0001354488-14-000595.txt : 20140210 0001354488-14-000595.hdr.sgml : 20140210 20140210161633 ACCESSION NUMBER: 0001354488-14-000595 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20131231 FILED AS OF DATE: 20140210 DATE AS OF CHANGE: 20140210 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CEL SCI CORP CENTRAL INDEX KEY: 0000725363 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [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: 14588864 BUSINESS ADDRESS: STREET 1: 8229 BOONE BLVD . STREET 2: SUITE 802 CITY: VIENNA STATE: VA ZIP: 22182 BUSINESS PHONE: 7035069460 MAIL ADDRESS: STREET 1: 8229 BOONE BLVD. STREET 2: SUITE 802 CITY: VIENNA STATE: VA ZIP: 22182 FORMER COMPANY: FORMER CONFORMED NAME: INTERLEUKIN 2 INC DATE OF NAME CHANGE: 19880317 10-Q 1 cvm_10q.htm QUARTERLY REPORT cvm_10q.htm


 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
 
 (Mark One)
 
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2013
 
OR

o 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 001-11889
 
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 þ No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes þ  No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):
 
Large accelerated filer o Accelerated filer þ
Non-accelerated filer o Smaller reporting company o
(Do not check if a smaller reporting company)
   
 
Indicate by check mark whether the Registrant is a shell company (as defined in Exchange Act Rule 12b-2 of the Exchange Act). Yes o  No þ
 
Class of Stock   No. Shares Outstanding   Date
Common   55,940,156   February 4, 2014
 


 
 
 
 
 
TABLE OF CONTENTS
 
      Page
     
PART I  FINANCIAL INFORMATION    
     
Item 1.       
       
 
Condensed Balance Sheets at December 31, 2013 and September 30, 2013 (unaudited)
  3
       
 
Condensed Statements of Operations for the three months Ended December 31, 2013 and 2012 (unaudited)
  4
       
 
Condensed Statements of Cash Flows for the three months Ended December 31, 2013 and 2012 (unaudited)
  5
       
 
Notes to Condensed Financial Statements (unaudited)
  7
       
Item 2.
     
       
 
Management's Discussion and Analysis of Financial Condition and Results of Operations
  22
       
Item 3.
     
       
  Quantitative and Qualitative Disclosures about Market Risks    26
       
Item 4.
     
       
  Controls and Procedures   26
       
PART II
   
       
Item 2.
     
       
  Unregistered Sales of Equity Securities and Use of Proceeds   27
       
Item 6.
     
       
  Exhibits   27
       
  Signatures   28

 
 
2

 
 
CEL-SCI CORPORATION
BALANCE SHEETS
DECEMBER 31, 2013 AND SEPTEMBER 30, 2013
(UNAUDITED)

   
DECEMBER 31,
   
SEPTEMBER 30,
 
ASSETS
 
2013
   
2013
 
             
CURRENT ASSETS:
           
  Cash and cash equivalents
  $ 13,494,028     $ 41,612  
  Receivables
    45,879       74,263  
  Prepaid expenses
    988,699       780,523  
  Deposits - current portion
    150,000       -  
  Inventory used for R&D and manufacturing
    1,347,257       1,016,628  
  Deferred rent - current portion
    585,156       598,717  
                 
  Total current assets
    16,611,019       2,511,743  
                 
RESEARCH AND OFFICE EQUIPMENT AND
               
  LEASEHOLD IMPROVEMENTS-- less accumulated
               
  depreciation and amortization of $3,010,439
               
  and $2,967,345
    463,053       489,336  
                 
PATENT COSTS--less accumulated
               
  amortization of $1,161,540 and $1,151,852
    317,460       318,195  
                 
DEFERRED RENT - net of current portion
    5,285,781       5,448,381  
                 
DEPOSITS - net of current portion
    2,120,917       2,070,917  
                 
TOTAL ASSETS
  $ 24,798,230     $ 10,838,572  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
                 
CURRENT LIABILITIES:
               
  Accounts payable
  $ 1,627,765     $ 1,924,482  
  Accrued expenses
    346,401       113,496  
  Due to employees
    280,464       386,337  
  Related party loan
    1,104,057       1,104,057  
  Deferred rent - current portion
    9,274       8,529  
  Lease obligation - current portion
    11,463       8,212  
                 
  Total current liabilities
    3,379,424       3,545,113  
                 
  Derivative instruments
    6,143,278       433,024  
  Deferred revenue
    126,545       126,545  
  Deferred rent - net of current portion
    6,381       7,875  
  Lease obligation - net of current portion
    24,445       20,925  
  Deposits held
    5,000       5,000  
                 
  Total liabilities
    9,685,073       4,138,482  
                 
COMMITMENTS AND CONTINGENCIES
               
                 
STOCKHOLDERS' EQUITY
               
  Preferred stock, $.01 par value--200,000 shares authorized;
               
    -0- shares issued and outstanding
    -       -  
  Common stock, $.01 par value - 600,000,000 shares authorized,
               
    55,852,992 shares and 31,025,019 shares  issued and outstanding
               
    at December 31, 2013 and September 30, 2013, respectively
    558,530       310,250  
  Additional paid-in capital
    231,049,613       218,550,408  
  Accumulated deficit
    (216,494,986 )     (212,160,568 )
                 
Total stockholders' equity
    15,113,157       6,700,090  
                 
TOTAL LIABILITIES AND
               
STOCKHOLDERS' EQUITY
  $ 24,798,230     $ 10,838,572  
 
See notes to financial statements.
 
 
3

 
 
CEL-SCI CORPORATION
 STATEMENTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 2013 and 2012
(UNAUDITED)
 
   
2013
   
2012
 
             
OTHER INCOME
  $ 113,144     $ 15,000  
                 
OPERATING EXPENSES:
               
  Research and development (excluding
               
    R&D depreciation of $41,673 and  $104,864
               
    respectively, included below)
    4,019,541       2,924,722  
  Depreciation and amortization
    56,699       133,450  
  General & administrative
    1,971,214       2,001,285  
                 
Total operating expenses
    6,047,454       5,059,457  
                 
OPERATING LOSS
    (5,934,310 )     (5,044,457 )
                 
GAIN ON DERIVATIVE INSTRUMENTS
    1,610,817       2,746,198  
                 
INTEREST INCOME
    31,757       29,415  
                 
INTEREST EXPENSE
    (42,682 )     (41,402 )
                 
NET LOSS
    (4,334,418 )     (2,310,246 )
                 
ISSUANCE OF ADDITIONAL SHARES DUE TO RESET PROVISIONS
    (1,117,447 )     -  
                 
NET LOSS AVAILABLE TO COMMON SHAREHOLDERS
  $ (5,451,865 )   $ (2,310,246 )
                 
NET LOSS PER COMMON SHARE
               
      BASIC
  $ (0.11 )   $ (0.08 )
                 
      DILUTED
  $ (0.15 )   $ (0.18 )
                 
WEIGHTED AVERAGE COMMON SHARES
               
  OUTSTANDING
               
      BASIC
    48,215,919       28,311,602  
                 
      DILUTED
    48,215,919       28,311,602  
 
See notes to financial statements.
 
 
4

 
 
CEL-SCI CORPORATION
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 2013 and 2012
(UNAUDITED)
 
 
2013
 
2012
 
CASH FLOWS FROM OPERATING ACTIVITIES:
       
  Net loss
 $    (4,334,418)
 
 $    (2,310,246)
 
  Adjustments to reconcile net loss to
       
    net cash used in operating activities:
       
      Depreciation and amortization
             56,699
 
           133,450
 
      Issuance of common stock, warrants and options for services
           137,729
 
             54,485
 
      Modification of warrants issued for services
             76,991
 
                     -
 
      Employee option cost
           510,278
 
           966,585
 
      Common stock contributed to 401(k) plan
             37,887
 
             39,711
 
      Impairment loss on abandonment of patents
                  240
 
             10,223
 
      Loss on retired equipment
                     -
 
               2,011
 
      Gain on derivative instruments
       (1,610,817)
 
       (2,746,198)
 
      (Increase)/decrease in assets:
       
        Receivables
             28,384
 
           143,714
 
        Deferred rent
           176,161
 
           139,536
 
        Prepaid expenses
          (210,367)
 
           471,936
 
        Inventory used for R&D and manufacturing
          (330,629)
 
           247,585
 
        Deposits
          (200,000)
 
                     -
 
      Increase/(decrease) in liabilities:
       
        Accounts payable
          (380,943)
 
          (192,358)
 
        Accrued expenses
           232,905
 
             23,252
 
        Due to employees
          (105,873)
 
             20,843
 
        Deferred rent liability
                 (749)
 
                  688
 
         
  Net cash used in operating activities
       (5,916,522)
 
       (2,994,783)
 
         
CASH FLOWS FROM INVESTING ACTIVITIES:
       
      Purchases of equipment
              (8,587)
 
            (16,093)
 
      Expenditures for patent costs
                     -
 
                 (125)
 
         
  Net cash used in investing activities
              (8,587)
 
            (16,218)
 
         
CASH FLOWS FROM FINANCING ACTIVITIES:
       
     Proceeds from issuance of common stock and warrants
      19,380,190
 
        9,807,375
 
     Payments on obligations under capital leases
              (2,665)
 
              (1,025)
 
         
  Net cash provided by financing activities
      19,377,525
 
        9,806,350
 
         
NET INCREASE
       
  IN CASH AND CASH EQUIVALENTS
      13,452,416
 
        6,795,349
 
         
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
             41,612
 
        3,941,042
 
         
CASH AND CASH EQUIVALENTS, END OF PERIOD
 $   13,494,028
 
 $   10,736,391
 
 
See notes to financial statements.
 
 
5

 
 
CEL-SCI CORPORATION
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 2013 and 2012
(UNAUDITED)
 
   
2013
   
2012
 
ISSUANCE OF WARRANTS:
           
    Increase in derivative liabilities
  $ (7,321,071 )   $ (4,200,000 )
    Decrease in additional paid-in capital
    7,321,071       4,200,000  
                 
    $ -     $ -  
                 
ISSUANCE OF ADDITIONAL SHARES
               
   Increase in common stock
  $ (15,631 )   $ -  
   Increase additional paid-in capital
    (1,101,786 )     -  
   Decrease additional paid-in capital
    1,117,417       -  
                 
    $ -     $ -  
                 
                 
ISSUANCE OF COMMON STOCK FOR PREPAID SERVICES
               
   Increase additional paid-in capital
  $ (55,362 )   $ (236,165 )
   Increase in prepaid expenses
    55,362       236,165  
                 
    $ -     $ -  
                 
PATENT COSTS INCLUDED IN
               
  ACCOUNTS PAYABLE:
               
    Increase in patent costs
  $ 9,208     $ 8,641  
    Increase in accounts payable
    (9,208 )     (8,641 )
                 
    $ -     $ -  
                 
NON-CASH EQUIPMENT COSTS
               
    Increase in research and office equipment
  $ 12,126     $ 36,622  
    Increase in accounts payable
    (2,664 )     -  
    Increase in capital lease obligation
    (9,462 )     (36,622 )
                 
    $ -     $ -  
                 
CAPITAL LEASE PAYMENTS INCLUDED IN
               
  ACCOUNTS PAYABLE:
               
    Decrease in capital lease obligation
  $ 26     $ 1,105  
    Increase in accounts payable
    (26 )     (1,105 )
                 
    $ -     $ -  
                 
OFFERING COSTS INCLUDED IN
               
  ACCOUNTS PAYABLE:
               
   Decrease additional paid-in capital
  $ 72,328     $ -  
    Increase in accounts payable
    (72,328 )     -  
                 
    $ -     $ -  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
               
   INFORMATION:
               
  Cash expenditure for interest expense
  $ 56,509     $ 41,878  
 
See notes to financial statements.
 
 
6

 
 
CEL-SCI CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 2013 AND 2012 (UNAUDITED)

A.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation
 
The accompanying condensed financial statements of CEL-SCI Corporation (the Company) are unaudited and certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission. While management of the Company believes that the disclosures presented are adequate to make the information presented not misleading, these interim condensed financial statements should be read in conjunction with the  financial statements and notes included in the Company’s annual report on Form 10-K for the year ended September 30, 2013.
 
In the opinion of management, the accompanying unaudited condensed financial statements contain all accruals and adjustments (each of which is of a normal recurring nature) necessary for a fair presentation of the Company’s financial position as of December 31, 2013 and the results of its operations for the three months then ended.  The condensed balance sheet as of September 30, 2013 is derived from the September 30, 2013 audited financial statements.  Significant accounting policies have been consistently applied in the interim financial statements and the annual financial statements.  The results of operations for the three months ended December 31, 2013 and 2012 are not necessarily indicative of the results to be expected for the entire year.

Summary of Significant Accounting Policies:

Research and Office Equipment and Leasehold Improvements - Research and office equipment is recorded at cost and depreciated using the straight-line method over estimated useful lives of five to seven years.  Leasehold improvements are depreciated over the shorter of the estimated useful life of the asset or the term of the lease.  Repairs and maintenance which do not extend the life of the asset are expensed when incurred. The fixed assets are reviewed on a quarterly basis to determine if any of the assets are impaired.

Patents - Patent expenditures are capitalized and amortized using the straight-line method over the shorter of the expected useful life or the legal life of the patent (17 years).  In the event changes in technology or other circumstances impair the value or life of the patent, appropriate adjustment in the asset value and period of amortization is made.  An impairment loss is recognized when estimated future undiscounted cash flows expected to result from the use of the asset, and from its disposition, is less than the carrying value of the asset.  The amount of the impairment loss would be the difference between the estimated fair value of the asset and its carrying value.

Research and Development Costs - Research and development costs are expensed as incurred.
 
 
7

 
 
Income Taxes - The Company uses the asset and liability method of accounting for income taxes.  Under the asset and liability method, deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating and tax loss carryforwards.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.  The Company records a valuation allowance to reduce the deferred tax assets to the amount that is more likely than not to be recognized.  A full valuation allowance was recorded against the deferred tax assets as of December 31, 2013 and September 30, 2013.

Derivative Instruments – The Company has entered into financing arrangements that contain embedded derivative features.  The Company has also issued warrants to various parties in connection with work performed by these parties.  The Company accounts for these arrangements in accordance with ASC 815, “Accounting for Derivative Instruments and Hedging Activities.” In accordance with accounting principles generally accepted in the United States (“GAAP”), derivative instruments and hybrid instruments are recognized as either assets or liabilities on the balance sheet and are measured at fair value with gains or losses recognized in earnings or other comprehensive income depending on the nature of the derivative or hybrid instruments.  The Company determines the fair value of derivative instruments and hybrid instruments based on available market data using appropriate valuation models, giving consideration to all of the rights and obligations of each instrument.  The derivative liabilities are remeasured at fair value at the end of each interim period as long as they are outstanding.

Deferred Rent (Asset) –Consideration paid, including deposits, related to operating leases is recorded as a deferred rent asset and amortized as rent expense over the lease term. Interest on the deferred rent is calculated at 3% on the funds deposited on the manufacturing facility and is included in deferred rent. This interest income will be used to offset future rent.

Stock-Based Compensation – Compensation cost for all stock-based awards is measured at fair value as of the grant date in accordance with the provisions of ASC 718 “Stock Compensation Expense”.  The fair value of the stock options is calculated using the Black-Scholes option pricing model.  The Black-Scholes model requires various judgmental assumptions including volatility and expected option life.  The stock-based compensation cost is recognized on the straight line allocation method as expense over the requisite service or vesting period.

Equity instruments issued to non-employees are accounted for in accordance with ASC 505-50, “Equity-Based Payments to Non Employees.”  Accordingly, compensation is recognized when goods or services are received and is measured using the Black-Scholes valuation model.  The Black-Scholes model requires various judgmental assumptions regarding the fair value of the equity instruments at the measurement date and the expected life of the options.
 
 
8

 
 
The Company has Incentive Stock Option Plans, Non-Qualified Stock Option Plans, a Stock Compensation Plan and Stock Bonus Plans. In some cases these Plans are collectively referred to as the "Plans".  All Plans have been approved by the stockholders.

Reclassification – Certain prior year items have been reclassified to conform to the current year presentation.

B.           NEW ACCOUNTING PRONOUNCEMENTS

There are no significant new accounting pronouncements that would impact the condensed financial statements.

C.           STOCKHOLDERS’ EQUITY

Stock options, stock bonuses and compensation granted by the Company as of December 31, 2013 are as follows:
 
Name of Plan
  Total Shares Reserved Under Plans     Shares Reserved for Outstanding Options     Shares Issued as Stock Bonus     Remaining Options/Shares Under Plans  
Incentive Stock Option Plans
    1,960,000       1,573,597       N/A       145,703  
Non-Qualified Stock Option Plans
    5,680,000       3,674,544       N/A       1,443,537  
Stock Bonus Plans
    1,594,000       N/A       958,325       634,919  
Stock Compensation Plan
    1,350,000       N/A       791,145       558,855  
 
There were zero and 1,437,466 options granted to employees and directors during the three months ended December 31, 2013 and 2012, respectively.

