NOTES TO CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 2017 AND 2016 (UNAUDITED)
A.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The
accompanying condensed financial statements of CEL-SCI Corporation
(the Company) are unaudited and certain information and footnote
disclosures normally included in the annual financial statements
prepared in accordance with accounting principles generally
accepted in the United States of America have been omitted pursuant
to the rules and regulations of the Securities and Exchange
Commission. While management of the Company believes that the
disclosures presented are adequate to make the information
presented not misleading, these interim condensed financial
statements should be read in conjunction with the financial
statements and notes included in the Company’s annual report
on Form 10-K for the year ended September 30, 2016.
In the
opinion of management, the accompanying unaudited condensed
financial statements contain all accruals and adjustments (each of
which is of a normal recurring nature) necessary for a fair
presentation of the Company’s financial position as of June
30, 2017 and the results of its operations for the three and nine
months then ended. The condensed balance sheet as of September 30,
2016 is derived from the September 30, 2016 audited financial
statements. Significant accounting policies have been consistently
applied in the interim financial statements and the annual
financial statements. The results of operations for the nine and
three months ended June 30, 2017 and 2016 are not necessarily
indicative of the results to be expected for the entire
year.
The
financial statements have been prepared assuming that the Company
will continue as a going concern, but due to recurring losses from
operations and future liquidity needs, there is substantial doubt
about the Company’s ability to continue as a going concern.
The financial statements do not include any adjustments that might
result from the outcome of this uncertainty. Refer to discussion in
Note B.
On June
12, 2017, the Company’s shareholders approved a reverse split
of the Company’s common stock which became effective on the
NYSE American on June 15, 2017. On that date, every twenty five
issued and outstanding shares of the Company’s common stock
automatically converted into one outstanding share. As a result of
the reverse stock split, the number of the Company’s
outstanding shares of common stock decreased from 230,127,331
(pre-split) shares to 9,201,645 (post-split) shares. In addition,
by reducing the number of the Company’s outstanding shares,
the Company’s loss per share in all prior periods will
increase by a factor of twenty five. The reverse stock split
affected all stockholders of the Company’s common stock
uniformly, and did not affect any stockholder’s percentage of
ownership interest. The par value of the Company’s stock
remained unchanged at $0.01 per share and the number of authorized
shares of common stock remained the same after the reverse stock
split.
As the
par value per share of the Company’s common stock remained
unchanged at $0.01 per share, a total of $2,204,938 was
reclassified from common stock to additional paid-in capital. In
connection with this reverse stock split, the number of shares of
common stock reserved for issuance under the Company’s
incentive and non-qualified stock option plans, as well as the
shares of common stock underlying outstanding stock options and
warrants, were also proportionately reduced while the exercise
prices of such stock options and warrants were proportionately
increased. All references to shares of common stock and per share
data for all periods presented in the accompanying financial
statements and notes thereto have been adjusted to reflect the
reverse stock split on a retroactive basis.
Summary of Significant Accounting Policies:
Research and Office Equipment and Leasehold
Improvements
- Research and office equipment is recorded at
cost and depreciated using the straight-line method over estimated
useful lives of five to seven years. Leasehold improvements are
depreciated over the shorter of the estimated useful life of the
asset or the term of the lease. Repairs and maintenance which do
not extend the life of the asset are expensed when incurred. The
fixed assets are reviewed on a quarterly basis to determine if any
of the assets are impaired.
Patents
- Patent expenditures are
capitalized and amortized using the straight-line method over the
shorter of the expected useful life or the legal life of the patent
(17 years). In the event changes in technology or other
circumstances impair the value or life of the patent, appropriate
adjustment in the asset value and period of amortization is made.
An impairment loss is recognized when estimated future undiscounted
cash flows expected to result from the use of the asset, and from
its disposition, is less than the carrying value of the asset. The
amount of the impairment loss would be the difference between the
estimated fair value of the asset and its carrying
value.
Research and Development Costs
-
Research and development costs are expensed as incurred. Management
accrues CRO expenses and clinical trial study expenses based on
services performed and relies on the CROs to provide estimates of
those costs applicable to the completion stage of a study.
Estimated accrued CRO costs are subject to revisions as such
studies progress to completion. The Company charges revisions to
estimated expense in the period in which the facts that give rise
to the revision become known.
Income Taxes
- The Company uses the
asset and liability method of accounting for income taxes. Under
the asset and liability method, deferred tax assets and liabilities
are recognized for future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and
operating and tax loss carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. The Company
records a valuation allowance to reduce the deferred tax assets to
the amount that is more likely than not to be recognized.
A full valuation
allowance was recorded against the deferred tax assets as of June
30, 2017 and September 30, 2016.
Derivative Instruments
– The Company has entered into
financing arrangements that consist of freestanding derivative
instruments that contain embedded derivative features. The Company
accounts for these arrangements in accordance with
Accounting Standards Codification (
ASC) 815, “Accounting for Derivative
Instruments and Hedging Activities.”
In accordance
with accounting principles generally accepted in the United States
(U.S. GAAP), derivative instruments and hybrid instruments are
recognized as either assets or liabilities in the balance sheet and
are measured at fair value with gains or losses recognized in
earnings or other comprehensive income depending on the nature of
the derivative or hybrid instruments. The Company determines the
fair value of derivative instruments and hybrid instruments based
on available market data using appropriate valuation models, giving
consideration to all of the rights and obligations of each
instrument. The derivative liabilities are re-measured at fair
value at the end of each interim period as long as they are
outstanding.
Deferred Rent (Asset)
–
Consideration paid,
including deposits, related to operating leases is recorded as a
deferred rent asset and amortized as rent expense over the lease
term. Interest on 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.
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 is measured using the
Black-Scholes valuation model. The Black-Scholes model requires
various judgmental assumptions regarding the fair value of the
equity instruments at the measurement date and the expected life of
the options.
