UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1999. OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to ______________. Commission File Number 0-11503 CEL-SCI CORPORATION Colorado 84-0916344 ============================ ====================== State or other jurisdiction (IRS) Employer incorporation Identification Number 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 ____X_____ No __________ Class of Stock No. Shares Outstanding Date - -------------- ---------------------- ---- Common 16,016,667 May 10, 1999 Page 1 of ___ pages
TABLE OF CONTENTS PART I FINANCIAL INFORMATION Item 1. Page ---- Balance Sheets 3-4 Statements of Operations 5-6 Statements of Cash Flow 7 Notes to Financial Statements 8 Item 2. Management's Discussion and Analysis 10 Item 3. Quantitative and Qualitative Disclosure about Market Risks 10 PART II Item 6. Exhibits and Reports on Form 8-K 11 Signatures 12
Item 1. FINANCIAL STATEMENTS CEL-SCI CORPORATION ------------------- CONSOLIDATED CONDENSED BALANCE SHEETS ------------------------ ASSETS (unaudited) March 31, September 30, 1999 1998 CURRENT ASSETS: Cash and cash equivalents $ 2,682,344 $ 2,813,225 Investments, net 6,385,610 9,675,311 Interest and other receivables 91,437 69,809 Prepaid expenses 532,085 723,834 Advances to officer/shareholder and employees - 70,982 Total Current Assets 9,691,476 13,353,161 RESEARCH AND OFFICE EQUIPMENT- Less accumulated depreciation of $1,457,205 and $1,352,165 555,083 619,496 DEPOSITS 14,828 14,828 PATENT COSTS- less accumulated amortization of $482,293 and $454,328 494,363 444,328 ----------- ---------- $ 10,755,750 $ 14,431,813 ============= ============ See notes to condensed financial statements.
CEL-SCI CORPORATION ------------------- CONSOLIDATED CONDENSED BALANCE SHEETS ------------------------ (continued) LIABILITIES AND STOCKHOLDERS' EQUITY (unaudited) March 31, September 30, 1999 1998 CURRENT LIABILITIES: Accounts payable $ 343,268 $ 427,147 Total current liabilities 343,268 427,147 DEFERRED RENT 29,382 29,382 Total liabilities 372,650 456,529 STOCKHOLDERS' EQUITY Preferred stock, Series D, $.01 par value - authorized 10,000 shares; issued and outstanding 5,347 and 9,002 shares 53 90 Common stock, $.01 par value; authorized, 100,000,000 shares; issued and outstanding, 14,332,318 and 11,972,695 shares 143,323 119,726 Additional paid-in capital 59,121,833 59,040,864 Net unrealized loss on equity securities (103,461) (48,291) Deficit (48,778,648) (45,137,105) TOTAL STOCKHOLDERS' EQUITY 10,383,100 13,975,284 ----------- ----------- $ 10,755,750 $ 14,431,813 ============= ============= See notes to condensed financial statements.
CEL-SCI CORPORATION ------------------- CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS --------------------------------- (unaudited) Six Months Ended March 31, 1999 1998 REVENUES: (As restated, See Note D) Interest income $ 243,866 $ 281,003 Other income 46,777 4,752 TOTAL INCOME 290,643 285,755 EXPENSES: Research and development 2,242,530 1,727,661 Depreciation and amortization 133,005 147,874 General and administrative 1,556,650 1,241,805 TOTAL OPERATING EXPENSES 3,932,185 3,117,340 NET LOSS 3,641,542 2,831,585 ACCRETION OF PREFERRED STOCK DIVIDENDS - 1,980,000 NET LOSS ATTRIBUTABLE TO COMMO STOCKHOLDERS $ 3,641,542 $ 4,811,585 LOSS PER COMMON SHARE (BASIC) $ 0.28 $ 0.43 LOSS PER COMMON SHARE (DILUTED) $ 0.28 $ 0.43 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 12,809,150 11,242,903 ========== ========== See notes to condensed financial statements.