In December 2012, the Company offered employees and directors holding options that expire on April 1, 2013 the opportunity to forfeit these options and have new options issued with an expiration date of December 17, 2017.  All twelve employees and directors eligible for this offer accepted the terms.  This resulted in the cancellation of 387,466 options priced at $2.20 per share and the concurrent issuance of the same number of options at $2.80 per share.  In accordance with ASC 718, the Company recorded the incremental compensation cost of the options.  The incremental compensation cost is the excess of the fair value of the replacement award over the fair value of the cancelled award at the cancellation date.  At the cancellation date, the incremental compensation cost was $477,879.

Stock-Based Compensation Expense

   
Three Months Ended December 31,
 
   
2013
   
2012
 
             
 Employees
  $ 510,278     $ 966,585  
 Non-employees
  $ 214,720     $ 107,818  
 
 
9

 
 
At December 31, 2013 and September 30, 2013, respectively, non-employee stock compensation expense excluded $55,362 and $57,553 of prepaid consulting expenses.

Derivative Liabilities, Warrants and Other Options

Below is a chart showing the derivative liabilities, warrants and other options outstanding at December 31, 2013:
 
Warrant
 
Issue Date
 
Shares Issuable upon Exercise of Warrant
   
Exercise Price
 
Expiration Date
 
Reference
 
                         
Series N
 
8/18/08
    2,951,420       0.53  
8/18/14
    1  
Series A
 
6/24/09
    130,347       5.00  
12/24/14
    1  
Schleuning (Series A)
 
7/8/09
    16,750       5.00  
1/8/15
    1  
Series B
 
9/4/09
    50,000       6.80  
9/4/14
    1  
Series C
 
8/20/09 – 8/26/09
    463,487       5.50  
2/20/15
    1  
Series E
 
9/21/09
    71,428       17.50  
8/12/14
    1  
Series F
 
10/6/11
    1,200,000       4.00  
10/6/14
    1  
Series G
 
10/6/11
    66,667       4.00  
8/12/14
    1  
Series H
 
1/26/12
    1,200,000       5.00  
8/1/15
    1  
Series Q
 
6/21/12
    1,200,000       5.00  
12/22/15
    1  
Series R
 
12/6/12
    2,625,000       4.00  
12/6/16
    1  
Series S
 
10/11/13-12/24/13
    25,713,095       1.25  
10/11/18
    1  
                               
Series L
 
4/18/07
    25,000       7.50  
4/17/14
    2  
Series L (repriced)
 
4/18/07
    70,000       2.50  
4/2/15
    2  
Series M (modified)
 
4/18/07
    500,000       1.00  
4/20/14
    2  
                               
Series P
 
2/10/12
    590,001       4.50  
3/6/17
    3  
                               
Private Investors
 
7/18/05-6/30/09
    740,938       5.60-8.20  
1/26/14 - 7/18/14
    4  
                               
Warrants held by Officer and Director
 
6/24/09-7/6/09
    349,754       4.00 – 5.00  
12/24/14 – 1/6/15
    5  
                               
Consultants
 
2/15/05-10/28/13
    200,750       0.85-20.00  
5/20/14 - 12/27/17
    6  

 
10

 
 
1.   Derivative Liabilities
 
See below for details of the balances of derivative instruments at December 31, 2013 and September 30, 2013.
 
   
December 31,
2013
   
September 30,
2013
 
             
Series A through E warrants
  $ 6,106     $ 6,106  
Series N warrants
    531,255       41,501  
Series F and G warrants
    12,667       12,667  
Series H warrants
    12,000       36,000  
Series Q warrants
    24,000       48,000  
Series R warrants
    157,500       288,750  
Series S warrants
    5,339,750       -  
 
               
Total derivative liabilities
  $ 6,143,278     $ 433,024  

The Company reviews all outstanding warrants in accordance with the requirements of ASC 815.  This topic provides that an entity should use a two-step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions.  The warrant agreements provide for adjustments to the exercise price for certain dilutive events, which includes an adjustment to the number of shares issuable upon the exercise of the warrant in the event that the Company makes certain equity offerings in the future at a price lower than the exercise prices of the warrant instruments.  Under the provisions of ASC 815, the warrants are not considered indexed to the Company’s stock because future equity offerings or sales of the Company’s stock are not an input to the fair value of a “fixed-for-fixed” option on equity shares, and equity classification is therefore precluded.

In accordance with ASC 815, derivative liabilities must be measured at fair value upon issuance and re-valued at the end of each reporting period through expiration.  Any change in fair value between the respective reporting dates is recognized as a gain or loss.

Series A through E Warrants

The Company accounted for the Series A through E Warrants as derivative liabilities in accordance with ASC 815.  These warrants do not qualify for equity accounting and must be accounted for as derivative liabilities since the warrant agreements provide the holder with the right, at its option, to require the Company to a cash settlement of the warrants at Black-Scholes value in the event of a Fundamental Transaction, as defined in the warrant agreement.  Since the occurrence of a Fundamental Transaction is not entirely within the Company's control, there exist circumstances that would require net-cash settlement of the warrants while holders of shares would not receive a cash settlement.

In June 2009, the Company issued 1,011,656 Series A warrants exercisable at $5.00 per share in connection with a financing.  The cost of the warrants of $2,775,021 was recorded as a debit to additional paid-in capital and a credit to derivative liabilities.  As of December 31, 2013, 130,347 of these warrants remained outstanding.  As of December 31, 2013 and September 30, 2013, the fair value of the remaining Series A warrants was $1,303.

In July 2009, the Company issued 16,750 warrants to a private investor.  The warrants were issued with an exercise price of $5.00 per share and valued at $43,550 using the Black Scholes method. The cost of the warrants was accounted for as a debit to additional paid-in capital and a credit to derivative liabilities. As of December 31, 2013, 16,750 warrants remained outstanding.  As of December 31, 2013 and September 30, 2013, the fair value of the remaining warrants was $168.
 
 
11

 
 
In connection with a loan received and fully repaid in a prior period, the Company issued 50,000 Series B warrants with an exercise price of $6.80 per share.  As of December 31, 2013, 50,000 Series B warrants remained outstanding.  As of December 31, 2013 and September 30, 2013, the fair value of the remaining Series B warrants was $0.

In connection with an August 2009 financing, the Company issued 539,222 Series C warrants exercisable at $5.50 per share.  As of December 31, 2013, 463,487 of these warrants remained outstanding.    As of December 31, 2013 and September 30, 2013, the fair value of the remaining Series C warrants was $4,635.

In September 2009, the Company issued 71,428 Series E warrants with an exercise price of $17.50 per share to the placement agent in connection with a financing. As of December 31, 2013, 71,428 Series E warrants remained outstanding.  As of December 31, 2013 and September 30, 2013, the fair value of the remaining Series E warrants was $0.

For the three months ended December 31, 2013 and 2012, the Company recorded a gain of $0 and $332,436, respectively, on the Series A through E warrants.

Series N Warrants

In October 2011, the Company sold 1,333,333 shares of its common stock to private investors for $4,000,000, or $3.00 per share.  This financing triggered the reset provision in the Series N warrants, which allows for adjustments in the exercise price if subsequent equity sales are offered at a lower price.  As a result, the outstanding 389,078 Series N warrants issued to investors in connection with a prior year financing, were reset from $4.00 to $3.00.  In addition, the investors were issued 129,693 warrants exercisable at $3.00 per share at an initial cost of $220,478.  The cost was accounted for as a debit to loss on derivatives and a credit to derivative liabilities.

On October 11, 2013 and December 24, 2013, in connection with public offerings of common stock on those dates, the Company issued the Series N warrant holders 2,432,649 additional warrants as required by the warrant agreements.  As of December 31, 2013, 2,951,420 Series N warrants remain outstanding.  As of December 31, 2013 and September 30, 2013, the values of the Series N warrants were $531,255 and $41,501, respectively.  During the three months ended December 31, 2013 and 2012, the Company recorded a loss of $489,754 and a gain of $311,262 on the Series N warrants, respectively.

Series F and G Warrants

In October 2011, in connection with a financing, the Company issued 1,200,000 Series F warrants exercisable at $4.00 per share at any time prior to October 6, 2014.  The Company also issued 66,667 Series G warrants exercisable at $4.00 per share to the placement agent for this offering.  The Series G warrants are exercisable at any time prior to August 12, 2014.  The initial cost of the warrants of $2,146,667 was recorded as a debit to additional paid-in capital and a credit to derivative liabilities. As of December 31, 2013 and September 30, 2013, the fair value of the Series F and G warrants was $12,667. During the three months ended December 30, 2013 and 2012, the Company recorded a gain on the Series F and G warrants of $0 and $640,000, respectively.
 
 
12

 
 
Series H Warrants

In January 2012, in connection with a financing, the Company issued 1,200,000 Series H warrants exercisable at $5.00 per share at any time prior to August 1, 2015. The initial cost of the warrants of $2,400,000 was recorded as a debit to additional paid-in capital and a credit to derivative liabilities. As of December 31, 2013 and September 30, 2013, the fair values of the Series H warrants were $12,000 and $36,000, respectively.   During the three months ended December 31, 2013 and 2012, the Company recorded a gain of $24,000 and $600,000, respectively, on the Series H warrants.

Series Q Warrants

In June 2012, in connection with a financing, the Company issued 1,200,000 Series Q warrants exercisable at $5.00 per share at any time prior to December 22, 2015.  The initial cost of the warrants of $2,160,000 was recorded as a debit to additional paid-in capital and a credit to derivative liabilities. As of December 31, 2013 and September 30, 2013, the fair values of the Series Q warrants were $24,000 and $48,000, respectively.   During the three months ended December 31, 2013 and 2012 the Company recorded a gain of $24,000 and $600,000, respectively, on the Series Q warrants.

Series R Warrants

In December 2012 the Company sold 3,500,000 shares of its common stock for $10,500,000, or $3.00 per share, in a registered direct offering.  The investors in this offering also received Series R warrants which entitle the investors to purchase up to 2,625,000 shares of the Company’s common stock.  The Series R warrants may be exercised at any time before December 7, 2016 at a price of $4.00 per share.   The initial cost of the warrants of $4,200,000 was recorded as a debit to additional paid-in capital and a credit to derivative liabilities. As of December 31, 2013 and September 30, 2013, the fair value of the derivative liabilities totaled $157,500 and $288,750, respectively.  During the three months ended December 31, 2013 and the Company recorded a gain of $131,250 and $262,500, respectively, on the Series R warrants.

Series S Warrants

On October 11, 2013, the Company closed a public offering of 17,826,087 units of common stock and warrants at a price of $1.00 per unit for net proceeds of $16,400,000, net of underwriting discounts and commissions and offering expenses of the Company.  Each unit consisted of one share of common stock and one Series S warrant to purchase one share of common stock.  The Series S warrants are immediately exercisable, expire on October 11, 2018, and have an exercise price of $1.25.  In November 2013, the underwriters purchased an additional 2,648,913 warrants pursuant to the overallotment option, for which the Company received net proceeds of $24,370.
 
 
13

 
 
On December 24, 2013, the Company closed a public offering of 4,761,905 units of common stock and warrants at a price of $0.63 per unit for net proceeds of $2,790,000, net of underwriting discounts and commissions and offering expenses of the Company.  Each unit consisted of one share of common stock and one Series S warrant to purchase one share of common stock.  The Series S warrants are immediately exercisable, expire on October 11, 2018, and have an exercise price of $1.25. The underwriters purchased an additional 476,190 units of common stock and warrants pursuant to the overallotment option, for which the Company received net proceeds of approximately $279,000.

The initial cost of the S warrants of $7,321,071 was recorded as a debit to additional paid-in capital and a credit to derivative liabilities. As of December 31, 2013, the fair value of the derivative liabilities totaled $5,399,750.  During the three months ended December 31, 2013, the Company recorded a gain of $1,921,321 on the Series S warrants.

1.  
Series L and M Warrants

In April 2007, the Company completed a $15 million private financing.  Shares were sold at $7.50, a premium over the closing price of the previous two weeks.  The financing was accompanied by 1,000,000 warrants with an exercise price of $7.50 and 1,000,000 warrants with an exercise price of $20.00.  The warrants are known as Series L and Series M warrants, respectively.  The warrants issued with the financing qualified for equity treatment in accordance with ASC 815.  The cost of Series L and Series M warrants were recorded as a debit and a credit to additional paid-in capital.

In November 2011, the Company reduced the exercise price of 160,000 Series L warrants to $3.40. The additional cost of $86,826 was recorded as a debit and a credit to additional paid-in capital and was a deemed dividend.  In March 2012, 60,000 Series L warrants were exercised at a price of $3.40, and the Company received proceeds of $204,000.

In April 2012, the 25,000 Series L warrants were transferred to a consultant exercisable at a price of $7.50 per share and were extended for two years from the current expiration date.  The additional value of $43,910 was accounted for as a credit to additional paid-in capital and a debit to general and administrative expense.  In June 2012, 10,167 Series L warrants with an exercise price of $7.50 per share, expired.  In April 2013, 100,000 Series L warrants were repriced to $2.50 and extended for two years to April 2, 2015 in return for a reduction in outstanding warrants to 70,000.  The additional cost of $59,531 was recorded as a debit and a credit to additional paid-in capital and was a deemed dividend.  This cost was included in modification of warrants and increased the net loss available to shareholders on the statements of operations.  As of December 31, 2013, 70,000 of the Series L warrants at the reduced exercise price of $2.50 and 25,000 warrants at the original exercise price of $7.50 remained outstanding.

In February 2011, 600,000 Series M warrants, exercisable at a price of $6.00 per share were extended for two years to July 31, 2014.  This cost of $661,457 was recorded as a debit and a credit to additional paid-in capital and was a deemed dividend.

 
14

 
 
In November 2011, the Company reduced the exercise price of 600,000 Series M warrants from $6.00 to $3.40.  The additional cost of $238,794 was recorded as a debit and a credit to additional paid-capital and was a deemed dividend.

In October 2013, the Company reduced the exercise prices of the Series M warrants from $3.40 to $1.00 in exchange for a reduction in the number of warrants from 600,000 to 500,000.  The additional cost of $76,991 was recorded as non-employee stock compensation expense.  As of December 31, 2013, 500,000 Series M warrants at the reduced exercise price of $1.00 remained outstanding.

3.  
Series O and P Warrants

In March 2009, as further consideration for its rights under a licensing agreement, Byron Biopharma LLC (“Byron”) purchased 375,000 Units from the Company at a price of $2.00 per Unit.  Each Unit consisted of one share of the Company’s common stock and two Series O warrants.  All Series O warrants were exercised by September 30, 2012.
 
On February 10, 2012, the Company issued 590,001 Series P warrants to the former holder of the Series O warrants as an inducement for the early exercise of the Series O warrants. Series O warrants entitled the holder to purchase 590,001 shares of the Company’s common stock at a price of $2.50 per share at any time on or prior to March 6, 2016.  The Series P warrants allow the holder to purchase up to 590,001 shares of the Company’s common stock at a price of $4.50 per share.  The Series P warrants are exercisable at any time prior to March 6, 2017.  The warrants were accounted for as an equity transaction using the Black-Scholes method to value the warrants.  The fair value of the warrants was calculated to be $1,593,000.  This cost was recorded as a debit and a credit to additional paid-in capital.    As of December 31, 2013, 590,001 Series P warrants remained outstanding.

4.  
Private Investor Warrants

In February 2011, 132,500 warrants issued to an investor with exercise prices between $5.60 and $8.20 were extended for three years.  The additional value of $406,912 was calculated using the Black Scholes method and was accounted for as a debit and a credit to additional paid-in capital.  As of December 31, 2013, 132,500 warrants remained outstanding.

In January 2009, as part of an amended lease agreement on the manufacturing facility, the Company repriced 300,000 warrants issued to the lessor in July 2007 at $12.50 per share and which were to expire on July 12, 2013. These warrants were repriced at $7.50 per share and expire on January 26, 2014. The cost of this repricing and extension of the warrants was $70,515 and was accounted for as a debit to the deferred rent asset and a credit to additional paid-in capital.  In addition, 78,750 additional warrants were given to the lessor of the manufacturing facility on the same date, exercisable at a price of $7.50 per share, and will expire on January 26, 2014. The cost of these warrants was $45,207 and was accounted for as a debit to the deferred rent asset and a credit to additional paid-in capital.  As of December 31, 2013, 378,750 warrants remained outstanding.

 
15

 
 
Between March 31 and June 30, 2009, 229,688 warrants were issued at $7.50 to the leaseholder on the manufacturing facility in consideration for the deferral of rent payments.  As of December 31, 2013, 229,688 warrants remained outstanding.