The
Company has Incentive Stock Option Plans, Non-Qualified Stock
Option Plans, a Stock Compensation Plan, Stock Bonus Plans and an
Incentive Stock Bonus Plan. In some cases, these Plans are
collectively referred to as the "Plans". All Plans have been
approved by the stockholders.
The
Company’s stock options are not transferable, and the actual
value of the stock options that an employee may realize, if any,
will depend on the excess of the market price on the date of
exercise over the exercise price. The Company has based its
assumption for stock price volatility on the variance of daily
closing prices of the Company’s stock. The risk-free interest
rate assumption was based on the U.S. Treasury rate at date of the
grant with term equal to the expected life of the option.
Historical data was used to estimate option exercise and employee
termination within the valuation model. The expected term of
options represents the period of time that options granted are
expected to be outstanding and has been determined based on an
analysis of historical exercise behavior. If any of the assumptions
used in the Black-Scholes model change significantly, stock-based
compensation expense for new awards may differ materially in the
future from that recorded in the current period.
Vesting
of restricted stock granted under the Incentive Stock Bonus Plan is
subject to service, performance and market conditions and meets the
classification of equity awards. These awards were measured at
market value on the grant-dates for issuances where the attainment
of performance criteria is likely and at fair value on the
grant-dates, using a Monte Carlo simulation for issuances where the
attainment of performance criteria is uncertain. The total
compensation cost will be expensed over the estimated requisite
service period.
New Accounting Pronouncements
In
February 2016, the Financial Accounting Standards Board (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.
No
other recently issued guidance is expected to have a material
impact on the Company’s financial statements.
B.
OPERATIONS AND FINANCING
The
Company has incurred significant costs since its inception in
connection with the acquisition of certain patented and unpatented
proprietary technology and know-how relating to the human
immunological defense system, patent applications, research and
development, administrative costs, construction of laboratory
facilities, and clinical trials. The Company has funded such costs
with proceeds from loans and the public and private sale of its
common stock. The Company will be required to raise additional
capital or find additional long-term financing in order to continue
with its research efforts. Currently, the clinical hold on the
Phase 3 clinical trial has had a significant impact on the
Company's market capital, and as such, may impact the Company's
ability to attract new capital. To date, the Company has not
generated any revenue from product sales. The ability of the
Company to complete the necessary clinical trials and obtain US
Food & Drug Administration (FDA) approval for the sale of
products to be developed on a commercial basis is uncertain.
Ultimately, the Company must complete the development of its
products, obtain the appropriate regulatory approvals and obtain
sufficient revenues to support its cost structure.
The
Company is currently running a large multi-national Phase 3
clinical trial for head and neck cancer with its partners TEVA
Pharmaceuticals and Orient Europharma. During the nine months ended
June 30, 2017, the Company raised approximately $8.7 million in net
proceeds from the combination of debt and equity financings. To
finance the study beyond the next twelve months, the Company plans
to raise additional capital in the form of corporate partnerships,
debt and/or equity financings. The Company believes that it will be
able to obtain additional financing because it has done so
consistently in the past and because Multikine is a product in the
Phase 3 clinical trial stage. However, there can be no assurance
that the Company will be successful in raising additional funds on
a timely basis or that the funds will be available to the Company
on acceptable terms or at all. If the Company does not raise
the necessary amounts of money, it will either have to slow 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 Phase 3 study is currently on clinical hold by the
FDA. The financial statements have been prepared assuming that the
Company will continue as a going concern, but due to recurring
losses from operations and future liquidity needs, there is
substantial doubt about the Company’s ability to continue as
a going concern. The financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
Since
the Company launched its Phase 3 clinical trial for Multikine, the
Company has spent approximately $37.4 million as of June 30, 2017
on direct costs for the Phase 3 clinical trial. The total
remaining cash cost of the clinical trial is estimated to be
approximately $21.2 million. It should be noted that this
estimate is based only on the information currently available in
the Company’s contracts with the Clinical Research
Organizations responsible for managing the Phase 3 clinical trial
and does not include other related costs, e.g. the manufacturing of
the drug. This number can be affected by the speed of
enrollment, foreign currency exchange rates and many other factors,
some of which cannot be foreseen.
The
Company is diligently continuing to work with the FDA to have the
clinical hold lifted. On June 28, 2017, the Company received a
letter from the U.S. Food and Drug Administration (FDA) in response
to the Company's most recent June 2, 2017 submission regarding the
clinical hold imposed on the Company's Phase 3 head and neck cancer
study with Multikine (Leukocyte Interleukin, Inj.) Investigational
New Drug (IND).
In this
most recent letter, the FDA requested that three additional changes
be made to the Multikine Investigator Brochure (IB) that CEL-SCI
submitted to the FDA on June 2, 2017. The FDA provided instructions
directing CEL-SCI on what the specific changes should be. CEL-SCI
has made the requested changes and has resubmitted them. The FDA
did not raise any other hold issues in this letter.
CEL-SCI
was also told by the FDA that the effect of the hold is not a
termination of the study. The only action that CEL-SCI needed to be
aware of is that CEL-SCI may not enroll new patients and may not
resume Multikine dosing in any previously enrolled patient in this
study or initiate any new studies under this IND. CEL-SCI is not
currently planning to do any of these things.
Nine
hundred twenty-eight (928) head and neck cancer patients have been
enrolled and have completed treatment in the Phase 3 study. In
accordance with the study protocol, the FDA's instructions, and
subject to the clinical hold, CEL-SCI continues to follow these
patients and gather all protocol-specific data. In light of new
clinical information from the Phase 3 study CEL-SCI decided in
April 2017 that it was not necessary to add more patients to the
study and therefore withdrew the study amendment for additional
patients.
