0001654954-19-009579.txt : 20190814 0001654954-19-009579.hdr.sgml : 20190814 20190814161630 ACCESSION NUMBER: 0001654954-19-009579 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 49 CONFORMED PERIOD OF REPORT: 20190630 FILED AS OF DATE: 20190814 DATE AS OF CHANGE: 20190814 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: 191026597 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, 2019
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, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check One):
 
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
 
 
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 
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
34,805,299
August 13, 2019
  
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock
CVM
NYSE American
 

 
 
 
TABLE OF CONTENTS
 
PART I FINANCIAL INFORMATION
 
Item 1.
 
Page
 
 
 
 
Condensed Balance Sheets at June 30, 2019 and September 30, 2018 (unaudited)
3
 
 
 
 
Condensed Statements of Operations for the nine months ended June 30, 2019 and 2018 (unaudited)
4
 
 
 
 
Condensed Statements of Operations for the three months ended June 30, 2019 and 2018 (unaudited)
5
 
 
 
 
Condensed Statements of Cash Flows for the nine months ended June 30, 2019 and 2018 (unaudited)
6
 
   
 
 
Notes to Condensed Financial Statements (unaudited)
8
 
 
 
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
22
 
 
 
Item 3.
Quantitative and Qualitative Disclosures about Market Risks
24
 
 
 
Item 4.
Controls and Procedures
24
 
 
 
PART II
 
 
 
 
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
25
 
 
 
Item 6.
Exhibits
25
 
 
 
 
Signatures
26
 
 
 
2
 
 
CEL-SCI CORPORATION
CONDENSED BALANCE SHEETS
(UNAUDITED)
 
 
 
JUNE 30,
 
 
SEPTEMBER 30,
 
ASSETS
 
2019
 
 
2018
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
     Cash and cash equivalents
 $9,485,495 
 $10,310,044 
     Receivables
  118,264 
  118,657 
     Prepaid expenses
  233,784 
  364,622 
     Inventory used for R&D and manufacturing
  754,825 
  645,238 
 
    
    
Total current assets
  10,592,368 
  11,438,561 
 
    
    
Plant, property and equipment, net
  15,948,864 
  16,218,851 
Patent costs, net
  272,488 
  258,093 
Deposits
  1,670,917 
  1,670,917 
 
    
    
Total Assets
 $28,484,637 
 $29,586,422 
 
    
    
 
    
    
 
    
    
LIABILITIES AND STOCKHOLDERS' EQUITY
    
    
 
    
    
Current Liabilities:
    
    
  Accounts payable
 $2,078,800 
 $5,743,913 
  Accrued expenses
  122,030 
  205,310 
  Due to employees
  761,027 
  764,941 
  Derivative instruments, current portion
  1,249,835 
  2,498,606 
  Other current liabilities
  16,009 
  14,029 
 
    
    
  Total current liabilities
  4,227,701 
  9,226,799 
 
    
    
  Derivative instruments, net of current portion
  9,482,995 
  6,818,458 
  Lease liability
  13,475,704 
  13,379,962 
  Deferred income
  126,849 
  126,795 
  Other liabilities
  25,084 
  33,492 
 
    
    
Total liabilities
  27,338,333 
  29,585,506 
 
    
    
Commitments and Contingencies
    
    
 
    
    
STOCKHOLDERS' EQUITY
    
    
  Preferred stock, $.01 par value-200,000 shares authorized;
    
    
    -0- shares issued and outstanding
  - 
  - 
  Common stock, $.01 par value - 600,000,000 shares authorized;
    
    
    34,066,914 and 28,034,487 shares issued and outstanding
    
    
    at June 30, 2019 and September 30, 2018, respectively
  340,669 
  280,346 
  Additional paid-in capital
  349,683,796 
  331,312,184 
  Accumulated deficit
  (348,878,161)
  (331,591,614)
 
    
    
Total stockholders' equity
  1,146,304 
  916 
 
    
    
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
 $28,484,637 
 $29,586,422 
 
See notes to condensed financial statements.
 
 
3
 
 
CEL-SCI CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 2019 and 2018
(UNAUDITED)
 
 
 
2019
 
 
2018
 
 
 
 
 
 
 
 
Grant income
 $386,121 
 $297,045 
 
    
    
Operating Expenses:
    
    
  Research and development
  7,956,203 
  7,713,873 
  General and administrative
  6,981,079 
  5,823,694 
 
    
    
Total operating expenses
  14,937,282 
  13,537,567 
 
    
    
Operating loss
  (14,551,161)
  (13,240,522)
 
    
    
Other income
  54,575 
  52,984 
 
    
    
(Loss) gain on derivative instruments
  (3,316,384)
  187,967 
 
    
    
Other non-operating gain (loss)
  1,877,197 
  (171,468)
 
    
    
Interest expense, net
  (1,350,774)
  (3,739,494)
 
    
    
Net loss available to common shareholders
 $(17,286,547)
 $(16,910,533)
 
    
    
 
    
    
Net loss per common share
    
    
       Basic and Diluted
 $(0.58)
 $(1.17)
 
    
    
Weighted average common shares outstanding
    
    
       Basic and Diluted
  30,046,241 
  14,486,351 
 
See notes to condensed financial statements.
 
 
4
 
 
CEL-SCI CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2019 and 2018
(UNAUDITED)
 
 
 
2019
 
 
2018
 
 
 
 
 
 
 
 
Grant income
 $108,938 
 $86,459 
 
    
    
Operating Expenses:
    
    
  Research and development
  2,298,555 
  2,425,562 
  General and administrative
  3,020,482 
  1,748,971 
 
    
    
Total operating expenses
  5,319,037 
  4,174,533 
 
    
    
Operating loss
  (5,210,099)
  (4,088,074)
 
    
    
Other income
  18,448 
  17,711 
 
    
    
Loss on derivative instruments
  (7,905,519)
  (8,618)
 
    
    
Other non-operating gain (loss)
  1,455,844 
  (149,359)
 
    
    
Interest expense, net
  (443,442)
  (1,786,228)
 
    
    
Net loss available to common shareholders
 $(12,084,768)
 $(6,014,568)
 
    
    
 
    
    
Net loss per common share
    
    
       Basic and Diluted
 $(0.37)
 $(0.36)
 
    
    
Weighted average common shares outstanding
    
    
       Basic and Diluted
  33,051,888 
  16,651,297 
 
See notes to condensed financial statements.
 
 
5
 
 
CEL-SCI CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 2019 and 2018
(UNAUDITED)
 
 
 
2019
 
 
2018
 
 
 
 
 
 
 
 
Net loss
 $(17,286,547)
 $(16,910,533)
  Adjustments to reconcile net loss to
    
    
    net cash used in operating activities:
    
    
      Depreciation and amortization
  513,028 
  485,710 
 Share-based payments for services
  688,070 
  349,319 
      Share-based payments for interest
  - 
  80,716 
      Equity based compensation
  2,626,311 
  2,193,402 
      Common stock contributed to 401(k) plan
  108,485 
  109,073 
      Shares issued for settlement of clinical research costs
  1,290,000 
  2,957,400 
      Loss on prepaid research and development
  - 
  471,157 
      Loss (gain) on derivative instruments
  3,316,384 
  (187,967)
      Amortization of debt discount
  - 
  1,956,424 
      Inducement expense
  - 
  291,234 
      Capitalized lease interest
  95,742 
  125,044 
      (Increase)/decrease in assets:
    
    
      Receivables
  393 
  98,829 
      Prepaid expenses
  11,047 
  122,627 
      Inventory used for R&D and manufacturing
  (109,587)
  44,364 
      Deposits
  - 
  150,000 
      Increase/(decrease) in liabilities:
    
    
      Accounts payable
  (3,567,182)
  (1,960,438)
      Accrued expenses
  (113,280)
  (74,856)
      Due to employees
  (3,914)
  548,982 
      Other liabilities
  (2,544)
  4,819 
 
    
    
Net cash used in operating activities
  (12,433,594)
  (9,144,694)
 
    
    
CASH FLOWS FROM INVESTING ACTIVITIES:
    
    
      Purchases of equipment
  (171,321)
  (1,015)
      Expenditures for patent costs
  (115,476)
  (2,437)
 
    
    
Net cash used in investing activities
  (286,797)
  (3,452)
 
    
    
CASH FLOWS FROM FINANCING ACTIVITIES:
    
    
     Proceeds from issuance of common stock and warrants
  - 
  7,091,536 
     Payments of stock issuance costs
  (90,224)
  (94,773)
     Proceeds from exercise of warrants
  11,657,590 
  2,133,677 
     Proceeds from exercise of options
  97,290 
  - 
     Proceeds from the purchase of stock by officers and directors
  234,997 
  - 
     Payments on obligations under capital lease
  (3,811)
  (5,082)
 
    
    
Net cash provided by financing activities
  11,895,842 
  9,125,358 
 
    
    
 NET DECREASE IN CASH AND CASH EQUIVALENTS
  (824,549)
  (22,788)
 
    
    
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
  10,310,044 
  2,369,438 
 
    
    
CASH AND CASH EQUIVALENTS, END OF PERIOD
 $9,485,495 
 $2,346,650 
 
See notes to condensed financial statements.
 
 
6
 
 
CEL-SCI CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 2019 and 2018
 
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
 
 
 
2019
 
 
2018
 
Capitalizable patent costs included in current liabilities
 $30,000 
 $61,501 
Capital lease obligation included in accounts payable
 $434 
 $408 
Exercise of derivative liabilities
 $1,900,618 
 $784,119 
Stock issuance costs included in current liabilities
 $8,010 
 $- 
Prepaid consulting services paid with issuance of common stock
 $(119,791)
 $113,786 
Notes payable converted into common shares
 $- 
 $2,294,300 
 
    
    
 
    
    
 
    
    
  Cash paid for interest expense
 $1,355,676 
 $1,312,664 
 
See notes to condensed financial statements.
 
 
7
 
 
CEL-SCI CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 2019 AND 2018 (UNAUDITED)
 
A.
BASIS OF PRESENTATION AND 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, 2018.
 
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, 2019 and the results of its operations for the nine and three months then ended. The condensed balance sheet as of September 30, 2018 is derived from the September 30, 2018 audited financial statements. Significant accounting policies have been consistently applied in the interim financial statements. The results of operations for the nine and three months ended June 30, 2019 are not necessarily indicative of the results to be expected for the entire year.
 
The financial statements have been prepared assuming that the Company will continue as a going concern, but due to recurring losses from operations, which are expected for the foreseeable future, 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. Refer to discussion in Note B.
 
Summary of Significant Accounting Policies:
 
Research and Office Equipment and Leasehold Improvements – The leased manufacturing facility is recorded at total project costs incurred and is depreciated over the 20-year useful life of the building. Research and office equipment is recorded at cost and depreciated using the straight-line method over estimated useful lives of five to seven years. Leasehold improvements are depreciated over the shorter of the estimated useful life of the asset or the term of the lease. Repairs and maintenance which do not extend the life of the asset are expensed when incurred. The fixed assets are reviewed on a quarterly basis to determine if any of the assets are impaired.
 
Patents - Patent expenditures are capitalized and amortized using the straight-line method over the shorter of the expected useful life or the legal life of the patent (17 years). In the event changes in technology or other circumstances impair the value or life of the patent, appropriate adjustment in the asset value and period of amortization is made. An impairment loss is recognized when estimated future undiscounted cash flows expected to result from the use of the asset, and from its disposition, are 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. Management accrues Clinical Research Organization (“CRO”) expenses and clinical trial study expenses based on services performed and relies on the CROs to provide estimates of those costs applicable to the completion stage of a study. Estimated accrued CRO costs are subject to revisions as such studies progress to completion. The Company charges revisions to estimated expense in the period in which the facts that give rise to the revision become known.
 
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, 2019 and September 30, 2018.
 
 
8
 
 
On December 22, 2017, the “Tax Cuts and Jobs Act” (the “Tax Act"), was signed into law by the President of the United States (U.S.). The Tax Act includes significant changes to corporate taxation, including reduction of the U.S. corporate tax rate from 35% to 21%, effective January 1, 2018, limitation of the tax deduction for interest expense to 30% of earnings (except for certain small businesses), limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks. The Company has accounted for the income tax effects of the Act in applying FASB ASC 740 to the current reporting period. Because the Company records a valuation allowance for its entire deferred income tax asset, there was no impact to the amounts reported in the Company’s financial statements resulting from the Tax Act.
 
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 considering all the rights and obligations of each instrument. The derivative liabilities are re-measured at fair value at the end of each interim period.
 
Deferred Rent– Certain of the Company’s operating leases provide for minimum annual payments that adjust over the life of the lease.  The aggregate minimum annual payments are expensed on a straight-line basis over the minimum lease term. The Company recognizes a deferred rent liability for rent escalations when the amount of straight-line rent exceeds the lease payments, and reduces the deferred rent liability when the lease payments exceed the straight-line rent expense.  For tenant improvement allowances and rent holidays, the Company records a deferred rent liability and amortizes the deferred rent over the lease term as a reduction to rent expense.
 
Leases – Leases are categorized as either operating or capital leases at inception. Operating lease costs are recognized on a straight-line basis over the term of the lease. An asset and a corresponding liability for the capital lease obligation are established for the cost of capital leases. The capital lease obligation is amortized over the life of the lease. For build-to-suit leases, the Company establishes an asset and liability for the estimated construction costs incurred to the extent that it is involved in the construction of structural improvements or takes construction risk prior to the commencement of the lease. Upon occupancy of facilities under build-to-suit leases, the Company assesses whether these arrangements qualify for sales recognition under the sale-leaseback accounting guidance. If a lease does not meet the criteria to qualify for a sale-leaseback transaction, the established asset and liability remain on the Company's balance sheet.
 
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 an expense over the requisite service or vesting period.
 
Equity instruments issued to non-employees are accounted for in accordance with ASC 505-50, “Equity-Based Payments to Non-Employees.” Accordingly, compensation is recognized when goods or services are received and is measured using the Black-Scholes valuation model. The Black-Scholes model requires various judgmental assumptions regarding the fair value of the equity instruments at the measurement date and the expected life of the options.
 
The Company has Incentive Stock Option Plans, Non-Qualified Stock Option Plans, a Stock Compensation Plan, 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 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. Forfeitures are accounted for when they occur. The expected term of options represents the period 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.
 
 
9
 
 
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.
 
New Accounting Pronouncements
 
In June 2018, the Financial Accounting Standards Board ("FASB") issued ASU 2018-07, Compensation—Stock Compensation (Topic 718), (“ASU 2018-7”), which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost. Under current GAAP, non-employee share-based payment awards are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever can be more reliably measured. Under ASU 2018-07, non-employee share-based payments would be measured at the grant-date fair value of the equity instruments an entity is obligated to issue when the good has been delivered or the service has been rendered and any other conditions necessary to earn the right to benefit from the instruments have been satisfied. Under current GAAP, the measurement date for equity classified non-employee share-based payment awards is the earlier of the date at which a commitment for performance by the counterparty is reached or the date at which the counterparty’s performance is complete. Under ASU 2018-07, equity-classified nonemployee share-based payment awards are measured at the grant date. The definition of the term grant date is amended to generally state the date at which a grantor and a grantee reach a mutual understanding of the key terms and conditions of a share-based payment award. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. An entity should only remeasure liability-classified awards that have not been settled by the date of adoption and equity classified awards for which a measurement date has not been established through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. Upon transition, the entity is required to measure these non-employee awards at fair value as of the adoption date. The entity must not remeasure awards that are completed. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position and results of operations.
 
In February 2016, the FASB issued ASU 2016-02, Leases, which will require most leases (except 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.  As permitted by the guidance, the Company has an option to retain the original lease classification and historical accounting for initial direct costs for leases existing prior to the adoption date. Furthermore, the Company will not have to reassess contracts entered into prior to the adoption date for the existence of a lease. The Company also has an option not to restate prior periods for the impact of the adoption of the new standard and may instead recognize a cumulative-effect adjustment to beginning retained earnings as of October 1, 2019 for any prior period income statement effects identified. The Company is evaluating the effect that adoption of this new standard will have on the Company’s 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.
 