3.  
Warrants Held by Officer and Director

Between December 2008 and June 2009, Maximilian de Clara, the Company’s President and a director, loaned the Company $1,104,057 under a note payable.  In June 2009, the Company issued 164,824 warrants, exercisable at $4.00 per share, to Mr. De Clara.  The warrants are exercisable at any time prior to December 24, 2014.  These warrants were valued at $65,796 using the Black-Scholes method.  In July 2009, as consideration for a further extension of the loan, the Company issued 184,930 warrants, exercisable at $5.00 per share, to Mr. De Clara.  These warrants were valued at $341,454 using the Black-Scholes method and can be exercised at any time prior to January 6, 2015.  The first warrants were recorded as a discount to the loan and a credit to additional paid-in capital.  The second warrants were recorded as a debit to derivative loss of $831,230, a premium of $341,454 on the loan and a credit to additional paid-in capital of $489,776.  The warrants and premium are fully amortized.  As of December 31, 2013, 349,754 warrants remained outstanding. See Note E for additional information.

4.  
Options and Shares Issued to Consultants
 
As of December 31, 2013, 200,750 options issued to consultants as payment for services remained outstanding, of which 191,250 options were issued from the Non-Qualified Stock Option plans.   On May 22, 2013, 3,000 options previously issued to a consultant from the Non-Qualified Stock Option plans expired.
 
On October 15, 2013, the Company entered into a consulting agreement for services to be provided through October 14, 2014.  In consideration for services provided, the Company agreed to issue the consultant 100,000 restricted shares in three installments – 34,000 upon signing, 33,000 on January 15, 2014, and 33,000 on March 14, 2014.  Accordingly, during the three months ended December 31, 2013, the Company issued the consultant 34,000 shares of restricted stock at the fair market value of $0.80 per share.  The aggregate fair market value of $27,200 was recorded as a prepaid expense and will be charged to general and administrative expense over the period of service.
 
On October 20, 2013, the Company entered into a consulting agreement for services to be provided through October 19, 2016.  In consideration for services provided, the Company agreed to issue the consultant 34,164 restricted shares each month of the agreement, with the first three months being issued in advance. Accordingly, the Company issued the consultant 102,492 shares of restricted stock at the fair market value of $0.82 per share.  The aggregate fair market value of $84,043 was recorded as a prepaid expense and will be charged to general and administrative expense over the period of service.  On December 28, 2012, the Company entered into a consulting agreement with this same consultant for services to be provided through December 27, 2013.  In consideration for the services to be provided, the Company issued the consultant 50,000 shares of common stock and 50,000 options to purchase common stock at a price of $2.80 per share.  The common shares were issued at the fair market value on the agreement date of $2.80.  The aggregate fair market value of $140,000 was recorded as a prepaid expense and was charged to general and administrative expense over the period of service.  The fair value of the options issued, as calculated using the Black-Scholes method, was determined to be $98,150 and was also charged to general and administrative expense over the period of service.
 
 
16

 
 
On October 28, 2013, the Company entered into a consulting agreement for services to be provided through April 27, 2014.  In consideration for services provided, the Company granted the consultant 60,000 options to purchase common stock at a price of $0.85 per share.  The fair value of the options issued, as calculated using the Black-Scholes method, was determined to be $24,294 and was recorded as a prepaid expense and will be charged to general and administrative expense over the period of service.
 
During the three months ended December 31, 2013 and 2012, the Company recorded expense of $137,729 and $1,985, respectively relating to these consulting arrangements.  As of December 31, 2013 and September 30, 2013, the Company recorded $55,362 and $57,553, respectively, in prepaid consulting expenses.

D.           FAIR VALUE MEASUREMENTS

In accordance with ASC 820-10, “Fair Value Measurements,” the Company determines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  The Company generally applies the income approach to determine fair value.  This method uses valuation techniques to convert future amounts to a single present amount.  The measurement is based on the value indicated by current market expectations with respect to those future amounts.

ASC 820-10 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value.  The hierarchy gives the highest priority to active markets for identical assets and liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).  The Company classifies fair value balances based on the observability of those inputs.  The three levels of the fair value hierarchy are as follows:

  
Level 1 – Observable inputs such as quoted prices in active markets for identical assets or liabilities
  
Level 2 – Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.  These include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and amounts derived from valuation models where all significant inputs are observable in active markets
  
Level 3 – Unobservable inputs that reflect management’s assumptions

For disclosure purposes, assets and liabilities are classified in their entirety in the fair value hierarchy level based on the lowest level of input that is significant to the overall fair value measurement.  The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the placement within the fair value hierarchy levels.
 
 
17

 
 
The table below sets forth the assets and liabilities measured at fair value on a recurring basis, by input level, in the condensed balance sheet at December 31, 2013:

   
Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)
   
Significant Other Observable
Inputs (Level 2)
   
Significant Unobservable Inputs (Level 3)
   
Total
 
                         
Derivative instruments
  $ -     $ -     $ 6,143,278     $ 6,143,278  

The table below sets forth the assets and liabilities measured at fair value on a recurring basis, by input level, in the condensed balance sheet at September 30, 2013:

   
Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)
   
Significant Other Observable
Inputs (Level 2)
   
Significant Unobservable Inputs (Level 3)
   
Total
 
                         
Derivative instruments
  $ -     $ -     $ 433,024     $ 433,024  

The following sets forth the reconciliation of beginning and ending balances related to fair value measurements using significant unobservable inputs (Level 3) for the three months ended December 31, 2013 and the year ended September 30, 2013:

   
(3 month)
   
(12 month)
 
   
December 31, 2013
   
September 30, 2013
 
Beginning balance
  $ 433,024     $ 6,983,690  
Issuances
    7,321,071       4,200,000  
Settlements
    -       -  
Realized and unrealized gains
               
recorded in earnings
    (1,610,817 )     (10,750,666 )
Ending balance
  $ 6,143,278     $ 433,024  
 
The fair values of the Company’s derivative instruments disclosed above are primarily derived from valuation models where significant inputs such as historical price and volatility of the Company’s stock as well as U.S. Treasury Bill rates are observable in active markets.

E.           LOANS FROM OFFICER

The Company’s President, and a director, Maximilian de Clara, loaned the Company $1,104,057.  The loan from Mr. de Clara bears interest at 15% per year and is secured by a lien on substantially all of the Company’s assets.  The Company does not have the right to prepay the loan without Mr. de Clara’s consent.  The loan was initially payable at the end of March 2009, but was extended to the end of June 2009.   At the time the loan was originally due, and in accordance with the loan agreement, the Company issued Mr. de Clara warrants to purchase 164,824 shares of the Company’s common stock at a price of $4.00 per share.  The warrants are exercisable at any time prior to December 24, 2014.  In June 2009, the loan with Mr. de Clara was extended for the second time to July 6, 2014.  At Mr. de Clara’s option, the loan may be converted into shares of the Company’s common stock.  The number of shares which will be issued upon any conversion will be determined by dividing the amount to be converted by $4.00.  As further consideration for the second extension, Mr. de Clara received warrants to purchase 184,930 shares of the Company’s common stock at a price of $5.00 per share at any time prior to January 6, 2015.  On May 13, 2011, to recognize Mr. de Clara’s willingness to agree to subordinate his note to the convertible preferred shares and convertible debt as part of the settlement agreement, the Company extended the maturity date of the note to July 6, 2015; however, Mr. de Clara may demand payment upon giving the Company a minimum 10 day notice.

During the three months ended December 31, 2013 and 2012, the Company paid $55,203 and $41,402 respectively in interest expense to Mr. de Clara.
 
 
18

 
 
F.           OPERATIONS AND FINANCING

The Company has incurred significant costs since its inception in connection with the acquisition of certain patented and unpatented proprietary technology and know-how relating to the human immunological defense system, patent applications, research and development, administrative costs, construction of laboratory facilities, and clinical trials.  The Company has funded such costs with proceeds from loans and the public and private sale of its common and preferred stock.  The Company will be required to raise additional capital or find additional long-term financing in order to continue with its research efforts.  To date, the Company has not generated any revenue from product sales.  The ability of the Company to complete the necessary clinical trials and obtain US Food & Drug Administration (FDA) approval for the sale of products to be developed on a commercial basis is uncertain. Ultimately, the Company must complete the development of its products, obtain the appropriate regulatory approvals and obtain sufficient revenues to support its cost structure.

The Company is currently running a large multi-national Phase III clinical trial for head and neck cancer with its partners TEVA Pharmaceuticals and Orient Europharma. The Company believes that it has enough capital to support its operations for more than the next twelve months and believes that it has ready access to new equity capital should the need arise. During fiscal year 2013, the Company raised $9.8 million net proceeds from several institutional investors.  During the three months ended December 31, 2013, the Company raised approximately $19.4 million in net proceeds through the sale of common stock and warrants in two public offerings.  These funds are expected to meet the Company’s cash requirements through 2014.  To finance the study beyond the next 12 months, the Company plans to raise additional capital in the form of corporate partnerships, debt and/or equity financings. The Company believes that it will be able to obtain additional financing since Multikine is a Phase III product designed to treat cancer and because it has done so consistently in the past. However, there can be no assurance that the Company will be successful in raising additional funds or that funds will be available to the Company on acceptable terms or at all.  If the Company does not raise the necessary amounts of money, the Company will either have to slow down or delay the Phase III clinical trial or even significantly curtail its operations until such time as it is able to raise the required funding.

Since the Company launched its Phase III trial for Multikine, the Company has spent approximately $11,300,000 as of December 31, 2013 on direct costs for the Phase III clinical trial.  The total remaining cash cost of the clinical trial is estimated to be about $33,300,000.  It should be noted that this estimate is based only on the information currently available in the Company’s contracts with the Clinical Research Organizations responsible for managing the Phase III trial.  This number can be affected by the speed of enrollment, foreign currency exchange rates and many other factors, some of which cannot be foreseen today.  It is therefore possible that the cost of the Phase III trial will be higher than currently estimated.

G.           COMMITMENTS AND CONTINGENCIES

Clinical Research Agreements

In March 2013, the Company entered into an agreement with Aptiv Solutions to provide certain clinical research services in accordance with a master service agreement.  The Company will reimburse Aptiv for costs incurred.  In May 2013, CEL-SCI made an advance payment of $400,000.  In October 2013, CEL-SCI made the second and final advance payment of $200,000. The funds advanced will be credited back in $150,000 annual increments from December 2014 through December 2017.  As of December 31, 2013, $150,000 of the deposit is classified as a current asset.

In April 2013, the Company entered into a co-development and revenue sharing agreement with Ergomed.  Under the agreement, Ergomed will contribute up to $10 million towards the Company’s Phase III trial in the form of offering discounted clinical services in exchange for a single digit percentage of milestone and royalty payments, up to a specific maximum amount.  The Company accounted for the co-development and revenue sharing agreement in accordance with ASC 808 “Collaborative Arrangements”.  The Company determined the payments to Erogmed are within the scope of ASC 730 “Research and Development.”  Therefore, the Company records the discount on the clinical services as a credit to research and development expense on its Statements of Operations.  Since the Company entered into the co-development and revenue sharing agreement with Ergomed it has incurred research and development expenses of approximately $2,017,000 related to Ergomed’s services.  This amount is net of Ergomed’s discount of approximately $634,000. During the three months ended December 31, 2013, the Company recorded, net of Ergomed’s discount, approximately $1,179,000 as research and development expense related to Ergomed’s services.

In October 2013, the Company entered into two co-development and profit sharing agreements with Ergomed.  One agreement supports the US Navy with the development of Multikine as a potential treatment in HIV/HPV co-infected men and women with peri-anal warts.  The other agreement focuses on the development of Multikine in HIV/HPV co-infected women with cervical dysplasia. Ergomed will assume up to $3 million in clinical and regulatory costs for each study.
 
 
19

 
 
On October 31, 2013, the Company commenced arbitration proceedings against inVentiv Health Clinical, LLC (inVentiv, f/k/a PharmaNet, LLC), the Company’s former clinical research organization.  The arbitration claim, initiated under the Commercial Rules of the American Arbitration Association, alleges (i) breach of contract, (ii) fraud in the inducement, and (iii) common law fraud, and seeks at least $50 million in damages.  The Company filed this arbitration because, among other reasons, the number of patients enrolled and treated in the study fell below the level agreed to with inVentiv.  In April 2013, the Company dismissed inVentiv and replaced it with Aptiv Solutions, Inc. and Ergomed Clinical Research Ltd, as noted above.

On December 12, 2013, inVentiv filed a counterclaim, alleging breach of contract on the part of CEL-SCI and seeking at least $2 million in damages.  On December 20, 2013, inVentiv moved to dismiss certain claims.  Given that this matter is at a preliminary stage, the Company is not in a position to predict or assess the likely outcome of these proceedings.

Lease Agreements

In August 2007, the Company leased a building near Baltimore, Maryland.  The building was remodeled in accordance with the Company’s specifications so that it can be used by the Company to manufacture Multikine for the Company’s Phase III clinical trial and sales of the drug if approved by the FDA.  The lease is for a term of twenty years and requires annual base rent to escalate each year at 3%.  The Company is required to pay all real and personal property taxes, insurance premiums, maintenance expenses, repair costs and utilities.  The lease allows the Company, at its election, to extend the lease for two ten-year periods or to purchase the building at the end of the 20-year lease.

The Company was required to deposit the equivalent of one year of base rent in accordance with the contract.  When the Company meets the minimum cash balance required by the lease, the deposit will be returned to the Company.  The $1,670,917 is included in non-current assets on December 31, 2013 and September 30, 2013.

The Company subleases a portion of its rental space on a month to month term lease, which requires a 30 day notice for termination. The Company receives $5,150 per month in rent for the subleased space.

The Company leases its research and development laboratory under a 60 month lease which expires February 28, 2017.  The operating lease includes escalating rental payments.  The Company is recognizing the related rent expense on a straight line basis over the full 60 month term of the lease at the rate of $11,360 per month.  As of December 31, 2013 and September 30, 2013, the Company has recorded a deferred rent liability of $4,591 and $3,992, respectively.

The Company leases its office headquarters under a 36 month lease which expires June 30, 2015. The operating lease includes escalating rental payments.  The Company is recognizing the related rent expense on a straight line basis over the full 36 month term of the lease at the rate $7,864 per month.  As of December 31, 2013 and September 30, 2013, the Company has recorded a deferred rent liability of $11,065 and $12,412, respectively.
 
 
20

 
 
The Company leased office equipment under a capital lease arrangement.  The term of the capital lease is 48 months and expires on September 30, 2016.  The monthly lease payment is $1,025.  The lease bears interest at approximately 16% per annum.

In October 2013, the Company purchased office equipment under a capital lease.  The term of the capital lease is 36 months and it expires on September 30, 2016.  The monthly lease payment is $299.  The lease bears interest at approximately 9% per annum.

H.           PATENTS

During the three months ended December 31, 2013 and 2012, the Company recorded patent impairment charges of $240 and $10,223, respectively.  For the three months ended December 31, 2013 and 2012, amortization of patent costs totaled $9,703 and $23,905, respectively. The Company estimates that future amortization expense will be as follows:

Nine months ending September 30, 2014
  $ 25,252  
Year ending September 30,
       
2015
    33,795  
2016
    33,795  
2017
    33,795  
2018
    33,461  
2019
    31,758  
Thereafter
    125,604  
Total
  $ 317,460  

I.           NET LOSS PER SHARE

The Company’s basic and diluted loss per share are as follows:  For the three months ended December 31, 2013 and 2012, the computation of dilutive net loss per share excluded options and warrants to purchase approximately 865,000 and 578,800 shares of common stock because their inclusion would have an anti-dilutive effect.

   
Three Months Ended December 31, 2013
 
   
Net Loss
   
Weighted Average Shares
   
LPS
 
                   
Basic loss per share
  $ (5,451,865 )     48,215,919     $ (0.11 )
Gain on derivatives
    (1,610,817 )                
                         
Dilutive loss per share
  $ (7,062,652 )     48,215,919     $ (0.15 )
 
   
Three Months Ended December 31, 2012
 
   
Net Loss
   
Weighted Average Shares
   
LPS
 
                         
Basic loss per share
  $ (2,310,246 )     28,311,602     $ (0.08 )
Gain on derivatives
    (2,746,198 )                
                         
Dilutive loss per share
  $ (5,056,444 )     28,311,602     $ (0.18 )

 
21

 
 
J.  
SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date these financial statements were filed and determined there are no subsequent events that require disclosure.
 
Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL    CONDITION AND RESULTS OF OPERATIONS

Liquidity and Capital Resources

The Company’s lead investigational therapy, Multikine® (Leukocyte Interleukin, Injection), is currently being tested in a Phase III clinical trial in advanced primary head and neck cancer. Multikine has been cleared by the regulators in eleven countries around the world, including the US. Multikine is also being used in a Phase I study with the US Naval Medical Center, San Diego under a Cooperative Research and Development Agreement (CRADA) in HIV/HPV co-infected men and women with peri-anal warts.

