As filed with the Securities and Exchange Commission on February 18, 1997.
Registration
No. 333-19989
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
Amendment No. 1
Registration Statement
Under
THE SECURITIES ACT OF 1933
CEL-SCI Corporation
(Exact name of registrant as specified in charter)
Colorado
(State or other jurisdiction of incorporation)
66 Canal Center Plaza, Suite 510
Alexandria, Virginia 223l4
84-09l6344 (703) 549-5293
(IRS Employer I.D. (Address, including zip code, and telephone
number
Number) including area of principal executive
offices)
Geert Kersten
66 Canal Center Plaza, Suite 510
Alexandria, Virginia 223l4
(703) 549-5293
(Name and address, including zip code, and telephone
number,
including area code, of agent for service)
Copies of all communications, including all communications
sent to the agent for service, should be sent to:
William T. Hart, Esq.
Hart & Trinen
1624 Washington
Street
Denver, Colorado
80203 (303) 839-
0061
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE
PUBLIC: As soon as practicable after the effective
date
of this Registration Statement
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please
check the following box. [ ]
Page 1 of Pages
Exhibit Index Begins on Page
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or inter-
est reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursu-
ant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier ef-
fective registration for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
regis- tration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
Title of each Proposed Proposed
Class of Maximum Maximum
Securities Securities Offering Aggregate Amount of
to be to be Price Per Offering Registration
Registered Registered Unit (1) Price Fee
Common Stock (2) 800,000 $5.05 $4,040,000 $1,225
Common Stock (3) 759,526 $5.05 3,835,607 1,163
Common Stock (4) 99,750 $5.05 503,738 153
Common Stock (5) 20,000 $5.05 101,000 31
Total 1,679,276 $8,480,345 $2,572
(1) Offering price computed in accordance with Rule 457(c).
(2) Shares of Common Stock are offered as a result of the conversion of the
Company's Series C Preferred Stock into shares of common stock.
(3) Shares of Common Stock issuable upon the exercise of Series A and Series
B Warrants. The Series A and Series B Warrants were issued in connection
with the sale of the Company's Series C Preferred Stock.
(4) Shares of Common Stock issuable upon the exercise of Warrants issued to
former holders of the Company's Series B Preferred Stock.
(5) Shares of Common Stock issuable upon the exercise an option granted to a
financial consultant.
Pursuant to Rule 416, this Registration Statement includes such
indeterminate number of additional securities as may be required for issuance
upon the conversion of the Series C Preferred Stock or upon the exercise of
the Warrants as a result of any adjustment in the number of securities
issuable by reason of the anti-dilution provisions of the Series C Preferred
Stock or the Sales Agent's Warrants.
The registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that this
Registra- tion Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of l933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Sec- tion 8(a), may determine.
CEL-SCI CORPORATION
CROSS REFERENCE SHEET
Item in Form S-3 Location in Prospectus
Item 1 Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus .............................. Facing Page; Outside
Front Cover Page
Item 2 Inside Front and Outside Back Cover
Pages of Prospectus ..................... Inside Front Cover Page;
Outside Back Cover Page
Item 3 Summary Information, Risk Factors and
Ratio of Earnings to Fixed Changes ...... Prospectus Summary; Risk
Factors
Item 4 Use of Proceeds ......................... Not Applicable.
Item 5 Determination of Offering Price ......... Selling Shareholders
Item 6 Dilution ................................ Dilution
Item 7 Selling Security Holders ................ Selling Shareholders
Item 8 Plan of Distribution .................... Selling Shareholders
Item 9 Description of Securities to be
Registered .............................. Description of
Securities
Item l0 Interest of Named Experts and Counsel ... Experts
Item 11 Material Changes ........................ Prospectus Summary
Item 12 Incorporation of Certain Information by
Reference ............................... Documents Incorporated
by Reference
Item l3. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities .............................
Indemnification
PROSPECTUS CEL-SCI CORPORATION
Common Stock
This Prospectus relates to:
1. The sale of shares of the Common Stock of Cel-Sci Corporation
(the "Company") by holders of the Company's Series C Preferred Stock (the
"Preferred Stock") if and when the holders of the Series C Preferred Stock
elect to convert the Preferred Stock into shares of the Company's Common
Stock. The Series C Preferred Shares are 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" is 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 may not be more than $4.00.
Beginning 90 days after December 17, 1996 one half of the Series C Preferred
Shares are 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 however that if the
Company's common stock trades for more than $8.00 at any time, then all
shares of Preferred Stock will thereafter be immediately convertible into
shares of the Company's common Stock. The holders of the Preferred Stock may
resell the shares they receive upon conversion from time to time in the
public market.
2. The sale of up to 759,526 shares of common stock issuable upon
the exercise of certain Warrants. The Warrants were issued in connection
with the sale of the Company's Series C Preferred Stock. As part of this
sale, the Company issued 379,763 Series A Warrants and 379,763 Series B
Warrants (collectively, the "Warrants"). 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.
3. The sale of up to 99,750 shares of common stock issuable upon
the exercise of certain Warrants. 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 $1,000 per share. In December 1996 the
Company repurchased 2,850 Series B Preferred Shares for $1,000 per share 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.
4. The sale of up to 20,000 shares of Common Stock issuable upon
the exercise of an option granted to a financial consultant.
