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, 1999.
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 16,351,446 Aug 9, 1999
Page 1 of 12 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,
1999 1998
------- -------------
CURRENT ASSETS:
Cash and cash equivalents $ 2,496,167 $ 2,813,225
Investments, net 4,788,709 9,675,311
Interest and other receivables 69,397 69,809
Prepaid expenses 544,464 723,834
Advances to officer/shareholder and employees 26,816 70,982
------------- -------------
Total Current Assets 7,925,553 13,353,161
RESEARCH AND OFFICE EQUIPMENT-
Less accumulated depreciation
of $1,509,966 and $1,352,165 504,092 619,496
DEPOSITS 14,828 14,828
PATENT COSTS- less accumulated
amortization of
$496,276 and $454,328 494,135 444,328
------------ --------------
$ 8,938,608 $14,431,813
=========== ===========
See notes to condensed financial statements.
<PAGE>
CEL-SCI CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
(unaudited)
June 30, September
30,
1999 1998
------- -----------
CURRENT LIABILITIES:
Accounts payable $198,359 $427,147
--------- --------
Total current liabilities 198,359 427,147
DEFERRED RENT 29,382 29,382
---------- ---------
Total liabilities 227,741 456,529
STOCKHOLDERS' EQUITY
Preferred stock, Series D, $.01 par value -
authorized 10,000 shares; issued and
outstanding 779 and 9,002 shares 8 90
Common stock, $.01 par value; authorized,
100,000,000 shares; issued and outstanding,
16,351,446 and 11,972,695 shares 163,514 119,726
Additional paid-in capital 59,123,522 59,040,864
Net unrealized loss on equity securities (115,191) (48,291)
Deficit (50,460,986) (45,137,105)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 8,710,867 13,975,284
------------- -----------
$8,938,608 $14,431,813
See notes to condensed financial statements.
<PAGE>
CEL-SCI CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
Nine Months Ended June 30,
1999 1998
REVENUES: (As restated, See Note D)
Interest income $ 316,194 $ 475,240
Other income 59,332 7,468
----------- ------------
TOTAL INCOME 375,526 482,708
EXPENSES:
Research and development 3,269,931 2,729,982
Depreciation and
amortization 199,749 221,861
General and administrative 2,229,726 1,983,089
---------- ---------
TOTAL OPERATING EXPENSES 5,699,406 4,934,932
---------- ---------
NET LOSS 5,323,880 4,452,224
ACCRETION OF PREFERRED STOCK
DIVIDENDS - 1,980,000
------------ ----------
NET LOSS ATTRIBUTABLE TO COMMON
STOCKHOLDERS $5,323,880 $6,432,224
=========== ==========
LOSS PER COMMON SHARE (BASIC) $ 0.39 $ 0.57
============== ============
LOSS PER COMMON SHARE (DILUTED) $ 0.39 $ 0.57
============= ============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 13,786,779 11,330,998
=========== ==========
See notes to condensed financial statements.
