2. DERIVATIVES LIABILITIES, WARRANTS AND OTHER OPTIONS

12 Months Ended

Sep. 30, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

2. DERIVATIVES LIABILITIES, WARRANTS AND OTHER OPTIONS

2. DERIVATIVES LIABILITIES, WARRANTS AND OTHER OPTIONS

Below is a chart presenting the derivative liabilities, warrants and other options outstanding at September 30, 2014:

Warrants	Issue Date	Shares Issuable upon Exercise of Warrants	Exercise Price	Expiration Date	Refer-ence
Series N	8/18/08	2,844,627	0.53	8/18/15	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	-	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	-	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	-	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	23,624,326	1.25	10/11/18	1
Series T	4/17/14	1,782,057	1.58	10/17/14	1
Series U	4/17/14	445,514	1.75	10/17/17	1
Series L	4/18/07	-	7.50	4/17/14	2
Series L (repriced)	4/18/07	70,000	2.50	4/2/15	2
Series P	2/10/12	590,001	4.50	3/6/17	3
Private Investor	7/18/05	-	6.50	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 – 4/25/14	149,500	0.85 – 20.00	2/15/15 - 12/27/17	6

1. Derivative Liabilities

The table below presents the derivative instruments and their respective balances at September 30.

	2014		2013
Series N warrants	$	-	$	41,501
Series A through E warrants		6,105		6,106
Series F and G warrants		-		12,667
Series H warrants		12,000		36,000
Series Q warrants		12,000		48,000
Series R warrants		157,500		288,750
Series S warrants		5,197,352		-
Series T warrants		-		-
Series U warrants		120,289		-
Total derivative liabilities	$	5,505,246	$	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. 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 periods is recognized as a gain or loss in the statement of operations.

Series N Warrants

In August 2008, CEL-SCI sold 138,339 shares of common stock and 207,508 Series N warrants in a private financing for $1,037,500. In June 2009, an additional 116,667 shares and 181,570 Series N warrants were issued to the investors. In October 2011, the outstanding 389,078 Series N warrants issued 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.

On October 11, 2013 and December 24, 2013, in connection with public offerings of common stock on those dates, the Company reset the exercise price from $3.00 to $0.53 and issued the Series N warrant holders 2,432,649 additional warrants exercisable at $0.53 as required by the warrant agreements. In January 2014, the Company offered the investors the option to extend the Series N warrants by one year and allow for cashless exercise, in exchange for cancelling the reset provision in the warrant agreement. One of the investors with 2,844,627 warrants accepted this offer. Accordingly, these warrants are no longer considered a derivative liability due to the cancelation of the reset provision. The fair value of the warrants on that date totaled $1,308,528 and was reclassified from derivative liabilities to additional paid-in capital. On March 21, 2014, the other investor exercised 106,793 Series N Warrants. The Company received cash proceeds of $7,424 for 14,078 of the warrants exercised. The remaining 92,715 warrants were exercised in a cashless exercise. The fair value of the warrants on the date of exercise was $137,000 and was reclassified from derivative liabilities to additional paid-in capital.

In addition, the October and December 2013 financings triggered the reset provision included in the August 2008 financing 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.

As of September 30, 2014, the remaining 2,844,627 Series N warrants entitle the holders to purchase one share of the Company's common stock at a price of $0.53 per share at any time prior to August 18, 2015. On September 30, 2014, no derivative liability was recorded because the warrants no longer were considered a liability for accounting purposes. On September 30, 2013, the value of the Series N warrants was $41,501. During the year ended September 30, 2014, the Company recorded a loss of $1,404,027 on the Series N warrants. During the years ended September 30, 2013 and 2012, the Company recorded a gain of $788,533 and $207,507, respectively, on Series N warrants. On October 28, 2014, the remaining Series N warrants were transferred to the de Clara Trust, of which the Company’s CEO, Geert Kersten, is the Trustee and a beneficiary.

Series K and Series A through E Warrants

The Company accounted for the Series K and 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 October 2011, 231,840 warrants held by the investors were reset from $4.00 to $3.00. In addition, the investors were issued 77,280 warrants exercisable at $3.00 per share at an initial cost of $30,912. This cost was accounted for as a debit to loss on derivatives and a credit to derivative liabilities.

In February 2012, all Series K warrants were exercised, and the Company received $927,359 from the exercise of Series K warrants to purchase 309,120 of the Company’s common shares. When the warrants were exercised, the value of the warrants, or $122,367, was converted from derivative liabilities to equity. During the year ended September 30, 2012, the Company recorded a loss of $21,903 from the exercise and mark to market on the remaining Series K warrants. As of September 30, 2012, all Series K warrants had been exercised and no liability was recorded.

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 September 30, 2014, 130,347 of these warrants remained outstanding. As of September 30, 2014 and 2013, the fair value of these derivative liabilities 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 September 30, 2014, 16,750 warrants remained outstanding. As of September 30, 2014 and 2013, the fair value of these derivative liabilities was $167 and $168, respectively.

