UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997.
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to ______________.
Commission File Number 0-11503
CEL-SCI CORPORATION
Colorado 84-0916344
- ---------------------------- ----------------------------
State or other jurisdiction (IRS) Employer
incorporation Identification Number
66 Canal Center Plaza, Suite 510
Alexandria, Virginia 22314
-----------------------------
Address of principal executive offices
(703) 549-5293
-----------------------------
Registrant's telephone number, including area code
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) had been subject to such filing
requirements for the past 90 days.
Yes ____X_____ No __________
Class of Stock No. Shares Outstanding Date
- -------------- ---------------------- ----
Common 10,389,194 August 14,1997
Page 1 of 14 pages
1
<PAGE>
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Page
----
Balance Sheets 3-4
Statement of Operations 5-6
Statements of Cash Flow 7-8
Notes to Financial Statements 9
Item 2.
Management's Discussion and Analysis 12
PART II
Item 6.
Exhibits and Reports on Form 8-K 13
Signatures 14
2
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Item 1. FINANCIAL STATEMENTS
CEL-SCI CORPORATION
-------------------
CONSOLIDATED CONDENSED BALANCE SHEETS
------------------------
ASSETS
(unaudited)
<TABLE>
<CAPTION>
June 30, September 30,
1997 1996
-------------------- --------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $3,401,150 $3,549,810
Investments, net 1,994,914 6,498,812
Accounts receivable -
Interest receivable 72,376 76,515
Prepaid expenses 576,510 272,404
Short-term loan to officer/shareholder 281,900 -
Advances to officer/shareholder
and employees 8,172 142,973
-------------------- --------------------
Total Current Assets 6,335,022 10,540,514
RESEARCH AND OFFICE EQUIPMENT-
Less accumulated depreciation
of $1,064,297 and $863,899 853,042 871,983
DEPOSITS 18,178 18,178
PATENT COSTS- less accumulated
amortization of
$389,132 and $352,990 457,404 447,695
-------------------- --------------------
$7,663,646 $11,878,370
==================== ====================
</TABLE>
See notes to condensed financial statements.
3
<PAGE>
CEL-SCI CORPORATION
-------------------
CONSOLIDATED CONDENSED BALANCE SHEETS
------------------------
(continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
(unaudited)
<TABLE>
<CAPTION>
June 30, September 30,
1997 1996
-------------------- --------------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $281,254 $274,410
Other current liabilities 25,498 -
-------------------- --------------------
Total current liabilities 306,752 274,410
DEFERRED RENT 19,638 19,638
-------------------- --------------------
Total liabilities 326,390 294,048
STOCKHOLDERS' EQUITY
Preferred stock, Series A, $.01 par value -
authorized
3,500 shares; issued and outstanding, 0 and - 6
600 shares
Preferred stock, Series B, $.01 par value -
authorized
5,000 shares; issued and outstanding, 0 and - 50
5,000 shares
Preferred stock, Series C, $.01 par value -
authorized
3,600 shares; issued and outstanding, 0 and - -
0 shares
Common stock, $.01 par value; authorized,
100,000,000
shares; issued and outstanding, 10,389,191 and
7,831,481 shares 103,892 78,315
Additional paid-in capital 44,194,118 41,918,036
Net unrealized loss on equity securities (2,555) (16,078)
Dividends (108,957)
Deficit (36,849,242) (30,396,007)
-------------------- --------------------
TOTAL STOCKHOLDERS'
EQUITY 7,337,256 11,584,322
-------------------- --------------------
$7,663,646 $11,878,370
==================== ====================
</TABLE>
See notes to condensed financial statements.
4
<PAGE>
CEL-SCI CORPORATION
-------------------
CONSOLIDATED
CONDENSED STATEMENTS OF OPERATIONS
---------------------------------
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
1997 1996
-------------------- --------------------
<S> <C> <C>
REVENUES:
Interest income $316,159 $136,651
Other income 62,105 51,605
-------------------- --------------------
TOTAL INCOME 378,264 188,256
EXPENSES:
Research and development 4,795,504 2,350,600
Depreciation and
amortization 236,541 208,912
General and administrative 1,799,454 2,113,884
-------------------- --------------------
TOTAL OPERATING EXPENSES 6,831,499 4,673,396
-------------------- --------------------
EQUITY IN LOSS OF JOINT VENTURE - (3,772)
-------------------- --------------------
6,831,499 4,677,168
-------------------- --------------------
NET LOSS $6,453,235 $4,488,912
==================== ====================
LOSS PER COMMON SHARE $0.72 $0.74
==================== ====================
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 8,970,583 6,086,492
==================== ====================
</TABLE>
See notes to condensed financial statements.
