UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 (Mark One)
☒            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30,December 31, 2019
OR
☐          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ______________.
 
Commission File Number 001-11889
CEL-SCI CORPORATION
Colorado 84-0916344
 State or other jurisdiction incorporation  (IRS) Employer Identification Number
 
8229 Boone Boulevard, Suite 802
 Vienna, Virginia 22182
 Address of principal executive offices
 (703) 506-9460
 Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common StockCVMNYSE American
 
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) had been subject to such filing requirements for the past 90 days.
Yes ☒                                                                           No ☐
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ☒ No ☐
 
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check One):
 
Large accelerated filer☐Accelerated filer☐☒
Non-accelerated filer☒☐Smaller reporting company☒
  Emerging growth company☐
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 
Indicate by check mark whether the Registrant is a shell company (as defined in Exchange Act Rule 12b-2 of the Exchange Act).
Yes ☐                                                                 No ☒
 
Class of Stock No. Shares OutstandingDate
Common34,805,29936,390,132
August 13, 2019
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common StockCVMNYSE AmericanFebruary 5, 2020
 

 
 
 
TABLE OF CONTENTS
 
PART I FINANCIAL INFORMATION
 
Item 1. 
Page
Condensed Balance Sheets at June 30, 2019 and September 30, 2018 (unaudited)3
Condensed Statements of Operations for the nine months ended June 30, 2019 and 2018 (unaudited)4
Condensed Statements of Operations for the three months ended June 30, 2019 and 2018 (unaudited)5
Condensed Statements of Cash Flows for the nine months ended June 30, 2019 and 2018 (unaudited)6
   
 
Notes to Condensed Financial StatementsBalance Sheets at December 31, 2019 and September 30, 2019 (unaudited)
8
3
   
Condensed Statements of Operations for the three months ended December 31, 2019 and 2018 (unaudited)
4
Condensed Statement of Stockholders’ Equity for the three months ended December 31, 2019 and 2018 (unaudited)
5
Condensed Statements of Cash Flows for the three months ended December 31, 2019 and 2018 (unaudited)
6
Notes to Condensed Financial Statements (unaudited)
8
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
22
19
   
Item 3.
Quantitative and Qualitative Disclosures about Market Risks
24
22
   
Item 4.
Controls and Procedures
24
22
   
PART II  
   
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
25
23
   
Item 6.
Exhibits
25
23
   
 
Signatures
26
24
 
CEL-SCI CORPORATION
 
 
CONDENSED BALANCE SHEETS
 
 
(UNAUDITED)
 
 
 
 
 
 
 
 
 
 
DECEMBER 31,
 
 
SEPTEMBER 30,
 
ASSETS
 
2019
 
 
2019
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
     Cash and cash equivalents
 $9,383,378 
 $8,444,774 
     Receivables
  91,043 
  62,765 
     Prepaid expenses
  367,093 
  524,953 
     Supplies used for R&D and manufacturing
  905,875 
  782,363 
 
    
    
Total current assets
  10,747,389 
  9,814,855 
 
    
    
Finance lease right of use assets
  13,120,256
  - 
Operating lease right of use assets
  945,991 
  - 
Property and equipment, net
  2,712,577 
  15,825,636 
Patent costs, net
  310,703 
  311,586 
Deposits
  1,670,917 
  1,670,917 
 
    
    
Total Assets
 $29,507,833
 $27,622,994 
 
    
    
 
    
    
 
    
    
LIABILITIES AND STOCKHOLDERS' EQUITY
    
    
 
    
    
Current Liabilities:
    
    
  Accounts payable
 $1,438,685 
 $1,586,478 
  Accrued expenses
  210,580 
  34,432 
  Due to employees
  785,962 
  709,442 
  Derivative instruments, current portion
  1,161,544 
  674,442 
  Lease liabilities, current portion
  964,088 
  - 
  Other current liabilities
  5,000 
  14,956 
 
    
    
  Total current liabilities
  4,565,859 
  3,019,750 
 
    
    
  Derivative instruments, net of current portion
  4,560,257 
  5,813,868 
  Finance lease obligations, net of current portion
  12,453,708 
  13,508,156 
  Operating lease obligations, net of current portion
  834,695 
  - 
  Other liabilities
  125,000 
  147,553 
 
    
    
Total liabilities
  22,539,519 
  22,489,327 
 
    
    
Commitments and Contingencies
    
    
 
    
    