 
10
 
 
B.
OPERATIONS AND FINANCING
 
The Company has incurred significant costs since its inception for 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 to continue with its research efforts.  The ability to raise capital may be dependent upon market conditions that are outside the control of the Company. 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 is taking cost-cutting initiatives, as well as exploring other sources of funding, to finance operations over the next 12 months. The Company believes that there is a high likelihood that it will continue to receive funds from warrant exercises similar to the way it has received funds during the past 12 months. However, there can be no assurance that the Company will be able to raise sufficient capital to support its operations.
 
The Company is currently in the final stages of its large multi-national Phase 3 clinical trial for head and neck cancer with its partners TEVA Pharmaceuticals and Orient Europharma. To finance the study beyond the next twelve months, the Company plans to raise additional capital in the form of corporate partnerships, debt issuances 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. However, 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 may have to curtail its operations until it can raise the required funding.
 
The financial statements have been prepared assuming the Company will continue as a going concern, but due to the Company’s 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.
 
Since the Company launched its Phase 3 clinical trial for Multikine, the Company has incurred expenses of approximately $54.7 million as of June 30, 2019 on direct costs for the Phase 3 clinical trial. The Company estimates it will incur additional expenses of approximately $5.6 million for the remainder of the Phase 3 clinical trial. It should be noted that this estimate is based only on the information currently available in the Company’s contracts with the Clinical Research Organizations responsible for managing the Phase 3 clinical trial and does not include other related costs, e.g., the manufacturing of the drug. This number may be affected by the rate of death accumulation in the study, 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 clinical trial will be higher than currently estimated.
 
Nine hundred twenty-eight (928) head and neck cancer patients have been enrolled and have completed treatment in the Phase 3 study. The study end point is a 10% increase in overall survival of patients between the two main comparator groups in favor of the group receiving the Multikine treatment regimen. The determination if the study end point has been met will occur when there are a total of 298 deaths in those two groups.
 
 
11
 
 
C.
STOCKHOLDERS’ EQUITY
 
The changes in stockholders’ equity during the nine months ended June 30, 2019 are as follows:
 
 
 
 
 
 
 
 
 
Additional
 
 
 
 
 
 
 
 
 
Common
 
 
Stock
 
 
Paid-In
 
 
Accumulated
 
 
 
 
 
 
 Shares
 
 
Amount
 
 
Capital
 
 
Deficit
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BALANCES AT OCTOBER 1, 2018
  28,034,487 
 $280,346 
 $331,312,184 
 $(331,591,614)
 $916 
Warrant exercises
  298,682 
  2,987 
  646,766 
  - 
  649,753 
401(k) contributions paid in common stock
  12,279 
  123 
  35,118 
  - 
  35,241 
 
    
    
    
    
    
Stock issued to nonemployees for services
  62,784 
  628 
  201,752 
  - 
  202,380 
Shares returned for settlement of clinical research costs
  (564,905)
  (5,649)
  5,649 
  - 
  - 
Equity based compensation - employees
  - 
  - 
  573,660 
  - 
  573,660 
Net income
  - 
  - 
  - 
  1,245,902 
  1,245,902 
 
    
    
    
    
    
BALANCES AT DECEMBER 31, 2018
  27,843,327 
  278,435 
  332,775,129 
  (330,345,712)
  2,707,852 
 
    
    
    
    
    
Warrant exercises
  1,523,933 
  15,239 
  2,640,395 
  - 
  2,655,634 
401(k) contributions paid in common stock
  10,419 
  104 
  36,779 
  - 
  36,883 
Stock issued to nonemployees for services
  77,449 
  774 
  224,855 
  - 
  225,629 
Equity based compensation - employees
  (3,500)
  (35)
  530,865 
  - 
  530,830 
Shares issued for settlement of clinical research costs
  500,000 
  5,000 
  1,285,000 
  - 
  1,290,000 
Stock issuance costs
  - 
  - 
  (43,625)
  - 
  (43,625)
Net loss
  - 
  - 
  - 
  (6,447,681)
  (6,447,681)
 
    
    
    
    
    
BALANCES AT MARCH 31, 2019
  29,951,628 
  299,517 
  337,449,398 
  (336,793,393)
  955,522 
 
    
    
    
    
    
Warrant exercises
  4,014,109 
  40,141 
  10,212,680 
  - 
  10,252,821 
401(k) contributions paid in common stock
  4,339 
  43 
  36,318 
  - 
  36,361 
Stock issued to nonemployees for services
  20,825 
  208 
  140,062 
  - 
  140,270 
Equity based compensation - employees
  (4,000)
  (40)
  1,521,861 
  - 
  1,521,821 
Option exercises
  42,770 
  428 
  96,862 
  - 
  97,290 
Purchase of stock by officers and directors
  37,243 
  372 
  234,625 
  - 
  234,997 
Stock issuance costs
  - 
  - 
  (8,010)
  - 
  (8,010)
Net loss
  - 
  - 
  - 
  (12,084,768)
  (12,084,768)
BALANCES AT JUNE 30, 2019
  34,066,914 
 $340,669 
 $349,683,796 
 $(348,878,161)
 $1,146,304 
 
 
12
 
 
The changes in stockholders’ deficit during the nine months ended June 30, 2018 are as follows:
 
 
 
 
 
 
 
 
 
Additional
 
 
 
 
 
 
 
 
 
 Common
 
 
Stock
 
 
Paid-In
 
 
Accumulated
 
 
 
 
 
 
 Shares
 
 
Amount
 
 
Capital
 
 
Deficit
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BALANCES AT OCTOBER 1, 2017
  11,903,133 
 $119,031 
 $296,298,401 
 $(299,754,409)
 $(3,336,977)
 
    
    
    
    
    
Sale of common stock
  1,289,478 
  12,895 
  2,437,105 
  - 
  2,450,000 
401(k) contributions paid in common stock
  18,984 
  190 
  35,690 
  - 
  35,880 
Stock issued to nonemployees for services
  13,705 
  137 
  25,270 
  - 
  25,407 
Equity based compensation - employees
  - 
  - 
  1,448,098 
  - 
  1,448,098 
Warrants issued with notes payable
  - 
  - 
  656,382 
  - 
  656,382 
Conversion of notes payable to common stock
  32,751 
  328 
  74,672 
  - 
  75,000 
Net loss
  - 
  - 
  - 
  (6,187,830)
  (6,187,830)
BALANCES AT DECEMBER 31, 2017
  13,258,051 
  132,581 
  300,975,618 
  (305,942,239)
  (4,834,040)
 
    
    
    
    
    
Sale of common stock
  2,501,145 
  25,011 
  4,652,130 
  - 
  4,677,141 
401(k) contributions paid in common stock
  25,901 
  259 
  36,261 
  - 
  36,520 
Stock issued to nonemployees for services
  124,082 
  1,241 
  227,254 
  - 
  228,495 
Equity based compensation - employees
  - 
  - 
  279,817 
  - 
  279,817 
Conversion of notes payable to common stock
  55,373 
  554 
  108,746 
  - 
  109,300 
Shares issued for settlement of clinical research costs
  660,000 
  6,600 
  1,240,800 
  - 
  1,247,400 
Stock issuance cost
  - 
  - 
  (94,773)
  - 
  (94,773)
Net loss
  - 
  - 
  - 
  (4,708,135)
  (4,708,135)
BALANCES AT MARCH 31, 2018
  16,624,552 
  166,246 
  307,425,853 
  (310,650,374)
  (3,058,275)
 
    
    
    
    
    
Warrant exercises
  1,117,644 
  11,177 
  2,906,619 
  - 
  2,917,796 
401(k) contributions paid in common stock
  39,862 
  399 
  36,274 
  - 
  36,673 
Stock issued to nonemployees for services
  81,604 
  816 
  208,387 
  - 
  209,203 
Equity based compensation - employees
  - 
  - 
  465,487 
  - 
  465,487 
Conversion of notes payable and interest to common stock
  1,106,806 
  11,068 
  2,179,648 
  - 
  2,190,716 
Shares issued for settlement of clinical research costs
  600,000 
  6,000 
  1,704,000 
  - 
  1,710,000 
Warrants issued with notes payable
  - 
  - 
  291,234 
  - 
  291,234 
Net loss
  - 
  - 
  - 
  (6,014,568)
  (6,014,568)
BALANCES AT JUNE 30, 2018
  19,570,468 
 $195,706 
 $315,217,502 
 $(316,664,942)
 $(1,251,734)
 
Underlying share information for equity compensation plans as of June 30, 2019 is 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
  138,400 
  99,962 
  N/A 
  385 
Non-Qualified Stock Option Plans
  6,387,200 
  6,193,237 
  N/A 
  115,156 
Stock Bonus Plans
  783,760 
  N/A 
  327,267 
  456,460 
Stock Compensation Plan
  634,000 
  N/A 
  122,221 
  493,369 
Incentive Stock Bonus Plan
  640,000 
  N/A 
  616,500 
  23,500 
 
 
13
 
 
Underlying share information for equity compensation plans as of September 30, 2018 is 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
  138,400 
  123,558 
  N/A 
  385 
Non-Qualified Stock Option Plans
  3,387,200 
  3,036,569 
  N/A 
  309,526 
Stock Bonus Plans
  783,760 
  N/A 
  297,230 
  486,497 
Stock Compensation Plan
  134,000 
  N/A 
  118,590 
  15,410 
Incentive Stock Bonus Plan
  640,000 
  N/A 
  624,000 
  16,000 
 
Stock option activity:
 
 
Nine Months Ended June 30,
 
 
 
 2019
 
 
 2018
 
Granted
  3,268,862 
  1,858,108 
Exercised
  42,770 
  - 
Expired
  29,322 
  26,395 
Forfeited
  63,698 
  1,393 
 
 
 
Three Months Ended June 30,
 
 
 
2019
 
 
2018
 
Granted
  3,268,362 
  1,847,808 
Exercised
  42,770 
  - 
Expired
  26,922 
  2,016 
Forfeited
  39,505 
  - 
 
During the quarter ended June 30, 2019, the Company adopted the 2019 Stock Compensation Plan, which authorized the issuance of up to 500,000 shares of common stock to officers, directors, employees and consultants.
 
Employee stock based 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. Stock based compensation expense is included in general and administrative expenses on the statements of operations.
 
Non-employee stock based compensation expense includes the value of shares and options issued under consulting arrangements. At June 30, 2019 and September 30, 2018, approximately $88,000 and $207,000, respectively, are included in prepaid expenses.
 
 
14
 
 
Warrants and Non-Employee Options
 
The following chart represents the warrants and non-employee options outstanding at June 30, 2019:
 
Warrant
 
Issue Date
 
Shares Issuable upon Exercise
of Warrants
 
 
Exercise Price
 
Expiration Date
Series N
 
8/18/2008
  85,339 
 $3.00 
2/18/2020
Series V
 
5/28/2015
  810,127 
 $19.75 
5/28/2020
Series UU
 
6/11/2018
  163,544 
 $2.80 
6/11/2020
Series W
 
10/28/2015
  688,930 
 $16.75 
10/28/2020
Series X
 
1/13/2016
  120,000 
 $9.25 
1/13/2021
Series Y
 
2/15/2016
  26,000 
 $12.00 
2/15/2021
Series ZZ
 
5/23/2016
  20,000 
 $13.75 
5/18/2021
Series BB
 
8/26/2016
  16,000 
 $13.75 
8/22/2021
Series Z
 
5/23/2016
  264,000 
 $13.75 
11/23/2021
Series FF
 
12/8/2016
  68,048 
 $3.91 
12/1/2021
Series CC
 
12/8/2016
  611,463 
 $5.00 
12/8/2021
Series HH
 
2/23/2017
  6,500 
 $3.13 
2/16/2022
Series AA
 
8/26/2016
  200,000 
 $13.75 
2/22/2022
Series JJ
 
3/14/2017
  9,450 
 $3.13 
3/8/2022
Series LL
 
4/30/2017
  26,398 
 $3.59 
4/30/2022
Series MM
 
6/22/2017
  893,491 
 $1.86 
6/22/2022
Series NN
 
7/24/2017
  473,798 
 $2.52 
7/24/2022
Series OO
 
7/31/2017
  60,000 
 $2.52 
7/31/2022
Series II
 
3/14/2017
  95,000 
 $3.00 
9/14/2022
Series RR
 
10/30/2017
  495,326 
 $1.65 
10/30/2022
Series SS
 
12/19/2017
  514,476 
 $2.09 
12/18/2022
Series TT
 
2/5/2018
  760,758 
 $2.24 
2/5/2023
Series PP
 
8/28/2017
  112,500 
 $2.30 
2/28/2023
Series WW
 
7/2/2018
  1,950 
 $1.63 
6/28/2023
Series VV
 
7/2/2018
  90,000 
 $1.75 
1/2/2024
Consultants
 
7/28/17
  10,000 
 $2.18 
7/27/2027
 
 
15
 
 
1.
Derivative Liabilities
 
The table below presents the fair value of the warrant liabilities at the balance sheet dates:
 
 
 
June 30,
2019
 
 
September 30,
2018
 
Series S warrants
 $- 
 $33 
Series V warrants
  1,249,835 
  770,436 
Series W warrants
  2,131,237 
  999,081 
Series Z warrants
  1,172,626 
  487,767 
Series ZZ warrants
  72,185 
  34,215 
Series AA warrants
  963,990 
  380,474 
Series BB warrants
  64,256 
  28,456 
Series CC warrants
  3,699,989 
  1,779,724 
Series DD warrants
  - 
  1,249,287 
Series EE warrants
  - 
  1,249,287 
Series FF warrants
  433,091 
  188,921 
Series GG warrants
  - 
  607,228 
Series HH warrants
  44,050 
  58,816 
Series II warrants
  660,020 
  660,135 
Series JJ warrants
  64,252 
  88,642 
Series KK warrants
  - 
  656,930 
Series LL warrants
  177,299 
  77,632 
Total warrant liabilities
 $10,732,830 
 $9,317,064 
 
The table below presents the gains/(losses) on the warrant liabilities for the nine months ended June 30:
 
 
 
2019 
 
 
2018 
 
Series S warrants
 $33 
 $(756,261)
Series V warrants
  (479,399)
  22,842 
Series W warrants
  (1,132,156)
  18,478 
Series Z warrants
  (684,859)
  34,682 
Series ZZ warrants
  (37,970)
  2,103 
Series AA warrants
  (583,516)
  28,337 
Series BB warrants
  (35,800)
  1,988 
Series CC warrants
  (2,007,287)
  181,244 
Series DD warrants
  1,249,287 
  5,492 
Series EE warrants
  1,249,287 
  5,492 
Series FF warrants
  (244,170)
  23,119 
Series GG warrants
  195,228 
  170,131 
Series HH warrants
  (22,859)
  7,962 
Series II warrants
  (593,960)
  250,578 
Series JJ warrants
  (32,954)
  11,970 
Series KK warrants
  (55,622)
  169,808 
Series LL warrants
  (99,667)
  10,002 
Net (loss) gain on warrant liabilities
 $(3,316,384)
 $187,967 
 
 
16
 
 
The table below presents the gains/(losses) on the warrant liabilities for the three months ended June 30:
 
 
 
 2019
 
 
 2018
 
Series S warrants
 $- 
 $(768,188)
Series V warrants
  (974,251)
  26,389 
Series W warrants
  (1,748,184)
  42,609 
Series Z warrants
  (799,690)
  26,587 
Series ZZ warrants
  (50,608)
  1,914 
Series AA warrants
  (676,784)
  19,661 
Series BB warrants
  (43,536)
  1,695 
Series CC warrants
  (2,346,985)
  139,325 
Series DD warrants
  - 
  36 
Series EE warrants
  - 
  36 
Series FF warrants
  (278,773)
  15,818 
Series GG warrants
  88,478 
  132,712 
Series HH warrants
  (33,501)
  5,279 
Series II warrants
  (709,303)
  199,970 
Series JJ warrants
  (48,880)
  7,960 
Series KK warrants
  (169,089)
  132,884 
Series LL warrants
  (114,413)
  6,695 
Net loss on warrant liabilities
 $(7,905,519)
 $(8,618)
 
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.
 
