NOTES TO FINANCIAL STATEMENTS
CEL-SCI
Corporation (the Company) was incorporated on March 22, 1983, in
the state of Colorado, to finance research and development in
biomedical science and ultimately to engage in marketing and
selling products.
CEL-SCI
is focused on finding the best way to activate the immune system to
fight cancer and infectious diseases. The Company’s lead
investigational therapy, Multikine (Leukocyte Interleukin,
Injection), is currently in a Phase 3 clinical trial as a potential
therapeutic agent directed at using the immune system to produce an
anti-tumor immune response for advanced primary head and neck
cancer. Data from Phase 1 and Phase 2 clinical trials suggest
Multikine has the potential to directly affect tumor cells. These
data also indicate that it appears to activate the patient’s
own anti-tumor immune response. Multikine (Leukocyte Interleukin,
Injection) is the full name of this investigational therapy, which,
for simplicity, is referred to in the remainder of this document as
Multikine. Multikine is the trademark that the Company has
registered for this investigational therapy, and this proprietary
name is subject to FDA review in connection with the
Company’s future anticipated regulatory submission for
approval. Multikine has not been licensed or approved by the FDA or
any other regulatory agency. Neither has its safety or efficacy
been established for any use. Further research is required, and
early-phase clinical trial results must be confirmed in the Phase 3
clinical trial of this investigational therapy that is in progress
and that is currently subject to a clinical hold on enrollment of
additional new patients.
Multikine has been
cleared by the regulators in twenty four countries around the
world, including the U.S. FDA, for a global Phase 3 clinical trial
in advanced primary (not yet treated) head and neck cancer
patients. On September 26, 2016, the Company received verbal notice
from the FDA that the Phase 3 clinical trial has been placed on
clinical hold.
The FDA’s partial
clinical hold letter identified the following specific
deficiencies: there is an unreasonable and significant risk of
illness or injury to human subjects; the investigator brochure is
misleading, erroneous, and materially incomplete; and that the plan
or protocol is deficient in design to meet its stated
objectives.
Pursuant to this communication from FDA,
patients currently receiving study treatments could continue to
receive treatment, and patients already enrolled in the study would
continue to be followed, but no additional patients could be
enrolled. On October 21, 2016, the Company announced it had
received the Partial Clinical Hold letter from the FDA. On November
21, 2016, the Company announced it has submitted what it believes
to be a complete response to the FDA
.
On December 8, 2016, the FDA advised CEL-SCI that the agency was
denying CEL-SCI’s request for a meeting at this time because
FDA’s review of CEL-SCI’s November 17, 2016 response
was ongoing. CEL-SCI was also advised that it will be receiving a
letter addressing CEL-SCI’s response by December 18,
2016.
Multikine is also
being used in a Phase 1 study at the University of California, San
Francisco (UCSF) in HIV/HPV co-infected men and women with
peri-anal warts.
2
.
OPERATIONS AND FINANCING
The
Company has incurred significant costs since its inception in
connection with the acquisition of certain patented and unpatented
proprietary technology and know-how relating to the human
immunological defense system, patent applications, research and
development, administrative costs, construction of laboratory
facilities, and clinical trials. The Company has funded such
costs with proceeds from loans and the public and private sale of
its common and preferred stock.
The
Company is currently running a large multi-national Phase 3
clinical trial for head and neck cancer. The Company believes that
it has enough capital to support its operations as it believes that
it has ready access to new equity capital should the need arise.
During fiscal year 2016, the Company raised approximately $21.4
million in net proceeds through the sale of common stock and
warrants from public and private offerings. During fiscal year
2015, the Company raised $21.1 million net proceeds from public
offerings. To finance the study beyond the next 12 months, the
Company plans to raise additional capital in the form of corporate
partnerships, debt and/or equity financings. In addition, the
Company expects to receive proceeds from the arbitration against
its former clinical research organization, inVentiv. The Company
believes that it will be able to obtain additional financing
because it has done so consistently in the past, and because
Multikine is a product in the Phase 3 clinical trial stage.
However, there can be no assurance that the Company will be
successful in raising additional funds or that funds will be
available to the Company on acceptable terms or at all. If
the Company does not raise the necessary capital, the Company will
either have to slow or delay the Phase 3 clinical trial or even
significantly curtail its operations until such time as it is able
to raise the required funding. The financial statements have been
prepared assuming that the Company will continue as a going
concern, but due to the Company’s future liquidity needs,
history of net losses, and the expectation that the Company will
incur losses for the foreseeable future, 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 spent approximately $34.5 million as of September 30,
2016 on direct costs for the Phase 3 clinical trial.
T
he
total remaining cash cost of the Phase 3 clinical trial, excluding
any costs that will be paid by CEL-SCI's partners, would be
approximately $12.1 million after September 30, 2016. This ís
based on the executed contract costs with the CROs only and does
not include other related costs, e.g. the manufacturing of the
drug.
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. This number can be
affected by the speed of enrollment, foreign currency exchange
rates and many other factors, some of which cannot be
foreseen. The Company has filed an amendment to the original
Phase 3 protocol for it head and neck cancer study with the FDA to
allow for this expansion in patient enrollment. Should the FDA
allow the amended protocol filed with them to proceed, the
remaining cost of the Phase 3 clinical trial will be higher. It is
therefore possible that the cost of the Phase 3 clinical trial will
be higher than currently estimated.
On
September 26, 2016, the Company received verbal notice from the FDA
that the Phase 3 clinical trial has been placed on clinical hold.
Pursuant to this communication from FDA, patients currently
receiving study treatments could continue to receive treatment, and
patients already enrolled in the study would continue to be
followed, but no additional patients could be enrolled. On October
21, 2016, the Company announced it had received the Partial
Clinical Hold letter from the FDA. On November 21, 2016, the
Company announced it has submitted a complete response to the FDA
and will work diligently with the FDA to seek to have the partial
clinical hold lifted.
3.
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
– For
purposes of the statements of cash flows, cash and cash equivalents
consist principally of unrestricted cash on deposit and short-term
money market funds. The Company considers all highly liquid
investments with a maturity when purchased of less than three
months as cash and cash equivalents.
Prepaid Expenses
– Prepaid
expenses are payments for future services to be rendered and are
expensed over the time period for which the service is rendered.
Prepaid expenses may also include payment for goods to be received
within one year of the payment date.
Inventory
– Inventory consists of
manufacturing production advances and bulk purchases of laboratory
supplies to be consumed in the manufacturing of the Company’s
product for clinical studies. Inventories are stated at the lower
of cost or market, where cost is determined using the first-in,
first out method applied on a consistent basis.
Deposits
– The deposits are
required by the lease agreement for the manufacturing facility and
by the clinical research organization (CRO)
agreements.
Research and Office Equipment
–
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 assess impairment, if any.
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 to 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
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.
Deferred Rent (Asset)
–
Consideration paid, including deposits, related to operating leases
is recorded as a deferred rent asset and amortized as rent expense
over the lease term. Interest on the deferred rent is calculated at
3% on the funds deposited on the manufacturing facility and is
included in deferred rent. This interest income will be used to
offset future rent.
Deferred Rent (Liability)
–
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.
Derivative Instruments
- The Company
has entered into financing arrangements that consist of
freestanding derivative instruments that contain embedded
derivative features, specifically, the settlement provisions in the
warrant agreements preclude the warrants from being treated as
equity. 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 on the
balance sheet and are measured at fair value with gains or losses
recognized in earnings or other comprehensive income depending on
the nature of the derivative or hybrid instruments. The Company
determines the fair value of derivative instruments and hybrid
instruments based on available market data using appropriate
valuation models, giving consideration to all of the rights and
obligations of each instrument. The derivative liabilities are
remeasured at fair value at the end of each reporting period as
long as they are outstanding.
Grant Income
– The Company's
grant arrangements are handled on a reimbursement basis. Grant
income under the arrangements is recognized when costs are
incurred.
Research and Development Costs
–
Research and development expenditures are expensed as
incurred.
Net Loss Per Common Share
– The
Company calculates net loss per common share in accordance with ASC
260 “Earnings Per Share” (ASC 260). Basic and diluted
net loss per common share was determined by dividing net loss
applicable to common shareholders by the weighted average number of
common shares outstanding during the period. The Company’s
potentially dilutive shares, which include outstanding common stock
options, restricted stock units, convertible preferred stock and
common stock warrants, have not been included in the computation of
diluted net loss per share for all periods as the result would be
anti-dilutive.
Concentration of Credit Risk
–
Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist of cash and cash
equivalents. The Company maintains its cash and cash
equivalents with high quality financial institutions. At
times, these accounts may exceed federally insured limits.
The Company has not experienced any losses in such bank
accounts. The Company believes it is not exposed to
significant credit risk related to cash and cash equivalents. All
non-interest bearing cash balances were fully insured
up to
$250,000 at September 30, 2016.
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 September 30, 2016 and 2015.
Use of Estimates
– The
preparation of financial statements in conformity U.S. GAAP
requires management to make estimates and assumptions that affect
the amounts reported in the financial statements and the
accompanying disclosures.
These
estimates are based on management’s best knowledge of current
events and actions the Company may undertake in the future.
Estimates are used in accounting for, among other items, inventory
obsolescence, accruals, stock options, useful lives for
depreciation and amortization of long-lived assets, deferred tax
assets and the related valuation allowance, and the valuation of
derivative liabilities.
