UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996.
OR
( ) TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15 (d) OF
THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to
______________.
Commission File Number 0-11503
CEL-SCI CORPORATION
Colorado
84-0916344
____________________________
____________________________
State or other
jurisdiction
(IRS) Employer
incorporation Identification Number
66 Canal Center Plaza, Suite 510
Alexandria, Virginia 22314
_____________________________
Address of principal executive offices
(703) 549-5293
_____________________________
Registrant's telephone number, including area code
Indicate by check mark whether the Registrant (1)
has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during
the preceding 12
months (or for such shorter period that the Registrant
was
required to file such reports) and (2) had been subject to
such filing requirements for the past 90 days.
Yes ____X_____ No __________
Class of Stock No. Shares
Outstanding
Date
Common 8,555,800
February
4,1997
Page 1 of
13 pages
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Page
Balance Sheets 3-4
Statement of Operations 5
Statements of Cash Flow 6-7
Notes to Financial Statements
8
Item 2.
Management's Discussion and
Analysis
11
PART II
Item 6.
Exhibits and Reports on Form 8-K
12 Signatures 13
Item I. FINANCIAL STATEMENTS
CELSCI CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
(unaudited)
December 31, September 30
1996 1996
CURRENT ASSETS:
Cash and cash equivalents $4,971,085 $3,549,810
Investments, net 4,049,932 6,498,812
Interest receivable 61,549 76,515
Prepaid expenses 262,063 272,404
Short-term loan to
officer/shareholder 300,000 -
Advances to officer/
shareholder and employees 113,208 142,973
Total Current Assets 9,757,837 10,540,514
RESEARCH AND OFFlCE EQUIPMENT-
Less accumulated depreciation
of $926,261 and $863,899 819,358 871,983
DEPOSITS 18,178 18,178
PATENT COSTS- less accumulated
amortization of $364,841
and $352,990 442,968 447,695
$11,038,341 $11,878,370
See notes to condensed financial statements.
3
CEL-SCI CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
(unaudited)
December 31, September 30
1996 1996
CURRENT LIABILITIES:
Accounts payable $ 107,806 $ 274,410
Other current liabilities 500,000 -
Total current liabilities 607,806 274,410
DEFERRED RENT 19,638 19,638
Total liabilities 627,444 294,048
STOCKHOLDERS' EQUITY
Preferred stock, Series A,
$.01 par value - authorized
3,500 shares; issued and out-
standing, 0 and 600 shares - 6
Preferred stock, Series B,
$.01 par value - authorized
5,000 shares; issued and out-
standing, 250 and 5,000 shares 3 50
Preferred stock, Series C,
$.01 par value - authorized
3,600 shares; issued and out-
standing, 2,850 and 0 shares 28 -
Common stock, $01 parvalue;
authorized, 100,000,000
shares; issued and out-
standing, 8,521,450 and
7,831,481 shares 85,214 78,315
Additional paid-in capital 42,017,042 41,918,036
Net unrealized loss on equity
securities (15,078) (16,078)
Dividends (98,968)
Deficit (31,577,344) (30,396,007)
TOTAL STOCKHOLDERS'
EQUITY 10,410,897 11,584,322
$ 11,038,341 $ 11,878,370
See notes to condensed financial statements.
4
CEL-SCI CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (unaudited)
Three Months Ended
December 31,
1996 1995
REVENUES:
Gross Sales $1,375 $ -
Interest income 123,670 44,421
Other income - 18,080
TOTAL INCOME 125,045 62,501
EXPENSES:
Research and development 683,959 1,238,197
Depreciation and
amortization 74,214 71,268
General and administrative 548,209 477,888
TOTAL OPERATING EXPENSES 1,306,382 1,787,353
EQUITY IN LOSS OF JOINT VENTURE - 3,772
NET LOSS $1,181,337 $1,728,624
LOSS PER COMMON SHARE $ 0.14 $ 0.32
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 8,153,409 5,457,431
See notes to condensed financial statements.
5
CEL-SCI CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
(unaudited)
Three Months Ended
December 31,
1996 1995
CASH FLOWS FROM OPERATING
ACTIVITIES:
NET LOSS $ (1,181,337) $ (1,728,624)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Research and development
expenses related to purchase
of Viral Technologies, Inc. - 536,619
Depreciation and amortization 74,214 71,268
Amortization of premium (discount)
on investments (75,120) -
Equity in loss of joint venture - 3,772
Realized loss on sale of investments - -
Changes in assets and liabilities,
net of effect from purchase
of Viral Technologies, Inc.:
Decrease (increase) in interest receivable 14,966 (2,063)
Decrease (increase) in accounts receivable -
Decrease (increase) in prepaid expenses 10,341 37,333
Decrease (increase) in advances 29,765 6,304
Increase (decrease) in other current
liabilities 500,000 -
Increase (decrease) in accounts payable (166,604) (184,417)
NET CASH USED IN OPERATING ACTIVITIES (793,775) (1,259,808)
CASH FLOWS PROVIDED BY (USED IN)
INVESTING ACTIVITY:
Sales of investments 2,525,000 -
Purchase of investments - -
Advance to Joint Venture - -
Payment on note payable - (80,845)
Note receivable from employee/
shareholder (300,000) -
Payments received on note
receivable from employee/shareholder -
Laboratory construction ` (8,205) -
Purchase of research and office equipment (1,533)
Patent costs (7,124) (5,885)
NET CASH USED IN INVESTING ACTIVITY 2,208,138 (86,730)
6
Continued on next page
CASH FLOW, CONTINUED FROM PREVIOUS PAGE
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Repurchase of preferred stock (2,850,000)
Issuance of preferred stock 2,850,000 -
Dividends paid (98,968)
Issuance of common stock 105,880 500,000
NET CASH PROVIDED BY FINANCING
ACTIVITIES 6,912 500,000
NET (DECREASE) INCREASE IN CASH 1,421,275 (846,538)
CASH AND CASH EQUIVALENTS:
Beginning of period 3,549,810 3,886,950
End of period $ 4,971,085 $ 3,040,412
SUPPLEMENTAL DISCLOSURES:
In October1995, CEL-SCI issued 159,170 shares of common stock as consideration
for 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
common stock.