Expiration of Derivative Liabilities
 
On December 10, 2018, 1,360,960 Series DD and 1,360,960 Series EE warrants, with an exercise price of $4.50, expired. The expiration dates of these warrants had been previously extended and such modifications were reflected in the fair value measurements of the warrants on the dates of modification.
 
On October 11, 2018, 327,729 Series S warrants, with an exercise price of $31.25, expired. The exercise price of these warrants had been previously repriced under temporarily revised terms. During the quarter ended June 30, 2018 and under the revised terms, 709,391 previously outstanding warrants were exercised for total proceeds of approximately $1.2 million,
 
2.
Securities Purchase Agreements
 
The Company has entered into several Securities Purchase Agreements (SPAs) with Ergomed plc, one of its Clinical Research Organizations responsible for managing the Phase 3 clinical trial, to facilitate a partial payment of amounts due Ergomed. Under the Agreements, the Company issued Ergomed shares of common stock as a forbearance fee in exchange for Ergomed’s agreement to provisionally forbear collection of the payables in an amount equal to the net proceeds from the sales of the shares issued to Ergomed. Upon issuance, the Company expenses the full value of the shares as Other Non-Operating Gain/Loss and subsequently offsets the expense as amounts are realized through the sale by Ergomed and reduces accounts payable to Ergomed. Any amounts received from the sale of the shares in excess of the payables will be applied towards the satisfaction of any future amounts owed.
 
 
17
 
 
On December 31, 2018, the prior SPA expired. Pursuant to that arrangement, Ergomed returned 564,905 unsold shares for cancellation. The par value of those shares was reclassed from Common Stock to Additional Paid-In Capital on the balance sheet.
 
On January 9, 2019, the Company entered into a new SPA under which it issued Ergomed 500,000 restricted shares of the Company’s common stock valued at approximately $1.3 million. This current SPA expires on December 31, 2019.
 
During the nine months ended June 30, 2019 and 2018, respectively, the Company decreased Accounts Payable by approximately $3.2 million and $2.8 million through the sale of 808,769 and 1,538,129 shares, respectively, by Ergomed.
 
The following table summarizes the Other Non-Operating Gains (Loss) for the nine and three months ended June 30, 2019 and 2018 relating to these agreements:
 
 
 
Nine Months Ended
 
 
Three Months Ended
 
 
 
6/30/2019
 
 
6/30/2018
 
 
6/30/2019
 
 
6/30/2018
 
Amount realized through the sale of shares
 $3,167,197 
 $2,785,932 
 $1,455,844 
 $1,560,641 
Fair value of shares upon issuance
  1,290,000 
  2,957,400 
  - 
  1,710,000 
Other non-operating gain (loss)
 $1,877,197 
 $(171,468)
 $1,455,844 
 $( 149,359)
 
As of June 30, 2019, Ergomed holds 45,226 shares and may sell the shares or return the shares to the Company for cancellation until December 31, 2019.
 
3.
Incentive Stock Bonus Plan
 
During the nine and three months ended June 30, 2019, respectively, 7,500 and 4,000 shares of common stock issued from the 2014 Incentive Stock Bonus Plan were forfeited.
 
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.
 
 
18
 
 
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, 2019:
 
 
 
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
 $- 
 $- 
 $10,732,830 
 $10,732,830 
 
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, 2018:
 
 
 
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
 $33 
 $- 
 $9,317,031 
 $9,317,064 
  
The following sets forth the reconciliation of beginning and ending balances related to fair value measurements using significant unobservable inputs (Level 3) for the three months ended June 30, 2019 and the year ended September 30, 2018:
 
 
 
Nine Months
 
 
Year Ended
 
 
 
Ended 
 
 
September 30, 
 
 
 
June 30, 2019
 
 
2018
 
 
 
 
 
 
 
 
Beginning balance
 $9,317,031 
 $2,020,629 
Issuances
  - 
  - 
Exercises
  (1,900,618)
  (595,780)
Realized and unrealized (gains) and losses
  3,316,417 
  7,892,182 
Ending balance
 $10,732,830 
 $9,317,031 
 
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 TRANSACTIONS
 
During the quarter ended June 30, 2019, the Company received security purchase agreements from five officers and directors of the Company for the purchase of 30,612 restricted shares of the Company’s common stock. The shares were sold at the aggregate fair market value on the closing date of approximately $210,000. Also during the current quarter, the Company’s CEO purchased 6,631 shares of restricted common stock for $25,000.
 
F.
COMMITMENTS AND CONTINGENCIES
  
Clinical Research Agreements 
 
Under co-development and revenue sharing agreements with Ergomed, Ergomed agreed to contribute up to $12 million towards the Company’s Phase 3 Clinical Trial in the form of discounted clinical services in exchange for a single digit percentage of milestone and royalty payments, up to a specific maximum amount. The Company accounted for the co-development and revenue sharing agreements 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 inception of the agreement with Ergomed, the Company has incurred research and development expenses of approximately $30.3 million for Ergomed’s services. This amount is net of Ergomed’s discount of approximately $10.2 million. During the nine months ended June 30, 2019 and 2018, the Company recorded, net of Ergomed’s discount, approximately $2.2 million and $2.4 million, respectively, as research and development expense related to Ergomed’s services. During the three months ended June 30, 2019 and 2018, the Company recorded, net of Ergomed’s discount, approximately $0.7 million and $0.8 million, respectively, as research and development expense related to Ergomed’s services.
 
 
19
 
 
Lease Agreements
 
The Company leases a manufacturing facility near Baltimore, Maryland (the San Tomas lease). 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 estate 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 contributed approximately $9.3 million towards the tenant-directed improvements, of which $3.2 million is being refunded during years nine through twenty through reduced rental payments. The landlord paid approximately $11.9 million towards the purchase of the building, land and the tenant-directed improvements. The Company placed the building in service in October 2008.
 
The Company was deemed to be the owner of the building for accounting purpose under the build-to-suit guidance in ASC 840-40-55. In addition to tenant improvements the Company incurred, the Company also recorded an asset for tenant-directed improvements and for the costs paid by the lessor to purchase the building and to perform improvements, as well as a corresponding liability for the landlord costs. Upon completion of the improvements, the Company did not meet the “sale-leaseback” criteria under ASC 840-40-25, Accounting for Lease, Sale-Leaseback Transactions, and therefore, treated the lease as a financing obligation. Thus, the asset and corresponding liability were not de-recognized. As of June 30, 2019 and September 30, 2018, the leased building asset has a net book value of approximately $15.7 and $16.1 million, respectively, and the landlord liability has a balance of approximately $13.5 million and $13.4 million, respectively. The leased building is being depreciated using a straight-line method over the 20-year lease term to a residual value. The landlord liability is being amortized over the 20 years using the effective interest method. Lease payments allocated to the landlord liability are accounted for as debt service payments on that liability using the finance method of accounting per ASC 840-40-55.
 
The Company was required to deposit the equivalent of one year of base rent in accordance with the lease. When the Company meets the minimum cash balance required by the lease, the deposit will be returned to the Company. The approximate $1.7 million deposit is included in non-current assets at June 30, 2019 and September 30, 2018.
 
Approximate future minimum lease payments under the San Tomas lease as of June 30, 2019 are as follows:
 
Three months ending September 30, 2019   
 $453,000 
Year ending September 30,
    
 2020
  1,872,000 
 2021
  1,937,000 
 2022
  2,004,000 
 2023
  2,073,000 
 2024
  2,145,000 
 Thereafter
  9,540,000 
Total future minimum lease obligation
  20,024,000 
Less imputed interest on financing obligation
  (6,548,000)
Net present value of lease financing obligation
 $13,476,000 
 
The Company subleases a portion of its rental space on a month-to-month term lease, which requires a 30-day notice for termination. The sublease rental income for the nine months ended June 30, 2019 and 2018 was approximately $55,000 and $53,000, respectively. The sublease rental income for each of the three months ended June 30, 2019 and 2018 was approximately $18,000.
 
The Company leases its research and development laboratory under a 60-month lease which expires February 28, 2022. 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 $13,000 per month. As of June 30, 2019 and September 30, 2018, the Company has recorded a deferred rent liability of approximately $14,000 and $12,000, respectively.
 
The Company leases its 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 approximately $8,000 per month. As of June 30, 2019 and September 30, 2018, the Company has recorded a deferred rent liability of approximately $9,000 and $14,000, respectively.
 
 
20
 
 
As of June 30, 2019, material contractual obligations, excluding the San Tomas lease, consisting of non-cancelable operating lease payments are as follows:
 
Three months ending September 30, 2019
 $66,000
Year ending September 30,
    
2020
  238,000
2021
  163,000
2022
      69,000
Total
 $536,000
 
The Company leases office equipment under a capital lease arrangement. The term of the capital lease is 60 months and expires on October 31, 2021. The monthly lease payment is $505. The lease bears interest at an annual interest rate of 6.25%.
 
G.
.PATENTS
 
During the nine months ended June 30, 2019 and 2018, no patent impairment charges were recorded. For the nine and three months ended June 30, 2019, amortization of patent costs totaled approximately $72,000 and $49,000, respectively. For the nine and three months ended June 30, 2018, amortization of patent costs totaled approximately $53,000 and $34,000, respectively. Approximate estimated future amortization expense is as follows:
 
Three months ending September 30, 2019
 $11,000 
Year ending September 30,
    
2020
  43,000 
2021
  40,000 
2022
  36,000 
2023
  26,000 
2024
  21,000 
Thereafter
  95,000 
Total
 $272,000 
 
H.
LOSS PER COMMON SHARE
  
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:
 
 
 
2019
 
 
2018
 
 
 
 
 
 
 
 
Options and Warrants
  7,742,857 
  12,567,982 
Unvested Restricted Stock
  552,000 
  312,000 
Total
  8,294,857 
  12,879,982 
 
I.
SUBSEQUENT EVENTS
 
Between July 1, 2019 and August 13, 2019, the Company received approximately $2.6 million through the exercise of options and warrants to purchase shares of the Company’s common stock.
 
 
21
 
 
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 cleared for a Phase 3 clinical trial in advanced primary head and neck cancer by the regulators in twenty-four countries, including the U.S.
 
Multikine (Leukocyte Interleukin, Injection) is the full name of this investigational therapy, which, for simplicity, is referred to in 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 under 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 the Company’s projects are under development. Consequently, 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 continue to exceed its revenues as it continues the development of Multikine and brings other drug candidates into clinical trials. Until the Company becomes profitable, any or all of these financing vehicles or others may be utilized to assist in funding the Company’s capital requirements.
 
Capital raised by the Company has been expended primarily for patent applications, research and development, administrative costs, and the construction of the Company’s manufacturing and laboratory facilities. The Company does not anticipate realizing significant revenues until it enters into licensing arrangements for its technology and know-how or until it receives regulatory approval to sell its products (which could take several years). Thus, the Company has been dependent upon the proceeds from the sale of its securities to meet all 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 to continue with its research efforts. The ability to raise capital may be dependent upon market conditions that are outside the control of the Company. 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 has been receiving millions of dollars from warrant exercises in the past 12 months. It has received approximately another $2.6 million since July 1, 2019. The Company is being funded through these warrant exercises. Should those warrant exercises stop, the Company will explore other sources of funding, to finance operations over the next 12 months. However, there can be no assurance that the Company will be able to raise sufficient capital to support its operations.
 
Since the Company launched its Phase 3 clinical trial for Multikine, the Company has incurred expenses of approximately $54.7 million as of June 30, 2019 on direct costs for the Phase 3 clinical trial. The Company estimates it will incur additional expenses of approximately $5.6 million for the remainder of the Phase 3 clinical trial. It should be noted that this estimate is based only on the information currently available from the Clinical Research Organizations responsible for managing the Phase 3 clinical trial and does not include other related costs, e.g., the manufacturing of the drug. This number may be affected by the rate of death accumulation in the study, 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 clinical trial will be higher than currently estimated.
 
The Company uses two CRO’s to manage the global Phase 3 study; ICON and Ergomed, who are both international leaders in managing oncology trials. As of September 2016, the study was fully enrolled with 928 patients.
 
Under a co-development agreement, Ergomed agreed to 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. Approximately $10.2 million of these credits were realized as of June 30, 2019.
 
During the nine months ended June 30, 2019, the Company’s cash decreased by approximately $0.8 million.  Significant components of this decrease included net cash used to fund the Company’s regular operations, including its Phase 3 clinical trial, of approximately $12.4 million and approximately $0.3 million to purchase long term assets. The decrease was offset by net proceeds from the exercise of warrants of approximately $11.7 million and employee stock purchases of approximately $0.2 million. During the nine months ended June 30, 2018, the Company’s cash remained constant. Cash used in operations of approximately $9.1 million was offset by approximately $9.1 million in cash provided by financing activities. Sources of financing during the nine months included approximately $7.0 million in proceeds from the issuance of common stock and warrants and $2.1 million in proceeds from the exercise of warrants.
 
During the nine months ended June 30, 2019, 5,836,724 warrants were exercised at a weighted average exercise price of $2.00 for proceeds of approximately $11.7 million. These exercises include 4,014,109 warrants exercised during the three months ended June 30, 2019 for proceeds of approximately $8.4 million. During the nine and three months ended June 30, 2018, 1,117,644 warrants were exercised at a weighted averaged exercise price of $1.91 for proceeds of approximately $2.1 million.
 
 
22
 
 
The Company has entered into several Securities Purchase Agreements (SPAs) with Ergomed plc, one of its Clinical Research Organizations responsible for managing the Phase 3 clinical trial, to facilitate a partial payment of amounts due Ergomed. Under the Agreements, the Company issued Ergomed shares of common stock in exchange for Ergomed’s agreement to provisionally forbear collection of the payables in an amount equal to the net proceeds from the sale of the shares issued to Ergomed. During the nine months ended June 30, 2019 and 2018, respectively, the Company decreased Accounts Payable by approximately $3.2 million and $2.8 million from the sale of 808,769 and 1,538,129 shares by Ergomed. As of June 30, 2019, Ergomed holds 45,226 shares and may sell the shares or return the shares to the Company for cancellation until December 31, 2019. For more information regarding the SPAs refer to Note C above.
 
Inventory at June 30, 2019 increased by approximately $110,000 as compared to September 30, 2018. In addition, receivables remained constant, and consist primarily of amounts due from the Company’s partners for reimbursed clinical study costs related to its Phase 3 clinical trial and amounts to be reimbursed for costs related to its Small Business Innovation Research (SBIR) grant.
 
Results of Operations and Financial Condition
 
During the nine months ended June 30, 2019, research and development expenses increased by approximately $0.2 million compared to the nine months ended June 30, 2018. During the three months ended June 30, 2019, research and development expenses decreased by approximately $0.1 million compared to the three months ended June 30, 2018. The majority of the Company’s research and development expense relates to its on-going Phase 3 clinical trial. The Company is continuing the Phase 3 clinical trial and research and development expenses fluctuate based on the activity level of the clinical trial.
 
During the nine and three months ended June 30, 2019, general and administrative expenses increased by approximately $1.2 million and $1.3 million compared to the nine and three months ended June 30, 2018. The increase over the nine month period is primarily due to an increase in public relations costs of approximately $0.8 million, of which approximately $0.3 million relates to equity based compensation. The increase in equity based public relations cost is primarily the result of the timing of the expense recognized with the timing of the services provided. In addition, the nine month period increase is due to an increase in employee stock based compensation of approximately $0.4 million as a result of employee stock options granted during the quarter ended June 30, 2019. The increase for the three months ended June 30, 2019 is primarily due to, the previously mentioned, employee stock based compensation from the grant of the employee stock options during the quarter ended June 30, 2019.
 
The loss on derivative instruments of approximately $3.3 million and $7.9 million for the nine and three months ended, respectively, is the result of the change in fair value of the derivative liabilities during the respective periods. The gain on derivative instruments of approximately $0.2 million for the nine months ended June 30, 2018 and the de minimus loss on derivative instruments for the three months ended June 30, 2018 were the result of the change in fair value of the derivative liabilities during the respective quarters. These changes were caused mainly by fluctuation in the share price of the Company’s common stock.
 