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. On September 4, 2014, all outstanding Series B warrants expired. As of September 30, 2014, no Series B warrants remained outstanding. As of September 30, 2013, the fair value of the 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 September 30, 2014, 463,487 of these warrants remained outstanding. As of September 30, 2014 and 2013, the fair value of the Series C warrants was $4,635.

In September 2009, 71,428 Series E warrants were issued to the placement agent in connection with a financing, with an exercise price of $17.50 per share. On August 12, 2014, all outstanding Series E warrants expired. As of September 30, 2014, no Series E warrants remained outstanding. As of September 30, 2013, the fair value of the Series E warrants was $0.

During the years ended September 30, 2014, 2013 and 2012, the Company recorded a gain of $1, $780,883, and $588,469, respectively, on the Series A through E warrants.

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 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. On August 12, 2014, all outstanding Series G warrants expired. As of September 30, 2014, 1,200,000 Series F warrants and no Series G warrants remained outstanding. As of September 30, 2014, the fair value of the Series F warrants was $0. As of September 30, 2013, the fair value of the Series F and G warrants was $12,000 and $667, respectively. During the years ended September 30, 2014, 2013 and 2012, the Company recorded a gain of $12,667, $1,634,000, and $500,000 respectively, on the Series F and G warrants. On October 6, 2014, all of the Series F warrants expired.

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 September 30, 2014, 1,200,000 Series H warrants remained outstanding. As of September 30, 2014 and 2013, the fair value of the warrants was $12,000 and $36,000, respectively. During the years ended September 30, 2014, 2013 and 2012, the Company recorded a gain of $24,000, $1,764,000 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 September 30, 2014, 1,200,000 Series Q warrants remained outstanding. As of September 30, 2014 and 2013, the fair value of the warrants was $12,000 and $48,000, respectively. During the years ended September 30, 2014, 2013 and 2012, the Company recorded a gain of $36,000, $1,872,000 and $240,000, respectively, on the Series Q warrants.

Series R Warrants

On December 4, 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 6, 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 September 30, 2014, 2,625,000 Series R warrants remained outstanding. As of September 30, 2014 and 2013, the fair value of the Series R warrants was $157,500 and $288,750, respectively. During the years ended September 30, 2014 and 2013, the Company recorded a gain of $131,250 and $3,911,250, 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 were 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.

On February 7, 2014, the Series S warrants began trading on the New York Stock Exchange. During the year ended September 30, 2014, 2,088,769 Series S Warrants had been exercised at a price of $1.25, and the Company received proceeds of $2,610,961. The fair value of the warrants on the date of exercise was $1,024,932. As of September 30, 2014, the remaining 23,624,326 Series S warrants entitle the holders to purchase one share of the Company's common stock at a price of $1.25 per share.

As of September 30, 2014, the fair value of the Series S warrants was $5,197,352. During the year ended September 30, 2014, the Company recorded a gain of $1,098,787 on the Series S warrants.

Series T and U Warrants

On April 17, 2014, the Company closed a public offering of 7,128,229 shares of common stock at a price of $1.40 and 1,782,057 Series T warrants to purchase one share of common stock for net proceeds of $9,230,000, net of underwriting commissions and offering expenses. The Series T warrants are immediately exercisable, expire on October 17, 2014, and have an exercise price of $1.58. The underwriters received 445,514 Series U warrants to purchase one share of common stock. The Series U warrants are exercisable beginning October 17, 2014, expire on October 17, 2017, and have an exercise price of $1.75. The initial cost of the Series T and U warrants of $470,377 was recorded as a debit to additional paid-in capital and a credit to derivative liabilities.

As of September 30, 2014, the fair value of the Series T and U warrants was $120,289. During the year ended September 30, 2014, the Company recorded a gain of $350,088, on the Series T and U warrants. On October 17, 2014, all of the Series T warrants expired.

Senior Convertible Notes and Redeemable Series A Convertible Preferred Stock

In March 2012, the Company repaid the remaining Senior Secured Convertible Notes derived from the settlement, thereby completely eliminating the Senior Secured Convertible Notes, satisfying the settlement and having the lien on the Company’s assets removed.

The accounting for the Senior Secured Convertible Notes was within the scope of ASC 815. Under ASC 815 or ASC 825,”Financial Instruments,” the Company may make an irrevocable election to initially and subsequently measure a hybrid financial instrument in its entirety at fair value. Any change in fair value between the respective reporting dates is recognized as a gain or loss. Based on the analysis of the Senior Secured Convertible Notes, the Company identified several embedded derivative features. The Company elected, in accordance with ASC 825, to initially and subsequently carry the instrument at fair value without bi-furcating the embedded derivatives. For the year ended September 30, 2012, the Company recorded a gain of $49,000 on the Senior Secured Convertible Notes.

2. 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 June 2012, 10,167 Series L warrants with an exercise price of $7.50 per share, expired.

