424(b)(2)
Commission File
#333-31489
PROSPECTUS
CEL-SCI CORPORATION
This Prospectus relates to the sale by the Company of upon to
1,035,000 shares of Common Stock which are issuable upon the exercise of
5,175,000 Warrants which were issued in connection with the Company's February
1992 public offering of Units. Each Unit sold in such offering consisted of
five shares of Common Stock and five Common Stock Purchase Warrants (the
"Warrants").
The Warrants are exercisable at any time prior to February 7, 1998
(the "Warrant Expiration Date"). The terms of the Warrants presently provide
that every five Warrants allow the holder to purchase one share of the
Company's Common Stock at a price of $6.00 per share. The Company, upon
30-days notice, may accelerate 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 l5 consecutive trading days. If the expiration date is
accelerated, all Warrants not exercised within the 30-day period will expire.
Notwithstanding the above, at any time between January 9, l998 and
February 6, 1998 every five Warrants will allow the holder to purchase, for
$6.00, one share of the Company's common stock and one Series A Warrant. Each
Series A Warrant entitles the holder to purchase one share of the Company's
Common Stock at a price of $18.00 per share at any time prior to February 7,
2000. The foregoing offer (the "Exchange Offer"), unless extended by the
Company, will expire on February 6, 1998 (the "Expiration Date"). The
expiration date of the Series A Warrants may be accelerated under certain
conditions. The shares of Common Stock and Series A Warrants will be
separately transferable immediately upon issuance. See "Plan of Distribution"
and "Description of Securities".
This offering is only being made to holders of the Company's
outstanding Warrants.
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" BEGINNING ON PAGE 9 OF
THIS PROSPECTUS 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.
<PAGE>
On November 14, 1997 the closing prices of the Company's Common
Stock and Warrants on the American Stock Exchange were $8.50 and $0.62
respectively.
As of the date of this Prospectus, there were 5,175,000 Warrants
and 11,159,660 shares of Common Stock outstanding.
The Company does not intend to pay any commissions or other forms
of compensation to any person in connection with this offering.
The expenses payable by the Company in connection with this
offering are estimated to be $40,000.
The exercise of any Warrants pursuant to the Exchange Offer will
be revocable until the Expiration Date and, if not yet accepted by the
Company, after March 7, 1998. The Company intends to accept the exercise of
all Warrants timely submitted to the Company in proper form.
Warrants that are not exercised pursuant to the Exchange Offer, or
are exercised but timely withdrawn, may nevertheless be exercised at any time
prior to February 7, 1998 (the "Warrant Expiration Date"). Any Warrants not
exercised pursuant to the Exchange Offer will be of no value after the Warrant
Expiration Date. See "Description of Securities".
Any holder of the Warrants desiring to exercise all or any portion
of the Warrants in accordance with the Exchange Offer should either (1)
complete and sign the Letter of Transmittal (or facsimile thereof) in
accordance with the instructions in the Letter of Transmittal and mail it or
deliver it with the certificate(s) representing such Warrants together with
the required cash payment to the Warrant Agent or (2) request his broker,
dealer, commercial bank, trust company or other nominee to effect the
transaction for such holder. A Warrant holder having Warrants registered in
the name of a broker, dealer, commercial bank, trust company or other nominee
must contact such person if the Warrant holder desires to exercise the
Warrants.
This offering is not contingent upon the exercise of any minimum
number of Warrants.
The date of this Prospectus is November 14, 1997
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities 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 (7 World Trade Center, Suite 1300, New York, New
York 10048) and Chicago (Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511). Copies of such material can be
obtained from the Public Reference Section of the Commission at its office in
-2-
<PAGE>
Washington, D.C. 20549 at prescribed rates. Certain information concerning
the Company is also available at the Internet Web Site maintained by the
Securities and Exchange Commission at www.sec.gov. The Company has filed with
the Commission a Registration Statement on Form S-3 (together with all
amendments and exhibits thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Act"), with respect to the Securities
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.
DOCUMENTS INCORPORATED BY REFERENCE
The Company will provide, without charge, to each person to whom a
copy of this Prospectus is delivered, including any beneficial owner, upon the
written or oral request of such person, a copy of any or all of the documents
incorporated by reference herein (other than exhibits to such documents,
unless such exhibits are specifically incorporated by reference into this
Prospectus). Requests should be directed to:
CEL-SCI Corporation
66 Canal Center Plaza, Suite 510
Alexandria, VA 22314
(703) 549-5293
Attention: Secretary
The following documents filed with the Commission by the Company
(Commission File No. 0-11503) are hereby incorporated by reference into this
Prospectus:
(1) The Company's Annual Report on Form 10-K/A for the fiscal
year ended September 30, 1996; and
(2) The Company's report on Form 10-Q for the nine months ending
June 30, 1997
(3) The Company's Proxy Statement relating to the Company's June
3, 1997 Annual Meeting of Shareholders.
All documents filed with the Commission by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
of this Prospectus and prior to the termination of the offering registered
hereby shall be deemed to be incorporated by reference into this Prospectus
and to be a part hereof from the date of the filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for the purposes
of this Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
-3-
<PAGE>
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 1983. The Company is involved in the research and development
of certain drugs and vaccines. The Company's first product, MULTIKINETM,
manufactured using the Company's proprietary cell culture technologies, is a
combination, or "cocktail", of natural human interleukin-2 ("IL-2") and
certain lymphokines and cytokines. MULTIKINE is being tested to determine if
it is effective in improving the immune response of cancer pantients. The
Company's second product, HGP-30, is being tested to determine if it is an
effective treatment/vaccine against the AIDS virus. In addition, the Company
recently acquired a new patented T-cell Modulation Process which uses
"heteroconjugates" to direct the body to chose a specific immune response.