Actual results could differ from
estimates, although management does not generally believe such
differences would materially affect the financial statements in any
given year. However, in regard to the valuation of derivative
liabilities determined using various valuation techniques including
the Black-Scholes and binomial pricing methodologies, significant
fluctuations may materially affect the financial statements in a
given year. The Company considers such valuations to be significant
estimates.
Fair Value Measurements
– The
Company evaluates financial assets and liabilities subject to fair
value measurements in accordance with a fair value hierarchy to
prioritize the inputs used to measure fair value. A financial
instrument’s level within the fair value hierarchy is based
on the lowest level of input significant to the fair value
measurement, where Level 1 is the highest and Level 3 is the
lowest. See Note 12 for the definition of levels and the
classification of assets and liabilities in those
levels.
Stock-Based Compensation
–
Compensation cost for all stock-based awards is measured at fair
value as of the grant date in accordance with the provisions of ASC
718, “Compensation – Stock Compensation.” The
fair value of stock options is calculated using the Black-Scholes
option pricing model. The Black-Scholes model requires various
judgmental assumptions including volatility and expected option
life. The stock-based compensation cost is recognized on the
straight line allocation method as expense over the requisite
service or vesting period.
Equity
instruments issued to non-employees are accounted for in accordance
with ASC 505-50, “Equity-Based Payments to
Non-Employees.” Accordingly, compensation is recognized when
goods or services are received and may be measured using the
Black-Scholes valuation model, based on the type of award. 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
Options 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 Company’s 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.
Historical data was used to estimate option exercise and employee
termination within the valuation model. The expected term of
options represents the period of time that options granted are
expected to be outstanding and has been determined based on an
analysis of historical exercise behavior. If any of the assumptions
used in the Black-Scholes model change significantly, stock-based
compensation expense for new awards may differ materially in the
future from that recorded in the current period.
Vesting
of restricted stock granted under the Incentive Stock Bonus Plan is
subject to service, performance or market conditions and meets the
classification of equity awards. These awards were measured at fair
market value on the grant-dates for issuances where the attainment
of performance criteria is probable and at fair value on the
grant-dates, using a Monte Carlo simulation for issuances where the
attainment of performance criteria is uncertain. The total
compensation cost will be expensed over the estimated requisite
service period.
Reclassification
– Certain prior
year items have been reclassified to conform to the current year
presentation.
Recent Accounting
Pronouncements
–
In May 2014, the FASB issued
Accounting Standards Update (ASU) 2014-09,
Revenue from Contracts with
Customers (Topic 606)
that will
supersede virtually all recognition guidance in US GAAP. For public
entities, the guidance is effective for annual and interim periods
beginning after December 15, 2017. Early adoption is permitted for
all entities for annual and interim periods beginning after
December 15, 2016. The FASB issued the following ASUs to amend the
new guidance: ASU 2015-14,
Revenue from Contracts with
Customers (Topic 606): Deferral of the Effective Date,
ASU 2016-08,
Revenue from Contracts with
Customers (Topic 606): Principal versus Agent Considerations
(Reporting Revenue Gross versus Net),
ASU 2016-10
, Revenue from Contracts with
Customers (Topic 606): Identifying Performance Obligations and
Licensing, and
ASU
2016-12
,
Revenue from Contracts with Customers (Topic 606): Narrow-Scope
Improvements and Practical Expedients.
Management does not expect the new standard or any
of the related updates to have a material effect on its financial
statements and related disclosures.
In January 2016, the FASB issued Accounting
Standards Update (ASU) No. 2016-01,
Financial Instruments –
Overall (Subtopic 825-10): Recognition and Measurement of Financial
Assets and Financial Liabilities.
The new guidance is intended to improve the
recognition and measurement of financial instruments. The new
guidance is effective for fiscal years beginning after December 15,
2017, including interim periods within those fiscal years. Early
adoption is permitted for specific provisions within the guidance.
Management does not expect the new standard to have a material
effect on its financial statements and related
disclosures.
In February 2016, the FASB issued
ASU
2016-02,
Leases
, which will require most leases (with the
exception of leases with terms of less than one year) to be
recognized on the balance sheet as an asset and a lease liability.
Leases will be classified as an operating lease or a financing
lease. Operating leases are expensed using the straight-line method
whereas financing leases will be treated similarly to a capital
lease under the current standard. The new standard will be
effective for annual and interim periods, within those fiscal
years, beginning after December 15, 2018, but early adoption is
permitted. The new standard must be presented using the modified
retrospective method beginning with the earliest comparative period
presented. The Company is currently evaluating the effect of the
new standard on its financial statements and related
disclosures.
In March 2016, the FASB issued ASU No.
2016-09,
Compensation - Stock
Compensation (Topic 718): Improvements to Employee Share-Based
Payment Accounting.
ASU 2016-09
simplifies several aspects of the accounting for share-based
payment award transactions, including income tax consequences,
classification of awards as either equity or liabilities and
classification on the statement of cash flows. The new standard
will be effective for annual and interim periods, within those
fiscal years, beginning after December 15, 2016 but early adoption
is permitted. The Company is currently evaluating the effect of the
new amendment on its financial statements and related
disclosures.
In
August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows
(Topic 230): Classification of Certain Cash Receipts and Cash
Payments. ASU 2016-15 amends eight specific cash flow issues: 1.)
Debt Prepayment or Debt Extinguishment Costs, 2.) Settlement of
Zero-Coupon Debt Instruments or Other Debt Instruments with Coupon
Interest Rates That Are Insignificant in Relation to the Effective
Interest Rate of the Borrowing, 3.) Contingent Consideration
Payments Made after a Business Combination, 4.) Proceeds from the
Settlement of Insurance Claims, 5.) Proceeds from the Settlement of
Corporate-Owned Life Insurance Policies, including Bank-Owned Life
Insurance Policies, 6.) Distributions Received from Equity Method
Investees, 7.) Beneficial Interests in Securitization Transactions,
8.) Separately Identifiable Cash Flows and Application of the
Predominance Principle. Management does not expect the adoption of
the amendments in this Update to have a material effect on its
financial statements and related disclosures.
In
November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows
(Topic 230): Restricted Cash. ASU 2016-18 requires that a statement
of cash flows explain the change during the period in the total of
cash, cash equivalents, and amounts generally described as
restricted cash or restricted cash equivalents. Therefore, amounts
generally described as restricted cash and restricted cash
equivalents should be included with cash and cash equivalents when
reconciling the beginning-of-period and end-of-period total amounts
shown on the statement of cash flows. The amendments in this Update
are effective for public business entities for fiscal years
beginning after December 15, 2017, and interim periods within those
fiscal years. Management does not expect the adoption of the
amendments in this Update to have a material effect on its
financial statements and related disclosures.
The
Company has considered all other recently issued accounting
pronouncements and does not believe the adoption of such
pronouncements will have a material impact on its financial
statements.
4.
WARRANTS AND
NON-EMPLOYEE OPTIONS
The
following chart represents the warrants and non-employee options
outstanding at September 30, 2016:
Warrant
|
|
Issue
Date
|
Shares Issuable upon Exercise of
Warrant
|
Exercise Price
|
Expiration
Date
|
Refer-ence
|
|
|
|
|
|
|
|
Series
R
|
|
12/6/12
|
2,625,000
|
$
4.00
|
12/6/16
|
1
|
Series
S
|
|
10/11/13
-10/24/14
|
25,928,010
|
$
1.25
|
10/11/18
|
1
|
Series
U
|
|
4/17/14
|
445,514
|
$
1.75
|
10/17/17
|
1
|
Series
V
|
|
5/28/15
|
20,253,164
|
$
0.79
|
5/28/20
|
1
|
Series
W
|
|
10/28/15
|
17,223,248
|
$
0.67
|
10/28/20
|
1
|
Series
X
|
|
1/13/16
|
3,000,000
|
$
0.37
|
1/13/21
|
2
|
Series
Y
|
|
2/15/16
|
650,000
|
$
0.48
|
2/15/21
|
2
|
Series
Z
|
|
5/23/16
|
6,600,000
|
$
0.55
|
11/23/21
|
1
|
Series
ZZ
|
|
5/23/16
|
500,000
|
$
0.55
|
5/18/21
|
1
|
Series
AA
|
|
8/26/16
|
5,000,000
|
$
0.55
|
2/22/22
|
1
|
Series
BB
|
|
8/26/16
|
400,000
|
$
0.55
|
8/22/21
|
1
|
Series
N
|
|
8/18/08
|
2,844,627
|
$
0.53
|
8/18/17
|
2
|
Series
P
|
|
2/10/12
|
590,001
|
$
4.50
|
3/6/17
|
2
|
Consultants
|
|
12/2/11-
7/1/16
|
640,000
|
$
0.37- $3.50
|
10/27/16-
6/30/19
|
3
|
The
following chart represents the warrants and non-employee options
outstanding at September 30, 2015:
Warrants
|
|
Issue
Date
|
Shares Issuable upon Exercise of
Warrants
|
Exercise Price
|
Expiration
Date
|
Refer-ence
|
|
|
|
|
|
|
|
Series
N
|
|
8/18/08
|
2,844,627
|
0.53
|
8/18/17
|
1
|
Series
Q
|
|
6/21/12
|
1,200,000
|
5.00
|
12/22/15
|
1
|
Series
R
|
|
12/6/12
|
2,625,000
|
4.00
|
12/6/16
|
1
|
Series
S
|
|
10/11/13-
10/24/14
|
25,928,010
|
1.25
|
10/11/18
|
1
|
Series
U
|
|
4/17/14
|
445,514
|
1.75
|
10/17/17
|
1
|
Series
V
|
|
5/28/15
|
20,253,164
|
0.79
|
5/28/20
|
1
|
Series
P
|
|
2/10/12
|
590,001
|
4.50
|
3/6/17
|
2
|
Consultants
|
|
10/14/05 –
7/1/15
|
238,000
|
0.66 – 20.00
|
10/14/15 -
6/30/18
|
3
|
The
table below presents the warrants accounted for as derivative
liabilities at September 30.