The
study endpoint is a 10% increase in overall survival of patients
between the two main comparator groups in favor of the group
receiving the Multikine treatment regimen. The determination if the
study end point is met will occur when there are a total of 298
deaths in those two groups.
Stock
options, stock bonuses and compensation granted by the Company as
of June 30, 2017 are as follows:
|
Name of
Plan
|
Total Shares Reserved Under Plans
|
Shares Reserved for Outstanding
Options
|
Shares Issued
|
Remaining Options/Shares Under
Plans
|
|
|
|
|
|
|
|
Incentive Stock
Options Plans
|
138,400
|
65,958
|
N/A
|
60,454
|
|
Non-Qualified Stock
Option Plans
|
1,187,200
|
298,783
|
N/A
|
859,313
|
|
Stock Bonus
Plans
|
383,760
|
N/A
|
189,940
|
193,787
|
|
Stock Compensation
Plan
|
134,000
|
N/A
|
87,590
|
46,410
|
|
Incentive Stock
Bonus Plan
|
640,000
|
N/A
|
624,000
|
16,000
|
Stock
options, stock bonuses and compensation granted by the Company as
of September 30, 2016 are as follows:
|
Name of
Plan
|
Total Shares Reserved Under Plans
|
Shares Reserved for Outstanding
Options
|
Shares Issued
|
Remaining Options/Shares Under
Plans
|
|
|
|
|
|
|
|
Incentive Stock
Option Plans
|
138,400
|
65,958
|
N/A
|
60,453
|
|
Non-Qualified Stock
Option Plans
|
387,200
|
277,613
|
N/A
|
82,370
|
|
Bonus
Plans
|
223,760
|
N/A
|
126,448
|
97,278
|
|
Stock Compensation
Plan
|
134,000
|
N/A
|
79,401
|
53,276
|
|
Incentive Stock
Bonus Plan
|
640,000
|
N/A
|
624,000
|
16,000
|
Stock option
activity
:
|
|
Nine Months Ended June30,
|
|
|
2017
|
2016
|
|
Granted
|
39,225
|
8,400
|
|
Expired
|
16,081
|
-
|
|
Forfeited
|
1,980
|
2,240
|
|
|
Three Months Ended June 30,
|
|
|
2017
|
2016
|
|
Granted
|
39,225
|
-
|
|
Expired
|
800
|
-
|
|
Forfeited
|
919
|
200
|
No
shares of restricted stock were forfeited from the Incentive Stock
Bonus Plan during the nine and three months ended June 30, 2017 and
2016.
Stock-Based Compensation Expense
|
|
NineMonths Ended June 30,
|
|
|
2017
|
2016
|
|
Employees
|
$
1,002,923
|
$
1,263,662
|
|
Non-employees
|
$
151,611
|
$
618,890
|
|
|
ThreeMonths Ended June 30,
|
|
|
2017
|
2016
|
|
Employees
|
$
325,168
|
$
418,562
|
|
Non-employees
|
$
38,833
|
$
146,830
|
Employee
compensation expense includes the expense related to options issued
or vested and restricted stock. Non-employee expense includes the
expense related to options and stock issued to consultants expensed
over the period of their service contracts.
Warrants and Non-employee Options
The
following chart presents the outstanding warrants and non-employee
options listed by expiration date at June 30, 2017:
|
Warrant
|
|
|
Shares Issuable upon Exercise
ofWarrant
|
Exercise Price
|
Expiration Date
|
Refer-ence
|
|
|
|
|
|
|
|
|
|
Series
DD
|
|
12/8/2016
|
1,360,960
|
$
4.50
|
8/10/2017
|
1
|
|
Series
N
|
|
8/18/2008
|
113,785
|
$
13.18
|
8/18/2017
|
|
|
Series
EE
|
|
12/8/2016
|
1,360,960
|
$
4.50
|
9/8/2017
|
1
|
|
Series
U
|
|
4/17/2014
|
17,821
|
$
43.75
|
10/17/2017
|
1
|
|
Series
S
|
|
10/11/13-
10/24/14
|
1,037,120
|
$
31.25
|
10/11/2018
|
1
|
|
Series
V
|
|
5/28/2015
|
810,127
|
$
19.75
|
5/28/2020
|
1
|
|
Series
W
|
|
10/28/2015
|
688,930
|
$
16.75
|
10/28/2020
|
1
|
|
Series
X
|
|
1/13/2016
|
120,000
|
$
9.25
|
1/13/2021
|
|
|
Series
Y
|
|
2/15/2016
|
26,000
|
$
12.00
|
2/15/2021
|
|
|
Series
ZZ
|
|
5/23/2016
|
20,000
|
$
13.75
|
5/18/2021
|
1
|
|
Series
BB
|
|
8/26/2016
|
16,000
|
$
13.75
|
8/22/2021
|
1
|
|
Series
Z
|
|
5/23/2016
|
264,000
|
$
13.75
|
11/23/2021
|
1
|
|
Series
FF
|
|
12/8/2016
|
68,048
|
$
3.91
|
12/1/2021
|
1
|
|
Series
CC
|
|
12/8/2016
|
680,480
|
$
5.00
|
12/8/2021
|
1
|
|
Series
HH
|
|
2/23/2017
|
20,000
|
$
3.13
|
2/16/2022
|
1
|
|
Series
AA
|
|
8/26/2016
|
200,000
|
$
13.75
|
2/22/2022
|
1
|
|
Series
JJ
|
|
3/14/2017
|
30,000
|
$
3.13
|
3/8/2022
|
1
|
|
Series
LL
|
|
4/30/2017
|
26,398
|
$
3.59
|
4/30/2022
|
1
|
|
Series
MM
|
|
6/22/2017
|
893,491
|
$
1.86
|
6/22/2022
|
2
|
|
Series
GG
|
|
2/23/2017
|
400,000
|
$
3.00
|
8/23/2022
|
1
|
|
Series
II
|
|
3/14/2017
|
600,000
|
$
3.00
|
9/14/2022
|
1
|
|
Series
KK
|
|
5/3/2017
|
395,970
|
$
3.04
|
11/3/2022
|
1
|
|
Consultants
|
|
12/28/12-
7/1/16
|
22,000
|
$
9.25-$70.00
|
12/27/17-
6/30/19
|
3
|
1.