The Company intends to use this new technology to improve the cellular immune
response of persons vaccinated with HGP-30 and to develop potential treatments
and/or vaccines against various diseases. Present target diseases are herpes
simplex, malaria, tuberculosis, prostate cancer and breast cancer.
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.
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, will be conducted at
several sites in the United States and Canada and 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 February 1996 the FDA authorized the Company to conduct two
human clinical studies using MULTIKINE and focusing on prostate and head and
neck cancer. The prostate study was conducted at Jefferson Hospital in
Philadelphia, Pennsylvania and involved prostate cancer patients who had
failed on hormonal therapy. Five patients completed the treatment and the
data from this study demonstrated the safety and feasibility of using
-4-
<PAGE>
MULTIKINE in the treatment of prostrate cancer. Biopsies from the patients in
the study also suggest the recruitment of inflammatory cells to the tumor
site. Based on these findings, investigators are currently preparing a new
protocol for evaluation by the FDA to study the ability of MULTIKINE to treat
patients with prostate cancer. The study is expected to test MULTIKINE as a
therapy to be used prior to surgical removal of the prostate gland. The head
and neck cancer study will involve up to 30 cancer patients who have failed
using conventional therapies. The head and neck cancer study in the U.S. is
being conducted in conjunction with the Company's Canadian head and neck
cancer study.
In January 1997 the FDA authorized a clinical trial using
MULTIKINE to determine its safety in the potential treatment of HIV infected
individuals and to determine its effect on various immune system responses.
In April 1997, pursuant to authorization from Israeli health
authorities, a clinical trial was begun using MULTIKINE to treat head and neck
cancer patients. In September 1997 the Company started a similiar clinical
trial in Canada. The Canadian study will involve up to 21 patients who are
scheduled for surgery or radiation. The first clinical center to start
treatment is Hospital Notre Dame in Montreal, Canada.
Viral Technologies, Inc. ("VTI"), a wholly-owned subsidiary of the
Company, is engaged in the development of a possible treatment/vaccine for
AIDS. VTI's technology may also have application in the treatment of
AIDS-infected individuals and the diagnosis of AIDS. VTI's AIDS
treatment/vaccine, HGP-30, has completed certain Phase I human clinical
trials. 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.
In April 1995 VTI, with the approval of the California Department
of Health Services Food and Drug Branch (FDB), began another clinical trial in
California using volunteers who received two vaccinations. The volunteers
receiving the two lowest dosage levels were asked to donate blood for a SCID
mouse HIV challenge study. The SCID mouse is considered to be the best
available animal model for HIV because it lacks its own immune system and
therefore permits human cell growth. White blood cells from the five (5)
vaccinated volunteers and from normal donors were injected into groups of SCID
mice. They were then challenged with high levels of a different strain of the
HIV virus than the one from which HGP-30 is derived. Infection by virus was
determined and confirmed by two different assays, p24 antigen, a component of
the virus core, and reverse transcriptase activity, an enzyme critical to HIV
replication. Approximately 78% of the SCID mice given blood from vaccinated
volunteers showed no HIV infection after virus challenge as compared to 13% of
the mice given blood from unvaccinated donors.
In September 1997 VTI completed a Phase I safety study of the
HGP-30 AIDS vaccine in 24 HIV infected patients. The study showed that
immunizations with the HGP-30 vaccine coupled with KLH were safe in AIDS
patients. The Company's main focus is now to determine the ability of the
HGP-30 vaccine to prevent, as opposed to only treat, AIDS.
-5-
<PAGE>
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, had an accumulated deficit of approximately $36,850,000 at June 30,
1997, and expects to incur substantial losses for the foreseeable future.
In August 1996 the Company sold, in a private transaction, 5,000
shares of its Series B Preferred Stock (the "Series B Preferred Shares") for
$5,000,000 or $1,000 per share. At the purchasers' option, up to 2,500 Series
B Preferred Shares were convertible, on or after ten days from the date the
shares were registered for public sale (the "Effective Date"), into shares of
the Company's Common Stock on the basis of one share of Preferred Stock for
shares of Common Stock equal in number to the amount determined by dividing
$1,000 by 87% of the Closing Price of the Company's Common Stock. All
Preferred Shares were convertible, on or after 40 days from the Effective
Date, on the basis of one share of Preferred Stock for shares of the Company's
Common Stock equal in number to the amount determined by dividing $1,000 by
85% of the Closing Price of the Company's Common Stock. The term "Closing
Price" was defined as the average closing bid price of the Company's Common
Stock over the five-day trading period ending on the day prior to the
conversion of the Preferred Stock. Notwithstanding the above, the conversion
price could not be less than $3.60 nor more than $14.75. Each Preferred Share
was entitled to a quarterly dividend, if, as, and when declared by the Board
of Directors, of $17.50. By means of a separate Registration Statement filed
with the Securities and Exchange Commission, the shares issuable upon the
conversion of the Series B Preferred Shares were registered for public sale.
Prior to December 20, 1996 1,900 Series B Preferred Shares were converted into
527,774 shares of the Company's common stock. In December 1996 the Company
repurchased 2,850 Series B Preferred Shares for $2,850,000 plus warrants which
allow the holders to purchase up to 99,750 shares of the Company's common
stock for $4.25 per share at any time prior to December 15, 1999. The Company
raised funds required for this repurchase from the sale of its Series C
Preferred Stock. In May 1997 all remaining 250 shares of the Series B
Preferred Stock were converted into 69,444 shares of common stock.