The holders of the Series C Preferred Stock, the Warrants and the
options referred to above, to the extent they convert the Preferred Stock
into shares of Common Stock or exercise the Warrants or options and receive
shares of the Company's Common Stock, are referred to in this Prospectus as
the "Selling Shareholders".
The Company will not receive any proceeds from the sale of the
shares by the Selling Shareholders. The Selling Shareholders has advised the
Company that it will offer the shares through broker/dealers at market prices
with customary commissions being paid by the Selling Shareholder. The costs
of registering the shares offered by the Selling Shareholder are being paid
by the Company. The Selling Shareholder will pay all other costs of the sale
of the shares offered by them. See "Selling Shareholder".
THESE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK
AND SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE
INVESTMENT. FOR A DESCRIPTION OF CERTAIN IMPORTANT FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS, SEE "RISK FACTORS" AND "DILUTION".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
On February , 1997 the closing prices of the Company's Common
Stock and Warrants on the NASDAQ System were $ and $ , respectively.
See "Market Information".
The Date of this Prospectus is February , 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 Washing-
ton, D.C. 20549 at prescribed rates. Certain information concerning the Com-
pany 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 Commis-
sion 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 Units offered hereby. This
Prospectus does not contain all of the information set forth in the Registra-
tion 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 for the fiscal year
ended September 30, 1996, the Company's Quarterly Report on Form 10-Q for the
quarter ending December 31, 1996; and
(2) The Company's Proxy Statement relating to the June 14, 1996
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 super- seded, to constitute a part of this Prospectus.
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 corpora-
tion in 1983. The Company is involved in the research and development of cer-
tain drugs and vaccines. The Company's first product, MULTIKINETM, manufac-
tured using the Company's proprietary cell culture technologies, is a combina-
tion, 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 advanced 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
"hetero- conjugates" to direct the body to chose a specific immune response.
The Com- pany intends to use this new technology to improve the cellular
immune response of persons vaccinated with HGP-30 and to develop a potential
tubercu- losis ("TB") treatment/vaccine.
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 toler-
able 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 indi- cations 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 Wel-
fare 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 inves- tigational treatment will depend on the patient's
response to treatment. In May l995, the U.S. Food and Drug Administration
(FDA) authorized the export of the Company's MULTIKINE drug to Canada for
purposes of this study.
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 is being conducted at Jefferson Hospital in Phila-
delphia, Pennsylvania and will involve up to 15 prostate cancer patients who
have failed on hormonal therapy. 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.
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-in-
fected 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 re-
ceiving 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 avail-
able 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.
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 $31,577,000 at
December 31, 1996, 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 are convertible, on or after ten days from the date
the shares have been 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 are 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" is 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 may not be less than $3.60 nor more than $14.75. Each Preferred Share
is entitled to a quarterly dividend, if, as, and when declared by the Board
of
Directors, of $17.50. Any Series B Preferred Shares which are outstanding on
the second anniversary of the Effective Date will be automatically converted
into shares of the Company's Common Stock. By means of a Registration
Statement filed with the Securities and Exchange Commission, the shares
issuable upon the conversion of the Series B Preferred Shares have been
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. The shares of
Common Stock issuable upon the exercise of these Warrants are being offered
for sale by means of this Prospectus. See "Selling Shareholders".
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 are 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" is 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 may not be more than $4.00. Beginning 90 days after December 17, 1996
one half of the Series C Preferred Shares are convertible into shares of the
Commpany's common stock. All preferred shares are convertible into shares of
the Company's common stock beginning 180 days after December 17, 1996
provided however that if the Company's common stock trades for more than
$8.00 at any time, then all shares of Preferred Stock will thereafter be
immediately convertible into shares of the Company's common stock. The
Preferred Shares are not entitled to any annual dividends, provided however
that if the shares of common stock issuable upon the conversion of the Series
C Preferred Stock have not been registered for public sale within 90 days
after December 17, 1996, then the Company will pay a dividend (based upon a
variable formula) with respect to each outstanding share of the Series C
Preferred Stock. Any Series C Preferred Shares which are outstanding on
December 15, 1998 will be automatically converted into shares of the
Company's Common Stock, provided however the shares of Common Stock issuable
upon the conversion of the Series C Preferred Shares have been registered for
public sale and the Company's Common Stock is listed on the Nasdaq System.
The Preferred Shares have a liquidation preference of $1,000 per share over
the Company's Common Stock. 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 are being offered for public sale by means of this Prospectus.
See "Selling Shareholders".
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. 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
Securities Offered: Shares of Common Stock are offered for public sale by
the holders of the Company's Series C Preferred Stock
if and when the holders of the Preferred Stock elect
to convert the Preferred Stock into shares of the
Company's Common Stock. Up to 759,526 additional
shares of Common Stock are offered for public sale
upon the exercise of Warrants which were issued in
connection with the sale of the Series C Preferred
Stock.
Up to 99,750 shares of Common Stock are offered by
the holders of certain warrants issued by the Company
in connection with the repurchase of shares of the
Company's Series B Preferred Stock.
Up to 20,000 shares are offered by a financial
consultant upon the exercise of an option granted to
such consultant.
