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 March 31, 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
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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 11,494,815 May 14, 1998
<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
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CONSOLIDATED CONDENSED BALANCE SHEETS
------------------------
ASSETS
(unaudited)
March 31, September 30,
1998 1997
-------------- --------------
CURRENT ASSETS:
Cash and cash equivalents
$2,957,409 $3,508,606
Investments, net 12,362,395 745,216
Interest receivable 94,578 106,443
Accounts receivable 702
Prepaid expenses 518,875 410,788
Advances to officer/shareholder
and employees 100,900 291,781
-------------- --------------
Total Current Assets 16,034,859 5,062,834
RESEARCH AND OFFICE EQUIPMENT-
Less accumulated depreciation
of $1,250,512 and $1,128,410 673,709 791,964
DEPOSITS 18,178 18,178
PATENT COSTS- less accumulated
amortization of
$427,798 and $402,025 471,670 461,421
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$17,198,416 $6,334,397
============== ==============
See notes to condensed financial statements.
3
<PAGE>
CEL-SCI CORPORATION
-------------------
CONSOLIDATED CONDENSED BALANCE SHEETS
------------------------
(continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
(unaudited)
March 31, September 30,
1998 1997
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CURRENT LIABILITIES:
Accounts payable $114,076 $481,587
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Total current liabilities 114,076 481,587
DEFERRED RENT 27,030 27,030
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Total liabilities 141,106 508,617
STOCKHOLDERS' EQUITY
Preferred stock, Series D, $.01 par value -
authorized 10,000
shares; issued and outstanding 10,000 100 -
shares
Common stock, $.01 par value; authorized,
100,000,000
shares; issued and outstanding,
11,492,815 and
10,445,691 shares 114,928 104,457
Additional paid-in capital
58,468,290 44,419,244
Net unrealized loss on equity securities - (3,499)
Deficit
(41,526,008) (38,694,422)
-------------- --------------
TOTAL STOCKHOLDERS'
EQUITY 17,057,310 5,825,780
-------------- --------------
$17,198,416 $6,334,397
============== ==============
See notes to condensed financial statements.
4
<PAGE>
CEL-SCI CORPORATION
-------------------
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
---------------------------------
(unaudited)
Six Months Ended
March 31,
1998 1997
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REVENUES:
Interest income $281,003 $223,222
Other income 4,752 3,438
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TOTAL INCOME 285,755 226,660
EXPENSES:
Research and development 1,727,661 3,672,943
Depreciation and
amortization 147,874 155,319
General and administrative 1,241,805 1,137,970
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TOTAL OPERATING EXPENSES 3,117,340 4,966,232
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NET LOSS
$2,831,585 $4,739,572
============== ==============
LOSS PER COMMON SHARE $0.25 $0.56
============== ==============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 11,242,903 8,497,139
============== ==============
See notes to condensed financial statements.
5
<PAGE>
CEL-SCI CORPORATION
-------------------
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
----------------------------------
(unaudited)
Three Months Ended
March 31,
1998 1997
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REVENUES:
Interest Income $183,422 $99,552
Other Income 2,734 2,063
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TOTAL INCOME 186,156 101,615
EXPENSES:
Research and development 704,349 2,988,983
Depreciation and
amortization 73,949 81,105
General and administrative 634,018 589,761
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TOTAL OPERATING EXPENSES 1,412,316 3,659,849
-------------- --------------
NET LOSS
$1,226,160 $3,558,234
============== ==============
LOSS PER COMMON SHARE $0.11 $0.40
============== ==============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 11,341,261 8,848,507
============== ==============
See notes to condensed financial statements.
6
<PAGE>
CEL-SCI CORPORATION
-------------------
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
---------------------------------
(unaudited)
Six Months Ended
March 31,
1998 1997
-------------- --------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
NET LOSS $(2,831,585) $(4,739,572)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 147,874 155,319
Amortization of premium (discount) on (237,060) (113,192)
investments
Unrealized gain (loss) on sale of investments 3,499 (11,550)
Stock issued for services 23,254 -
Stock options issued for services 40,419 -
Decrease (increase) in interest receivable 11,865 (17,798)
Decrease (increase) in accounts receivable (702) (688)
Decrease (increase) in prepaid expenses (108,088) (157,781)
Decrease (increase) in advances 135,090 136,293
Increase (decrease) in accounts payable (367,511) (150,885)
-------------- --------------
NET CASH USED IN OPERATING ACTIVITIES (3,182,945) (4,899,854)
-------------- --------------
CASH FLOWS PROVIDED BY (USED IN) INVESTING
ACTIVITY:
Sales of investments 6,750,000 3,550,000
Purchase of investments (18,130,119) -
Note receivable from employee/shareholder - (300,000)
Payment on note receivable from 55,791
employee/shareholder
Laboratory construction - (113,837)
Purchase of research and office equipment (3,847) (49,299)
Patent costs (36,021) (29,191)
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NET CASH USED IN INVESTING ACTIVITY (11,364,196) 3,057,673
-------------- --------------
CASH FLOWS PROVIDED BY (USED IN) FINANCING
ACTIVITIES:
Repurchase of preferred stock - (2,850,000)
Issuance of preferred stock 10,000,000 2,850,000
Dividends paid - (103,963)
Issuance of common stock 3,995,944 2,121,401
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NET CASH PROVIDED BY FINANCING ACTIVITIES 13,995,944 2,017,438
-------------- --------------
NET (DECREASE) INCREASE IN CASH (551,197) 175,257
CASH AND CASH EQUIVALENTS:
Beginning of period 3,508,606 3,549,810
-------------- --------------
End of period $2,957,409 $3,725,067
============== ==============
See notes to condensed financial statements.
7
<PAGE>
CEL-SCI CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SIX MONTHS ENDED MARCH 31, 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 March 31, 1998 and the results of operations for the
six-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.
-8-
<PAGE>
CEL-SCI CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SIX MONTHS ENDED MARCH 31, 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 March 31,
1998 is $96,009.
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.
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 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 expiration date of the Company's old warrants was extended to July 31,
1998.
-9-
<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 will expire on July
31, 1998.
During 1997, the Company issued Preferred Stock. See Footnote C,
Stockholders' Equity.
Results of Operations
Interest income during the six months ending March 31, 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.
-10-
<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 March 31, 1998.
-11-
<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:May 14, 1998, 1998 /s/ Geert Kersten
-----------------
Geert Kersten
Chief Executive Officer*
*Also signing in the capacity of the Chief Accounting Officer and Principal
Financial Officer.
-12-
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<CASH> 2,957,409
<SECURITIES> 12,362,395
<RECEIVABLES> 714,353
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 16,034,859
<PP&E> 1,924,221
<DEPRECIATION> 1,250,512
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<CURRENT-LIABILITIES> 114,076
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<COMMON> 114,928
<OTHER-SE> 16,942,282
<TOTAL-LIABILITY-AND-EQUITY> 17,198,416
<SALES> 0
<TOTAL-REVENUES> 285,755
<CGS> 0
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<INCOME-CONTINUING> (2,831,585)
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