In December 1996 the Company raised $2,850,000 from the sale of
units consisting of 2,850 shares of the Company's Series C Preferred Stock,
379,763 Series A Warrants and 379,763 Series B Warrants. The Series C
Preferred Shares were convertible into shares of the Company's Common Stock on
the basis of one share of Preferred Stock for shares of Common Stock equal in
number to the amount determined by dividing $1,000 by 85% of the Closing Price
of the Company's Common Stock (the "Conversion Price"). The term "Closing
Price" was defined as the average closing bid price of the Company's Common
Stock over the five day trading period ending on the day prior to the
conversion of the Preferred Stock. Notwithstanding the above, the Conversion
Price could not be more than $4.00. Each Series A Warrant entitles the holder
to purchase one share of the Company's common stock at a price of $4.50 per
share at any time prior to March 15, 1998. Each Series B Warrant entitles the
holder to purchase one share of the Company's common stock at a price of $4.50
per share at any time prior to March 15, 1999. The shares issuable upon the
conversion of the Series C Preferred Shares and the exercise of the Warrants
are being offered for public sale by means of a separate Registration
Statement. As of June 30, 1997 all shares of the Series C Preferred Stock had
been converted into 9l5,27l shares of the Company's common stock.
-6-
<PAGE>
Acquisition of MULTIKINE Technology
The MULTIKINE technology being tested by the Company was developed
by a group of researchers 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"). The MULTIKINE technology 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 required
Sittona to pay Hooper and Shanksville royalties on income received by Sittona
with respect to the MULTIKINE technology. In l983, Sittona licensed the
MULTIKINE Technology to the Company and received from the Company a $1,400,000
advance royalty payment. At such time as the Company generated revenues from
the sale or sublicense of this technology, the Company was 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, was required to pay to
those companies a minimum of l0% of any royalty payments received from the
Company. The license agreement with Sittona also required 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 MULTIKINE technology. The license was to remain in effect
until the expiration or abandonment of all patent rights or until the
MULTIKINE technology entered into the public domain, whichever was later.
Prior to October, 1996, Maximilian de Clara, an Officer, Director
and shareholder of the Company, owned 50% and 30%, respectively, of Hooper and
Shanksville. Between 1985 and October 1996 Mr. de Clara owned all of the
issued and outstanding stock of Sittona. In October 1996, Mr. de Clara
disposed of his interest in Hooper, Shanksville and Sittona.
In January 1997 Hooper and Shanksville sold all of their rights in
the MULTIKINE technology to Sittona. Immediately following these
transactions, Sittona sold all of its rights in the MULTIKINE technology to
the Company, including all rights acquired from Hooper and Shanksville, in
consideration for $500,000 in cash and 751,678 shares of the Company's common
stock. The shares of the Company's Common Stock acquired by Sittona as a
result of this transaction are being offered to the public by means of a
separate Registration Statement.
The Company's executive offices are located at 66 Canal Center
Plaza, Suite 510, Alexandria, Virginia 22314, and its telephone number is
(703) 549-5293.
The Offering
This Prospectus relates to the sale by the Company of 1,035,000
shares of common stock which are issuable upon the exercise of 5,175,000
Warrants which were issued in connection with the Company's February 1992
public offering of Units. Each Unit sold in such offering consisted of five
shares of Common Stock and five Common Stock Purchase Warrants (the
"Warrants").
-7-
<PAGE>
The Warrants are exercisable at any time prior to February 7, 1998
(the "Warrant Expiration Date"). The terms of the Warrants presently provide
that every five Warrants allow the holder to purchase one share of the
Company's Common Stock at a price of $6.00 per share. The Company, upon
certain conditions, may accelerate the expiration date of the Warrants.
Notwithstanding the above, at any time between January 9, 1998 and
February 6, 1998 every five Warrants will allow the holder to purchase, for
$6.00, one share of the Company's common stock and one Series A Warrant. Each
Series A Warrant entitles the holder to purchase one share of the Company's
Common Stock at a price of $18.00 per share at any time prior to February 7,
2000. The foregoing offer (the "Exchange Offer"), unless extended by the
Company, will expire on February 6, l998 (the "Expiration Date"). The
expiration date of the Series A Warrants may be accelerated under certain
conditions. The shares of Common Stock and Series A Warrants will be
separately transferable immediately upon issuance. See "Plan of Distribution"
and "Description of Securities".
Use of proceeds. The proceeds from this offering will be used to
finance the Company's business, including research, clinical trials and
general and administrative expenses. See "Use of Proceeds".
Shares Outstanding. As of October 31, 1997 the Company had
11,159,660 issued and outstanding shares of Common Stock. The number of
shares outstanding excludes shares of Common Stock issuable upon the exercise
of currently outstanding options and warrants, and shares of Common Stock
issuable upon the conversion of other convertible securities issued by the
Company. See "Dilution and Comparative Share Data."
Risk Factors The purchase of the Securities offered by this
Prospectus involves a high degree of risk. Risk factors include the
following: lack of revenues and history of loss, need for additional capital,
government regulation, need for FDA approval, and dilution. See "Risk
Factors."
AMEX Symbols: Common Stock: HIV
Warrants: HIV WS
Series A Warrants: HIV WA (1)
(1) The Company will make an application to have the Series A Warrants
listed on the American Stock Exchange. No assuarance can be given that the
American Stock Exchange will approve the listing of the Series A Warrants.
See "Risk Factors."
