actually
and necessarily incurred by them, in connection with the defense of
any legal proceeding or threatened legal proceeding, except as to
matters in which such persons shall be determined to not have acted
in good faith and in the best interest of the Company.
Item 25. Other Expenses of Issuance and Distribution.
SEC Filing Fee $272
NASD Filing Fee
578
Blue Sky Fees and Expenses
500 Printing and Engraving Expenses 1,000 Legal Fees
and Expenses 25,000 Accounting Fees and Expenses
5,000
Transfer Agent Fees
100
Miscellaneous Expenses
2,550
TOTAL
35,000
All expenses other than the S.E.C. and NASD filing fees
are estimated. Item 26. Recent Sales of Unregistered
Securities.
The following information sets forth all securities
of
the Company
which have been sold during the past three years and which
securities were
not registered under the Securities Act of 1933, as
amended.
Shares of
Common Date of
Security Holder Stock Sold Sale Consideration
Daryl Strahl 2,431 11/1/93 8,038(1)
Isadore Klausner 25,000 11/1/93 (2)
Private Investors 575,000 6/22/95 $1,150,000
Unless otherwise indicated, the consideration paid for the
shares was cash.
(1) Surrender of options to Company. The options surrendered were
valued at $8,038.
(2) Settlement of claim against officer and director. Officer and
director was indemnified by Company for this claim. Accordingly,
shares were is
sued directly to Mr. Klausner, the person asserting the claim against
the officer and director.
The sales of the Company's Common Stock described above were
exempt transactions under Section 4(2) of the Act as transactions by
an issuer not involving a public offering. The shares of Common
Stock sold subsequent to February 1995 were also exempt in accordance
with Rule 505 of the Securities and Exchange Commission. All of the
shares of Common
Stock were issued for investment purposes only and without a view to
distribution. All of the persons who acquired the foregoing
securities were fully informed and advised about matters concerning
the Company, including its business, financial affairs and other
matters. The purchasers of the Company's Common Stock acquired the
securities for their own accounts. The certificates evidencing
the securities bear legends stating that they may not be offered,
sold or transferred other than pursuant to an effective registration
statement under the Securities Act of 1933, or pursuant to an
applicable exemption from registration. No underwriters were
involved with the sale of the shares of Common Stock and no
commissions or other forms of remuneration were paid to any person in
connection with sales of the Company's securities prior to June 1995.
The Company paid a commission of $115,000 (and issued warrants for
the purchase of up to 115,000 shares of Common Stock) to
Neidiger/Tucker/Bruner, Inc. in connection with the sale of the
securities sold in June 1995. All of the shares of Common Stock sold
by the Company are "restricted" shares as defined in Rule 144 of the
Rules and Regulations of the Securities and Exchange Commission.
Item 27. Exhibits and Financial Statement Schedules
Exhibits Page Number
3(a) Articles of Incorporation Incorporated by reference to
Exhibit
3(a) of the Company's combined
Regi stration Statement on Form
S1 and Post-Effective Amendment
("Registra
tion Statement"), Registration Nos. 285547-D and 33-7531.
II-2
(b) Amended Articles Incorporated by reference to
Exhibit
3(a) of the Company's
Registration Statement on Form
S1,
Registration Nos. 2-85547-D and 337531.
(c) Amended Articles Filed as exhibit to Company's
Regis-
(Name change only) tration Statement on Form S-1
(No.
33-34878).
(d) Bylaws Incorporated by reference to
Exhibit
3(b) of the Company's
Registration Statement on Form
S1, Registration Nos. 2-85547-D
and 337531.
4(a) Specimen copy of Incorporated by reference to
Exhibit
Stock Certificate 4(a) of the Company's
Registration
Statement on Form S-1,
Registration Nos. 2-85547-D and
337531.
(c) Form of Common Stock Incorporated by reference to
Exhibit
Purchase Warrant 4(c) filed as an exhibit to the
Com-
pany's Registration Statement
on Form S-1 (Registration No.
33 43281).
5. Opinion of Counsel
10(a) Purchase Agreement Incorporated by reference to
Exhibit
dated April 21, 1986 10(a) of the Company's
Registration
with Alpha I Biomedical Statement on Form S-1,
Registration
Nos. 2-85547-D and 33-7531.