The holders of the Preferred Stock, Warrants and
options referred to above, to the extent they convert
the Preferred Stock into Common Stock or exercise the
Warrants or options, may resell the shares they
receive upon conversion or exercise from time to time
in the public market. The holders of the Preferred
Stock, Warrants and options are sometimes referred to
in this Prospectus as the "Selling Shareholders".
The Company will not receive any proceeds from the
sale of the shares offered by the Selling
Shareholders. See "Comparative Share Data" and
"Selling Shareholders".
Common Stock Outstand-
ing Prior To and After
Offering: As of January 31, 1997, the Company had 9,271,628
shares of Common Stock issued and outstanding.
Assuming all shares of the Series C Preferred Stock
are converted to 712,500 shares of the Company's
Common Stock (assuming a conversion price of $4.00
per share) and all Warrants and options described
above are exercised, there will be 10,863,416 shares
of Common Stock issued and outstanding. The number
of outstanding shares before and after this Offering
does not give effect to shares which may be issued
upon the exercise and/or conversion of options,
warrants or other convertible securitites previously
issued by the Company. See "Comparative Share Data",
"Selling Shareholders" and "Description of
Securities".
Risk Factors: The purchase of the Securities offered by this Pros-
pectus involves a high degree of risk. Risk factors
include the following: lack of revenues and history
of loss, need for additional capital, government
regula- tion, need for FDA approval, and dilution.
See "Risk Factors."
NASDAQ Symbols: Common Stock: CELI
Warrants: CELIW
Summary Financial Data
For the Years Ended September 30,
1996 1995 1994 1993 1992
Investment Income &
Other Revenues $ 322,370 $ 423,765 $624,670 $997,964 $434,180
Expenses:
Research and
Development 3,471,477 1,824,661 2,896,109 1,307,042 481,697
Depreciation
and
Amortization 290,829 262,705 138,755 55,372 33,536
General and
Administrative 2,882,958 1,713,912 1,621,990 1,696,119 1,309,475
Equity in loss
of joint venture 3,772 501,125 394,692 344,423 260,388
Net Loss $(6,326,666) $(3,878,638) $(4,426,876) $(2,404,992) $(1,650,916)
Loss per
common share $(0.98) $(0.89) $(1.06) $(0.58) $(0.42)
Weighted average
common shares
outstanding 6,425,316 4,342,628 4,185,240 4,155,431 3,953,233
Balance Sheet Data
September 30,
1996 1995 1994 1993 1992
Working Capital $10,266,104 $3,983,699 $5,795,191 $10,296,472 $13,043,012
Total Assets 11,878,370 6,359,011 8,086,670 11,633,090 13,769,504
Current
Liabilities 274,410 491,860 472,040 505,699 405,228
Long Term and Other
Liabilities 19,638 1,025,118 935,562 182,532 61,858
Total
Liabilities 294,048 1,516,978 1,407,602 688,231 467,086
Shareholders'
Equity 11,584,322 4,842,033 6,679,068 10,944,859 13,302,4l8
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.
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 December 31, 1996, the Company incurred net losses of
approximately $31,577,000. 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 of 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 incor-
rect, the Company will need additional funding for its research efforts.
Government Regulation - FDA Approval. Products which may be devel-
oped 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 approv-
al, prior to general marketing, by the FDA in the United States and by compar-
able agencies in most foreign countries. The process of obtaining FDA and
corresponding foreign approvals is costly and time consuming, particularly
for pharmaceutical products such as those which might ultimately be developed
by the Company, Viral Technologies, Inc. or its licensees, and there can be
no assurance that such approvals will be granted. Any failure to obtain or
any delay in obtaining such approvals may adversely affect the ability of
poten- tial licensees or the Company to successfully market any products
developed.
Also, the extent of adverse government regulations which might arise from
future legislative or administrative action cannot be predicted. The
clinical trial which the Company's affiliate, Viral Technologies, Inc., is
conducting in California is regulated by government agencies in California
and obtaining approvals from states for clinical trials is likewise expensive
and time consuming.
Dependence on Others to Manufacture Product. The Company has an
agreement with an unrelated corporation for the production, until 1997, of
MULTIKINE for research and testing purposes. 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.
Licensed Technology. The Company's clinical studies and research
with respect to MULTIKINE have focused on compounds, compositions and
processes which were licensed to the Company by Sittona Company, B.V.
("Sittona") in 1983. Maximilian de Clara, the Company's president and a
director, controlled Sittona between 1985 and 1996. Any commercial products
developed by the Com- pany and based upon the technology licensed by Sittona
will belong to Sittona, subject to the Company's right to manufacture and
sell such products in accordance with the terms of the licensing agreement.
The Company's license remains in effect until the expiration or abandonment
of all patent rights or until the compounds, compositions and processes
subject to the license enter into the public domain, whichever is later. The
license may be terminated earlier for other reasons, including the insolvency
of the Company. Any future trans- actions between the Company and Sittona
will be subject to the review and approval by a majority of the Company's
disinterested directors.
Technological Change. The biomedical field in which the Company is
involved is undergoing rapid and significant technological change. The suc-
cessful development of therapeutic agents and diagnostic products from the
compounds, compositions and processes licensed to the Company, through
Company financed research or as a result of possible licensing arrangements
with phar- maceutical or other companies, will depend on its ability to be in
the tech- nological forefront of this field. There can be no assurance that
the Company will achieve or maintain such a competitive position or that
other technologi- cal developments will not cause the Company's proprietary
technologies to become uneconomical or obsolete.