Summary Financial Data
Nine Months Ended Years Ended September 30,
June 30,
1997 1996 1996 1995
Investment Income
& Other Revenues $378,264 $188,256 $322,370 $423,765
Expenses:
Research and
Development 4,795,504 2,350,600 3,471,477 1,824,661
-8-
<PAGE>
Summary Financial Data
Nine Months Ended Years Ended September 30,
June 30,
1997 1996 1996 1995
Depreciation
and
Amortization 236,541 208,912 290,829 262,705
General and
Administrative 1,799,454 2,113,884 2,882,958 1,713,912
Equity in loss of
joint venture - 3,772 3,772 501,125
Net Loss $(6,453,235) (4,488,912) $(6,326,666) $(3,878,638)
Loss per
common share $(0.72) $(0.74) $(0.98) $(0.89)
Weighted average
common shares
outstanding 8,970,583 6,086,492 6,425,316 4,342,628
Balance Sheet Data
June 30, September 30,
1997 1996 1996 1995
Total Assets $7,663,646 $8,723,934 $11,878,370 $6,359,011
Working Capital 6,028,270 6,979,975 10,266,104 3,983,699
Current
Liabilities 306,752 355,684 274,410 491,860
Long Term and
Other Liabilities 19,638 835,316 19,638 1,025,118
Total
Liabilities 326,390 1,191,000 294,048 1,516,978
Shareholders'
Equity 7,337,256 7,532,934 11,584,322 4,842,033
Book Value per Share $0.70 $1.06 $1.47 $0.90
No common stock dividends have been declared by the Company since its
inception.
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.
-9-
<PAGE>
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, 1997, the Company has incurred net losses of
approximately $36,850,000. During the years ended September 30, 1994, 1995
and 1996 the Company suffered losses of $4,426,876, $3,878,638 and $6,326,666
respectively. The Company has relied principally upon the proceeds from the
public and private sales of securities to finance its activities to date. 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.
Viral Technologies, Inc. ("VTI"), a wholly-owned subsididary of
the Company, is dependent upon funding from the Company for its operations and
research programs.
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.
Government Regulation - FDA Approval. Products which may be
developed 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, VTI 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 VTI 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.
-10-
<PAGE>
Dependence on Others to Manufacture Product. The Company has an
agreement with an unrelated corporation for the production, until 1998, of
MULTIKINE for research and testing purposes. At present, this is the
Company's only source of MULTIKINE. If this corporation could not, for any
reason, supply the Company with MULTIKINE, the Company estimates that it would
take approximately six to ten months to obtain supplies of MULTIKINE under an
alternative manufacturing arrangement. The Company does not know what cost it
would incur to obtain this alternative source of supply.
Technological Change. The biomedical field in which the Company
is involved is undergoing rapid and significant technological change. The
successful development of vaccines, therapeutic agents and diagnostic products
from the Company's compounds, compositions and processes 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. Certain aspects of the Company's technologies are
covered by U.S. and foreign patents. In addition, the Company has a number of
patent applications pending. There is no assurance that patent applications
filed by the Company or which may be filed in the future will result in the
issuance of any patents. Furthermore, there is no assurance 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 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 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 Company's first
MULTIKINE patent will expire in the year 2000. Since the Company does not
know if it will ever be able to sell MULTIKINE on a commercial basis, the
Company cannot predict what effect the expiration of this patent will have on
the Company. Notwithstanding the above, the Company believes that later
issued patents will protect the technology associated with MULTIKINE past the
year 2000.
Product Liability. Although the Company has product liability
insurance for MULTIKINE and its HGP-30 vaccine, the successful prosecution of
a product liability case against the Company could have a materially adverse
effect upon its business if the amount of any judgment exceeds the Company's
insurance coverage.
-11-
<PAGE>
Dependence on Management and Scientific Personnel. 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 effect on the Company's business. The Company does not
carry key man life insurance on any of its officers. The Company's future
success will also depend upon its ability to attract and retain qualified
scientific personnel. There can be no assurance that the Company will be able
to hire and retain such necessary personnel.
Options, Warrants and Convertible Securities. The Company has
issued options, warrants and other convertible securities ("Derivative
Securities") which allow the holders to acquire additional shares of the
Company's Common Stock. In some cases the Company has agreed that, at its
expense, it will make appropriate filings with the Securities and Exchange
Commission so that the securities underlying certain Derivative Securities
will be available for public sale. Such filings could result in substantial
expense to the Company and could hinder future financings by the Company.
For the terms of these Derivative Securities, 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 Derivative Securities may exercise and/or convert them at a time when
the Company could obtain additional capital on terms more favorable than those
provided by the Derivative Securities. The exercise or conversion of the
Derivative Securities will dilute the voting interest of the owners of
presently outstanding shares of the Company's Common Stock and may adversely
affect the ability of the Company to obtain additional capital in the future.
The sale of the shares of Common Stock issuable upon the exercise or
conversion of the Derivative Securities could adversely affect the market
price of the Company's stock. See "Dilution and Comparative Share Data".
Competition. The competition in the research, development and
commercialization 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.
Determination of Offering Price. The exercise price of the
Warrants (and the terms of the Exchange Offer) were determined by the Company
based upon factors such as the Company's capital needs, the percentage of
ownership to be held by Warrant holders, the general condition of the
securities markets and other relevant factors. Neither the exercise price of
the Warrants nor the terms of the Exchange Offer necessarily bear any
relationship to the Company's assets, book value, earnings history or other
investment criteria.
-12-
<PAGE>
Offering Proceeds. There is no minimum number of Warrants which
are required to be exercised in connection with in this Offering.
Accordingly, if only a limited number of Warrants are exercised, the
corresponding proceeds to the Company from this Offering may be small. See
"Use of Proceeds".
Warrants. In connection with the Exchange Offer, the Company has
applied to have the Series A Warrants listed for trading on the American Stock
Exchange. In order for the Series A Warrants to be listed on the American
Stock Exchange, there must be at least 100,000 Series A Warrants issued and
outstanding. Since there is no minimum number of Warrants which are required
to be exercised in the Exchange Offer, no assurance can be given that the
number of Series A Warrants which will be issued and outstanding following the
expiration of the Exchange Offer will be sufficient so as to allow the listing
of the Series A Warrants on the American Stock Exchange. If the Series A
Warrants cannot be listed on the American Stock Exchange, the Company will
attempt to have the Warrants listed for trading on the NASD's Electronic
Bulletin Board.