Multikine (Leukocyte Interleukin, Injection) is the full name of this investigational therapy, which, for simplicity, is referred to in the remainder of this report as Multikine.  Multikine is the trademark that the Company has registered for this investigational therapy, and this proprietary name is subject to FDA review in connection with the Company’s future anticipated regulatory submission for approval.  Multikine has not been licensed or approved by the FDA or any other regulatory agency.  Neither has its safety or efficacy been established for any use.

The Company also owns and is developing a pre-clinical technology called LEAPS (Ligand Epitope Antigen Presentation System).

All of the Company’s projects are under development.  As a result, the Company cannot predict when it will be able to generate any revenue from the sale of any of its products.

Since inception, the Company has financed its operations through the sale of equity securities, convertible notes, loans and certain research grants.  The Company’s expenses will likely exceed its revenues as it continues the development of Multikine and brings other drug candidates into clinical trials.  Until such time as the Company becomes profitable, any or all of these financing vehicles or others may be utilized to assist the Company’s capital requirements.

Capital raised by the Company has been expended primarily for patent applications, debt repayment, research and development, administrative costs, and the construction of the Company’s laboratory facilities.  The Company does not anticipate realizing significant revenues until it enters into licensing arrangements regarding its technology and know-how or until it receives regulatory approval to sell its products (which could take a number of years).  As a result the Company has been dependent upon the proceeds from the sale of its securities to meet all of its liquidity and capital requirements and anticipates having to do so in the future.
 
 
22

 
 
The Company will be required to raise additional capital or find additional long-term financing in order to continue with its research efforts.  The ability of the Company to complete the necessary clinical trials and obtain FDA approval for the sale of products to be developed on a commercial basis is uncertain.  Ultimately, the Company must complete the development of its products, obtain the appropriate regulatory approvals and obtain sufficient revenues to support its cost structure.  The Company believes that, counting its cash on hand and access to the capital markets established over the years, it will have enough capital to support its operations through year end.

The Company estimates the total cash cost of the Phase III trial, with the exception of the parts that will be paid by its licensees, Teva Pharmaceuticals and Orient Europharma, to be approximately $33,300,000.  This is in addition to approximately $11,300,000 which has been paid as of December 31, 2013.  This estimate is based on the information currently available in the Company’s contracts with the Clinical Research Organization responsible for managing the Phase III trial.  This number can be affected by the speed of enrollment, foreign currency exchange rates and many other factors, some of which cannot be foreseen today.  It is therefore possible that the cost of the Phase III trial will be higher than currently estimated.

In April 2013, the Company replaced the clinical research organization (CRO) running its Phase III clinical trial. This was necessary since the patient enrollment in the study dropped off substantially following a takeover of the CRO which caused most of the members of the CRO’s study team to leave the CRO.  The Company  has hired two CRO’s who will manage the global Phase III study; Aptiv Solutions and Ergomed who are both international leaders in managing oncology trials. Both CRO’s will help the Company expand the trial by 60-80 clinical sites globally. As of April 2013, the last update given by the Company, the study has enrolled 117 patients and has been conducted at 39 sites in 8 countries, including three centers in Israel where the Company’s partner Teva Pharmaceuticals has the marketing rights, and nine centers in Taiwan where the Company’s partner Orient Europhama has the marketing rights.

Under a co-development agreement, Ergomed will contribute up to $10 million towards the study where it will perform clinical services in exchange for a single digit percentage of milestone and royalty payments, up to a specified maximum amount, only from sales for head and neck cancer.  Ergomed, a privately-held firm headquartered in Europe with global operations, has entered into five similar co-development agreements, including one with Genzyme (purchased by Sanofi in 2011 for over $20 billion).  Ergomed will be responsible for the majority of the new patient enrollment since it has a novel model for clinical site management to accelerate patient recruitment and retention.   For example, they have almost 25 physicians who can directly call on clinical sites to aid recruitment and retention.  Some of the Ergomed physicians also have experience of being clinical investigators themselves. The Company believes that this interaction on a physician to physician level is what is needed to help physicians increase enrollment in the Multikine study.

During the three months ended December 31, 2013, the Company’s cash increased by approximately $13,452,000.  Significant components of this increase include net proceeds from the sale of the Company’s stock of approximately $19,380,000 offset by net cash used to fund the Company’s regular operations, including its on-going Phase III clinical trial, of approximately $5,917,000, purchases of equipment of approximately $9,000 and payment on capital leases of approximately $3,000. During the three months ended December 31, 2012, the Company’s cash increased by approximately $6,795,000.  Significant components of this increase include net proceeds from the sale of the Company’s stock of approximately $9,807,000 offset by net cash used to fund the Company’s regular operations, including its on-going Phase III clinical trial, of approximately $2,995,000, purchases of equipment of approximately $16,000 and payment on capital leases of approximately $1,000.
 
 
23

 
 
In December 2012, CEL-SCI sold 3,500,000 shares of its common stock for $10,500,000, or $3.00 per share, in a registered direct offering.  The investors in this offering also received Series R warrants which entitle the investors to purchase up to 2,625,000 shares of CEL-SCI’s common stock.  The Series R warrants may be exercised at any time before December 7, 2016 at a price of $4.00 per share.  CEL-SCI paid Chardan Capital Markets, LLC, the placement agent for this offering, a cash commission of $682,500.

On October 11, 2013, the Company closed a public offering of units of common stock and Series S warrants at a price of $1.00 per unit for net proceeds of $16,400,000, net of underwriting discounts and commissions.  Each unit consisted of one share of common stock and a warrant to purchase one share of common stock.  The warrants are immediately exercisable and expire on October 11, 2018, and have an exercise price of $1.25.  In November 2013, the underwriters purchased an additional 2,648,913 warrants pursuant to the overallotment option, for which the Company received net proceeds of $24,370.

On December 24, 2013, the Company closed a public offering of units of common stock and warrants at a price of $0.63 per unit for net proceeds of $2,790,000, net of underwriting discounts and commissions.  Each unit consisted of one share of common stock and a warrant to purchase one share of common stock.  The warrants are immediately exercisable and expire on October 11, 2018, and have an exercise price of $1.25.   The underwriters exercised the option for the full 10% overallotment, for which the Company received net proceeds of approximately $279,000.

The Company incurred $185,508 in offering costs related to the two offerings which were charged to additional paid in capital and netted against the cash proceeds in the Statement of Cash Flows.

The October and December 2013 financings triggered the reset provision  of the Series N warrants which resulted in the issuance of an additional 1,563,083 shares of common stock.  The cost of additional shares issued was $1,117,447. This cost was recorded as a debit and a credit to additional paid-in capital and was deemed a dividend.

Results of Operations and Financial Condition

During the three months ended December 31, 2013, grant and other income increased by approximately $98,000 compared to the three months ended December 31, 2012.
 
During the three months ended December 31, 2013, research and development expenses increased by approximately $1,095,000 compared to the three months ended December 31, 2012.  The Company is continuing the Phase III clinical trial and research and development fluctuates based on the activity level of the clinical trial.
 
 
24

 
 
During the three months ended December 31, 2013, general and administrative expenses decreased by approximately $30,000 compared to the three months ended December 31, 2012. This decrease is primarily due to decreased costs of employee stock options.

The gain on derivative instruments of approximately $1,611,000 for the three months ended December 31, 2013 was the result of the change in fair value of the derivative liabilities during the period.  This change was caused by fluctuations in the share price of the Company’s common stock.

Interest expense was approximately $43,000 for the three months ended December 31, 2013 and consisted entirely of $42,000 in interest expense on the loan from the Company’s president and $1,000 in interest on capital leases.   Interest expense was approximately $41,000 for the three months ended December 31, 2012 and consisted entirely of interest expense on the loan from the Company’s president.

Research and Development Expenses

During the three month periods ended December 31, 2013 and 2012, the Company’s research and development efforts involved Multikine and LEAPS.  The table below shows the research and development expenses associated with each project.

   
Three months ended December 31,
 
   
2013
   
2012
 
             
MULTIKINE
  $ 3,922,477     $ 2,832,695  
LEAPS
    97,064       92,027  
                 
TOTAL
  $ 4,019,541     $ 2,924,722  

Clinical and other studies necessary to obtain regulatory approval of a new drug involve significant costs and require several years to complete.  The extent of the Company’s clinical trials and research programs are primarily based upon the amount of capital available to the Company and the extent to which the Company has received regulatory approvals for clinical trials.  The inability of the Company to conduct clinical trials or research, whether due to a lack of capital or regulatory approval, will prevent the Company from completing the studies and research required to obtain regulatory approval for any products which the Company is developing.  Without regulatory approval, the Company will be unable to sell any of its products.  Since all of the Company’s projects are under development, the Company cannot predict when it will be able to generate any revenue from the sale of any of its products.

Critical Accounting Estimates and Policies

Management’s discussion and analysis of the Company’s financial condition and results of operations is based on its unaudited condensed financial statements. The preparation of these financial statements is based on the selection of accounting policies and the application of significant accounting estimates, some of which require management to make judgments, estimates and assumptions that affect the amounts reported in the financial statements and notes. The Company believes some of the more critical estimates and policies that affect its financial condition and results of operations are in the areas of operating leases and stock-based compensation. For more information regarding the Company’s critical accounting estimates and policies, see Part II, Item 7 of the Company’s 2013 10-K report. The application of these critical accounting policies and estimates has been discussed with the Audit Committee of the Company’s Board of Directors.
 
 
25

 
 
Item 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

The Company has a loan from the president that bears interest at 15%.  The Company does not believe that it has any significant exposures to market risk.

Item 4.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the direction and with the participation of the Company’s management, including the Company’s Chief Executive and Chief Financial Officer, the Company has conducted an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures as of December 31, 2013.  The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its periodic reports with the Securities and Exchange Commission is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and regulations, and that such information is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.  The Company’s disclosure controls and procedures are designed to provide a reasonable level of assurance of reaching its desired disclosure control objectives. Based on the evaluation, the Chief Executive and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2013.

Changes in Internal Control over Financial Reporting

The Company’s management, with the participation of the Chief Executive and Chief Financial Officer, has evaluated whether any change in the Company’s internal control over financial reporting occurred during the first three months of fiscal year 2014.  There was no change in the Company’s internal control over financial reporting during the three months ended December 31, 2013.

 
26

 
 
PART II
 
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds.

Issuance of Restricted Stock

During the three months ended December 31, 2013 the Company issued 34,000 shares of common stock to a consultant for investor relations services and 1,563,083 shares of common stock to an investor per the reset provision associated with the Company’s Series N financing.

The Company relied upon the exemption provided by Section 4(2) of the Securities Act of 1933 with respect to the issuance of these shares.  The persons who acquired these shares were sophisticated investors and were provided full information regarding the Company’s business and operations.  There was no general solicitation in connection with the offer or sale of these securities.  The persons who acquired these shares acquired them for their own accounts.  The certificates representing these shares bear a restricted legend providing that they cannot be sold except pursuant to an effective registration statement or an exemption from registration.  No commission or other form of remuneration was given to any person in connection with the issuance of these shares.
 
Item 6.   (a)    Exhibits
 
Number   Exhibit
     
31   Rule 13a-14(a) Certifications
     
32   Section 1350 Certifications
 
 
 
27

 
 
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   , 2014 
By:
/s/ Geert Kersten  
   
Geert Kersten, Principal Executive Officer*
 
       
       


 
*  Also signing in the capacity of the Principal Accounting and Financial Officer.
 
 
 
 28

EX-31 2 cvm_ex31.htm CERTIFICATION cvm_ex31.htm
Exhibit 31
 
I, Geert Kersten, certify that:
 
1.           I have reviewed this quarterly report on Form 10-Q of CEL-SCI Corporation;
 
2.           Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.           The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a)           designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b)           designed such internal control over financial reporting, or cause such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c)           evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d)           disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.           The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
 
a)           all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b)           any fraud, whether or not material, that involves management or other employees who have significant role in the registrant’s internal control over financial reporting.
 
February   , 2014
  /s/ Geert Kersten  
    Geert Kersten  
    Principal Executive Officer  
       
 
 
 

 
 
I, Geert Kersten, certify that:
 
1.           I have reviewed this quarterly report on Form 10-Q of CEL-SCI Corporation;
 
2.           Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.           The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a)           designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b)           designed such internal control over financial reporting, or cause such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c)           evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d)           disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.           The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
 
a)           all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b)           any fraud, whether or not material, that involves management or other employees who have significant role in the registrant’s internal control over financial reporting.
 
February   , 2014
  /s/ Geert Kersten  
    Geert Kersten  
    Principal Financial Officer
 
 
EX-32 3 cvm_ex32.htm CERTIFICATION cvm_ex32.htm
Exhibit 32
 
In connection with the Quarterly Report of CEL-SCI Corporation (the “Company”) on Form 10-Q for the period ending December 31, 2013 as filed with the Securities and Exchange Commission (the “Report”), Geert Kersten, the Principal Executive and Financial Officer of the Company, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

(1)  
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)  
The information contained in the Report fairly presents, in all material respects, the financial condition and results of the Company.

February   , 2014
  /s/ Geert Kersten  
    Geert Kersten  
   
Principal Executive and
    Principal Financial Officer
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I. NET LOSS PER SHARE (Details) (USD $)
3 Months Ended
Dec. 31, 2013
Dec. 31, 2012
I. Net Loss Per Share Details    
Net loss – available to common shareholders $ (5,451,865) $ (2,310,246)
Less: Gain on derivative instruments (1,610,817) (2,746,198)
Net loss - diluted $ (7,062,652) $ (5,056,444)
Weighted average number of shares - basic and diluted 48,215,919 28,311,602
Earnings per share - basic $ (0.11) $ (0.08)
Earnings per share - diluted $ (0.15) $ (0.18)

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C. STOCKHOLDERS EQUITY (Details 3) (USD $)
Dec. 31, 2013
Sep. 30, 2013
C. Stockholders Equity Details 3    
Series A through E $ 6,106 $ 6,106
Series N 531,255 41,501
Series F and G warrants 12,667 12,667
Series H warrants 12,000 36,000
Series Q warrants 24,000 48,000
Series R warrants 157,500 288,750
Series S warrants 5,339,750   
Total derivative liabilities $ 6,143,278 $ 433,024
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C. STOCKHOLDERS EQUITY
3 Months Ended
Dec. 31, 2013
Notes to Financial Statements  
C. STOCKHOLDERS' EQUITY

Stock options, stock bonuses and compensation granted by the Company as of December 31, 2013 are as follows:

 

Name of Plan   Total Shares Reserved Under Plans     Shares Reserved for Outstanding Options     Shares Issued as Stock Bonus     Remaining Options/Shares Under Plans  
Incentive Stock Option Plans     1,960,000       1,573,597       N/A       145,703  
Non-Qualified Stock Option Plans     5,680,000       3,674,544       N/A       1,443,537  
Stock Bonus Plans     1,594,000       N/A       958,325       634,919  
Stock Compensation Plan     1,350,000       N/A       791,145       558,855  

 

There were zero and 1,437,466 options granted to employees and directors during the three months ended December 31, 2013 and 2012, respectively.

 

In December 2012, the Company offered employees and directors holding options that expire on April 1, 2013 the opportunity to forfeit these options and have new options issued with an expiration date of December 17, 2017.  All twelve employees and directors eligible for this offer accepted the terms.  This resulted in the cancellation of 387,466 options priced at $2.20 per share and the concurrent issuance of the same number of options at $2.80 per share.  In accordance with ASC 718, the Company recorded the incremental compensation cost of the options.  The incremental compensation cost is the excess of the fair value of the replacement award over the fair value of the cancelled award at the cancellation date.  At the cancellation date, the incremental compensation cost was $477,879.

 

Stock-Based Compensation Expense

 

    Three Months Ended December 31,  
    2013     2012  
             
 Employees   $ 510,278     $ 966,585  
 Non-employees   $ 214,720     $ 107,818  

 

   

 

At December 31, 2013 and September 30, 2013, respectively, non-employee stock compensation expense excluded $55,362 and $57,553 of prepaid consulting expenses.