Derivative
Liabilities
The
table below presents the warrant liabilities and their respective
balances at the balance sheet dates:
|
|
June30, 2017
|
September30, 2016
|
|
Series S
warrants
|
$
74,673
|
$
3,111,361
|
|
Series U
warrants
|
-
|
-
|
|
Series V
warrants
|
170,127
|
1,620,253
|
|
Series W
warrants
|
181,303
|
1,799,858
|
|
Series Z
warrants
|
141,325
|
970,604
|
|
Series ZZ
warrants
|
9,227
|
70,609
|
|
Series AA
warrants
|
116,651
|
763,661
|
|
Series BB
warrants
|
8,140
|
58,588
|
|
Series CC
warrants
|
643,824
|
-
|
|
Series DD
warrants
|
8,009
|
-
|
|
Series EE
warrants
|
39,885
|
-
|
|
Series FF
warrants
|
75,579
|
-
|
|
Series GG
warrants
|
522,459
|
-
|
|
Series HH
warrants
|
24,977
|
-
|
|
Series II
warrants
|
779,415
|
-
|
|
Series JJ
warrants
|
37,670
|
-
|
|
Series KK
warrants
|
525,332
|
-
|
|
Series LL
warrants
|
32,044
|
-
|
|
|
|
|
|
Total warrant
liabilities
|
$
3,390,640
|
$
8,394,934
|
The
table below presents the gains on the warrant liabilities for the
nine months ended June 30:
|
|
2017
|
2016
|
|
Series S
warrants
|
$
3,036,688
|
$
3,432,869
|
|
Series U
warrants
|
-
|
40,096
|
|
Series V
warrants
|
1,450,126
|
2,835,443
|
|
Series W
warrants
|
1,618,555
|
1,502,800
|
|
Series Z
warrants
|
829,279
|
210,848
|
|
Series ZZ
warrants
|
61,382
|
15,918
|
|
Series AA
warrants
|
647,010
|
-
|
|
Series BB
warrants
|
50,448
|
-
|
|
Series CC
warrants
|
416,599
|
-
|
|
Series DD
warrants
|
435,263
|
-
|
|
Series EE
warrants
|
651,522
|
-
|
|
Series FF
warrants
|
45,403
|
-
|
|
Series GG
warrants
|
92,178
|
-
|
|
Series HH
warrants
|
4,653
|
-
|
|
Series II
warrants
|
137,044
|
-
|
|
Series JJ
warrants
|
6,943
|
-
|
|
Series KK
warrants
|
172,883
|
-
|
|
Series LL
warrants
|
14,001
|
-
|
|
Net gain on warrant
liabilities
|
$
9,669,977
|
$
8,037,974
|
The
table below presents the gains and (losses) on the warrant
liabilities for the three months ended June 30:
|
|
2017
|
2016
|
|
Series S
warrants
|
$
456,852
|
$
285,208
|
|
Series U
warrants
|
-
|
13,366
|
|
Series V
warrants
|
32,405
|
1,012,658
|
|
Series W
warrants
|
9,140
|
970,746
|
|
Series Z
warrants
|
1,016
|
210,848
|
|
Series ZZ
warrants
|
187
|
15,918
|
|
Series AA
warrants
|
345
|
-
|
|
Series BB
warrants
|
110
|
-
|
|
Series CC
warrants
|
(13,270
)
|
-
|
|
Series DD
warrants
|
21,315
|
-
|
|
Series EE
warrants
|
139,284
|
-
|
|
Series FF
warrants
|
(1,763
)
|
-
|
|
Series GG
warrants
|
(16,033
)
|
-
|
|
Series HH
warrants
|
(687
)
|
-
|
|
Series II
warrants
|
(24,375
)
|
-
|
|
Series JJ
warrants
|
(1,045
)
|
-
|
|
Series KK
warrants
|
172,883
|
-
|
|
Series LL
warrants
|
14,001
|
-
|
|
|
|
|
|
Net gain on warrant
liabilities
|
$
790,365
|
$
2,508,744
|
The
Company reviews all outstanding warrants in accordance with the
requirements of ASC 815. This topic provides that an entity should
use a two-step approach to evaluate whether an equity-linked
financial instrument (or embedded feature) is indexed to its own
stock, including evaluating the instrument’s contingent
exercise and settlement provisions. The warrant agreements provide
for adjustments to the exercise price for certain dilutive events.
Under the provisions of ASC 815, the warrants are not considered
indexed to the Company’s stock because future equity
offerings or sales of the Company’s stock are not an input to
the fair value of a “fixed-for-fixed” option on equity
shares, and equity classification is therefore
precluded.
In
accordance with ASC 815, derivative liabilities must be measured at
fair value upon issuance and re-valued at the end of each reporting
period through expiration. Any change in fair value between the
respective reporting dates is recognized as a gain or
loss.
Issuance of additional Warrants
On June
22, 2017, in connection with the issuance of convertible notes (see
below), the Company issued the note holders Series MM warrants,
which entitle the purchasers to acquire up to an aggregate of
893,491 shares of the Company’s common stock. The Series MM
warrants are exercisable at a fixed price of $1.86 per share and
expire on June 22, 2022. Shares issuable upon the exercise of the
notes and warrants will be restricted securities unless registered.
Proceeds from the sale of notes payable and the issuance of the
warrants were $1.51 million.