5
<PAGE>
CEL-SCI CORPORATION
-------------------
CONSOLIDATED
CONDENSED STATEMENTS OF OPERATIONS
----------------------------------
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
1997 1996
-------------------- --------------------
<S> <C> <C>
REVENUES:
Interest Income $92,937 $51,737
Other Income 58,667 44,280
-------------------- --------------------
TOTAL INCOME 151,604 96,017
EXPENSES:
Research and development 1,122,561 617,987
Depreciation and
amortization 81,222 68,950
General and administrative 661,484 894,165
-------------------- --------------------
TOTAL OPERATING EXPENSES 1,865,267 1,581,102
EQUITY IN LOSS OF JOINT VENTURE - -
-------------------- --------------------
1,865,267 1,581,102
-------------------- --------------------
NET LOSS $1,713,663 $1,485,085
==================== ====================
LOSS PER COMMON SHARE $0.17 $0.22
==================== ====================
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 9,917,471 6,612,293
==================== ====================
</TABLE>
See notes to condensed financial statements.
6
<PAGE>
CEL-SCI CORPORATION
-------------------
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
---------------------------------
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
1997 1996
-------------------- --------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
NET LOSS $(6,453,235) $(4,488,912)
Adjustments to reconcile net loss to
net cash used in operating activities:
Research and development expenses related to
stock portion of purchase
of Cell-Med 150,000
Research and development expenses related to
stock portion of purchase
of Multikine rights from Sittona 1,747,651
Research and development expenses related to
purchase of Viral Technologies, Inc. - 515,617
Depreciation and amortization 236,541 208,912
Amortization of premium (discount) on investments (166,102) -
Equity in loss of joint venture - 3,772
Unrealized loss on sale of investments 13,523 -
Changes in assets and liabilities, net of effect
from purchase
of Viral Technologies, Inc.:
Decrease (increase) in interest receivable 4,139 (11,325)
Decrease (increase) in accounts receivable - (46,342)
Decrease (increase) in prepaid expenses (304,106) 73,362
Decrease (increase) in advances 134,801 (116,488)
Increase (decrease) in other current liabilities 25,498 -
Increase (decrease) in accounts payable 6,844 (136,176)
-------------------- --------------------
NET CASH USED IN OPERATING ACTIVITIES (4,604,446) (3,997,580)
-------------------- --------------------
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITY:
Sales of investments 5,620,000 -
Purchase of investments (950,000) -
Payment on note payable - (182,534)
Note receivable from employee/shareholder (300,000) (114,800)
Payment on note receivable from 18,100 28,700
employee/shareholder
Laboratory construction (115,790) -
Purchase of research and office equipment (65,667) (17,808)
Patent costs (45,851) (30,800)
-------------------- --------------------
NET CASH USED IN INVESTING ACTIVITY 4,160,792 (317,242)
-------------------- --------------------
7
Continued on next page
<PAGE>
CASH FLOW, CONTINUED FROM PREVIOUS PAGE
CASH FLOWS PROVIDED BY (USED IN) FINANCING
ACTIVITIES:
Repurchase of preferred stock - -
Issuance of preferred stock - 3,325,000
Issuance of convertible debenture - 1,250,000
Dividends paid (108,957) -
Issuance of common stock 403,951 2,499,129
-------------------- --------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 294,994 7,074,129
-------------------- --------------------
NET (DECREASE) INCREASE IN CASH (148,660) 2,759,307
CASH AND CASH EQUIVALENTS:
Beginning of period 3,549,810 3,886,950
-------------------- --------------------
End of period $3,401,150 $6,646,257
==================== ====================
</TABLE>
SUPPLEMENTAL DISCLOSURES:
In October 1995, CEL-SCI issued 159,170 shares of common stock as consideration
for the purchase of the remaining 50% of Viral Technology, Inc. In conjunction
with this acquisition, CEL-SCI obtained net assets with a fair value of
$170,000.