|
2016
|
2015
|
Series S
warrants
|
$
3,111,361
|
$
7,363,555
|
Series U
warrants
|
-
|
44,551
|
Series V
warrants
|
1,620,253
|
6,278,481
|
Series W
warrants
|
1,799,858
|
-
|
Series Z
warrants
|
970,604
|
-
|
Series ZZ
warrants
|
70,609
|
-
|
Series AA
warrants
|
763,661
|
-
|
Series BB
warrants
|
58,588
|
-
|
|
|
|
Total derivative
liabilities
|
$
8,394,934
|
$
13,686,587
|
The
table below presents the gains and (losses) on the warrant
liabilities for the years ended September 30:
|
2016
|
2015
|
2014
|
Series A -
E
|
$
-
|
$
6,105
|
$
1
|
Series F and
G
|
-
|
-
|
12,667
|
Series
H
|
-
|
12,000
|
24,000
|
Series
N
|
-
|
-
|
(1,404,027
)
|
Series
Q
|
-
|
12,000
|
36,000
|
Series
R
|
-
|
157,500
|
131,250
|
Series
S
|
4,252,193
|
(1,705,466
)
|
1,098,787
|
Series
T
|
-
|
-
|
276,122
|
Series
U
|
44,552
|
75,738
|
73,967
|
Series
V
|
4,658,228
|
1,724,739
|
-
|
Series
W
|
3,260,913
|
-
|
-
|
Series
Z
|
997,226
|
-
|
-
|
Series
ZZ
|
75,229
|
-
|
-
|
Series
AA
|
672,246
|
-
|
-
|
Series
BB
|
53,139
|
-
|
-
|
|
|
|
|
Net
gain
|
$
14,013,726
|
$
282,616
|
$
248,767
|
The
Company reviews all outstanding warrants in accordance with the
requirements of ASC 815. This topic provides that an entity should
use a two-step approach to evaluate whether an equity-linked
financial instrument (or embedded feature) is indexed to its own
stock, including evaluating the instrument’s contingent
exercise and settlement provisions. The warrant agreements provide
for adjustments to the exercise price for certain dilutive events.
Under the provisions of ASC 815, the warrants are not considered
indexed to the Company’s stock because future equity
offerings or sales of the Company’s stock are not an input to
the fair value of a “fixed-for-fixed” option on equity
shares, and equity classification is therefore
precluded.
In
accordance with ASC 815, derivative liabilities must be measured at
fair value upon issuance and re-valued at the end of each reporting
period through expiration. Any change in fair value between the
respective reporting periods is recognized as a gain or loss in the
statement of operations.
Expired warrants
As of
September 30, 2015, all Series A, B, C, E, F, G, H, and Q warrants
had expired.
Series R Warrants
On
December 4, 2012, the Company sold 3,500,000 shares of its common
stock for $10,500,000, or $3.00 per share, in a registered direct
offering. The investors in this offering also received Series R
warrants which entitle the investors to purchase up to 2,625,000
shares of the Company’s common stock. The Series R warrants
may be exercised at any time before December 6, 2016 at a price of
$4.00 per share. The fair value at issuance of the warrants of $4.2
million was recorded as a warrant liability.
Series S Warrants
On
October 11, 2013, the Company closed a public offering of
17,826,087 units of common stock and warrants at a price of $1.00
per unit for net proceeds of approximately $16.4 million, net of
underwriting discounts and commissions and offering expenses of the
Company. Each unit consisted of one share of common stock and one
Series S warrant to purchase one share of common stock. The Series
S warrants were immediately exercisable, expire on October 11,
2018, and have an exercise price of $1.25. In November 2013, the
underwriters purchased an additional 2,648,913 warrants pursuant to
the overallotment option, for which the Company received net
proceeds of $24,370. The fair value at issuance of the Series S
warrants of $6.1 million was recorded as a warrant
liability.
On
December 24, 2013, the Company closed a public offering of
4,761,905 units of common stock and warrants at a price of $0.63
per unit for net proceeds of approximately $2.8 million, net of
underwriting discounts and commissions and offering expenses of the
Company. Each unit consisted of one share of common stock and one
Series S warrant to purchase one share of common stock. The
underwriters purchased an additional 476,190 units of common stock
and warrants pursuant to the overallotment option, for which the
Company received net proceeds of approximately $279,000. The fair
value at issuance of the Series S warrants of approximately $1.2
million was recorded as a warrant liability. On February 7, 2014,
the Series S warrants began trading on the NYSE MKT under the
symbol CVM WT.
On
October 24, 2014, the Company closed an underwritten public
offering of 7,894,737 shares of common stock and 1,973,684 Series S
warrants to purchase shares of common stock. Additionally, on
October 21, 2014, the Company sold 1,320,000 shares of common stock
and 330,000 Series S warrants to purchase shares of common stock in
a private offering. The common stock and Series S warrants were
sold at a combined per unit price of $0.76 for net proceeds of
approximately $6.4 million, net of underwriting discounts and
commissions and offering expenses. The fair value at issuance of
the Series S warrants of approximately $461,000 was added to the
existing Series S warrant liability.
During
the years ended September 30, 2016 and 2015, no Series S warrants
were exercised. During the year ended September 30, 2014, 2,088,769
Series S Warrants were exercised, and the Company received proceeds
of approximately $2.6 million.
Series T and U Warrants
On
April 17, 2014, the Company closed a public offering of 7,128,229
shares of common stock at a price of $1.40 and 1,782,057 Series T
warrants to purchase one share of common stock for net proceeds of
approximately $9.2 million, net of underwriting commissions and
offering expenses. The Series T warrants were immediately
exercisable and had an exercise price of $1.58. On October 17,
2014, all of the Series T warrants expired. The underwriters
received 445,514 Series U warrants to purchase one share of common
stock. The Series U warrants were exercisable beginning October 17,
2014, expire on October 17, 2017, and have an exercise price of
$1.75. The fair value at issuance of the Series T and U warrants of
approximately $470,000 was recorded as a warrant
liability.
Series V Warrants
On May
28, 2015, the Company closed an underwritten public offering of
20,253,164 shares of common stock and 20,253,164 Series V warrants
to purchase shares of common stock. The common stock and Series V
warrants were sold at a combined per unit price of $0.79 for net
proceeds of approximately $14.7 million, net of underwriting
discounts and commissions and offering expenses. The Series V
warrants were immediately exercisable at a price of $0.79 and
expire on May 28, 2020. The fair value at issuance of the Series V
warrants of approximately $8.0 million was recorded as a warrant
liability.
Series W Warrants
On
October 28, 2015, the Company closed an underwritten public
offering of 17,223,248 shares of common stock and 17,223,248 Series
W warrants to purchase shares of common stock. The common stock and
warrants were sold at a combined per unit price of $0.67 for net
proceeds of approximately $10.5 million, net of underwriting
discounts and commissions and offering expenses. The Series W
warrants are immediately exercisable at a price of $0.67 and expire
on October 28, 2020. The fair value at issuance of the Series W
warrants of approximately $5.1 million was recorded as warrant
liability.
Series Z and ZZ Warrants
On May
23, 2016, the Company closed a registered direct offering of
10,000,000 shares of common stock and 6,600,000 Series Z warrants
to purchase shares of common stock. The common stock and warrants
were sold at a combined per unit price of $0.50 for net proceeds of
approximately $4.6 million, net of placement agent’s
commissions and offering expenses. The Series Z warrants may be
exercised at any time on or after November 23, 2016 and on or
before November 23, 2021 at a price of $0.55 per share. The Company
also issued 500,000 Series ZZ warrants to the placement agent as
part of its compensation. The Series ZZ warrants may be exercised
at any time on or after November 23, 2016 and on or before May 18,
2021 at a price of $0.55 per share. The fair value of the Series Z
and Series ZZ warrants of approximately $2.1 million on the date of
issuance was recorded as a warrant liability.
Series AA and BB Warrants
On August 26, 2016, the Company closed a
registered direct offering of 10,000,000 shares of common
stock and 5,000,000 Series AA warrants to purchase shares of common
stock. The common stock and warrants were sold at a combined per
unit price of $0.50 for proceeds of approximately $4.5 million, net
of placement agent’s commissions and offering expenses. The
series AA warrants may be exercised at any time after February 22,
2017 and on or before February 22, 2022 at a price of $0.55 per
share.
The Company also issued 400,000 Series BB warrants to
the placement agent as part of its compensation. The Series BB
warrants may be exercised at any time on or after February 22, 2017
and on or before August 22, 2021 at a price of $0.55 per share. The
fair value of the Series AA and Series BB warrants of approximately
$1.5 million on the date of issuance was recorded as a warrant
liability.