(b) Agreement with Sittona Incorporated by reference to
Exhibit
Company B.V. dated 10(c) of the Company's
Registration
May 3, 1983 Statement on Form S-1,
Registration
Nos. 2-85547-D and 33-7531.
(c) Addendum effective May 3, Incorporated by reference to
Exhibit
1983 to Licensing Agree- 10(e) of the Company's
Registration
ment with Sittona Company, Statement on Form S-1,
Registration
B.V. Nos. 2-85547-D and 33-7531.
(d) Addendum effective October Incorporated by reference to
Exhibit
13, 1989 to Licensing Agree- 10(d) of Company's Annual
Report
on
ment with Sittona Company, Form 10-K for the year ended
September
B.V. 30, 1989.
10(e) Employment Agreement with Filed with Amendment Number 1
to
the
Geert Kersten Company's Registration
Statement
on
Form S-1 (Commission File
Number 33 43281).
II-3
10(g) Agreement between Viral Filed with Amendment Number 2
to
the
Technologies, Inc. and Company's Registration
Statement
on
Nippon Zeon Co., Ltd. Form S-1 (Commission File
Number
33-
90230).
23(a) Consent of Hart & Trinen
(b) Consent of Deloitte &
Touche LLP
24. Power of Attorney Included as part of signature
page.
Item 28. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement.
(i) To include any Prospectus required by Section
l0(a)(3) of the Securities Act of l933;
(ii) To reflect in the Prospectus any facts or events
arising after the effective date of the Registration
Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate,
represent a fundamental change in the information set
forth in the Registration Statement;
(iii) To include any material information with respect
to the plan of distribution not previously disclosed in
the Registra
tion Statement or any material change to such
information in the Registration Statement, including
(but not limited to) any addition or deletion of a
managing underwriter.
(2) That, for the purpose of determining any liability under
the Securities Act of l933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amend ment any of the securities being registered which remain unsold
at the termi nation of the offering.
(4) To provide to the Underwriter at the closing specified
in the underwriting agreement certificates in such denominations and
registered in such names as required by the Underwriter to permit
prompt delivery to each purchaser.
(5) Insofar as indemnification for liabilities arising under
the Securities Act of l933 may be permitted to directors, officers and
controlling persons of the Registrant, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against pub-
II-4
lic policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid
by a director, of ficer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
of whether such
indemnification by it is against public policy as expressed in the Act
and
will be governed by the final adjudication of such issue.
II-5
POWER OF ATTORNEY
The registrant and each person whose signature appears below
hereby authorizes the agent for service named in this Registration
Statement, with full power to act alone, to file one or more
amendments (including posteffective amendments) to this Registration
Statement,
which amendments may make such changes in this Registration Statement
as such agent for service deems appropriate, and the Registrant and
each such person hereby appoints such agent for service as attorney-in-
fact, with full power to act alone, to execute in the name and in
behalf of the Registrant and any such person, individually and in each
capacity stated below, any such amendments to this Registration
Statement.
SIGNATURES
Pursuant to the requirements of the Securities Act of l933,
the Reg istrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Alexandria, State of Virginia, on the 3rd day of October,
1995.
CEL-SCI CORPORATION
By: /s/ Maximilian de Clara
MAXIMILIAN DE CLARA,
PRESIDENT
Pursuant to the requirements of the Securities Act of l933,
this Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
Signature Title Date
/s/ Maximilian de Clara Director and Principal October 3,
1995
MAXIMILIAN DE CLARA Executive Officer
/s/ Geert R. Kersten Director, Principal October 3,
1995
GEERT R. KERSTEN Financial Officer
and Chief Executive
Officer
/s/ Mark V. Soresi Director October 3,
1995
MARK V. SORESI
/s/ F. Donald Hudson Director October 3,
1995 F. DONALD HUDSON
/s/ Edwin A. Shalloway Director October 3,
1995 EDWIN A. SHALLOWAY
October 5,1995
CEL-SCI Corporation
66 Canal Center Plaza, Suite 5l0
Alexandria, VA 22314
This letter will constitute an opinion upon the legality of the
sale by CEL-SCI Corporation (the "Company") of up to 159,170 shares
of the Company's common stock, all as referred to in the
Registration Statement on Form S-1 filed by the Company with the
Securities and Exchange Commission.