Lack of Dividends. There can be no assurance the Company will be
profitable. At the present time, the Company intends to use available funds
to finance the Company's operations. Accordingly, while payment of dividends
rests within the discretion of the Board of Directors, no common stock
dividends have been declared or paid by the Company. The Company does not
presently intend to pay dividends on its common stock and there can be no
assurance that common stock dividends will ever be paid.
Dilution. Persons purchasing the securities offered by this
Prospectus will suffer immediate dilution since the price paid for the
securities offered will likely be more than the net tangible book value of the
Company's 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. The provisions in the Company's Articles of Incorporation
relating to the Preferred Stock 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 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.
USE OF PROCEEDS
The net proceeds to the Company from this (assuming all Warrants
are exercised) are estimated to be approximately $6,200,000.
The Company anticipates that the net proceeds from this offering
will be used to finance the Company's research, clinical trials and general
and administrative expenses.
-13-
<PAGE>
Notwithstanding the above, there is no minimum number of Warrants
which is required to be sold in this Offering. Accordingly, if only a limited
number of Warrants are exercised, the corresponding proceeds to the Company
from this Offering will be minimal.
DILUTION AND COMPARATIVE SHARE DATA
As of October 31, 1997 the Company had 11,159,660 shares of Common
Stock issued and outstanding with a net tangible book value (total assets less
total liabilities and intangible assets) of $0.67 per share. The following
illustrates per share dilution to investors in this offering as well as other
comparative share data, assuming all Warrants are exercised. The number of
shares outstanding excludes shares of Common Stock issuable on exercise of
outstanding options, warrants and other convertible securities previously
issued by the Company or which may be issued by the Company in connection with
this offering.
Public Offering Price (Price of
One Share of Common Stock Upon
Exercise of Warrants) ................ $6.00
Shares Outstanding As Of October
31, 1997 ............................. 11,159,660
Shares to be issued in this
Offering (1) ......................... 1,035,000
Shares Outstanding After This
Offering (3) ......................... 12,194,660
Net Tangible Book Value Per Share
of Common Stock Prior To This
Offering ................ ............ $0.67
Pro Forma Net Tangible Book Value
Per Share of Common Stock After
This Offering ........................ $1.15
Gain in Book Value Per Share to
Present Shareholders ................. $0.48
Dilution Per Share to Purchasers
of Common Stock ...................... $4.85
Equity Ownership by Present
Shareholders Following Offering ..... 91%
Equity Ownership by Investors in
this Offering ........................ 9%
"Net tangible book value" is the amount that results from
subtracting the total liabilities and intangible assets of the Company from
its total assets. Tangible assets exclude deposits and patent costs.
"Dilution" is the difference between the public offering price and the net
tangible book value of the Company's shares of Common Stock immediately after
the Offering.
(1) Assumes all Warrants are exercised, of which there can be no
assurance. In the case of the Exchange Offer, does not reflect shares of
common stock issuable upon the exercise of the Series A Warrants.
(2) Every five Warrants will allow the holder to purchase, for
$6.00, one share of the Company's Common Stock and one Series A Warrant. See
"Plan of Distribution".
-14-
<PAGE>
(3) Does not reflect shares of common stock issuable upon the
exercise of the Series A Warrants or additional shares which may be issued as
the result of the exercise of outstanding options and warrants or the
conversion of other securities issued by the Company, as shown by the
following:
Number of Note
Shares Reference
Outstanding as of October 31, 1997 11,159,660
Shares offered by this Prospectus 1,035,000
Other Shares Which May Be Issued:
Shares issuable upon exercise of
Series A Warrants 1,035,000 A
Shares issuable upon exercise of
Class A and Class B Warrants 233,188 B
Shares issuable upon exercise of warrants
held by former holders of the
Company's Series B Preferred Stock. 82,250 C
Shares issuable upon exercise of
options granted to Company's officers,
directors, employees and consultants 2,481,654 D
Shares outstanding (as adjusted),
assuming all Warrants are exercised: 16,026,752
A. Pursuant to the terms of the Exchange Offer, at any time between January
9, 1998 and February 6, 1998 every five Warrants will allow the holder to
purchase, for $6.00, one share of the Company's common stock and one
Series A Warrant. Each Series A Warrant entitles the holder to purchase
one share of the Company's Common Stock at a price of $18.00 per share at
any time prior to February 7, 2000. The Exchange Offer, unless extended
by the Company, will expire on February 6, 1998 (the "Expiration Date").
See "Description of Securities".
B. In December 1996 the Company raised $2,850,000 from the sale of units
consisting of 2,850 shares of the Company's Series C Preferred Stock,
379,763 Class A Warrants and 379,763 Class B Warrants. The Series C
Preferred Shares were convertible into shares of the Company's Common
Stock on the basis of one share of Preferred Stock for shares of Common
Stock equal in number to the amount determined by dividing $1,000 by the
85% of Closing Price of the Company's Common Stock (the "Conversion
Price"). The term "Closing Price" was defined as the average closing bid
price of the Company's Common Stock over the five-day trading period
ending on the day prior to the conversion of the Preferred Stock.
Notwithstanding the above, the Conversion Price could not be more than
$4.00. Each Class A Warrant entitles the holder to purchase one share of
-15-
<PAGE>
the Company's common stock at a price of $4.50 per share at any time prior
to March 15, 1998. Each Class B Warrant entitles the holder to purchase
one share of the Company's common stock at a price of $4.50 per share at
any time prior to March 15, 1999. By means of a separate Registration
Statement, the shares issuable upon the conversion of the Series C
Preferred Shares and the exercise of the Class A Warrants and Class B
Warrants are being offered for public sale. As of October 31, 1997 all
shares of the Series C Preferred Stock had been converted into 9l5,27l
shares of the Company's common stock, 273,163 Class A Warrants had been
exercised and 253,175 Class B Warrants had been exercised.
