-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UwiqysduIpRV6BC3ii+psoRQeNyrxrsTl1H7NADsF+N5pr4nXaS8lL5ijlQC34aD jYgT6QFhm4KRoCo2RIngiw== 0001004878-97-000031.txt : 19970303 0001004878-97-000031.hdr.sgml : 19970303 ACCESSION NUMBER: 0001004878-97-000031 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970221 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CEL SCI CORP CENTRAL INDEX KEY: 0000725363 STANDARD INDUSTRIAL CLASSIFICATION: 2836 IRS NUMBER: 840916344 STATE OF INCORPORATION: CO FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11889 FILM NUMBER: 97540581 BUSINESS ADDRESS: STREET 1: 66 CANAL CENTER PLZ STE 510 CITY: ALEXANDRIA STATE: VA ZIP: 22314 BUSINESS PHONE: 7035495293 MAIL ADDRESS: STREET 1: 66 CANAL CENTER PLAZA SUITE 510 CITY: ALEXANDRIA STATE: VA ZIP: 22314 FORMER COMPANY: FORMER CONFORMED NAME: INTERLEUKIN 2 INC DATE OF NAME CHANGE: 19880317 10-Q 1 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, 1996. 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 _____________________________ Address of principal executive offices (703) 549-5293 _____________________________ 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 8,555,800 February 4,1997 Page 1 of 13 pages TABLE OF CONTENTS PART I FINANCIAL INFORMATION Item 1. Page Balance Sheets 3-4 Statement of Operations 5 Statements of Cash Flow 6-7 Notes to Financial Statements 8 Item 2. Management's Discussion and Analysis 11 PART II Item 6. Exhibits and Reports on Form 8-K 12 Signatures 13 Item I. FINANCIAL STATEMENTS CELSCI CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS ASSETS (unaudited) December 31, September 30 1996 1996 CURRENT ASSETS: Cash and cash equivalents $4,971,085 $3,549,810 Investments, net 4,049,932 6,498,812 Interest receivable 61,549 76,515 Prepaid expenses 262,063 272,404 Short-term loan to officer/shareholder 300,000 - Advances to officer/ shareholder and employees 113,208 142,973 Total Current Assets 9,757,837 10,540,514 RESEARCH AND OFFlCE EQUIPMENT- Less accumulated depreciation of $926,261 and $863,899 819,358 871,983 DEPOSITS 18,178 18,178 PATENT COSTS- less accumulated amortization of $364,841 and $352,990 442,968 447,695 $11,038,341 $11,878,370 See notes to condensed financial statements. 3 CEL-SCI CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS (continued) LIABILITIES AND STOCKHOLDERS' EQUITY (unaudited) December 31, September 30 1996 1996 CURRENT LIABILITIES: Accounts payable $ 107,806 $ 274,410 Other current liabilities 500,000 - Total current liabilities 607,806 274,410 DEFERRED RENT 19,638 19,638 Total liabilities 627,444 294,048 STOCKHOLDERS' EQUITY Preferred stock, Series A, $.01 par value - authorized 3,500 shares; issued and out- standing, 0 and 600 shares - 6 Preferred stock, Series B, $.01 par value - authorized 5,000 shares; issued and out- standing, 250 and 5,000 shares 3 50 Preferred stock, Series C, $.01 par value - authorized 3,600 shares; issued and out- standing, 2,850 and 0 shares 28 - Common stock, $01 parvalue; authorized, 100,000,000 shares; issued and out- standing, 8,521,450 and 7,831,481 shares 85,214 78,315 Additional paid-in capital 42,017,042 41,918,036 Net unrealized loss on equity securities (15,078) (16,078) Dividends (98,968) Deficit (31,577,344) (30,396,007) TOTAL STOCKHOLDERS' EQUITY 10,410,897 11,584,322 $ 11,038,341 $ 11,878,370 See notes to condensed financial statements. 4 CEL-SCI CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (unaudited) Three Months Ended December 31, 1996 1995 REVENUES: Gross Sales $1,375 $ - Interest income 123,670 44,421 Other income - 18,080 TOTAL INCOME 125,045 62,501 EXPENSES: Research and development 683,959 1,238,197 Depreciation and amortization 74,214 71,268 General and administrative 548,209 477,888 TOTAL OPERATING EXPENSES 1,306,382 1,787,353 EQUITY IN LOSS OF JOINT VENTURE - 3,772 NET LOSS $1,181,337 $1,728,624 LOSS PER COMMON SHARE $ 0.14 $ 0.32 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 8,153,409 5,457,431 See notes to condensed financial statements. 