Other non-operating gain (loss) for the nine and three months ended June 30, 2019 and 2018 is a result of shares issued to Ergomed to facilitate partial payments of amounts due to Ergomed under the SPA mentioned above. For more information regarding the SPAs refer to Note C above.
 
Net interest expense decreased by approximately $2.4 million for the nine months ended June 30, 2019 compared to the nine months ended June 30, 2018. Net interest expense decreased by approximately $1.3 million for the three months ended June 30, 2019 compared to the three months ended June 30, 2018. The prior periods included interest expense and the amortization of a discount on the notes payable that were converted by September 30, 2018.
 
 
23
 
 
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,
 
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
MULTIKINE
 $7,389,101 
 $7,210,355 
 $2,131,154 
 $2,220,634 
LEAPS
  567,102 
  503,518 
  167,401 
  204,928 
TOTAL
 $7,956,203 
 $7,713,873 
 $2,298,555 
 $2,425,562 
 
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 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, 2018. 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 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, 2019. 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 concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2019.
 
Changes in Internal Control over Financial Reporting
 
There was no change in the Company’s internal control over financial reporting that occurred during the quarter ended June 30, 2019 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
 
 
24
 
 
PART II
 
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.
 
During the nine months ended June 30, 2019 the Company issued 161,058 restricted shares of common stock to consultants for investor relations services.
 
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 which provides 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. Exhibits
 
Number                Exhibit
 
Rule 13a-14(a) Certifications
 
Section 1350 Certifications
 
 
 
 
25
 
 
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 14, 2019
By:  
/s/  Geert Kersten
 
 
 
Geert Kersten 
 
 
 
Principal Executive Officer* 
 
 
 
 
 
 
 
* Also signing in the capacity of the Principal Accounting and Financial Officer.
 
 
 
26
EX-31 2 cvm_ex31.htm CERTIFICATION PURSUANT TO RULE 13A-14(A)/15D-14(A) CERTIFICATIONS SECTION 302 OF THE SARBANES-OXLY ACT OF 2002 Blueprint
 
EXHIBIT 31
 
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, considering 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 14, 2019
By:  
/s/ Geert Kersten
 
 
 
Geert Kersten 
 
 
 
Principal Executive Officer 
 
 
 
 
 
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, considering 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 14, 2019
By:  
/s/ Geert Kersten
 
 
 
Geert Kersten 
 
 
 
Principal Financial Officer
 
 
 
EX-32 3 cvm_ex32.htm CERTIFICATE PURSUANT TO SECTION 18 U.S.C. PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Blueprint
 
 
EXHIBIT 32
 
In connection with the Quarterly Report of CEL-SCI Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2019 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 14, 2019
By:  
/s/ Geert Kersten
 
 
 
Geert Kersten 
 
 
 
Principal Executive and
Principal Financial Officer
 
 
 
 
 
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An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost. Under current GAAP, non-employee share-based payment awards are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever can be more reliably measured. Under ASU 2018-07, non-employee share-based payments would be measured at the grant-date fair value of the equity instruments an entity is obligated to issue when the good has been delivered or the service has been rendered and any other conditions necessary to earn the right to benefit from the instruments have been satisfied. Under current GAAP, the measurement date for equity classified non-employee share-based payment awards is the earlier of the date at which a commitment for performance by the counterparty is reached or the date at which the counterparty&#8217;s performance is complete. Under ASU 2018-07, equity-classified nonemployee share-based payment awards are measured at the grant date. The definition of the term <i>grant date</i> is amended to generally state the date at which a <i>grantor</i> and a <i>grantee</i> reach a mutual understanding of the key terms and conditions of a share-based payment award. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted, but no earlier than an entity&#8217;s adoption date of Topic 606. An entity should only remeasure liability-classified awards that have not been settled by the date of adoption and equity classified awards for which a measurement date has not been established through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. 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Document and Entity Information - shares
9 Months Ended
Jun. 30, 2019
Aug. 13, 2019
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, 2019  
Amendment Flag false  
Current Fiscal Year End Date --09-30  
Is Entity's Reporting Status Current? Yes  
Entity Filer Category Non-accelerated Filer  
Entity Emerging Growth Company false  
Entity Small Business true  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   34,805,299
Document Fiscal Period Focus Q3  
Document Fiscal Year Focus 2019  
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BALANCE SHEETS - USD ($)
Jun. 30, 2019
Sep. 30, 2018
CURRENT ASSETS:    
Cash and cash equivalents $ 9,485,495 $ 10,310,044
Receivables 118,264 118,657
Prepaid expenses 233,784 364,622
Inventory used for R&D and manufacturing 754,825 645,238
Total current assets 10,592,368 11,438,561
Plant, property and equipment, net 15,948,864 16,218,851
Patent costs, net 272,488 258,093
Deposits 1,670,917 1,670,917
Total Assets 28,484,637 29,586,422
CURRENT LIABILITIES:    
Accounts payable 2,078,800 5,743,913
Accrued expenses 122,030 205,310
Due to employees 761,027 764,941
Derivative instruments, current portion 1,249,835 2,498,606
Other current liabilities 16,009 14,029
Total current liabilities 4,227,701 9,226,799
Derivative instruments - net of current portion 9,482,995 6,818,458
Lease Liability 13,475,704 13,379,962
Deferred income 126,849 126,795
Other liabilities 25,084 33,492
Total liabilities 27,338,333 29,585,506
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY    
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; 34,066,914 and 28,034,487 shares issued and outstanding at June 30, 2019 and September 30, 2018, respectively 340,669 280,346
Additional paid-in capital 349,683,796 331,312,184
Accumulated deficit (348,878,161) (331,591,614)
Total stockholders' equity 1,146,304 916
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 28,484,637 $ 29,586,422
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BALANCE SHEETS (Parenthetical) - $ / shares
Jun. 30, 2019
Sep. 30, 2018
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 34,066,914 28,034,487
Common Stock Shares Outstanding 34,066,914 28,034,487
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STATEMENTS OF OPERATIONS - USD ($)
3 Months Ended 9 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Income Statement [Abstract]        
Grant income $ 108,938 $ 86,459 $ 386,121 $ 297,045
Operating Expenses:        
Research and development 2,298,555 2,425,562 7,956,203 7,713,873
General & administrative 3,020,482 1,748,971 6,981,079 5,823,694
Total operating expenses 5,319,037 4,174,533 14,937,282 13,537,567
Operating loss (5,210,099) (4,088,074) (14,551,161) (13,240,522)
Other income 18,448 17,711 54,575 52,984
(Loss) gain on derivative instruments (7,905,519) (8,618) (3,316,384) 187,967
Other non-operating gain (loss) 1,455,844 (149,359) 1,877,197 (171,468)
Interest expense, net (443,442) (1,786,228) (1,350,774) (3,739,494)
Net loss available to common shareholders $ (12,084,768) $ (6,014,568) $ (17,286,547) $ (16,910,533)
Net loss per common share        
Basic and Diluted $ (0.37) $ (0.36) $ (0.58) $ (1.17)
Weighted average common shares outstanding        
Basic and Diluted 33,051,888 16,651,297 30,046,241 14,486,351
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STATEMENTS OF CASH FLOWS - USD ($)
9 Months Ended
Jun. 30, 2019
Jun. 30, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss $ (17,286,547) $ (16,910,533)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization 513,028 485,710
Share-based payments for services 688,070 349,319
Share-based payments for interest 0 80,716
Equity based compensation 2,626,311 2,193,402
Common stock contributed to 401(k) plan 108,485 109,073
Shares issued for settlement of clinical research costs 1,290,000 2,957,400
Loss on prepaid research and development 0 471,157
Loss (gain) on derivative instruments 3,316,384 (187,967)
Amortization of debt discount 0 1,956,424
Inducement expense 0 291,234
Capitalized lease interest 95,742 125,044
(Increase)/decrease in assets:    
Receivables 393 98,829
Prepaid expenses 11,047 122,627
Inventory used for R&D and manufacturing (109,587) 44,364
Deposits 0 150,000
Increase/(decrease) in liabilities:    
Accounts payable (3,567,182) (1,960,438)
Accrued expenses (113,280) (74,856)
Due to employees (3,914) 548,982
Other liabilities (2,544) 4,819
Net cash used in operating activities (12,433,594) (9,144,694)
CASH FLOWS FROM INVESTING ACTIVITIES:    
Purchases of equipment (171,321) (1,015)
Expenditures for patent costs (115,476) (2,437)
Net cash used in investing activities (286,797) (3,452)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Proceeds from issuance of common stock and warrants 0 7,091,536
Payments of stock issuance costs (90,224) (94,773)
Proceeds from exercise of warrants 11,657,590 2,133,677
Proceeds from exercise of options 97,290 0
Proceeds from the purchase of stock by officers and directors 234,997 0
Payments on obligations under capital lease (3,811) (5,082)
Net cash provided by financing activities 11,895,842 9,125,358
NET DECREASE IN CASH AND CASH EQUIVALENTS (824,549) (22,788)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 10,310,044 2,369,438
CASH AND CASH EQUIVALENTS, END OF PERIOD 9,485,495 2,346,650
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:    
Capitalizable patent costs included in current liabilities 30,000 61,501
Capital lease obligation included in accounts payable 434 408
Exercise of derivative liabilities 1,900,618 784,119
Stock issuance costs included in current liabilities 8,010 0
Prepaid consulting services paid with issuance of common stock (119,791) 113,786
Notes payable converted into common shares 0 2,294,300
Cash paid for interest expense $ 1,355,676 $ 1,312,664
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A. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
9 Months Ended
Jun. 30, 2019
Accounting Policies [Abstract]  
A. BASIS OF PRESENTATION AND 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, 2018.

 

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, 2019 and the results of its operations for the nine and three months then ended. The condensed balance sheet as of September 30, 2018 is derived from the September 30, 2018 audited financial statements. Significant accounting policies have been consistently applied in the interim financial statements. The results of operations for the nine and three months ended June 30, 2019 are not necessarily indicative of the results to be expected for the entire year.

 

The financial statements have been prepared assuming that the Company will continue as a going concern, but due to recurring losses from operations, which are expected for the foreseeable future, 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. Refer to discussion in Note B.

 

Summary of Significant Accounting Policies:

 

Research and Office Equipment and Leasehold Improvements – The leased manufacturing facility is recorded at total project costs incurred and is depreciated over the 20-year useful life of the building. Research and office equipment is recorded at cost and depreciated using the straight-line method over estimated useful lives of five to seven years. Leasehold improvements are depreciated over the shorter of the estimated useful life of the asset or the term of the lease. Repairs and maintenance which do not extend the life of the asset are expensed when incurred. The fixed assets are reviewed on a quarterly basis to determine if any of the assets are impaired.

 

Patents - Patent expenditures are capitalized and amortized using the straight-line method over the shorter of the expected useful life or the legal life of the patent (17 years). In the event changes in technology or other circumstances impair the value or life of the patent, appropriate adjustment in the asset value and period of amortization is made. An impairment loss is recognized when estimated future undiscounted cash flows expected to result from the use of the asset, and from its disposition, are 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. Management accrues Clinical Research Organization (“CRO”) expenses and clinical trial study expenses based on services performed and relies on the CROs to provide estimates of those costs applicable to the completion stage of a study. Estimated accrued CRO costs are subject to revisions as such studies progress to completion. The Company charges revisions to estimated expense in the period in which the facts that give rise to the revision become known.

 

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, 2019 and September 30, 2018.

 

On December 22, 2017, the “Tax Cuts and Jobs Act” (the “Tax Act"), was signed into law by the President of the United States (U.S.). The Tax Act includes significant changes to corporate taxation, including reduction of the U.S. corporate tax rate from 35% to 21%, effective January 1, 2018, limitation of the tax deduction for interest expense to 30% of earnings (except for certain small businesses), limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks. The Company has accounted for the income tax effects of the Act in applying FASB ASC 740 to the current reporting period. Because the Company records a valuation allowance for its entire deferred income tax asset, there was no impact to the amounts reported in the Company’s financial statements resulting from the Tax Act.

 

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 considering all the rights and obligations of each instrument. The derivative liabilities are re-measured at fair value at the end of each interim period.

 

Deferred Rent– Certain of the Company’s operating leases provide for minimum annual payments that adjust over the life of the lease.  The aggregate minimum annual payments are expensed on a straight-line basis over the minimum lease term. The Company recognizes a deferred rent liability for rent escalations when the amount of straight-line rent exceeds the lease payments, and reduces the deferred rent liability when the lease payments exceed the straight-line rent expense.  For tenant improvement allowances and rent holidays, the Company records a deferred rent liability and amortizes the deferred rent over the lease term as a reduction to rent expense.

 

Leases – Leases are categorized as either operating or capital leases at inception. Operating lease costs are recognized on a straight-line basis over the term of the lease. An asset and a corresponding liability for the capital lease obligation are established for the cost of capital leases. The capital lease obligation is amortized over the life of the lease. For build-to-suit leases, the Company establishes an asset and liability for the estimated construction costs incurred to the extent that it is involved in the construction of structural improvements or takes construction risk prior to the commencement of the lease. Upon occupancy of facilities under build-to-suit leases, the Company assesses whether these arrangements qualify for sales recognition under the sale-leaseback accounting guidance. If a lease does not meet the criteria to qualify for a sale-leaseback transaction, the established asset and liability remain on the Company's balance sheet.

 

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 an expense over the requisite service or vesting period.

 

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

 

The Company has Incentive Stock Option Plans, Non-Qualified Stock Option Plans, a Stock Compensation Plan, 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 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. Forfeitures are accounted for when they occur. The expected term of options represents the period 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.

 

New Accounting Pronouncements

 

In June 2018, the Financial Accounting Standards Board ("FASB") issued ASU 2018-07, Compensation—Stock Compensation (Topic 718), (“ASU 2018-7”), which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost. Under current GAAP, non-employee share-based payment awards are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever can be more reliably measured. Under ASU 2018-07, non-employee share-based payments would be measured at the grant-date fair value of the equity instruments an entity is obligated to issue when the good has been delivered or the service has been rendered and any other conditions necessary to earn the right to benefit from the instruments have been satisfied. Under current GAAP, the measurement date for equity classified non-employee share-based payment awards is the earlier of the date at which a commitment for performance by the counterparty is reached or the date at which the counterparty’s performance is complete. Under ASU 2018-07, equity-classified nonemployee share-based payment awards are measured at the grant date. The definition of the term grant date is amended to generally state the date at which a grantor and a grantee reach a mutual understanding of the key terms and conditions of a share-based payment award. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. An entity should only remeasure liability-classified awards that have not been settled by the date of adoption and equity classified awards for which a measurement date has not been established through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. Upon transition, the entity is required to measure these non-employee awards at fair value as of the adoption date. The entity must not remeasure awards that are completed. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position and results of operations.

 

In February 2016, the FASB issued ASU 2016-02, Leases, which will require most leases (except 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.  As permitted by the guidance, the Company has an option to retain the original lease classification and historical accounting for initial direct costs for leases existing prior to the adoption date. Furthermore, the Company will not have to reassess contracts entered into prior to the adoption date for the existence of a lease. The Company also has an option not to restate prior periods for the impact of the adoption of the new standard and may instead recognize a cumulative-effect adjustment to beginning retained earnings as of October 1, 2019 for any prior period income statement effects identified. The Company is evaluating the effect that adoption of this new standard will have on the Company’s 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.

 

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B. OPERATIONS AND FINANCING
9 Months Ended
Jun. 30, 2019
B. Operations And Financing  
B. OPERATIONS AND FINANCING

The Company has incurred significant costs since its inception for 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 to continue with its research efforts.  The ability to raise capital may be dependent upon market conditions that are outside the control of the Company. 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 is taking cost-cutting initiatives, as well as exploring other sources of funding, to finance operations over the next 12 months. The Company believes that there is a high likelihood that it will continue to receive funds from warrant exercises similar to the way it has received funds during the past 12 months. However, there can be no assurance that the Company will be able to raise sufficient capital to support its operations.