Patents. Since 1983 the Company, on behalf of the owners of the
compounds, compositions and processes licensed to the Company, has filed
applications for United States and foreign patents covering certain aspects
of the technology. Although the Company has paid the costs of applying for
and ob- taining patents, the technology covered by the patents is not owned
by the Company, but by an affiliated party which has licensed the technology
to the Company. As of the date of this Prospectus nine patents have been
issued in the United States and three patents have been issued in Europe.
There is no assurance that the applications still pending or which may be
filed in the future will result in the issuance of any patents. Furthermore,
there is no 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 owners of the patents or the Company and others as to the
scope, validity and ownership rights of these or other patents. Any defense of
the patents could prove costly and time consuming and there can be no assurance
that the Company or the owners of the patents will be in a position, or will
deem it advisable, to carry on such a defense. Other private and public
concerns, including universities, may have filed applications for, or may have
been issued, patents and are expected to obtain additional patents and other
proprietary rights to technology potentially useful or necessary to the
Company.
The scope and validity of such patents, if any, the extent to which the
Company or the owners of the patents may wish or need to acquire the rights
to such patents, and the cost and availability of such rights are presently
unknown. Also, as far as the Company relies upon unpatented proprietary
technology, there is no assurance that others may not acquire or
independently develop the same or similar technology. The first patent
licensed to the Company will ex- pire in the year 2000. Since the Company's
Investigational New Drug applica- tion relating to MULTIKINE has only
recently been cleared by the FDA, and 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 Insurance. Although the Company has product lia-
bility insurance for MULTIKINE and its HGP-30 vaccine, the successful prosecu-
tion 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.
Dependence on Management and Scientific Personnel. The Company is
dependent for its success on the continued availability of its executive offi-
cers. 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
scien- tific 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 is-
sued options, warrants and other convertible securities ("Derivative Securi-
ties") 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
pre- sently outstanding shares of the Company's Common Stock and may
adversely af- fect 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 conver- sion of the Derivative Securities could adversely affect
the market price of the Company's stock. See "Comparative Share Data".
Competition. The competition in the research, development and com-
mercialization of products which may be used in the prevention or treatment
of cancer and AIDS is intense. Major pharmaceutical and chemical companies,
as well as specialized genetic engineering firms, are developing products for
these diseases. Many of these companies have substantial financial, research
and development, and marketing resources and are capable of providing signifi-
cant long-term competition either by establishing in-house research groups or
by forming collaborative ventures with other entities. In addition, both
smaller companies and non-profit institutions are active in research relating
to cancer and AIDS and are expected to become more active in the future.
The clinical trials sponsored to date by the Company and VTI have
not been approved by the FDA, but rather have been conducted pursuant to
approvals obtained from regulatory agencies in England, Canada and certain
states. Since the results of these clinical trials may not be accepted by
the FDA, companies which are conducting clinical trials approved by the FDA
may have a competi- tive advantage in that the products of such companies are
further advanced in the regulatory process than those of the Company or VTI.
Lack of Dividends. There can be no assurance 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 Pros-
pectus 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 "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 issu-
ance 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.
COMPARATIVE SHARE DATA
As of January 31, 1997, the present shareholders of the Company
owned 9,271,628 shares of Common Stock, which had a net tangible book value
of approximately $1.38 per share. The following table illustrates the
comparative stock ownership of the other stockholders of the Company, as
compared to the investors in this Offering, assuming all shares offered are
sold.
Shares outstanding (1) 9,271,628
Shares to be issued upon conversion of
Series C Preferred Stock, assuming
Conversion price of $4.00 per share 712,512
Shares to be issued upon exercise of Warrants
Held by Owners of Series C Preferred Stock 759,526
Shares to be issued upon exercise of Warrants
held by former owners of Series B Preferred
Stock 99,750
Shares to be issued upon exercise of option
granted to financial consultant 20,000
Shares outstanding (pro forma basis) (1) 10,863,416
Net tangible book value per share $1.38
Equity ownership by present shareholders
afterthis offering 85.4%
Equity ownership by investors in this Offering 14.6%
(1) Amount excludes shares which may be issued upon the exercise and/or con-
version of options, warrants and other convertible securities previously
issued by the Company. See table below.
The purchasers of the securities offered by this Prospectus will suf-
fer an immediate dilution if the price paid for the securities offered is
greater than the net tangible book value of the Company's Common Stock.
"Net tangible book value" is the amount that results from
subtracting the total liabilities and intangible assets of the Company from
its total as- sets. "Dilution" is the difference between the offering price
and the net tangible book value of shares immediately after the Offering.
The following table reflects the additional shares which may be is-
sued as the result of the exercise of outstanding options and warrants or the
conversion of other securities issued by the Company.