We have examined the Articles of Incorporation, the Bylaws and the
minutes of the Board of Directors of the Company and the applicable
laws of the State of Colorado, and a copy of the Registration
Statement. In our opinion, the Company is authorized to issue the
shares of Common Stock mkentioned above and, when issued in
accordance with the terms and conditions set out in the
Registration Statement, such shares of common stock will be legally
issued, fully paid and non assessable.
Very truly yours,
HART & TRINEN
William T. Hart
Reference is made to the Registration Statement of CEL-SCI
Corporation (the "Company") whereby the Company proposes to
sell up to 159,170 shares of the Company's common stock.
Reference is also made to Exhibit 5 included in the
Registration Statement relating to the validity of the
securities proposed to be issued and sold.
We hereby consent to the use of our opinion concerning the
validity of the securities proposed to be issued and sold.
Very truly yours,
HART & TRINEN
William T. Hart
Denver, Colorado
October 5, 1995
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement relating
to 159,170 shares of CEL-SCI Corporation common stock on Form
S1,of our report dated December 5,1994, (which expresses an
unqualified opinion and includes an explanatory paragraph
referring to accounting changes) appearing in the Prospectus,
which is part of this Registration Statement.
Deloitte & Touche LLP
Washington, D.C.
October 4, 1995
CEL-SCI CORPORATION
Financial Statements for the Years Ended September 30,
1994, 1993, and 1992, and Independent Auditors' Report
CEL-SCI CORPORATION
TABLE OF CONTENTS
Page INDEPENDENT AUDITORS' REPORT
F-1
FINANCIAL STATEMENTS FOR THE YEARS ENDED
SEPTEMBER 30, 1994, 1993, AND 1992:
Balance Sheets F-
2
Statements of Operations F-
3
Statements of Stockholders' Equity F-
4
Statements of Cash Flows F-
5
Notes to Financial Statements F-7
F-
15
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
CEL-SCI Corporation:
We have audited the accompanying balance sheets of CEL-SCI
Corporation as of September 30, 1994 and 1993, and the related
statements of operations, stockholders' equity, and cash flows
for each of the three years in the period ended September 30,
1994. These financial statements are the responsibility of the
Company's
management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of CEL-SCI Corporation as of September 30, 1994 and
1993, and the results of its operations and its cash flows for
each of the three years in the period ended September 30, 1994,
in conformity with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, as of
October
1, 1993, the Company changed its method of accounting for
income taxes to conform with Statement of Financial Accounting
Standards No. 109. Also, as discussed in Note 1 to the
financial statements, as of September 30, 1994, the Company
changed its method of accounting for certain investments in
debt and equity securities to conform with Statement of
Financial Accounting Standards No. 115. Deloitte & Touche llp
Washington, DC
December 5, 1994
CEL-SCI CORPORATION
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1994, 1993, AND 1992
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CEL-SCI Corporation (the Company) was incorporated on March
22, 1983 in the State of Colorado, to finance research and
development in biomedical science and ultimately to engage
in marketing products.
Significant accounting policies are as follows:
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.
The adoption of SFAS 115, which has not been applied
retroactively to prior years' financial statements,
resulted in a decrease in stockholders' equity of $85,753
for the net unrealized losses on investments available-
for-sale at September 30, 1994.
Prior to September 30, 1994, all investments available-
forsale
were carried at the lower of aggregate amortized cost or
market value.
Research and Office Equipment Research and office
equipment is recorded at cost and depreciated using the
straight-line method over five and seven years estimated
useful lives. Research and Development Costs Research
and development expenditures are expensed as incurred.
Patents Patent expenditures are capitalized and
amortized using the straight-line method over 17 years.
In the event changes in technology or other
circumstances impair
the value or life of the patent, appropriate adjustment in the
asset value and period of amortization will be made. Net 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.
Investment in Joint Venture Investment in joint venture
is accounted for by the equity method. The Company's
proportionate share of the net loss of the joint venture
is included in the respective statements of operations.