 

The Company is currently in the final stages of its large multi-national Phase 3 clinical trial for head and neck cancer with its partners TEVA Pharmaceuticals and Orient Europharma. To finance the study beyond the next twelve months, the Company plans to raise additional capital in the form of corporate partnerships, debt issuances 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. However, 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 may have to curtail its operations until it can raise the required funding.

 

The financial statements have been prepared assuming the Company will continue as a going concern, but due to the Company’s 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.

 

Since the Company launched its Phase 3 clinical trial for Multikine, the Company has incurred expenses of approximately $54.7 million as of June 30, 2019 on direct costs for the Phase 3 clinical trial. The Company estimates it will incur additional expenses of approximately $5.6 million for the remainder of the Phase 3 clinical trial. It should be noted that this estimate is based only on the information currently available in the Company’s contracts with the Clinical Research Organizations responsible for managing the Phase 3 clinical trial and does not include other related costs, e.g., the manufacturing of the drug. This number may be affected by the rate of death accumulation in the study, 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 clinical trial will be higher than currently estimated.

 

Nine hundred twenty-eight (928) head and neck cancer patients have been enrolled and have completed treatment in the Phase 3 study. The study end point is a 10% increase in overall survival of patients between the two main comparator groups in favor of the group receiving the Multikine treatment regimen. The determination if the study end point has been met will occur when there are a total of 298 deaths in those two groups.

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C. STOCKHOLDERS EQUITY
9 Months Ended
Jun. 30, 2019
Equity [Abstract]  
C. STOCKHOLDERS' EQUITY

The changes in stockholders’ equity during the nine months ended June 30, 2019 are as follows:

 

                Additional              
    Common     Stock     Paid-In     Accumulated        
     Shares     Amount     Capital     Deficit     Total  
                               
BALANCES AT OCTOBER 1, 2018     28,034,487     $ 280,346     $ 331,312,184     $ (331,591,614 )   $ 916  
Warrant exercises     298,682       2,987       646,766       -       649,753  
401(k) contributions paid in common stock     12,279       123       35,118       -       35,241  
                                         
Stock issued to nonemployees for services     62,784       628       201,752       -       202,380  
Shares returned for settlement of clinical research costs     (564,905 )     (5,649 )     5,649       -       -  
Equity based compensation - employees     -       -       573,660       -       573,660  
Net income     -       -       -       1,245,902       1,245,902  
                                         
BALANCES AT DECEMBER 31, 2018     27,843,327       278,435       332,775,129       (330,345,712 )     2,707,852  
                                         
Warrant exercises     1,523,933       15,239       2,640,395       -       2,655,634  
401(k) contributions paid in common stock     10,419       104       36,779       -       36,883  
Stock issued to nonemployees for services     77,449       774       224,855       -       225,629  
Equity based compensation - employees     (3,500 )     (35 )     530,865       -       530,830  
Shares issued for settlement of clinical research costs     500,000       5,000       1,285,000       -       1,290,000  
Stock issuance costs     -       -       (43,625 )     -       (43,625 )
Net loss     -       -       -       (6,447,681 )     (6,447,681 )
                                         
BALANCES AT MARCH 31, 2019     29,951,628       299,517       337,449,398       (336,793,393 )     955,522  
                                         
Warrant exercises     4,014,109       40,141       10,212,680       -       10,252,821  
401(k) contributions paid in common stock     4,339       43       36,318       -       36,361  
Stock issued to nonemployees for services     20,825       208       140,062       -       140,270  
Equity based compensation - employees     (4,000 )     (40 )     1,521,861       -       1,521,821  
Option exercises     42,770       428       96,862       -       97,290  
Purchase of stock by officers and directors     37,243       372       234,625       -       234,997  
Stock issuance costs     -       -       (8,010 )     -       (8,010 )
Net loss     -       -       -       (12,084,768 )     (12,084,768 )
BALANCES AT JUNE 30, 2019     34,066,914     $ 340,669     $ 349,683,796     $ (348,878,161 )   $ 1,146,304  

 

The changes in stockholders’ deficit during the nine months ended June 30, 2018 are as follows:

 

                Additional              
     Common     Stock     Paid-In     Accumulated        
     Shares     Amount     Capital     Deficit     Total  
                               
BALANCES AT OCTOBER 1, 2017     11,903,133     $ 119,031     $ 296,298,401     $ (299,754,409 )   $ (3,336,977 )
                                         
Sale of common stock     1,289,478       12,895       2,437,105       -       2,450,000  
401(k) contributions paid in common stock     18,984       190       35,690       -       35,880  
Stock issued to nonemployees for services     13,705       137       25,270       -       25,407  
Equity based compensation - employees     -       -       1,448,098       -       1,448,098  
Warrants issued with notes payable     -       -       656,382       -       656,382  
Conversion of notes payable to common stock     32,751       328       74,672       -       75,000  
Net loss     -       -       -       (6,187,830 )     (6,187,830 )
BALANCES AT DECEMBER 31, 2017     13,258,051       132,581       300,975,618       (305,942,239 )     (4,834,040 )
                                         
Sale of common stock     2,501,145       25,011       4,652,130       -       4,677,141  
401(k) contributions paid in common stock     25,901       259       36,261       -       36,520  
Stock issued to nonemployees for services     124,082       1,241       227,254       -       228,495  
Equity based compensation - employees     -       -       279,817       -       279,817  
Conversion of notes payable to common stock     55,373       554       108,746       -       109,300  
Shares issued for settlement of clinical research costs     660,000       6,600       1,240,800       -       1,247,400  
Stock issuance cost     -       -       (94,773 )     -       (94,773 )
Net loss     -       -       -       (4,708,135 )     (4,708,135 )
BALANCES AT MARCH 31, 2018     16,624,552       166,246       307,425,853       (310,650,374 )     (3,058,275 )
                                         
Warrant exercises     1,117,644       11,177       2,906,619       -       2,917,796  
401(k) contributions paid in common stock     39,862       399       36,274       -       36,673  
Stock issued to nonemployees for services     81,604       816       208,387       -       209,203  
Equity based compensation - employees     -       -       465,487       -       465,487  
Conversion of notes payable and interest to common stock     1,106,806       11,068       2,179,648       -       2,190,716  
Shares issued for settlement of clinical research costs     600,000       6,000       1,704,000       -       1,710,000  
Warrants issued with notes payable     -       -       291,234       -       291,234  
Net loss     -       -       -       (6,014,568 )     (6,014,568 )
BALANCES AT JUNE 30, 2018     19,570,468     $ 195,706     $ 315,217,502     $ (316,664,942 )   $ (1,251,734 )

 

Underlying share information for equity compensation plans as of June 30, 2019 is 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     138,400       99,962       N/A       385  
Non-Qualified Stock Option Plans     6,387,200       6,193,237       N/A       115,156  
Stock Bonus Plans     783,760       N/A       327,267       456,460  
Stock Compensation Plan     634,000       N/A       122,221       493,369  
Incentive Stock Bonus Plan     640,000       N/A       616,500       23,500  

 

Underlying share information for equity compensation plans as of September 30, 2018 is 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     138,400       123,558       N/A       385  
Non-Qualified Stock Option Plans     3,387,200       3,036,569       N/A       309,526  
Stock Bonus Plans     783,760       N/A       297,230       486,497  
Stock Compensation Plan     134,000       N/A       118,590       15,410  
Incentive Stock Bonus Plan     640,000       N/A       624,000       16,000  

 

Stock option activity:

    Nine Months Ended June 30,  
     2019      2018  
Granted     3,268,862       1,858,108  
Exercised     42,770       -  
Expired     29,322       26,395  
Forfeited     63,698       1,393  

 

    Three Months Ended June 30,  
    2019     2018  
Granted     3,268,362       1,847,808  
Exercised     42,770       -  
Expired     26,922       2,016  
Forfeited     39,505       -  

 

During the quarter ended June 30, 2019, the Company adopted the 2019 Stock Compensation Plan, which authorized the issuance of up to 500,000 shares of common stock to officers, directors, employees and consultants.

 

Employee stock based 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. Stock based compensation expense is included in general and administrative expenses on the statements of operations.

 

Non-employee stock based compensation expense includes the value of shares and options issued under consulting arrangements. At June 30, 2019 and September 30, 2018, approximately $88,000 and $207,000, respectively, are included in prepaid expenses.

 

Warrants and Non-Employee Options

 

The following chart represents the warrants and non-employee options outstanding at June 30, 2019:

 

Warrant   Issue Date  

Shares Issuable upon Exercise

of Warrants

    Exercise Price  

Expiration Date

Series N   8/18/2008     85,339     $ 3.00   2/18/2020
Series V   5/28/2015     810,127     $ 19.75   5/28/2020
Series UU   6/11/2018     163,544     $ 2.80   6/11/2020
Series W   10/28/2015     688,930     $ 16.75   10/28/2020
Series X   1/13/2016     120,000     $ 9.25   1/13/2021
Series Y   2/15/2016     26,000     $ 12.00   2/15/2021
Series ZZ   5/23/2016     20,000     $ 13.75   5/18/2021
Series BB   8/26/2016     16,000     $ 13.75   8/22/2021
Series Z   5/23/2016     264,000     $ 13.75   11/23/2021
Series FF   12/8/2016     68,048     $ 3.91   12/1/2021
Series CC   12/8/2016     611,463     $ 5.00   12/8/2021
Series HH   2/23/2017     6,500     $ 3.13   2/16/2022
Series AA   8/26/2016     200,000     $ 13.75   2/22/2022
Series JJ   3/14/2017     9,450     $ 3.13   3/8/2022
Series LL   4/30/2017     26,398     $ 3.59   4/30/2022
Series MM   6/22/2017     893,491     $ 1.86   6/22/2022
Series NN   7/24/2017     473,798     $ 2.52   7/24/2022
Series OO   7/31/2017     60,000     $ 2.52   7/31/2022
Series II   3/14/2017     95,000     $ 3.00   9/14/2022
Series RR   10/30/2017     495,326     $ 1.65   10/30/2022
Series SS   12/19/2017     514,476     $ 2.09   12/18/2022
Series TT   2/5/2018     760,758     $ 2.24   2/5/2023
Series PP   8/28/2017     112,500     $ 2.30   2/28/2023
Series WW   7/2/2018     1,950     $ 1.63   6/28/2023
Series VV   7/2/2018     90,000     $ 1.75   1/2/2024
Consultants   7/28/17     10,000     $ 2.18   7/27/2027

 

The table below presents the fair value of the warrant liabilities at the balance sheet dates:

 

   

June 30,

2019

   

September 30,

2018

 
Series S warrants   $ -     $ 33  
Series V warrants     1,249,835       770,436  
Series W warrants     2,131,237       999,081  
Series Z warrants     1,172,626       487,767  
Series ZZ warrants     72,185       34,215  
Series AA warrants     963,990       380,474  
Series BB warrants     64,256       28,456  
Series CC warrants     3,699,989       1,779,724  
Series DD warrants     -       1,249,287  
Series EE warrants     -       1,249,287  
Series FF warrants     433,091       188,921  
Series GG warrants     -       607,228  
Series HH warrants     44,050       58,816  
Series II warrants     660,020       660,135  
Series JJ warrants     64,252       88,642  
Series KK warrants     -       656,930  
Series LL warrants     177,299       77,632  
Total warrant liabilities   $ 10,732,830     $ 9,317,064  

 

The table below presents the gains/(losses) on the warrant liabilities for the nine months ended June 30:

 

    2019      2018   
Series S warrants   $ 33     $ (756,261 )
Series V warrants     (479,399 )     22,842  
Series W warrants     (1,132,156 )     18,478  
Series Z warrants     (684,859 )     34,682  
Series ZZ warrants     (37,970 )     2,103  
Series AA warrants     (583,516 )     28,337  
Series BB warrants     (35,800 )     1,988  
Series CC warrants     (2,007,287 )     181,244  
Series DD warrants     1,249,287       5,492  
Series EE warrants     1,249,287       5,492  
Series FF warrants     (244,170 )     23,119  
Series GG warrants     195,228       170,131  
Series HH warrants     (22,859 )     7,962  
Series II warrants     (593,960 )     250,578  
Series JJ warrants     (32,954 )     11,970  
Series KK warrants     (55,622 )     169,808  
Series LL warrants     (99,667 )     10,002  
Net (loss) gain on warrant liabilities   $ (3,316,384 )   $ 187,967  

 

The table below presents the gains/(losses) on the warrant liabilities for the three months ended June 30:

 

     2019      2018  
Series S warrants   $ -     $ (768,188 )
Series V warrants     (974,251 )     26,389  
Series W warrants     (1,748,184 )     42,609  
Series Z warrants     (799,690 )     26,587  
Series ZZ warrants     (50,608 )     1,914  
Series AA warrants     (676,784 )     19,661  
Series BB warrants     (43,536 )     1,695  
Series CC warrants     (2,346,985 )     139,325  
Series DD warrants     -       36  
Series EE warrants     -       36  
Series FF warrants     (278,773 )     15,818  
Series GG warrants     88,478       132,712  
Series HH warrants     (33,501 )     5,279  
Series II warrants     (709,303 )     199,970  
Series JJ warrants     (48,880 )     7,960  
Series KK warrants     (169,089 )     132,884  
Series LL warrants     (114,413 )     6,695  
Net loss on warrant liabilities   $ (7,905,519 )   $ (8,618 )

 

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.

 

Expiration of Derivative Liabilities

 

On December 10, 2018, 1,360,960 Series DD and 1,360,960 Series EE warrants, with an exercise price of $4.50, expired. The expiration dates of these warrants had been previously extended and such modifications were reflected in the fair value measurements of the warrants on the dates of modification.

 

On October 11, 2018, 327,729 Series S warrants, with an exercise price of $31.25, expired. The exercise price of these warrants had been previously repriced under temporarily revised terms. During the quarter ended June 30, 2018 and under the revised terms, 709,391 previously outstanding warrants were exercised for total proceeds of approximately $1.2 million,

 

2. Securities Purchase Agreements

 

The Company has entered into several Securities Purchase Agreements (SPAs) with Ergomed plc, one of its Clinical Research Organizations responsible for managing the Phase 3 clinical trial, to facilitate a partial payment of amounts due Ergomed. Under the Agreements, the Company issued Ergomed shares of common stock as a forbearance fee in exchange for Ergomed’s agreement to provisionally forbear collection of the payables in an amount equal to the net proceeds from the sales of the shares issued to Ergomed. Upon issuance, the Company expenses the full value of the shares as Other Non-Operating Gain/Loss and subsequently offsets the expense as amounts are realized through the sale by Ergomed and reduces accounts payable to Ergomed. Any amounts received from the sale of the shares in excess of the payables will be applied towards the satisfaction of any future amounts owed.

 

On December 31, 2018, the prior SPA expired. Pursuant to that arrangement, Ergomed returned 564,905 unsold shares for cancellation. The par value of those shares was reclassed from Common Stock to Additional Paid-In Capital on the balance sheet.

 

On January 9, 2019, the Company entered into a new SPA under which it issued Ergomed 500,000 restricted shares of the Company’s common stock valued at approximately $1.3 million. This current SPA expires on December 31, 2019.

 

During the nine months ended June 30, 2019 and 2018, respectively, the Company decreased Accounts Payable by approximately $3.2 million and $2.8 million through the sale of 808,769 and 1,538,129 shares, respectively, by Ergomed.

 

The following table summarizes the Other Non-Operating Gains (Loss) for the nine and three months ended June 30, 2019 and 2018 relating to these agreements:

 

    Nine Months Ended     Three Months Ended  
    6/30/2019     6/30/2018     6/30/2019     6/30/2018  
Amount realized through the sale of shares   $ 3,167,197     $ 2,785,932     $ 1,455,844     $ 1,560,641  
Fair value of shares upon issuance     1,290,000       2,957,400       -       1,710,000  
Other non-operating gain (loss)   $ 1,877,197     $ (171,468 )   $ 1,455,844     $ ( 149,359 )

 

As of June 30, 2019, Ergomed holds 45,226 shares and may sell the shares or return the shares to the Company for cancellation until December 31, 2019.

 

3. Incentive Stock Bonus Plan

 

During the nine and three months ended June 30, 2019, respectively, 7,500 and 4,000 shares of common stock issued from the 2014 Incentive Stock Bonus Plan were forfeited.