During the quarter ended December 31, 1996, 600 shares of Series A Preferred
Stock were converted into 127,945 shares of common stock and 1,900 shares of
Series B Preferred Stock were converted into 527,774 shares of common stock.
During the quarter ended March 31, 1997, 500 shares of Series C Preferred Stock
were converted into 125,000 shares of common stock. During the quarter ended
June 30, 1997, 250 shares of Series B Preferred Stock was converted into 69,444
shares of common stock and 2,350 shares of Series C Preferred Stock were
converted into 790,271 shares of common stock.
In March 1997, CEL-SCI issued 751,678 shares of common stock as consideration
for the purchase of the rights to its Multikine technology. In addition, the
Company paid $500,000 in cash for the rights, included in research and
development expense.
In April 1997, CEL-SCI issued 33,378 shares of common stock to Cell-Med as a
milestone payment for the company's heteroconjugate technology. CEL-SCI also
paid $50,000 in cash for Cell-Med, included in research and development expense.
See notes to condensed financial statements.
8
<PAGE>
CEL-SCI CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(unaudited)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements have been prepared in accordance
with rules established by the Securities and Exchange Commission for
Form 10-Q. Not all financial disclosures required to present the
financial position and results of operations in accordance with
generally accepted accounting principles are included herein. The
reader is referred to the Company's Financial Statements included in
the registrant's Annual Report on Form 10-K for the year ended
September 30, 1996. 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, 1997
and the results of operations for the nine-month period then ended
have been made. Significant accounting policies have been consistently
applied in the interim financial statements and the annual financial
statements.
Investments
Effective September 30, 1994, the Company adopted, on a prospective
basis, Statement of Financial Accounting Standard No. 115, "Accounting
for Certain Debt and Equity Securities" (SFAS 115) and revised its
policy for investments. Investments that may be sold as part of the
liquidity management of the Company or for other factors are
classified as available-for-sale and are carried at fair market value.
Unrealized gains and losses on such securities are reported as a
separate component of stockholders' equity. Realized gains and losses
on sales of securities are reported in earnings and computed using the
specific identified cost basis.
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.
9
<PAGE>
CEL-SCI CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(unaudited)
(continued)
B. RELATED PARTY TRANSACTIONS
In October, 1996, the Company loaned $300,000 to an officer and
shareholder. The loan carried an interest rate of 5% and was due on
December 31, 1996. At that time, the loan was extended and the balance
is now due September 30, 1997. Payments have been made on the note and
the balance on June 30, 1997 is $281,900.
C. STOCKHOLDERS' EQUITY
During 1996, the Company sold 5,000 shares of Series B Preferred Stock
(Series B Stock) for $1,000 per share. Holders of Series B Stock are
entitled to dividends, payable quarterly if declared, at the rate of
$17.50 per quarter. Dividends which are not declared will not accrue
nor be cumulative. Each share of Series B Stock is convertible into
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 on or after 10 days from the effective registration date of the
common shares, and 85% of the closing price on or after 40 days from
the effective date, with the conversion price not less than $3.60 nor
more than $14.75. Dividends were declared and paid on Series B Stock
during the quarter ended December 31,1996. During the quarter ending
December 31, 1996, 1,900 shares of Series B Stock were converted into
527,774 shares of common stock at a price of $3.60 per share of common
stock. During the quarter ended December 31, 1996, 2,850 shares of
Series B Stock were repurchased by the Company. During the quarter
ended June 30, 1997 the remaining 250 shares of the Series B Preferred
Stock were converted into 69,444 shares of the Company's common
stock..