Series X Warrants
In
January 2016, the Company sold 3,000,000 shares of its common stock
and 3,000,000 Series X warrants to the de Clara Trust for
approximately $1.1 million. The de Clara Trust is controlled by
Geert Kersten, the Company's Chief Executive Officer and a
director. Each Series X warrant allows the de Clara Trust to
purchase one share of the Company's common stock at a price of
$0.37 per share at any time on or before January 13, 2021. The
Series X warrants qualify for equity treatment in accordance with
ASC 815. The relative fair value of the warrants was calculated to
be approximately $417,000.
Series Y Warrants
On
February 15, 2016, the Company sold 1,300,000 shares of its common
stock and 650,000 Series Y warrants to a private investor for
$624,000. Each Series Y warrant allows the holder to purchase one
share of the Company's common stock at a price of $0.48 per share
at any time on or before February 15, 2021. The Series Y warrants
qualify for equity treatment in accordance with ASC 815. The
relative fair value on the date of issuance of the warrants was
calculated to be approximately $144,000.
Series N Warrants
Series
N warrants were previously issued in connection with a financing.
On October 11, 2013 and December 24, 2013, in connection with
public offerings of common stock on those dates, the Company reset
the exercise price of the 518,771 outstanding Series N warrants
from $3.00 to $0.53 and issued the Series N warrant holders
2,432,649 additional warrants exercisable at $0.53, as required by
the warrant agreements. In January 2014, the Company offered the
investors the option to extend the Series N warrants by one year
and allow for cashless exercise in exchange for cancelling the
reset provision in the warrant agreement. One investor, holding
2,844,627 Series N warrants accepted this offer. Accordingly, these
warrants are no longer considered a derivative liability due to the
cancelation of the reset provision. The fair value of the warrants
on that date totaled approximately $1.3 million and was
reclassified from derivative liabilities to additional paid-in
capital. On March 21, 2014, the other investor exercised 106,793
Series N warrants. The Company received cash proceeds of
approximately $7,000 for 14,078 of the warrants exercised. The
remaining 92,715 warrants were exercised in a cashless exercise.
The fair value of the warrants on the date of exercise was $137,000
and was reclassified from derivative liabilities to additional
paid-in capital.
On
October 28, 2014, the outstanding 2,844,627 Series N Warrants were
transferred to the de Clara Trust, of which the Company’s
CEO, Geert Kersten, is the trustee and a beneficiary. On June 29,
2015, the Company extended the expiration date of the Series N
warrants to August 18, 2017. The incremental cost of this
modification was approximately $475,000. The modification was
concurrent with the extinguishment and reissuance of a note payable
also held in the de Clara Trust, and was recorded as a loss on debt
extinguishment.
As of
September 30, 2016, the remaining 2,844,627 Series N warrants
entitle the holder to purchase one share of the Company's common
stock at a price of $0.53 per share at any time prior to August 18,
2017. On September 30, 2016 and 2015, no derivative liability was
recorded because the warrants no longer were considered a liability
for accounting purposes.
Series L and Series M Warrants
Series
L and Series M warrants were previously issued in connection with a
financing. In April 2014, 25,000 Series L warrants, with an
exercise price of $7.50, expired. In April 2015, the remaining
70,000 of the Series L warrants, which had been repriced to $2.50
in April 2013, expired.
In
October 2013, the Company reduced the exercise prices of the Series
M warrants from $3.40 to $1.00 in exchange for a reduction in the
number of warrants from 600,000 to 500,000. The additional cost of
$76,991 was recorded as non-employee stock expense. In March 2014,
500,000 Series M warrants were exercised at a price of $1.00, and
the Company received proceeds of $500,000.
Series P Warrants
On
February 10, 2012, the Company issued 590,001 Series P warrants to
purchase up to 590,001 shares of the Company’s common stock
at a price of $4.50 per share as an inducement for the exercise of
previously issued warrants. The Series P warrants are exercisable
at any time prior to March 6, 2017.
3.
Options and Shares Issued to Consultants
The
Company typically enters into consulting arrangements in exchange
for common stock or stock options. During the years ended September
30, 2016 and 2015, the Company issued 1,248,831 and 739,968 shares
of common stock, respectively, to consultants, of which 784,000 and
180,000, respectively, were restricted shares. Under these
arrangements, the common stock was issued with stock prices ranging
between $0.37 and $1.11 per share.
Additionally,
during the years ended September 30, 2016 and 2015, the Company
issued to consultants 410,000 and 90,000 options, respectively, to
purchase common stock with exercise prices ranging from $0.37 to
$1.02 per share and fair values ranging from $0.12 to $0.50 per
share. The aggregate values of the issuances of restricted common
stock and common stock options are recorded as prepaid expenses and
are charged to general and administrative expenses over the periods
of service.
During the years
ended September 30, 2016 and 2015, the Company recorded total
expense of approximately $752,000 and $566,000, respectively,
relating to these consulting agreements. At September 30, 2016 and
2015, approximately $48,000 and $30,000, respectively, are included
in prepaid expenses. As of September 30, 2016, 640,000 options
issued to consultants as payment for services remained outstanding,
440,000 of which are fully vested, and all of which were issued
from the Non-Qualified Stock Option plans
5.
RESEARCH
AND OFFICE EQUIPMENT
Research and office
equipment consisted of the following at September 30:
|
2016
|
2015
|
|
|
|
Research
equipment
|
$
3,158,633
|
$
3,268,757
|
Furniture
and equipment
|
133,499
|
141,347
|
Leasehold
improvements
|
131,910
|
131,910
|
|
|
|
|
3,424,042
|
3,542,014
|
|
|
|
Accumulated
depreciation and amortization
|
(3,197,826
)
|
(3,234,548
)
|
|
|
|
Net
research and office equipment
|
$
226,216
|
$
307,466
|
Depreciation
expense for the years ended September 30, 2016, 2015 and 2014
totaled approximately $112,000, $166,000 and $189,000,
respectively. One asset is recorded under capital lease with a net
book value of $0 and approximately $8,000 on September 30, 2016 and
2015, respectively. Amortization of the capital lease asset is
included in general and administrative expenses on the Statements
of Operations.
Patents
consisted of the following at September 30:
|
2016
|
2015
|
|
|
|
Patents
|
$
1,528,610
|
$
1,525,791
|
Accumulated
amortization
|
(1,272,063.00
)
|
(1,234,227.00
)
|
|
|
|
Net
Patents
|
$
256,547
|
$
291,564
|
During
the years ended September 30, 2016, 2015 there was no impairment of
patent costs and a nominal impairment charge in 2014. Amortization
expense for the years ended September 30, 2016, 2015 and 2014
totaled approximately $38,000, $40,000 and $43,000, respectively.
The total estimated future amortization is as follows:
Years ending September
30,
|
|
2017
|
$
37,000
|
2018
|
36,000
|
2019
|
35,000
|
2020
|
31,000
|
2021
|
28,000
|
Thereafter
|
90,000
|
|
$
257,000
|
At
September 30, 2016 and 2015, the Company had federal net operating
loss carryforwards of approximately $169.7 million and $157.0
million, respectively. The NOLs begin to expire during the fiscal
year ending September 30, 2019 and become fully expired by the end
of the fiscal year ended 2036. In addition, the Company has a
general business credit as a result of the credit for increasing
research activities (“R&D credit”) of approximately
$1.2 million at September 30, 2016 and 2015. The R&D credit
begins to expire during the fiscal year ending September 30, 2020
and is fully expired during the fiscal year ended 2029. Deferred
taxes consisted of the following at September 30:
|
2016
|
2015
|
|
|
|
Net
operating loss carryforwards
|
$
64,366,000
|
$
61,363,000
|
|
|
|
R&D
credit
|
1,221,000
|
1,221,000
|
Stock-based
compensation
|
6,379,000
|
5,855,000
|
Fixed
assets and intangibles
|
57,000
|
41,000
|
Capitalized
R&D
|
18,508,000
|
15,082,000
|
Vacation
and other
|
179,000
|
114,000
|
Loan
modification
|
-
|
57,000
|
|
|
|
Total
deferred tax assets
|
90,710,000
|
83,733,000
|
|
|
|
Valuation
allowance
|
(90,710,000
)
|
(83,733,000
)
|
Net
deferred tax asset
|
$
-
|
$
-
|
In
assessing the realization of deferred tax assets, management
considered whether it was more likely than not that some, or all,
of the deferred tax asset will be realized. The ultimate
realization of the deferred tax assets is dependent upon the
generation of future taxable income. Management has considered the
history of the Company’s operating losses and believes that
the realization of the benefit of the deferred tax assets cannot be
reasonably assured. In addition, under Internal Revenue Code
Section 382, the Company’s ability to utilize these net
operating loss carryforwards may be limited or eliminated in the
event of future changes in ownership.