CEL-SCI CORPORATION ------------------- CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS CEL-SCI CORPORATION ------------------------- (unaudited) Three Months Ended March 31, 1999 1998 REVENUES: (As restated See Note D) Interest income $ 87,820 $ 183,422 Other income 7,110 2,734 TOTAL INCOME 94,930 186,156 EXPENSES: Research and development 1,300,582 704,349 Depreciation and amortization 67,073 73,949 General and administrative 850,626 634,018 TOTAL OPERATING EXPENSES 2,218,281 1,412,316 NET LOSS $ 2,123,351 $ 1,226,160 LOSS PER COMMON SHARE (BASIC) $ 0.15 $ 0.11 NET LOSS LOSS PER COMMON SHARE (DILUTED) $ 0.15 $ 0.11 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 14,004,082 11,341,261 ============ =========== See notes to condensed financial statements.
CEL-SCI CORPORATION ------------------- CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW --------------------------------- (unaudited) Six Months Ended March 31, 1999 1998 CASH FLOWS FROM OPERATING ACTIVITIES: NET LOSS $ (3,641,542) $ (2,831,585) Adjustments to reconcile net loss to net cash used in operating activities: - Depreciation and amortization 133,005 147,874 Amortization of premium (discount) on investments - (237,060) Unrealized gain (loss) on investments (55,170) 3,499 Stock issued for services - 23,254 Stock options issued for services 61,149 40,419 Decrease (increase) in receivables (21,628) 11,163 Decrease (increase) in prepaid expenses 191,748 (108,088) Decrease (increase) in advances - 135,090 Increase (decrease) in accounts payable (83,879) (367,511) NET CASH USED IN OPERATING ACTIVITIES (3,416,317) (3,182,945) CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITY: Sales of investments 3,289,701 6,750,000 Purchase of investments - (18,130,119) Note receivable from employee/shareholder - - Payment on note receivable from employee/ shareholder 70,982 55,791 Purchase of research and office equipment (40,627) (3,847) Patent costs (78,000) (36,021) NET CASH USED IN INVESTING ACTIVITY 3,242,056 (11,364,196) CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES: Issuance of preferred stock - 10,000,000 Issuance of common stock 43,380 3,995,944 NET CASH PROVIDED BY FINANCING ACTIVITIES 43,380 13,995,944 NET (DECREASE) INCREASE IN CASH (130,881) (551,197) CASH AND CASH EQUIVALENTS: Beginning of period 2,813,225 3,508,606 End of period $ 2,682,344 $ 2,957,409 ============== ============= See notes to condensed financial statements.
CEL-SCI CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS SIX MONTHS ENDED MARCH 31, 1999 AND 1998 (unaudited) A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying financial statements have been prepared in accordance with rules established by the Securities and Exchange Commission for Form 10-Q. Not all financial disclosures required to present the financial position and results of operations in accordance with generally accepted accounting principles are included herein. The reader is referred to the Company's Financial Statements included in the registrant's Annual Report on Form 10-K for the year ended September 30, 1998. In the opinion of management, all accruals and adjustments (each of which is of a normal recurring nature) necessary for a fair presentation of the financial position as of March 31, 1999 and the results of operations for the six-month period then ended have been made. Significant accounting policies have been consistently applied in the interim financial statements and the annual financial statements. Investments Investments that may be sold as part of the liquidity management of the Company or for other factors are classified as available-for-sale and are carried at fair market value. Unrealized gains and losses on such securities are reported as a separate component of stockholders' equity. Realized gains and losses on sales of securities are reported in earnings and computed using the specific identified cost basis. Loss per Share Net loss per common share is computed by dividing the net loss, after increasing the loss for the effect of any preferred stock dividends, by the weighted average number of common shares outstanding during the period. Common stock equivalents, including options to purchase common stock, were excluded from the calculation.