 

XML 18 R9.htm IDEA: XBRL DOCUMENT v3.19.2
D. FAIR VALUE MEASUREMENTS
9 Months Ended
Jun. 30, 2019
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, 2019:

 

   

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   $ -     $ -     $ 10,732,830     $ 10,732,830  

 

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, 2018:

 

   

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   $ 33     $ -     $ 9,317,031     $ 9,317,064  

  

The following sets forth the reconciliation of beginning and ending balances related to fair value measurements using significant unobservable inputs (Level 3) for the three months ended June 30, 2019 and the year ended September 30, 2018:

 

   Nine Months Ended  Year Ended
   June 30, 2019  September 30, 2018
       
Beginning balance  $9,317,031   $2,020,629 
Issuances   —      —   
Exercises   (1,900,618)   (595,780)
Realized and unrealized (gains) and losses   3,316,417    7,892,182 
Ending balance  $10,732,830   $9,317,031 

 

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.

XML 19 R10.htm IDEA: XBRL DOCUMENT v3.19.2
E. RELATED PARTY TRANSACTIONS
9 Months Ended
Jun. 30, 2019
Related Party Transactions [Abstract]  
E. RELATED PARTY TRANSACTIONS

During the quarter ended June 30, 2019, the Company received security purchase agreements from five officers and directors of the Company for the purchase of 30,612 restricted shares of the Company’s common stock. The shares were sold at the aggregate fair market value on the closing date of approximately $210,000. Also during the current quarter, the Company’s CEO purchased 6,631 shares of restricted common stock for $25,000.

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F. COMMITMENTS AND CONTINGENCIES
9 Months Ended
Jun. 30, 2019
Commitments and Contingencies Disclosure [Abstract]  
F. COMMITMENTS AND CONTINGENCIES

Clinical Research Agreements 

 

Under co-development and revenue sharing agreements with Ergomed, Ergomed agreed to contribute up to $12 million towards the Company’s Phase 3 Clinical Trial in the form of discounted clinical services in exchange for a single digit percentage of milestone and royalty payments, up to a specific maximum amount. The Company accounted for the co-development and revenue sharing agreements 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 inception of the agreement with Ergomed, the Company has incurred research and development expenses of approximately $30.3 million for Ergomed’s services. This amount is net of Ergomed’s discount of approximately $10.2 million. During the nine months ended June 30, 2019 and 2018, the Company recorded, net of Ergomed’s discount, approximately $2.2 million and $2.4 million, respectively, as research and development expense related to Ergomed’s services. During the three months ended June 30, 2019 and 2018, the Company recorded, net of Ergomed’s discount, approximately $0.7 million and $0.8 million, respectively, as research and development expense related to Ergomed’s services.

 

Lease Agreements

 

The Company leases a manufacturing facility near Baltimore, Maryland (the San Tomas lease). 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 estate 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 contributed approximately $9.3 million towards the tenant-directed improvements, of which $3.2 million is being refunded during years nine through twenty through reduced rental payments. The landlord paid approximately $11.9 million towards the purchase of the building, land and the tenant-directed improvements. The Company placed the building in service in October 2008.

 

The Company was deemed to be the owner of the building for accounting purpose under the build-to-suit guidance in ASC 840-40-55. In addition to tenant improvements the Company incurred, the Company also recorded an asset for tenant-directed improvements and for the costs paid by the lessor to purchase the building and to perform improvements, as well as a corresponding liability for the landlord costs. Upon completion of the improvements, the Company did not meet the “sale-leaseback” criteria under ASC 840-40-25, Accounting for Lease, Sale-Leaseback Transactions, and therefore, treated the lease as a financing obligation. Thus, the asset and corresponding liability were not de-recognized. As of June 30, 2019 and September 30, 2018, the leased building asset has a net book value of approximately $15.7 and $16.1 million, respectively, and the landlord liability has a balance of approximately $13.5 million and $13.4 million, respectively. The leased building is being depreciated using a straight-line method over the 20-year lease term to a residual value. The landlord liability is being amortized over the 20 years using the effective interest method. Lease payments allocated to the landlord liability are accounted for as debt service payments on that liability using the finance method of accounting per ASC 840-40-55.

 

The Company was required to deposit the equivalent of one year of base rent in accordance with the lease. When the Company meets the minimum cash balance required by the lease, the deposit will be returned to the Company. The approximate $1.7 million deposit is included in non-current assets at June 30, 2019 and September 30, 2018.

 

Approximate future minimum lease payments under the San Tomas lease as of June 30, 2019 are as follows:

 

Three months ending September 30, 2019      $ 453,000  
Year ending September 30,        
 2020     1,872,000  
 2021     1,937,000  
 2022     2,004,000  
 2023     2,073,000  
 2024     2,145,000  
 Thereafter     9,540,000  
Total future minimum lease obligation     20,024,000  
Less imputed interest on financing obligation     (6,548,000 )
Net present value of lease financing obligation   $ 13,476,000  

 

The Company subleases a portion of its rental space on a month-to-month term lease, which requires a 30-day notice for termination. The sublease rental income for the nine months ended June 30, 2019 and 2018 was approximately $55,000 and $53,000, respectively. The sublease rental income for each of the three months ended June 30, 2019 and 2018 was approximately $18,000.

 

The Company leases its research and development laboratory under a 60-month lease which expires February 28, 2022. 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 $13,000 per month. As of June 30, 2019 and September 30, 2018, the Company has recorded a deferred rent liability of approximately $14,000 and $12,000, respectively.

 

The Company leases its 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 approximately $8,000 per month. As of June 30, 2019 and September 30, 2018, the Company has recorded a deferred rent liability of approximately $9,000 and $14,000, respectively.

 

As of June 30, 2019, material contractual obligations, excluding the San Tomas lease, consisting of non-cancelable operating lease payments are as follows:

 

Three months ending September 30, 2019  $66,000
Year ending September 30,  
2020   238,000
2021   163,000
2022       69,000
Total  $536,000

 

The Company leases office equipment under a capital lease arrangement. The term of the capital lease is 60 months and expires on October 31, 2021. The monthly lease payment is $505. The lease bears interest at an annual interest rate of 6.25%.

 

XML 21 R12.htm IDEA: XBRL DOCUMENT v3.19.2
G. PATENTS
9 Months Ended
Jun. 30, 2019
Intangible Assets, Net (Excluding Goodwill) [Abstract]  
G. PATENTS

During the nine months ended June 30, 2019 and 2018, no patent impairment charges were recorded. For the nine and three months ended June 30, 2019, amortization of patent costs totaled approximately $72,000 and $49,000, respectively. For the nine and three months ended June 30, 2018, amortization of patent costs totaled approximately $53,000 and $34,000, respectively. Approximate estimated future amortization expense is as follows:

 

Three months ending September 30, 2019   $ 11,000  
Year ending September 30,        
2020     43,000  
2021     40,000  
2022     36,000  
2023     26,000  
2024     21,000  
Thereafter     95,000  
Total   $ 272,000  

 

XML 22 R13.htm IDEA: XBRL DOCUMENT v3.19.2
H. LOSS PER COMMON SHARE
9 Months Ended
Jun. 30, 2019
Net loss per common share  
H. LOSS PER COMMON SHARE

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:

 

    2019     2018  
             
Options and Warrants     7,742,857       12,567,982  
Unvested Restricted Stock     552,000       312,000  
Total     8,294,857       12,879,982  

 

XML 23 R14.htm IDEA: XBRL DOCUMENT v3.19.2
I. SUBSEQUENT EVENTS
9 Months Ended
Jun. 30, 2019
Subsequent Events [Abstract]  
I. SUBSEQUENT EVENTS

Between July 1, 2019 and August 13, 2019, the Company received approximately $2.6 million through the exercise of options and warrants to purchase shares of the Company’s common stock.

 

XML 24 R15.htm IDEA: XBRL DOCUMENT v3.19.2
A. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (POLICIES)
9 Months Ended
Jun. 30, 2019
Accounting Policies [Abstract]  
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, 2018.

 

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, 2019 and the results of its operations for the nine and three months then ended. The condensed balance sheet as of September 30, 2018 is derived from the September 30, 2018 audited financial statements. Significant accounting policies have been consistently applied in the interim financial statements. The results of operations for the nine and three months ended June 30, 2019 are not necessarily indicative of the results to be expected for the entire year.

 

The financial statements have been prepared assuming that the Company will continue as a going concern, but due to recurring losses from operations, which are expected for the foreseeable future, 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. Refer to discussion in Note B.

 

Research and Office Equipment and Leasehold Improvements

Research and Office Equipment and Leasehold Improvements – The leased manufacturing facility is recorded at total project costs incurred and is depreciated over the 20-year useful life of the building. Research and office equipment is recorded at cost and depreciated using the straight-line method over estimated useful lives of five to seven years. Leasehold improvements are depreciated over the shorter of the estimated useful life of the asset or the term of the lease. Repairs and maintenance which do not extend the life of the asset are expensed when incurred. The fixed assets are reviewed on a quarterly basis to determine if any of the assets are impaired.

 

Patents

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

 

Research and Development Costs

Research and Development Costs - Research and development costs are expensed as incurred. Management accrues Clinical Research Organization (“CRO”) expenses and clinical trial study expenses based on services performed and relies on the CROs to provide estimates of those costs applicable to the completion stage of a study. Estimated accrued CRO costs are subject to revisions as such studies progress to completion. The Company charges revisions to estimated expense in the period in which the facts that give rise to the revision become known.

 

Income Taxes

Income Taxes - The Company uses the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating and tax loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company records a valuation allowance to reduce the deferred tax assets to the amount that is more likely than not to be recognized.  A full valuation allowance was recorded against the deferred tax assets as of June 30, 2019 and September 30, 2018.

 

On December 22, 2017, the “Tax Cuts and Jobs Act” (the “Tax Act"), was signed into law by the President of the United States (U.S.). The Tax Act includes significant changes to corporate taxation, including reduction of the U.S. corporate tax rate from 35% to 21%, effective January 1, 2018, limitation of the tax deduction for interest expense to 30% of earnings (except for certain small businesses), limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks. The Company has accounted for the income tax effects of the Act in applying FASB ASC 740 to the current reporting period. Because the Company records a valuation allowance for its entire deferred income tax asset, there was no impact to the amounts reported in the Company’s financial statements resulting from the Tax Act.

 

Derivative Instruments

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 considering all the rights and obligations of each instrument. The derivative liabilities are re-measured at fair value at the end of each interim period.

 

Deferred Rent

Deferred Rent– Certain of the Company’s operating leases provide for minimum annual payments that adjust over the life of the lease.  The aggregate minimum annual payments are expensed on a straight-line basis over the minimum lease term. The Company recognizes a deferred rent liability for rent escalations when the amount of straight-line rent exceeds the lease payments, and reduces the deferred rent liability when the lease payments exceed the straight-line rent expense.  For tenant improvement allowances and rent holidays, the Company records a deferred rent liability and amortizes the deferred rent over the lease term as a reduction to rent expense.

 

Leases

Leases – Leases are categorized as either operating or capital leases at inception. Operating lease costs are recognized on a straight-line basis over the term of the lease. An asset and a corresponding liability for the capital lease obligation are established for the cost of capital leases. The capital lease obligation is amortized over the life of the lease. For build-to-suit leases, the Company establishes an asset and liability for the estimated construction costs incurred to the extent that it is involved in the construction of structural improvements or takes construction risk prior to the commencement of the lease. Upon occupancy of facilities under build-to-suit leases, the Company assesses whether these arrangements qualify for sales recognition under the sale-leaseback accounting guidance. If a lease does not meet the criteria to qualify for a sale-leaseback transaction, the established asset and liability remain on the Company's balance sheet.

 

Stock-Based Compensation

Stock-Based Compensation – Compensation cost for all stock-based awards is measured at fair value as of the grant date in accordance with the provisions of ASC 718 “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 an expense over the requisite service or vesting period.

 

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

 

The Company has Incentive Stock Option Plans, Non-Qualified Stock Option Plans, a Stock Compensation Plan, 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 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. Forfeitures are accounted for when they occur. The expected term of options represents the period 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.

 

New Accounting Pronouncements

In June 2018, the Financial Accounting Standards Board ("FASB") issued ASU 2018-07, Compensation—Stock Compensation (Topic 718), (“ASU 2018-7”), which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost. Under current GAAP, non-employee share-based payment awards are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever can be more reliably measured. Under ASU 2018-07, non-employee share-based payments would be measured at the grant-date fair value of the equity instruments an entity is obligated to issue when the good has been delivered or the service has been rendered and any other conditions necessary to earn the right to benefit from the instruments have been satisfied. Under current GAAP, the measurement date for equity classified non-employee share-based payment awards is the earlier of the date at which a commitment for performance by the counterparty is reached or the date at which the counterparty’s performance is complete. Under ASU 2018-07, equity-classified nonemployee share-based payment awards are measured at the grant date. The definition of the term grant date is amended to generally state the date at which a grantor and a grantee reach a mutual understanding of the key terms and conditions of a share-based payment award. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. An entity should only remeasure liability-classified awards that have not been settled by the date of adoption and equity classified awards for which a measurement date has not been established through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. Upon transition, the entity is required to measure these non-employee awards at fair value as of the adoption date. The entity must not remeasure awards that are completed. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position and results of operations.

 

In February 2016, the FASB issued ASU 2016-02, Leases, which will require most leases (except 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.  As permitted by the guidance, the Company has an option to retain the original lease classification and historical accounting for initial direct costs for leases existing prior to the adoption date. Furthermore, the Company will not have to reassess contracts entered into prior to the adoption date for the existence of a lease. The Company also has an option not to restate prior periods for the impact of the adoption of the new standard and may instead recognize a cumulative-effect adjustment to beginning retained earnings as of October 1, 2019 for any prior period income statement effects identified. The Company is evaluating the effect that adoption of this new standard will have on the Company’s 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.

