0001654954-16-001315.txt : 20160809 0001654954-16-001315.hdr.sgml : 20160809 20160809163146 ACCESSION NUMBER: 0001654954-16-001315 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 47 CONFORMED PERIOD OF REPORT: 20160630 FILED AS OF DATE: 20160809 DATE AS OF CHANGE: 20160809 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: 161818402 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 Blueprint

 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 (Mark One)
☒            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2016
OR
 
☐          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ______________.
 
Commission File Number 001-11889
CEL-SCI CORPORATION
 
 Colorado
 
  84-0916344     
 State or other jurisdiction incorporation
 
 (IRS) Employer 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 ☒                                                                           No ☐
 
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 ☒ No ☐
 
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 ☐                                                          Accelerated filer ☒
Non-accelerated filer ☐                                                           Smaller reporting company ☐
 
(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 ☐                                                                 No ☒
 
 Class of Stock
 No. Shares Outstanding
   Date
    Common
145,349,718
  August 1, 2016
 

 
 
 
 
TABLE OF CONTENTS
 
 
  Page   
PART I FINANCIAL INFORMATION
 
 
 
Item 1.

 
 
Condensed Balance Sheets at June 30, 2016 and September 30, 2015 (unaudited)
2
 
 
Condensed Statements of Operations for the nine months Ended June 30, 2016 and 2015 (unaudited)
3
 
 
Condensed Statements of Operations for the three months Ended June 30, 2016 and 2015 (unaudited)
4
 
 
Condensed Statements of Cash Flows for the nine months Ended June 30, 2016 and 2015 (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
28
 
 
Item 6. Exhibits
28
 
 
Signatures
29
 
 
 
1
 
 
 
CEL-SCI CORPORATION      
 
 
BALANCE SHEETS      
 
 
(UNAUDITED)      
 
 
 
 
JUNE 30,
 
 
SEPTEMBER 30,
 
ASSETS
 
2016
 
 
2015
 
 
 
 
 
 
 
 
CURRENT ASSETS:
 
 
 
 
 
 
  Cash and cash equivalents
  $5,218,960 
  $5,726,682 
  Receivables
    790,658 
    87,214 
  Prepaid expenses
    713,549 
    979,655 
  Deposits - current portion
    150,000 
    150,000 
  Inventory used for R&D and manufacturing
    1,259,458 
    1,401,839 
  Deferred rent - current portion
    444,349 
    487,793 
 
       
       
  Total current assets
    8,576,974 
    8,833,183 
 
       
       
RESEARCH AND OFFICE EQUIPMENT, net
    250,552 
    307,466 
 
       
       
PATENT COSTS, net
    266,493 
    291,564 
 
       
       
DEFERRED RENT - net of current portion
    3,565,684 
    4,044,473 
 
       
       
DEPOSITS
    1,820,917 
    1,970,917 
 
       
       
TOTAL ASSETS
  $14,480,620 
  $15,447,603 
 
       
       
 
       
       
 
       
       
LIABILITIES AND STOCKHOLDERS' DEFICIT
       
       
 
       
       
CURRENT LIABILITIES:
       
       
  Accounts payable
  $4,437,389 
  $5,128,682 
  Accrued expenses
    520,973 
    88,575 
  Due to employees
    316,804 
    365,131 
  Related party loan
    - 
    1,104,057 
  Deferred rent - current portion
    4,037 
    9,997 
  Lease obligation - current portion
    2,309 
    9,028 
 
       
       
  Total current liabilities
    5,281,512 
    6,705,470 
 
       
       
  Derivative instruments
    12,823,052 
    13,686,587 
  Deferred revenue
    126,501 
    126,639 
  Deferred rent - net of current portion
    18,378 
    9,026 
  Deposits held
    5,000 
    5,000 
 
       
       
  Total liabilities
    18,254,443 
    20,532,722 
 
       
       
COMMITMENTS AND CONTINGENCIES
       
       
 
       
       
STOCKHOLDERS' DEFICIT
       
       
  Preferred stock, $.01 par value--200,000 shares authorized;
       
       
    -0- shares issued and outstanding
    - 
    - 
  Common stock, $.01 par value - 600,000,000 shares authorized,
       
       
    145,146,097 shares and 112,360,568 shares issued and outstanding
       
       
    at June 30, 2016 and September 30, 2015, respectively
    1,451,461 
    1,123,606 
  Additional paid-in capital
    279,328,561 
    267,992,754 
  Accumulated deficit
    (284,553,845)
    (274,201,479)
 
       
       
Total stockholders' deficit
    (3,773,823)
    (5,085,119)
 
       
       
TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT
  $14,480,620 
  $15,447,603 
 
See notes to financial statements.
 
2
 
 
 
CEL-SCI CORPORATION        
 
 
 STATEMENTS OF OPERATIONS        
 
 
NINE MONTHS ENDED JUNE 30, 2016 and 2015        
 
 
(UNAUDITED)        
 
 
 
 
2016
 
 
2015
 
 
 
 
 
 
 
 
GRANT INCOME AND OTHER
  $183,726 
  $723,681 
 
       
       
OPERATING EXPENSES:
       
       
  Research and development
    14,636,197 
    15,701,986 
  General & administrative
    3,987,011 
    10,978,254 
 
       
       
Total operating expenses
    18,623,208 
    26,680,240 
 
       
       
OPERATING LOSS
    (18,439,482)
    (25,956,559)
 
       
       
GAIN ON DERIVATIVE INSTRUMENTS
    8,037,974 
    1,808,954 
 
       
       
LOSS ON DEBT EXTINGUISHMENT
    - 
    (641,276)
 
       
       
INTEREST INCOME (EXPENSE), NET
    49,142 
    (41,810)
 
       
       
NET LOSS
  $(10,352,366)
  $(24,830,691)
 
       
       
NET LOSS PER COMMON SHARE
       
       
      BASIC AND DILUTED
  $(0.09)
  $(0.32)
 
       
       
WEIGHTED AVERAGE COMMON SHARES
       
       
  OUTSTANDING
       
       
      BASIC AND DILUTED
    117,412,443 
    77,625,511 
 
See notes to financial statements.
 
3
 
 
 
CEL-SCI CORPORATION        
 
 
STATEMENTS OF OPERATIONS        
 
 
THREE MONTHS ENDED JUNE 30, 2016 and 2015        
 
 
(UNAUDITED)        
 
 
 
 
2016
 
 
2015
 
 
 
 
 
 
 
 
GRANT AND OTHER INCOME
  $129,975 
  $389,223 
 
       
       
OPERATING EXPENSES:
       
       
  Research and development
    4,838,108 
    5,727,577 
  General & administrative
    1,674,614 
    2,863,121 
 
       
       
Total operating expenses
    6,512,722 
    8,590,698 
 
       
       
OPERATING LOSS
    (6,382,747)
    (8,201,475)
 
       
       
GAIN ON DERIVATIVE INSTRUMENTS
    2,508,744 
    4,428,780 
 
       
       
LOSS ON DEBT EXTINGUISHMENT
    - 
    (641,276)
 
       
       
INTEREST INCOME (EXPENSE), NET
    24,679 
    (15,166)
 
       
       
NET LOSS
  $(3,849,324)
  $(4,429,137)
 
       
       
NET LOSS PER COMMON SHARE
       
       
      BASIC
  $(0.03)
  $(0.05)
 
       
       
      DILUTED
  $(0.03)
  $(0.06)
 
       
       
WEIGHTED AVERAGE COMMON SHARES
       
       
  OUTSTANDING
       
       
      BASIC
    124,132,500 
    83,796,311 
 
       
       
      DILUTED
    124,132,500 
    85,134,107 
 
See notes to financial statements.
 
4
 
 
 
CEL-SCI CORPORATION        
 
 
STATEMENTS OF CASH FLOWS        
 
 
NINE MONTHS ENDED JUNE 30, 2016 and 2015        
 
 
(UNAUDITED)        
 
 
 
 
2016
 
 
2015
 
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
  Net loss
  $(10,352,366)
  $(24,830,691)
  Adjustments to reconcile net loss to
       
       
    net cash used in operating activities:
       
       
      Depreciation and amortization
    118,272 
    163,431 
      Issuance of common stock and options for services
    618,890 
    437,729 
      Equity based compensation
    1,263,662 
    4,570,999 
      Common stock contributed to 401(k) plan
    120,693 
    123,066 
      Loss on retired equipment
    115 
    313 
      Gain on derivative instruments
    (8,037,974)
    (1,808,954)
      Loss on debt extinguishment
    - 
    641,276 
      (Increase)/decrease in assets:
       
       
        Receivables
    5,854 
    (76,672)
        Deferred rent
    522,233 
    559,828 
        Prepaid expenses
    267,742 
    (283,864)
        Inventory used for R&D and manufacturing
    142,381 
    36,513 
        Deposits
    150,000 
    150,000 
      Increase/(decrease) in liabilities:
       
       
        Accounts payable
    (1,079,423)
    1,856,635 
        Accrued expenses
    86,398 
    (117,207)
        Due to employees
    (48,327)
    95,214 
        Deferred rent liability
    3,392 
    (5,795)
        Deferred revenue
    (138)
    (1,591)
 
       
       
  Net cash used in operating activities
    (16,218,596)
    (18,489,770)
 
       
       
CASH FLOWS FROM INVESTING ACTIVITIES:
       
       
      Purchases of equipment
    (31,405)
    (56,616)
      Expenditure for patent costs
    (5,008)
    (9,422)
  Net cash used in investing activities
    (36,413)
    (66,038)
 
       
       
CASH FLOWS FROM FINANCING ACTIVITIES:
       
       
     Proceeds from issuance of common stock and warrants
    16,858,029 
    21,278,905 
     Payment on related party loan
    (1,104,057)
    - 
     Payments on obligations under capital lease
    (6,685)
    (6,290)
 
       
       
  Net cash provided by financing activities
    15,747,287 
    21,272,615 
 
       
       
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
    (507,722)
    2,716,807 
 
       
       
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    5,726,682 
    8,513,620 
 
       
       
CASH AND CASH EQUIVALENTS, END OF PERIOD
  $5,218,960 
  $11,230,427 
 
See notes to financial statements.
 
5
 
 
 
CEL-SCI CORPORATION        
 
 
STATEMENTS OF CASH FLOWS        
 
 
NINE MONTHS ENDED JUNE 30, 2016 and 2015        
 
 
(UNAUDITED)        
 
 
 
 
 
 
 
 
 
SUPPLEMENTAL DISCLOSURE OF NON-CASH CHANGES
 
 
 
 
 
 
 
 
2016
 
 
2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ACCOUNTS PAYABLE
 
 
 
 
 
 
    Increase in receivables
  $363,298 
  $- 
    Increase in research and office equipment
    - 
    12,625 
    (Decrease) in patent costs
    (12)
    (975)
    Decrease in capital lease obligation
    34 
    32 
    Increase in direct financing costs
    24,810 
    128,630 
    (Increase) in accounts payable
    (388,130)
    (140,312)
 
  $- 
  $- 
 
       
       
 
       
       
ACCRUED EXPENSES
       
       
    Increase in receivables
  $346,000 
  $- 
(Increase) in accrued expenses
    (346,000)
    - 
 
  $- 
  $- 
 
       
       
 
       
       
ADDITIONAL PAID-IN CAPITAL
       
       
    (Increase) in derivative liabilities
  $(7,174,439)
  $(8,463,957)
    Decrease in common stock
    - 
    1,000 
    Increase in prepaid services
    1,636 
    20,464 
    Decrease in additional paid-in capital
    7,172,803 
    8,442,493 
 
  $- 
  $- 
 
       
       
 
       
       
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
       
       
   INFORMATION:
       
       
  Cash paid for interest expense
  $43,646 
  $124,914 
 
See notes to financial statements.
 
 
6
 
 
CEL-SCI CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 2016 AND 2015 (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, 2015.
 
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 June 30, 2016 and the results of its operations for the nine and three months then ended. The condensed balance sheet as of September 30, 2015 is derived from the September 30, 2015 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 nine and three months ended June 30, 2016 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. Research and office equipment 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 in the period identified. 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 June 30, 2016 and September 30, 2015.
 
Derivative Instruments – The Company has entered into financing arrangements that consist of freestanding derivative instruments that contain embedded derivative features. The Company accounts for these arrangements in accordance with Accounting Standards Codification (ASC) 815, “Accounting for Derivative Instruments and Hedging Activities.” In accordance with accounting principles generally accepted in the United States (U.S. GAAP), derivative instruments and hybrid instruments are recognized as either assets or liabilities in 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 reporting 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 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 “Compensation – Stock Compensation.” The fair value of 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 options issued are 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, Stock Bonus Plans and an Incentive Stock Bonus Plan. In some cases, these Plans are collectively referred to as the "Plans". All Plans have been approved by the stockholders.
 
The Company’s stock options are not transferable, and the actual value of the stock options that an employee may realize, if any, will depend on the excess of the market price on the date of exercise over the exercise price. The Company has based its assumption for stock price volatility on the variance of daily closing prices of the Company’s common stock. The risk-free interest rate assumption was based on the U.S. Treasury rate at date of the grant with term equal to the expected life of the option. Historical data was used to estimate option exercise and employee termination within the valuation model. The expected term of options represents the period of time that options granted are expected to be outstanding and has been determined based on an analysis of historical exercise behavior. If any of the assumptions used in the Black-Scholes model change significantly, stock-based compensation expense for new awards may differ materially in the future from that recorded in the current period.
 