The
Company allocated proceeds received to the Notes and the Series MM
warrants on a relative fair value basis. As a result of such
allocation, the Company determined the initial carrying value of
the Series MM warrants to be approximately $0.6 million. The Series
MM warrants qualify for equity treatment in accordance with ASC
815.
On
April 30, 2017, the Company entered into a securities purchase
agreement with an institutional investor whereby it sold 527,960
shares of its common stock for net proceeds of approximately $1.4
million, or $2.875 per share, in a registered direct offering. In a
concurrent private placement, the Company also issued to the
purchaser of the Company’s common stock, Series KK warrants
to purchase 395,970 shares of common stock. The warrants can be
exercised at a price of $3.04 per share, at any time on or after
November 3, 2017 and expire on November 3, 2022. In addition, the
Company issued 26,398 Series LL warrants to the Placement Agent as
part of its compensation. The Series LL warrants are exercisable on
October 30, 2017 and expire on April 30, 2022 at a price of $3.59
per share. The fair value of the Series KK and LL warrants of
approximately $0.7 million on the date of issuance was recorded as
a warrant liability.
On
March 14, 2017, the Company sold 600,000 registered shares of
common stock and 600,000 Series II warrants to purchase 600,000
unregistered shares of common stock at combined offering price of
$2.50 per share. The Series II warrants have an exercise
price of $3.00 per share, are exercisable on September 14, 2017,
and expire September 14, 2022.
In
addition, the Company issued 30,000 Series JJ warrants to purchase
30,000 shares of unregistered common stock to the placement agent.
The Series JJ warrants have an exercise price $3.13, are
exercisable on September 14, 2017 and expire on March 8, 2022.
The net proceeds from this
offering were approximately $1.3 million.
The
fair value of the Series II and JJ warrants of approximately $1.0
million on the date of issuance was recorded as a warrant
liability.
On
February 23, 2017, the Company sold 400,000 registered shares of
common stock and 400,000 Series GG warrants to purchase 400,000
unregistered shares of common stock at a combined price of $2.50
per share. The Series GG warrants have an exercise price of
$3.00 per share, are exercisable on August 23, 2017, and expire
August 23, 2022.
In addition, the
Company issued to the placement agent, 20,000 Series HH warrants to
purchase 20,000 shares of unregistered common stock. The Series HH
warrants have an exercise price $3.13, are exercisable on August
23, 2017 and expire on February 16, 2022.
The net proceeds from this
offering were approximately $0.8 million.
The
fair value of the Series GG and HH warrants of approximately $0.6
million on the date of issuance was recorded as a warrant
liability.
On December 8, 2016, the Company sold 1,360,960
shares of common stock and warrants to purchase common stock at a
price of $3.13 in a public offering. The warrants consist of
680,480 Series CC warrants to purchase 680,480 shares of common
stock, 1,360,960 Series DD warrants to purchase 1,360,960 shares of
common stock and 1,360,960 Series EE warrants to purchase 1,360,960
shares of common stock. The Series CC warrants are immediately
exercisable, expire in five-years from the offering date and have
an exercise price of $5.00 per share. The Series DD warrants are
immediately exercisable at an exercise price of $4.50 per share. On
June 5, 2017 and June 29, 2017, the expiration date of the Series
DD warrants was extended from June 8, 2017 to July 10, 2017 and
then to August 10, 2017. The Series EE warrants are immediately
exercisable, expire on September 8, 2017 and have an exercise price
of $4.50 per share. In addition, the Company issued 68,048 Series
FF warrants to purchase 68,048 shares of common stock to the
placement agent. The FF warrants are exercisable at any time on or
after June 8, 2017, expire on December 1, 2021 and have an exercise
price $3.91. Net proceeds from this
offering were approximately $3.7 million.
The
fair value of the Series CC, DD, EE and FF warrants of
approximately $2.3 million on the date of issuance was recorded as
a warrant liability.
Expiration of Warrants
On
March 16, 2017, 23,600 Series P warrants, with an exercise price of
$112.50, expired. The fair value of the Series P warrants was $0 on
the date of expiration.
On
December 6, 2016, 105,000 Series R warrants, with an exercise price
of $100.00, expired. The fair value of the Series R warrants was $0
on the date of expiration.
On
December 22, 2015, 48,000 Series Q warrants, with an exercise price
of $125.00, expired. The fair value of the Series Q warrants was $0
on the date of expiration.
On June 22, 2017, CEL-SCI issued convertible notes
(Notes) in the aggregate principal amount of $1.51 million to six
individual investors.
The Notes bear interest at 4% per year
and are due on December 22, 2017. At the option of the note
holders, the Notes can be converted into shares of the
Company’s common stock at a fixed conversion rate of $1.69.
The number of shares of the Company’s common stock issued
upon conversion will be determined by dividing the principal amount
to be converted by $1.69, which could result in the issuance of
893,491 shares, subject to a proportionate adjustment in the event
of any stock split or capital reorganization.
The Notes were issued together with Series MM
warrants, as discussed in the preceding section. Upon issuance of
the Notes and Series MM warrants, the Company allocated proceeds
received to the Notes and the Series MM warrants on a relative fair
value basis.
As a result of such
allocation, the Company determined the initial carrying value of
the
Notes to be approximately $0.9 million, the initial
carrying value of the Series MM warrants to be approximately $0.6
million, and recorded a debt discount in the amount of
approximately $0.6 million.
Pursuant to the guidance in ASC 815-40,
Contracts in
Entity’s Own Equity
, the
Company evaluated whether the conversion feature of the Note needed
to be bifurcated from the host instrument as a freestanding
financial instrument. Under ASC 815-40, to qualify for equity
classification (or nonbifurcation, if embedded) the instrument (or
embedded feature) must be both (1) indexed to the issuer’s
own stock and (2) meet the requirements of the equity
classification guidance. Based upon the Company’s analysis,
it was determined the conversion option is indexed to its own stock
and also met all the criteria for equity classification.
