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, 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 14,279,027 February 8, 1999
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)
December September
31, 30,
1998 1998
------------- --------------
CURRENT ASSETS:
Cash and cash equivalents
$2,511,702 $2,813,225
Investments, net 9,675,311
8,389,198
Interest and other receivables 68,553 69,809
Prepaid expenses 653,822 723,834
Advances to officer/shareholder 52,567 70,982
and employees
------------- --------------
Total Current Assets
11,675,842 13,353,161
RESEARCH AND OFFICE EQUIPMENT-
Less accumulated depreciation
of $1,404,522 and $1,352,165 599,026 619,496
DEPOSITS 14,828 14,828
PATENT COSTS- less accumulated
amortization of
$467,904 and $454,328 454,408 444,328
------------- --------------
$12,744,104 $14,431,813
============= ==============
See notes to condensed financial statements.
<PAGE>
CEL-SCI CORPORATION
-------------------
CONSOLIDATED
CONDENSED BALANCE SHEETS
------------------------
(continued)
LIABILITIES
AND STOCKHOLDERS' EQUITY
(unaudited)
December 31, September
30,
1998 1998
------------- --------------
CURRENT LIABILITIES:
Accounts payable $298,896 $427,147
------------- --------------
Total current liabilities 298,896 427,147
DEFERRED RENT 29,382 29,382
------------- --------------
Total liabilities 328,278 456,529
STOCKHOLDERS' EQUITY
Preferred stock, Series D, $.01
par value - authorized 10,000
shares; issued and outstanding 71 90
7,084 and 9,002 shares
Common stock, $.01 par value;
authorized, 100,000,000
shares; issued and
outstanding, 12,796,979 and
11,972,695 shares 127,970 119,726
Additional paid-in capital
59,054,193 59,040,864
Net unrealized loss on equity (111,110) (48,291)
securities
Deficit
(46,655,298) (45,137,105)
------------- --------------
TOTAL STOCKHOLDERS'
EQUITY
12,415,826 13,975,284
------------- --------------
$12,744,104 $14,431,813
============= ==============
See notes to condensed financial statements.
<PAGE>
CEL-SCI CORPORATION
-------------------
CONSOLIDATED CONDENSED
STATEMENTS OF OPERATIONS
---------------------------------
(unaudited)
Three Months Ended
December 31,
1998 1997
------------- --------------
REVENUES:
Interest income $156,046 $97,581
Other income 39,667 2,018
------------- --------------
TOTAL INCOME 195,713 99,599
EXPENSES:
Research and development 941,948 1,023,312
Depreciation and
amortization 65,932 73,925
General and administrative 706,024 607,787
------------- --------------
TOTAL OPERATING EXPENSES 1,713,904 1,705,024
------------- --------------
NET LOSS
$1,518,191 $1,605,425
============= ==============
LOSS PER COMMON SHARE (BASIC) $0.13 $0.32
============= ==============
LOSS PER COMMON SHARE (DILUTED) $0.13 $0.32
============= ==============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING
11,615,914 11,146,683
============= ==============
See notes to condensed financial statements.