Vesting of restricted stock granted under the Incentive Stock Bonus Plan is subject to service, performance and market conditions and meets the classification of equity awards. These awards were measured at market value on the grant-dates for issuances where the attainment of performance criteria is likely and at fair value on the grant-dates, using a Monte Carlo simulation for issuances where the attainment of performance criteria is uncertain. The total compensation cost will be expensed over the estimated requisite service period.
 
Reclassification – Certain prior year items have been reclassified to conform to the current year presentation. Such reclassifications include approximately $145,000 between related party notes payable and additional paid-in capital to reflect the modification of the note payable to the de Clara Trust in July 2015, which was accounted for as an extinguishment.
 
B.          NEW ACCOUNTING PRONOUNCEMENTS
  
In January 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The new guidance is intended to improve the recognition and measurement of financial instruments. The new guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted for specific provisions within the guidance. Management does not expect the new standard to have a material effect on its financial statements and related disclosures.
 
In February 2016, the FASB issued ASU 2016-02, Leases, which will require most leases (with the exception of leases with terms of less than one year) to be recognized on the balance sheet as an asset and a lease liability. Leases will be classified as an operating lease or a financing lease. Operating leases are expensed using the straight-line method whereas financing leases will be treated similarly to a capital lease under the current standard. The new standard will be effective for annual and interim periods, within those fiscal years, beginning after December 15, 2018, but early adoption is permitted. The new standard must be presented using the modified retrospective method beginning with the earliest comparative period presented. The Company is currently evaluating the effect of the new standard on its financial statements and related disclosures.
 
 
9
 
 
In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 simplifies several aspects of the accounting for share-based payment award transactions, including income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. The new standard will be effective for annual and interim periods, within those fiscal years, beginning after December 15, 2016 but early adoption is permitted. The Company is currently evaluating the effect of the new amendment on its financial statements and related disclosures.
 
The Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its financial statements.
 
C.          STOCKHOLDERS’ EQUITY
 
Stock options, stock bonuses and compensation granted by the Company as of June 30, 2016 are as follows:
 
Name of Plan
 
Total Shares Reserved Under Plans
 
 
Shares Reserved for Outstanding Options
 
 
Shares Issued
 
 
Remaining Options/Shares Under Plans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Incentive Stock Options Plans
    1,960,000 
    1,685,966 
    N/A 
    11,334 
Non-Qualified Stock Option Plans
    7,680,000 
    6,005,721 
    N/A 
    1,062,861 
Stock Bonus Plans
    3,594,000 
    N/A 
    2,562,950 
    1,030,223 
Stock Compensation Plan
    3,350,000 
    N/A 
    1,767,047 
    1,549,905 
Incentive Stock Bonus Plan
    16,000,000 
    N/A 
    15,600,000 
    400,000 
 
   Stock options, stock bonuses and compensation granted by the Company as of September 30, 2015 are as follows:
 
Name of Plan
 
Total Shares Reserved Under Plans
 
 
Shares Reserved for Outstanding Options
 
 
Shares Issued
 
 
Remaining Options/Shares Under Plans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Incentive Stock Option Plans
    1,960,000 
    1,690,665 
    N/A 
    6,635 
Non-Qualified Stock Option Plans
    7,680,000 
    5,849,103 
    N/A 
    1,219,479 
Bonus Plans
    3,594,000 
    N/A 
    1,643,714 
    1,949,459 
Stock Compensation Plan
    3,350,000 
    N/A 
    1,423,999 
    1,892,950 
Incentive Stock Bonus Plan
    16,000,000 
    N/A 
    15,600,000 
    400,000 
 
 
10
 
  
Stock option activity:
 
 
 
Nine Months Ended June 30,
 
 
 
 2016
 
 
 2015
 
Granted
    210,000 
    803,700 
Forfeited
    55,998 
    137,249 
 
 
 
Three Months Ended June 30,
 
 
 
 2016
 
 
 2015
 
Granted
    0 
    801,700 
Forfeited
    5,000 
    27,833 
 
No shares of restricted stock were forfeited from the Incentive Stock Bonus Plan during the nine and three months ended June 30, 2016. During the nine and three months ended June 30, 2015, 100,000 and 0 shares, respectively, of non-vested restricted stock were forfeited.
 
Stock-Based Compensation Expense
 
 
 
Nine Months Ended June 30,
 
 
 
2016
 
 
2015
 
Employees
  $1,263,662 
  $4,570,999 
Non-employees
  $618,890 
  $437,729 
 
 
 
Three months Ended June 30,
 
 
 
2016
 
 
2015
 
Employees
  $418,562 
  $619,145 
Non-employees
  $146,830 
  $137,600 
 
Employee compensation expense includes the expense related to options issued or vested and restricted stock. Non-employee expense includes the expense related to options and stock issued to consultants expensed over the period of their service contracts.
 
Derivative Liabilities, Warrants and Other Options
 
The following chart presents the derivative liabilities, warrants and other options outstanding during the quarter ended June 30, 2016:
 
Warrant
 
Issue Date
 
Shares Issuable upon Exercise of Warrant
 
 
Exercise Price
 
Expiration Date
 
Refer-ence
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Series R
 
12/6/12
    2,625,000 
  $4.00 
12/6/16
    1 
Series S
 
10/11/13 -10/24/14
    25,928,010 
  $1.25 
10/11/18
    1 
Series U
 
4/17/14
    445,514 
  $1.75 
10/17/17
    1 
Series V
 
5/28/15
    20,253,164 
  $0.79 
5/28/20
    1 
Series W
 
10/28/15
    17,223,248 
  $0.67 
10/28/20
    1 
Series Z
 
5/23/16
    6,600,000 
  $0.55 
11/23/21
    1 
Series ZZ
 
5/23/16
    500,000 
  $0.55 
5/18/21
    1 
Series X
 
1/13/16
    3,000,000 
  $0.37 
1/13/21
    2 
Series Y
 
2/15/16
    650,000 
  $0.48 
2/15/21
    2 
Series N
 
8/18/08
    2,844,627 
  $0.53 
8/18/17
       
Series P
 
2/10/12
    590,001 
  $4.50 
3/6/17
       
Consultants
 
12/2/11- 1/1/16
    440,000 
  $0.37- $3.50 
10/27/16- 12/31/18
    3 
 
 
11
 
  
The following chart presents the derivative liabilities, warrants and other options outstanding at September 30, 2015:
 
Warrant
 
Issue Date
 
Shares Issuable upon Exercise of Warrants
 
 
Exercise Price
 
Expiration Date
 
Refer-ence
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Series N
 
8/18/08
    2,844,627 
    0.53 
8/18/17
 
 
 
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- 10/24/14
    25,928,010 
    1.25 
10/11/18
    1 
Series U
 
4/17/14
    445,514 
    1.75 
10/17/17
    1 
Series V
 
5/28/15
    20,253,164 
    0.79 
5/28/20
    1 
Series P
 
2/10/12
    590,001 
    4.50 
3/6/17
       
Consultants
 
10/14/05 – 7/1/15
    238,000 
    0.66 – 20.00 
10/14/15 - 6/30/18
    3 
 
1.
Derivative Liabilities
 
The table below presents the derivative instruments and their respective balances at the balance sheet dates:
 
 
 
June 30, 2016
 
 
September 30, 2015
 
Series S warrants
  $3,930,686 
  $7,363,555 
Series U warrants
    4,455 
    44,551 
Series V warrants
    3,443,038 
    6,278,481 
Series W warrants
    3,557,971 
    - 
Series Z warrants
    1,756,982 
    - 
Series ZZ warrants
    129,920 
    - 
 
       
       
Total derivative liabilities
  $12,823,052 
  $13,686,587 
 
12
 
 
The gains on the derivative instruments are as follows:
 
 
 
Nine Months Ended June 30,
 
 
 
2016
 
 
2015
 
Series A through E warrants
  $- 
  $6,105 
Series H warrants
    - 
    12,000 
Series Q warrants
    - 
    12,000 
Series R warrants
    - 
    131,250 
Series S warrants
    3,432,869 
    472,487 
Series U warrants
    40,096 
    74,352 
Series V warrants
    2,835,443 
    1,100,760 
Series W warrants
    1,502,800 
    - 
Series Z warrants
    210,848 
    - 
Series ZZ warrants
    15,918 
    - 
 
       
       
Gain on derivative instruments
  $8,037,974 
  $1,808,954 
 
 
 
Three Months Ended June 30,
 
 
 
2016
 
 
2015
 
Series H warrants
  $- 
  $12,000 
Series Q warrants
    - 
    12,000 
Series R warrants
    - 
    105,000 
Series S warrants
    285,208 
    3,111,361 
Series U warrants
    13,366 
    87,659 
Series V warrants
    1,012,658 
    1,100,760 
Series W warrants
    970,746 
       
Series Z warrants
    210,848 
    - 
Series ZZ warrants
    15,918 
    - 
 
       
       
Gain on derivative instruments
  $2,508,744 
  $4,428,780 
 
       
       
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 dates is recognized as a gain or loss.
 
Issuance of additional Warrants
 
On May 23, 2016, the Company closed a registered direct offering of 10,000,000 shares of common stock and 6,600,000 Series Z warrants to purchase shares of common stock. The common stock and warrants were sold at a combined per unit price of $0.50 for net proceeds of approximately $4.6 million, net of placement agent’s commissions and offering expenses. The Series Z warrants may be exercised at any time on or after November 23, 2016 and on or before November 23, 2021 at a price of $0.55 per share. The Company also issued 500,000 Series ZZ warrants to the placement agent as part of its compensation. The Series ZZ warrants may be exercised at any time on or after November 23, 2016 and on or before May 18, 2021 at a price of $0.55 per share. The fair value of the Series Z and Series ZZ warrants of $2.1 million on the date of issuance was recorded as a warrant liability.
 
 
13
 
 
On October 28, 2015, the Company closed an underwritten public offering of 17,223,248 shares of common stock and 17,223,248 Series W warrants to purchase shares of common stock. The common stock and warrants were sold at a combined per unit price of $0.67 for net proceeds of approximately $10.5 million, net of underwriting discounts and commissions and offering expenses. The Series W warrants are immediately exercisable at a price of $0.67 and expire on October 28, 2020. The fair value of the Series W warrants of $5.1 million on the date of issuance was recorded as warrant liability.
 
Expiration of Warrants
 
On December 22, 2015, 1,200,000 Series Q warrants, with an exercise price of $5.00, expired. The fair value of the Series Q warrants was $0 on the date of expiration.
 
2.
Equity-based warrants
 
In January 2016, the Company sold 3,000,000 shares of its common stock and 3,000,000 Series X warrants to the de Clara Trust for approximately $1.1 million. The de Clara Trust is controlled by Geert Kersten, the Company's Chief Executive Officer and a director. Each Series X warrant allows the de Clara Trust to purchase one share of the Company's common stock at a price of $0.37 per share at any time on or before January 13, 2021. The Series X warrants qualify for equity treatment in accordance with ASC 815. The relative fair value of the warrants was calculated to be approximately $417,000.
 
In February 2016, the Company sold 1,300,000 shares of its common stock and 650,000 Series Y warrants to a private investor for $624,000. Each Series Y warrant allows the holder to purchase one share of the Company's common stock at a price of $0.48 per share at any time on or before February 15, 2021. The Series Y warrants qualify for equity treatment in accordance with ASC 815. The relative fair value on the date of issuance of the warrants was calculated to be approximately $144,000.
 
3.
Options and shares issued to consultants
 
The Company typically enters into consulting arrangements in exchange for common stock or stock options. During the nine and three months ended June 30, 2016, the Company issued 990,045 and 186,267 shares of common stock, respectively, of which 647,000 and 67,000, respectively, were restricted shares. Under these arrangements, the common stock was issued with stock prices ranging between $0.37 and $0.72 per share. During the nine and three months ended June 30, 2015, the Company issued 584,476 and 160,492 shares of common stock, respectively, of which 127,000 and 58,000, respectively, were restricted shares. Under these arrangements, the common stock was issued with stock prices ranging between $0.57 and $1.11 per share.
Additionally, during the nine and three months ended June 30, 2016, the Company issued 210,000 and 0 of fully vested options, respectively, to purchase common stock with a fair value ranging between $0.19 and $0.30 per share. During the nine and three months ended June 30, 2015, the Company issued 40,000 and 0 options, respectively, to purchase common stock with a fair value of $0.50 per share. The aggregate values of the issuances of restricted common stock and common stock options are recorded as prepaid expenses and are charged to general and administrative expenses over the periods of service.
 
 
14
 
  
During the nine and three months ended June 30, 2016, the Company recorded total expense of approximately $619,000 and $147,000, respectively, relating to these consulting agreements. During the nine and three months ended June 30, 2015, the Company recorded total expense of approximately $438,000 and $138,000, respectively, relating to these consulting agreements. At June 30, 2016 and September 30, 2015, approximately $32,000 and $30,000, respectively, are included in prepaid expenses. As of June 30, 2016, 440,000 vested options issued to consultants as payment for services remained outstanding, all of which were issued from the Non-Qualified Stock Option plans.
 
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.
 