 

Derivative Liabilities, Warrants and Other Options

 

Below is a chart showing the derivative liabilities, warrants and other options outstanding at December 31, 2013:

 

Warrant   Issue Date   Shares Issuable upon Exercise of Warrant     Exercise Price   Expiration Date   Reference  
                         
Series N   8/18/08     2,951,420       0.53   8/18/14     1  
Series A   6/24/09     130,347       5.00   12/24/14     1  
Schleuning (Series A)   7/8/09     16,750       5.00   1/8/15     1  
Series B   9/4/09     50,000       6.80   9/4/14     1  
Series C   8/20/09 – 8/26/09     463,487       5.50   2/20/15     1  
Series E   9/21/09     71,428       17.50   8/12/14     1  
Series F   10/6/11     1,200,000       4.00   10/6/14     1  
Series G   10/6/11     66,667       4.00   8/12/14     1  
Series H   1/26/12     1,200,000       5.00   8/1/15     1  
Series Q   6/21/12     1,200,000       5.00   12/22/15     1  
Series R   12/6/12     2,625,000       4.00   12/6/16     1  
Series S   10/11/13-12/24/13     25,713,095       1.25   10/11/18     1  
                               
Series L   4/18/07     25,000       7.50   4/17/14     2  
Series L (repriced)   4/18/07     70,000       2.50   4/2/15     2  
Series M (modified)   4/18/07     500,000       1.00   4/20/14     2  
                               
Series P   2/10/12     590,001       4.50   3/6/17     3  
                               
Private Investors   7/18/05-6/30/09     740,938       5.60-8.20   1/26/14 - 7/18/14     4  
                               
Warrants held by Officer and Director   6/24/09-7/6/09     349,754       4.00 – 5.00   12/24/14 – 1/6/15     5  
                               
Consultants   2/15/05-10/28/13     200,750       0.85-20.00   5/20/14 - 12/27/17     6  

 

 

1.   Derivative Liabilities

 

See below for details of the balances of derivative instruments at December 31, 2013 and September 30, 2013.

 

   

December 31,

2013

   

September 30,

2013

 
             
Series A through E warrants   $ 6,106     $ 6,106  
Series N warrants     531,255       41,501  
Series F and G warrants     12,667       12,667  
Series H warrants     12,000       36,000  
Series Q warrants     24,000       48,000  
Series R warrants     157,500       288,750  
Series S warrants     5,339,750       -  
                 
Total derivative liabilities   $ 6,143,278     $ 433,024  

 

The Company reviews all outstanding warrants in accordance with the requirements of ASC 815.  This topic provides that an entity should use a two-step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions.  The warrant agreements provide for adjustments to the exercise price for certain dilutive events, which includes an adjustment to the number of shares issuable upon the exercise of the warrant in the event that the Company makes certain equity offerings in the future at a price lower than the exercise prices of the warrant instruments.  Under the provisions of ASC 815, the warrants are not considered indexed to the Company’s stock because future equity offerings or sales of the Company’s stock are not an input to the fair value of a “fixed-for-fixed” option on equity shares, and equity classification is therefore precluded.

 

In accordance with ASC 815, derivative liabilities must be measured at fair value upon issuance and re-valued at the end of each reporting period through expiration.  Any change in fair value between the respective reporting dates is recognized as a gain or loss.

 

Series A through E Warrants

 

The Company accounted for the Series A through E Warrants as derivative liabilities in accordance with ASC 815.  These warrants do not qualify for equity accounting and must be accounted for as derivative liabilities since the warrant agreements provide the holder with the right, at its option, to require the Company to a cash settlement of the warrants at Black-Scholes value in the event of a Fundamental Transaction, as defined in the warrant agreement.  Since the occurrence of a Fundamental Transaction is not entirely within the Company's control, there exist circumstances that would require net-cash settlement of the warrants while holders of shares would not receive a cash settlement.

 

In June 2009, the Company issued 1,011,656 Series A warrants exercisable at $5.00 per share in connection with a financing.  The cost of the warrants of $2,775,021 was recorded as a debit to additional paid-in capital and a credit to derivative liabilities.  As of December 31, 2013, 130,347 of these warrants remained outstanding.  As of December 31, 2013 and September 30, 2013, the fair value of the remaining Series A warrants was $1,303.

 

In July 2009, the Company issued 16,750 warrants to a private investor.  The warrants were issued with an exercise price of $5.00 per share and valued at $43,550 using the Black Scholes method. The cost of the warrants was accounted for as a debit to additional paid-in capital and a credit to derivative liabilities. As of December 31, 2013, 16,750 warrants remained outstanding.  As of December 31, 2013 and September 30, 2013, the fair value of the remaining warrants was $168.

 

 

In connection with a loan received and fully repaid in a prior period, the Company issued 50,000 Series B warrants with an exercise price of $6.80 per share.  As of December 31, 2013, 50,000 Series B warrants remained outstanding.  As of December 31, 2013 and September 30, 2013, the fair value of the remaining Series B warrants was $0.

 

In connection with an August 2009 financing, the Company issued 539,222 Series C warrants exercisable at $5.50 per share.  As of December 31, 2013, 463,487 of these warrants remained outstanding.    As of December 31, 2013 and September 30, 2013, the fair value of the remaining Series C warrants was $4,635.

 

In September 2009, the Company issued 71,428 Series E warrants with an exercise price of $17.50 per share to the placement agent in connection with a financing. As of December 31, 2013, 71,428 Series E warrants remained outstanding.  As of December 31, 2013 and September 30, 2013, the fair value of the remaining Series E warrants was $0.

 

For the three months ended December 31, 2013 and 2012, the Company recorded a gain of $0 and $332,436, respectively, on the Series A through E warrants.

 

Series N Warrants

 

In October 2011, the Company sold 1,333,333 shares of its common stock to private investors for $4,000,000, or $3.00 per share.  This financing triggered the reset provision in the Series N warrants, which allows for adjustments in the exercise price if subsequent equity sales are offered at a lower price.  As a result, the outstanding 389,078 Series N warrants issued to investors in connection with a prior year financing, were reset from $4.00 to $3.00.  In addition, the investors were issued 129,693 warrants exercisable at $3.00 per share at an initial cost of $220,478.  The cost was accounted for as a debit to loss on derivatives and a credit to derivative liabilities.

 

On October 11, 2013 and December 24, 2013, in connection with public offerings of common stock on those dates, the Company issued the Series N warrant holders 2,432,649 additional warrants as required by the warrant agreements.  As of December 31, 2013, 2,951,420 Series N warrants remain outstanding.  As of December 31, 2013 and September 30, 2013, the values of the Series N warrants were $531,255 and $41,501, respectively.  During the three months ended December 31, 2013 and 2012, the Company recorded a loss of $489,754 and a gain of $311,262 on the Series N warrants, respectively.

 

Series F and G Warrants

 

In October 2011, in connection with a financing, the Company issued 1,200,000 Series F warrants exercisable at $4.00 per share at any time prior to October 6, 2014.  The Company also issued 66,667 Series G warrants exercisable at $4.00 per share to the placement agent for this offering.  The Series G warrants are exercisable at any time prior to August 12, 2014.  The initial cost of the warrants of $2,146,667 was recorded as a debit to additional paid-in capital and a credit to derivative liabilities. As of December 31, 2013 and September 30, 2013, the fair value of the Series F and G warrants was $12,667. During the three months ended December 30, 2013 and 2012, the Company recorded a gain on the Series F and G warrants of $0 and $640,000, respectively.

 

 

Series H Warrants

 

In January 2012, in connection with a financing, the Company issued 1,200,000 Series H warrants exercisable at $5.00 per share at any time prior to August 1, 2015. The initial cost of the warrants of $2,400,000 was recorded as a debit to additional paid-in capital and a credit to derivative liabilities. As of December 31, 2013 and September 30, 2013, the fair values of the Series H warrants were $12,000 and $36,000, respectively.   During the three months ended December 31, 2013 and 2012, the Company recorded a gain of $24,000 and $600,000, respectively, on the Series H warrants.

 

Series Q Warrants

 

In June 2012, in connection with a financing, the Company issued 1,200,000 Series Q warrants exercisable at $5.00 per share at any time prior to December 22, 2015.  The initial cost of the warrants of $2,160,000 was recorded as a debit to additional paid-in capital and a credit to derivative liabilities. As of December 31, 2013 and September 30, 2013, the fair values of the Series Q warrants were $24,000 and $48,000, respectively.   During the three months ended December 31, 2013 and 2012 the Company recorded a gain of $24,000 and $600,000, respectively, on the Series Q warrants.

 

Series R Warrants

 

In December 2012 the Company sold 3,500,000 shares of its common stock for $10,500,000, or $3.00 per share, in a registered direct offering.  The investors in this offering also received Series R warrants which entitle the investors to purchase up to 2,625,000 shares of the Company’s common stock.  The Series R warrants may be exercised at any time before December 7, 2016 at a price of $4.00 per share.   The initial cost of the warrants of $4,200,000 was recorded as a debit to additional paid-in capital and a credit to derivative liabilities. As of December 31, 2013 and September 30, 2013, the fair value of the derivative liabilities totaled $157,500 and $288,750, respectively.  During the three months ended December 31, 2013 and the Company recorded a gain of $131,250 and $262,500, respectively, on the Series R warrants.

 

Series S Warrants

 

On October 11, 2013, the Company closed a public offering of 17,826,087 units of common stock and warrants at a price of $1.00 per unit for net proceeds of $16,400,000, net of underwriting discounts and commissions and offering expenses of the Company.  Each unit consisted of one share of common stock and one Series S warrant to purchase one share of common stock.  The Series S warrants are immediately exercisable, expire on October 11, 2018, and have an exercise price of $1.25.  In November 2013, the underwriters purchased an additional 2,648,913 warrants pursuant to the overallotment option, for which the Company received net proceeds of $24,370.

 

 

On December 24, 2013, the Company closed a public offering of 4,761,905 units of common stock and warrants at a price of $0.63 per unit for net proceeds of $2,790,000, net of underwriting discounts and commissions and offering expenses of the Company.  Each unit consisted of one share of common stock and one Series S warrant to purchase one share of common stock.  The Series S warrants are immediately exercisable, expire on October 11, 2018, and have an exercise price of $1.25. The underwriters purchased an additional 476,190 units of common stock and warrants pursuant to the overallotment option, for which the Company received net proceeds of approximately $279,000.

 

The initial cost of the S warrants of $7,321,071 was recorded as a debit to additional paid-in capital and a credit to derivative liabilities. As of December 31, 2013, the fair value of the derivative liabilities totaled $5,399,750.  During the three months ended December 31, 2013, the Company recorded a gain of $1,921,321 on the Series S warrants.

 

1.   Series L and M Warrants

 

In April 2007, the Company completed a $15 million private financing.  Shares were sold at $7.50, a premium over the closing price of the previous two weeks.  The financing was accompanied by 1,000,000 warrants with an exercise price of $7.50 and 1,000,000 warrants with an exercise price of $20.00.  The warrants are known as Series L and Series M warrants, respectively.  The warrants issued with the financing qualified for equity treatment in accordance with ASC 815.  The cost of Series L and Series M warrants were recorded as a debit and a credit to additional paid-in capital.

 

In November 2011, the Company reduced the exercise price of 160,000 Series L warrants to $3.40. The additional cost of $86,826 was recorded as a debit and a credit to additional paid-in capital and was a deemed dividend.  In March 2012, 60,000 Series L warrants were exercised at a price of $3.40, and the Company received proceeds of $204,000.

 

In April 2012, the 25,000 Series L warrants were transferred to a consultant exercisable at a price of $7.50 per share and were extended for two years from the current expiration date.  The additional value of $43,910 was accounted for as a credit to additional paid-in capital and a debit to general and administrative expense.  In June 2012, 10,167 Series L warrants with an exercise price of $7.50 per share, expired.  In April 2013, 100,000 Series L warrants were repriced to $2.50 and extended for two years to April 2, 2015 in return for a reduction in outstanding warrants to 70,000.  The additional cost of $59,531 was recorded as a debit and a credit to additional paid-in capital and was a deemed dividend.  This cost was included in modification of warrants and increased the net loss available to shareholders on the statements of operations.  As of December 31, 2013, 70,000 of the Series L warrants at the reduced exercise price of $2.50 and 25,000 warrants at the original exercise price of $7.50 remained outstanding.

 

In February 2011, 600,000 Series M warrants, exercisable at a price of $6.00 per share were extended for two years to July 31, 2014.  This cost of $661,457 was recorded as a debit and a credit to additional paid-in capital and was a deemed dividend.

 

 

In November 2011, the Company reduced the exercise price of 600,000 Series M warrants from $6.00 to $3.40.  The additional cost of $238,794 was recorded as a debit and a credit to additional paid-capital and was a deemed dividend.

 

In October 2013, the Company reduced the exercise prices of the Series M warrants from $3.40 to $1.00 in exchange for a reduction in the number of warrants from 600,000 to 500,000.  The additional cost of $76,991 was recorded as non-employee stock compensation expense.  As of December 31, 2013, 500,000 Series M warrants at the reduced exercise price of $1.00 remained outstanding.

 

3.   Series O and P Warrants

 

In March 2009, as further consideration for its rights under a licensing agreement, Byron Biopharma LLC (“Byron”) purchased 375,000 Units from the Company at a price of $2.00 per Unit.  Each Unit consisted of one share of the Company’s common stock and two Series O warrants.  All Series O warrants were exercised by September 30, 2012.

 

On February 10, 2012, the Company issued 590,001 Series P warrants to the former holder of the Series O warrants as an inducement for the early exercise of the Series O warrants. Series O warrants entitled the holder to purchase 590,001 shares of the Company’s common stock at a price of $2.50 per share at any time on or prior to March 6, 2016.  The Series P warrants allow the holder to purchase up to 590,001 shares of the Company’s common stock at a price of $4.50 per share.  The Series P warrants are exercisable at any time prior to March 6, 2017.  The warrants were accounted for as an equity transaction using the Black-Scholes method to value the warrants.  The fair value of the warrants was calculated to be $1,593,000.  This cost was recorded as a debit and a credit to additional paid-in capital.    As of December 31, 2013, 590,001 Series P warrants remained outstanding.

 

4.   Private Investor Warrants

 

In February 2011, 132,500 warrants issued to an investor with exercise prices between $5.60 and $8.20 were extended for three years.  The additional value of $406,912 was calculated using the Black Scholes method and was accounted for as a debit and a credit to additional paid-in capital.  As of December 31, 2013, 132,500 warrants remained outstanding.

 

In January 2009, as part of an amended lease agreement on the manufacturing facility, the Company repriced 300,000 warrants issued to the lessor in July 2007 at $12.50 per share and which were to expire on July 12, 2013. These warrants were repriced at $7.50 per share and expire on January 26, 2014. The cost of this repricing and extension of the warrants was $70,515 and was accounted for as a debit to the deferred rent asset and a credit to additional paid-in capital.  In addition, 78,750 additional warrants were given to the lessor of the manufacturing facility on the same date, exercisable at a price of $7.50 per share, and will expire on January 26, 2014. The cost of these warrants was $45,207 and was accounted for as a debit to the deferred rent asset and a credit to additional paid-in capital.  As of December 31, 2013, 378,750 warrants remained outstanding.

 

 

Between March 31 and June 30, 2009, 229,688 warrants were issued at $7.50 to the leaseholder on the manufacturing facility in consideration for the deferral of rent payments.  As of December 31, 2013, 229,688 warrants remained outstanding.

 

3.   Warrants Held by Officer and Director

 

Between December 2008 and June 2009, Maximilian de Clara, the Company’s President and a director, loaned the Company $1,104,057 under a note payable.  In June 2009, the Company issued 164,824 warrants, exercisable at $4.00 per share, to Mr. De Clara.  The warrants are exercisable at any time prior to December 24, 2014.  These warrants were valued at $65,796 using the Black-Scholes method.  In July 2009, as consideration for a further extension of the loan, the Company issued 184,930 warrants, exercisable at $5.00 per share, to Mr. De Clara.  These warrants were valued at $341,454 using the Black-Scholes method and can be exercised at any time prior to January 6, 2015.  The first warrants were recorded as a discount to the loan and a credit to additional paid-in capital.  The second warrants were recorded as a debit to derivative loss of $831,230, a premium of $341,454 on the loan and a credit to additional paid-in capital of $489,776.  The warrants and premium are fully amortized.  As of December 31, 2013, 349,754 warrants remained outstanding. See Note E for additional information.

 

4.   Options and Shares Issued to Consultants

 

As of December 31, 2013, 200,750 options issued to consultants as payment for services remained outstanding, of which 191,250 options were issued from the Non-Qualified Stock Option plans.   On May 22, 2013, 3,000 options previously issued to a consultant from the Non-Qualified Stock Option plans expired.

 

On October 15, 2013, the Company entered into a consulting agreement for services to be provided through October 14, 2014.  In consideration for services provided, the Company agreed to issue the consultant 100,000 restricted shares in three installments – 34,000 upon signing, 33,000 on January 15, 2014, and 33,000 on March 14, 2014.  Accordingly, during the three months ended December 31, 2013, the Company issued the consultant 34,000 shares of restricted stock at the fair market value of $0.80 per share.  The aggregate fair market value of $27,200 was recorded as a prepaid expense and will be charged to general and administrative expense over the period of service.