The
Company has no federal or state current or deferred tax expense or
benefit. The Company’s effective tax rate differs from the
applicable federal statutory tax rate. The reconciliation of these
rates is as follows at September 30:
|
2016
|
2015
|
2014
|
|
|
|
|
Federal
Rate
|
34.00
%
|
34.00
%
|
34.00
%
|
State
tax rate, net of federal benefit
|
3.92
|
5.12
|
5.15
|
State
tax rate change
|
(22.13
)
|
(0.15
)
|
(0.93
)
|
Other
adjustments
|
(0.03
)
|
(0.21
)
|
0.00
|
Adjustment
to deferreds
|
0.00
|
0.00
|
19.13
|
Permanent
differences (1)
|
45.08
|
(0.71
)
|
(0.43
)
|
Change
in valuation allowance
|
(60.84
)
|
(38.05
)
|
(58.78
)
|
Effective
tax rate
|
0.00
%
|
0.00
%
|
0.00
%
|
(1)
The 2016 amount is mainly due to the gain on derivative instruments
approximating $14 million from the change in fair value of the
Company’s warrant liabilities during the
year.
The
Company applies the provisions of ASC 740,
“Accounting for Uncertainty in Income
Taxes,”
which requires financial statement benefits to
be recognized for positions taken for tax return purposes when it
is more likely than not that the position will be sustained. The
Company has elected to reflect any tax penalties or interest
resulting from tax assessments on uncertain tax positions as a
component of tax expense. The Company has generated federal net
operating losses in tax years ending September 30, 1998 through
2015. These years remain open to examination by the major domestic
taxing jurisdictions to which the Company is subject.
The
Company recognized the following expenses for options issued or
vested and restricted stock awarded during the year:
|
Year Ended September
30,
|
|
2016
|
2015
|
2014
|
Employees
|
$
2,113,433
|
$
5,105,827
|
$
3,958,637
|
Non-employees
|
$
751,651
|
$
565,915
|
$
771,946
|
These
expenses were recorded as general and administrative expense.
During the years ended September 30, 2016, 2015 and 2014,
non-employee stock compensation excluded approximately $48,000,
$30,000 and $26,000, respectively, for future services to be
performed (Note 12).
During
the years ended September 30, the fair value of each option grant
was estimated on the date of grant using the Black-Scholes
option-pricing model with the following assumptions.
|
2016
|
2015
|
2014
|
Expected stock
price volatility
|
75.58
– 80.9
%
|
73.38
– 86.19
%
|
72.81
– 86.87
%
|
Risk-free interest
rate
|
0.71
– 1.56
%
|
0.93
– 2.35
%
|
0.59
– 2.65
%
|
Expected life of
options
|
3.0 – 9.69 Years
|
3.0 – 9.76 Years
|
3.0 –
9.76 Years
|
Expected dividend
yield
|
-
|
-
|
-
|
Non-Qualified Stock Option
Plans
--At September 30, 2016, the Company has collectively
authorized the issuance of 9,680,000 shares of common stock under
its Non-Qualified Stock Option Plans. Options typically vest over a
three-year period and expire no later than ten years after the
grant date. Terms of the options are to be determined by the
Company’s Compensation Committee, which administers the
plans. The Company’s employees, directors, officers, and
consultants or advisors are eligible to be granted options under
the Non-Qualified Stock Option Plans.
Incentive Stock Option
Plans
--At September 30, 2016, the Company had collectively
authorized the issuance of 3,460,000 shares of common stock under
its Incentive Stock Option Plans. Options typically vest over a
three-year period and expire no later than ten years after the
grant date. Terms of the options were determined by the
Company’s Compensation Committee, which administers the
plans. Only the Company’s employees are eligible to be
granted options under the Incentive Stock Option
Plans.
Activity in the
Company’s Non-Qualified and Incentive Stock Option Plans for
the two years ended September 30, 2016 is summarized as
follows:
Non-Qualified and Incentive Stock Option Plans
|
Outstanding
|
Exercisable
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
Ave
|
|
|
|
Ave
|
|
|
Number of
|
Weighted
Average
|
Remaining Contractual
|
Aggregate
Intrinsic
|
Number of
|
Weighted
Average
|
Remaining Contractual
|
Aggregate
Intrinsic
|
|
Shares
|
Exercise Price
|
Term (Years)
|
Value
|
Shares
|
Exercise Price
|
Term (Years)
|
Value
|
Outstanding
at October 1, 2014
|
6,831,149
|
$
2.98
|
6.55
|
$
3,600
|
3,443,884
|
$
3.40
|
5.49
|
$
3,600
|
|
|
|
|
|
|
|
|
|
Vested
|
|
|
|
|
1,153,357
|
$
2.48
|
|
|
Granted
(a)
|
893,700
|
$
0.66
|
|
|
|
|
|
|
Forfeited
|
116,665
|
$
1.87
|
|
|
|
|
|
|
Expired
|
70,499
|
$
4.15
|
|
|
70,499
|
$
4.15
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at September 30, 2015
|
7,537,685
|
$
2.71
|
5.98
|
$
50
|
4,526,742
|
$
3.15
|
5.01
|
$
0
|
Vested
|
|
|
|
|
1,401,716
|
$
1.27
|
|
|
Granted
(b)
|
1,213,600
|
$
0.48
|
|
|
|
|
|
|
Forfeited
|
55,998
|
$
0.86
|
|
|
|
|
|
|
Expired
|
106,000
|
$
5.80
|
|
|
106,000
|
$
5.80
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at September 30, 2016
|
8,589,287
|
$
2.37
|
5.35
|
$
0
|
5,822,458
|
$
2.65
|
4.76
|
$
0
|
(a)
Includes 90,000
stock options granted to consultants
(b)
Includes 410,000
stock options granted to consultants
A
summary of the status of the Company’s non-vested options for
the two years ended September 30, 2016 is presented
below:
|
|
Weighted Average
|
|
Number of
|
Grant Date
|
|
Options
|
Fair Value
|
|
|
|
Unvested
at October 1, 2014
|
3,387,265
|
$
2.15
|
Vested
|
(1,153,357
)
|
|
Granted
|
893,700
|
|
Forfeited
|
(116,665
)
|
|
Unvested
at September 30, 2015
|
3,010,943
|
$
1.72
|
Vested
|
(1,401,716
)
|
|
Granted
|
1,213,600
|
|
Forfeited
|
(55,998
)
|
|
Unvested
at September 30, 2016
|
2,766,829
|
$
1.48
|
Incentive Stock Bonus Plan
-- On
July 22, 2014 the Company's shareholders approved the 2014
Incentive Stock Bonus Plan, authorizing the issuance of up to
16,000,000 shares in the Company’s Incentive Stock Bonus
Plan. The shares will only be earned upon the achievement of
certain milestones leading to the commercialization of the
Company’s Multikine technology, or specified increases in the
market price of the Company’s stock
.
If the performance or market criteria
are not met as specified in the Incentive Stock Bonus Plan, all or
a portion of the awarded shares will be forfeited. The fair value
of the shares on the grant date was calculated using the market
value on the grant-date for issuances where the attainment of
performance criteria is likely and using a Monte Carlo simulation
for issuances where the attainment of performance criteria is
uncertain. The grant date fair value of shares issued that remain
outstanding as of September 30, 2016 is approximately $8.6 million.
The total value of the shares, if earned, is being expensed over
the requisite service periods for each milestone, provided the
requisite service periods are rendered, regardless of whether the
market conditions are met. No compensation cost is recognized for
awards where the requisite service period is not rendered. During
the years ended September 30, 2016 and 2015, the Company recorded
expense relating to the issuance of restricted stock pursuant to
the plan of approximately $634,000 and $3.4 million, respectively.
At September 30, 2016, the Company has unrecognized compensation
expense of approximately $3.1 million which is expected to be
recognized over a weighted average period of 5.03
years.
A
summary of the status of the Company’s restricted stock units
issued from the Incentive Stock Bonus Plan for the two years in the
period ended September 30, 2016 is presented below:
|
Number of Shares
|
Weighted Average Grant Date Fair
Value
|
Unvested at
October 1, 2014
|
15,700,000
|
$
0.55
|
Vested
|
(500,000
)
|
|
Granted
|
-
|
|
Forfeited
|
(100,000
)
|
|
Unvested at
September 30, 2015
|
15,100,000
|
$
0.55
|
Vested
|
-
|
|
Unvested at
September 30, 2016
|
15,100,000
|
$
0.55
|
Stock Bonus Plans
-- At
September 30, 2016, the Company was authorized to issue up to
5,594,000 shares of common stock under its Stock Bonus Plans. All
employees, directors, officers, consultants, and advisors are
eligible to be granted shares. During the year ended September 30,
2016, 408,497 shares were issued to the Company’s 401(k) plan
for a cost of approximately $162,000. During the year ended
September 30, 2015, 243,178 shares were issued to the
Company’s 401(k) plan for a cost of approximately $166,000.
During the year ended September 30, 2014, 164,787 shares were
issued to the Company’s 401(k) plan for a cost of
approximately $155,000. As of September 30, 2016, the Company has
issued a total of 3,161,211 shares of common stock from the Stock
Bonus Plans.
Stock Compensation Plans
-- At
September 30, 2016, 3,350,000 shares were authorized for use in the
Company’s stock compensation plans. During the years ended
September 30, 2016, 2015 and 2014, 464,831, 218,328 and 409,968
shares, respectively, were issued from the Stock Compensation Plans
to consultants for payment of services at a cost of approximately
$234,000, $147,000 and $439,000, respectively. During the year
ended September 30, 2016 and 2015, 95,935 and 107,050 shares,
respectively, were issued to employees from the Stock Compensation
Plans as part of their compensation at a cost of approximately
$45,000 and $58,000, respectively. No shares were issued to
employees from the Stock Compensation Plans during the year ended
September 30, 2014. As of September 30, 2016, the Company has
issued 1,984,765 shares of common stock from the Stock Compensation
Plans.