 
15
 
  
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 June 30, 2016:
 
 
 
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
  $3,930,686 
  $- 
  $8,892,366 
  $12,823,052 
 
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, 2015:
 
 
 
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
  $7,363,555 
  $- 
  $6,323,032 
  $13,686,587 
 
The following sets forth the reconciliation of beginning and ending balances related to fair value measurements using significant unobservable inputs (Level 3) for the nine months ended June 30, 2016 and the year ended September 30, 2015:
 
 
 
(9 months ended)
 
 
(12 months ended)
 
 
 
June 30, 2016
 
 
September 30, 2015
 
Beginning balance
  $6,323,032 
  $307,894 
Issuances
    7,174,439 
    8,003,220 
Realized and unrealized gains
    (4,605,105)
    (1,988,082)
Ending balance
  $8,892,366 
  $6,323,032 
 
The fair values of the Company’s derivative instruments disclosed above under Level 3 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.          RELATED PARTY LOAN
 
On January 12, 2016, the Company owed the de Clara Trust $1,105,989, which amount included accrued and unpaid interest. On January 13, 2016, the de Clara Trust demanded payment on the note payable. At the same time the Company sold 3,000,000 shares of its common stock and 3,000,000 Series X warrants to the de Clara Trust for approximately $1.1 million. Each warrant allows the de Clara Trust to purchase one share of the Company's common stock at a price of $0.37 per share at any time on or before January 13, 2021.
 
Prior to the repayment, on June 29, 2015, the Company had extended the maturity date of the note to July 6, 2017, lowered the interest rate from 15% to 9% and changed the conversion price from $4.00 to $0.59, the closing stock price on the previous trading day. The Company determined these modifications to be substantive and accounted for the modification as an extinguishment of the pre-modification note and issuance of the post-modification note. The Company recorded an extinguishment loss and a premium on the note payable of approximately $166,000. The premium was credited to additional paid-in capital.
 
 
16
 
  
During the nine and three months ended June 30, 2016, the Company paid approximately $43,000 and $0, respectively, in interest expense to Mr. de Clara. During the nine and three months ended June 30, 2015, the Company paid approximately $124,000 and $41,000, respectively, in interest expense to Mr. de Clara.
 
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 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 3 clinical trial for head and neck cancer with its partners TEVA Pharmaceuticals and Orient Europharma. During the nine months ended June 30, 2016, the Company raised $16.8 million in net proceeds from public and private sales of common stock and warrants. To finance the study for the next twelve months and beyond, the Company plans to raise additional capital in the form of corporate partnerships, as well as debt and/or equity financings. The Company believes that it will be able to obtain additional financing because it has done so consistently in the past and because Multikine is a product in the Phase 3 clinical trial stage. However, the operating plan may change as a result of many factors currently unknown to the Company, and the Company may need additional funds sooner than planned. There can be no assurance that the Company will be successful in raising additional funds on a timely basis or that the funds will be available to the Company on acceptable terms or at all.  If the Company does not raise the necessary amounts of money, it will either have to slow the development of the Phase 3 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 3 clinical trial for Multikine, the Company has spent approximately $31.9 million as of June 30, 2016 on direct costs for the Phase 3 clinical trial.
 
The financial statements have been prepared assuming that the Company will continue as a going concern, but due to recurring losses from operations and future liquidity needs, there is substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
 
17
 
  
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. The agreement required the Company to make $600,000 in advanced payments which are being credited back in $150,000 annual increments through December 2017. As of June 30, 2016, the total balance advanced is $300,000, of which $150,000 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 study 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. In October 2015 the Company entered into a second co-development and revenue sharing agreement with Ergomed for an additional $2 million, for a total of $12 million. The Company accounted for the co-development and revenue sharing agreement in accordance with ASC 808 “Collaborative Arrangements.” The Company determined the payments to Ergomed 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 $17.8 million related to Ergomed’s services. This amount is net of Ergomed’s discount of approximately $5.9 million. During the nine and three months ended June 30, 2016, the Company recorded, net of Ergomed’s discount, approximately $5.9 million and $2.1 million, respectively, as research and development expense related to Ergomed’s services. During the nine and three months ended June 30, 2015, the Company recorded, net of Ergomed’s discount, approximately $4.9 million and $1.7 million, respectively, 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 Phase I study being conducted at the Naval Medical Center, San Diego under a Cooperative Research and Development Agreement (CRADA) with the U.S. Navy for 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, or inVentiv, the Company’s former clinical research organization (CRO). 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. Currently, the Company is seeking at least $50 million in damages in its amended statement of claim. Based upon further analysis, however, the Company believes that its damages (direct and consequential) presently total over $150 million.
 
 
18
 
  
On December 12, 2013, the former CRO 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, the former CRO moved to dismiss certain claims. On June 24, 2014, the arbitrator denied the motion to dismiss.
 
In an amended statement of claim, the Company asserted the claims set forth above as well as an additional claim for professional malpractice.  The arbitrator subsequently granted inVentiv’s motion to dismiss the professional malpractice claim based on the “economic loss doctrine” under New Jersey law, a legal doctrine that, under certain circumstances, prohibits bringing a negligence-based claim alongside a claim for breach of contract.  The arbitrator denied the remainder of inVentiv’s motion, which had sought to dismiss certain other aspects of the amended statement of claim.  In particular, the arbitrator rejected inVentiv’s argument that several aspects of the amended statement of claim were beyond the arbitrator’s jurisdiction.
 
In connection with the pending arbitration proceedings, inVentiv has asserted counterclaims against the Company for (i) breach of contract, seeking at least $2 million in damages for services allegedly performed by inVentiv; (ii) breach of contract, seeking at least $1 million in damages for the Company’s alleged use of inVentiv’s name in connection with publications and promotions in violation of the parties’ contract; (iii) opportunistic breach, restitution and unjust enrichment, seeking at least $20 million in disgorgement of alleged unjust profits allegedly made by the Company as a result of the purported breaches referenced in subsection (ii); and (iv) defamation, seeking at least $1 million in damages for allegedly defamatory statements made about inVentiv. The Company believes inVentiv’s counterclaims are meritless and intends to vigorously defend against them. However, if such defense is unsuccessful, and inVentiv successfully asserts any of its counterclaims, such an adverse determination could have a material adverse effect on the Company’s business, results, financial condition and liquidity.
 
In October 2015, the Company signed a funding agreement with a company established by Lake Whillans Litigation Finance, LLC, a firm specializing in funding litigation expenses. Pursuant to the agreement, an affiliate of Lake Whillans will provide the Company funding for litigation expenses to support its arbitration claims against inVentiv. The funding is available to the Company as needed to fund the expenses of the ongoing arbitration and will only be repaid when the Company receives proceeds from the arbitration. During the nine months ended June 30, 2016, the Company recognized a gain of approximately $1.1 million on the derecognition of legal fees to record the transfer of the liability that existed prior to the execution of the financing agreement from the Company to Lake Whillans. The gain on derecognition of legal fees is recorded as a reduction of general and administration expenses on the Statement of Operations. All related legal fees are directly billed to and paid by Lake Whillans. As part of the agreement with Lake Whillans, the law firm agreed to cap its fees and expenses for the arbitration at $5 million.
 
The arbitration hearing on the merits (the “trial”) has been scheduled to commence on September 7, 2016.
 
 
19
 
  
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 3 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 deposit is included in non-current assets at June 30, 2016 and September 30, 2015.
 
The Company subleases a portion of its rental space on a month to month term lease, which requires a 30 day notice for termination. Effective February 1, 2016, the parties agreed to a 3% rental increase. As of that date, the Company receives $5,628 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 approximately $11,000 per month. As of June 30, 2016 and September 30, 2015, the Company has recorded a deferred rent liability of $4,000 and $6,000, respectively.
 
The Company leases office headquarters under a 60 month lease which expires June 30, 2020. 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 approximately $8,000 per month. As of June 30, 2016 and September 30, 2015, the Company has recorded a deferred rent liability of $19,000 and $13,000, 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 6% per annum.
 
 
20
 
 
H.          PATENTS
 
During the nine and three months ended June 30, 2016 and 2015, no patent impairment charges were recorded. For the nine and three months ended June 30, 2016, amortization of patent costs totaled approximately $30,000 and $12,000, respectively. For the nine and three months ended June 30, 2015, amortization of patent costs totaled approximately $31,000 and $12,000, respectively. Amortization of patent costs is included in general and administrative expenses on the Statement of Operations. The Company estimates that future amortization expense will be as follows:
 
Three months ending September 30, 2016
  $9,210 
Year ending September 30,
       
2017
    36,841 
2018
    36,507 
2019
    34,804 
2020
    31,611 
2021
    28,311 
Thereafter
    89,209 
Total
  $266,493 
 
I.           LOSS PER COMMON SHARE
The following tables provide the details of the basic and diluted loss per-share (LPS) computations:
 
 
 
Nine Months Ended June 30, 2016
 
 
 
Net Loss
 
 
Weighted Average Shares
 
 
LPS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic and dilutive LPS
  $(10,352,366)
    117,412,443 
  $(0.09)
 
 
 
Three Months Ended June 30, 2016
 
 
 
Net Loss
 
 
Weighted Average Shares
 
 
LPS
 
 
 
 
 
 
 
 
 
 
 
Basic and dilutive LPS
  $(3,849,324)
    124,132,500 
  $(0.03)
 
 
 
Nine Months Ended June 30, 2015
 
 
 
Net Loss
 
 
Weighted Average Shares
 
 
LPS
 
 
 
 
 
 
 
 
 
 
 
Basic and dilutive LPS
  $(24,830,691)
    77,625,511 
  $(0.32)
 
 
 
Three Months Ended June 30, 2015
 
 
 
Net Loss
 
 
Weighted Average Shares
 
 
LPS
 
 
 
 
 
 
 
 
 
 
 
Basic LPS
  $(4,429,137)
    83,796,311 
  $(0.05)
Gain on derivatives
    (1,100,760)
    1,337,796 
       
 
       
       
       
Dilutive LPS
  $(5,529,897)
    85,134,107 
  $(0.06)
 
 
21
 
 
In accordance with the contingently issuable shares guidance of FASB ASC Topic 260, Earnings Per Share, the calculation of diluted net earnings (loss) per share excludes the following securities because their inclusion would have been anti-dilutive as of June 30:
 
 
 
2016
 
 
2015
 
 
 
 
 
 
 
 
Options and Warrants
    86,066,292 
    38,786,333 
Convertible Debt
    - 
    1,871,283 
Unvested Restricted Stock
    15,100,000 
    15,100,000 
Total
    101,166,292 
    55,757,616 
 
 
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 3 clinical trial in advanced primary head and neck cancer. Multikine has been cleared for clinical testing by the regulators in twenty four countries around the world, including the United States. Multikine is also being used in a Phase I study at the Naval Medical Center, San Diego under a CRADA with the U.S. Navy 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.
 
 
22
 
  
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.
 
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. In addition, the Company expects to receive proceeds from the arbitration against its former clinical research organization, InVentiv.
 
The Company estimates the total remaining cash cost of the Phase 3 trial as currently planned, with the exception of the parts that will be paid by its licensees, Teva Pharmaceuticals and Orient Europharma, to be approximately $14.7 million. This is in addition to approximately $31.9 million which has been paid as of June 30, 2016. This estimate is based on the information currently available in the Company’s contracts with the Clinical Research Organizations responsible for managing the Phase 3 trial.  This number can be affected by the speed of enrollment, rate of death of patients, 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 3 trial will be higher than currently estimated. The trial costs will also increase should the Company need to enroll additional patients to replace patients enrolled by inVentiv, its former clinical research organization, since the data from certain patients enrolled by inVentiv may not be usable, or for other reasons. If additional patients need to be enrolled, the timelines for the trial will also be affected.
 
In April 2013, the Company announced that it had replaced the CRO running its Phase 3 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 announced that it had hired two CRO’s who will manage the global Phase 3 study; Aptiv Solutions and Ergomed, which are both international leaders in managing oncology trials. Both CRO’s helped the Company expand the trial to over 80 clinical sites globally. As of June 30, 2016, the study has enrolled 848 patients.
 
Under a co-development agreement, Ergomed will contribute up to $12 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 numerous similar co-development agreements, including one with Genzyme (purchased by Sanofi in 2011 for over $20 billion). Ergomed will be responsible for the new patient enrollment.
 
During the nine months ended June 30, 2016, the Company’s cash decreased by approximately $500,000.  Significant components of this decrease include net proceeds from the sale of the Company’s stock of $16.8 million offset by net cash used to fund the Company’s regular operations, including its on-going Phase 3 clinical trial, of $16.2 million and the $1.1 million repayment of the related party loan. During the nine months ended June 30, 2015, the Company’s cash increased by $2.7 million.  Significant components of this increase include net proceeds from the sale of the Company’s stock of $21.3 million offset by net cash used to fund the Company’s regular operations, including its on-going Phase 3 clinical trial, of $18.5 million.
 
 
23
 
 
On October 28, 2015, the Company closed an underwritten public offering of 17,223,248 shares of common stock and 17,223,248 Series W warrants to purchase shares of common stock. The common stock and warrants were sold at a combined per unit price of $0.67 for net proceeds of approximately $10.5 million, net of underwriting discounts and commissions and offering expenses. The Series W warrants are immediately exercisable at a price of $0.67 and expire on October 28, 2020.
 
In January 2016, the Company sold 3,000,000 shares of its common stock and 3,000,000 Series X Warrants to the de Clara Trust for approximately $1.1 million. Each Series X Warrant allows the de Clara Trust to purchase one share of the Company's common stock at a price of $0.37 per share at any time on or before January 13, 2021.
 