 

On October 20, 2013, the Company entered into a consulting agreement for services to be provided through October 19, 2016.  In consideration for services provided, the Company agreed to issue the consultant 34,164 restricted shares each month of the agreement, with the first three months being issued in advance. Accordingly, the Company issued the consultant 102,492 shares of restricted stock at the fair market value of $0.82 per share.  The aggregate fair market value of $84,043 was recorded as a prepaid expense and will be charged to general and administrative expense over the period of service.  On December 28, 2012, the Company entered into a consulting agreement with this same consultant for services to be provided through December 27, 2013.  In consideration for the services to be provided, the Company issued the consultant 50,000 shares of common stock and 50,000 options to purchase common stock at a price of $2.80 per share.  The common shares were issued at the fair market value on the agreement date of $2.80.  The aggregate fair market value of $140,000 was recorded as a prepaid expense and was charged to general and administrative expense over the period of service.  The fair value of the options issued, as calculated using the Black-Scholes method, was determined to be $98,150 and was also charged to general and administrative expense over the period of service.

 

 

On October 28, 2013, the Company entered into a consulting agreement for services to be provided through April 27, 2014.  In consideration for services provided, the Company granted the consultant 60,000 options to purchase common stock at a price of $0.85 per share.  The fair value of the options issued, as calculated using the Black-Scholes method, was determined to be $24,294 and was recorded as a prepaid expense and will be charged to general and administrative expense over the period of service.

 

During the three months ended December 31, 2013 and 2012, the Company recorded expense of $137,729 and $1,985, respectively relating to these consulting arrangements.  As of December 31, 2013 and September 30, 2013, the Company recorded $55,362 and $57,553, respectively, in prepaid consulting expenses.

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E. LOANS FROM OFFICER (Details Narrative) (USD $)
3 Months Ended
Dec. 31, 2013
Dec. 31, 2012
E. Loans From Officer Details Narrative    
Interest expense paid to Mr. de Clara $ 55,203 $ 41,402
XML 18 R28.htm IDEA: XBRL DOCUMENT v2.4.0.8
D. FAIR VALUE MEASUREMENTS (Details 1) (USD $)
3 Months Ended 12 Months Ended
Dec. 31, 2013
Sep. 30, 2013
D. Fair Value Measurements Details 1    
Beginning balance $ 433,024 $ 6,983,690
Issuances 7,321,071 4,200,000
Settlements      
Realized and unrealized gains recorded in Earnings Recorded in earnings (1,610,817) (10,750,666)
Ending balance $ 6,143,278 $ 433,024
XML 19 R30.htm IDEA: XBRL DOCUMENT v2.4.0.8
G. COMMITMENTS AND CONTINGENCIES (Details Narrative) (USD $)
3 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Sep. 30, 2013
Research and development expense $ 4,019,541 $ 2,924,722  
Rent deposit included in non-current assets 1,670,917   1,670,917
R & D deferred rent liability 4,591   3,992
Deferred rent liability $ 11,065   $ 12,412
XML 20 R31.htm IDEA: XBRL DOCUMENT v2.4.0.8
H. PATENTS (Details) (USD $)
Dec. 31, 2013
H. Patents Details  
Three months ending September 30, 2014 $ 25,252
Year ending September 30, 2015 33,795
Year ending September 30, 2016 33,795
Year ending September 30, 2017 33,795
Year ending September 30, 2018 33,461
Year ending September 30, 2019 31,758
Thereafter 125,604
Total $ 317,460
XML 21 R8.htm IDEA: XBRL DOCUMENT v2.4.0.8
B. NEW ACCOUNTING PRONOUNCEMENTS
3 Months Ended
Dec. 31, 2013
Accounting Changes and Error Corrections [Abstract]  
B. NEW ACCOUNTING PRONOUNCEMENTS

There are no significant new accounting pronouncements that would impact the condensed financial statements.

XML 22 R32.htm IDEA: XBRL DOCUMENT v2.4.0.8
H. PATENTS (Details Narrative) (USD $)
3 Months Ended
Dec. 31, 2013
Dec. 31, 2012
H. Patents Details Narrative    
Patent impairment charges $ 240 $ 10,223
Amortization of patent costs $ 9,703 $ 23,905
XML 23 R2.htm IDEA: XBRL DOCUMENT v2.4.0.8
BALANCE SHEETS (USD $)
Dec. 31, 2013
Sep. 30, 2013
ASSETS    
Cash and cash equivalents $ 13,494,028 $ 41,612
Receivables 45,879 74,263
Prepaid expenses 988,699 780,523
Deposits - current portion 150,000 0
Inventory used for R&D and manufacturing 1,347,257 1,016,628
Deferred rent - current portion 585,156 598,717
Total current assets 16,611,019 2,511,743
RESEARCH AND OFFICE EQUIPMENT AND LEASEHOLD IMPROVEMENTS-- less accumulated depreciation depreciation and amortization of $3,010,439 and $2,967,345 463,053 489,336
PATENT COSTS--less accumulated amortization of $1,148,214 and $1,313,046 317,460 318,195
DEFERRED RENT - net of current portion 5,285,781 5,448,381
DEPOSITS 2,120,917 2,070,917
TOTAL ASSETS 24,798,230 10,838,572
LIABILITIES AND STOCKHOLDERS' EQUITY    
Accounts payable 1,627,765 1,924,482
Accrued expenses 346,401 113,496
Due to employees 280,464 386,337
Related party loan 1,104,057 1,104,057
Deferred rent - current portion 9,274 8,529
Lease obligations - current portion 11,463 8,212
Total current liabilities 3,379,424 3,545,113
Derivative instruments 6,143,278 433,024
Deferred revenue 126,545 126,545
Deferred rent-net of current portion 6,381 7,875
Lease obligations - net of current portion 24,445 20,925
Deposits held 5,000 5,000
Total liabilities 9,685,073 4,138,482
COMMITMENTS AND CONTINGENCIES 0 0
STOCKHOLDERS' EQUITY    
Preferred stock, $.01 par value - authorized 200,000 shares, issued and outstanding, -0- 0 0
Common stock, $.01 par value - authorized 600,000,000 shares; issued and outstanding 55,852,992 shares and 31,025,019 shares issued and outstanding at December 31, 2013 and September 30, 2013, respectively 558,530 310,250
Additional paid-in capital 231,049,613 218,550,408
Accumulated deficit (216,494,986) (212,160,568)
Total stockholders' equity 15,113,157 6,700,090
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 24,798,230 $ 10,838,572
XML 24 R6.htm IDEA: XBRL DOCUMENT v2.4.0.8
STATEMENTS OF CASH FLOWS (USD $)
3 Months Ended
Dec. 31, 2013
Dec. 31, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss $ (4,334,418) $ (2,310,246)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization 56,699 133,450
Issuance of common stock, warrants and options for services 137,729 54,485
Modification of warrants issued for services 76,991 0
Employee option cost 510,278 966,585
Common stock contributed to 401 (k) plan 37,887 39,711
Impairment loss on abandonment of patents 240 10,223
Loss on retired equipment 0 2,011
Gain on derivative instruments (1,610,817) (2,746,198)
(Increase)/decrease in assets:    
Receivables 28,384 143,714
Deferred rent 176,161 139,536
Prepaid expenses (210,367) 471,936
Inventory used for R&D and manufacturing (330,629) 247,585
Deposits (200,000) 0
Increase/(decrease) in liabilities:    
Accounts payable (380,943) (192,358)
Accrued expenses 232,905 23,252
Due to employees (105,873) 20,843
Deferred rent liability (749) 688
Net cash used in operating activities (5,916,522) (2,994,783)
CASH FLOWS FROM INVESTING ACTIVITIES:    
Purchases of equipment (8,587) (16,093)
Expenditures for patent costs 0 (125)
Net cash used in investing activities (8,587) (16,218)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Proceeds from issuance of common stock and warrants 19,380,190 9,807,375
Payments on oblgations under capital leases 2,665 1,025
Net cash provided by financing activities 19,377,525 9,806,350
NET INCREASE IN CASH AND CASH EQUIVALENTS 13,452,416 6,795,349
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 41,612 3,941,042
CASH AND CASH EQUIVALENTS, END OF PERIOD 13,494,028 10,736,391
ISSUANCE OF WARRANTS:    
Increase in derivative liabilities (7,321,071) (4,200,000)
Decrease in additional paid-in capital 7,321,071 4,200,000
Total 0 0
ISSUANCE OF ADDITIONAL SHARES    
Increase in common stock (15,631) 0
Increase in additional paid-in capital (1,101,786) 0
Decrease in additional paid-in capital 1,117,417 0
Total 0 0
ISSUANCE OF COMMON STOCK FOR PREPAID SERVICES:    
Increase in additional paid-in capital (55,362) (236,165)
Increase in prepaid expenses 55,362 236,165
Total 0 0
PATENT COSTS INCLUDED IN ACCOUNTS PAYABLE    
Increase in patent costs 9,208 8,641
Increase in accounts payable (9,208) (8,641)
Total 0 0
NON CASH RESEARCH AND OFFICE EQUIPMENT PURCHASES    
Increase in research and office equipment (12,126) (36,622)
Increase in accounts payable (2,664) 0
Increase in capital lease obligation 9,462 36,622
Total 0 0
CAPITAL LEASE PAYMENTS INCLUDED IN ACCOUNTS PAYABLE:    
Decrease in capital lease obligation 26 1,105
Increase in accounts payable (26) (1,105)
Total 0 0
OFFERING COSTS INCLUDED IN ACCOUNTS PAYABLE:    
Decrease additional paid-in capital 72,328 0
Increase in accounts payable (72,328) 0
Total 0 0
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:    
Cash expenditures for interest expense $ 56,509 $ 41,878
XML 25 R22.htm IDEA: XBRL DOCUMENT v2.4.0.8
C. STOCKHOLDERS EQUITY (Details)
Dec. 31, 2013
Incentive Stock Option Plans
 
Total Shares Reserved Under Plans 1,960,000
Shares Reserved forOutstanding Options 1,573,597
Remaining Options/Shares Under Plans 145,703
Non-Qualified Stock Option Plans
 
Total Shares Reserved Under Plans 5,680,000
Shares Reserved forOutstanding Options 3,674,544
Remaining Options/Shares Under Plans 1,443,537
Stock Bonus Plans
 
Total Shares Reserved Under Plans 1,594,000
Shares Issued as Stock Compensation 958,325
Remaining Options/Shares Under Plans 634,919
Stock Compensation Plan
 
Total Shares Reserved Under Plans 1,350,000
Shares Issued as Stock Compensation 791,145
Remaining Options/Shares Under Plans 558,855
XML 26 R24.htm IDEA: XBRL DOCUMENT v2.4.0.8
C. STOCKHOLDERS EQUITY (Details 2) (USD $)
Dec. 31, 2013
Series N [Member]
 
STOCKHOLDERS' EQUITY  
Issue Date Aug. 18, 2008
Shares Issuable upon Exercise of Warrant 2,951,420
Exercise Price $ 0.53
Expiration Date Aug. 18, 2014
Series A [Member]
 
STOCKHOLDERS' EQUITY  
Issue Date Jun. 24, 2009
Shares Issuable upon Exercise of Warrant 130,347
Exercise Price $ 5.00
Expiration Date Dec. 24, 2014
CSchleuningSeriesAMember
 
STOCKHOLDERS' EQUITY  
Issue Date Jul. 08, 2009
Shares Issuable upon Exercise of Warrant 16,750
Exercise Price $ 5.00
Expiration Date Jan. 08, 2015
Series B [Member]
 
STOCKHOLDERS' EQUITY  
Issue Date Sep. 04, 2009
Shares Issuable upon Exercise of Warrant 50,000
Exercise Price $ 6.80
Expiration Date Sep. 04, 2014
Series C [Member]
 
STOCKHOLDERS' EQUITY  
Shares Issuable upon Exercise of Warrant 463,487
Exercise Price $ 5.50
Expiration Date Feb. 20, 2015
Issue Start date Aug. 20, 2009
Issue End Date Aug. 26, 2009
Series E [Member]
 
STOCKHOLDERS' EQUITY  
Issue Date Sep. 21, 2009
Shares Issuable upon Exercise of Warrant 71,428
Exercise Price $ 17.50
Expiration Date Aug. 12, 2014
Series F [Member]
 
STOCKHOLDERS' EQUITY  
Issue Date Oct. 06, 2011
Shares Issuable upon Exercise of Warrant 1,200,000
Exercise Price $ 4.00
Expiration Date Oct. 06, 2014
Series G [Member]
 
STOCKHOLDERS' EQUITY  
Issue Date Oct. 06, 2011
Shares Issuable upon Exercise of Warrant 66,667
Exercise Price $ 4.00
Expiration Date Aug. 12, 2014
Series H [Member]
 
STOCKHOLDERS' EQUITY  
Issue Date Jan. 26, 2012
Shares Issuable upon Exercise of Warrant 1,200,000
Exercise Price $ 5.00
Expiration Date Aug. 01, 2015
Series Q [Member]
 
STOCKHOLDERS' EQUITY  
Issue Date Jun. 21, 2012
Shares Issuable upon Exercise of Warrant 1,200,000
Exercise Price $ 5.00
Expiration Date Dec. 22, 2015
SeriesRMember
 
STOCKHOLDERS' EQUITY  
Issue Date Dec. 06, 2012
Shares Issuable upon Exercise of Warrant 2,625,000
Exercise Price $ 4.00
Expiration Date Dec. 06, 2016
Series S
 
STOCKHOLDERS' EQUITY  
Shares Issuable upon Exercise of Warrant 25,713,095
Exercise Price $ 1.25
Expiration Date Oct. 11, 2018
Issue Start date Oct. 11, 2013
Issue End Date Dec. 24, 2013
Series L [Member]
 
STOCKHOLDERS' EQUITY  
Issue Date Apr. 18, 2007
Shares Issuable upon Exercise of Warrant 25,000
Exercise Price $ 7.50
Expiration Date Apr. 17, 2014
Series L Repriced [Member]
 
STOCKHOLDERS' EQUITY  
Issue Date Apr. 18, 2007
Shares Issuable upon Exercise of Warrant 70,000
Exercise Price $ 2.50
Expiration Date Apr. 02, 2015
Series M Modified
 
STOCKHOLDERS' EQUITY  
Issue Date Apr. 18, 2007
Shares Issuable upon Exercise of Warrant 500,000
Exercise Price $ 1.00
Expiration Date Apr. 20, 2014
Series P [Member]
 
STOCKHOLDERS' EQUITY  
Issue Date Feb. 10, 2012
Shares Issuable upon Exercise of Warrant 590,001
Exercise Price $ 4.50
Expiration Date Mar. 06, 2017
Private Investors [Member]
 
STOCKHOLDERS' EQUITY  
Shares Issuable upon Exercise of Warrant 740,938
Issue Start date Jul. 18, 2005
Issue End Date Jun. 30, 2009
Expiration start date Jan. 26, 2014
Expiration end date Jul. 18, 2014
Exercise Price Minimum $ 5.60
Exercise Price Maximum $ 8.20
Warrants Held by Officer And Director [Member]
 
STOCKHOLDERS' EQUITY  
Shares Issuable upon Exercise of Warrant 349,754
Issue Start date Jun. 24, 2009
Issue End Date Jul. 06, 2009
Expiration start date Dec. 24, 2014
Expiration end date Jan. 06, 2015
Exercise Price Minimum $ 4.00
Exercise Price Maximum $ 5.00
Consultants [Member]
 
STOCKHOLDERS' EQUITY  
Shares Issuable upon Exercise of Warrant 200,750
Issue Start date Feb. 15, 2005
Issue End Date Oct. 28, 2013
Expiration start date May 20, 2014
Expiration end date Dec. 27, 2017
Exercise Price Minimum $ 0.85
Exercise Price Maximum $ 20.00
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A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3 Months Ended
Dec. 31, 2013
Notes to Financial Statements  
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

 

The accompanying condensed financial statements of CEL-SCI Corporation (the Company) are unaudited and certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission. While management of the Company believes that the disclosures presented are adequate to make the information presented not misleading, these interim condensed financial statements should be read in conjunction with the  financial statements and notes included in the Company’s annual report on Form 10-K for the year ended September 30, 2013.

 

In the opinion of management, the accompanying unaudited condensed financial statements contain all accruals and adjustments (each of which is of a normal recurring nature) necessary for a fair presentation of the Company’s financial position as of December 31, 2013 and the results of its operations for the three months then ended.  The condensed balance sheet as of September 30, 2013 is derived from the September 30, 2013 audited financial statements.  Significant accounting policies have been consistently applied in the interim financial statements and the annual financial statements.  The results of operations for the three months ended December 31, 2013 and 2012 are not necessarily indicative of the results to be expected for the entire year.

 

Summary of Significant Accounting Policies:

 

Research and Office Equipment and Leasehold Improvements - Research and office equipment is recorded at cost and depreciated using the straight-line method over estimated useful lives of five to seven years.  Leasehold improvements are depreciated over the shorter of the estimated useful life of the asset or the term of the lease.  Repairs and maintenance which do not extend the life of the asset are expensed when incurred. The fixed assets are reviewed on a quarterly basis to determine if any of the assets are impaired.