Accordingly, the conversion option is not required to be bifurcated
from the host instrument as a freestanding financial instrument.
Since the conversion feature meets the equity scope exception from
derivative accounting, the Company then evaluated whether the
conversion feature needed to be separately accounted for as an
equity component under ASC 470-20,
Debt with Conversion and Other
Options
. Based upon the
Company’s analysis, it was determined that a beneficial
conversion feature existed as a result of the reduction in the face
value of the Notes, due to a portion of proceeds being allocated to
the Series MM warrants, and thus the conversion feature needed to
be separately accounted for as equity component. The Company
recorded a beneficial conversion feature relating to the Notes
Payable of approximately $0.6 million, which was also recorded as a
debt discount.
The
total debt discount of approximately $1.2 million will be amortized
to interest expense using the effective interest method over the
expected term of the Notes.
During
the nine and three months ended June 30, 2017, the Company recorded
approximately $23,000 in interest expense related to the Notes, of
which approximately $2,000 was recorded as accrued interest, and
approximately $21,000 was recorded as amortization of the debt
discount.
The
Notes are secured by a first lien on all of the Company’s
assets.
3.
Options and shares issued to Consultants
The
Company typically enters into consulting arrangements in exchange
for common stock or stock options. During the nine and three months
ended June 30, 2017, the Company issued 36,999 and 18,000 shares of
common stock, respectively. The common stock was issued with stock
prices ranging between $2.25 and $7.25 per share. During the nine
and three months ended June 30, 2016, the Company issued 39,602 and
7,451 shares of common stock, respectively. The common stock was
issued with stock prices ranging between $9.25 and $18.00 per
share. Additionally, during the nine and three months ended June
30, 2016, the Company issued a consultant 8,400 and 0 options,
respectively, to purchase common stock at prices between $9.25 and
$15.00 per share with fair values ranging between $4.75 and $7.50
per share. These options are fully vested. The aggregate values of
the issuances of restricted common stock and common stock options
are recorded as prepaid expenses and are charged to general and
administrative expenses over the periods of service.
During
the nine and three months ended June 30, 2017, the Company recorded
total expense of approximately $152,000 and $39,000, respectively,
relating to these consulting agreements. During the nine and three
months ended June 30, 2016, the Company recorded total expense of
approximately $619,000 and $147,000, respectively, relating to
these consulting agreements. At June 30, 2017 and September 30,
2016, approximately $11,000 and $48,000, respectively, are included
in prepaid expenses. As of June 30, 2017, 22,000 options were
outstanding and vested, which were issued to consultants as payment
for services from the Non-Qualified Stock Option
plans.
D.
FAIR VALUE MEASUREMENTS
In
accordance with ASC 820-10,
“Fair Value Measurements,”
the Company determines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement
date. The Company generally applies the income approach to
determine fair value. This method uses valuation techniques to
convert future amounts to a single present amount. The measurement
is based on the value indicated by current market expectations with
respect to those future amounts.
ASC
820-10 establishes a fair value hierarchy that prioritizes the
inputs used to measure fair value. The hierarchy gives the highest
priority to active markets for identical assets and liabilities
(Level 1 measurement) and the lowest priority to unobservable
inputs (Level 3 measurement). The Company classifies fair value
balances based on the observability of those inputs. The three
levels of the fair value hierarchy are as follows:
●
Level 1 –
Observable inputs such as quoted prices in active markets for
identical assets or liabilities
●
Level 2 –
Inputs other than quoted prices that are observable for the asset
or liability, either directly or indirectly. These include quoted
prices for similar assets or liabilities in active markets, quoted
prices for identical or similar assets or liabilities in markets
that are not active and amounts derived from valuation models where
all significant inputs are observable in active
markets
●
Level 3 –
Unobservable inputs that reflect management’s
assumptions
For
disclosure purposes, assets and liabilities are classified in their
entirety in the fair value hierarchy level based on the lowest
level of input that is significant to the overall fair value
measurement. The Company’s assessment of the significance of
a particular input to the fair value measurement requires judgment
and may affect the placement within the fair value hierarchy
levels.
The
table below sets forth the assets and liabilities measured at fair
value on a recurring basis, by input level, in the condensed
balance sheet at June 30, 2017:
|
|
QuotedPrices in Active Markets for Identical Assets
or Liabilities (Level1)
|
SignificantOther Observable Inputs (Level
2)
|
SignificantUnobservable Inputs (Level
3)
|
Total
|
|
|
|
|
|
|
|
Derivative
instruments
|
$
74,673
|
$
-
|
$
3,315,967
|
$
3,390,640
|
The
table below sets forth the assets and liabilities measured at fair
value on a recurring basis, by input level, in the condensed
balance sheet at September 30, 2016:
|
|
QuotedPrices in Active Markets for Identical Assets
or Liabilities (Level1)
|
SignificantOther Observable Inputs (Level
2)
|
SignificantUnobservable Inputs (Level
3)
|
Total
|
|
|
|
|
|
|
|
Derivative
instruments
|
$
3,111,361
|
$
-
|
$
5,283,573
|
$
8,394,934
|
The
following sets forth the reconciliation of beginning and ending
balances related to fair value measurements using significant
unobservable inputs (Level 3) for the nine months ended June 30,
2017 and the year ended September 30, 2016:
|
|
(Nine Months Ended)
|
(Year Ended)
|
|
|
June 30, 2017
|
September 30, 2016
|
|
|
|
|
|
Beginning
balance
|
$
5,283,573
|
$
6,323,032
|
|
Issuances
|
4,665,683
|
8,722,073
|
|
Realized and
unrealized gains
|
(6,633,289
)
|
(9,761,532
)
|
|
Ending
balance
|
$
3,315,967
|
$
5,283,573
|
The
fair values of the Company’s derivative instruments disclosed
above under Level 3 are primarily derived from valuation models
where significant inputs such as historical price and volatility of
the Company’s stock, as well as U.S. Treasury Bill rates, are
observable in active markets.