In February 2016, the Company sold 1,300,000 shares of its common stock and 650,000 Series Y Warrants to a private investor for $624,000. Each Series Y Warrant allows the holder to purchase one share of the Company's common stock at a price of $0.48 per share at any time on or before February 15, 2021.
 
On May 23, 2016, the Company closed a registered direct offering of 10,000,000 shares of common stock and 6,600,000 Series Z warrants to purchase shares of common stock. The common stock and warrants were sold at a combined per unit price of $0.50 for net proceeds of approximately $4.6 million, net of placement agent’s commissions and offering expenses. The Series Z warrants may be exercised at any time on or after November 23, 2016 and on or before November 23, 2021 at a price of $0.55 per share. The Company issued 500,000 Series ZZ warrants to the placement agent as part of its compensation. The Series ZZ warrants may be exercised at any time on or after November 23, 2016 and on or before May 18, 2021 at a price of $0.55 per share.
 
Results of Operations and Financial Condition
 
During the nine and three months ended June 30, 2016, grant and other income decreased by approximately $540,000 and $260,000, respectively, compared to the nine and three months ended June 30, 2015. The decrease is primarily due to the timing of study drug shipments to supply the Company’s partner in Taiwan and the grant income received through the Company’s Small Business Innovation Research (SBIR) grant during the quarter ended June 30, 2015.
 
During the nine and three months ended June 30, 2016, research and development expenses decreased by approximately $1.1 million and $890,000, respectively, compared to the nine and three months ended June 30, 2015. The Company is continuing the Phase 3 clinical trial and research and development fluctuates based on the activity level of the clinical trial.
 
During the nine and three months ended June 30, 2016, general and administrative expenses decreased by approximately $7 million and $1.2 million, respectively, compared to the nine and three months ended June 30, 2015. Major components of the decrease are the reduction of legal fees and a decrease in share-based employee compensation costs, during the nine and three months ended June 30, 2016. Additionally, during the nine months ended June 30, 2016 the Company recognized an approximate $1.1 million dollar gain on derecognition of legal fees to record the transfer of the liability from the Company to Lake Whillans that existed prior to the execution of the financing agreement. The gain on derecognition of legal fees is recorded as a reduction of general and administrative expenses.
 
 
24
 
  
The gain on derivative instruments of $8 million and $2.5 million, respectively, for the nine months ended June 30, 2016 were the results of the change in fair value of the derivative liabilities during the respective periods. The gain on derivative instruments of $1.8 million and $4.4 million for the nine and three months ended June 30, 2015 was the result of the change in fair value of the derivative liabilities during the period. These changes were caused by fluctuations in the share price of the Company’s common stock.
 
During the three months ended June 30, 2015, the Company recorded a loss on debt extinguishment of $641,000. This amount was comprised of an approximate $166,000 premium on the note payable held in a related party trust, and an additional expense of approximately $475,000 relating to the modification of Series N warrants also held in the trust. The loss on debt extinguishment resulted from substantive modification of the terms under the note, including an extension of the expiration date and a decrease in the interest rate, and an extension of the expiration date on the warrants.
 
Net interest income was $49,000 and $25,000 for the nine and three months ended June 30, 2016, which consisted of interest expense on the loan from the Company’s president of approximately $29,000 and $0, respectively, offset by interest income of approximately $78,000 and $25,000, respectively, earned on the Company’s cash balances. Net interest expense was $42,000 and $15,000 for the nine and three months ended June 30, 2015, which consisted of approximately $125,000 and $42,000, respectively, of interest expense primarily on the loan from the Company’s president, offset by approximately $83,000 and $27,000, respectively, of interest income earned on the Company’s cash balances.
 
Research and Development Expenses
 
The Company’s research and development efforts involve Multikine and LEAPS. The table below shows the research and development expenses associated with each project.
 
 
 
Nine months ended June 30,
 
 
Three months ended June 30,
 
 
  2016 
 
 2015
 
 
 2016
 
 
2015
 
 
 
 
 
 
 
 
 
 
 
MULTIKINE
  $14,344,946 
  $15,326,179(a)
  $4,743,319 
  $5,593,709(a)
LEAPS
    291,251 
    375,807 
    94,789 
    133,868 
 
       
       
       
       
TOTAL
  $14,636,197 
  $15,701,986 
  $4,838,108 
  $5,727,577 
 
(a)
The above Multikine expense amounts include depreciation relating to research and development equipment, which in prior years was included as a separate line item on the Statement of Operations. For the nine and three months ended June 30, 2015, depreciation expenses totaling $119,053, and $35,009, respectively, were reclassified to Multikine research and development expenses to be consistent with the current year presentation.
 
 
25
 
  
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 Annual Report on Form 10-K for the year ended September 30, 2015. The application of these critical accounting policies and estimates has been discussed with the Audit Committee of the Company’s Board of Directors.
 
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
 
The Company had a loan from its president that bore interest at 9%. This loan was paid on January 12, 2016. 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 June 30, 2016. 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 has concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2016.
 
 
26
 
 
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 nine months of fiscal year 2016. There was no change in the Company’s internal control over financial reporting during the nine months ended June 30, 2016.
 
 
27
 
 
PART II
 
 
Item 2.                  Unregistered Sales of Equity Securities and Use of Proceeds.
 
Issuance of Restricted Stock
 
During the nine months ended June 30, 2016 the Company issued 647,000 restricted shares of common stock to consultants for investor relations services from the Stock Bonus Plans.
 
The Company relied upon the exemption provided by Section 4(a)(2) of the Securities Act of 1933 with respect to the issuance of these shares. The individuals 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 individuals 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
 
 
28
 
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: August 9, 2016  
By:  
/s/  Geert Kersten
 
 
 
Geert Kersten
 
 
 
Principal Executive Officer*
 
 
 

 
* Also signing in the capacity of the Principal Accounting and Financial Officer.
 
 
 
 
 
 29
EX-31.1 2 cvm_ex311.htm CERTIFICATION Blueprint
 Exhibit 31.1
CERTIFICATIONS
 
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.
 
 
 
 
 
 
 
 
August 9, 2016               
By:  
/s/   Geert Kersten
 
 
 
 Geert Kersten
 
 
 
Principal Executive Officer
 
 
 
EX-31.2 3 cvm_ex312.htm CERTIFICATION Blueprint
 Exhibit 31.2
 
CERTIFICATIONS
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.
 
 
 
 
 
 
 
August 9, 2016  
By:  
/s/  Geert Kersten
 
 
 
Geert Kersten
 
 
 
Principal Financial Officer
 
 
 
EX-32 4 cvm_ex32.htm CERTIFICATE Blueprint
Exhibit 32
 
In connection with the Quarterly Report of CEL-SCI Corporation (the “Company”) on Form 10-Q for the period ending June 30, 2016 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.
 
 
 
 
 
 
 
 
August 9, 2016
 
By:  
/s/  Geert Kersten
 
 
 
Geert Kersten
 
 
 
Principal Executive and
Principal Financial Officer
 
 