The
Company maintains a defined contribution retirement plan,
qualifying under Section 401(k) of the Internal Revenue Code,
subject to the Employee Retirement Income Security Act of 1974, as
amended, and covering substantially all Company employees. Each
participant’s contribution is matched by the Company with
shares of common stock that have a value equal to 100% of the
participant’s contribution, not to exceed the lesser of
$10,000 or 6% of the participant’s total compensation. The
Company’s contribution of common stock is valued each quarter
based upon the closing bid price of the Company’s common
stock. Total expense, including plan maintenance, for the years
ended September 30, 2016, 2015 and 2014, in connection with this
Plan was approximately $168,000, $170,000 and $160,000,
respectively.
10.
COMMITMENTS AND CONTINGENCIES
Clinical Research Agreements
In
March 2013, the Company entered into an agreement with Aptiv
Solutions to provide certain clinical research services in
accordance with a master service agreement. The Company will
reimburse Aptiv for costs incurred. The agreement required the
Company to make $600,000 in advance payments which are being
credited against future invoices in $150,000 annual increments
through December 2017. As of September 30, 2016, the total balance
advanced is $300,000, of which $150,000 is classified as a current
asset.
In April 2013, the Company entered into a
co-development and revenue sharing agreement with Ergomed. Under
the agreement, Ergomed will contribute up to $10 million towards
the study in the form of offering discounted clinical services in
exchange for a single digit percentage of milestone and royalty
payments, up to a specific maximum amount
. In October 2015,
the Company entered into a second
co-development and revenue sharing agreement with
Ergomed
for an additional $2 million, for a total of $12
million. The Company accounted for the co-development and revenue
sharing agreement in accordance with ASC 808 “Collaborative
Arrangements”. The Company determined the payments to Ergomed
are within the scope of ASC 730 “Research and
Development.” Therefore, the Company records the discount on
the clinical services as a credit to research and development
expense on its Statements of Operations. Since the Company entered
into the co-development and revenue sharing agreement with Ergomed,
it has incurred research and development expenses of approximately
$19.2 million related to Ergomed’s services. This amount is
net of Ergomed’s discount of approximately $6.3 million.
During the years ended September 30, 2016, 2015 and 2014, the
Company recorded, approximately $7.2 million, $6.7 million and $4.4
million, respectively, as research and development expense related
to Ergomed’s services. These amounts were net of
Ergomed’s discount of approximately $2.1 million, $2.4
million and $1.5 million, respectively, over the comparable
periods.
In
October 2013, the Company entered into two co-development and
profit sharing agreements with Ergomed. One agreement
supports the Phase 1 study being conducted at UCSF for the
development of Multikine as a potential treatment for peri-anal
warts in HIV/HPV co-infected men and women. The other
agreement focuses on the development of Multikine as a potential
treatment for cervical dysplasia in HIV/HPV co-infected women.
Ergomed will assume up to $3 million in clinical and regulatory
costs for each study.
The
Company is currently involved in a pending arbitration proceeding,
CEL-SCI Corporation v. inVentiv Health Clinical, LLC (f/k/a
PharmaNet LLC) and PharmaNet GmbH (f/k/a PharmaNet AG). On October
31, 2013,
the Company initiated the
proceedings against inVentiv Health Clinical, LLC, or inVentiv, the
former third-party CRO, and are seeking payment for damages related
to inVentiv’s prior involvement in the ongoing Phase 3
clinical trial of Multikine. The arbitration claim, initiated under
the Commercial Rules of the American Arbitration Association,
alleges (i) breach of contract, (ii) fraud in the inducement, and
(iii) common law fraud. The Company is seeking at least $50 million
in damages in its amended statement of claim. Based upon further
analysis, however, the Company believes that its damages (direct
and consequential) presently total over $150
million.
In an
amended statement of claim, the Company asserted the claims set
forth above as well as an additional claim for professional
malpractice. The arbitrator subsequently granted
inVentiv’s motion to dismiss the professional malpractice
claim based on the “economic loss doctrine” which,
under New Jersey law, is a legal doctrine that, under certain
circumstances, prohibits bringing a negligence-based claim
alongside a claim for breach of contract. The arbitrator
denied the remainder of inVentiv’s motion, which had sought
to dismiss certain other aspects of the amended statement of
claim. In particular, the arbitrator rejected
inVentiv’s argument that several aspects of the amended
statement of claim were beyond the arbitrator’s
jurisdiction.
In
connection with the pending arbitration proceedings, inVentiv has
asserted counterclaims against the Company for (i) breach of
contract, seeking at least $2 million in damages for services
allegedly performed by inVentiv; (ii) breach of contract, seeking
at least $1 million in damages for the Company’s alleged use
of inVentiv’s name in connection with publications and
promotions in violation of the parties’ contract; (iii)
opportunistic breach, restitution and unjust enrichment, seeking at
least $20 million in disgorgement of alleged unjust profits
allegedly made by the Company as a result of the purported breaches
referenced in subsection (ii); and (iv) defamation, seeking at
least $1 million in damages for allegedly defamatory statements
made about inVentiv. The Company believes inVentiv’s
counterclaims are meritless. However, if inVentiv successfully
asserts any of its counterclaims, such an adverse determination
could have a material adverse effect on the Company’s
business, results, financial condition and liquidity.
In
October 2015 the Company signed an arbitration funding agreement
with a company established by Lake Whillans Litigation Finance,
LLC, a firm specializing in funding litigation expenses. Pursuant
to the agreement, an affiliate of Lake Whillans provides the
Company with funding for litigation expenses to support its
arbitration claims against inVentiv. The funding is available to
the Company to fund the expenses of the ongoing arbitration and
will only be repaid when the Company receives proceeds from the
arbitration. During the year ended September 30, 2016, the Company
recognized a gain of approximately $1.1 million on the
derecognition of legal fees to record the transfer of the liability
that existed prior to the execution of the financing agreement from
the Company to Lake Whillans. The gain on derecognition of legal
fees is recorded as a reduction of general and administration
expenses on the Statement of Operations. All related legal fees are
directly billed to and paid by Lake Whillans. As part of the
agreement with Lake Whillans, the law firm agreed to cap its fees
and expenses for the arbitration at $5 million.
The
arbitration hearing on the merits (the “trial”) began
on September 26, 2016.
Lease Agreements
The
approximate future minimum annual rental payments due under
non-cancelable operating leases for office and laboratory space are
as follows:
Years
Ending September 30,
|
|
2017
|
$
1,930,000
|
2018
|
1,997,000
|
2019
|
2,066,000
|
2020
|
2,110,000
|
2021
|
2,100,000
|
Thereafter
|
15,831,000
|
Total
minimum lease payments:
|
$
26,034,000
|
Rent
expense, including amortization of deferred rent, for the years
ended September 30, 2016, 2015 and 2014, was approximately $2.7
million. The Company’s three leases expire between June 2020
and October 2028.
The
Company leases a building near Baltimore, Maryland. The building
was remodeled in accordance with the Company’s specifications
so that it can be used by the Company to manufacture Multikine for
the Company’s Phase 3 clinical trial and sales of the drug if
approved by the FDA. The lease is for a term of twenty years and
requires annual base rent to escalate each year at 3%. The Company
is required to pay all real 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.
At
September 30, 2016, the Company recorded a total deferred rent
asset of approximately $3.8 million, of which approximately $3.4
million is long term and the balance of approximately $430,000 is
included in current assets. At September 30, 2015, the Company
recorded a total deferred rent asset of approximately $4.5 million,
of which approximately $4 million is long term and the balance of
approximately $488,000 is included in current assets. On September
30, 2016 and 2015, the Company has included in deferred rent the
following: 1) deposit on the manufacturing facility ($3.1 million);
2) the fair value of the warrants issued to lessor ($1.4 million);
3) additional investment ($3.0); 4) deposit on the cost of the
leasehold improvements for the manufacturing facility ($1.8
million). At September 30, 2016, the Company has accumulated
amortization of approximately $5.5 million. At September 30, 2015,
the Company has also included accrued interest on deposit of
approximately $128,000, and accumulated amortization of
approximately $4.9 million.
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 on September 30, 2016 and
2015.
The
Company subleases a portion of its rental space on a month to month
term lease, which requires a 30 day notice for termination. The
sublease rent for the years ended September 30, 2016, 2015 and 2014
was approximately $67,000, $65,000 and $63,000, respectively, and
is recorded in grant income and other in the statements of
operations.
The
Company leases its research and development laboratory under a 60
month lease which expires February 28, 2017. In September 2016, the
lease was extended through 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 $11,000 per
month. As of September 30, 2016 and 2015, the Company has recorded
a deferred rent liability of approximately $2,000 and $6,000,
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 September
30, 2016 and 2015, the Company has recorded a deferred rent
liability of approximately $18,000 and $13,000,
respectively.
The
Company leases office equipment under a capital lease arrangement.
The term of the capital lease is 48 months and expired on September
30, 2016. The monthly lease payment is $1,025. The lease bears
interest at approximately 6% per annum.
Vendor Obligations
Further, the
Company has contingent obligations with other vendors for work that
will be completed in relation to the Phase 3 trial. The timing of
these obligations cannot be determined at this time.