STOCKHOLDERS' EQUITY
    
    
  Preferred stock, $.01 par value-200,000 shares authorized;
    
    
    -0- shares issued and outstanding
  - 
  - 
  Common stock, $.01 par value - 600,000,000 shares authorized;
    
    
    35,995,089 and 35,231,776 shares issued and outstanding
    
    
    at December 31, 2019 and September 30, 2019, respectively
  359,951 
  352,318 
  Additional paid-in capital
  365,705,533 
  358,507,603 
  Accumulated deficit
  (359,097,170)
  (353,726,254)
 
    
    
Total stockholders' equity
  6,968,314
  5,133,667 
 
    
    
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
 $29,507,833
 $27,622,994 
 
    
    
 
See notes to condensed financial statements.
 

 
CEL-SCI CORPORATION
 
 
CONDENSED STATEMENTS OF OPERATIONS
 
 
THREE MONTHS ENDED DECEMBER 31, 2019 and 2018
 
 
(UNAUDITED)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2019
 
 
2018
 
 
 
 
 
 
 
 
Grant income
 $35,506 
 $126,414 
 
    
    
Operating Expenses:
    
    
  Research and development
  4,196,613 
  3,471,714 
  General and administrative
  2,638,896 
  1,689,162 
Total operating expenses
  6,835,509 
  5,160,876 
 
    
    
Operating loss
  (6,800,003)
  (5,034,462)
 
    
    
Other income
  18,448 
  17,911 
Gain on derivative instruments
  766,509 
  5,556,306 
Other non-operating gains
  790,669 
  1,152,176 
Interest expense, net
  (250,783)
  (446,029)
 
    
    
Net (loss) income available to common shareholders
 $(5,475,160)
 $1,245,902 
 
    
    
 
    
    
Net (loss) income per common share
    
    
      BASIC
 $(0.16)
 $0.04 
      DILUTED
 $(0.16)
 $0.02 
 
    
    
Weighted average common shares outstanding
    
    
      BASIC
  35,084,279 
  27,985,327 
      DILUTED
  35,098,608 
  29,929,353 
 
    
    
 
See notes to condensed financial statements.
 

 
CEL-SCI CORPORATION
 
 
CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
 
 
     THREE MONTHS ENDED DECEMBER 31, 2019 AND 2018
 
 
(UNAUDITED)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional
 
 
 
 
 
 
 
 
 
Common
 
 
Stock
 
 
Paid-In
 
 
Accumulated
 
 
 
 
 
 
 Shares
 
 
Amount
 
 
Capital
 
 
Deficit
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BALANCES AT OCTOBER 1, 2019
  35,231,776 
 $352,318 
 $358,507,603 
 $(353,726,254)
 $5,133,667 
 
    
    
    
    
    
Adoption of new accounting standard
  -
 -
 -
 104,244
 104,244
Issuance of common stock
  606,395 
  6,064 
  5,043,939 
  - 
  5,050,003 
Warrant exercises
  132,900 
  1,329 
  295,772 
  - 
  297,101 
Equity based compensation - employees
  - 
  - 
  1,800,225 
  -
  1,800,225 
401(k) contributions paid in common stock
  4,474 
  45 
  40,892 
  - 
  40,937 
Stock issued to nonemployees for service
  15,819 
  158 
  84,289 
  - 
  84,447 
Purchase of stock by officer
  3,725 
  37 
  24,963 
  - 
  25,000 
Share issuance costs
  - 
  - 
  (92,150)
  - 
  (92,150)
Net loss
  - 
  - 
  - 
  (5,475,160)
 (5,475,160)
 
    
    
    
    
    
BALANCES AT DECEMBER 31, 2019
  35,995,089 
 $359,951 
 $365,705,533 
 $(359,097,170)
 $6,968,314
 
    
    
    
    
    
 
 
 
 
 
 
 
 
Additional
 
 
 
 
 
 
 
 
 
Common
 
 
Stock
 
 
Paid-In
 
 
Accumulated
 
 
 
 
 
 
 Shares
 
 
Amount
 
 
Capital
 
 
Deficit
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BALANCES AT OCTOBER 1, 2018
  28,034,487 
 $280,346 
 $331,312,184 
 $(331,591,614)
 $916 
 
    
    
    
    
    
Warrant exercises
  298,682 
  2,987 
  646,766 
  -
  649,753 
401(k) contributions paid in common stock
  12,279 
  123 
  35,118 
  - 
  35,241 
Stock issued to nonemployees for service
  62,784 
  628 
  201,752 
  - 
  202,380 
Shares returned for settlement of clinical research costs
  (564,905)
  (5,649)
  5,649 
  - 
  - 
Equity based compensation - employees
  - 
  - 
  573,660 
  - 
  573,660 
Net income
  - 
  - 
  - 
  1,245,902 
  1,245,902 
 
    
    
    
    
    
BALANCES AT DECEMBER 31, 2018
  27,843,327 
 $278,435 
 $332,775,129 
 $(330,345,712)
 $2,707,852 
See notes to condensed financial statements.