E.
RELATED PARTY TRANSACTIONS
On June 22, 2017, CEL-SCI issued convertible notes
(Notes) in the aggregate principal amount of $1.51 million to six
individual investors.
Geert Kersten, the Company’s
Chief Executive Officer, participated in the offering and purchased
notes in the principal amount of $250,000. The terms of Mr.
Kersten’s Note were identical to the other participants. The
number of shares of the Company’s common stock issued upon
conversion will be determined by dividing the principal amount to
be converted by $1.69, which would result in the issuance of
147,929 shares to Mr. Kersten upon conversion. No interest payments
were made to Mr. Kersten during the nine and three months ended
June 30, 2017.
Along
with the other purchasers of the convertible notes, Mr. Kersten
also received Series MM warrants to purchase up to 147,929 shares
of the Company’s common stock. The Series MM warrants are
exercisable at a fixed price of $1.86 per share and expire on June
22, 2022. Shares issuable upon the exercise of the notes and
warrants will be restricted securities unless
registered.
Effective August
31, 2016, Maximilian de Clara, the Company’s then President
and a director, resigned for health reasons. In payment for past
services, the Company agreed to issue Mr. de Clara 26,000 shares of
restricted stock; 13,000 shares upon his resignation and 13,000 on
August 31, 2017. At June 30, 2017 and September 30, 2016, the fair
value accrued for unissued shares was approximately $29,000 and
$101,000, respectively.
On
January 13, 2016, the de Clara Trust demanded payment on a note
payable, of which the balance, including accrued and unpaid
interest, was approximately $1.1 million. 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 a beneficiary of the de Clara Trust.
When the de Clara Trust demanded payment on the note, the Company
sold 120,000 shares of its common stock and 120,000 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 $9.25 per share at any time on
or before January 13, 2021.
No
interest payments were made to Mr. de Clara during the nine and
three months ended June 30, 2017. During the nine and three months
ended June 30, 2016, the Company paid approximately $43,000 and $0,
respectively, in interest expense to Mr. de Clara.
F.
COMMITMENTS AND CONTINGENCIES
Clinical Research Agreements
In
March 2013, the Company entered into an agreement with Aptiv
Solutions, Inc. (which was subsequently acquired by ICON Inc.) to
provide certain clinical research services in accordance with a
master service agreement. The Company will reimburse ICON 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 June 30,
2017, the total balance advanced is $150,000, which 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
$24.2 million related to Ergomed’s services. This amount is
net of Ergomed’s co-development contribution of approximately
$8.1 million. During the nine and three months ended June 30, 2017,
the Company recorded, net of Ergomed’s co-development
contribution, approximately $5.1 million and $1 million,
respectively, as research and development expense related to
Ergomed’s services. During the nine and three months ended
June 30, 2016, the Company recorded, net of Ergomed’s
co-development contribution, approximately $5.9 million and $2.1
million, respectively, as research and development expense related
to Ergomed’s services.
In
October 2013, the Company entered into two co-development and
profit sharing agreements with Ergomed. One agreement
supports the Phase 1 study being conducted at the University of
California, San Francisco, or UCSF, for the development of
Multikine as a potential treatment for peri-anal warts in HIV/HPV
co-infected men and women. The Phase 1 study originally
started after the Company signed a cooperative research and
development agreement with the U.S. Naval Medical Center, San
Diego. In August 2016, the U.S. Navy discontinued this Phase 1
study because of difficulties in enrolling patients. 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).
T
he 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 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. Currently, the Company is seeking at least $50 million in
damages in its amended statement of claim.
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 alleged use of
inVentiv’s name in connection with publications and
promotions in violation of the parties’ contract; (iii)
opportunistic breach, restitution and unjust enrichment, seeking at
least $20 million in disgorgement of alleged unjust profits
allegedly made by the Company as a result of the purported breaches
referenced in subsection (ii); and (iv) defamation, seeking at
least $1 million in damages for allegedly defamatory statements
made about inVentiv. The Company believes inVentiv’s
counterclaims are meritless
and is
defending against them. However, if such defense is unsuccessful,
and inVentiv successfully asserts any of its counterclaims, such an
adverse determination could have a material adverse effect on the
Company’s business, results, financial condition and
liquidity.
In
October 2015 the Company signed 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 up to $5 million in 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 if the Company receives
proceeds from the arbitration. During the three months ended
December 31, 2015, 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 was 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 has been going on longer than expected, but it is
finally nearing its end. The hearing (the “trial”)
started on September 26, 2016 and was originally scheduled to end
in November/December of 2016. Instead it is still ongoing, but we
expect it to end during the second half of calendar year
2017.
Lease Agreements
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. As of June 30, 2017 and September 30,
2016, the Company has recorded a deferred rent asset of
approximately $3.4 million and $3.8 million,
respectively.
The
Company was required to deposit the equivalent of one year of base
rent in accordance with the lease. When the Company meets the
minimum cash balance required by the lease, the deposit will be
returned to the Company. The approximate $1.7 million deposit is
included in non-current assets at June 30, 2017 and September 30,
2016.
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
Company receives approximately $6,000 per month in rent for the
sub-leased space.
The
Company leases its research and development laboratory under a 60
month lease which expires February 28, 2022. The operating lease
includes escalating rental payments. The Company is recognizing the
related rent expense on a straight line basis over the full 60
month term of the lease at the rate of approximately $13,000 per
month. As of June 30, 2017 and September 30, 2016, the Company has
recorded a deferred rent liability of approximately $3,000 and
$2,000, respectively.