Statement of Cash Flows For purposes of the statements
of cash flows, cash consists principally of unrestricted
cash on deposit, and short-term money market funds. The
Company considers all highly liquid investments with a
maturity of less than three months to be cash
equivalents.
Income Taxes Effective October 1, 1993, the Company adopted
Statement of Financial Accounting Standard No. 109
"Accounting for Income Taxes" (SFAS 109). SFAS 109
requires an asset and liability approach for reporting
income taxes. Implementation
of SFAS 109 in 1994 did not have any effect on the Company's
net earnings and reported financial position and prior
financial statements have not been restated.
Reclassifications Certain reclassifications have been made for
1993 and 1992 for comparative purposes.
2. INVESTMENTS
The carrying values and estimated market values of
investments available-for-sale at September 30, 1994,
are as follows:
The carrying values and estimated market values of investment
securities at September 30, 1993, are as follows:
The maturities of investments at September 30, 1994, are as
follows:
The gross realized gains and losses of sales of investments
available-for-sale for the year ended September 30, 1994,
are $154,732 and $77,958, respectively.
3. PROPERTY AND EQUIPMENT
Property and equipment at September 30, 1994 and 1993, consist
of the following:
4. JOINT VENTURE
In April 1986, the Company paid $200,000 cash and issued
500,000 shares of its $.001 par value common stock to
acquire half the rights to technology which may be useful
in the diagnosis, prevention and treatment of Acquired
Immune Deficiency Syndrome (AIDS) from Alpha I Biomedicals,
Inc. The Company's stock was valued at $1.50 per share on
the basis of arm's-length negotiations. At the time the
transaction took place, the stock was trading at $2.42.
Because the cost of these rights to technology is
considered research and development, the $950,000 purchase
price was expensed.
The Company and Alpha 1 Biomedicals, Inc. (Alpha I)
contributed their respective interests in the technology
and $10,000 each to capitalize a joint venture, Viral
Technologies, Inc. (VTI). VTI is wholly owned by the
Company and Alpha 1, each having a 50% ownership interest.
The total loaned or advanced to VTI by Cel Sci Corporation
through September 30, 1994, was $1,246,503.
During the three years ended September 30, 1994, VTI had no
sales. The operations of VTI were as follows:
The balance sheets of VTI at September 30, 1994 and 1993, are
summarized as follows:
On December 17, 1987, Viral Technologies, Inc., entered into
a licensing agreement with Nippon Zeon Company, Ltd., a
Japanese company. Under the agreement, Nippon Zeon will
engage in the development and testing and, if development
is successful, the
marketing of the potential AIDS vaccine in the Pacific area.
As a result, Viral Technologies, Inc., received
precommercialization payments of $850,000 during the year
ended
September 30, 1988. Additional precommercialization payments
are due upon the meeting of certain agreed-upon milestones,
during the development, clinical testing, and regulatory
process. If the product is sold in any of the licensed
countries, Viral Technologies, Inc., will be entitled to
royalties.
5. CREDIT ARRANGEMENTS
At September 30, 1994, the Company had draws against a line
of credit in the amount of $788,601. Subsequent to year-
end this amount was converted to a promissory note. The
principal is to be repaid over forty-eight consecutive
months beginning February 5, 1995. Interest on the
outstanding balance is calculated at the Bank's prime rate
plus two percent, which is 9.5% at September 30, 1994, and
is to be paid monthly with the principal payments. The
line of credit is secured by all corporate assets and
requires the Company to hold a certificate of deposit equal
to 20% of the
outstanding balance of the line of credit with the Bank.
Under the line of credit, the Company is also subject to
certain minimum equity, liquidity and operating covenants.
6. COMMITMENTS AND CONTINGENCIES
An officer and director of the Company has been involved in
legal proceedings concerning shares of the Company's common
stock. The officer and director was acting on behalf of
the Company in trying to secure financing, and the Company
paid legal fees in connection with these proceedings and
indemnified the officer for any loss he suffered upon the
settlement of these matters.