CEL-SCI CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS SIX MONTHS ENDED MARCH 31, 1999 AND 1998 (unaudited) (continued) B. RELATED PARTY TRANSACTIONS In October, 1996, the Company loaned $300,000 to an officer and shareholder. The loan carried an interest rate of 5% and was due September 30, 1998. The final payment on the note was made in October 1998. C. STOCKHOLDERS' EQUITY On December 23, 1997, the Company sold 10,000 shares of Series D convertible preferred stock to institutional investors for $10,000,000. The stock was initially convertible, at the option of the holder, into shares of common stock of the Company at $8.28. The number of shares issuable upon the conversion of each Series D preferred share was to be determined by dividing $1,000 by $8.28. The preferred stock is now convertible at the lower of $8.28 or the average price of the Company's common stock for any two consecutive trading days during the ten trading days preceding the conversion date. Investors also received an aggregate of 1,100,000 four-year warrants to purchase additional shares at $8.625 and $9.315. The Company filed a registration statement for the resale of the shares of common stock acquired upon conversion of the Series D preferred stock and warrants. During the quarter ended March 31, 1999, 2,431 shares of the Series D preferred stock were converted into 1,477,974 shares of common stock. D. RESTATEMENT Subsequent to the issuance of the Company's report on Form 10-Q for the quarter ended December 31, 1997, the Company determined that the application of a technical accounting treatment required the loss per share calculation to include the impact of $1,980,000 for the accretion of Series D Preferred Stock warrants for the three months ended December 31, 1997. The effect of the accretion is a non-cash charge to additional paid-in capital and does not impact the previously reported net loss for the three months ended December 31, 1997, nor does it result in a net change to stockholders' equity at September 30, 1997 or December 31, 1997. The effect of the restatement was to increase net loss attributable to common stockholders and net loss per share for the three months ended December 31, 1997. The effect of the change is shown on the income statement for the six months ended March 31, 1998.
CEL-SCI CORPORATION Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS Liquidity and Capital Resources The Company has had only limited revenues from operations since its inception in March 1983. The Company has relied upon proceeds realized from the public and private sale of its Common Stock and short-term borrowings to meet its funding requirements. Funds raised by the Company have been expended primarily in connection with the acquisition of exclusive rights to certain patented and unpatented proprietary technology and know-how relating to the human immunological defense system, the funding of VTI's research and development program, patent applications, the repayment of debt, the continuation of Company-sponsored research and development and administrative costs, and the construction of laboratory facilities. Inasmuch as the Company does not anticipate realizing significant revenues until such time as it enters into licensing arrangements regarding its technology and know-how or until such time it receives permission to sell its product (which could take a number of years), the Company is mostly dependent upon short-term borrowings and the proceeds from the sale of its securities to meet all of its liquidity and capital resource requirements. Results of Operations Interest income during the six months ending March 31, 1999 reflects interest accrued on investments. Interest income has decreased as the Company uses the proceeds of the sale of the Series D Preferred Stock. Research and development expense in 1999 were higher than in 1998 because the Company is running more and larger clinical trials. General and administrative expenses have increased due to the addition of more employees needed for the increased activity level. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS The Company's cash flow and earnings are subject to fluctuations due to changes in interest rates in its investment portfolio of debt securities, to the fair value of equity instruments held, and, to an immaterial extent, to foreign currency exchange rates. The Company maintains an investment portfolio of various issuers, types and maturities. These securities are generally classified as available-for-sale and, consequently, are recorded on the balance sheet at fair value with unrealized gains or losses reported as a separate component of stockholders' equity. Other-than-temporary losses are recorded against earnings in the same period the loss was deemed to have occurred. The Company does not currently hedge this exposure and there can be no assurance that other-than-temporary losses will not have a material adverse impact on the Company's results of operations in the future.
PART II Item 2. Changes in Securities and Use of Proceeds See Notes C and D to the Company's Notes to Financial Statements. Item 6. (a) Exhibits No exhibits are filed with this report. (b) Reports on Form 8-K The Company did not file any reports on Form 8-K during the quarter ended March 31, 1999.
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: May 14, 1999 /s/ Geert Kersten ----------------- Geert Kersten Chief Executive Officer* *Also signing in the capacity of the Chief Accounting Officer and Principal Financial Officer.