5 CEL-SCI CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW (unaudited) Three Months Ended December 31, 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES: NET LOSS $ (1,181,337) $ (1,728,624) Adjustments to reconcile net loss to net cash used in operating activities: Research and development expenses related to purchase of Viral Technologies, Inc. - 536,619 Depreciation and amortization 74,214 71,268 Amortization of premium (discount) on investments (75,120) - Equity in loss of joint venture - 3,772 Realized loss on sale of investments - - Changes in assets and liabilities, net of effect from purchase of Viral Technologies, Inc.: Decrease (increase) in interest receivable 14,966 (2,063) Decrease (increase) in accounts receivable - Decrease (increase) in prepaid expenses 10,341 37,333 Decrease (increase) in advances 29,765 6,304 Increase (decrease) in other current liabilities 500,000 - Increase (decrease) in accounts payable (166,604) (184,417) NET CASH USED IN OPERATING ACTIVITIES (793,775) (1,259,808) CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITY: Sales of investments 2,525,000 - Purchase of investments - - Advance to Joint Venture - - Payment on note payable - (80,845) Note receivable from employee/ shareholder (300,000) - Payments received on note receivable from employee/shareholder - Laboratory construction ` (8,205) - Purchase of research and office equipment (1,533) Patent costs (7,124) (5,885) NET CASH USED IN INVESTING ACTIVITY 2,208,138 (86,730) 6 Continued on next page CASH FLOW, CONTINUED FROM PREVIOUS PAGE CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES: Repurchase of preferred stock (2,850,000) Issuance of preferred stock 2,850,000 - Dividends paid (98,968) Issuance of common stock 105,880 500,000 NET CASH PROVIDED BY FINANCING ACTIVITIES 6,912 500,000 NET (DECREASE) INCREASE IN CASH 1,421,275 (846,538) CASH AND CASH EQUIVALENTS: Beginning of period 3,549,810 3,886,950 End of period $ 4,971,085 $ 3,040,412 SUPPLEMENTAL DISCLOSURES: In October1995, CEL-SCI issued 159,170 shares of common stock as consideration for remaining 50% of Viral Technology, Inc. In conjunction with this acquisition, CEL-SCI obtained net assets with a fair value of$170,000. During the quarter ended December 31,1996, 600 shares of Series A Preferred Stock were converted into 127,945 shares of common stock and 1,900 shares of Series B Preferred Stock were converted into 527,774 common stock. See notes to condensed financial statements. 7 CEL-SCI CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995 (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, 1996. 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, 1996 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 Effective September 30, 1994, the Company adopted, on a prospective basis, Statement of Financial Accounting Standard No. 115, "Accounting for Certain Debt and Equity Securities" (SFAS 115) and revised its policy for 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. CEL-SCI CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995 (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 on December 31, 1996. At that time, the loan was extended and is now due March 31, 1997. C. STOCKHOLDERS' EQUITY During 1996, the Company authorized 5,000 shares of Series B Preferred Stock (Series B Stock) with a par value of $.01 per share. Holders of Series B Stock are entitled to dividends, payable quarterly if declared, at the rate of $17.50 per quarter. Dividends which are not declared will not accrue nor be cumulative. Each share of Series B Stock is convertible into shares of common stock equal in number to the amount determined by dividing $1,000 by 87% of the closing price of the Company's common stock on or after 10 days from the effective registration date of the common shares, and 85% of the closing price on or after 40 days from the effective date, with the conversion price not less than $3.60 nor more than $14.75. Dividends were declared and paid on Series B Stock during the quarter ended December 31,1997. During the quarter, 1,900 shares of Series B Stock were converted into 527,774 shares of common stock at a price of $3.60 per share of common stock. Two thousand, eight hundred fifty shares of Series B Stock were repurchased by the Company during the quarter ended December 31, 1996. Also during the quarter ended December 31, 1996, the Company issued 2,850 shares of Series C Preferred Stock (Series C Stock) with a par value of $.01 per share. Series C Stock is convertible into shares of the Company's common stock on the basis of one share of Series C Stock for shares of common stock equal in number to the amount determined by dividing $1,000 by 