C. In August 1996 the Company sold, in a private transaction, 5,000 shares of
its Series B Preferred Stock (the "Preferred Shares") for $5,000,000 or
$1,000 per share. At the purchasers' option, up to 2,500 Preferred Shares
were convertible, on or after November 7, 1996 (the "Effective Date"),
into shares of the Company's Common Stock on the basis of one share of
Preferred Stock for shares of Common Stock equal in number to the amount
determined by dividing $1,000 by 87% of the Closing Price of the Company's
Common Stock. All Preferred Shares were convertible, on or after 40 days
from the Effective Date, on the basis of one share of Preferred Stock for
shares of the Company's Common Stock equal in number of the amount
determined by dividing $1,000 by 85% of the Closing Price of the Company's
Common Stock. The term "Closing Price" was defined as the average closing
bid price of the Company's Common Stock over the five-day trading period
ending on the day prior to the conversion of the Preferred Stock.
Notwithstanding the above, the conversion price could not be less than
$3.60 nor more than $14.75. The Preferred Shares were entitled to a
quarterly dividend of $17.50 per share. By means of a separate
Registration Statement filed with the Securities and Exchange Commission,
the shares issued upon the conversion of the Series B Preferred Shares
were registered for public sale. Prior to December 20, 1996 1,900 Series
B Preferred Shares were converted into 527,774 shares of the Company's
common stock. In December 1996 the Company repurchased 2,850 Series B
Preferred Shares for $2,850,000 plus warrants which allow the holders to
purchase up to 99,750 shares of the Company's common stock for $4.25 per
share at any time prior to December 15, 1999. The Company raised the
funds required for this repurchase from the sale of its Series C Preferred
Stock. In May 1997 all remaining 250 shares of the Series B Preferred
Stock were converted into 69,444 shares of common stock. As of October
31, l997 warrants for the purchase of 17,500 shares of common stock had
been exercised.
D. The options are exercisable at prices ranging from $2.38 to $19.70 per
share. The Company may also grant options to purchase additional shares
of Common Stock under its Incentive Stock Option and Non-Qualified Stock
Option Plans.
MARKET FOR THE COMPANY"S COMMON STOCK
As of October 31, 1997, there were approximately 2,800 record
holders of the Company's Common Stock and approximately 100 record holders of
the Company's Warrants. Prior to June 5, 1997, the Company's Common Stock and
Warrants were traded on the National Association of Securities Dealers
-16-
<PAGE>
Automatic Quotation ("NASDAQ") System. Since June 5, 1997 the Company's
Common Stock and Warrants have traded on the American Stock Exchange. Set
forth below are the range of high and low quotations for the periods indicated
as reported by NASDAQ and the American Stock Exchange, and as adjusted for the
10 for 1 reverse stock split which was approved by the Company's shareholders
on April 28, 1995 and became effective on May 1, 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
12/31/94 $ 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
9/30/95 $ 5.46 $ 3.56 $0.28 $0.09
12/31/95 $ 4.75 $ 2.28 $0.25 $0.09
3/31/96 $ 7.12 $ 2.68 $0.28 $0.03
6/30/96 $14.38 $ 4.56 $0.41 $0.16
9/30/96 $12.00 $ 5.62 $0.44 $0.21
12/31/96 $ 6.63 $ 3.50 $0.28 $0.12
3/31/97 $ 6.12 $ 4.19 $0.22 $0.12
6/30/97 $ 5.12 $ 2.75 $0.44 $0.09
9/30/97 $ 8.06 $ 3.12 $0.69 $0.19
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 on it's Common Stock and the Company does not have any current
plans to pay any Common Stock dividends.
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.
PLAN OF DISTRIBUTION
Regular Warrant Exercise
The Warrants are exercisable at any time prior to February 7, 1998
(the "Warrant Expiration Date"). The terms of the Warrants presently provide
that every five Warrants allows the holder to purchase one share of the
Company's Common Stock at a price of $6.00 per share. The Company, upon
30-days notice, may accelerate the expiration date of the Warrants.
-17-
<PAGE>
The Warrants may be exercised by sending properly completed and
signed certificates to the Warrant Agent accompanied by payment in full of the
exercise price for each share of Common Stock as to which the Warrants are
being exercised. Payment for the exercise price of Warrants may be made by
cash, wire transfer, bank cashier's check or personal check. Payments should
be made to "American Securities Transfer". If payment is made by personal
check the shares of common stock issuable upon the exercise of the Warrants
will not be issued until the check has been paid by the Warrant holder's bank.
Exchange Offer
The terms of the Exchange Offer provide that at any time between
January 9, 1998 and February 6, 1998 every five Warrants will allow the holder
to purchase, for $6.00, one share of the Company's common stock and one Series
A Warrant. Each Series A Warrant entitles the holder to purchase one share of
the Company's Common Stock at a price of $18.00 per share at any time prior to
February 7, 2000. The foregoing offer (the "Exchange Offer"), unless extended
by the Company, will expire on February 6, 1998 (the "Expiration Date"). See
"Description of Securities" for further information concerning the terms of
the Series A Warrant.
The purpose of the Exchange Offer is to provide an incentive for
the exercise of the Company's outstanding Warrants. To the extent that
Warrants are exercised pursuant to this Exchange Offer, the Company will
benefit from the receipt of the cash received in conjunction with the
exercise. Any Warrants accepted for exercise will be retired.
The Board of Directors of the Company believes the Exchange Offer
is in the best interests of the Company and that the Company will benefit from
the receipt of cash proceeds, if any, received pursuant to the Exchange Offer.