During 1992, one of the matters was settled by the officer
and director delivering 30,000 shares of the Company's
common stock to one plaintiff, and paying this plaintiff
$200,000. In the other matter, a European Court awarded a
different plaintiff 250,000 shares of the Company's common
stock owned by the officer and director. In October 1993,
the Company issued 250,000 shares of common stock to the
plaintiff to satisfy the judgment and in lieu of
reimbursement to the officer and director for this claim.
The value of the shares issued, $202,500, was expensed
during 1993 and was included in accrued expenses at
September 30, 1993.
During 1992, the Company reimbursed the officer and director
for legal fees of approximately $60,000, incurred in
connection with the two legal proceedings.
During 1992, the Company decided to terminate its clinical
and pre-clinical studies arrangement with the University of
South Florida and accrued and expensed costs to terminate
of $200,000. During 1993, the termination was completed at
an actual cost of $200,700.
7. RELATED-PARTY TRANSACTIONS
The technology and know-how licensed to the Company was
developed by a group of researchers under the direction of
Dr. Hans-Ake Fabricius and was assigned during 1980 and
1981 to Hooper Trading Company, N.V., a Netherlands
Antilles corporation (Hooper) and Shanksville Corporation,
also a Netherlands Antilles corporation (Shanksville).
Maximillian de Clara, an officer and director in the
Company, and Dr. Fabricius own 50%
and 30%, respectively, of each of these companies. The
technology and know-how assigned to Hooper and Shanksville
was licensed to Sittona Company, B.V., a Netherlands
corporation (Sittona), effective September, 1982 pursuant
to a licensing agreement which requires Sittona to pay to
Hooper and Shanksville royalties on income received by
Sittona respecting the technology and know-how licensed to
Sittona. In 1983, Sittona licensed this technology to the
Company. At such time as the Company generates revenues
from the sale or sublicense of this technology, the Company
will be required to pay royalties to Sittona equal to 10%
of net sales and 15% of licensing royalties received from
third parties. In that event, Sittona, pursuant to its
licensing agreements with Hooper and Shanksville, will be
required to pay to those companies a minimum of 10% of any
royalty payments received from the Company.
In 1985 Mr. de Clara acquired 100% of the issued and
outstanding stock of Sittona. Mr. de Clara and Dr.
Fabricius, because of their ownership interests in Hooper
and
Shanksville, could receive approximately 50% and 30%
respectively, of any royalties paid by Sittona to Hooper
and Shanksville, and Mr. de Clara, through his interest in
all three companies (Hooper, Shanksville, and Sittona),
will receive up to 95% of any royalties paid by the
Company.
During 1992, the Company reimbursed an officer and director
for
legal fees incurred in connection with certain legal
proceedings as discussed in Note 6. In addition, during
1992 the Company paid the officer and director $200,000
representing the amount which he paid in connection with
one of the legal proceedings discussed in Note 6, and, in
1993, issued 30,000 shares of common stock to the officer
and director as reimbursement for shares he delivered in
connection with the proceeding. The $200,000 payment was
expensed in 1992, and the value of the 30,000 shares,
$20,100, was expensed in 1993.
8. INCOME TAXES
The approximate tax effect of each type of temporary
differences and carryforward that gave rise to the
Company's tax assets and liabilities at September 30, 1994,
is as follows:
The Company has available for income tax purposes net
operating loss carryforwards of approximately $20,219,000,
expiring from 1998 through 2006.
In the event of a significant change in the ownership of the
Company, the utilization of such carryforwards could be
substantially limited.
9. STOCK OPTIONS, WARRANTS, AND BONUS PLAN
On February 23, 1988, the shareholders of the Company adopted
the 1987 Nonqualified Stock Option and Stock Bonus Plan
(the 1987 Plan). This plan reserved 2,000,000 shares of
the Company's previously unissued common stock to be
granted as incentive stock options to employees. The 1987
Plan reserved 500,000 shares of the Company's previously
unissued common stock to be granted as stock bonuses to
employees. The exercise price of the options could not be
established at less than fair market value on the date of
grant and the option period could not be greater than ten
years. During 1992, the 1987 Plan was terminated and no
further options will be granted and no
further bonus shares will be issued pursuant to the 1987
Plan.