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. This cost is included in modification of warrants and increased the net loss available to shareholders on the statement of operations. 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, 25,000 Series L warrants exercisable at a price of $7.50 per share were transferred to a consultant 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. On April 17, 2014, the 25,000 Series L warrants expired. In April 2013, 100,000 Series L warrants were repriced to $2.50 per share and were 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 September 30, 2014, 70,000 of the Series L warrants at the reduced exercise price of $2.50 remained outstanding.

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. This cost is included in modification of warrants and increased the net loss available to shareholders on the statement of operations.

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. In March 2014, 500,000 Series M warrants were exercised at a price of $1.00, and the Company received proceeds of $500,000. As of September 30, 2014, no Series M warrants 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. During the year ended September 30, 2012, all 650,000 of the outstanding Series O warrants were exercised. There were no Series O warrants outstanding at 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. This cost is included in inducement warrants and increased the net loss available to shareholders on the statement of operations. As of September 30, 2014, 590,001 Series P warrants remained outstanding.

4. Private Investor Warrants

In February 2011, 132,500 warrants issued to a private investor with exercise prices between $5.60 and $8.20 were extended for three years. Between February and August 2014, all 132,500 outstanding warrants expired. As of September 30, 2014, no warrants remained outstanding.

On January 26, 2014, 608,438 warrants issued to the lessor of the Company’s manufacturing facility, priced at $7.50 per share, expired. As of September 30, 2014, no warrants relating to the facilities lease remained outstanding.

5. 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 September 30, 2014, 349,754 warrants remained outstanding (Note 10). In August 2014, the loan and warrants were transferred to the de Clara Trust, of which the Company’s CEO, Geert Kersten, is the Trustee and a beneficiary.

6. Options and Shares Issued to Consultants

As of September 30, 2014, 149,500 options that were issued to consultants as payment for services remained outstanding, of which 140,000 options were issued from the Non-Qualified Stock Option plans. During the year ended September 30, 2014 and 2013, 71,250 and 3,000 options previously issued to a consultant from the Non-Qualified Stock Option plans expired, respectively.

In December 2011, 5,000 options were issued to a consultant with an exercise price of $3.00 which vested immediately and expire on December 1, 2016. The cost of these options was $10,211 calculated using the Black-Scholes method and was accounted for as a credit to additional paid-in capital and a debit to general and administrative expense.

In March 2012, 5,000 options were issued to a consultant with an exercise price of $3.50 which vested immediately and expire on March 5, 2017. The cost of these options was $12,037 calculated using the Black-Scholes method and was accounted for as a credit to additional paid-in capital and a debit to general and administrative expense.

In April 2012, 7,000 options issued to a consultant with exercise prices between $6.30 and $7.00 were extended for two years from the current expiration date. The additional value of $10,879 was accounted for as a credit to additional paid-in capital and a debit to general and administrative expense. During the year ended September 30, 2014, the 7,000 options 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 issued 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. The aggregate fair market value of the 100,000 restricted shares of $108,710 was recorded as a prepaid expense and is being charged to general and administrative expense over the period of service. During the year ended September 30, 2014, the Company recorded $104,540 in consulting expense. At September 30, 2014, $4,170 is included in prepaid expenses.

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 month issued in advance. During the year ended September 30, 2014, the Company issued the consultant a total of 409,968 shares of restricted stock at the fair market value on the dates of issuance. The aggregate fair market value of $439,008 was recorded as a prepaid expense and is being charged to general and administrative expense over the period of service. The Company had previously entered into a one year consulting agreement with this same consultant for services to be provided through December 27, 2013. In consideration for the services to be provided under that earlier agreement, 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. During the years ended September 30, 2014 and 2013, the Company recorded expense of $474,263 and $180,597 for services provided by this consultant, respectively.

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 charged to general and administrative expense over the period of service.

On December 1, 2013, the Company extended an agreement with a public relations consultant through December 1, 2014. In consideration for services provided, the Company agreed to continue to issue the consultant a monthly retainer of 5,000 shares of restricted stock. In addition, the consultant received an additional 20,000 shares of restricted stock for meeting certain performance requirements. During the years ended September 30, 2014 and 2013, respectively, the Company issued the consultant 70,000 and 60,000 restricted shares of common stock at the fair market value on the grant dates, for an aggregate fair market value of $79,400 and $161,500, respectively which was recorded as a general and administrative expense.

On April 25, 2014, the Company entered into a consulting agreement for services to be provided through August 25, 2014. In consideration for services provided, the Company granted the consultant 20,000 options to purchase common stock at a price of $1.22 per share. The fair value of the options issued, as calculated using the Black-Scholes method, was determined to be $12,458 and was charged to general and administrative expense over the period of service.

During the years ended September 30, 2014 and 2013, the Company recorded total expense of $694,955 and $342,097 relating to these consulting arrangements. As of September 30, 2014 and 2013, the Company recorded $26,468 and $57,553, respectively, in prepaid consulting expenses.