 
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Stockholders Equity Tables Stock options, stock bonuses and compensation granted by the Company Schedule of employees and non-employees stock compensation Derivative Liabilities, Warrants and Other Options Tabular disclosure of derivative liabilities at fair value Schedule Of Gains and (Losses) on Derivative Liabilities D. Fair Value Measurements Tables Measured at fair value on a recurring basis Reconciliation of beginning and ending balances related to fair value measurements using significant unobservable inputs (Level 3) H. Patents Tables Schedule of total estimated future amortization I. Loss Per Common Share Tables Computation of dilutive net loss per share Antidilutive securities Total Shares Reserved Under Plans Shares Reserved for Outstanding Options Shares Issued Remaining Options/Shares Under Plans C. Stockholders Equity Details 1 Granted Forfeited C. Stockholders Equity Details 2 Employees Non-employees Class of Warrant or Right [Axis] STOCKHOLDERS' EQUITY Issue Date Last Issue Date Shares Issuable upon Exercise of Warrant Exercise Price Exercise Price Minimum Exercise Price Maximum Expiration Date Last Expiration Date C. Stockholders Equity Details 4 Series A through E warrants Series N Series F and G warrants Series H warrants Series Q warrants Series R warrants Series S warrants Series T warrants Series U warrants Series V warrants Series W warrants Series Z warrants Series ZZ warrants Total derivative liabilities Series A through E warrants Series H warrants Series N warrants Series Q warrants Series R warrants Series S warrants Series T warrants Series U warrants Series V warrants Series W warrants Series Z warrants Series ZZ warrants Gain on derivative instruments Fair Value, Hierarchy [Axis] FAIR VALUE MEASUREMENTS Derivative instruments D. Fair Value Measurements Details 1 Beginning balance Issuances Settlements Transfers to Level 1 Realized and unrealized (gains) losses Ending balance E. Related Party Loan Details Narrative Interest expense paid to Mr. de Clara H. Patents Details Six months ending September 30, 2016 Year ending September 30, 2017 Year ending September 30, 2018 Year ending September 30, 2019 Year ending September 30, 2020 Year ending September 30, 2021 Thereafter Total H. Patents Details Narrative Patent impairment charges Amortization of patent costs I. Loss Per Common Share Details Net Loss Gain on derivatives Net Loss, Diluted Weighted Average Shares - Basic Gain on derivatives, shares Weighted Average Shares - Diluted Weighted Average Shares - Basic and Diluted LPS - Basic and Diluted LPS - Basic LPS - Diluted I. Loss Per Common Share Details 1 Options and Warrants Convertible Debt Unvested Restricted Stock Total Custom Element. Custom Element. Custom Element. Consultants. Convertible Notes Settlement. Custom Element. Custom Element. Custom Element. Decrease In Deferred Rent. Custom Element. Custom Element. Custom Element. Deferred Rent Net Of Current Portion. Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Fair Value Measurements. Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Financings 2009 Warrants Series A To E. Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Incentive Stock Option Plans. Custom Element. Increase In Derivative Liabilities From Issuance Of Warrants. Increase In Prepaid Expenses. Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Non Qualified Stock Option Plans. Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Private Investors. Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Series C. Series E. Series F And G Warrants. Series F. Series G. Series H. Series H Warrants. Series K warrants. Series L. Series M Modified. Custom Element. Series N. Custom Element. Custom Element. Series P. Series Q. Series Q Warrants. Custom Element. Custom Element. Custom Element. Custom Element. Shares Issuable Upon Exercise Of warrant. Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Assets, Current Assets Deferred Rent Credit Liabilities, Current Derivative Instruments and Hedges, Liabilities, Noncurrent Liabilities Stockholders' Equity Attributable to Parent Liabilities and Equity Operating Expenses Interest Expense Depreciation, Depletion and Amortization, Nonproduction Stock Issued During Period, Value, Employee Benefit Plan Gain (Loss) on Disposition of Property Plant Equipment Increase (Decrease) in Receivables Increase (Decrease) in Prepaid Expense Increase (Decrease) in Inventories Increase (Decrease) in Accounts Payable Increase (Decrease) in Accrued Liabilities Increase (Decrease) in Due to Officers and Stockholders Increase (Decrease) in Deferred Revenue Net Cash Provided by (Used in) Operating Activities Payments to Acquire Property, Plant, and Equipment Payments to Acquire Intangible Assets Net Cash Provided by (Used in) Investing Activities Repayments of Related Party Debt Repayments of Debt and Capital Lease Obligations Net Cash Provided by (Used in) Financing Activities AccountsPayableTotal IncreaseInReceivable AccruedExpensesTotal AdditionalPaidInCapitalTotal GainLossSeriesAthroughEWarrants GainLossSeriesHWarrant GainLossSeriesQWarrant GainLossSeriesRWarrant GainLossSeriesSWarrant GainLossSeriesTWarrants GainLossSeriesUWarrant GainLossSeriesVWarrants GainLossSeriesWWarrants GainLossSeriesZWarrants GainLossSeriesZzWarrants Derivative Liability, Fair Value, Gross Liability Fair Value, Measurement with Unobservable Inputs Reconciliations, Recurring Basis, Liability Value Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount CSchleuningSeriesAMember ConvertibleNotesSettlementMember DeferredRentLiabilityMember ExercisableMember Financings2009WarrantsSeriesAToEMember OutstandingMember PatentMember PrivateInvestorWarrants1Member PrivateInvestorWarrants2Member PrivateInvestorWarrants3Member PrivateInvestorWarrantsMember PrivateInvestorsMember SeniorConvertibleNotesMember SeriesAThroughEWarrantsMember SeriesCMember SeriesEMember SeriesFAndGWarrantsMember SeriesFMember SeriesGMember SeriesHMember SeriesHWarrantsMember SeriesKwarrantsMember SeriesLMember SeriesMModifiedMember SeriesMModififedMember SeriesOMember SeriesOandPMember SeriesQWarrantsMember SeriesTMember Warrants2008SeriesNMember WarrantsHeldbyOfficerAndDirectorMember EX-101.PRE 10 cvm-20160630_pre.xml XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE XML 11 R1.htm IDEA: XBRL DOCUMENT v3.5.0.2
Document and Entity Information - shares
9 Months Ended
Jun. 30, 2016
Aug. 01, 2016
Document And Entity Information    
Entity Registrant Name CEL SCI CORP  
Entity Central Index Key 0000725363  
Document Type 10-Q  
Document Period End Date Jun. 30, 2016  
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   145,349,718
Document Fiscal Period Focus Q3  
Document Fiscal Year Focus 2016  
XML 12 R2.htm IDEA: XBRL DOCUMENT v3.5.0.2
BALANCE SHEETS - USD ($)
Jun. 30, 2016
Sep. 30, 2015
CURRENT ASSETS:    
Cash and cash equivalents $ 5,218,960 $ 5,726,682
Receivables 790,658 87,214
Prepaid expenses 713,549 979,655
Deposits - current portion 150,000 150,000
Inventory used for R&D and manufacturing 1,259,458 1,401,839
Deferred rent - current portion 444,349 487,793
Total current assets 8,576,974 8,833,183
RESEARCH AND OFFICE EQUIPMENT, net 250,552 307,466
PATENT COSTS, net 266,493 291,564
DEFERRED RENT - net of current portion 3,565,684 4,044,473
DEPOSITS 1,820,917 1,970,917
TOTAL ASSETS 14,480,620 15,447,603
CURRENT LIABILITIES:    
Accounts payable 4,437,389 5,128,682
Accrued expenses 520,973 88,575
Due to employees 316,804 365,131
Related party loan 0 1,104,057
Deferred rent - current portion 4,037 9,997
Lease obligation - current portion 2,309 9,028
Total current liabilities 5,281,512 6,705,470
Derivative instruments 12,823,052 13,686,587
Deferred revenue 126,501 126,639
Deferred rent - net of current portion 18,378 9,026
Deposits held 5,000 5,000
Total liabilities 18,254,443 20,532,722
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT    
Preferred stock, $.01 par value--200,000 shares authorized;-0- shares issued and outstanding 0 0
Common stock, $.01 par value - 600,000,000 shares authorized, 145,146,097 shares and 112,360,568 shares issued and outstanding at June 30, 2016 and September 30, 2015, respectively 1,451,461 1,123,606
Additional paid-in capital 279,328,561 267,992,754
Accumulated deficit (284,553,845) (274,201,479)
Total stockholders' deficit (3,773,823) (5,085,119)
TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT $ 14,480,620 $ 15,447,603
XML 13 R3.htm IDEA: XBRL DOCUMENT v3.5.0.2
BALANCE SHEETS (Parenthetical) - $ / shares
Jun. 30, 2016
Sep. 30, 2015
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 145,146,097 112,360,568
Common Stock Shares Outstanding 145,146,097 112,360,568
XML 14 R4.htm IDEA: XBRL DOCUMENT v3.5.0.2
STATEMENTS OF OPERATIONS - USD ($)
3 Months Ended 9 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
Income Statement [Abstract]        
GRANT INCOME AND OTHER $ 129,975 $ 389,223 $ 183,726 $ 723,681
OPERATING EXPENSES:        
Research and development 4,838,108 5,727,577 14,636,197 15,701,986
General & administrative 1,674,614 2,863,121 3,987,011 10,978,254
Total operating expenses 6,512,722 8,590,698 18,623,208 26,680,240
OPERATING LOSS (6,382,747) (8,201,475) (18,439,482) (25,956,559)
GAIN ON DERIVATIVE INSTRUMENTS 2,508,744 4,428,780 8,037,974 1,808,954
LOSS ON DEBT EXTINGUISHMENT 0 (641,276) 0 (641,276)
INTEREST INCOME (EXPENSE), NET 24,679 (15,166) 49,142 (41,810)
NET LOSS $ (3,849,324) $ (4,429,137) $ (10,352,366) $ (24,830,691)
NET LOSS PER COMMON SHARE        
BASIC $ (0.03) $ (0.05)    
DILUTED $ (0.03) $ (0.06)    
BASIC and DILUTED     $ (0.09) $ (0.32)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING        
BASIC 124,132,500 83,796,311    
DILUTED 124,132,500 85,134,107    
BASIC AND DILUTED     117,412,443 77,625,511
XML 15 R5.htm IDEA: XBRL DOCUMENT v3.5.0.2
STATEMENTS OF CASH FLOWS - USD ($)
9 Months Ended
Jun. 30, 2016
Jun. 30, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss $ (10,352,366) $ (24,830,691)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization 118,272 163,431
Issuance of common stock and options for services 618,890 437,729
Equity based compensation 1,263,662 4,570,999
Common stock contributed to 401(k) plan 120,693 123,066
Loss on retired equipment 115 313
Gain on derivative instruments (8,037,974) (1,808,954)
Loss on debt extinguishment 0 641,276
(Increase)/decrease in assets:    
Receivables 5,854 (76,672)
Deferred rent 522,233 559,828
Prepaid expenses 267,742 (283,864)
Inventory used for R&D and manufacturing 142,381 36,513
Deposits 150,000 150,000
Increase/(decrease) in liabilities:    
Accounts payable (1,079,423) 1,856,635
Accrued expenses 86,398 (117,207)
Due to employees (48,327) 95,214
Deferred rent liability 3,392 (5,795)
Deferred revenue (138) (1,591)
Net cash used in operating activities (16,218,596) (18,489,770)
CASH FLOWS FROM INVESTING ACTIVITIES:    
Purchases of equipment (31,405) (56,616)
Expenditures for patent costs (5,008) (9,422)
Net cash used in investing activities (36,413) (66,038)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Proceeds from issuance of common stock and warrants 16,858,029 21,278,905
Payments on related party loan (1,104,057)
Payments on obligations under capital lease (6,685) (6,290)
Net cash provided by financing activities 15,747,287 21,272,615
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (507,722) 2,716,807
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 5,726,682 8,513,620
CASH AND CASH EQUIVALENTS, END OF PERIOD 5,218,960 11,230,427
ACCOUNTS PAYABLE    
Increase in receivables 363,298 0
Increase in research and office equipment 0 12,625
(Decrease) in patent costs (12) (975)
Decrease in capital lease obligation 34 32
Increase in direct financing costs 24,810 128,630
(Increase) in accounts payable (388,130) (140,312)
Total 0 0
ACCRUED EXPENSES    
Increase in receivables 346,000 0
(Increase) in accrued expenses (346,000) 0
Total 0 0
ADDITIONAL PAID IN CAPITAL    
(Increase) in derivative liabilities (7,174,439) (8,463,957)
Decrease in common stock 0 1,000
Increase in prepaid services 1,636 20,464
Decrease in additional paid in capital 7,172,803 8,442,493
Total 0
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:    
Cash paid for interest expense $ 43,646 $ 124,914
XML 16 R6.htm IDEA: XBRL DOCUMENT v3.5.0.2
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
9 Months Ended
Jun. 30, 2016
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, 2015.

 

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 June 30, 2016 and the results of its operations for the nine and three months then ended. The condensed balance sheet as of September 30, 2015 is derived from the September 30, 2015 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 nine and three months ended June 30, 2016 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. Research and office equipment 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 in the period identified. 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 June 30, 2016 and September 30, 2015.

 

Derivative Instruments – The Company has entered into financing arrangements that consist of freestanding derivative instruments that contain embedded derivative features. The Company accounts for these arrangements in accordance with Accounting Standards Codification (ASC) 815, “Accounting for Derivative Instruments and Hedging Activities.” In accordance with accounting principles generally accepted in the United States (U.S. GAAP), derivative instruments and hybrid instruments are recognized as either assets or liabilities in 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 reporting 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 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 “Compensation – Stock Compensation.” The fair value of 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 options issued are 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, Stock Bonus Plans and an Incentive Stock Bonus Plan. In some cases, these Plans are collectively referred to as the "Plans". All Plans have been approved by the stockholders.

 

The Company’s stock options are not transferable, and the actual value of the stock options that an employee may realize, if any, will depend on the excess of the market price on the date of exercise over the exercise price. The Company has based its assumption for stock price volatility on the variance of daily closing prices of the Company’s common stock. The risk-free interest rate assumption was based on the U.S. Treasury rate at date of the grant with term equal to the expected life of the option. Historical data was used to estimate option exercise and employee termination within the valuation model. The expected term of options represents the period of time that options granted are expected to be outstanding and has been determined based on an analysis of historical exercise behavior. If any of the assumptions used in the Black-Scholes model change significantly, stock-based compensation expense for new awards may differ materially in the future from that recorded in the current period.

 

Vesting of restricted stock granted under the Incentive Stock Bonus Plan is subject to service, performance and market conditions and meets the classification of equity awards. These awards were measured at market value on the grant-dates for issuances where the attainment of performance criteria is likely and at fair value on the grant-dates, using a Monte Carlo simulation for issuances where the attainment of performance criteria is uncertain. The total compensation cost will be expensed over the estimated requisite service period.

 

Reclassification – Certain prior year items have been reclassified to conform to the current year presentation. Such reclassifications include approximately $145,000 between related party notes payable and additional paid-in capital to reflect the modification of the note payable to the de Clara Trust in July 2015, which was accounted for as an extinguishment.

XML 17 R7.htm IDEA: XBRL DOCUMENT v3.5.0.2
B. NEW ACCOUNTING PRONOUNCEMENTS
9 Months Ended
Jun. 30, 2016
Accounting Changes and Error Corrections [Abstract]  
B. NEW ACCOUNTING PRONOUNCEMENTS

In January 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The new guidance is intended to improve the recognition and measurement of financial instruments. The new guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted for specific provisions within the guidance. Management does not expect the new standard to have a material effect on its financial statements and related disclosures.

 

In February 2016, the FASB issued ASU 2016-02, Leases, which will require most leases (with the exception of leases with terms of less than one year) to be recognized on the balance sheet as an asset and a lease liability. Leases will be classified as an operating lease or a financing lease. Operating leases are expensed using the straight-line method whereas financing leases will be treated similarly to a capital lease under the current standard. The new standard will be effective for annual and interim periods, within those fiscal years, beginning after December 15, 2018, but early adoption is permitted. The new standard must be presented using the modified retrospective method beginning with the earliest comparative period presented. The Company is currently evaluating the effect of the new standard on its financial statements and related disclosures.

 

In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 simplifies several aspects of the accounting for share-based payment award transactions, including income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. The new standard will be effective for annual and interim periods, within those fiscal years, beginning after December 15, 2016 but early adoption is permitted. The Company is currently evaluating the effect of the new amendment on its financial statements and related disclosures.

 

The Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its financial statements.

XML 18 R8.htm IDEA: XBRL DOCUMENT v3.5.0.2
C. STOCKHOLDERS EQUITY
9 Months Ended
Jun. 30, 2016
Notes to Financial Statements  
C. STOCKHOLDERS' EQUITY

Stock options, stock bonuses and compensation granted by the Company as of June 30, 2016 are as follows:

 

Name of Plan   Total Shares Reserved Under Plans     Shares Reserved for Outstanding Options     Shares Issued     Remaining Options/Shares Under Plans  
                         
Incentive Stock Options Plans     1,960,000       1,685,966       N/A       11,334  
Non-Qualified Stock Option Plans     7,680,000       6,005,721       N/A       1,062,861  
Stock Bonus Plans     3,594,000       N/A       2,562,950       1,030,223  
Stock Compensation Plan     3,350,000       N/A       1,767,047       1,549,905  
Incentive Stock Bonus Plan     16,000,000       N/A       15,600,000       400,000  

 

   Stock options, stock bonuses and compensation granted by the Company as of September 30, 2015 are as follows:

 

Name of Plan   Total Shares Reserved Under Plans     Shares Reserved for Outstanding Options     Shares Issued     Remaining Options/Shares Under Plans  
                         
Incentive Stock Option Plans     1,960,000       1,690,665       N/A       6,635  
Non-Qualified Stock Option Plans     7,680,000       5,849,103       N/A       1,219,479  
Bonus Plans     3,594,000       N/A       1,643,714       1,949,459  
Stock Compensation Plan     3,350,000       N/A       1,423,999       1,892,950  
Incentive Stock Bonus Plan     16,000,000       N/A       15,600,000       400,000  

 

 

  

Stock option activity:

 

    Nine Months Ended June 30,  
     2016      2015  
Granted     210,000       803,700  
Forfeited     55,998       137,249  

 

    Three Months Ended June 30,  
     2016      2015  
Granted     0       801,700  
Forfeited     5,000       27,833  

 

No shares of restricted stock were forfeited from the Incentive Stock Bonus Plan during the nine and three months ended June 30, 2016. During the nine and three months ended June 30, 2015, 100,000 and 0 shares, respectively, of non-vested restricted stock were forfeited.

 

Stock-Based Compensation Expense

 

    Nine Months Ended June 30,  
    2016     2015  
Employees   $ 1,263,662     $ 4,570,999  
Non-employees   $ 618,890     $ 437,729  

 

    Three months Ended June 30,  
    2016     2015  
Employees   $ 418,562     $ 619,145  
Non-employees   $ 146,830     $ 137,600  

 

Employee compensation expense includes the expense related to options issued or vested and restricted stock. Non-employee expense includes the expense related to options and stock issued to consultants expensed over the period of their service contracts.