On September 30, 1992, the shareholders of the Company
approved the adoption of three new plans, the 1992 Incentive
Stock Option Plan (1992 Incentive Plan), the 1992 Non-
Qualified Stock Option Plan (1992 Non-Qualified Plan) and the
Stock Bonus Plan (1992 Bonus Plan). Shares are reserved under
each plan and total 1,000,000, 600,000 and 400,000 shares,
respectively. Only employees of the Company are eligible to
receive options under the Incentive Plan, while the Company's
employees, directors, officers, and consultants or advisors
are eligible to be granted options under the Non-Qualified
Plan or issued shares under the Bonus Plan. Terms of the
options are to be determined by the Company's Compensation
Committee which will administer all of the plans, but in no
event are options to be granted for shares at a price below
fair market value at date of grant. Options granted under the
option plans must be granted, or shares issued under the bonus
plan, issued, before
August 20, 2002.
On July 29, 1994, the Board of Directors approved the
adoption of two new plans, subject to shareholder approval,
the 1994 Incentive Stock Option Plan (1994 Incentive Plan)
and the 1994 Non-Qualified Stock Option Plan (1994 Non-
Qualified). Shares are reserved under each plan and total
1,000,000 shares for each plan. Only employees of the
Company are eligible to receive
options under the 1994 Incentive Plan, while the Company's
employees, directors, officers, and consultants or advisors
are eligible to be granted options under the 1994 Non-
Qualified Plan. Terms of the options are to be determined by
the Company's Compensation Committee, which will administer
all of the plans, but in no event are options to be granted
for shares at a price below fair market value at date of
grant. Options granted under the option plans must be
granted, or shares issued under the bonus plan issued before
July 29, 2004.
Information regarding the Company's stock option plan is
summarized as follows:
During 1991, the Company granted a consultant an option to
purchase 500,000 shares of the Company's common stock. The
option is exercisable at $1.38 per share and expires in March
1996. The holder of the option has the right to have the
shares issuable upon the exercise of the option included in
any registration statement filed by the Company.
Also during 1991, the Company granted another consultant
options to purchase 60,000 shares of the Company's common
stock. Options to purchase 6,667 shares expired in April
1992. Options to purchase 13,333 shares at $0.25 per share
were exercised in April 1993. At September 30, 1994, options
to purchase 40,000 shares were outstanding and exercisable at
prices ranging from $.25 to $1.50 per share.
In connection with the 1992 public offering discussed in Note
11, 5,175,000 common stock purchase warrants were issued and
are outstanding at September 30, 1994. Each warrant entitles
the holder to purchase one share of common stock at a price
of $4.65 per share. Subsequent to September 30, 1994, the
expiration of these warrants was extended to February 1996.
The Company may accelerate the expiration date of the
warrants by giving 30 days notice to the warrant holders,
provided, however, that at the time the Company gives such
notice of acceleration (1) the Company has in effect a
current registration statement covering the shares of common
stock issuable upon the exercise of the
warrants and (2) at anytime during the 30-day period
preceding such notice, the average closing bid price of
the Company's common stock has been at least 20% higher
than the warrant exercise price for 15 consecutive trading
days.
Also in connection with the 1992 offering, the Company issued
to the underwriter warrants to purchase 90,000 equity units,
each unit consisting of 5 shares of common stock and 5
warrants entitling the holder to purchase one additional share
of common stock. The equity unit warrants are outstanding at
September 30, 1994 and are exercisable through February 8,
1997, at a price of $25.57 per unit. The common stock
warrants included in the units are exercisable at a price of
$7.67 per share. 10.EMPLOYEE BENEFIT PLAN
During 1993 the Company implemented a defined contribution
retirement plan, qualifying under Section 401(k) of the
Internal Revenue Code, subject to the Employee Retirement
Income Security Act of 1974, as amended, and covering
substantially all CEL-SCI employees. The employer
contribution is equal to 50% of each employee's
contribution to a maximum of 6% of the participant's
salary. The expense for the year ended September 30, 1994
and 1993 in connection with this plan was approximately
$16,160 and $7,700, respectively.
