UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998.
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
8229 Boone Boulevard, Suite 802
Vienna, Virginia 22182
-----------------------------
Address of principal executive offices
(703) 506-9460
-----------------------------
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 11,518,236 July 31, 1998
Page 1 of ___ pages
<PAGE>
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Page
----
Balance Sheets 3-4
Statements of Operations 5-6
Statements of Cash Flow 7
Notes to Financial Statements 8
Item 2.
Management's Discussion and Analysis 10
PART II
Item 6.
Exhibits and Reports on Form 8-K 11
Signatures 12
<PAGE>
Item 1. FINANCIAL STATEMENTS
CEL-SCI CORPORATION
-------------------
CONSOLIDATED CONDENSED BALANCE SHEETS
------------------------
ASSETS
(unaudited)
June 30, September 30,
1998 1997
CURRENT ASSETS:
================= =================
Cash and cash equivalents $2,500,696 $3,508,606
Investments, net 11,571,262 745,216
Interest receivable 72,813 106,443
Accounts receivable 1,375
Prepaid expenses 398,325 410,788
Advances to officer/shareholder and 112,644 291,781
employees
================= =================
Total Current Assets 14,657,115 5,062,834
RESEARCH AND OFFICE EQUIPMENT-
Less accumulated depreciation
of $1,311,563 and $1,128,410 646,716 791,964
DEPOSITS 33,006 18,178
PATENT COSTS- less accumulated
amortization of
$440,733 and $402,025 450,184 461,421
--------------- -----------------
$15,787,021 $6,334,397
See notes to condensed
financial statements.
<PAGE>
CEL-SCI CORPORATION
-------------------
CONSOLIDATED CONDENSED BALANCE SHEETS
------------------------
(continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
(unaudited)
June 30, September 30,
1998 1997
CURRENT LIABILITIES:
----------------- -----------------
Accounts payable $259,180 $481,587
Total current liabilities 259,180 481,587
DEFERRED RENT - 27,030
----------------- -----------------
Total liabilities 259,180 508,617
STOCKHOLDERS' EQUITY
Preferred stock, Series D, $.01
par value - authorized 10,000
shares; issued and outstanding
100 shares 100 -
Common stock, $.01 par value;
authorized, 100,000,000 shares;
issued and outstanding,
11,518,236 and 10,445,691 shares 115,182 104,457
Additional paid-in capital 58,559,206 44,419,244
Net unrealized loss on equity
securities - (3,499)
Deficit (43,146,647) (38,694,422)
----------------- -----------------
TOTAL STOCKHOLDERS'
EQUITY 15,527,841 5,825,780
----------------- -----------------
$15,787,021 $6,334,397
See notes to condensed
financial statements.
<PAGE>
CEL-SCI CORPORATION
-------------------
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
---------------------------------
(unaudited)
Nine Months Ended
June 30,
1998 1997
REVENUES:
----------------- -----------------
Interest income $475,240 $316,159
Other income 7,468 62,105
----------------- -----------------
TOTAL INCOME 482,708 378,264
EXPENSES:
Research and development 2,729,982 4,795,504
Depreciation and
amortization 221,861 236,541
General and administrative 1,983,089 1,799,454
----------------- -----------------
TOTAL OPERATING EXPENSES 4,934,932 6,831,499
----------------- -----------------
NET LOSS $4,452,224 $6,453,235
LOSS PER COMMON SHARE $0.39 $0.72
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 11,330,998 8,970,583
See notes to condensed
financial statements.
<PAGE>
CEL-SCI CORPORATION
-------------------
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
----------------------------------
(unaudited)
Three Months Ended
June 30,
1998 1997
REVENUES: ----------------- -----------------
Interest Income $194,237 $92,937
Other Income 2,716 58,667
TOTAL INCOME 196,953 151,604
----------------- -----------------
EXPENSES:
Research and development 1,002,321 1,122,561
Depreciation and
amortization 73,987 81,222
General and administrative 741,284 661,484
----------------- -----------------
TOTAL OPERATING EXPENSES 1,817,592 1,865,267
----------------- -----------------
NET LOSS $1,620,639 $1,713,663
================= =================
LOSS PER COMMON SHARE $0.14 $0.17
================= =================
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 11,507,187 9,917,471
See notes to condensed
financial statements.