<PAGE>
CEL-SCI CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended June 30,
1999 1998
REVENUES: (As restated, See Note D)
Interest income $ 72,328 $ 194,237
Other Income 12,555 2,716
--------- -----------
TOTAL INCOME 84,883 196,953
EXPENSES:
Research and development 1,027,401 1,002,321
Depreciation and amortization 66,744 73,987
General and administrative 673,076 741,284
---------- ----------
TOTAL OPERATING EXPENSES 1,767,221 1,817,592
------------ -----------
NET LOSS $ 1,682,338 $ 1,620,639
=========== ===========
LOSS PER COMMON SHARE (BASIC) $ 0.11 $ 0.14
================ ================
LOSS PER COMMON SHARE (DILUTED) $ 0.11 $ 0.14
================ ================
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING $15,742,037 $11,507,187
=========== ===========
See notes to condensed financial statements
<PAGE>
CEL-SCI CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
(unaudited)
Nine Months Ended June 30,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
NET LOSS $(5,323,880) $(4,452,224)
Adjustments to reconcile net loss to
net cash used in operating activities: --
Depreciation and amortization 199,749 221,861
Amortization of premium (discount) on
investments - (237,060)
Unrealized gain (loss) on investments (66,900) 3,499
Stock issued for services - 23,254
Stock options issued for services 61,149 40,419
Stock issued to 401K 65,215 19,675
Decrease (increase) in deposits - (14,828)
Decrease (increase) in receivables 412 32,255
Decrease (increase) in prepaid expenses 179,370 (10,420)
Decrease (increase) in advances (26,816) 311,286
Increase (decrease) in accounts payable (228,788) (222,407)
------------- -------------
NET CASH USED IN OPERATING ACTIVITIES (5,140,489) (4,284,690)
------------ ------------
CASH FLOWS PROVIDED BY (USED IN)
INVESTING ACTIVITY:
Sales of investments 4,886,602 7,700,000
Purchase of investments - (18,602,893)
Note receivable from employee/shareholder - -
Payment on note receivable from
employee/shareholder 70,982 177,610
Purchase of research and office equipment (42,398) (37,905)
Patent costs (91,755) (27,471)
NET CASH USED IN INVESTING ACTIVITY 4,823,431 (10,790,659)
---------- -------------
CASH FLOWS PROVIDED BY (USED IN) FINANCING
ACTIVITIES:
Issuance of preferred stock - 10,000,000
Issuance of common stock - 4,067,439
------------- ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES - 14,067,439
------------- -----------
NET (DECREASE) INCREASE IN CASH (317,058) (1,007,910)
CASH AND CASH EQUIVALENTS:
Beginning of period 2,813,225 3,508,606
------------ ------------
End of period $ 2,496,167 $ 2,500,696
============ ============
See notes to condensed financial statements.
<PAGE>
CEL-SCI CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1999 AND 1998
(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 June 30, 1999 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 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.
<PAGE>
CEL-SCI CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1999 AND 1998
(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 was 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.
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 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 June 30, 1999,
4,568 shares of the Series D preferred stock were converted into 2,010,170
shares of common stock.
D. RESTATEMENT
Subsequent to the issuance of the Company's report on Form 10-Q for the
quarter ended December 31, 1997, the Company determined that the
application of a technical accounting treatment required the loss per
share calculation to include the impact of $1,980,000 for the accretion of
Series D Preferred Stock warrants for the three months ended December 31,
1997. The effect of the accretion is a non-cash charge to additional
paid-in capital and does not impact the previously reported net loss for
the three months ended December 31, 1997, nor does it result in a net
change to stockholders' equity at September 30, 1997 or December 31, 1997.
The effect of the restatement was to increase net loss attributable to
common stockholders and net loss per share for the three months ended
December 31, 1997. The effect of the change is shown on the income
statement for the nine months ended June 30, 1999 and 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.
Results of Operations
Interest income during the nine months ending June 30, 1999 reflects
interest accrued on investments. Interest income has decreased as the Company
uses the proceeds of the sale of the Series D Preferred Stock. Research and
development expense in 1999 was higher than in 1998 because the Company is
running more and larger clinical trials. General and administrative expenses
have increased due to the addition of more employees needed for the increased
activity level.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Company's cash flow and earnings are subject to fluctuations due to
changes in interest rates in its investment portfolio of debt securities, to the
fair value of equity instruments held, and, to an immaterial extent, to foreign
currency exchange rates. The Company maintains an investment portfolio of
various issuers, types and maturities. These securities are generally classified
as available-for-sale and, consequently, are recorded on the balance sheet at
fair value with unrealized gains or losses reported as a separate component of
stockholders' equity. Other-than-temporary losses are recorded against earnings
in the same period the loss was deemed to have occurred. The Company does not
currently hedge this exposure and there can be no assurance that
other-than-temporary losses will not have a material adverse impact on the
Company's results of operations in the future.
<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, 1999.
<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:_______________, 1999 ____________________________
Geert Kersten
Chief Executive Officer*
*Also signing in the capacity of the Chief Accounting Officer and Principal
Financial Officer.
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