11.LEASE COMMITMENTS
Operating Leases The future minimum annual rental payments
due under noncancelable operating leases for office and
laboratory space are as follows:
Rent expense for the year ended September 30, 1994, 1993,
and 1992, was approximately $122,369, $55,000, and $32,000,
respectively.
12.STOCKHOLDERS' EQUITY
During 1994, the Company granted 15,000 shares of common
stock to an officer as a bonus award. The Company also
issued 250,000 shares to satisfy the judgment against an
officer and director. The issuance was to the plantiff in
lieu of reimbursement to the officer and director. The
judgment was settled in 1993 and the expense of the
issuance was recorded in 1993.
During 1993, the Company received $27,333 cash for 73,333
shares of common stock.
During 1992, the Company issued common stock to investors for
cash pursuant to a public offering. Net proceeds of
$13,852,780 were received for 5,175,000 shares of common
stock. In September 1991, the Company received
subscriptions for 1,275,000 shares of its common stock from
eleven persons for $1.00 per share or a total of
$1,275,000. Cash of $250,000 was received in September
1991 and the remainder in October 1991. Commissions payable
of $161,250 at September 30, 1991, relative to the offering
were paid in October 1991 by the issuance of 161,250 shares
of stock.
CEL-SCI CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 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
interim financial statements. 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 for the years ended September 30, 1994 and 1993 which are
included elsewhere in this Prospectus. 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, 1995 and the results of operations
for the ninemonth periods ended June 30, 1995 and 1994 have been
made.
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 availablefor-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. The adoption of SFAS 115, which has not been
applied retroactively to prior years' financial statements,
resulted in a decrease in stockholders' equity of $85,753 for the
net unrealized losses on investments available-for-sale at
September 30, 1994. This unrealized loss declined to -0at June 30,
1995, as all investments in bonds were sold prior to such date.
CEL-SCI CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1995 AND 1994
(unaudited)
(continued)
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.
B. JOINT VENTURE LICENSING AGREEMENT
The operations of VTI for the nine months ended June 30, 1995 and
1994 are summarized as follows:
1995 1994
Income $ 0 $ 0
Expenses $ 794,446 $ 670,834
NET LOSS $ (794,446) $
(670,834)
The balance sheets of VTI at June 30, 1995 and September
30, 1994 are summarized as follows:
June 30 September
30 Current Assets $ 27,889 $
24,403
Non-current Assets $ 151,183 $
87,822
Current Liabilities $ 4,054,438 $
3,197,143
Equity (deficit net of
initial capitalization) $(3,875,366)
$(3,084,918)
CEL-SCI CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1995 AND 1994
(unaudited) (continued)
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 of space at 4820 Seton Drive, Baltimore, Maryland.
In
the spring of 1994 the Company commenced construction of the
new laboratory at the leased space. 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, 1995 is $872,107.
The Company's note payable is to be repaid over forty-
eight consecutive months beginning February 5, 1995.
Interest on
the outstanding balance is to be paid monthly with the
principal payments. The note is secured by all corporate
assets and requires the Company to maintain a certificate
of deposit with the bank equal to 20% of the outstanding
principal balance of the note. Under the terms of the
loan agreement, the Company is also subject to certain
minimum equity, liquidity and operating covenants. The
Company may not pay any dividends without the consent of
the bank.
D. SUBSEQUENT EVENTS
On May 1, 1995 the Company's stock underwent a 1-for-10
reverse stock split. This split was approved by a
majority of the shareholders at the April 28, 1995 Annual
Meeting of Shareholders.
In June 1995 the Company sold 575,000 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 the Company's Common Stock for
$3.25 per share at any time prior to June 30, 1997.