However, the Board of Directors is not making any recommendations to the
holders of the Warrants as to whether they should excercise or refrain from
exercising any or all of their Warrants. Each Warrant holder must make his or
her own decision as to whether to exchange all or any portion of the Warrants
owned by such person.
Subject to the terms and conditions as set forth herein, the
Company will accept all Warrants which are timely and properly tendered to
American Securities Transfer, Inc., (the "Warrant Agent") under the terms of
this Exchange Offer prior to 6:00 p.m. Denver, Colorado Time on February 6,
1998 (the "Expiration Date"). The Company at its sole option may extend the
Exchange Offer for an additional period of time by giving written or oral
notification of such extension to the Exchange Agent and by causing notice of
any extension of the Exchange Offer to be mailed to all Warrant holders of
record, and to be published in The New York Times, the Wall Street Journal or
any other newspaper of national circulation selected by the Company. The
Company has no present intention to extend the Exchange Offer beyond the
Expiration Date.
The Company reserves the right to withdraw, cancel, modify or
terminate this Exchange Offer at any time prior to the Expiration Date (by
written or oral notice to the Warrant Agent and by causing notice thereof to
be given to all Warrant Holders of record) if, in the opinion of counsel for
-18-
<PAGE>
the Company, there exists any actual or threatened legal impediment to the
Exchange Offer, including any material legal action or administrative
proceeding instituted or threatened against the Company or the Warrant Agent
with respect to the Exchange Offer. No such impediments are presently known
by the Company to exist. Upon any such termination of the Exchange Offer, the
Company will return all such Warrants and cash payments without interest
thereon or deduction therefrom, and have no further obligation or liability
with respect to the Exchange Offer.
Should any funds of any tendering Warrant holder whose exercise
has not been accepted by the Company be left on deposit with the Warrant Agent
for any reason including, but not limited to, termination of the Exchange
Offer, the Warrant Agent will promptly refund such funds without interest
thereon or deduction therefrom.
No variation in the terms of the Exchange Offer is presently
contemplated. However, if for any reason the terms should be changed, the
revised terms will apply for all tendering Warrant holders whether they
tendered before or after such change.
Requests for additional copies of this Prospectus or the Letter of
Transmittal or assistance in completing an exchange should be made by mail or
telephone to any of the following:
WARRANT AGENT:
American Securities Transfer & Trust, Inc.
938 Quail St., Suite l0l
Lakewood, Colorado 802l5
Telephone: (303) 534-5300
Attention: Administrative Services
THE COMPANY:
CEL-SCI Corporation
66 Canal Center Plaza
Suite 510
Alexandria, Virginia 22314
Telephone: (703) 549-5293
Attention: Patricia B. Prichep
Vice President of Operations
The Warrant certificates and payments should NOT be sent to the Company.
Warrant certificates and payments should be sent to the Warrant Agent.
Payment should be made to "American Securities Transfer & Trust".
If a holder of Warrants does not tender Warrants pursuant to the
terms of this Exchange Offer, such holder may nevertheless exercise the
Warrants in accordance with the terms of the Warrants. Such terms provide
that every five Warrants entitle the holder to purchase one (1) share of the
Company' Common Stock at a price of $6.00 at any time prior to February 7,
1998 (the "Warrant Expiration Date").
-19-
<PAGE>
Procedure for Exchange Offer
Except as otherwise stated below, to be properly tendered pursuant
to this Exchange Offer, a Warrant holder must send the Warrant Certificates,
together with a properly completed and executed Letter of Transmittal and the
applicable payment to the Warrant Agent prior to the Expiration Date. The
certificates, Letter of Transmittal and the payment should not be sent to the
Company. The method of delivery of the Warrants, the payment and other
documents forwarded to the Warrant Agent is at the election and risk of the
holder, but if such delivery is by mail it is suggested that registered mail
with return receipt requested be used. The applicable payment accompanying
the Warrants must be made by cash, wire transfer, bank cashier's check or
personal check payable in United States dollars to American Securities
Transfer & Trust, Inc. as Warrant Agent. If payment is made by personal
check, the shares of common stock and Series A Warrants will not be issued
until the check has been paid by the Warrant holder's bank.
All questions as to the validity, form, eligibility (including
time of receipt) and acceptance of the Warrants or payments tendered will be
determined by the Company, which determination shall be final and binding.
The Company reserves the absolute right to reject any or all tenders of any
Warrants and payments not properly tendered or any acceptence of which would,
in the opinion of the Company, be unlawful. The Company also reserves the
right to waive any irregularities or conditions of tender as to any particular
Warrants, and the Company's interpretation of the terms and conditions of the
Exchange Offer (including the instrutions and Letter of Transmittal) shall be
final and binding. Any irregularities in connection with the tenders, unless
waived, must be cured within such time as the Company shall determine, which
time may be extended beyond the Expiration Date. Neither the Company nor the
Warrant Agent shall be under any duty to give notification of defects in such
tenders or incur any liability for failure to give such notification. Tenders
of the Warrants and payments received by the Warrant Agent that are not
properly tendered and as to which the irregularities have not been cured or
waived will be returned (without interest on the payment or deduction
therefrom) by the Warrant Agent to the appropriate Warrant holder as soon as
practicable.
Procedure for Late Delivery of Warrants
If the Warrant Agent receives, prior to the Expiration Date, the
applicable payment with respect to the number of Warrants being exercised,
together with a letter or facsimile transmission from a commercial bank or
trust company in the United States, a member of the National Association of
Securities Dealers, Inc. or a member firm of a national securities exchange
stating the number of Warrants being excercised, the name of the holder of the
Warrants and guaranteeing that the Warrants and/or Letter of Transmittal, as
the case may be, and any other documents required for such exercise will be
received by the Warrant Agent within three (3) business days of the Expiration
Date, such tender will be accepted subject to the receipt by the Warrant Agent
of the guaranteed items within the specified period. The guarantee of
delivery of Warrants may also be effected by executing and delivering to the
Warrant Agent prior to the Expiration Date, the applicable payment and a
Letter of Transmittal with the guarantee of delivery contained therein
separately executed by one of the aforementioned institutions.