<PAGE>
CEL-SCI CORPORATION
-------------------
CONSOLIDATED CONDENSED STATEMENTS
OF CASH FLOW
---------------------------------
(unaudited)
Three
Months
Ended
December 31,
1998 1997
------------- --------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
NET LOSS $(1,518,191) $(1,605,425)
Adjustments to reconcile net loss to
net cash used in operating
activities:
-
Depreciation and amortization 65,932 73,925
Amortization of premium - (12,051)
(discount) on investments
Unrealized gain (loss) on - (3,499)
investments
Stock issued for services - 23,254
Stock options issued for services - -
Decrease (increase) in interest 1,256 45,257
receivable
Decrease (increase) in prepaid 70,013 29,298
expenses
Decrease (increase) in advances (52,395) 702
Increase (decrease) in other - -
current liabilities
Increase (decrease) in accounts (128,251) (111,581)
payable
------------- --------------
NET CASH USED IN OPERATING (1,561,636) (1,560,120)
ACTIVITIES
------------- --------------
CASH FLOWS PROVIDED BY (USED IN)
INVESTING ACTIVITY:
Sales of investments 1,294,101 750,000
Purchase of investments - (5,784,737)
Note receivable from - -
employee/shareholder
Payment on note receivable from - 135,075
employee/shareholder
Laboratory construction - 471
Purchase of research and office (31,887) -
equipment
Patent costs (23,654) 17,329
------------- --------------
NET CASH USED IN INVESTING ACTIVITY 1,238,560 (4,881,862)
------------- --------------
CASH FLOWS PROVIDED BY (USED IN)
FINANCING ACTIVITIES:
Repurchase of preferred stock - -
Issuance of preferred stock - 9,500,000
Dividends paid - -
Issuance of common stock 21,553 3,247,922
------------- --------------
NET CASH PROVIDED BY FINANCING 21,553 12,747,922
ACTIVITIES
------------- --------------
NET (DECREASE) INCREASE IN CASH (301,523) 6,305,940
CASH AND CASH EQUIVALENTS:
Beginning of period 2,813,225 3,508,606
------------- --------------
End of period $2,511,702 $9,814,546
============= ==============
<PAGE>
CEL-SCI CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 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, 1998. 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, 1998 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 computed by dividing the net loss, after
increasing the loss for the effect of any preferred stock dividends, by
the weighted average number of common shares outstanding during the
period. Common stock equivalents, including options to purchase common
stock, were excluded from the calculation.
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
THREE MONTHS ENDED DECEMBER 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. The final payment on the note was made in October 1998.
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.
Each share of the Series D Preferred Stock is convertible, at the option
of the holder, into shares of common stock of the Company in an amount
determined by dividing $1,000 by the lower of $8.28 or the average price
of the Company's common stock for any two consecutive 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. During the
quarter ended December 31, 1998, 1,918 shares of the Series D preferred
stock were converted into 828,338 shares of common stock.
D. COMPREHENSIVE LOSS
In fiscal 1999, the Company adopted Statement of Financial Accounting
Standard ("SFAS") No. 130 "Reporting Comprehensive Income" which was
effective for fiscal years beginning after December 15, 1997.
Comprehensive income(loss) is the change in equity of a business
enterprise during a period from transactions and other events and
circumstances from non-owner sources. The Company's source of other
comprehensive loss, other than net losses, is from unrealized gain or loss
on investments. The components of comprehensive income (loss) are as
follows:
Three months ended Three months ended
December 31, 1998 December 31, 1997
Net Loss $1,518,191 $1,605,425
Other Comprehensive
Income:
Unrealized Loss (Gain)
from Investments 62,819 (3,499)
------ -------
Comprehensive Loss
$1,581,010 $1,601,926
========== ==========
<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.
Results of Operations
Interest income during the three months ending December 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 was similar to 1997.
General and administrative expenses have increased due to the addition of more
employees needed for the increased activity level.
Year 2000
The Company is in the process of modifying its computer hardware and
software systems to recognize the year 2000. The Company expects these
modifications to be substantially complete by early 1999. The Company does not
expect these modifications to have a significant effect on its operations and
the costs of modification are expected to be insignificant. In addition, the
Company is evaluating significant vendors and other third parties which could
have an effect on the Company's operations to ensure year 2000 compliance. If
the Company's computer systems fail during the year 2000, the Company may need
to have independent laboratories perform some of research that is presently
being conducted by the Company's laboratory. Since the Company expects its
computer systems to be compliant with the year 2000 by early 1999, the Company
has not developed any contingency plans in the event the Company's computer
systems fail to be year 2000 compliant.
<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 December 31, 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: February 11, 1999 /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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