 

Derivative Liabilities, Warrants and Other Options

 

The following chart presents the derivative liabilities, warrants and other options outstanding during the quarter ended June 30, 2016:

 

Warrant   Issue Date   Shares Issuable upon Exercise of Warrant     Exercise Price   Expiration Date   Refer-ence  
                         
Series R   12/6/12     2,625,000     $ 4.00   12/6/16     1  
Series S   10/11/13 -10/24/14     25,928,010     $ 1.25   10/11/18     1  
Series U   4/17/14     445,514     $ 1.75   10/17/17     1  
Series V   5/28/15     20,253,164     $ 0.79   5/28/20     1  
Series W   10/28/15     17,223,248     $ 0.67   10/28/20     1  
Series Z   5/23/16     6,600,000     $ 0.55   11/23/21     1  
Series ZZ   5/23/16     500,000     $ 0.55   5/18/21     1  
Series X   1/13/16     3,000,000     $ 0.37   1/13/21     2  
Series Y   2/15/16     650,000     $ 0.48   2/15/21     2  
Series N   8/18/08     2,844,627     $ 0.53   8/18/17        
Series P   2/10/12     590,001     $ 4.50   3/6/17        
Consultants   12/2/11- 1/1/16     440,000     $ 0.37- $3.50   10/27/16- 12/31/18     3  

 

 

The following chart presents the derivative liabilities, warrants and other options outstanding at September 30, 2015:

 

Warrant   Issue Date   Shares Issuable upon Exercise of Warrants     Exercise Price   Expiration Date   Refer-ence  
                         
Series N   8/18/08     2,844,627       0.53   8/18/17      
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- 10/24/14     25,928,010       1.25   10/11/18     1  
Series U   4/17/14     445,514       1.75   10/17/17     1  
Series V   5/28/15     20,253,164       0.79   5/28/20     1  
Series P   2/10/12     590,001       4.50   3/6/17        
Consultants   10/14/05 – 7/1/15     238,000       0.66 – 20.00   10/14/15 - 6/30/18     3  

 

1. Derivative Liabilities

 

The table below presents the derivative instruments and their respective balances at the balance sheet dates:

 

    June 30, 2016     September 30, 2015  
Series S warrants   $ 3,930,686     $ 7,363,555  
Series U warrants     4,455       44,551  
Series V warrants     3,443,038       6,278,481  
Series W warrants     3,557,971       -  
Series Z warrants     1,756,982       -  
Series ZZ warrants     129,920       -  
                 
Total derivative liabilities   $ 12,823,052     $ 13,686,587  

 

 

The gains on the derivative instruments are as follows:

 

    Nine Months Ended June 30,  
    2016     2015  
Series A through E warrants   $ -     $ 6,105  
Series H warrants     -       12,000  
Series Q warrants     -       12,000  
Series R warrants     -       131,250  
Series S warrants     3,432,869       472,487  
Series U warrants     40,096       74,352  
Series V warrants     2,835,443       1,100,760  
Series W warrants     1,502,800       -  
Series Z warrants     210,848       -  
Series ZZ warrants     15,918       -  
                 
Gain on derivative instruments   $ 8,037,974     $ 1,808,954  

 

    Three Months Ended June 30,  
    2016     2015  
Series H warrants   $ -     $ 12,000  
Series Q warrants     -       12,000  
Series R warrants     -       105,000  
Series S warrants     285,208       3,111,361  
Series U warrants     13,366       87,659  
Series V warrants     1,012,658       1,100,760  
Series W warrants     970,746          
Series Z warrants     210,848       -  
Series ZZ warrants     15,918       -  
                 
Gain on derivative instruments   $ 2,508,744     $ 4,428,780  
                 

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 dates is recognized as a gain or loss.

 

Issuance of additional Warrants

 

On May 23, 2016, the Company closed a registered direct offering of 10,000,000 shares of common stock and 6,600,000 Series Z warrants to purchase shares of common stock. The common stock and warrants were sold at a combined per unit price of $0.50 for net proceeds of approximately $4.6 million, net of placement agent’s commissions and offering expenses. The Series Z warrants may be exercised at any time on or after November 23, 2016 and on or before November 23, 2021 at a price of $0.55 per share. The Company also issued 500,000 Series ZZ warrants to the placement agent as part of its compensation. The Series ZZ warrants may be exercised at any time on or after November 23, 2016 and on or before May 18, 2021 at a price of $0.55 per share. The fair value of the Series Z and Series ZZ warrants of $2.1 million on the date of issuance was recorded as a warrant liability.

 

 

On October 28, 2015, the Company closed an underwritten public offering of 17,223,248 shares of common stock and 17,223,248 Series W warrants to purchase shares of common stock. The common stock and warrants were sold at a combined per unit price of $0.67 for net proceeds of approximately $10.5 million, net of underwriting discounts and commissions and offering expenses. The Series W warrants are immediately exercisable at a price of $0.67 and expire on October 28, 2020. The fair value of the Series W warrants of $5.1 million on the date of issuance was recorded as warrant liability.

 

Expiration of Warrants

 

On December 22, 2015, 1,200,000 Series Q warrants, with an exercise price of $5.00, expired. The fair value of the Series Q warrants was $0 on the date of expiration.

 

2. Equity-based warrants

 

In January 2016, the Company sold 3,000,000 shares of its common stock and 3,000,000 Series X warrants to the de Clara Trust for approximately $1.1 million. The de Clara Trust is controlled by Geert Kersten, the Company's Chief Executive Officer and a director. Each Series X warrant allows the de Clara Trust to purchase one share of the Company's common stock at a price of $0.37 per share at any time on or before January 13, 2021. The Series X warrants qualify for equity treatment in accordance with ASC 815. The relative fair value of the warrants was calculated to be approximately $417,000.

 

In February 2016, the Company sold 1,300,000 shares of its common stock and 650,000 Series Y warrants to a private investor for $624,000. Each Series Y warrant allows the holder to purchase one share of the Company's common stock at a price of $0.48 per share at any time on or before February 15, 2021. The Series Y warrants qualify for equity treatment in accordance with ASC 815. The relative fair value on the date of issuance of the warrants was calculated to be approximately $144,000.

 

3. Options and shares issued to consultants

 

The Company typically enters into consulting arrangements in exchange for common stock or stock options. During the nine and three months ended June 30, 2016, the Company issued 990,045 and 186,267 shares of common stock, respectively, of which 647,000 and 67,000, respectively, were restricted shares. Under these arrangements, the common stock was issued with stock prices ranging between $0.37 and $0.72 per share. During the nine and three months ended June 30, 2015, the Company issued 584,476 and 160,492 shares of common stock, respectively, of which 127,000 and 58,000, respectively, were restricted shares. Under these arrangements, the common stock was issued with stock prices ranging between $0.57 and $1.11 per share.

 

Additionally, during the nine and three months ended June 30, 2016, the Company issued 210,000 and 0 of fully vested options, respectively, to purchase common stock with a fair value ranging between $0.19 and $0.30 per share. During the nine and three months ended June 30, 2015, the Company issued 40,000 and 0 options, respectively, to purchase common stock with a fair value of $0.50 per share. The aggregate values of the issuances of restricted common stock and common stock options are recorded as prepaid expenses and are charged to general and administrative expenses over the periods of service.

  

During the nine and three months ended June 30, 2016, the Company recorded total expense of approximately $619,000 and $147,000, respectively, relating to these consulting agreements. During the nine and three months ended June 30, 2015, the Company recorded total expense of approximately $438,000 and $138,000, respectively, relating to these consulting agreements. At June 30, 2016 and September 30, 2015, approximately $32,000 and $30,000, respectively, are included in prepaid expenses. As of June 30, 2016, 440,000 vested options issued to consultants as payment for services remained outstanding, all of which were issued from the Non-Qualified Stock Option plans.

XML 19 R9.htm IDEA: XBRL DOCUMENT v3.5.0.2
D. FAIR VALUE MEASUREMENTS
9 Months Ended
Jun. 30, 2016
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 June 30, 2016:

 

    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   $ 3,930,686     $ -     $ 8,892,366     $ 12,823,052  
                                 

 

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, 2015:

 

    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   $ 7,363,555     $ -     $ 6,323,032     $ 13,686,587  
                                 

 

The following sets forth the reconciliation of beginning and ending balances related to fair value measurements using significant unobservable inputs (Level 3) for the nine months ended June 30, 2016 and the year ended September 30, 2015:

 

    (9 months ended)     (12 months ended)  
    June 30, 2016     September 30, 2015  
Beginning balance   $ 6,323,032     $ 307,894  
Issuances     7,174,439       8,003,220  
Realized and unrealized gains     (4,605,105 )     (1,988,082 )
Ending balance   $ 8,892,366     $ 6,323,032  

 

The fair values of the Company’s derivative instruments disclosed above under Level 3 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.

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E. RELATED PARTY LOAN
9 Months Ended
Jun. 30, 2016
Notes to Financial Statements  
E. RELATED PARTY LOAN

On January 12, 2016, the Company owed the de Clara Trust $1,105,989, which amount included accrued and unpaid interest. On January 13, 2016, the de Clara Trust demanded payment on the note payable. At the same time the Company sold 3,000,000 shares of its common stock and 3,000,000 Series X warrants to the de Clara Trust for approximately $1.1 million. Each warrant allows the de Clara Trust to purchase one share of the Company's common stock at a price of $0.37 per share at any time on or before January 13, 2021.

 

Prior to the repayment, on June 29, 2015, the Company had extended the maturity date of the note to July 6, 2017, lowered the interest rate from 15% to 9% and changed the conversion price from $4.00 to $0.59, the closing stock price on the previous trading day. The Company determined these modifications to be substantive and accounted for the modification as an extinguishment of the pre-modification note and issuance of the post-modification note. The Company recorded an extinguishment loss and a premium on the note payable of approximately $166,000. The premium was credited to additional paid-in capital.

 

 

During the nine and three months ended June 30, 2016, the Company paid approximately $43,000 and $0, respectively, in interest expense to Mr. de Clara. During the nine and three months ended June 30, 2015, the Company paid approximately $124,000 and $41,000, respectively, in interest expense to Mr. de Clara.

 

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F. OPERATIONS AND FINANCING
9 Months Ended
Jun. 30, 2016
Notes to Financial Statements  
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 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 3 clinical trial for head and neck cancer with its partners TEVA Pharmaceuticals and Orient Europharma. During the nine months ended June 30, 2016, the Company raised $16.8 million in net proceeds from public and private sales of common stock and warrants. To finance the study for the next twelve months and beyond, the Company plans to raise additional capital in the form of corporate partnerships, as well as debt and/or equity financings. The Company believes that it will be able to obtain additional financing because it has done so consistently in the past and because Multikine is a product in the Phase 3 clinical trial stage. However, the operating plan may change as a result of many factors currently unknown to the Company, and the Company may need additional funds sooner than planned. There can be no assurance that the Company will be successful in raising additional funds on a timely basis or that the funds will be available to the Company on acceptable terms or at all.  If the Company does not raise the necessary amounts of money, it will either have to slow the development of the Phase 3 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 3 clinical trial for Multikine, the Company has spent approximately $31.9 million as of June 30, 2016 on direct costs for the Phase 3 clinical trial.

 

The financial statements have been prepared assuming that the Company will continue as a going concern, but due to recurring losses from operations and future liquidity needs, there is substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

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G. COMMITMENTS AND CONTINGENCIES
9 Months Ended
Jun. 30, 2016
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. The agreement required the Company to make $600,000 in advanced payments which are being credited back in $150,000 annual increments through December 2017. As of June 30, 2016, the total balance advanced is $300,000, of which $150,000 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 study 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. In October 2015 the Company entered into a second co-development and revenue sharing agreement with Ergomed for an additional $2 million, for a total of $12 million. The Company accounted for the co-development and revenue sharing agreement in accordance with ASC 808 “Collaborative Arrangements.” The Company determined the payments to Ergomed 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 $17.8 million related to Ergomed’s services. This amount is net of Ergomed’s discount of approximately $5.9 million. During the nine and three months ended June 30, 2016, the Company recorded, net of Ergomed’s discount, approximately $5.9 million and $2.1 million, respectively, as research and development expense related to Ergomed’s services. During the nine and three months ended June 30, 2015, the Company recorded, net of Ergomed’s discount, approximately $4.9 million and $1.7 million, respectively, 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 Phase I study being conducted at the Naval Medical Center, San Diego under a Cooperative Research and Development Agreement (CRADA) with the U.S. Navy for 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, or inVentiv, the Company’s former clinical research organization (CRO). 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. Currently, the Company is seeking at least $50 million in damages in its amended statement of claim. Based upon further analysis, however, the Company believes that its damages (direct and consequential) presently total over $150 million.

 

  

On December 12, 2013, the former CRO 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, the former CRO moved to dismiss certain claims. On June 24, 2014, the arbitrator denied the motion to dismiss.

 

In an amended statement of claim, the Company asserted the claims set forth above as well as an additional claim for professional malpractice.  The arbitrator subsequently granted inVentiv’s motion to dismiss the professional malpractice claim based on the “economic loss doctrine” under New Jersey law, a legal doctrine that, under certain circumstances, prohibits bringing a negligence-based claim alongside a claim for breach of contract.  The arbitrator denied the remainder of inVentiv’s motion, which had sought to dismiss certain other aspects of the amended statement of claim.  In particular, the arbitrator rejected inVentiv’s argument that several aspects of the amended statement of claim were beyond the arbitrator’s jurisdiction.