 
CEL-SCI CORPORATION
 
 
CONDENSED STATEMENTS OF CASH FLOWS
 
 
THREE MONTHS ENDED DECEMBER 31, 2019 and 2018
 
 
(UNAUDITED)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2019
 
 
2018
 
 
 
 
 
 
 
 
Net (loss) income
 $(5,475,160)
 $1,245,902 
  Adjustments to reconcile net (loss) income to
    
    
    net cash used in operating activities:
    
    
      Depreciation and amortization
  446,340 
  154,821 
 Share-based payments for services
  155,740 
  238,904 
      Equity based compensation
  1,800,225 
  573,660 
      Common stock contributed to 401(k) plan
  40,937 
  35,241 
      Gain on derivative instruments
  (766,509)
  (5,556,306)
      Capitalized lease interest
  - 
  34,223 
      (Increase)/decrease in assets:
    
    
      Receivables
  (28,278)
  (10,105)
      Prepaid expenses
  86,567 
  (105,685)
      Supplies used for R&D and manufacturing
  (123,512)
  (37,287)
      Increase/(decrease) in liabilities:
    
    
      Accounts payable
  (393,064)
  (734,770)
      Accrued expenses
  80,432 
  (127,600)
      Due to employees
  76,520 
  131,892 
      Other liabilities
  (1,914)
  (369)
 
    
    
Net cash used in operating activities
  (4,101,676)
  (4,157,479)
 
    
    
CASH FLOWS FROM INVESTING ACTIVITIES:
    
    
      Purchases of property and equipment
  (101,820)
  (6,132)
      Proceeds from the sale of equipment
  4,500 
  - 
      Expenditures for patent costs
  (12,390)
  (66,131)
 
    
    
Net cash used in investing activities
  (109,710)
  (72,263)
 
    
    
CASH FLOWS FROM FINANCING ACTIVITIES:
    
    
     Proceeds from issuance of common stock
  5,050,003 
  - 
     Payments of stock issuance costs
  (31,080)
  (46,599)
     Proceeds from the purchase of stock by officer
  25,000 
  - 
     Proceeds from exercises of warrants
  297,101 
  649,753 
     Payments on obligations under finance lease
  (191,034)
  (1,251)
 
    
    
Net cash provided by financing activities
  5,149,990 
  601,903 
 
    
    
 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
  938,604 
  (3,627,839)
 
    
    
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
  8,444,774 
  10,310,044 
 
    
    
CASH AND CASH EQUIVALENTS, END OF PERIOD
 $9,383,378 
 $6,682,205 
See notes to condensed financial statements.

 
CEL-SCI CORPORATION
 
 
CONDENSED STATEMENTS OF CASH FLOWS
 
 
THREE MONTHS ENDED DECEMBER 31, 2019 and 2018
 
 
 
 
 
 
 
 
 
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
2019
 
 
2018
 
Property and equipment included in current liabilities
 $296,941 
 $- 
Finance lease obligation included in accounts payable
 $745 
 $421 
Prepaid consulting services paid with issuance of common stock
 $(71,293)
 $(36,524)
Financing costs included in current liabilities
 $76,650 
 $- 
 
    
    
 
    
    
  Cash paid for interest
 $295,107 
 $448,486 
 
    
    
See notes to condensed financial statements.
 