Number of Note
Shares Reference
Outstanding as of January 31, 1997 9,271,628
Shares Subject to this Offering:
Shares issuable upon conversion of
the Series C Preferred Stock, assuming
conversion price of $4.00 per share 712,512 A
Shares issuable upon exercise of
Series A and Series B Warrants 759,526 A
Shares issuable upon exercise of warrants
held by former owners of the
Company's Series B Preferred Stock. 99,750 B
Shares to be issued upon exercise of
option granted to financial consultant 20,000 C
Shares outstanding (pro forma basis) 10,863,416
Other Shares Which May Be Issued:
Shares issuable upon conversion of
remaining outstanding shares of Series B
Preferred Stock, assuming conversion
price of $4.00 per share 62,500 B
Shares issuable upon exercise ofwarrants
issued to Selling Agent, or its assigns,
in connection with the Company's June and
September 1995 Private Offerings 49,720 D
Shares issuable upon exercise of
warrants issued to Selling Agent, or its
assigns, in connection with the Company's
August 1996 Private Offering 15,355 E
Shares issuable upon exercise of
warrants sold in Company's 1992
Public Offering 517,500 F
Shares issuable upon exercise of
options granted to Company's officers,
directors, employees and consultants 1,161,750 G
12,670,241
A. In December 1996 the Company raised $2,850,000 from the sale of units con-
sisting of 2,850 shares of the Comany's Series C Preferred Stock, 379,763
Series A Warrants and 379,763 Series B Warrants. The Series C Preferred
Shares are 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" is defined as the average closing bid price of the Com-
pany's Common Stock over the five-day trading period ending on the day prior
to the conversion of the Preferred Stock. Beginning 90 days after December
17, 1996, one half of the Series C Preferred Shares are 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 however that if the closing bid price of the Company's
common stock trades for
more than $8.00 at any time, then all shares of Preferred Stock will
thereafter be immediately convertible into shares of the Company's common
stock. Notwithstanding the above, the Conversion Price may not be more than
$4.00. Any Preferred Shares which are outstanding on December 15, 1998 will
be automatically converted into shares of the Company's Common Stock,
provided that the shares of Common Stock issuable upon the conversion of the
Preferred Shares have been registered for public sale and the Company's
Common Stock is listed on the Nasdaq system. 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 this
Prospectus. See "Selling Shareholders".
B. 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 are 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" is 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 may not be less than $3.60 nor more than
$14.75. The Preferred Shares, if issued, are entitled to a quarterly divi-
dend of $17.50 per share. Any Preferred Shares which are outstanding on
November 7, 1998 will be automatically converted into shares of the Com-
pany's Common Stock. 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 have been 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. The
shares issuable upon the exercise of these Warrants are being registered
for public sale by means of this Prospectus. See "Selling Shareholders".
C. In February 1996 the Company granted Waterton Group, L.L.C., a financial
consultant to the Company, an option to purchase 20,000 shares of the
Company's Common Stock at $3.25 per share. The shares issuable upon the
exercise of this option are being offered for public sale by means of
this Prospectus. See "Selling Shareholders".
D. In connection with the Company's June and September Private Offerings,
Neidiger/Tucker/Bruner, Inc., the Sales Agent for these offerings,
received a commission, a non-accountable expense allowance and warrants
to purchase (i) 57,500 shares of the Company's Common Stock at $2.00 per
share, (ii) 57,500 shares at $2.40 per share, and (ii) an additional
115,000 shares at $3.25 per share. Prior to the date of this Prospectus
the Sales Agent (and/or its assigns) collectively exercised Warrants
pertaining to 180,280 shares of the Company's Common Stock. By means of
a separate Registration Statement, the shares of Common Stock issuable
upon the exercise of the remaining Warrants issued to the Sales Agent
have been registered for public sale.
E. In connection with the Company's August l996 Private Offering, Shoreline
Pacific Institutional Finance, the Sales Agent for such offering,
received a commission plus warrants to purchase 15,355 shares of the
Company's Com- mon Stock at $6.51 per share. By means of a separate
Registration State- ment, the shares of Common Stock issuable upon the
exercise of the Warrants issued to the Sales Agent (or its assigns) have
been registered for public sale.
F. See "Description of Securities".
G. The options are exercisable at prices ranging from $2.87 to $19.70 per
share. The Company may also grant options to purchase 833,707 additional
shares under its Incentive Stock Option and Non-Qualified Stock Option
Plans.
SELLING SHAREHOLDERS
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. At the purchasers'
option, the Preferred Shares are convertible from time to time, in whole or
in part, into shares of the Copany's Common Stock upon certain terms. See
"Comparative Share Data". The shares issuable upon the conversion of the
Series C Preferred Shares and/or the exercise of the Series A and Series B
Warrants are being offered to the public by means of this Prospectus.
The holders of the Preferred Shares, Warrants and options, to the
event they convert their Preferred Shares into shares of Common Stock or
exercise their Warrants or options, are referred to in this Prospectus as
the "Selling Shareholders". The Company will not receive any proceeds from
the sale of the shares by the Selling Shareholders.