-20-
<PAGE>
Withdrawal Rights
Tenders of Warrants and payments may be withdrawn at any time
prior to the termination of the Exchange Offer and, if not yet accepted for
excercise, after March 7, 1998.
For a withdrawal to be effective, a written or facsimile
transmission notice of withdrawal must be timely received by the Warrant Agent
at its address as set forth above. Such notice of withdrawal must set forth
the name of the tendering Warrant holder, the name of the registered holder if
different from that of the Warrant holder, the number of Warrants (and, if
available, the certificate numbers) and the amount of the payment to be
withdrawn. All questions as to the validity (including time of receipt) or
notices of withdrawal will be determined by the Company, whose determination
shall be final and binding. All Warrants and payments withdrawn in the manner
specified above will not be considered to have been duly exercised.
Delivery of Common Stock and Series A Warrants
Upon the terms and subject to the conditions of this Exchange
Offer, delivery of the Common Stock and Series A Warrants in exchange for the
Warrants and cash payments validly tendered and accepted by the Company will
be made as soon as practicable after the Expiration Date. It is anticipated
that the certificates for the Shares of Common Stock and Series A Warrants
will be mailed within three business days of the Expiration Date. All
deliveries will be made through the Warrant Agent.
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 issuable upon the exercise of the Series
A Warrants will be, upon issuance, fully paid and non-assessable.
-21-
<PAGE>
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.
In May 1996 the Company sold 3,500 shares of its Series A
Preferred Stock (the "Preferred Shares") for $3,500,000 or $1,000 per share.
All Preferred Shares were convertible on the basis of one share of Preferred
Stock for shares of the Company's Common Stock equal in number to the amount
determined by dividing $1,000 by 83% of the Closing Price of the Company's
Common Stock. The term "Closing Price" was defined as the average closing bid
price of the Company's Common Stock over the five-day trading period ending on
the day prior to the conversion of the Preferred Stock. All outstanding
shares of the Series A Preferred Stock have since been converted into 632,041
shares of the Company's Common Stock. The shares issued upon the conversion
of the Series A Preferred Stock were offered for public sale by means of a
separate Registration Statement.
See "Dilution and Comparative Share Data" for information
concerning the Company's Series B and Series C Preferred Stock.
Publicly Traded Warrants
In connection with the Company's February, 1992 public offering,
the Company issued 5,175,000 Warrants. Every five Warrants entitle the holder
to purchase one share of the Company's Common Stock at a price of $6.00 per
share prior to February 7, 1998. The Warrants were issued pursuant to the
terms of a Warrant Agreement between the Company and American Securities
Transfer & Trust, Inc. (the "Warrant Agent"). The Company has authorized and
reserved for issuance l,035,000 shares of Common Stock issuable upon the
exercise of the Warrants.
The Company, upon 30-days notice, may accelerate 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 30-day 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.
-22-
<PAGE>
1. Holders of the Warrants may sell the Warrants rather than
exercise them. However, there can be no assurance that a market will 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 discretion of the Company's Board of Directors by giving each Warrant
holder notice 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.
Series A Warrants
Each Series A Warrant entitles the holder to purchase one share of
the Company's Common Stock at a price of $18.00 per share at any time prior to
February 7, 2000. The Company, upon 30-days notice, may accelerate the
expiration date of the Series A 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 Series A 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 Series A Warrants not exercised within the 30-day period will expire.
Other provisions of the Series A Warrants are set forth below.
This information is subject to the provisions of the Warrant Certificate
representing the Warrants.
1. Holders of the Series A Warrants may sell the Warrants
rather than exercise them. However, there can be no assurance that a market
will develop or continue as to the Series A Warrants.
2. Unless exercised within the time provided for exercise, the
Series A Warrants will automatically expire.
-23-
<PAGE>
3. The exercise price of the Series A Warrants may not be
increased during the term of the Series A Warrants, but the exercise price may
be decreased at the discretion of the Company's Board of Directors by giving
each Series A Warrant holder notice of such decrease. The exercise period for
the Series A Warrants may be extended by the Company's Board of Directors
giving notice of such extension to each Series A Warrant holder of record.
4. There is no minimum number of shares which must be purchased
upon exercise of the Series A Warrants.
5. The holders of the Series A 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 Series A 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 Series A Warrants
will not be entitled to participate in the distribution of the Company's
assets.
Transfer Agent
American Securities Transfer & Trust, Inc., of Denver, Colorado,
is the transfer agent and registrar for the Company's Common Stock and
Warrants.
EXPERTS
The financial statements incorporated by reference in this
prospectus by reference from the Company's Annual Report on Form l0-K have
been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report which is incorporated herein, and have been so incorporated in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
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.
-24-
<PAGE>
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
Statement, 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, 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. This Registration Statement and the related exhibits may
also be inspected at the Internet Web Site maintained by the Securities and
Exchange Commission at www.sec.gov. Copies may be obtained at the Washington,
D.C. office upon payment of the charges prescribed by the Commission.
-25-
<PAGE>
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 ........................................... 5
Risk Factors ................................................. 10
Use of Proceeds............................................... 14
Dilution and Comparative Share Data .......................... 14
Market for the Company's Common Stock......................... 18
Plan of Distribution ......................................... 17
Description of Securities .................................... 18
Experts ...................................................... 18
Indemnification .............................................. 18
Additional Information ....................................... 18
CEL-SCI CORPORATION
PROSPECTUS
November 14, 1997