The total remaining
cash cost of the Phase 3 clinical trial, excluding any costs that
will be paid by CEL-SCI's partners, would be approximately $12.1
million after September 30, 2016. This ís based on the
executed contract costs with the CROs only and does not include
other related costs, e.g. the manufacturing of the
drug.
The Company has filed an amendment to the
original Phase 3 protocol for it head and neck cancer study with
the FDA to allow for this expansion in patient enrollment. Should
the FDA allow the amended protocol filed with them to proceed, the
remaining cost of the Phase 3 clinical trial will be
higher.
11.
RELATED PARTY TRANSACTIONS
Effective August
31, 2016, Maximilian de Clara, the Company’s President and a
director, resigned for health reasons. In payment for past
services, the Company agreed to issue Mr. de Clara 650,000 shares
of restricted stock; 325,000 shares upon his resignation and
325,000 on August 31, 2017. The market value of the shares granted,
including the accrued value of the shares to be issued in August
2017, totaled $253,500.
On
January 13, 2016, the de Clara Trust demanded payment on the note
payable, of which the balance, including accrued and unpaid
interest, was $1,105,989. The de Clara Trust was established by
Maximilian de Clara, the Company’s former President and a
director. The Company’s Chief Executive Officer, Geert
Kersten, is the trustee and a beneficiary. When the de Clara Trust
demanded payment on the note, the Company sold 3,000,000 shares of
its common stock and 3,000,000 Series X warrants to the de Clara
Trust for approximately $1.1 million. Each warrant allows the de
Clara Trust to purchase one share of the Company's common stock at
a price of $0.37 per share at any time on or before January 13,
2021.
Prior
to the repayment, on June 29, 2015, the Company had extended the
maturity date of the note to July 6, 2017, lowered the interest
rate from 15% to 9% and changed the conversion price from $4.00 to
$0.59, the closing stock price on the previous trading day. The
Company determined these modifications to be substantive and
accounted for the modification as an extinguishment of the
pre-modification note and issuance of the post-modification note.
The Company recorded an extinguishment loss and a premium on the
note payable of approximately $166,000, which was credited to
additional paid in capital. Concurrently, the Company extended the
expiration date of the Series N warrants to August 18, 2017. The
incremental cost of this modification was approximately $475,000
and was included in debt extinguishment loss on the note, for a
total loss of approximately $620,000 during the year ended
September 30, 2015.
During
the years ended September 30, 2016, 2015 and 2014, the Company paid
approximately $43,000, $146,000 and $179,000, respectively, in
interest expense to Mr. de Clara.
12.
STOCKHOLDERS’ EQUITY
During
the years ended September 30, 2016 and 2015, no warrants were
exercised. During the year ended September 30, 2014, 2,695,562
Series M, N and S warrants were exercised. The Company issued
2,668,508 shares of common stock and received approximately $3.1
million from the exercise of these warrants since 92,715 Series N
warrants were exercised in a cashless exercise.
On
October 11, 2013, the Company closed a public offering of units of
common stock and Series S warrants at a price of $1.00 per unit for
net proceeds of $16.4 million, net of underwriting discounts and
commissions. Each unit consisted of one share of common stock and a
warrant to purchase one share of common stock. The warrants were
immediately exercisable and expire on October 11, 2018, and have an
exercise price of $1.25. In November 2013, the underwriters
purchased an additional 2,648,913 warrants pursuant to the
overallotment option, for which the Company received net proceeds
of approximately $24,000.
On
December 24, 2013, the Company closed a public offering of units of
common stock and Series S warrants at a price of $0.63 per unit for
net proceeds of approximately $2.8 million, net of underwriting
discounts and commissions. Each unit consisted of one share of
common stock and a warrant to purchase one share of common stock.
The warrants are immediately exercisable and expire on October 11,
2018, and have an exercise price of $1.25. The underwriters
exercised the option for the full 10% overallotment, for which the
Company received net proceeds of approximately
$279,000.
The
October and December 2013 financings triggered the reset provision
from the August 2008 financing which resulted in the issuance of an
additional 1,563,083 shares of common stock. The cost of additional
shares issued was approximately $1.1 million. This cost was
recorded as a deemed a dividend.
On
October 24, 2014, the Company closed an underwritten public
offering of 7,894,737 shares of common stock and 1,973,684 Series S
warrants to purchase shares of common stock. Additionally, in a
related private offering on October 21, 2014, the Company sold
1,320,000 shares of common stock and 330,000 Series S warrants to
purchase shares of common stock. The common stock and Series S
warrants were sold at a combined price of $0.76 for net proceeds of
approximately $6.4 million, net of offering expenses. The Series S
warrants trade of the NYSE MKT under the symbol CVM
WT.
On
April 17, 2014, the Company closed a public offering of units
consisting of 7,128,229 shares of common stock and Series T
warrants to purchase an aggregate of 1,782,057 shares of common
stock. The units were sold at a price of $1.40 per unit. The
Company received net proceeds of approximately $9.1 million after
deducting the underwriting commissions and offering expenses. The
common stock and warrants separated immediately. The Series T
warrants, with an exercise price of $1.58 per share, expired on
October 17, 2014. The underwriters in the offering received 445,514
Series U warrants to purchase one share of common stock. The Series
U warrants expire on October 17, 2017, and have an exercise price
of $1.75.
On May
28, 2015, the Company closed an underwritten public offering of
20,253,164 shares of common stock and 20,253,164 Series V warrants
to purchase shares of common stock. The common stock and Series V
warrants were sold at a combined per unit price of $0.79 for net
proceeds of approximately $14.7 million, net of underwriting
discounts and commissions and offering expenses. The Series V
warrants are immediately exercisable at a price of $0.79 and expire
on May 28, 2020.
On
October 28, 2015, the Company closed an underwritten public
offering of 17,223,248 shares of common stock and 17,223,248 Series
W warrants to purchase shares of common stock. The common stock and
warrants were sold at a combined price of $0.67 for net proceeds of
approximately $10.5 million, net of underwriting commissions and
offering expenses. The warrants were immediately exercisable,
expire October 28, 2020 and have an exercise price of
$0.67.
On May
23, 2016, the Company closed a registered direct offering of
10,000,000 shares of common stock and 6,600,000 Series Z warrants
to purchase shares of common stock. The common stock and warrants
were sold at a combined per unit price of $0.50 for net proceeds of
approximately $4.6 million, net of placement agent’s
commissions and offering expenses. The Series Z warrants may be
exercised at any time on or after November 23, 2016 and on or
before November 23, 2021 at a price of $0.55 per share. The Company
also issued 500,000 Series ZZ warrants to the placement agent as
part of its compensation. The Series ZZ warrants may be exercised
at any time on or after November 23, 2016 and on or before May 18,
2021 at a price of $0.55 per share.
On August 26, 2016, the Company closed a
registered direct offering of 10,000,000 shares of common
stock and Series AA warrants to purchase up to 5,000,000 shares of
common stock. Each share of common stock was sold together with a
Series AA warrant to purchase one-half of a share of common stock
for the combined purchase price of $0.50. Each warrant can be
exercised at any time after February 22, 2017 and on or before
February 22, 2022 at a price of $0.55 per share.
The Company
also issued 400,000 Series BB warrants to the placement agent as
part of its compensation. The Series BB warrants may be exercised
at any time on or after February 22, 2017 and on or before August
22, 2021 at a price of $0.55 per share. The Company received
proceeds from the sale of Series AA and Series BB shares and
warrants of approximately $4.5 million, net of placement
agent’s commissions and offering expenses
13.
FAIR VALUE MEASUREMENTS
In
accordance with the provisions of ASC 820, “
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 about those future
amounts.
ASC 820
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:
o
Level 1 –
Observable inputs such as quoted prices in active markets for
identical assets or liabilities
o
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
o
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 liabilities measured at fair value on a
recurring basis, by input level, on the balance sheet at September
30, 2016:
|
Quoted Prices in
|
Significant
|
|
|
|
Active Markets for
|
Other
|
Significant
|
|
|
Identical
|
Observable
|
Unobservable
|
|
|
Liabilities (Level 1)
|
Inputs (Level 2)
|
Inputs (Level 3)
|
Total
|
|
|
|
|
|
Derivative
Instruments
|
$
3,111,361
|
|
$
5,283,573
|
$
8,394,934
|
The
table below sets forth the liabilities measured at fair value on a
recurring basis, by input level, on the balance sheet at September
30, 2015:
|
Quoted
Prices in
|
Significant
|
|
|
|
Active
Markets for
|
Other
|
Significant
|
|
|
Identical
|
Observable
|
Unobservable
|
|
|
Liabilities
(Level 1)
|
Inputs
(Level 2)
|
Inputs
(Level 3)
|
Total
|
|
|
|
|
|
Derivative
Instuments
|
$
7,365,555
|
|
$
6,323,032
|
$
13,686,587
|
The
following sets forth the reconciliation of beginning and ending
balances related to fair value measurements using significant
unobservable inputs (Level 3), as of September 30:
|
2016
|
2015
|
|
|
|
Beginning
balance
|
$
6,323,032
|
$
307,894
|
Issuances
|
8,722,073
|
8,003,220
|
Net realized
and unrealized derivative gain
|
(9,761,532
)
|
(1,988,082
)
|
Ending
balance
|
$
5,283,573
|
$
6,323,032
|
The
fair values of the Company’s derivative instruments disclosed
above under Level 3 are primarily derived from valuation models
where significant inputs such as historical price and volatility of
the Company’s stock as well as U.S. Treasury Bill rates are
observable in active markets. At September 30, 2016, the
Company’s Level 3 derivative instruments have a weighted
average fair value of $0.10 per share and a weighted average
exercise price of $0.86 per share. Fair values were determined
using a weighted average risk free interest rate of 1.04% and 75%
volatility.