 

Patents - Patent expenditures are capitalized and amortized using the straight-line method over the shorter of the expected useful life or the legal life of the patent (17 years).  In the event changes in technology or other circumstances impair the value or life of the patent, appropriate adjustment in the asset value and period of amortization is made.  An impairment loss is recognized when estimated future undiscounted cash flows expected to result from the use of the asset, and from its disposition, is less than the carrying value of the asset.  The amount of the impairment loss would be the difference between the estimated fair value of the asset and its carrying value.

 

Research and Development Costs - Research and development costs are expensed as incurred.

   

Income Taxes - The Company uses the asset and liability method of accounting for income taxes.  Under the asset and liability method, deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating and tax loss carryforwards.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.  The Company records a valuation allowance to reduce the deferred tax assets to the amount that is more likely than not to be recognized.  A full valuation allowance was recorded against the deferred tax assets as of December 31, 2013 and September 30, 2013.

 

Derivative Instruments – The Company has entered into financing arrangements that contain embedded derivative features.  The Company has also issued warrants to various parties in connection with work performed by these parties.  The Company accounts for these arrangements in accordance with ASC 815, “Accounting for Derivative Instruments and Hedging Activities.” In accordance with accounting principles generally accepted in the United States (“GAAP”), derivative instruments and hybrid instruments are recognized as either assets or liabilities on the balance sheet and are measured at fair value with gains or losses recognized in earnings or other comprehensive income depending on the nature of the derivative or hybrid instruments.  The Company determines the fair value of derivative instruments and hybrid instruments based on available market data using appropriate valuation models, giving consideration to all of the rights and obligations of each instrument.  The derivative liabilities are remeasured at fair value at the end of each interim period as long as they are outstanding.

 

Deferred Rent (Asset) –Consideration paid, including deposits, related to operating leases is recorded as a deferred rent asset and amortized as rent expense over the lease term. Interest on the deferred rent is calculated at 3% on the funds deposited on the manufacturing facility and is included in deferred rent. This interest income will be used to offset future rent.

 

Stock-Based Compensation – Compensation cost for all stock-based awards is measured at fair value as of the grant date in accordance with the provisions of ASC 718 “Stock Compensation Expense”.  The fair value of the stock options is calculated using the Black-Scholes option pricing model.  The Black-Scholes model requires various judgmental assumptions including volatility and expected option life.  The stock-based compensation cost is recognized on the straight line allocation method as expense over the requisite service or vesting period.

 

Equity instruments issued to non-employees are accounted for in accordance with ASC 505-50, “Equity-Based Payments to Non Employees.”  Accordingly, compensation is recognized when goods or services are received and is measured using the Black-Scholes valuation model.  The Black-Scholes model requires various judgmental assumptions regarding the fair value of the equity instruments at the measurement date and the expected life of the options.

  

 

The Company has Incentive Stock Option Plans, Non-Qualified Stock Option Plans, a Stock Compensation Plan and Stock Bonus Plans. In some cases these Plans are collectively referred to as the "Plans".  All Plans have been approved by the stockholders.

 

Reclassification – Certain prior year items have been reclassified to conform to the current year presentation.

XML 29 R3.htm IDEA: XBRL DOCUMENT v2.4.0.8
BALANCE SHEETS (Parenthetical) (USD $)
Dec. 31, 2013
Sep. 30, 2013
Assets    
Accumulated Depreciation and Amortization for Research and Office Equipment and Leasehold Improvements $ 3,010,439 $ 2,967,345
Accumulated Amortization for Patents $ 1,161,540 $ 1,151,852
Stockholders Equity    
Preferred Stock Shares Par Value $ 0.01 $ 0.01
Preferred Stock Shares Authorized 200,000 200,000
Preferred Stock Shares Issued 0 0
Preferred Stock Shares Outstanding 0 0
Common Stock Shares Par Value $ 0.01 $ 0.01
Common Stock Shares Authorized 600,000,000 600,000,000
Common Stock Shares Issued 55,852,992 31,025,019
Common Stock Shares Outstanding 55,852,992 31,025,019
XML 30 R17.htm IDEA: XBRL DOCUMENT v2.4.0.8
A. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (POLICIES)
3 Months Ended
Dec. 31, 2013
A. Organization And Summary Of Significant Accounting Policies Policies  
Basis of Presentation

The accompanying condensed financial statements of CEL-SCI Corporation (the Company) are unaudited and certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission. While management of the Company believes that the disclosures presented are adequate to make the information presented not misleading, these interim condensed financial statements should be read in conjunction with the financial statements and notes included in the Company’s annual report on Form 10-K for the year ended September 30, 2013.

In the opinion of management, the accompanying unaudited condensed financial statements contain all accruals and adjustments (each of which is of a normal recurring nature) necessary for a fair presentation of the Company’s financial position as of December 31, 2013 and the results of its operations for the three months then ended. The condensed balance sheet as of September 30, 2013 is derived from the September 30, 2013 audited financial statements. Significant accounting policies have been consistently applied in the interim financial statements and the annual financial statements. The results of operations for the three months ended December 31, 2013 and 2012 are not necessarily indicative of the results to be expected for the entire year.
Research and Office Equipment and Leasehold Improvements

Research and Office Equipment and Leasehold Improvements - Research and office equipment is recorded at cost and depreciated using the straight-line method over estimated useful lives of five to seven years. Leasehold improvements are depreciated over the shorter of the estimated useful life of the asset or the term of the lease. Repairs and maintenance which do not extend the life of the asset are expensed when incurred. The fixed assets are reviewed on a quarterly basis to determine if any of the assets are impaired.

 

Patents

Patents - Patent expenditures are capitalized and amortized using the straight-line method over the shorter of the expected useful life or the legal life of the patent (17 years). In the event changes in technology or other circumstances impair the value or life of the patent, appropriate adjustment in the asset value and period of amortization is made. An impairment loss is recognized when estimated future undiscounted cash flows expected to result from the use of the asset, and from its disposition, is less than the carrying value of the asset. The amount of the impairment loss would be the difference between the estimated fair value of the asset and its carrying value.

Research and Development Costs

Research and Development Costs - Research and development costs are expensed as incurred.

Income Taxes

Income Taxes - The Company uses the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating and tax loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company records a valuation allowance to reduce the deferred tax assets to the amount that is more likely than not to be recognized. A full valuation allowance was recorded against the deferred tax assets as of December 31, 2013 and September 30, 2013.

Derivative Instruments

Derivative Instruments – The Company has entered into financing arrangements that contain embedded derivative features. The Company has also issued warrants to various parties in connection with work performed by these parties. The Company accounts for these arrangements in accordance with ASC 815, “Accounting for Derivative Instruments and Hedging Activities.” In accordance with accounting principles generally accepted in the United States (“GAAP”), derivative instruments and hybrid instruments are recognized as either assets or liabilities on the balance sheet and are measured at fair value with gains or losses recognized in earnings or other comprehensive income depending on the nature of the derivative or hybrid instruments. The Company determines the fair value of derivative instruments and hybrid instruments based on available market data using appropriate valuation models, giving consideration to all of the rights and obligations of each instrument. The derivative liabilities are remeasured at fair value at the end of each interim period as long as they are outstanding.

Deferred Rent (Asset)

Deferred Rent (Asset)Consideration paid, including deposits, related to operating leases is recorded as a deferred rent asset and amortized as rent expense over the lease term. Interest on the deferred rent is calculated at 3% on the funds deposited on the manufacturing facility and is included in deferred rent. This interest income will be used to offset future rent.

Stock-Based Compensation

Stock-Based Compensation – Compensation cost for all stock-based awards is measured at fair value as of the grant date in accordance with the provisions of ASC 718 “Stock Compensation Expense”. The fair value of the stock options is calculated using the Black-Scholes option pricing model. The Black-Scholes model requires various judgmental assumptions including volatility and expected option life. The stock-based compensation cost is recognized on the straight line allocation method as expense over the requisite service or vesting period.

 

Equity instruments issued to non-employees are accounted for in accordance with ASC 505-50, “Equity-Based Payments to Non Employees.” Accordingly, compensation is recognized when goods or services are received and is measured using the Black-Scholes valuation model. The Black-Scholes model requires various judgmental assumptions regarding the fair value of the equity instruments at the measurement date and the expected life of the options.

The Company has Incentive Stock Option Plans, Non-Qualified Stock Option Plans, a Stock Compensation Plan and Stock Bonus Plans. In some cases these Plans are collectively referred to as the "Plans". All Plans have been approved by the stockholders.

Reclassification

Reclassification – Certain prior year items have been reclassified to conform to the current year presentation.

XML 31 R1.htm IDEA: XBRL DOCUMENT v2.4.0.8
Document and Entity Information
3 Months Ended
Dec. 31, 2013
Feb. 04, 2014
Document And Entity Information    
Entity Registrant Name CEL SCI CORP  
Entity Central Index Key 0000725363  
Document Type 10-Q  
Document Period End Date Dec. 31, 2013  
Amendment Flag false  
Current Fiscal Year End Date --09-30  
Is Entity a Well-known Seasoned Issuer? No  
Is Entity a Voluntary Filer? No  
Is Entity's Reporting Status Current? Yes  
Entity Filer Category Accelerated Filer  
Entity Common Stock, Shares Outstanding   55,940,156
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2014  
XML 32 R18.htm IDEA: XBRL DOCUMENT v2.4.0.8
C. STOCKHOLDERS EQUITY (Tables)
3 Months Ended
Dec. 31, 2013
C. Stockholders Equity Tables  
Stock options, stock bonuses and compensation granted by the Company
Name of Plan   Total Shares Reserved Under Plans     Shares Reserved for Outstanding Options     Shares Issued as Stock Bonus     Remaining Options/Shares Under Plans  
Incentive Stock Option Plans     1,960,000       1,573,597       N/A       145,703  
Non-Qualified Stock Option Plans     5,680,000       3,674,544       N/A       1,443,537  
Stock Bonus Plans     1,594,000       N/A       958,325       634,919  
Stock Compensation Plan     1,350,000       N/A       791,145       558,855  
Schedule of employees and non-employees stock compensation
   Three Months Ended December 31,
   2013  2012
       
  Employees                  $510,278   $966,585 
  Non-employees           $214,720   $107,818 
Derivative Liabilities, Warrants and Other Options
Warrant  Issue Date   Shares Issuable upon Exercise of Warrant    Exercise Price   Expiration Date   Refer-ence 
                      
Series N  8/18/08   2,951,420    0.53   8/18/14   1 
Series A  6/24/09   130,347    5.00   12/24/14   1 
Schleuning (Series A)  7/8/09   16,750    5.00   1/8/15   1 
Series B  9/4/09   50,000    6.80   9/4/14   1 
Series C  8/20/09 – 8/26/09   463,487    5.50   2/20/15   1 
Series E  9/21/09   71,428    17.50   8/12/14   1 
Series F  10/6/11   1,200,000    4.00   10/6/14   1 
Series G  10/6/11   66,667    4.00   8/12/14   1 
Series H  1/26/12   1,200,000    5.00   8/1/15   1 
Series Q  6/21/12   1,200,000    5.00   12/22/15   1 
Series R  12/6/12   2,625,000    4.00   12/6/16   1 
Series S  10/11/13-12/24/13   25,713,095    1.25   10/11/18   1 
                      
Series L  4/18/07   25,000    7.50   4/17/14   2 
Series L (repriced)  4/18/07   70,000    2.50   4/2/15   2 
Series M (modified)  4/18/07   500,000    1.00   4/20/14   2 
                      
Series P  2/10/12   590,001    4.50   3/6/17   3 
                      
Private Investors  7/18/05-6/30/09   740,938    5.60-8.20   1/26/14 - 7/18/14   4 
                      
Warrants held by Officer and Director  6/24/09-7/6/09   349,754    4.00 – 5.00   12/24/14 – 1/6/15   5 
                      
Consultants  2/15/05-10/28/13   200,750    0.85-20.00   5/20/14 - 12/27/17   6 
Tabular disclosure of derivative liabilities at fair value
    December 31, 2013    September 30, 2013 
           
Series A through E warrants  $6,106   $6,106 
Series N warrants   531,255    41,501 
Series F and G warrants   12,667    12,667 
Series H warrants   12,000    36,000 
Series Q warrants   24,000    48,000 
Series R warrants   157,500    288,750 
Series S warrants   5,339,750    —   
           
Total derivative liabilities  $6,143,278   $433,024 
XML 33 R4.htm IDEA: XBRL DOCUMENT v2.4.0.8
STATEMENTS OF OPERATIONS (USD $)
3 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Income Statement [Abstract]    
OTHER INCOME $ 113,144 $ 15,000
OPERATING EXPENSES:    
Research and development (excluding R&D depreciation of R&D depreciation of $41,673 and $104,864) 4,019,541 2,924,722
Depreciation and amortization 56,699 133,450
General & administrative 1,971,214 2,001,285
Total operating expenses 6,047,454 5,059,457
OPERATING LOSS (5,934,310) (5,044,457)
GAIN ON DERIVATIVE INSTRUMENTS 1,610,817 2,746,198
INTEREST INCOME 31,757 29,415
INTEREST EXPENSE (42,682) (41,402)
NET LOSS (4,334,418) (2,310,246)
ISSUANCE OF ADDITIONAL SHARES DUE TO RESET PROVISIONS (1,117,447) 0
NET LOSS AVAILABLE TO COMMON SHAREHOLDERS $ (5,451,865) $ (2,310,246)
NET LOSS PER COMMON SHARE    
BASIC $ (0.11) $ (0.08)
DILUTED $ (0.15) $ (0.18)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING    
BASIC 48,215,919 28,311,602
DILUTED 48,215,919 28,311,602
XML 34 R12.htm IDEA: XBRL DOCUMENT v2.4.0.8
F. OPERATIONS, FINANCING
3 Months Ended
Dec. 31, 2013
Notes to Financial Statements  
F. OPERATIONS, FINANCING

The Company has incurred significant costs since its inception in connection with the acquisition of certain patented and unpatented proprietary technology and know-how relating to the human immunological defense system, patent applications, research and development, administrative costs, construction of laboratory facilities, and clinical trials.  The Company has funded such costs with proceeds from loans and the public and private sale of its common and preferred stock.  The Company will be required to raise additional capital or find additional long-term financing in order to continue with its research efforts.  To date, the Company has not generated any revenue from product sales.  The ability of the Company to complete the necessary clinical trials and obtain US Food & Drug Administration (FDA) approval for the sale of products to be developed on a commercial basis is uncertain. Ultimately, the Company must complete the development of its products, obtain the appropriate regulatory approvals and obtain sufficient revenues to support its cost structure.

 

The Company is currently running a large multi-national Phase III clinical trial for head and neck cancer with its partners TEVA Pharmaceuticals and Orient Europharma. The Company believes that it has enough capital to support its operations for more than the next twelve months and believes that it has ready access to new equity capital should the need arise. During fiscal year 2013, the Company raised $9.8 million net proceeds from several institutional investors. During the three months ended December 31, 2013, the Company raised approximately $19.4 million in net proceeds through the sale of common stock and warrants in two public offerings. These funds are expected to meet the Company’s cash requirements through 2014. To finance the study beyond the next 12 months, the Company plans to raise additional capital in the form of corporate partnerships, debt and/or equity financings. The Company believes that it will be able to obtain additional financing since Multikine is a Phase III product designed to treat cancer and because it has done so consistently in the past. However, there can be no assurance that the Company will be successful in raising additional funds or that funds will be available to the Company on acceptable terms or at all.  If the Company does not raise the necessary amounts of money, the Company will either have to slow down or delay the Phase III clinical trial or even significantly curtail its operations until such time as it is able to raise the required funding.

 

Since the Company launched its Phase III trial for Multikine, the Company has spent approximately $11,300,000 as of December 31, 2013 on direct costs for the Phase III clinical trial. The total remaining cash cost of the clinical trial is estimated to be about $33,300,000.  It should be noted that this estimate is based only on the information currently available in the Company’s contracts with the Clinical Research Organizations responsible for managing the Phase III trial. This number can be affected by the speed of enrollment, foreign currency exchange rates and many other factors, some of which cannot be foreseen today. It is therefore possible that the cost of the Phase III trial will be higher than currently estimated.