 

 
CEL-SCI CORPORATION
NOTES TO CONDENSED BALANCE SHEETS
(UNAUDITED)
 
 
JUNE 30,
 
 
SEPTEMBER 30,
 
ASSETS
 
2019
 
 
2018
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
     Cash and cash equivalents
 $9,485,495 
 $10,310,044 
     Receivables
  118,264 
  118,657 
     Prepaid expenses
  233,784 
  364,622 
     Inventory used for R&D and manufacturing
  754,825 
  645,238 
 
    
    
Total current assets
  10,592,368 
  11,438,561 
 
    
    
Plant, property and equipment, net
  15,948,864 
  16,218,851 
Patent costs, net
  272,488 
  258,093 
Deposits
  1,670,917 
  1,670,917 
 
    
    
Total Assets
 $28,484,637 
 $29,586,422 
 
    
    
 
    
    
 
    
    
LIABILITIES AND STOCKHOLDERS' EQUITY
    
    
 
    
    
Current Liabilities:
    
    
  Accounts payable
 $2,078,800 
 $5,743,913 
  Accrued expenses
  122,030 
  205,310 
  Due to employees
  761,027 
  764,941 
  Derivative instruments, current portion
  1,249,835 
  2,498,606 
  Other current liabilities
  16,009 
  14,029 
 
    
    
  Total current liabilities
  4,227,701 
  9,226,799 
 
    
    
  Derivative instruments, net of current portion
  9,482,995 
  6,818,458 
  Lease liability
  13,475,704 
  13,379,962 
  Deferred income
  126,849 
  126,795 
  Other liabilities
  25,084 
  33,492 
 
    
    
Total liabilities
  27,338,333 
  29,585,506 
 
    
    
Commitments and Contingencies
    
    
 
    
    
STOCKHOLDERS' EQUITY
    
    
  Preferred stock, $.01 par value-200,000 shares authorized;
    
    
    -0- shares issued and outstanding
  - 
  - 
  Common stock, $.01 par value - 600,000,000 shares authorized;
    
    
    34,066,914 and 28,034,487 shares issued and outstanding
    
    
    at June 30, 2019 and September 30, 2018, respectively
  340,669 
  280,346 
  Additional paid-in capital
  349,683,796 
  331,312,184 
  Accumulated deficit
  (348,878,161)
  (331,591,614)
 
    
    
Total stockholders' equity
  1,146,304 
  916 
 
    
    
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
 $28,484,637 
 $29,586,422 
See notes to condensed financial statements.

CEL-SCI CORPORATION
CONDENSEDFINANCIAL STATEMENTS OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 2019 and 2018
(UNAUDITED)
 
 
2019
 
 
2018
 
 
 
 
 
 
 
 
Grant income
 $386,121 
 $297,045 
 
    
    
Operating Expenses:
    
    
  Research and development
  7,956,203 
  7,713,873 
  General and administrative
  6,981,079 
  5,823,694 
 
    
    
Total operating expenses
  14,937,282 
  13,537,567 
 
    
    
Operating loss
  (14,551,161)
  (13,240,522)
 
    
    
Other income
  54,575 
  52,984 
 
    
    
(Loss) gain on derivative instruments
  (3,316,384)
  187,967 
 
    
    
Other non-operating gain (loss)
  1,877,197 
  (171,468)
 
    
    
Interest expense, net
  (1,350,774)
  (3,739,494)
 
    
    
Net loss available to common shareholders
 $(17,286,547)
 $(16,910,533)
 
    
    
 
    
    
Net loss per common share
    
    
       Basic and Diluted
 $(0.58)
 $(1.17)
 
    
    
Weighted average common shares outstanding
    
    
       Basic and Diluted
  30,046,241 
  14,486,351 
See notes to condensed financial statements.

CEL-SCI CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2019 and 2018
(UNAUDITED)
 
 
2019
 
 
2018
 
 
 
 
 
 
 
 
Grant income
 $108,938 
 $86,459 
 
    
    
Operating Expenses:
    
    
  Research and development
  2,298,555 
  2,425,562 
  General and administrative
  3,020,482 
  1,748,971 
 
    
    
Total operating expenses
  5,319,037 
  4,174,533 
 
    
    
Operating loss
  (5,210,099)
  (4,088,074)
 
    
    
Other income
  18,448 
  17,711 
 
    
    
Loss on derivative instruments
  (7,905,519)
  (8,618)
 
    
    
Other non-operating gain (loss)
  1,455,844 
  (149,359)
 
    
    
Interest expense, net
  (443,442)
  (1,786,228)
 
    
    
Net loss available to common shareholders
 $(12,084,768)
 $(6,014,568)
 
    
    
 
    
    
Net loss per common share
    
    
       Basic and Diluted
 $(0.37)
 $(0.36)
 
    
    
Weighted average common shares outstanding
    
    
       Basic and Diluted
  33,051,888 
  16,651,297 
See notes to condensed financial statements.