 

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C. STOCKHOLDERS EQUITY (Tables)
9 Months Ended
Jun. 30, 2019
Equity [Abstract]  
Changes in stockholders' equity

The changes in stockholders’ equity during the nine months ended June 30, 2019 are as follows:

 

                Additional              
    Common     Stock     Paid-In     Accumulated        
     Shares     Amount     Capital     Deficit     Total  
                               
BALANCES AT OCTOBER 1, 2018     28,034,487     $ 280,346     $ 331,312,184     $ (331,591,614 )   $ 916  
Warrant exercises     298,682       2,987       646,766       -       649,753  
401(k) contributions paid in common stock     12,279       123       35,118       -       35,241  
                                         
Stock issued to nonemployees for services     62,784       628       201,752       -       202,380  
Shares returned for settlement of clinical research costs     (564,905 )     (5,649 )     5,649       -       -  
Equity based compensation - employees     -       -       573,660       -       573,660  
Net income     -       -       -       1,245,902       1,245,902  
                                         
BALANCES AT DECEMBER 31, 2018     27,843,327       278,435       332,775,129       (330,345,712 )     2,707,852  
                                         
Warrant exercises     1,523,933       15,239       2,640,395       -       2,655,634  
401(k) contributions paid in common stock     10,419       104       36,779       -       36,883  
Stock issued to nonemployees for services     77,449       774       224,855       -       225,629  
Equity based compensation - employees     (3,500 )     (35 )     530,865       -       530,830  
Shares issued for settlement of clinical research costs     500,000       5,000       1,285,000       -       1,290,000  
Stock issuance costs     -       -       (43,625 )     -       (43,625 )
Net loss     -       -       -       (6,447,681 )     (6,447,681 )
                                         
BALANCES AT MARCH 31, 2019     29,951,628       299,517       337,449,398       (336,793,393 )     955,522  
                                         
Warrant exercises     4,014,109       40,141       10,212,680       -       10,252,821  
401(k) contributions paid in common stock     4,339       43       36,318       -       36,361  
Stock issued to nonemployees for services     20,825       208       140,062       -       140,270  
Equity based compensation - employees     (4,000 )     (40 )     1,521,861       -       1,521,821  
Option exercises     42,770       428       96,862       -       97,290  
Purchase of stock by officers and directors     37,243       372       234,625       -       234,997  
Stock issuance costs     -       -       (8,010 )     -       (8,010 )
Net loss     -       -       -       (12,084,768 )     (12,084,768 )
BALANCES AT JUNE 30, 2019     34,066,914     $ 340,669     $ 349,683,796     $ (348,878,161 )   $ 1,146,304  

 

The changes in stockholders’ deficit during the nine months ended June 30, 2018 are as follows:

 

                Additional              
     Common     Stock     Paid-In     Accumulated        
     Shares     Amount     Capital     Deficit     Total  
                               
BALANCES AT OCTOBER 1, 2017     11,903,133     $ 119,031     $ 296,298,401     $ (299,754,409 )   $ (3,336,977 )
                                         
Sale of common stock     1,289,478       12,895       2,437,105       -       2,450,000  
401(k) contributions paid in common stock     18,984       190       35,690       -       35,880  
Stock issued to nonemployees for services     13,705       137       25,270       -       25,407  
Equity based compensation - employees     -       -       1,448,098       -       1,448,098  
Warrants issued with notes payable     -       -       656,382       -       656,382  
Conversion of notes payable to common stock     32,751       328       74,672       -       75,000  
Net loss     -       -       -       (6,187,830 )     (6,187,830 )
BALANCES AT DECEMBER 31, 2017     13,258,051       132,581       300,975,618       (305,942,239 )     (4,834,040 )
                                         
Sale of common stock     2,501,145       25,011       4,652,130       -       4,677,141  
401(k) contributions paid in common stock     25,901       259       36,261       -       36,520  
Stock issued to nonemployees for services     124,082       1,241       227,254       -       228,495  
Equity based compensation - employees     -       -       279,817       -       279,817  
Conversion of notes payable to common stock     55,373       554       108,746       -       109,300  
Shares issued for settlement of clinical research costs     660,000       6,600       1,240,800       -       1,247,400  
Stock issuance cost     -       -       (94,773 )     -       (94,773 )
Net loss     -       -       -       (4,708,135 )     (4,708,135 )
BALANCES AT MARCH 31, 2018     16,624,552       166,246       307,425,853       (310,650,374 )     (3,058,275 )
                                         
Warrant exercises     1,117,644       11,177       2,906,619       -       2,917,796  
401(k) contributions paid in common stock     39,862       399       36,274       -       36,673  
Stock issued to nonemployees for services     81,604       816       208,387       -       209,203  
Equity based compensation - employees     -       -       465,487       -       465,487  
Conversion of notes payable and interest to common stock     1,106,806       11,068       2,179,648       -       2,190,716  
Shares issued for settlement of clinical research costs     600,000       6,000       1,704,000       -       1,710,000  
Warrants issued with notes payable     -       -       291,234       -       291,234  
Net loss     -       -       -       (6,014,568 )     (6,014,568 )
BALANCES AT JUNE 30, 2018     19,570,468     $ 195,706     $ 315,217,502     $ (316,664,942 )   $ (1,251,734 )

 

Stock options, stock bonuses and compensation granted by the Company

Underlying share information for equity compensation plans as of June 30, 2019 is 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     138,400       99,962       N/A       385  
Non-Qualified Stock Option Plans     6,387,200       6,193,237       N/A       115,156  
Stock Bonus Plans     783,760       N/A       327,267       456,460  
Stock Compensation Plan     634,000       N/A       122,221       493,369  
Incentive Stock Bonus Plan     640,000       N/A       616,500       23,500  

 

Underlying share information for equity compensation plans as of September 30, 2018 is 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     138,400       123,558       N/A       385  
Non-Qualified Stock Option Plans     3,387,200       3,036,569       N/A       309,526  
Stock Bonus Plans     783,760       N/A       297,230       486,497  
Stock Compensation Plan     134,000       N/A       118,590       15,410  
Incentive Stock Bonus Plan     640,000       N/A       624,000       16,000  

 

Stock option activity
    Nine Months Ended June 30,  
     2019      2018  
Granted     3,268,862       1,858,108  
Exercised     42,770       -  
Expired     29,322       26,395  
Forfeited     63,698       1,393  

 

    Three Months Ended June 30,  
    2019     2018  
Granted     3,268,362       1,847,808  
Exercised     42,770       -  
Expired     26,922       2,016  
Forfeited     39,505       -  

 

Derivative liabilities, warrants and other options
Warrant   Issue Date  

Shares Issuable upon Exercise

of Warrants

    Exercise Price  

Expiration Date

Series N   8/18/2008     85,339     $ 3.00   2/18/2020
Series V   5/28/2015     810,127     $ 19.75   5/28/2020
Series UU   6/11/2018     163,544     $ 2.80   6/11/2020
Series W   10/28/2015     688,930     $ 16.75   10/28/2020
Series X   1/13/2016     120,000     $ 9.25   1/13/2021
Series Y   2/15/2016     26,000     $ 12.00   2/15/2021
Series ZZ   5/23/2016     20,000     $ 13.75   5/18/2021
Series BB   8/26/2016     16,000     $ 13.75   8/22/2021
Series Z   5/23/2016     264,000     $ 13.75   11/23/2021
Series FF   12/8/2016     68,048     $ 3.91   12/1/2021
Series CC   12/8/2016     611,463     $ 5.00   12/8/2021
Series HH   2/23/2017     6,500     $ 3.13   2/16/2022
Series AA   8/26/2016     200,000     $ 13.75   2/22/2022
Series JJ   3/14/2017     9,450     $ 3.13   3/8/2022
Series LL   4/30/2017     26,398     $ 3.59   4/30/2022
Series MM   6/22/2017     893,491     $ 1.86   6/22/2022
Series NN   7/24/2017     473,798     $ 2.52   7/24/2022
Series OO   7/31/2017     60,000     $ 2.52   7/31/2022
Series II   3/14/2017     95,000     $ 3.00   9/14/2022
Series RR   10/30/2017     495,326     $ 1.65   10/30/2022
Series SS   12/19/2017     514,476     $ 2.09   12/18/2022
Series TT   2/5/2018     760,758     $ 2.24   2/5/2023
Series PP   8/28/2017     112,500     $ 2.30   2/28/2023
Series WW   7/2/2018     1,950     $ 1.63   6/28/2023
Series VV   7/2/2018     90,000     $ 1.75   1/2/2024
Consultants   7/28/17     10,000     $ 2.18   7/27/2027
Tabular disclosure of derivative liabilities at fair value
   

June 30,

2019

   

September 30,

2018

 
Series S warrants   $ -     $ 33  
Series V warrants     1,249,835       770,436  
Series W warrants     2,131,237       999,081  
Series Z warrants     1,172,626       487,767  
Series ZZ warrants     72,185       34,215  
Series AA warrants     963,990       380,474  
Series BB warrants     64,256       28,456  
Series CC warrants     3,699,989       1,779,724  
Series DD warrants     -       1,249,287  
Series EE warrants     -       1,249,287  
Series FF warrants     433,091       188,921  
Series GG warrants     -       607,228  
Series HH warrants     44,050       58,816  
Series II warrants     660,020       660,135  
Series JJ warrants     64,252       88,642  
Series KK warrants     -       656,930  
Series LL warrants     177,299       77,632  
Total warrant liabilities   $ 10,732,830     $ 9,317,064  
Schedule of gains and (losses) on derivative liabilities

The table below presents the gains/(losses) on the warrant liabilities for the nine months ended June 30:

 

    2019      2018   
Series S warrants   $ 33     $ (756,261 )
Series V warrants     (479,399 )     22,842  
Series W warrants     (1,132,156 )     18,478  
Series Z warrants     (684,859 )     34,682  
Series ZZ warrants     (37,970 )     2,103  
Series AA warrants     (583,516 )     28,337  
Series BB warrants     (35,800 )     1,988  
Series CC warrants     (2,007,287 )     181,244  
Series DD warrants     1,249,287       5,492  
Series EE warrants     1,249,287       5,492  
Series FF warrants     (244,170 )     23,119  
Series GG warrants     195,228       170,131  
Series HH warrants     (22,859 )     7,962  
Series II warrants     (593,960 )     250,578  
Series JJ warrants     (32,954 )     11,970  
Series KK warrants     (55,622 )     169,808  
Series LL warrants     (99,667 )     10,002  
Net (loss) gain on warrant liabilities   $ (3,316,384 )   $ 187,967  

 

The table below presents the gains/(losses) on the warrant liabilities for the three months ended June 30:

 

     2019      2018  
Series S warrants   $ -     $ (768,188 )
Series V warrants     (974,251 )     26,389  
Series W warrants     (1,748,184 )     42,609  
Series Z warrants     (799,690 )     26,587  
Series ZZ warrants     (50,608 )     1,914  
Series AA warrants     (676,784 )     19,661  
Series BB warrants     (43,536 )     1,695  
Series CC warrants     (2,346,985 )     139,325  
Series DD warrants     -       36  
Series EE warrants     -       36  
Series FF warrants     (278,773 )     15,818  
Series GG warrants     88,478       132,712  
Series HH warrants     (33,501 )     5,279  
Series II warrants     (709,303 )     199,970  
Series JJ warrants     (48,880 )     7,960  
Series KK warrants     (169,089 )     132,884  
Series LL warrants     (114,413 )     6,695  
Net loss on warrant liabilities   $ (7,905,519 )   $ (8,618 )

 

Other non-operating gain (loss)
    Nine Months Ended     Three Months Ended  
    6/30/2019     6/30/2018     6/30/2019     6/30/2018  
Amount realized through the sale of shares   $ 3,167,197     $ 2,785,932     $ 1,455,844     $ 1,560,641  
Fair value of shares upon issuance     1,290,000       2,957,400       -       1,710,000  
Other non-operating gain (loss)   $ 1,877,197     $ (171,468 )   $ 1,455,844     $ ( 149,359 )
XML 26 R17.htm IDEA: XBRL DOCUMENT v3.19.2
D. FAIR VALUE MEASUREMENTS (Tables)
9 Months Ended
Jun. 30, 2019
Fair Value Disclosures [Abstract]  
Measured at fair value on a recurring basis

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, 2019:

 

   

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   $ -     $ -     $ 10,732,830     $ 10,732,830  

 

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, 2018:

 

   

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   $ 33     $ -     $ 9,317,031     $ 9,317,064  
Reconciliation of beginning and ending balances related to fair value measurements using significant unobservable inputs (Level 3)
   Nine Months Ended  Year Ended
   June 30, 2019  September 30, 2018
       
Beginning balance  $9,317,031   $2,020,629 
Issuances   —      —   
Exercises   (1,900,618)   (595,780)
Realized and unrealized (gains) and losses   3,316,417    7,892,182 
Ending balance  $10,732,830   $9,317,031 
XML 27 R18.htm IDEA: XBRL DOCUMENT v3.19.2
F. COMMITMENTS AND CONTINGENCIES (Tables)
9 Months Ended
Jun. 30, 2019
Commitments and Contingencies Disclosure [Abstract]  
Future minimum lease payments under the San Tomas lease
Three months ending September 30, 2019      $ 453,000  
Year ending September 30,        
 2020     1,872,000  
 2021     1,937,000  
 2022     2,004,000  
 2023     2,073,000  
 2024     2,145,000  
 Thereafter     9,540,000  
Total future minimum lease obligation     20,024,000  
Less imputed interest on financing obligation     (6,548,000 )
Net present value of lease financing obligation   $ 13,476,000  
Schedule of future minimum payments under operating leases
Three months ending September 30, 2019  $66,000
Year ending September 30,  
2020   238,000
2021   163,000
2022       69,000
Total  $536,000
XML 28 R19.htm IDEA: XBRL DOCUMENT v3.19.2
G. PATENTS (Tables)
9 Months Ended
Jun. 30, 2019
Intangible Assets, Net (Excluding Goodwill) [Abstract]  
Schedule of total estimated future amortization
Three months ending September 30, 2019   $ 11,000  
Year ending September 30,        
2020     43,000  
2021     40,000  
2022     36,000  
2023     26,000  
2024     21,000  
Thereafter     95,000  
Total   $ 272,000  
XML 29 R20.htm IDEA: XBRL DOCUMENT v3.19.2
H. LOSS PER COMMON SHARE (Tables)
9 Months Ended
Jun. 30, 2019
Net loss per common share  
Antidilutive securities
    2019     2018  
             