<PAGE>
CEL-SCI CORPORATION
-------------------
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
---------------------------------
(unaudited)
Nine Months Ended
June 30,
1998 1997
--------------- ---------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
NET LOSS $(4,452,224) $(6,453,235)
Adjustments to reconcile net loss to
net cash used in operating activities:
Research and development expenses related to
stock portion of
purchase of Cell-Med 150,000
Research and development expenses related to
stock portion of
Purchase of Multikine rights from Sittona 1,747,651
Depreciation and amortization 221,861 236,541
Amortization of premium (discount) on (237,060) (166,102)
investments
Unrealized gain (loss) on sale of investments 3,499 13,523
Stock issued for services 23,254 -
Stock options issued for services 40,419 -
Stock issued to 401K 19,675 -
Decrease (increase) in deposits (14,828) -
Decrease (increase) in interest receivable 33,630 4,139
Decrease (increase) in accounts receivable (1,375) -
Decrease (increase) in prepaid expenses (10,420) (304,106)
Decrease (increase) in advances 311,286 134,801
Increase (decrease) in other current - 25,498
liabilities
Increase (decrease) in accounts payable (222,407) 6,844
--------------- -------------
NET CASH USED IN OPERATING ACTIVITIES (4,284,690) (4,604,446)
--------------- -------------
CASH FLOWS PROVIDED BY (USED IN) INVESTING
ACTIVITY:
Sales of investments 7,700,000 5,620,000
Purchase of investments (18,602,893) (950,000)
Note receivable from employee/shareholder - (300,000)
Payment on note receivable from 177,610 18,100
employee/shareholder
Laboratory construction - (115,790)
Purchase of research and office equipment and (37,905) (65,667)
leasehold costs
Patent costs (27,471) (45,851)
--------------- ----------------
NET CASH USED IN INVESTING ACTIVITY (10,790,659) 4,160,792
--------------- ----------------
CASH FLOWS PROVIDED BY (USED IN) FINANCING
ACTIVITIES:
Repurchase of preferred stock - -
Issuance of preferred stock 10,000,000 -
Dividends paid - (108,957)
Issuance of common stock 4,067,439 403,951
-------------- ----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 14,067,439 294,994
-------------- ----------------
NET (DECREASE) INCREASE IN CASH (1,007,910) (148,660)
CASH AND CASH EQUIVALENTS:
Beginning of period 3,508,606 3,549,810
-------------- ----------------
End of period $2,500,696 $3,401,150
============== ================
See notes to condensed
financial statements.
<PAGE>
CEL-SCI CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED June 30, 1998 AND 1997
(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 June 30, 1998 and the results of operations for the
nine-month period then ended have been made. Significant accounting
policies have been consistently applied in the interim financial
statements and the annual financial statements.
Investments
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.
<PAGE>
CEL-SCI CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1998 AND 1997
(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 September
30, 1998. Payments have been made on the note and the balance on June 30,
1998 is $109,265.
C. STOCKHOLDERS' EQUITY
On December 23, 1997, the Company sold 10,000 shares of Series D
convertible preferred stock to institutional investors for $10,000,000.
The stock was initially convertible, at the option of the holder, into
shares of common stock of the Company at $8.28. The number of shares
issuable upon the conversion of each Series D preferred share was to be
determined by dividing $1,000 by $8.28. The preferred stock is now
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 filed a registration statement for the resale of the
shares of common stock acquired upon conversion of the Series D preferred
stock and warrants.
D. SERIES A WARRANT OFFER
Between January 9, 1998 and February 6, 1998 the holders of the Company's
outstanding warrants were given the opportunity to purchase one share of
the Company's Common Stock and one Series A Warrant in exchange for $6.00
and five warrants (the "Exchange Offer"). Each Series A Warrant originally
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
expiration date of the Exchange offer was subsequently extended to
February 17, 1998 and the exercise price of the Series A Warrants was
lowered to $10.00.
During the period of the exchange offer, 582,025 warrants were tendered,
the Company received proceeds of approximately $698,000, and a total of
116,405 Series A Warrants were issued to the warrant holders participating
in the exchange offer.
The Company's old warrants expired on July 31, 1998.
<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. These warrants expired on July 31,
1998.
During 1997, the Company issued Preferred Stock. See Footnote C,
Stockholders' Equity.
Results of Operations
Interest income during the nine months ending June 30, 1998 reflects
interest accrued on investments. Interest income has increased over the same
period in 1997 due to the investment of the proceeds of the sale of the Series D
Preferred Stock. Research and development expense in 1998 is substantially less
than it was in 1997 because the 1997 numbers reflect the acquisition of the
license for Multikine. General and administrative expenses have increased due to
the additional employees needed for the increased activity level.
<PAGE>
PART II
Item 2. Changes in Securities and Use of Proceeds
See Notes C and D to the Company's Notes to Financial Statements.
Item 6.
(a) Exhibits
No exhibits are filed with this report.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter
ended June 30, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CEL-SCI Corporation
Date:August 11, 1998 /s/ Geert Kersten
------------------------------
Geert Kersten
Chief Executive Officer*
*Also signing in the capacity of the Chief Accounting Officer and Principal
Financial Officer.
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<PERIOD-TYPE> 9-MOS
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<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 2,500,696
<SECURITIES> 11,571,262
<RECEIVABLES> 186,832
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<PP&E> 1,958,279
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