XML 35 R11.htm IDEA: XBRL DOCUMENT v2.4.0.8
E. LOANS FROM OFFICER
3 Months Ended
Dec. 31, 2013
Notes to Financial Statements  
E. LOANS FROM OFFICER AND INVESTOR

The Company’s President, and a director, Maximilian de Clara, loaned the Company $1,104,057. The loan from Mr. de Clara bears interest at 15% per year and is secured by a lien on substantially all of the Company’s assets. The Company does not have the right to prepay the loan without Mr. de Clara’s consent. The loan was initially payable at the end of March 2009, but was extended to the end of June 2009. At the time the loan was originally due, and in accordance with the loan agreement, the Company issued Mr. de Clara warrants to purchase 164,824 shares of the Company’s common stock at a price of $4.00 per share. The warrants are exercisable at any time prior to December 24, 2014. In June 2009, the loan with Mr. de Clara was extended for the second time to July 6, 2014. At Mr. de Clara’s option, the loan may be converted into shares of the Company’s common stock. The number of shares which will be issued upon any conversion will be determined by dividing the amount to be converted by $4.00. As further consideration for the second extension, Mr. de Clara received warrants to purchase 184,930 shares of the Company’s common stock at a price of $5.00 per share at any time prior to January 6, 2015. On May 13, 2011, to recognize Mr. de Clara’s willingness to agree to subordinate his note to the convertible preferred shares and convertible debt as part of the settlement agreement, the Company extended the maturity date of the note to July 6, 2015; however, Mr. de Clara may demand payment upon giving the Company a minimum 10 day notice.

 

During the three months ended December 31, 2013 and 2012, the Company paid $55,203 and $41,402 respectively in interest expense to Mr. de Clara.

XML 36 R23.htm IDEA: XBRL DOCUMENT v2.4.0.8
C. STOCKHOLDERS EQUITY (Details 1) (USD $)
3 Months Ended
Dec. 31, 2013
Dec. 31, 2012
C. Stockholders Equity Details 1    
Employees $ 510,278 $ 966,585
Non-employees $ 214,720 $ 107,818
XML 37 R19.htm IDEA: XBRL DOCUMENT v2.4.0.8
D. FAIR VALUE MEASUREMENTS (Tables)
3 Months Ended
Dec. 31, 2013
D. Fair Value Measurements Tables  
Measured at fair value on a recurring basis
    Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)    

Significant Other Observable

Inputs (Level 2)

    Significant Unobservable Inputs (Level 3)     Total  
                         
Derivative instruments   $ -     $ -     $ 6,143,278     $ 6,143,278  
                                 

 

The table below sets forth the assets and liabilities measured at fair value on a recurring basis, by input level, in the condensed balance sheet at September 30, 2013:

 

    Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)    

Significant Other Observable

Inputs (Level 2)

    Significant Unobservable Inputs (Level 3)     Total  
                         
Derivative instruments   $ -     $ -     $ 433,024     $ 433,024  
                                 

 

Reconciliation of beginning and ending balances related to fair value measurements using significant unobservable inputs (Level 3)
    (3 month)     (12 month)  
    December 31, 2013     September 30, 2013  
Beginning balance   $ 433,024     $ 6,983,690  
Issuances     7,321,071       4,200,000  
Settlements     -       -  
Realized and unrealized gains                
recorded in earnings     (1,610,817 )     (10,750,666 )
Ending balance   $ 6,143,278     $ 433,024  
XML 38 R15.htm IDEA: XBRL DOCUMENT v2.4.0.8
I. NET LOSS PER SHARE
3 Months Ended
Dec. 31, 2013
Accounting Policies [Abstract]  
I. NET LOSS PER SHARE

The Company’s basic and diluted loss per share are as follows: For the three months ended December 31, 2013 and 2012, the computation of dilutive net loss per share excluded options and warrants to purchase approximately 865,000 and 578,800 shares of common stock because their inclusion would have an anti-dilutive effect.

 

   Three Months Ended December 31, 2013
   Net Loss  Weighted Average Shares  LPS
          
Basic loss per share  $(5,451,865)   48,215,919   $(0.11)
Gain on derivatives   (1,610,817)          
                
Dilutive loss per share  $(7,062,652)   48,215,919   $(0.15)
                
    Three Months Ended December 31, 2012           
    Net Loss    Weighted Average Shares    LPS 
                
Basic loss per share  $(2,310,246)   28,311,602   $(0.08)
Gain on derivatives   (2,746,198)          
                
Dilutive loss per share  $(5,056,444)   28,311,602   $(0.18)
XML 39 R13.htm IDEA: XBRL DOCUMENT v2.4.0.8
G. COMMITMENTS AND CONTINGENCIES
3 Months Ended
Dec. 31, 2013
Commitments and Contingencies Disclosure [Abstract]  
G. COMMITMENTS AND CONTINGENCIES

Clinical Research Agreements

 

In March 2013, the Company entered into an agreement with Aptiv Solutions to provide certain clinical research services in accordance with a master service agreement. The Company will reimburse Aptiv for costs incurred. In May 2013, CEL-SCI made an advance payment of $400,000. In October 2013, CEL-SCI made the second and final advance payment of $200,000. The funds advanced will be credited back in $150,000 annual increments from December 2014 through December 2017. As of December 31, 2013, $150,000 of the deposit is classified as a current asset.

 

In April 2013, the Company entered into a co-development and revenue sharing agreement with Ergomed. Under the agreement, Ergomed will contribute up to $10 million towards the Company’s Phase III trial in the form of offering discounted clinical services in exchange for a single digit percentage of milestone and royalty payments, up to a specific maximum amount. The Company accounted for the co-development and revenue sharing agreement in accordance with ASC 808 “Collaborative Arrangements”. The Company determined the payments to Erogmed are within the scope of ASC 730 “Research and Development.” Therefore, the Company records the discount on the clinical services as a credit to research and development expense on its Statements of Operations. Since the Company entered into the co-development and revenue sharing agreement with Ergomed it has incurred research and development expenses of approximately $2,017,000 related to Ergomed’s services. This amount is net of Ergomed’s discount of approximately $634,000. During the three months ended December 31, 2013, the Company recorded, net of Ergomed’s discount, approximately $1,179,000 as research and development expense related to Ergomed’s services.

 

In October 2013, the Company entered into two co-development and profit sharing agreements with Ergomed.  One agreement supports the US Navy with the development of Multikine as a potential treatment in HIV/HPV co-infected men and women with peri-anal warts.  The other agreement focuses on the development of Multikine in HIV/HPV co-infected women with cervical dysplasia. Ergomed will assume up to $3 million in clinical and regulatory costs for each study.

 

On October 31, 2013, the Company commenced arbitration proceedings against inVentiv Health Clinical, LLC (inVentiv, f/k/a PharmaNet, LLC), the Company’s former clinical research organization. The arbitration claim, initiated under the Commercial Rules of the American Arbitration Association, alleges (i) breach of contract, (ii) fraud in the inducement, and (iii) common law fraud, and seeks at least $50 million in damages. The Company filed this arbitration because, among other reasons, the number of patients enrolled and treated in the study fell below the level agreed to with inVentiv. In April 2013, the Company dismissed inVentiv and replaced it with Aptiv Solutions, Inc. and Ergomed Clinical Research Ltd, as noted above.

 

On December 12, 2013, inVentiv filed a counterclaim, alleging breach of contract on the part of CEL-SCI and seeking at least $2 million in damages. On December 20, 2013, inVentiv moved to dismiss certain claims. Given that this matter is at a preliminary stage, the Company is not in a position to predict or assess the likely outcome of these proceedings.

 

Lease Agreements

 

In August 2007, the Company leased a building near Baltimore, Maryland. The building was remodeled in accordance with the Company’s specifications so that it can be used by the Company to manufacture Multikine for the Company’s Phase III clinical trial and sales of the drug if approved by the FDA. The lease is for a term of twenty years and requires annual base rent to escalate each year at 3%. The Company is required to pay all real and personal property taxes, insurance premiums, maintenance expenses, repair costs and utilities. The lease allows the Company, at its election, to extend the lease for two ten-year periods or to purchase the building at the end of the 20-year lease.

 

The Company was required to deposit the equivalent of one year of base rent in accordance with the contract. When the Company meets the minimum cash balance required by the lease, the deposit will be returned to the Company. The $1,670,917 is included in non-current assets on December 31, 2013 and September 30, 2013.

 

The Company subleases a portion of its rental space on a month to month term lease, which requires a 30 day notice for termination. The Company receives $5,150 per month in rent for the subleased space.

 

The Company leases its research and development laboratory under a 60 month lease which expires February 28, 2017. The operating lease includes escalating rental payments. The Company is recognizing the related rent expense on a straight line basis over the full 60 month term of the lease at the rate of $11,360 per month. As of December 31, 2013 and September 30, 2013, the Company has recorded a deferred rent liability of $4,591 and $3,992, respectively.

 

The Company leases its office headquarters under a 36 month lease which expires June 30, 2015. The operating lease includes escalating rental payments. The Company is recognizing the related rent expense on a straight line basis over the full 36 month term of the lease at the rate $7,864 per month. As of December 31, 2013 and September 30, 2013, the Company has recorded a deferred rent liability of $11,065 and $12,412, respectively.

 

The Company leased office equipment under a capital lease arrangement. The term of the capital lease is 48 months and expires on September 30, 2016. The monthly lease payment is $1,025. The lease bears interest at approximately 16% per annum.

 

In October 2013, the Company purchased office equipment under a capital lease. The term of the capital lease is 36 months and it expires on September 30, 2016. The monthly lease payment is $299. The lease bears interest at approximately 9% per annum.

 

XML 40 R14.htm IDEA: XBRL DOCUMENT v2.4.0.8
H. PATENTS
3 Months Ended
Dec. 31, 2013
Accounting Policies [Abstract]  
H. PATENTS

During the three months ended December 31, 2013 and 2012, the Company recorded patent impairment charges of $240 and $10,223, respectively.  For the three months ended December 31, 2013 and 2012, amortization of patent costs totaled $9,703 and $23,905, respectively. The Company estimates that future amortization expense will be as follows:

 

Nine months ending September 30, 2014   $ 25,252  
Year ending September 30,        
2015     33,795  
2016     33,795  
2017     33,795  
2018     33,461  
2019     31,758  
Thereafter     125,604  
Total   $ 317,460  
XML 41 R16.htm IDEA: XBRL DOCUMENT v2.4.0.8
J. SUBSEQUENT EVENTS
3 Months Ended
Dec. 31, 2013
Subsequent Events [Abstract]  
J. SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date these financial statements were filed and determined there are no subsequent events that require disclosure.

XML 42 R34.htm IDEA: XBRL DOCUMENT v2.4.0.8
I. NET LOSS PER SHARE (Details Narrative)
3 Months Ended
Dec. 31, 2013
Dec. 31, 2012
I. Net Loss Per Share Details Narrative    
Options and warrants excluded from earnings per share due to anti-dilutive effect 865,000 578,800
XML 43 R21.htm IDEA: XBRL DOCUMENT v2.4.0.8
I. NET LOSS PER SHARE (Tables)
3 Months Ended
Dec. 31, 2013
I. Net Loss Per Share Tables  
Computation of dilutive net loss per share

 

    Three Months Ended December 31, 2013  
    Net Loss     Weighted Average Shares     LPS  
                   
Basic loss per share   $ (5,451,865 )     48,215,919     $ (0.11 )
Gain on derivatives     (1,610,817 )                
                         
Dilutive loss per share   $ (7,062,652 )     48,215,919     $ (0.15 )

 

    Three Months Ended December 31, 2012  
    Net Loss     Weighted Average Shares     LPS  
                         
Basic loss per share   $ (2,310,246 )     28,311,602     $ (0.08 )
Gain on derivatives     (2,746,198 )                
                         
Dilutive loss per share   $ (5,056,444 )     28,311,602     $ (0.18 )

 

 

XML 44 R26.htm IDEA: XBRL DOCUMENT v2.4.0.8
C. STOCKHOLDERS EQUITY (Details Narrative) (USD $)
3 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Sep. 30, 2013
Options granted to employees and directors 0 1,437,466  
Amount excluded from non-employee stock compensation expense for future services to be performed $ 55,362   $ 57,553
Series A through E warrants
     
Gain on warrants 0 332,436  
Series A [Member]
     
Warrants outstanding 130,347    
Fair value of outstanding warrants 1,303   1,303
Private Investors [Member]
     
Warrants outstanding 16,750    
Fair value of outstanding warrants 168   168
Series B [Member]
     
Warrants outstanding 50,000    
Fair value of outstanding warrants 0   0
Series C [Member]
     
Warrants outstanding 463,487    
Fair value of outstanding warrants 4,635   4,635
Series E [Member]
     
Warrants outstanding 71,428    
Fair value of outstanding warrants 0   0
Series N [Member]
     
Loss on warrants 489,754    
Gain on warrants   311,262  
Warrants outstanding 2,951,420    
Fair value of outstanding warrants 531,255   41,501
SeriesFAndGWarrantsMember
     
Gain on warrants 0 640,000  
Fair value of outstanding warrants 12,667   12,667
Series H [Member]
     
Gain on warrants 24,000 600,000  
Fair value of outstanding warrants 12,000   36,000
Series Q [Member]
     
Gain on warrants 24,000 600,000  
Fair value of outstanding warrants 24,000   48,000
SeriesRMember
     
Gain on warrants 131,250 262,500  
Fair value of outstanding warrants 157,500   288,750
Series S
     
Gain on warrants 1,921,321    
Fair value of outstanding warrants 5,399,750    
Series M Modified [Member]
     
Warrants outstanding 500,000    
Series P [Member]
     
Warrants outstanding 590,001    
Private Investor Warrants
     
Warrants outstanding 132,500    
Private Investor Warrants
     
Warrants outstanding 378,750    
Private Investor Warrants
     
Warrants outstanding 229,688    
Warrants Held by Officer And Director [Member]
     
Warrants outstanding 349,754    
Consultants [Member]
     
Warrants outstanding 200,750    
Expense recorded for consulting arrangement 137,729 1,985  
Prepaid consulting expenses $ 55,362   $ 57,553
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STATEMENTS OF OPERATIONS (Parenthetical) (USD $)
3 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Expenses    
Depreciation $ 41,673 $ 104,864
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D. FAIR VALUE MEASUREMENTS
3 Months Ended
Dec. 31, 2013
Fair Value Disclosures [Abstract]  
D. FAIR VALUE MEASUREMENTS

In accordance with ASC 820-10, “Fair Value Measurements,” the Company determines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  The Company generally applies the income approach to determine fair value.  This method uses valuation techniques to convert future amounts to a single present amount.  The measurement is based on the value indicated by current market expectations with respect to those future amounts.

 

ASC 820-10 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value.  The hierarchy gives the highest priority to active markets for identical assets and liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).  The Company classifies fair value balances based on the observability of those inputs.  The three levels of the fair value hierarchy are as follows:

 

●   Level 1 – Observable inputs such as quoted prices in active markets for identical assets or liabilities
●   Level 2 – Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.  These include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and amounts derived from valuation models where all significant inputs are observable in active markets

 

●   Level 3 – Unobservable inputs that reflect management’s assumptions

 

For disclosure purposes, assets and liabilities are classified in their entirety in the fair value hierarchy level based on the lowest level of input that is significant to the overall fair value measurement.  The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the placement within the fair value hierarchy levels.

  

 

The table below sets forth the assets and liabilities measured at fair value on a recurring basis, by input level, in the condensed balance sheet at December 31, 2013:

 

    Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)    

Significant Other Observable

Inputs (Level 2)

    Significant Unobservable Inputs (Level 3)     Total  
                         
Derivative instruments   $ -     $ -     $ 6,143,278     $ 6,143,278  
                                 

 

The table below sets forth the assets and liabilities measured at fair value on a recurring basis, by input level, in the condensed balance sheet at September 30, 2013:

 

    Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)    

Significant Other Observable

Inputs (Level 2)

    Significant Unobservable Inputs (Level 3)     Total  
                         
Derivative instruments   $ -     $ -     $ 433,024     $ 433,024  
                                 

 

The following sets forth the reconciliation of beginning and ending balances related to fair value measurements using significant unobservable inputs (Level 3) for the three months ended December 31, 2013 and the year ended September 30, 2013:

 

    (3 month)     (12 month)  
    December 31, 2013     September 30, 2013  
Beginning balance   $ 433,024     $ 6,983,690  
Issuances     7,321,071       4,200,000  
Settlements     -       -  
Realized and unrealized gains                
recorded in earnings     (1,610,817 )     (10,750,666 )
Ending balance   $ 6,143,278     $ 433,024  

 

The fair values of the Company’s derivative instruments disclosed above are primarily derived from valuation models where significant inputs such as historical price and volatility of the Company’s stock as well as U.S. Treasury Bill rates are observable in active markets.

XML 47 R27.htm IDEA: XBRL DOCUMENT v2.4.0.8
D. FAIR VALUE MEASUREMENTS (Details) (USD $)
Dec. 31, 2013
Sep. 30, 2013
Level1
   
Derivative instruments      
Level2
   
Derivative instruments      
Level3
   
Derivative instruments 6,143,278 433,024
Total
   
Derivative instruments $ 6,143,278 $ 433,024
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3 Months Ended
Dec. 31, 2013
H. Patents Tables  
Schedule of total estimated future amortization
Nine months ending September 30, 2014   $ 25,252  
Year ending September 30,        
2015     33,795  
2016     33,795  
2017     33,795  
2018     33,461  
2019     31,758  
Thereafter     125,604  
Total   $ 317,460