Options and Warrants     7,742,857       12,567,982  
Unvested Restricted Stock     552,000       312,000  
Total     8,294,857       12,879,982  
XML 30 R21.htm IDEA: XBRL DOCUMENT v3.19.2
C. STOCKHOLDERS EQUITY (Details) - USD ($)
3 Months Ended 9 Months Ended
Jun. 30, 2019
Mar. 31, 2019
Dec. 31, 2018
Jun. 30, 2018
Mar. 31, 2018
Dec. 31, 2017
Jun. 30, 2019
Jun. 30, 2018
Common Stock                
Beginning balance $ 299,517 $ 278,435 $ 280,346 $ 166,246 $ 132,581 $ 119,031 $ 280,346 $ 119,031
Beginning balance, shares 29,951,628 27,843,327 28,034,487 16,624,552 13,258,051 11,903,133 28,034,487 11,903,133
Sale of common stock         $ 25,011 $ 12,895    
Sale of common stock, shares         2,501,145 1,289,478    
Warrant exercises $ 40,141 $ 15,239 $ 2,987 $ 11,177        
Warrant exercises, shares 4,014,109 1,523,933 298,682 1,117,644        
401(k) contributions paid in common stock $ 43 $ 104 $ 123 $ 399 $ 259 $ 190    
401(k) contributions paid in common stock, shares 4,339 10,419 12,279 39,862 25,901 18,984    
Stock issued to nonemployees for service $ 208 $ 774 $ 628 $ 816 $ 1,241 $ 137    
Stock issued to nonemployees for service, shares 20,825 77,449 62,784 81,604 124,082 13,705    
Conversion of notes payable and interest to common stock       $ 11,068 $ 554      
Conversion of notes payable and interest to common stock, shares       1,106,806 55,373      
Shares issued (returned) for settlement of clinical research costs   $ 5,000 $ (5,649) $ 6,000 $ 6,600      
Shares issued (returned) for settlement of clinical research costs, shares   500,000 (564,905) 600,000 660,000      
Equity based compensation - employees $ (40) $ (35)            
Equity based compensation - employees, shares (4,000) (3,500)            
Option exercises $ 428              
Option exercises, shares 42,770              
Purchase of stock by officers and directors $ 372              
Purchase of stock by officers and directors, shares 37,243              
Ending balance $ 340,669 $ 299,517 $ 278,435 $ 195,706 $ 166,246 $ 132,581 $ 340,669 $ 195,706
Ending balance, shares 34,066,914 29,951,628 27,843,327 19,570,468 16,624,552 13,258,051 34,066,914 19,570,468
Additional Paid-In Capital                
Beginning balance $ 337,449,398 $ 332,775,129 $ 331,312,184 $ 307,425,853 $ 300,975,618 $ 296,298,401 $ 331,312,184 $ 296,298,401
Sale of common stock         4,652,130 2,437,105    
Warrant exercises 10,212,680 2,640,395 646,766 2,906,619        
401(k) contributions paid in common stock 36,318 36,779 35,118 36,274 36,261 35,690    
Stock issued to nonemployees for service 140,062 224,855 201,752 208,387 227,254 25,270    
Conversion of notes payable and interest to common stock       2,179,648 108,746      
Shares issued (returned) for settlement of clinical research costs   1,285,000 5,649 1,704,000 1,240,800      
Equity based compensation - employees 1,521,861 530,865 573,660 465,487 279,817 1,448,098    
Option exercises 96,862              
Purchase of stock by officers and directors 234,625              
Stock issuance cost (8,010) (43,625)     (94,773)      
Warrants issued with notes payable       291,234        
Ending balance 349,683,796 337,449,398 332,775,129 315,217,502 307,425,853 300,975,618 349,683,796 315,217,502
Accumulated Deficit                
Beginning balance (336,793,393) (330,345,712) (331,591,614) (310,650,374) (305,942,239) (299,754,409) (331,591,614) (299,754,409)
Warrant exercises       0        
Net income (loss) (12,084,768) (6,447,681) 1,245,902 (6,014,568) (4,708,135) (6,187,830)    
Ending balance (348,878,161) (336,793,393) (330,345,712) (316,664,942) (310,650,374) (305,942,239) (348,878,161) (316,664,942)
Beginning balance 955,522 2,707,852 916 (3,058,275) (4,834,040) (3,336,977) 916 (3,336,977)
Sale of common stock         4,667,141 2,450,000    
Warrant exercises 10,252,821 2,655,634 649,753 2,917,796        
401(k) contributions paid in common stock 36,361 36,883 35,241 36,673 36,520 35,880 108,485 109,073
Stock issued to nonemployees for service 140,270 225,629 202,380 209,203 228,495 25,407    
Conversion of notes payable and interest to common stock       2,190,716 109,300      
Shares issued (returned) for settlement of clinical research costs   1,290,000 0 1,710,000 1,247,400      
Equity based compensation - employees 1,521,821 530,830 573,660 465,487 279,817 1,448,098    
Option exercises 97,290              
Purchase of stock by officers and directors 234,997              
Stock issuance cost (8,010) (43,625)     (94,773)      
Warrants issued with notes payable       291,234        
Net income (loss) (12,084,768) (6,447,681) 1,245,902 (6,014,568) (4,708,135) (6,187,830) (17,286,547) (16,910,533)
Ending balance $ 1,146,304 $ 955,522 $ 2,707,852 $ (1,251,734) $ (3,058,275) $ (4,834,040) $ 1,146,304 $ (1,251,734)
XML 31 R22.htm IDEA: XBRL DOCUMENT v3.19.2
C. STOCKHOLDERS EQUITY (Details 1) - shares
Jun. 30, 2019
Sep. 30, 2018
Incentive Stock Option Plans    
Total shares reserved under plans 138,400 138,400
Shares reserved for outstanding options 99,962 123,558
Shares issued 0 0
Remaining options/shares under plans 385 385
Non Qualified Stock Option Plans    
Total shares reserved under plans 6,387,200 3,387,200
Shares reserved for outstanding options 6,193,237 3,036,569
Shares issued 0 0
Remaining options/shares under plans 115,156 309,526
Stock Bonus Plans    
Total shares reserved under plans 783,760 783,760
Shares reserved for outstanding options 0 0
Shares issued 327,267 297,230
Remaining options/shares under plans 456,460 486,497
Stock Compensation Plan    
Total shares reserved under plans 634,000 134,000
Shares reserved for outstanding options 0 0
Shares issued 122,221 118,590
Remaining options/shares under plans 493,369 15,410
Incentive Stock Bonus Plan    
Total shares reserved under plans 640,000 640,000
Shares reserved for outstanding options 0 0
Shares issued 616,500 624,000
Remaining options/shares under plans 23,500 16,000
XML 32 R23.htm IDEA: XBRL DOCUMENT v3.19.2
C. STOCKHOLDERS EQUITY (Details 2) - shares
3 Months Ended 9 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Equity [Abstract]        
Granted 3,268,362 1,847,808 3,268,862 1,858,108
Exercised 42,770 0 42,770 0
Expired 26,922 2,016 29,322 26,395
Forfeited 39,505 0 63,698 1,393
XML 33 R24.htm IDEA: XBRL DOCUMENT v3.19.2
C. STOCKHOLDERS EQUITY (Details 3)
9 Months Ended
Jun. 30, 2019
$ / shares
shares
Series N [Member]  
STOCKHOLDERS' EQUITY  
Issue date 8/18/2008
Shares issuable upon exercise of warrant | shares 85,339
Exercise price | $ / shares $ 3.00
Expiration date 2/18/2020
Series V [Member]  
STOCKHOLDERS' EQUITY  
Issue date 5/28/2015
Shares issuable upon exercise of warrant | shares 810,127
Exercise price | $ / shares $ 19.75
Expiration date 5/28/2020
Series UU [Member]  
STOCKHOLDERS' EQUITY  
Issue date 6/11/2018
Shares issuable upon exercise of warrant | shares 163,544
Exercise price | $ / shares $ 2.80
Expiration date 6/11/2020
Series W [Member]  
STOCKHOLDERS' EQUITY  
Issue date 10/28/2015
Shares issuable upon exercise of warrant | shares 688,930
Exercise price | $ / shares $ 16.75
Expiration date 10/28/2020
Series X [Member]  
STOCKHOLDERS' EQUITY  
Issue date 1/13/2016
Shares issuable upon exercise of warrant | shares 120,000
Exercise price | $ / shares $ 9.25
Expiration date 1/13/2021
Series Y [Member]  
STOCKHOLDERS' EQUITY  
Issue date 2/15/2016
Shares issuable upon exercise of warrant | shares 26,000
Exercise price | $ / shares $ 12.00
Expiration date 2/15/2021
Series ZZ [Member]  
STOCKHOLDERS' EQUITY  
Issue date 5/23/2016
Shares issuable upon exercise of warrant | shares 20,000
Exercise price | $ / shares $ 13.75
Expiration date 5/18/2021
Series BB [Member]  
STOCKHOLDERS' EQUITY  
Issue date 8/26/2016
Shares issuable upon exercise of warrant | shares 16,000
Exercise price | $ / shares $ 13.75
Expiration date 8/22/2021
Series Z [Member]  
STOCKHOLDERS' EQUITY  
Issue date 5/23/2016
Shares issuable upon exercise of warrant | shares 264,000
Exercise price | $ / shares $ 13.75
Expiration date 11/23/2021
Series FF [Member]  
STOCKHOLDERS' EQUITY  
Issue date 12/8/2016
Shares issuable upon exercise of warrant | shares 68,048
Exercise price | $ / shares $ 3.91
Expiration date 12/1/2021
Series CC [Member]  
STOCKHOLDERS' EQUITY  
Issue date 12/8/2016
Shares issuable upon exercise of warrant | shares 611,463
Exercise price | $ / shares $ 5.00
Expiration date 12/8/2021
Series HH [Member]  
STOCKHOLDERS' EQUITY  
Issue date 2/23/2017
Shares issuable upon exercise of warrant | shares 6,500
Exercise price | $ / shares $ 3.13
Expiration date 2/16/2022
Series AA [Member]  
STOCKHOLDERS' EQUITY  
Issue date 8/26/2016
Shares issuable upon exercise of warrant | shares 200,000
Exercise price | $ / shares $ 13.75
Expiration date 2/22/2022
Series JJ [Member]  
STOCKHOLDERS' EQUITY  
Issue date 3/14/2017
Shares issuable upon exercise of warrant | shares 9,450
Exercise price | $ / shares $ 3.13
Expiration date 3/8/2022
Series LL [Member]  
STOCKHOLDERS' EQUITY  
Issue date 4/30/2017
Shares issuable upon exercise of warrant | shares 26,398
Exercise price | $ / shares $ 3.59
Expiration date 4/30/2022
Series MM [Member]  
STOCKHOLDERS' EQUITY  
Issue date 6/22/2017
Shares issuable upon exercise of warrant | shares 893,491
Exercise price | $ / shares $ 1.86
Expiration date 6/22/2022
Series NN [Member]  
STOCKHOLDERS' EQUITY  
Issue date 7/24/2017
Shares issuable upon exercise of warrant | shares 473,798
Exercise price | $ / shares $ 2.52
Expiration date 7/24/2022
Series OO [Member]  
STOCKHOLDERS' EQUITY  
Issue date 7/31/2017
Shares issuable upon exercise of warrant | shares 60,000
Exercise price | $ / shares $ 2.52
Expiration date 7/31/2022
Series II [Member]  
STOCKHOLDERS' EQUITY  
Issue date 3/14/2017
Shares issuable upon exercise of warrant | shares 95,000
Exercise price | $ / shares $ 3.00
Expiration date 9/14/2022
Series RR [Member]  
STOCKHOLDERS' EQUITY  
Issue date 10/30/2017
Shares issuable upon exercise of warrant | shares 495,326
Exercise price | $ / shares $ 1.65
Expiration date 10/30/2022
Series SS [Member]  
STOCKHOLDERS' EQUITY  
Issue date 12/19/2017
Shares issuable upon exercise of warrant | shares 514,476
Exercise price | $ / shares $ 2.09
Expiration date 12/18/2022
Series TT [Member]  
STOCKHOLDERS' EQUITY  
Issue date 2/5/2018
Shares issuable upon exercise of warrant | shares 760,758
Exercise price | $ / shares $ 2.24
Expiration date 2/5/2023
Series PP [Member]  
STOCKHOLDERS' EQUITY  
Issue date 8/28/2017
Shares issuable upon exercise of warrant | shares 112,500
Exercise price | $ / shares $ 2.30
Expiration date 2/28/2023
Series WW [Member]  
STOCKHOLDERS' EQUITY  
Issue date 7/2/2018
Shares issuable upon exercise of warrant | shares 1,950
Exercise price | $ / shares $ 1.63
Expiration date 6/28/2023
Series VV [Member]  
STOCKHOLDERS' EQUITY  
Issue date 7/2/2018
Shares issuable upon exercise of warrant | shares 90,000
Exercise price | $ / shares $ 1.75
Expiration date 1/2/2024
Consultants [Member]  
STOCKHOLDERS' EQUITY  
Issue date 7/28/2017
Shares issuable upon exercise of warrant | shares 10,000
Exercise price | $ / shares $ 2.18
Expiration date 7/27/2027
XML 34 R25.htm IDEA: XBRL DOCUMENT v3.19.2
C. STOCKHOLDERS EQUITY (Details 4) - USD ($)
3 Months Ended 9 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Sep. 30, 2018
Equity [Abstract]          
Series S warrants $ 0   $ 0   $ 33
Series V warrants 1,249,835   1,249,835   770,436
Series W warrants 2,131,237   2,131,237   999,081
Series Z warrants 1,172,626   1,172,626   487,767
Series ZZ warrants 72,185   72,185   34,215
Series AA warrants 963,990   963,990   380,474
Series BB warrants 64,256   64,256   28,456
Series CC warrants 3,699,989   3,699,989   1,779,724
Series DD warrants 0   0   1,249,287
Series EE warrants 0   0   1,249,287
Series FF warrants 433,091   433,091   188,921
Series GG warrants 0   0   607,228
Series HH warrants 44,050   44,050   58,816
Series II warrants 660,020   660,020   660,135
Series JJ warrants 64,252   64,252   88,642
Series KK warrants 0   0   656,930
Series LL warrants 177,299   177,299   77,632
Total warrant liabilities 10,732,830   10,732,830   $ 9,317,064
Series S warrants 0 $ (768,188) 33 $ (756,261)  
Series V warrants (974,251) 26,389 (479,399) 22,842  
Series W warrants (1,748,184) 42,609 (1,132,156) 18,478  
Series Z warrants (799,690) 26,587 (684,859) 34,682  
Series ZZ warrants (50,608) 1,914 (37,970) 2,103  
Series AA warrants (676,784) 19,661 (583,516) 28,337  
Series BB warrants (43,536) 1,695 (35,800) 1,988  
Series CC warrants (2,346,985) 139,325 (2,007,287) 181,244  
Series DD warrants 0 36 1,249,287 5,492  
Series EE warrants 0 36 1,249,287 5,492  
Series FF warrants (278,773) 15,818 (244,170) 23,119  
Series GG warrants 88,478 132,712 195,228 170,131  
Series HH warrants (33,501) 5,279 (22,859) 7,962  
Series II warrants (709,303) 199,970 (593,960) 250,578  
Series JJ warrants (48,880) 7,960 (32,954) 11,970  
Series KK warrants (169,089) 132,884 (55,622) 169,808  
Series LL warrants (114,413) 6,695 (99,667) 10,002  
Net (loss)/gain on warrant liabilities $ (7,905,519) $ (8,618) $ (3,316,384) $ 187,967  
XML 35 R26.htm IDEA: XBRL DOCUMENT v3.19.2
C. STOCKHOLDERS EQUITY (Details 5) - USD ($)
3 Months Ended 9 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Equity [Abstract]        
Amount realized through the sale of shares $ 1,455,844 $ 1,560,641 $ 3,167,196 $ 2,785,932
Fair value of shares upon issuance 0 1,710,000 1,290,000 2,957,400
Other non-operating gain (loss) $ 1,455,844 $ (149,359) $ 1,877,197 $ (171,468)
XML 36 R27.htm IDEA: XBRL DOCUMENT v3.19.2
C. STOCKHOLDERS EQUITY (Details Narrative) - USD ($)
Jun. 30, 2019
Sep. 30, 2018
Equity [Abstract]    
Non-employee stock based compensation expense $ 88,000 $ 207,000
XML 37 R28.htm IDEA: XBRL DOCUMENT v3.19.2
D. FAIR VALUE MEASUREMENTS (Details) - USD ($)
Jun. 30, 2019
Sep. 30, 2018
Derivative instruments $ 10,732,830 $ 9,317,064
Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)    
Derivative instruments 0 33
Significant Other Observable Inputs (Level 2)    
Derivative instruments 0 0
Significant Unobservable Inputs (Level 3)    
Derivative instruments $ 10,732,830 $ 9,317,031
XML 38 R29.htm IDEA: XBRL DOCUMENT v3.19.2
D. FAIR VALUE MEASUREMENTS (Details 1) - USD ($)
9 Months Ended 12 Months Ended
Jun. 30, 2019
Sep. 30, 2018
Fair Value Disclosures [Abstract]    
Beginning balance $ 9,317,031 $ 2,020,629
Issuances 0 0
Exercises (1,900,618) (595,780)
Realized and unrealized (gains) and losses 3,316,417 7,892,182
Ending balance $ 10,732,830 $ 9,317,031
XML 39 R30.htm IDEA: XBRL DOCUMENT v3.19.2
F. COMMITMENTS AND CONTINGENCIES (Details)
Jun. 30, 2019
USD ($)
Commitments and Contingencies Disclosure [Abstract]  
Three months ending September 30, 2019 $ 453,000
2020 1,872,000
2021 1,937,000
2022 2,004,000
2023 2,073,000
2024 2,145,000
Thereafter 9,540,000
Total future minimum lease obligation 20,024,000
Less imputed interest on financing obligation (6,548,000)
Net present value of lease financing obligation $ 13,476,000
XML 40 R31.htm IDEA: XBRL DOCUMENT v3.19.2
F. COMMITMENTS AND CONTINGENCIES (Details 1)
Jun. 30, 2019
USD ($)
Commitments and Contingencies Disclosure [Abstract]  
Three months ending September 30, 2019 $ 66,000
2020 238,000
2021 163,000
2022 69,000
Total $ 536,000
XML 41 R32.htm IDEA: XBRL DOCUMENT v3.19.2
F. COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($)
Jun. 30, 2019
Sep. 30, 2018
Research and Development Lab    
Deferred rent liability $ 14,000 $ 12,000
Headquarters    
Deferred rent liability $ 9,000 $ 14,000
XML 42 R33.htm IDEA: XBRL DOCUMENT v3.19.2
G. PATENTS (Details) - USD ($)
Jun. 30, 2019
Sep. 30, 2018
Intangible Assets, Net (Excluding Goodwill) [Abstract]    
Three months ending September 30, 2019 $ 11,000  
2020 43,000  
2021 40,000  
2022 36,000  
2023 26,000  
2024 21,000  
Thereafter 95,000  
Total $ 272,488 $ 258,093
XML 43 R34.htm IDEA: XBRL DOCUMENT v3.19.2
G. PATENTS (Details Narrative) - USD ($)
3 Months Ended 9 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Intangible Assets, Net (Excluding Goodwill) [Abstract]        
Amortization of patent costs $ 49,000 $ 34,000 $ 72,000 $ 53,000
XML 44 R35.htm IDEA: XBRL DOCUMENT v3.19.2
H. LOSS PER COMMON SHARE (Details) - shares
9 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Antidilutive securities 8,294,857 12,879,982
Options and Warrants    
Antidilutive securities 7,742,857 12,567,982
Unvested Restricted Stock    
Antidilutive securities 552,000 312,000
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