The names of the Selling Shareholders are:
Shares
Which Shares
May Be Which
Acquired May be
Upon Con- Acquired Share
version of Upon Ex- Shares to Owner-
Shares Series C ercise of be Sold ship
Presently Preferred Warrants in this After Of-
Name Owned Shares (1) or Options Offering(5) fering
Laura Huber-
feld/Naomi
Bodner Partner-
ship - 250,000 266,500 (2) 516,500 -
Saleslink LTD - 125,000 133,250 (2) 258,250 -
Newark Sales
Corporation - 75,000 79,950 (2) 154,950 -
Cong. Ahavas
Tzdoka V'Chesed - 125,000 133,250 (2) 258,250 -
Rita Folger - 37,500 39,976 (2) 77,476 -
Viva Corporation - 100,000 106,600 (2) 106,600 -
Infinity Investors
LTD - - 67,900 (3) 67,900 -
Seacrest Capital
Limited - - 14,350 (3) 14,350 -
Baskerville
Trading Corp. - - 17,500 (3) 17,500 -
Waterton Group
LLC - - 20,00 (4) 20,000 -
(1) Represents shares issuable upon the conversion of the Series C Preferred
Stock assuming conversion price of $4.00 per share. The actual number of shares
to be issued upon the conversion of the Preferred Shares will
depend upon the price of the Company's Common Stock at the time of
conversion. See "Description of Securities.
(2) Represents shares issuable upon the exercise of the Series A and Series
B Warrants.
(3) Represents shares issuable upon the exercise of warrants.
(4) Represents shares issuable upon exercise of option granted in partial
consideration for financial consulting services.
(5) Assumes all shares owned, or which may be acquired, by the Sellng Share-
holders, are sold to the public by means of this Prospectus.
Manner of Sale. The shares of Common Stockowned, or which may be
acquired, by the Selling Shareholders may be offered and sold by means of
this Prospectus from time to time as market conditions permit in the over-the-
counter market, or otherwise, at prices and terms then prevailing or at
prices related to the then-current market price, or in negotiated
transactions. These shares may be sold by one or more of the following
methods, without limitation: (a) a block trade in which a broker or dealer
so engaged will attempt to sell theshares as agent but may position and
resell a portion of the block as principal to facilitate the transaction; (b)
purchases by a broker or dealer as principal and resale by such broker or
dealer for its account pursuant tothis Prospectus; (c) ordinary brokerage
transactions and transactions in which the borker solicits purchasers; and
(d) face-to-face transactions between sellers and purchasers without a
broker/dealer. In effecting sales, brokers or dealers engaged by the Selling
Shareholders may arrange for other brokers or dealers to participate. Such
brokers or dealers may receive commissions or discounts from Selling
Shareholders in amounts to be negotiated.
The Selling Shareholder and any broker/dealers who act in connection
with the sale of the Shares hereunder may be deemed to be "underwriters"
within the meaning of 2(11) of the Securities Acts of 1933, and any
commissions re- ceived by them and profit on any resale of the Shares as
principal might be deemed to be underwriting discounts and commissions under
the Securities Act. The Company has agreed to indemnify the Selling
Shareholder and any securities broker/dealers who may be deemed to be
underwriters against certain liabili- ties, including liabilities under the
Securities Act as underwriters or other- wise.
The Company has advised the Selling Shareholder that it and any
securities broker/dealers or others who may be deemed to be statutory under-
writers will be subject to the Prospectus delivery requirements under the
Securities Act of 1933. The Company has also advised the Selling Shareholder
that in the event of a "distribution" of the shares owned by the Selling
Shareholder, such Selling Shareholder, any "affiliated purchasers", and any
broker/ dealer or other person who participates in such distribution may be
subject to Rule 10b-6 under the Securities Exchange Act of 1934 ("1934 Act")
until their participation in that distribution is completed. A
"distribution" is defined in Rule 10b-6 as an offering of securities "that is
distinguished from ordinary trading transactions by the magnitude of the
offering and the presence of spe- cial selling efforts and selling methods".
The Company has also advised the Selling Shareholder that Rule 10b-7 under
the 1934 Act prohibits any "stabi- lizing bid" or "stabilizing purchase" for
the purpose of pegging, fixing or stabilizing the price of the Common Stock
in connection with this offering.
Rule 10b-6 makes it unlawful for any person who is participating in
a distribution to bid for or purchase stock of the same class as is the
subject of the distribution. If Rule 10b-6 applies to the offer and sale of
any of the Shares, then participating broker/dealers will be obligated to
cease market-making activities nine business days prior to their
participation in the offer and sale of such Shares and may not recommence
market-making activi- ties until their participation in the distribution has
been completed. If Rule 10b-6 applies to one or more of the principal market-
makers in the Company's Common Stock, the market price of such stock could be
adversely affected.
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 out- standing 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,
redemp- tion, sinking fund or similar provisions regarding the Common Stock.
All of the outstanding shares of Common Stock are fully paid and
nonassessable and all of the shares of Common Stock offered as a component of
the Units will be, upon issuance, fully paid and non-assessable.
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 estab-
lish the terms of, and to issue, the Preferred Stock without shareholder
approval, the Preferred Stock could be issued to defend against any attempted
take- over 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. At the
purchasers' option, up to 1,750 Preferred Shares were convertible, on or
after 60 days from the closing date of the purchase of such shares (the
"Closing"), 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. All Preferred Shares were convertible, on or after
90 days from the Closing, 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 are being
offered for public sale by means of a separate registration statement.
See "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 ten Warrants entitle the holder to
purchase one share of the Company's Common Stock at a price of $15.00 per
share prior to February 7, 1998. 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 cur- rent 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 pre- ceding 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 exer- cised within the 30-day period will
expire.
Other provisions of the Warrants are set forth below. This informa-
tion is subject to the provisions of the Warrant Certificate representing the
Warrants.