During the quarter ended December 31, 1996, the Company sold 2,850
shares of Series C Preferred Stock (Series C Stock) for $1,000 per
share. Series C Stock is convertible into shares of the Company's
common stock on the basis of one share of Series C Stock for shares of
common stock equal in number to the amount determined by dividing
$1,000 by 85% of the average closing price of the Company's common
stock over the five-day trading period ending on the day prior to the
conversion of the Series C Stock. The conversion price may not be more
than $4.00. Beginning 90 days after December 17, 1996, one-half of the
Series C Stock is convertible into shares of the Company's common
stock. All preferred shares are convertible into shares of the
Company's common stock beginning 180 days after December 17, 1996
provided that, if the Company's common stock trades for more than
$8.00 at any time, then all shares of the Series C Stock will
thereafter be immediately convertible into shares of the Company's
common stock. In addition, 379,796 Series A warrants and 379,763
Series B warrants were sold with the Series C Stock. The Series A
warrants entitle 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. As of June 30, 1997, all shares of
the Series C Preferred Stock have been converted into shares of
10
<PAGE>
CEL-SCI CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(unaudited)
(continued)
common stock.
D. NEW ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board issued
Statement No. 123, Accounting for Stock Based Compensation (SFAS 123),
which provides an alternative to APB Opinion No. 25 in accounting for
stock-based compensation issued to employees. As permitted by SFAS
123, the Company plans to continue to account for stock-based
compensation in accordance with APB Opinion No. 25. The Company will
present in its annual financial statements the additional disclosure
required by SFAS 123. As of June 30, 1997, there are 140,000 options
outstanding to non-employees ranging in exercise price from $3.50 to
$3.94. All of these options were granted in April, 1997.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share (SFAS 128), which establishes
standards for computing and presenting earnings per share. Because the
Company has a loss from continuing operations, potential exercise of
warrants and options would have an antidilutive effect, and are
therefore not included in the earnings per share calculation.
E. PURCHASE OF RIGHTS TO MULTIKINETE
On March 10, 1997, the Company purchased from Sittona Company,
B.V., Netherlands, all rights to its Multikine technology, including
all patents and trade secrets. The previous agreement with Sittona
required Cel-Sci to pay a 10% royalty on sales and a 15% royalty on
sublicenses for the use of the technology, know-how and trade secrets.
The Company purchased these rights with $500,000 in cash and 751,678
shares of its common stock. This purchase was expensed as research and
development expense.
F. PURCHASE OF HETEROCONJUGATE TECHNOLOGY
In April 1997, the Company purchased the rights to Cell-Med's
heteroconjugate technology. To date, the milestone payments include
$50,000 in cash and 33,378 shares of the Company's common stock. This
purchase was expensed as research and development expense.
11
<PAGE>
CEL-SCI CORPORATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Liquidity and Capital Resources
The Company has had only limited revenues from operations since its
inception in March 1983. The Company has relied upon proceeds realized from the
public and private sale of its Common Stock and short-term borrowings to meet
its funding requirements. Funds raised by the Company have been expended
primarily in connection with the acquisition of exclusive rights to certain
patented and unpatented proprietary technology and know-how relating to the
human immunological defense system, the funding of VTI's research and
development program, patent applications, the repayment of debt, the
continuation of Company-sponsored research and development and administrative
costs, and the construction of laboratory facilities. Inasmuch as the Company
does not anticipate realizing significant revenues until such time as it enters
into licensing arrangements regarding its technology and know-how or until such
time it receives permission to sell its product (which could take a number of
years), the Company is mostly dependent upon short-term borrowings and the
proceeds from the sale of its securities to meet all of its liquidity and
capital resource requirements.
Effective June 1, 1997, the exercise price of the publicly held warrants,
was lowered from $15.00 to $6.00. In addition, the Company changed the terms of
the conversion such that only 5 warrants are required to purchase one share.
Previously ten warrants had been required.
During 1996, the Company issued Preferred Stock. See Footnote C,
Stockholders' Equity.
Results of Operations
Interest income during the nine months ending June 30, 1997 reflects
interest accrued on investments. Research and development expenses have
increased due to the beginning of new clinical studies with cancer and AIDS
patients. Research and development expenses also increased due to the purchase
of the Multikine rights from the Sittona Company, which was expensed as research
and development expense.
12
<PAGE>
PART II
Item 6.
(a) Exhibits
No exhibits are filed with this document.
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the fiscal
quarter ended June 30, 1997.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CEL-SCI Corporation
Date: August 14, 1997 /s/Geert Kersten
...........................
Geert Kersten
Chief Executive Officer*
*Also signing in the capacity of the Chief Accounting Officer and Principal
Financial Officer.
13