CEL-SCI CORPORATION
CONDENSED STATEMENTS OF CASH FLOW
(unaudited)
Nine Months
Ended June
30, 1995
1994
CASH FLOWS FROM OPERATING ACTIVITIES:
NET LOSS $(2,966,006)
$(3,160,237)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 201,197
76,494
Equity in loss of joint venture 395,224
335,416
Amortization of premium on investments 60,954 0
Realized loss on sale of investments 13,422 0
Changes in assets and liabilities:
Decrease (increase) in inventory ( 207,397)
Decrease (increase) in interest receivable ( 341,206)
40,204
Decrease (increase) in prepaid expenses ( 18,456) (
7,984)
Decrease (increase) in advances 10,463 0
Increase (decrease) in payable to
officer and shareholder 0 (
38,228)
Decrease (increase) in receivable from
joint venture ( 123,952) 0
Increase (decrease) in accrued expenses 0 (
22,500)
Increase (decrease) in accounts payable ( 203,594)
76,975
NET CASH USED IN OPERATING ACTIVITIES (3,179,351)
(2,899,860)
CASH FLOWS PROVIDED BY (USED IN) INVESTING
ACTIVITY:
Purchases of investments ( 400,000)
(650,000)
Sales of investments 2,906,132
4,344,117
Advance to Joint Venture ( 287,952)
(250,000)
Laboratory construction ( 10,135)
(326,896)
Purchase of research and office equipment ( 128,750)
(
37,794)
NET CASH USED IN INVESTING ACTIVITIES: 2,079,295
3,079,427
CASH FLOWS PROVIDED BY FINANCING
ACTIVITIES:
Issuance of note payable 205,195
0
Payment on note ( 121,689)
0
Issuance of common stock 990,890
241,889
NET CASH PROVIDED BY FINANCING ACTIVITIES: 1,074,396
241,889
NET INCREASE IN CASH ( 25,660)
421,456
CASH AND CASH EQUIVALENTS:
Beginning of period 3,370,713
2,156,179
End of period $ 3,345,053 $
2,577,635
See notes to condensed financial statements.
CEL-SCI CORPORATION CONDENSED
BALANCE
SHEETS ASSETS
(unaudited)
June 30,
September 30,
1995 1994
CURRENT ASSETS:
Cash and cash equivalents $3,345,053
$3,370,713
Investments, net 200,000
2,694,756
Inventory 207,397
0
Accounts receivable 457,939
116,733
Prepaid expenses 100,062
81,606
Advances to officer/employees 6,918
17,381
4,317,369
6,281,189 INTEREST RECEIVABLE FROM JOINT VENTURE
475,156
351,204
RESEARCH AND OFFICE EQUIPMENT -
Less accumulated depreciation of
$535,448 and $355,430
1,144,366
1,185,499
PATENT COSTS less accumulated
amortization of $232,431
and $211,253 247,601
268,778
$6,184,492
$8,086,670
See notes to condensed financial statements.
CEL-SCI CORPORATION CONDENSED BALANCE
SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY
(unaudited)
June 30,
September 30,
1995 1994
CURRENT LIABILITIES:
Accounts payable $ 120,585
$324,179
Current portion note payable 147,861
147,861
Total current liabilities 268,446
472,040
NOTE PAYABLE 724,246
640,740
DEFERRED RENT 17,598
17,598
EQUITY IN SUBSIDIARY 384,496
277,224
Total Liabilities 1,394,786
1,407,602
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,
4,763,244 and 4,188,244 shares 47,632
41,882
Additional paid-in capital 27,839,988
26,854,848
Net unrealized loss on marketable
equity securities 0 (
85,753)
Deficit (23,097,914)
(20,131,909)
TOTAL STOCKHOLDERS' EQUITY 4,789,706
6,679,068
$ 6,184,492 $
8,086,670
See notes to condensed financial statements.
CEL-SCI CORPORATION
CONDENSED STATEMENTS OF
OPERATIONS (unaudited)
Nine Months
Ended
June 30,
1995
1994 REVENUES:
Gross Sales $ 39,588
$
0
Interest Income 273,417
629,034
Other 0
0
TOTAL INCOME 313,005
629,034
EXPENSES:
Research and Development 1,378,005
2,192,645
Depreciation and
Amortization 201,197
76,494
General and Administrative 1,304,585
1,184,716
TOTAL OPERATING EXPENSES 2,883,787
3,453,855
EQUITY IN LOSS OF JOINT VENTURE (395,224)
(335,416)
3,279,011
3,789,271
NET LOSS $2,966,006
$3,160,247
LOSS PER COMMON SHARE $0.70
$0.75
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 4,194,563
4,184,634
See notes to condensed financial statements.