 

In connection with the pending arbitration proceedings, inVentiv has asserted counterclaims against the Company for (i) breach of contract, seeking at least $2 million in damages for services allegedly performed by inVentiv; (ii) breach of contract, seeking at least $1 million in damages for the Company’s alleged use of inVentiv’s name in connection with publications and promotions in violation of the parties’ contract; (iii) opportunistic breach, restitution and unjust enrichment, seeking at least $20 million in disgorgement of alleged unjust profits allegedly made by the Company as a result of the purported breaches referenced in subsection (ii); and (iv) defamation, seeking at least $1 million in damages for allegedly defamatory statements made about inVentiv. The Company believes inVentiv’s counterclaims are meritless and intends to vigorously defend against them. However, if such defense is unsuccessful, and inVentiv successfully asserts any of its counterclaims, such an adverse determination could have a material adverse effect on the Company’s business, results, financial condition and liquidity.

 

In October 2015, the Company signed a funding agreement with a company established by Lake Whillans Litigation Finance, LLC, a firm specializing in funding litigation expenses. Pursuant to the agreement, an affiliate of Lake Whillans will provide the Company funding for litigation expenses to support its arbitration claims against inVentiv. The funding is available to the Company as needed to fund the expenses of the ongoing arbitration and will only be repaid when the Company receives proceeds from the arbitration. During the nine months ended June 30, 2016, the Company recognized a gain of approximately $1.1 million on the derecognition of legal fees to record the transfer of the liability that existed prior to the execution of the financing agreement from the Company to Lake Whillans. The gain on derecognition of legal fees is recorded as a reduction of general and administration expenses on the Statement of Operations. All related legal fees are directly billed to and paid by Lake Whillans. As part of the agreement with Lake Whillans, the law firm agreed to cap its fees and expenses for the arbitration at $5 million.

 

The arbitration hearing on the merits (the “trial”) has been scheduled to commence on September 7, 2016.

 

 

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 3 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 deposit is included in non-current assets at June 30, 2016 and September 30, 2015.

 

The Company subleases a portion of its rental space on a month to month term lease, which requires a 30 day notice for termination. Effective February 1, 2016, the parties agreed to a 3% rental increase. As of that date, the Company receives $5,628 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 approximately $11,000 per month. As of June 30, 2016 and September 30, 2015, the Company has recorded a deferred rent liability of $4,000 and $6,000, respectively.

 

The Company leases office headquarters under a 60 month lease which expires June 30, 2020. 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 approximately $8,000 per month. As of June 30, 2016 and September 30, 2015, the Company has recorded a deferred rent liability of $19,000 and $13,000, 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 6% per annum.

 

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H. PATENTS
9 Months Ended
Jun. 30, 2016
Accounting Policies [Abstract]  
H. PATENTS

During the nine and three months ended June 30, 2016 and 2015, no patent impairment charges were recorded. For the nine and three months ended June 30, 2016, amortization of patent costs totaled approximately $30,000 and $12,000, respectively. For the nine and three months ended June 30, 2015, amortization of patent costs totaled approximately $31,000 and $12,000, respectively. Amortization of patent costs is included in general and administrative expenses on the Statement of Operations. The Company estimates that future amortization expense will be as follows:

 

Three months ending September 30, 2016   $ 9,210  
Year ending September 30,        
2017     36,841  
2018     36,507  
2019     34,804  
2020     31,611  
2021     28,311  
Thereafter     89,209  
Total   $ 266,493  

 

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I. LOSS PER COMMON SHARE
9 Months Ended
Jun. 30, 2016
Accounting Policies [Abstract]  
I. LOSS PER COMMON SHARE

The following tables provide the details of the basic and diluted loss per-share (LPS) computations:

 

    Nine Months Ended June 30, 2016  
    Net Loss     Weighted Average Shares     LPS  
                   
                   
Basic and dilutive LPS   $ (10,352,366 )     117,412,443     $ (0.09 )
                         

 

    Three Months Ended June 30, 2016  
    Net Loss     Weighted Average Shares     LPS  
                   
Basic and dilutive LPS   $ (3,849,324 )     124,132,500     $ (0.03 )
                         

 

    Nine Months Ended June 30, 2015  
    Net Loss     Weighted Average Shares     LPS  
                   
Basic and dilutive LPS   $ (24,830,691 )     77,625,511     $ (0.32 )
                         

 

    Three Months Ended June 30, 2015  
    Net Loss     Weighted Average Shares     LPS  
                   
Basic LPS   $ (4,429,137 )     83,796,311     $ (0.05 )
Gain on derivatives     (1,100,760 )     1,337,796          
                         
Dilutive LPS   $ (5,529,897 )     85,134,107     $ (0.06 )

 

 

21

 

 

In accordance with the contingently issuable shares guidance of FASB ASC Topic 260, Earnings Per Share, the calculation of diluted net earnings (loss) per share excludes the following securities because their inclusion would have been anti-dilutive as of June 30:

 

    2016     2015  
             
Options and Warrants     86,066,292       38,786,333  
Convertible Debt     -       1,871,283  
Unvested Restricted Stock     15,100,000       15,100,000  
Total     101,166,292       55,757,616  
XML 25 R15.htm IDEA: XBRL DOCUMENT v3.5.0.2
J. SUBSEQUENT EVENTS
9 Months Ended
Jun. 30, 2016
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.

 

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A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (POLICIES)
9 Months Ended
Jun. 30, 2016
A. 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, 2015.

 

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 June 30, 2016 and the results of its operations for the nine and three months then ended. The condensed balance sheet as of September 30, 2015 is derived from the September 30, 2015 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 nine and three months ended June 30, 2016 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 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. Research and office equipment 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 in the period identified. 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 June 30, 2016 and September 30, 2015.

Derivative Instruments

The Company has entered into financing arrangements that consist of freestanding derivative instruments that contain embedded derivative features. The Company accounts for these arrangements in accordance with Accounting Standards Codification (ASC) 815, “Accounting for Derivative Instruments and Hedging Activities.” In accordance with accounting principles generally accepted in the United States (U.S. GAAP), derivative instruments and hybrid instruments are recognized as either assets or liabilities in 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 reporting 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 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 “Compensation – Stock Compensation.” The fair value of 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 options issued are 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, Stock Bonus Plans and an Incentive Stock Bonus Plan. In some cases, these Plans are collectively referred to as the "Plans". All Plans have been approved by the stockholders.

 

The Company’s stock options are not transferable, and the actual value of the stock options that an employee may realize, if any, will depend on the excess of the market price on the date of exercise over the exercise price. The Company has based its assumption for stock price volatility on the variance of daily closing prices of the Company’s common stock. The risk-free interest rate assumption was based on the U.S. Treasury rate at date of the grant with term equal to the expected life of the option. Historical data was used to estimate option exercise and employee termination within the valuation model. The expected term of options represents the period of time that options granted are expected to be outstanding and has been determined based on an analysis of historical exercise behavior. If any of the assumptions used in the Black-Scholes model change significantly, stock-based compensation expense for new awards may differ materially in the future from that recorded in the current period.

 

Vesting of restricted stock granted under the Incentive Stock Bonus Plan is subject to service, performance and market conditions and meets the classification of equity awards. These awards were measured at market value on the grant-dates for issuances where the attainment of performance criteria is likely and at fair value on the grant-dates, using a Monte Carlo simulation for issuances where the attainment of performance criteria is uncertain. The total compensation cost will be expensed over the estimated requisite service period.

Reclassification

Certain prior year items have been reclassified to conform to the current year presentation. Such reclassifications include approximately $145,000 between related party notes payable and additional paid-in capital to reflect the modification of the note payable to the de Clara Trust in July 2015, which was accounted for as an extinguishment.

XML 27 R17.htm IDEA: XBRL DOCUMENT v3.5.0.2
C. STOCKHOLDERS EQUITY (Tables)
9 Months Ended
Jun. 30, 2016
C. Stockholders Equity Tables  
Stock options, stock bonuses and compensation granted by the Company

Stock options, stock bonuses and compensation granted by the Company as of June 30, 2016 are as follows:

 

Name of Plan   Total Shares Reserved Under Plans     Shares Reserved for Outstanding Options     Shares Issued     Remaining Options/Shares Under Plans  
                         
Incentive Stock Options Plans     1,960,000       1,685,966       N/A       11,334  
Non-Qualified Stock Option Plans     7,680,000       6,005,721       N/A       1,062,861  
Stock Bonus Plans     3,594,000       N/A       2,562,950       1,030,223  
Stock Compensation Plan     3,350,000       N/A       1,767,047       1,549,905  
Incentive Stock Bonus Plan     16,000,000       N/A       15,600,000       400,000  

 

   Stock options, stock bonuses and compensation granted by the Company as of September 30, 2015 are as follows:

 

Name of Plan   Total Shares Reserved Under Plans     Shares Reserved for Outstanding Options     Shares Issued     Remaining Options/Shares Under Plans  
                         
Incentive Stock Option Plans     1,960,000       1,690,665       N/A       6,635  
Non-Qualified Stock Option Plans     7,680,000       5,849,103       N/A       1,219,479  
Bonus Plans     3,594,000       N/A       1,643,714       1,949,459  
Stock Compensation Plan     3,350,000       N/A       1,423,999       1,892,950  
Incentive Stock Bonus Plan     16,000,000       N/A       15,600,000       400,000  

 

 

Stock option activity:

 

    Nine Months Ended June 30,  
     2016      2015  
Granted     210,000       803,700  
Forfeited     55,998       137,249  

 

    Three Months Ended June 30,  
     2016      2015  
Granted     0       801,700  
Forfeited     5,000       27,833  

 

No shares of restricted stock were forfeited from the Incentive Stock Bonus Plan during the nine and three months ended June 30, 2016. During the nine and three months ended June 30, 2015, 100,000 and 0 shares, respectively, of non-vested restricted stock were forfeited.

Schedule of employees and non-employees stock compensation

Stock-Based Compensation Expense

 

    Nine Months Ended June 30,  
    2016     2015  
Employees   $ 1,263,662     $ 4,570,999  
Non-employees   $ 618,890     $ 437,729  

 

    Three months Ended June 30,  
    2016     2015  
Employees   $ 418,562     $ 619,145  
Non-employees   $ 146,830     $ 137,600  

 

Derivative Liabilities, Warrants and Other Options

 

Warrant   Issue Date   Shares Issuable upon Exercise of Warrant     Exercise Price   Expiration Date   Refer-ence  
                         
Series R   12/6/12     2,625,000     $ 4.00   12/6/16     1  
Series S   10/11/13 -10/24/14     25,928,010     $ 1.25   10/11/18     1  
Series U   4/17/14     445,514     $ 1.75   10/17/17     1  
Series V   5/28/15     20,253,164     $ 0.79   5/28/20     1  
Series W   10/28/15     17,223,248     $ 0.67   10/28/20     1  
Series Z   5/23/16     6,600,000     $ 0.55   11/23/21     1  
Series ZZ   5/23/16     500,000     $ 0.55   5/18/21     1  
Series X   1/13/16     3,000,000     $ 0.37   1/13/21     2  
Series Y   2/15/16     650,000     $ 0.48   2/15/21     2  
Series N   8/18/08     2,844,627     $ 0.53   8/18/17        
Series P   2/10/12     590,001     $ 4.50   3/6/17        
Consultants   12/2/11- 1/1/16     440,000     $ 0.37- $3.50   10/27/16- 12/31/18     3  

 

 

11

 

  

The following chart presents the derivative liabilities, warrants and other options outstanding at September 30, 2015:

 

Warrant   Issue Date   Shares Issuable upon Exercise of Warrants     Exercise Price   Expiration Date   Refer-ence  
                         
Series N   8/18/08     2,844,627       0.53   8/18/17      
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- 10/24/14     25,928,010       1.25   10/11/18     1  
Series U   4/17/14     445,514       1.75   10/17/17     1  
Series V   5/28/15     20,253,164       0.79   5/28/20     1  
Series P   2/10/12     590,001       4.50   3/6/17        
Consultants   10/14/05 – 7/1/15     238,000       0.66 – 20.00   10/14/15 - 6/30/18     3  
Tabular disclosure of derivative liabilities at fair value

The table below presents the derivative instruments and their respective balances at the balance sheet dates:

 

    June 30, 2016     September 30, 2015  
Series S warrants   $ 3,930,686     $ 7,363,555  
Series U warrants     4,455       44,551  
Series V warrants     3,443,038       6,278,481  
Series W warrants     3,557,971       -  
Series Z warrants     1,756,982       -  
Series ZZ warrants     129,920       -  
                 
Total derivative liabilities   $ 12,823,052     $ 13,686,587  
Schedule Of Gains and (Losses) on Derivative Liabilities

The gains on the derivative instruments are as follows:

 

    Nine Months Ended June 30,  
    2016     2015  
Series A through E warrants   $ -     $ 6,105  
Series H warrants     -       12,000  
Series Q warrants     -       12,000  
Series R warrants     -       131,250  
Series S warrants     3,432,869       472,487  
Series U warrants     40,096       74,352  
Series V warrants     2,835,443       1,100,760  
Series W warrants     1,502,800       -  
Series Z warrants     210,848       -  
Series ZZ warrants     15,918       -  
                 
Gain on derivative instruments   $ 8,037,974     $ 1,808,954  

 

    Three Months Ended June 30,  
    2016     2015  
Series H warrants   $ -     $ 12,000  
Series Q warrants     -       12,000  
Series R warrants     -       105,000  
Series S warrants     285,208       3,111,361  
Series U warrants     13,366       87,659  
Series V warrants     1,012,658       1,100,760  
Series W warrants     970,746          
Series Z warrants     210,848       -  
Series ZZ warrants     15,918       -  
                 