1. Holders of the Warrants may sell the Warrants rather than exer-
cise them. However, there can be no assurance that a market will develop or
continue as to the Warrants.
2. Unless exercised within the time provided for exercise, the War-
rants will automatically expire.
3. The exercise price of the Warrants may not be increased during
the term of the Warrants, but the exercise price may be decreased at the dis-
cretion of the Company's Board of Directors by giving each Warrant holder
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, reclassifi-
cations, and mergers.
6. The holders of the Warrants have no voting power and are not en-
titled to dividends. In the event of a liquidation, dissolution, or winding
up of the Company, holders of the Warrants will not be entitled to
participate in the distribution of the Company's assets.
Transfer Agent
American Securities Transfer, Inc., of Denver, Colorado, is the
transfer agent for the Company's Common Stock.
LITIGATION
In February 1996 the Company filed a lawsuit against ImmunoRx and
Dr. John Hadden for contract breach, tortious interference of contract and
patent infringement concerning the Company's MULTIKINE drug. The lawsuit,
filed in the U.S. District Court for the Middle District of Florida, seeks
damages and the termination of certain research and clinical studies being
conducted by ImmunoRx and Dr. Hadden. From 1984 to 1992, Dr. Hadden
consulted with the Company, performed research on MULTIKINE and manufactured
MULTIKINE for the Com- pany's head and neck cancer study in Florida. In
early 1993, Dr. Hadden signed a separation agreement with the Company
acknowledging the Company's ownership of both MULTIKINE and the research
results. The Company has learned that Dr. Hadden and ImmunoRx are apparently
making copies of MULTIKINE, in contravention of the separation agreement and
the patents covering MULTIKINE, and have begun clinical studies in a foreign
country using a copy of MULTIKINE. See "Business Compounds and Processes
Licensed to the Company".
EXPERTS
The financial statements as of September 30, 1996 and 1995 and for
each of the three years in the period ended September 30, 1996 incorporated
by reference in this prospectus have been audited by Deloitte & Touche LLP,
inde- pendent auditors, as stated in their report appearing herein, and are
incorpo- rated by reference 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 en- titled 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 Com- pany has been informed that in
the opinion of the Securities and Exchange Com- mission, such indemnification
is against public policy as expressed in the Act and is therefore
unenforceable.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission,
450 5th Street, N.W., Washington, D.C. 20001, a Registration Statement under
the Securities Act of l933, as amended, with respect to the securities
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement. For further information with respect to
the Com- pany and such securities, reference is made to the Registration
Statement and to the Exhibits filed therewith. Statements contained in this
Prospectus as to the contents of any contract or other documents are
summaries which are not necessarily complete, and in each instance reference
is made to the copy of such contract or other document filed as an Exhibit to
the Registration State- ment, each such statement being qualified in all
respects by such reference. Copies of each document may be inspected at the
Commission's offices at 450 Fifth Street, N.W., Washington, D.C., 20549, and
at the Northeast Regional Office, 7 World Trade Center, 13th Floor, New York,
New York 10048 and the Midwest Regional Office, Suite 1400, 500 West Madison
Street, Chicago, Illi- nois 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.
2588D
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
Prospec- tus 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 ...........................................
Risk Factors .................................................
Comparative Share Data .......................................
Selling Shareholders .........................................
Description of Securities ....................................
Litigation ...................................................
Experts ......................................................
Indemnification ..............................................
Additional Information .......................................
Common Stock
CEL-SCI CORPORATION
PROSPECTUS
PART II
Information Not Required in Prospectus
Item 14. Other Expenses of Issuance and Distribution.
SEC Filing Fee $2,388
NASD Filing Fee 1,287
Blue Sky Fees and Expenses 2,000
Printing and Engraving Expenses 1,000
Legal Fees and Expenses 20,000
Accounting Fees and Expenses 3,000
Transfer Agent Fees 100
Miscellaneous Expenses 5,225
TOTAL $35,000
All expenses other than the S.E.C. and NASD filing fees are
estimated.
Item 25. Indemnification of Officers and Directors.
It is provided by Section 7-109-102 of the Colorado Revised Statutes
and the Company's Bylaws that the Company may indemnify any and all of its of-
ficers, directors, employees or agents or former officers, directors,
employees or agents, against expenses actually and necessarily incurred by
them, in con- nection with the defense of any legal proceeding or threatened
legal proceed- ing, except as to matters in which such persons shall be
determined to not have acted in good faith and in the best interest of the
Company.
Item 16. Exhibits
3(a) Articles of Incorporation Incorporated by reference to Exhibit
3(a) of the Company's combined Regis-
tration Statement on Form S-1 and
PostEffective Amendment
("Registration Statement"),
Registration Nos. 2-85547D and 33-
7531.
(b) Amended Articles Incorporated by reference to Exhibit
3(a) of the Company's Registration
Statement on Form S-1, Registration
Nos. 2-85547-D and 33-7531.
(c) Amended Articles Filed as Exhibit 3(c) to the
Company's
(Name change only) Registration Statement on Form S-1
Registration Statement (No. 33-
34878).
(d) Bylaws Incorporated by reference to Exhibit
3(b) of the Company's Registration
Statement on Form S-1, Registration
Nos. 2-85547-D and 33-7531.