See notes to condensed financial statements.
7
CEL-SCI CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1996 AND
1995 (unaudited)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements have been prepared in
accordance with rules established by the Securities and
Exchange Commission for Form 10-Q. Not all financial
disclosures required to present the financial position and
results of operations in accordance with generally accepted
accounting principles are included herein. The reader is
referred to the Company's Financial Statements included in
the registrant's Annual Report on Form 10-K for the year
ended September 30, 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 December 31, 1996 and the results
of operations for the three-month period then ended have
been made. Significant accounting policies have been
consistently applied in the interim financial statements and
the annual financial statements.
Investments
Effective September 30, 1994, the Company adopted, on a
prospective basis, Statement of
Financial Accounting Standard No. 115, "Accounting for
Certain Debt and Equity Securities" (SFAS 115) and revised
its policy for investments. Investments that may be sold as
part of the liquidity management of the Company or for other
factors are classified as available-for-sale and are carried
at fair market value. Unrealized gains and losses on such
securities are reported as a separate component of
stockholders' equity. Realized gains and losses on sales of
securities are reported in earnings and computed using the
specific identified cost basis.
Loss per Share
Net loss per common share is based on the weighted average
number of common shares outstanding during the period.
Common stock equivalents, including options to purchase
common stock, are excluded from the calculation as they are
antidilutive.
Long-lived Assets
Statement of Accounting Standards No. 121, "Accounting for
the Impairment of Long-lived Assets and for Long-lived Assets to
be Disposed of" is effective for financial statements for
fiscal years beginning after December 15, 1995. It is the
Company's opinion that the adoption of the statement would
have no material effect on its Financial Statements.
CEL-SCI CORPORATION
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1996 AND
1995 (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 is now due March 31, 1997.
C. STOCKHOLDERS' EQUITY
During 1996, the Company authorized 5,000 shares of Series B
Preferred Stock (Series B Stock) with a par value of $.01
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
31,1997. During the quarter, 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. Two thousand,
eight hundred fifty shares of Series B Stock were
repurchased by the Company during the quarter ended December
31, 1996.
Also during the quarter ended December 31, 1996, the Company
issued 2,850 shares of Series C Preferred Stock (Series C
Stock) with a par value of $.01 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 share 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, warrants were
included 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. None of the Series C Stock was converted into common
stock nor were any warrants exercised before December 31,
1996.
CEL-SCI CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1996 AND
1995 (unaudited)
(continued)
D. NEW ACCOUNTING PRONOUNCEMENT
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.
CEL-SCI CORPORATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Liquidity and Capital Resources
The Company has had only limited revenues from operations
since its inception in March 1983. The Company has relied upon
proceeds realized from the public and private sale of its Common
Stock and short-term borrowings to meet its funding requirements.
Funds raised by the Company have been expended primarily in
connection with the acquisition of an exclusive worldwide license
to certain patented and unpatented proprietary technology and
know-how relating to the human immunological defense system, the
funding of VTI's research and development program, patent
applications, the repayment of debt, the continuation of 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 the
technology and know-how licensed to it or until such time it
receives permission to sell its product (which could take a
number of years), the Company is mostly dependent upon short-term
borrowings and the proceeds from the sale of its securities to
meet all of its liquidity and capital resource requirements.
In February, 1992, the Company sold 1,035,000 Units at
$15.50 per Unit in a public offering. Each unit consisted of
five shares of Common Stock and five Common Stock Purchase
Warrants. Ten Warrants entitle the holder to purchase one
additional share of Common Stock at a price of $46.50 per share
prior to February 7, 1997.
In June and September, 1995, the Company completed private
offerings whereby it sold a total of 1,150,000 units at $2.00 per
unit. Each unit consisted of one share of Common Stock and one
Warrant. Each Warrant entitles the holder to purchase one
additional share of Common Stock at a price of $3.25 per share at
any time prior to June 30, 1997. The net proceeds to the Company
from these offerings, after the payment of Sales Agent's
commissions and other offering expenses, were approximately
$2,000,000. On November 30, 1995 the Company and the investors
in these Private Offerings agreed to reduce the exercise price of
the Warrants to $1.60 per share in return for the commitment on
the part of the investors to exercise 312,500 Warrants ($500,000)
prior to December 23, 1995 and an additional 312,500 Warrants
($500,000) prior to January 31, 1996. All of these warrants were
exercised.
During 1996, the Company issued Preferred Stock. See
Footnote C, Stockholders' Equity.
Results of Operations
Interest income during the three months ending December 31,
1996 reflects interest accrued on investments. Research and
development expenses have increased due to new research on the TB
vaccine, increased work to follow up on positive findings with
the AIDS vaccine and the conduct of three clinical studies with
cancer and AIDS patients. However, research and development
expenses decreased from last year because the purchase of the
remaining 50% of Viral Technologies, Inc. in October 1995, was
expensed as research and development expense during the 1996
fiscal year.
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 December 31, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
CEL-SCI Corporation
Date:_______________, 1997 ____________
________________
Geert Kersten
Chief Executive Officer*
*Also signing in the capacity of the Chief Accounting Officer and
Principal Financial Officer.