14. NET LOSS PER COMMON
SHARE
Basic
loss per share is computed by dividing net loss available to common
shareholders by the weighted average number of common shares
outstanding during the period. The Company’s potentially
dilutive shares, which include outstanding common stock options,
common stock warrants, restricted stock and shares issuable on
convertible debt, have not been included in the computation of
diluted net loss per share for all periods presented, as the result
would be anti-dilutive. For the years presented, the gain on
derivative instruments is not included in net loss available to
common shareholders for purposes of computing dilutive loss per
share because its effect is anti-dilutive.
The
following table provides a reconciliation of the numerators and
denominators of the basic and diluted per-share
computations:
|
2016
|
2015
|
2014
|
|
|
|
|
Net
loss available to
|
|
|
|
common
shareholders
|
$
(11,466,498
)
|
$
(34,674,646
)
|
$
(28,483,712
)
|
Less:
Gain on derivative
|
|
|
|
Instruments
|
-
|
-
|
(248,767
)
|
Net
loss - diluted
|
$
(11,466,498
)
|
$
(34,674,646
)
|
$
(28,732,479
)
|
|
|
|
|
Weighted
average number of
|
|
|
|
shares
- basic and diluted
|
121,655,108
|
82,519,027
|
58,804,622
|
|
|
|
|
Loss
per share - basic
|
$
(0.09
)
|
$
(0.42
)
|
$
(0. 48
)
|
Loss
per share - diluted
|
$
(0.09
)
|
$
(0.42
)
|
$
(0. 49
)
|
For the
years ended September 30, 2016 and 2015, the gain on derivatives is
not excluded from the numerator in calculating diluted loss per
share because the gain relates to derivative warrants that were
priced higher than the average market price during the
period.
In
accordance with the contingently issuable shares guidance of FASB
ASC Topic 260,
Earnings Per
Share
, the calculation of diluted net loss per share
excludes the following dilutive securities because their inclusion
would have been anti-dilutive as of September 30:
|
2016
|
2015
|
2014
|
|
|
|
|
Options and
Warrants
|
91,882,022
|
58,421,058
|
39,994,707
|
Convertible
Debt
|
-
|
1,871,283
|
276,014
|
Unvested Restricted
Stock
|
15,100,000
|
15,100,000
|
15,700,000
|
Total
|
106,982,022
|
75,392,341
|
55,970,721
|
15. SEGMENT
REPORTING
ASC
280, “
Disclosure about
Segments of an Enterprise and Related Information
”
establishes standards for reporting information regarding operating
segments in annual financial statements and requires selected
information for those segments to be presented in interim financial
reports issued to stockholders. This topic also establishes
standards for related disclosures about products and services and
geographic areas. Operating segments are identified as components
of an enterprise about which separate discrete financial
information is available for evaluation by the chief operating
decision maker, or decision-making group, in making decisions how
to allocate resources and assess performance. The Company’s
chief decision maker, as defined under this topic, is the Chief
Executive Officer. To date, the Company has viewed its operations
as principally one segment, the research and development of certain
drugs and vaccines. As a result, the financial information
disclosed herein materially represents all of the financial
information related to the Company’s principal operating
segment.
16. QUARTERLY INFORMATION
(UNAUDITED)
The
following quarterly data are derived from the Company’s
statements of operations.
Financial Data
Fiscal
2016
|
|
|
|
|
|
|
Three months
|
Three months
|
Three months
|
Three months
|
|
|
ended
|
ended
|
ended
|
Ended
|
Year ended
|
|
December 31
2015
|
March 31,
2016
|
June 30,
2016
|
September 30,
2016
|
September 30,
2016
|
Grant
income and other
|
$
20,976
|
$
32,775
|
$
129,975
|
$
101,329
|
$
285,055
|
Operating
expenses
|
5,804,108
|
6,306,378
|
6,512,722
|
7,215,072
|
25,838,280
|
Non-operating
(expense) income, net
|
1,985
|
22,478
|
24,679
|
23,859
|
73,001
|
Gain
(loss) on derivative instruments
|
8,122,960
|
(2,593,730
)
|
2,508,744
|
5,975,752
|
14,013,726
|
Net
income (loss) available to
|
|
|
|
|
|
common
shareholders
|
$
2,341,813
|
$
(8,844,855
)
|
$
(3,849,324
)
|
$
(1,114,132
)
|
$
(11,466,498
)
|
EPS
(LPS) -basic and diluted
|
$
0.02
|
$
(0.07
)
|
$
(0.03
)
|
$
(0.01
)
|
$
(0.09
)
|
Weighted
average shares:
|
|
|
|
|
|
Basic
|
109,768,502
|
118,420,327
|
124,132,500
|
134,290,870
|
121,655,108
|
Diluted
|
111,639,785
|
118,420,327
|
124,132,500
|
134,290,870
|
121,655,108
|
Fiscal
2015
|
|
|
|
|
|
|
Three months
|
Three months
|
Three months
|
Three months
|
|
|
ended
|
ended
|
ended
|
Ended
|
Year ended
|
|
December 31
2014
|
March 31,
2015
|
June 30,
2015
|
September 30,
2015
|
September 30,
2015
|
Grant
income and other
|
$
136,838
|
$
197,620
|
$
389,223
|
$
(66,304
)
|
$
657,377
|
Operating
expenses
|
10,132,579
|
7,956,963
|
8,590,698
|
8,273,682
|
34,953,922
|
Non-operating
(expense) income, net
|
(12,547
)
|
(14,097
)
|
(35,985
)
|
22,369
|
(40,260
)
|
Gain
(loss) on derivative instruments
|
2,162,970
|
(4,782,796
)
|
4,428,780
|
(1,526,338
)
|
282,616
|
Loss
on debt extinguishment
|
-
|
-
|
(620,457
)
|
-
|
(620,457
)
|
Net
loss available to
|
|
|
|
|
|
common
shareholders
|
$
(7,845,318
)
|
$
(12,556,236
)
|
$
(4,429,137
)
|
$
(9,843,955
)
|
$
(34,674,646
)
|
Net
loss per share-basic
|
$
(0.11
)
|
$
(0.17
)
|
$
(0.05
)
|
$
(0.10
)
|
$
(0.42
)
|
Net
loss per share-diluted
|
$
(0.14
)
|
$
(0.17
)
|
$
(0.06
)
|
$
(0.10
)
|
$
(0.42
)
|
Weighted
average shares:
|
|
|
|
|
|
Basic
|
73,260,783
|
75,847,869
|
83,796,311
|
97,040,004
|
82,519,027
|
Diluted
|
73,260,783
|
75,847,869
|
85,134,107
|
97,040,004
|
82,519,027
|
The
Company has experienced large swings in its quarterly gains and
losses caused by the changes in the fair value of warrants each
quarter.
17. SUBSEQUENT
EVENTS
In
accordance with ASC 855, “
Subsequent Events
”, the Company
has reviewed subsequent events through the date of the
filing.
On
December 8, 2016, the Company sold 34,024,000 shares of common
stock and warrants to purchase common stock at a price of $0.125 in
a public offering. The warrants consist of 17,012,000 Series CC
warrants to purchase 17,012,000 shares of common stock, 34,024,000
Series DD warrants to purchase 34,024,000 shares of common stock
and 34,024,000 Series EE warrants to purchase 34,024,000 shares of
common stock. The Series CC warrants are immediately exercisable,
expire in five-years and have an exercise price of $0.20 per share.
The Series DD warrants are immediately exercisable, expire in
six-months and have an exercise price of $0.18 per share. The
Series EE warrants are immediately exercisable, expire in
nine-months and have an exercise price of $0.18 per share. In
addition, the Company issued 1,701,000 Series FF warrants to
purchase 1,701,000 shares of common stock to the placement agent.
The FF warrants are exercisable at any time on or after June 8,
2017 and expire on December 1, 2021 and have an exercise price
$0.15625. The
net
proceeds to
CEL-SCI from this offering
was
approximately $
3.8
million,
excluding any future proceeds that may be received from the
exercise of the warrants.
On
December 9, 2016, the Company reported on a communication received
from the staff of the NYSE MKT, its current listing exchange, that
it considered the Company to be noncompliant with certain listing
requirements based on its quarterly report for the period ended
June 30, 2016. The Company has been given the opportunity to
maintain its listing by submitting a plan of compliance by January
9, 2017. This plan must advise of actions the company has taken or
will take to regain compliance with the continued listing standards
by June 11, 2018. The Company intends to submit such a plan by
January 9, 2017. The communication and compliance plan has no
current effect on the listing of the Company's shares on the
exchange. If the plan is not acceptable or the Company does not
make sufficient progress under the plan or reestablish compliance
by June 11, 2018, then staff of the exchange may initiate
proceedings for delisting from the NYSE MKT. The Company may then
appeal a staff determination to initiate such proceedings in
accordance with the exchange's Company Guide.