II-1
4(a) Specimen copy of Incorporated by reference to Exhibit
Stock Certificate 4(a) of the Company's Registration
Statement on Form S-1, Registration
Nos. 2-85547-D and 33-7531.
(c) Form of Common Stock Incorporated by reference to Exhibit
Purchase Warrant 4(c) filed as an exhibit to the Com-
pany's Registration Statement on Form
S-1 (Registration No. 33-43281).
5. Opinion of Counsel
10(e) Employment Agreement with Filed with Amendment Number 1 to the
Geert Kersten Company's Registration Statement on
Form S-1 (Commission File Number 33-
43281).
23(a) Consent of Hart & Trinen
(b) Consent of Deloitte
& Touche, LLP Filed with initial Registration
Statement
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement.
(i) To include any Prospectus required by Section l0(a)(3) of
the Securities Act of l933;
(ii) To reflect in the Prospectus any facts or events arising
after the effective date of the Registration Statement (or the
most recent post-effective amendment thereof) which, individual-
ly or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the Regis-
tration Statement or any material change to such information in
the Registration Statement, including (but not limited to) any
addition or deletion of a managing underwriter.
II-2
(2) That, for the purpose of determining any liability under the
Securities Act of l933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amend-
ment any of the securities being registered which remain unsold at the termi-
nation of the offering.
Insofar as indemnification for liabilities arising under the Securi-
ties Act of l933 may be permitted to directors, officers and controlling per-
sons of the Registrant, the Registrant has been advised 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. In
the event that a claim for indemnification against such liabilities (other
than the pay- ment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling per- son in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controll- ing precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
II-3
2588D:dm
POWER OF ATTORNEY
The registrant and each person whose signature appears below hereby
authorizes the agent for service named in this Registration Statement, with
full power to act alone, to file one or more amendments (including post-effec-
tive amendments) to this Registration Statement, which amendments may make
such changes in this Registration Statement as such agent for service deems
appropriate, and the Registrant and each such person hereby appoints such
agent for service as attorney-in-fact, with full power to act alone, to exe-
cute in the name and in behalf of the Registrant and any such person, indivi-
dually and in each capacity stated below, any such amendments to this Regis-
tration Statement.
SIGNATURES
Pursuant to the requirements of the Securities Act of l933, the Reg-
istrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly auth-
orized, in the City of Alexandria, State of Virginia, on the 17th day of
February, 1997.
CEL-SCI CORPORATION
By: /s/ Maximilian de Clara
MAXIMILIAN DE CLARA, PRESIDENT
Pursuant to the requirements of the Securities Act of l933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ Maximilian de Clara Director and Principal February 17, 1997
MAXIMILIAN DE CLARA Executive Officer
/s/ Geert R. Kersten Director, Principal February 17, 1997
GEERT R. KERSTEN Financial Officer
and Chief Executive
Officer
Director
MARK V. SORESI
/s/ F. Donald Hudson Director February 17, 1997
F. DONALD HUDSON
2588D
EXHIBIT 5
February 14, 1997
CEL-SCI Corporation
66 Canal Center Plaza
Suite 510
Alexandria, Virginia 223l4
Gentlemen:
This letter will constitute an opinion upon the legality of the sale by CEL-
SCI Corporation, a Colorado corporation ("the Company"), of up to 1,679,276
shares of Common Stock, all as referred to in the Registration Statement on
Form S-1 filed by the Company with the Securities and Exchange Commission.
We have examined the Articles of Incorporation, the Bylaws and the minutes
of the Board of Directors of the Company and the applicable laws of the
State of Colorado, and a copy of the Registration Statement. In our
opinion, the Company is authorized to issue the shares of stock mentioned
above and such shares, when issued, will represent fully paid and non-
assessable shares of the Company's Common Stock.
Very truly yours,
HART & TRINEN
William T. Hart
EXHIBIT 23(a)
CONSENT OF ATTORNEYS
Reference is made to the Registration Statement of CEL-SCI Corporation, whereby
Sittona Company, B.V. proposes to sell up to 1,679,276 shares of the Company's
Common Stock. Reference is also made to Exhibit 5 included in the Registration
Statement relating to the validity of the securities proposed to be sold.
We hereby consent to the use of our opinion concerning the validity of the
securities proposed to be issued and sold.
Very truly yours,
HART & TRINEN
William T. Hart
Denver, Colorado
February 14, 1997
HART & TRINEN, L.L.P.
Attorneys at Law
1624 Washington Street
Denver, Colorado 80202
Telecopier No 839-5414
(303) 839-0061
February 18, 1997
Julia E. Griffith
Mail Stop 7-6
Securities and Exchange Commission
450 5th Street, N.W.
Washington, D.C. 20001
Re: Registration Statement on Form S-3
CEL-SCI Corporation
File #333-19989
Dear Ms. Griffith:
On behalf of the above-named Registrant, we enclose Amendment No. 1
to the Registration Statement on Form S-3.
We request that the effective date of this Registration Statement
be accelerated to February 20, 1997, or a soon as practicable thereafter.
The additional registration fee for this amendment has been sent
via wire transfer.
Very truly yours,
HART & TRINEN, L.L.P.
By /s/ William T. Hart
William T. Hart
WTH:dm
Enclosures