Gain on derivative instruments   $ 2,508,744     $ 4,428,780  
XML 28 R18.htm IDEA: XBRL DOCUMENT v3.5.0.2
D. FAIR VALUE MEASUREMENTS (Tables)
9 Months Ended
Jun. 30, 2016
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   $ 3,930,686     $ -     $ 8,892,366     $ 12,823,052  
                                 

 

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, 2015:

 

    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   $ 7,363,555     $ -     $ 6,323,032     $ 13,686,587  
Reconciliation of beginning and ending balances related to fair value measurements using significant unobservable inputs (Level 3)
    (9 months ended)     (12 months ended)  
    June 30, 2016     September 30, 2015  
Beginning balance   $ 6,323,032     $ 307,894  
Issuances     7,174,439       8,003,220  
Realized and unrealized gains     (4,605,105 )     (1,988,082 )
Ending balance   $ 8,892,366     $ 6,323,032  
XML 29 R19.htm IDEA: XBRL DOCUMENT v3.5.0.2
H. PATENTS (Tables)
9 Months Ended
Jun. 30, 2016
H. Patents Tables  
Schedule of total estimated future amortization
Three months ending September 30, 2016   $ 9,210  
Year ending September 30,        
2017     36,841  
2018     36,507  
2019     34,804  
2020     31,611  
2021     28,311  
Thereafter     89,209  
Total   $ 266,493  
XML 30 R20.htm IDEA: XBRL DOCUMENT v3.5.0.2
I. LOSS PER COMMON SHARE (Tables)
9 Months Ended
Jun. 30, 2016
I. Loss Per Common Share Tables  
Computation of dilutive net loss per share

The following tables provide the details of the basic and diluted loss per-share (LPS) computations:

 

    Nine Months Ended June 30, 2016  
    Net Loss     Weighted Average Shares     LPS  
                   
                   
Basic and dilutive LPS   $ (10,352,366 )     117,412,443     $ (0.09 )
                         

 

    Three Months Ended June 30, 2016  
    Net Loss     Weighted Average Shares     LPS  
                   
Basic and dilutive LPS   $ (3,849,324 )     124,132,500     $ (0.03 )
                         

 

    Nine Months Ended June 30, 2015  
    Net Loss     Weighted Average Shares     LPS  
                   
Basic and dilutive LPS   $ (24,830,691 )     77,625,511     $ (0.32 )
                         

 

    Three Months Ended June 30, 2015  
    Net Loss     Weighted Average Shares     LPS  
                   
Basic LPS   $ (4,429,137 )     83,796,311     $ (0.05 )
Gain on derivatives     (1,100,760 )     1,337,796          
                         
Dilutive LPS   $ (5,529,897 )     85,134,107     $ (0.06 )
Antidilutive securities
    2016     2015  
             
Options and Warrants     86,066,292       38,786,333  
Convertible Debt     -       1,871,283  
Unvested Restricted Stock     15,100,000       15,100,000  
Total     101,166,292       55,757,616  
XML 31 R21.htm IDEA: XBRL DOCUMENT v3.5.0.2
C. STOCKHOLDERS EQUITY (Details) - shares
Jun. 30, 2016
Sep. 30, 2015
Incentive Stock Option Plans    
Total Shares Reserved Under Plans 1,960,000 1,960,000
Shares Reserved for Outstanding Options 1,685,966 1,690,665
Remaining Options/Shares Under Plans 11,334 6,635
NonQualifiedStockOptionPlansMember    
Total Shares Reserved Under Plans 7,680,000 7,680,000
Shares Reserved for Outstanding Options 6,005,721 5,849,103
Remaining Options/Shares Under Plans 1,062,861 1,219,479
Stock Bonus Plans    
Total Shares Reserved Under Plans 3,594,000 3,594,000
Shares Issued 2,562,950 1,643,714
Remaining Options/Shares Under Plans 1,030,223 1,949,459
Stock Compensation Plan    
Total Shares Reserved Under Plans 3,350,000 3,350,000
Shares Issued 1,767,047 1,423,999
Remaining Options/Shares Under Plans 1,549,905 1,892,950
Incentive Stock Bonus Plan    
Total Shares Reserved Under Plans 16,000,000 16,000,000
Shares Issued 15,600,000 15,600,000
Remaining Options/Shares Under Plans 400,000 400,000
XML 32 R22.htm IDEA: XBRL DOCUMENT v3.5.0.2
C. STOCKHOLDERS EQUITY (Details 1) - shares
3 Months Ended 9 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
C. Stockholders Equity Details 1        
Granted 0 801,700 210,000 803,700
Forfeited 5,000 27,833 55,998 137,249
XML 33 R23.htm IDEA: XBRL DOCUMENT v3.5.0.2
C. STOCKHOLDERS EQUITY (Details 2) - USD ($)
3 Months Ended 9 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
C. Stockholders Equity Details 2        
Employees $ 418,562 $ 619,145 $ 1,263,662 $ 4,570,999
Non-employees $ 146,830 $ 137,600 $ 618,890 $ 437,729
XML 34 R24.htm IDEA: XBRL DOCUMENT v3.5.0.2
C. STOCKHOLDERS EQUITY (Details 3) - $ / shares
9 Months Ended 12 Months Ended
Jun. 30, 2016
Sep. 30, 2015
Series R [Member]    
STOCKHOLDERS' EQUITY    
Issue Date 12/6/2012 12/6/2012
Shares Issuable upon Exercise of Warrant 2,625,000 2,625,000
Exercise Price $ 4 $ 4
Expiration Date 12/6/2016 12/6/2016
Series S [Member]    
STOCKHOLDERS' EQUITY    
Issue Date 10/11/13 -10/24/14 10/11/13- 10/24/14
Shares Issuable upon Exercise of Warrant 25,928,010 25,928,010
Exercise Price $ 1.25 $ 1.25
Expiration Date 10/11/2018 10/11/2018
Series U [Member]    
STOCKHOLDERS' EQUITY    
Issue Date 4/17/2014 4/17/2014
Shares Issuable upon Exercise of Warrant 445,514 445,514
Exercise Price $ 1.75 $ 1.75
Expiration Date 10/17/2017 10/17/2017
Series V [Member]    
STOCKHOLDERS' EQUITY    
Issue Date 5/28/2015 5/28/2015
Shares Issuable upon Exercise of Warrant 20,253,164 20,253,164
Exercise Price $ 0.79 $ 0.79
Expiration Date 5/28/2020 5/28/2020
Series W [Member]    
STOCKHOLDERS' EQUITY    
Issue Date 10/28/2015  
Shares Issuable upon Exercise of Warrant 17,223,248  
Exercise Price $ 0.67  
Expiration Date 10/28/20  
Series X [Member]    
STOCKHOLDERS' EQUITY    
Issue Date 1/13/2016  
Shares Issuable upon Exercise of Warrant 3,000,000  
Exercise Price $ 0.37  
Expiration Date 1/13/2021  
Series Y [Member]    
STOCKHOLDERS' EQUITY    
Issue Date 2/15/2016  
Shares Issuable upon Exercise of Warrant 650,000  
Exercise Price $ 0.48  
Expiration Date 2/15/2021  
Series N [Member]    
STOCKHOLDERS' EQUITY    
Issue Date 8/18/2008 8/18/2008
Shares Issuable upon Exercise of Warrant 2,844,627 2,844,627
Exercise Price $ 0.53 $ 0.53
Expiration Date 8/18/2017 8/18/2017
Series P [Member]    
STOCKHOLDERS' EQUITY    
Issue Date 2/10/2012 2/10/2012
Shares Issuable upon Exercise of Warrant 590,001 590,001
Exercise Price $ 4.5 $ 4.5
Expiration Date 3/6/2017 3/6/2017
Consultants [Member]    
STOCKHOLDERS' EQUITY    
Issue Date 12/2/11- 10/1/16 10/14/05 – 7/1/15
Shares Issuable upon Exercise of Warrant 440,000 238,000
Exercise Price Minimum $ 0.37 $ 0.66
Exercise Price Maximum $ 3.50 $ 20.00
Expiration Date 10/27/16- 12/31/18 10/14/15 - 6/30/18
Series Q [Member]    
STOCKHOLDERS' EQUITY    
Issue Date   6/21/2012
Shares Issuable upon Exercise of Warrant   1,200,000
Exercise Price   $ 5
Expiration Date   12/22/2015
XML 35 R25.htm IDEA: XBRL DOCUMENT v3.5.0.2
C. STOCKHOLDERS EQUITY (Details 4) - USD ($)
3 Months Ended 9 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
Sep. 30, 2015
C. Stockholders Equity Details 4          
Series S warrants $ 3,930,686   $ 3,930,686   $ 7,363,555
Series U warrants 4,455   4,455   44,551
Series V warrants 3,443,038   3,443,038   6,278,481
Series W warrants 3,557,971   3,557,971   0
Series Z warrants 1,756,982   1,756,982   0
Series ZZ warrants 129,920   129,920   0
Total derivative liabilities 12,823,052   12,823,052   $ 13,686,587
Series A through E warrants     0 $ 6,105  
Series H warrants 0 $ 12,000 0 12,000  
Series Q warrants 0 12,000 0 12,000  
Series R warrants 0 105,000 0 131,250  
Series S warrants 285,208 3,111,361 3,432,869 472,487  
Series U warrants 13,366 87,659 40,096 74,352  
Series V warrants 1,012,658 1,100,760 2,835,443 1,100,760  
Series W warrants 970,746 0 1,502,800 0  
Series Z warrants 210,848 0 210,848 0  
Series ZZ warrants 15,918 0 15,918 0  
Gain on derivative instruments $ 2,508,744 $ 4,428,780 $ 8,037,974 $ 1,808,954  
XML 36 R26.htm IDEA: XBRL DOCUMENT v3.5.0.2
D. FAIR VALUE MEASUREMENTS (Details) - USD ($)
Jun. 30, 2016
Sep. 30, 2015
Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)    
Derivative instruments $ 3,930,686 $ 7,363,555
Significant Other Observable Inputs (Level 2)    
Derivative instruments 0 0
Significant Unobservable Inputs (Level 3)    
Derivative instruments 8,892,366 6,323,032
Total    
Derivative instruments $ 12,823,052 $ 13,686,587
XML 37 R27.htm IDEA: XBRL DOCUMENT v3.5.0.2
D. FAIR VALUE MEASUREMENTS (Details 1) - USD ($)
9 Months Ended 12 Months Ended
Jun. 30, 2016
Sep. 30, 2015
D. Fair Value Measurements Details 1    
Beginning balance $ 6,323,032 $ 307,894
Issuances 7,174,439 8,003,220
Realized and unrealized (gains) losses (4,605,105) (1,988,082)
Ending balance $ 8,892,336 $ 6,323,032
XML 38 R28.htm IDEA: XBRL DOCUMENT v3.5.0.2
E. RELATED PARTY LOAN (Details Narrative) - USD ($)
3 Months Ended 9 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
E. Related Party Loan Details Narrative        
Interest expense paid to Mr. de Clara $ 0 $ 41,000 $ 43,000 $ 124,000
XML 39 R29.htm IDEA: XBRL DOCUMENT v3.5.0.2
H. PATENTS (Details) - USD ($)
Jun. 30, 2016
Sep. 30, 2015
H. Patents Details    
Six months ending September 30, 2016 $ 9,210  
Year ending September 30, 2017 36,841  
Year ending September 30, 2018 36,507  
Year ending September 30, 2019 34,804  
Year ending September 30, 2020 31,611  
Year ending September 30, 2021 28,311  
Thereafter 89,209  
Total $ 266,493 $ 291,564
XML 40 R30.htm IDEA: XBRL DOCUMENT v3.5.0.2
H. PATENTS (Details Narrative) - USD ($)
3 Months Ended 9 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
H. Patents Details Narrative        
Patent impairment charges $ 0 $ 0 $ 0 $ 0
Amortization of patent costs $ 12,000 $ 12,000 $ 30,000 $ 31,000
XML 41 R31.htm IDEA: XBRL DOCUMENT v3.5.0.2
I. LOSS PER COMMON SHARE (Details) - USD ($)
3 Months Ended 9 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
I. Loss Per Common Share Details        
Net Loss $ (3,849,324) $ (4,429,137) $ (10,352,366) $ (24,830,691)
Gain on derivatives   (1,100,760)    
Net Loss, Diluted   $ (5,529,897)    
Weighted Average Shares - Basic 124,132,500 83,796,311    
Gain on derivatives, shares   1,337,796    
Weighted Average Shares - Diluted 124,132,500 85,134,107    
Weighted Average Shares - Basic and Diluted     117,412,443 77,625,511
LPS - Basic and Diluted     $ (0.09) $ (0.32)
LPS - Basic $ (0.03) $ (0.05)    
LPS - Diluted $ (0.03) $ (0.06)    
XML 42 R32.htm IDEA: XBRL DOCUMENT v3.5.0.2
I. LOSS PER COMMON SHARE (Details 1) - shares
9 Months Ended
Jun. 30, 2016
Jun. 30, 2015
I. Loss Per Common Share Details 1    
Options and Warrants 86,066,292 38,786,333
Convertible Debt 0 1,871,283
Unvested Restricted Stock 15,100,000 15,100,000
Total 101,166,292 55,757,616
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