The
Company leases its office headquarters under a 60 month lease which
expires June 30, 2020. The operating lease includes escalating
rental payments. The Company is recognizing the related rent
expense on a straight line basis over the full 60 month term of the
lease at the rate approximately $8,000 per month. As of June 30,
2017 and September 30, 2016, the Company has recorded a deferred
rent liability of approximately $18,000.
As of
June 30, 2017, material contractual obligations, consisting of
operating lease payments are as follows:
|
Three months ending
September 30, 2017
|
$
484,769
|
|
Year ending
September 30,
|
|
|
2018
|
1,997,309
|
|
2019
|
2,066,329
|
|
2020
|
2,109,887
|
|
2021
|
2,099,785
|
|
2022
|
2,072,809
|
|
Thereafter
|
13,757,986
|
|
Total
|
$
24,588,874
|
The
Company leases office equipment under a capital lease arrangement.
The term of the capital lease is 60 months and expires on October
31, 2021. The monthly lease payment is $505. The lease bears
interest at approximately 6.25% per annum. The Company’s
previous equipment lease expired on September 30,
2016.
During
the nine and three months ended June 30, 2017 and 2016, no patent
impairment charges were recorded. For the nine and three months
ended June 30, 2017, amortization of patent costs totaled
approximately $30,000 and $11,000, respectively. For the nine and
three months ended June 30, 2016, amortization of patent costs
totaled approximately $30,000 and $12,000, respectively. The total
estimated future amortization expense is approximately as
follows:
|
Three months ending
September 30, 2017
|
$
9,248
|
|
Year ending
September 30,
|
|
|
2018
|
36,660
|
|
2019
|
34,957
|
|
2020
|
31,763
|
|
2021
|
28,463
|
|
2022
|
24,661
|
|
Thereafter
|
65,897
|
|
Total
|
$
231,649
|
The
following tables provide the details of the basic and diluted loss
per-share (LPS) computations:
|
|
Nine Months Ended June 30, 2017
|
|
|
NetLoss
|
Weighted Average Shares
|
LPS
|
|
|
|
|
|
|
|
$
(9,318,395
)
|
7,235,140
|
$
(1.29
)
|
|
Gain on derivatives
(1)
|
(413,651
)
|
57,575
|
|
|
|
|
|
|
|
Dilutive loss per
share
|
$
(9,732,046
)
|
7,292,715
|
$
(1.33
)
|
(1)
Includes Series GG,
HH, II, JJ and KK warrants.
|
|
Three Months Ended June 30, 2017
|
|
|
NetLoss
|
Weighted Average Shares
|
LPS
|
|
|
|
|
|
|
Basic and dilutive
loss per share
|
$
(4,445,708
)
|
8,405,790
|
$
(0.53
)
|
|
|
Nine Months Ended June 30, 2016
|
|
|
NetLoss
|
Weighted Average Shares
|
LPS
|
|
|
|
|
|
|
Basic and dilutive
loss per share
|
$
(10,352,366
)
|
4,696,498
|
$
(2.20
)
|
|
|
ThreeMonths Ended June 30, 2016
|
|
|
NetLoss
|
WeightedAverage Shares
|
LPS
|
|
|
|
|
|
|
Basic and dilutive
loss per share
|
$
(3,849,324
)
|
4,965,300
|
$
(0.78
)
|
The
gain on derivatives priced lower than the average market price
during the period is excluded from the numerator and the related
shares are excluded from the denominator in calculating diluted
loss per share.
In
accordance with the contingently issuable shares guidance of FASB
ASC Topic 260,
Earnings Per
Share
, the calculation of diluted net earnings (loss) per
share excludes the following securities because their inclusion
would have been anti-dilutive as of June 30:
|
|
2017
|
2016
|
|
|
|
|
|
Options and
Warrants
|
7,951,929
|
3,442,651
|
|
Convertible
Debt
|
893,491
|
-
|
|
Unvested Restricted
Stock
|
604,000
|
604,000
|
|
Total
|
9,449,420
|
4,046,651
|
On July
24, 2017, the Company issued convertible notes (Notes) in the
aggregate principal amount of $1,235,000 to 12 individual
investors. A trust in which Geert Kersten, the Company’s
Chief Executive Officer, holds a beneficial interest participated
in the offering and purchased a note in the principal amount of
$250,000. Patricia B. Prichep, the Company’s Senior Vice
President of Operations, participated in the offering and purchased
a note in the principal amount of $25,000. The Notes bear interest
at 4% per year and are due on December 22, 2017. At the option of
the note holders, the Notes can be converted into shares of the
Company’s common stock at a fixed conversion rate of $2.29,
the closing price on July 21, 2017. The purchasers of the
convertible notes also received warrants which entitle the
purchasers to acquire up to 539,300 shares of the Company’s
common stock. The warrants are exercisable at a fixed price of
$2.52 per share and expire on July 24, 2022. Shares issuable upon
the exercise of the warrants will be restricted securities unless
registered.
On July
26, 2017, the Company entered into a securities purchase agreement
with an investor whereby it sold 100,000 shares of its common stock
for gross proceeds of $229,000, or $2.29 per share, in a registered
offering.
In a
concurrent private placement, the Company also issued to the
purchaser of the Company’s common stock referred to in the
preceding paragraph warrants (Series OO) to purchase 60,000 shares
of the Company’s common stock. The warrants can be exercised
at a price of $2.52 per share, commencing six months after the date
of issuance and ending five years after the date of issuance. The
warrants and the shares of common stock issuable upon the exercise
of the warrants were offered pursuant to the exemption provided in
Section 4(a)(2) under the Securities Act of 1933 and Rule 506(b)
promulgated thereunder.
On August 14, 2017,
the Company announced it has received a letter from the U.S. Food
and Drug Administration stating that the clinical hold that had
been imposed on the Company’s Phase 3 cancer study with
Multikine has been removed and that all clinical trial activities
under this IND application may
resume.