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, 1997.
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ______________.
Commission File Number 0-11503
CEL-SCI CORPORATION
Colorado 84-0916344
============================
State or other jurisdiction (IRS) Employer
incorporation Identification Number
66 Canal Center Plaza, Suite 510
Alexandria, Virginia 22314
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Address of principal executive offices
(703) 549-5293
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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 11,268,410 February 9,1998
Page 1 of ___ pages
<PAGE>
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Page
----
Balance Sheets 3-4
Statements of Operations 5
Statements of Cash Flow 6
Notes to Financial Statements 7
Item 2.
Management's Discussion and Analysis 9
PART II
Item 6.
Exhibits and Reports on Form 8-K 10
Signatures 11
<PAGE>
Item 1. FINANCIAL STATEMENTS
CEL-SCI CORPORATION
- -------------------
CONSOLIDATED CONDENSED BALANCE SHEETS
- ------------------------
ASSETS
(unaudited)
<TABLE>
<CAPTION>
December 31, September 30,
1997 1997
----------------- -----------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $9,814,546 $3,508,606
Investments, net 5,762,940 745,216
Interest receivable 61,186 106,443
Prepaid expenses 381,490 410,788
Advances to officer/shareholder
and employees 157,407 291,781
----------------- -----------------
Total Current Assets 16,177,569 5,062,834
RESEARCH AND OFFICE EQUIPMENT-
Less accumulated depreciation
of $1,189,461 and $1,128,410 730,443 791,964
DEPOSITS 18,178 18,178
PATENT COSTS- less accumulated
amortization of
$414,899 and $402,025 465,876 461,421
----------------- -----------------
$17,392,066 $6,334,397
================= =================
</TABLE>
See notes to condensed financial statements.
3
<PAGE>
CEL-SCI CORPORATION
- -------------------
CONSOLIDATED CONDENSED BALANCE SHEETS
- ------------------------
(continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
(unaudited)
<TABLE>
<CAPTION>
December 31, September 30,
1997 1997
----------------- -----------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $370,006 $481,587
----------------- -----------------
Total current liabilities 370,006 481,587
DEFERRED RENT 27,030 27,030
----------------- -----------------
Total liabilities 397,036 508,617
STOCKHOLDERS' EQUITY
Preferred stock, Series D, $.01 par value -
authorized 10,000 shares; issued and 100 -
outstanding 10,000 shares
Common stock, $.01 par value; authorized,
100,000,000 shares; issued and outstanding,
11,268,410 and 10,445,691 shares 112,684 104,457
Additional paid-in capital 57,182,093 44,419,244
Net unrealized loss on equity securities - (3,499)
Deficit (40,299,847) (38,694,422)
----------------- -----------------
TOTAL STOCKHOLDERS'
EQUITY 16,995,030 5,825,780
----------------- -----------------
$17,392,066 $6,334,397
================= =================
</TABLE>
See notes to condensed financial statements.
4
<PAGE>
CEL-SCI CORPORATION
- -------------------
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
- ---------------------------------
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1997 1996
----------------- -----------------
<S> <C> <C>
REVENUES:
Interest income $97,581 $123,670
Other income 2,018 1,375
----------------- -----------------
TOTAL INCOME 99,599 125,045
EXPENSES:
Research and development 1,023,312 683,959
Depreciation and
amortization 73,925 74,214
General and administrative 607,787 548,209
----------------- -----------------
TOTAL OPERATING EXPENSES 1,705,024 1,306,382
----------------- -----------------
NET LOSS $1,605,425 $1,181,337
================= =================
LOSS PER COMMON SHARE $0.14 $0.14
================= =================
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 11,146,683 8,153,409
================= =================
</TABLE>
See notes to condensed financial statements.
5
<PAGE>
CEL-SCI CORPORATION
- -------------------
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
- ---------------------------------
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1997 1996
----------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
NET LOSS $(1,605,425) $(1,181,337)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 73,925 74,214
Amortization of premium (discount) on
investments (12,051) (75,120)
Unrealized loss on sale of investments (3,499) -
Stock issued for services 23,254 -
Changes in assets and liabilities, net of
effect from purchase
of Viral Technologies, Inc.:
Decrease (increase) in accounts receivable 45,257 14,966
Decrease (increase) in prepaid expenses 29,298 10,341
Decrease (increase) in advances 702 29,765
Increase (decrease) in other current
liabilities - 500,000
Increase (decrease) in accounts payable (111,581) (166,604)
----------------- -----------------
NET CASH USED IN OPERATING ACTIVITIES (1,560,120) (793,775)
----------------- -----------------
CASH FLOWS PROVIDED BY (USED IN) INVESTING
ACTIVITY:
Sales of investments 750,000 2,525,000
Purchase of investments (5,784,737) -
Note receivable from employee/shareholder - (300,000)
Payment on note receivable from
employee/shareholder 135,075
Laboratory construction 471 (8,205)
Purchase of research and office equipment - (1,533)
Patent costs 17,329 (7,124)
----------------- -----------------
NET CASH USED IN INVESTING ACTIVITY (4,881,862) 2,208,138
----------------- -----------------
CASH FLOWS PROVIDED BY (USED IN) FINANCING
ACTIVITIES:
Repurchase of preferred stock - (2,850,000)
Issuance of preferred stock 9,500,000 2,850,000
Issuance of convertible debenture -
Dividends paid - (98,968)
Issuance of common stock 3,247,922 105,880
----------------- -----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 12,747,922 6,912
----------------- -----------------
NET (DECREASE) INCREASE IN CASH 6,305,940 1,421,275
CASH AND CASH EQUIVALENTS:
Beginning of period 3,508,606 3,549,810
----------------- -----------------
End of period $9,814,546 $4,971,085
================= =================
</TABLE>
See notes to condensed financial statements.