85% of the average closing price of the Company's common stock over the five-day trading period ending on the day prior to the conversion of the Series C Stock. The conversion price may not be more than $4.00. Beginning 90 days after December 17, 1996, one-half of the Series C Stock is convertible into share of the Company's common stock. All preferred shares are convertible into shares of the Company's common stock beginning 180 days after December 17, 1996 provided that, if the Company's common stock trades for more than $8.00 at any time, then all shares of the Series C Stock will thereafter be immediately convertible into shares of the Company's common stock. In addition, warrants were included with the Series C Stock. The Series A warrants entitle the holder to purchase one share of the Company's common stock at a price of $4.50 per share at any time prior to March 15, 1998. Each Series B warrant entitles the holder to purchase one share of the Company's common stock at a price of $4.50 per share at any time prior to March 15, 1999. None of the Series C Stock was converted into common stock nor were any warrants exercised before December 31, 1996. CEL-SCI CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995 (unaudited) (continued) D. NEW ACCOUNTING PRONOUNCEMENT In October 1995, the Financial Accounting Standards Board issued Statement No. 123, Accounting for Stock Based Compensation (SFAS 123), which provides an alternative to APB Opinion No. 25 in accounting for stock-based compensation issued to employees. As permitted by SFAS 123, the Company plans to continue to account for stock-based compensation in accordance with APB Opinion No. 25. The Company will present in its annual financial statements the additional disclosure required by SFAS 123. 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 an exclusive worldwide license 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 the technology and know-how licensed to it 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. In February, 1992, the Company sold 1,035,000 Units at $15.50 per Unit in a public offering. Each unit consisted of five shares of Common Stock and five Common Stock Purchase Warrants. Ten Warrants entitle the holder to purchase one additional share of Common Stock at a price of $46.50 per share prior to February 7, 1997. In June and September, 1995, the Company completed private offerings whereby it sold a total of 1,150,000 units at $2.00 per unit. Each unit consisted of one share of Common Stock and one Warrant. Each Warrant entitles the holder to purchase one additional share of Common Stock at a price of $3.25 per share at any time prior to June 30, 1997. The net proceeds to the Company from these offerings, after the payment of Sales Agent's commissions and other offering expenses, were approximately $2,000,000. On November 30, 1995 the Company and the investors in these Private Offerings agreed to reduce the exercise price of the Warrants to $1.60 per share in return for the commitment on the part of the investors to exercise 312,500 Warrants ($500,000) prior to December 23, 1995 and an additional 312,500 Warrants ($500,000) prior to January 31, 1996. All of these warrants were exercised. During 1996, the Company issued Preferred Stock. See Footnote C, Stockholders' Equity. Results of Operations Interest income during the three months ending December 31, 1996 reflects interest accrued on investments. Research and development expenses have increased due to new research on the TB vaccine, increased work to follow up on positive findings with the AIDS vaccine and the conduct of three clinical studies with cancer and AIDS patients. However, research and development expenses decreased from last year because the purchase of the remaining 50% of Viral Technologies, Inc. in October 1995, was expensed as research and development expense during the 1996 fiscal year. PART II Item 6. (a) Exhibits No exhibits are filed with this document. (b) Reports on Form 8-K The Company filed no reports on Form 8-K during the fiscal quarter ended December 31, 1996. 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:_______________, 1997 ____________ ________________ Geert Kersten Chief Executive Officer* *Also signing in the capacity of the Chief Accounting Officer and Principal Financial Officer. -----END PRIVACY-ENHANCED MESSAGE-----