6
<PAGE>
CEL-SCI CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
(unaudited)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements have been prepared in accordance
with rules established by the Securities and Exchange Commission for Form
10-Q. Not all financial disclosures required to present the financial
position and results of operations in accordance with generally accepted
accounting principles are included herein. The reader is referred to the
Company's Financial Statements included in the registrant's Annual Report
on Form 10-K for the year ended September 30, 1997. 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, 1997 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
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.
-7-
<PAGE>
CEL-SCI CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
(unaudited)
(continued)
B. RELATED PARTY TRANSACTIONS
In October, 1996, the Company loaned $300,000 to an officer and
shareholder. The loan carried an interest rate of 5% and is due March 31,
1998. Payments have been made on the note and the balance on December 31,
1997 is $151,801.
C. STOCKHOLDERS' EQUITY
On December 23, 1997, the Company sold 10,000 shares of convertible
preferred stock to institutional investors for $10,000,000. Prior to
September 19, 1998, the stock is convertible, at the option of the holder,
into shares of common stock of the Company at $8.28, a premium to the
closing bid stock price of $7.25, the day prior to the closing of the
financing. The number of shares issuable upon the conversion of each
Series D preferred share is to be determined by dividing $1,000 by $8.28.
After a nine month holding period, the preferred stock will be convertible
at the lower of $8.28 or the average price of the Company's common stock
for any two trading days during the ten trading days preceding the
conversion date. Investors also received an aggregate of 1,100,000
four-year warrants to purchase additional shares at $8.625 and $9.315. The
Company has filed a registration statement for the resale of the shares of
common stock acquired upon conversion of the convertible preferred stock
and warrants.
D. SUBSEQUENT EVENTS
Between January 9 and February 6, 1998, the holders of the Company's
outstanding warrants are being given the opportunity to purchase one share
of the Company's common stock and one Series A Warrant for $6.00 and five
warrants. The Series A warrant, by its original terms, allowed the holder
to purchase one additional share of the Company's common stock for $18.00
at any time prior to February 7, 2000. The terms of the offering made by
means of the November 14, 1997 Prospectus have been changed as follows:
1. The exercise price of the Series A warrant has been lowered from $18 to
$10.
2. The expiration date of the exchange offer has been extended to February
17, 1998.
3. Warrants not exercised by February 17, 1998 may still be exercised at
any time prior to March 7, 1998. Holders exercising warrants after
February 17, 1998 and before March 7, 1998 will receive, for $6.00 and
five warrants, one share of the Company's common stock. However,
holders exercising warrants after February 17, 1998 will not receive a
Series A warrant.
-8-
<PAGE>
CEL-SCI CORPORATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Liquidity and Capital Resources
The Company has had only limited revenues from operations since its
inception in March 1983. The Company has relied upon proceeds realized from the
public and private sale of its Common Stock and short-term borrowings to meet
its funding requirements. Funds raised by the Company have been expended
primarily in connection with the acquisition of exclusive rights to certain
patented and unpatented proprietary technology and know-how relating to the
human immunological defense system, the funding of VTI's research and
development program, patent applications, the repayment of debt, the
continuation of Company-sponsored research and development and administrative
costs, and the construction of laboratory facilities. Inasmuch as the Company
does not anticipate realizing significant revenues until such time as it enters
into licensing arrangements regarding its technology and know-how or until such
time it receives permission to sell its product (which could take a number of
years), the Company is mostly dependent upon short-term borrowings and the
proceeds from the sale of its securities to meet all of its liquidity and
capital resource requirements.
Effective June 1, 1997, the exercise price of the publicly held warrants,
was lowered from $15.00 to $6.00. In addition, the Company changed the terms of
the conversion such that only 5 warrants are required to purchase one share.
Previously ten warrants had been required.
During 1997, the Company issued Preferred Stock. See Footnote C,
Stockholders' Equity.
Results of Operations
Interest income during the three months ending December 31, 1997 reflects
interest accrued on investments. Research and development expense has increased
due to the preparation for VTI's Phase II Clinical Trials of the HIV vaccine as
well as the addition of two clinical trials for Multikine. General and
administrative expense has increased due to the additional employees needed for
the increased activity level.
-9-
<PAGE>
PART II
Item 2. Changes in Securities and Use of Proceeds
See Note C to the Company's Notes to Financial Statements. Item 6.
(a) Exhibits
No exhibits are filed with this document.
(b) Reports on Form 8-K
The Company filed a report on Form 8-K, dated December 22, 1998,
pertaining to the issuance of the Company's Series D Preferred
Stock.
-9-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CEL-SCI Corporation
Date:_______________, 1998 ____________________________
Geert Kersten
Chief Executive Officer*
*Also signing in the capacity of the Chief Accounting Officer and Principal
Financial Officer.
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<NAME> Cel-Sci Corporation
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 9,814,546
<SECURITIES> 5,762,940
<RECEIVABLES> 218,593
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 16,177,569
<PP&E> 1,919,904
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<CURRENT-LIABILITIES> 370,006
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<COMMON> 112,684
<OTHER-SE> 16,882,246
<TOTAL-LIABILITY-AND-EQUITY> 17,392,066
<SALES> 0
<TOTAL-REVENUES> 99,599
<CGS> 0
<TOTAL-COSTS> 1,705,024
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<INCOME-PRETAX> (1,605,425)
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