CEL-SCI CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 2019 and 2018
(UNAUDITED)
 
 
2019
 
 
2018
 
 
 
 
 
 
 
 
Net loss
 $(17,286,547)
 $(16,910,533)
  Adjustments to reconcile net loss to
    
    
    net cash used in operating activities:
    
    
      Depreciation and amortization
  513,028 
  485,710 
 Share-based payments for services
  688,070 
  349,319 
      Share-based payments for interest
  - 
  80,716 
      Equity based compensation
  2,626,311 
  2,193,402 
      Common stock contributed to 401(k) plan
  108,485 
  109,073 
      Shares issued for settlement of clinical research costs
  1,290,000 
  2,957,400 
      Loss on prepaid research and development
  - 
  471,157 
      Loss (gain) on derivative instruments
  3,316,384 
  (187,967)
      Amortization of debt discount
  - 
  1,956,424 
      Inducement expense
  - 
  291,234 
      Capitalized lease interest
  95,742 
  125,044 
      (Increase)/decrease in assets:
    
    
      Receivables
  393 
  98,829 
      Prepaid expenses
  11,047 
  122,627 
      Inventory used for R&D and manufacturing
  (109,587)
  44,364 
      Deposits
  - 
  150,000 
      Increase/(decrease) in liabilities:
    
    
      Accounts payable
  (3,567,182)
  (1,960,438)
      Accrued expenses
  (113,280)
  (74,856)
      Due to employees
  (3,914)
  548,982 
      Other liabilities
  (2,544)
  4,819 
 
    
    
Net cash used in operating activities
  (12,433,594)
  (9,144,694)
 
    
    
CASH FLOWS FROM INVESTING ACTIVITIES:
    
    
      Purchases of equipment
  (171,321)
  (1,015)
      Expenditures for patent costs
  (115,476)
  (2,437)
 
    
    
Net cash used in investing activities
  (286,797)
  (3,452)
 
    
    
CASH FLOWS FROM FINANCING ACTIVITIES:
    
    
     Proceeds from issuance of common stock and warrants
  - 
  7,091,536 
     Payments of stock issuance costs
  (90,224)
  (94,773)
     Proceeds from exercise of warrants
  11,657,590 
  2,133,677 
     Proceeds from exercise of options
  97,290 
  - 
     Proceeds from the purchase of stock by officers and directors
  234,997 
  - 
     Payments on obligations under capital lease
  (3,811)
  (5,082)
 
    
    
Net cash provided by financing activities
  11,895,842 
  9,125,358 
 
    
    
 NET DECREASE IN CASH AND CASH EQUIVALENTS
  (824,549)
  (22,788)
 
    
    
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
  10,310,044 
  2,369,438 
 
    
    
CASH AND CASH EQUIVALENTS, END OF PERIOD
 $9,485,495 
 $2,346,650 
See notes to condensed financial statements.

CEL-SCI CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 2019 and 2018
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
 
 
2019
 
 
2018
 
Capitalizable patent costs included in current liabilities
 $30,000 
 $61,501 
Capital lease obligation included in accounts payable
 $434 
 $408 
Exercise of derivative liabilities
 $1,900,618 
 $784,119 
Stock issuance costs included in current liabilities
 $8,010 
 $- 
Prepaid consulting services paid with issuance of common stock
 $(119,791)
 $113,786 
Notes payable converted into common shares
 $- 
 $2,294,300 
 
    
    
 
    
    
 
    
    
  Cash paid for interest expense
 $1,355,676 
 $1,312,664 
See notes to condensed financial statements.

CEL-SCI CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30,DECEMBER 31, 2019 AND 2018 (UNAUDITED)
 
A.
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Basis of Presentation
 
The accompanying condensed financial statements of CEL-SCI Corporation (the Company) are unaudited and certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission. While management of the Company believes that the disclosures presented are adequate to make the information presented not misleading, these interim condensed financial statements should be read in conjunction with the financial statements and notes included in the Company’s annual report on Form 10-K10-K/A for the year ended September 30, 2018.2019.
 
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,December 31, 2019 and the results of its operations for the nine and three months then ended. The condensed balance sheet as of September 30, 20182019 is derived from the September 30, 20182019 audited financial statements. SignificantOn October 1, 2019, the Company adopted Accounting Standards Update (ASU) No. 2016-02 “Leases (Topic 842)” using the modified retrospective transition approach. In accordance with this adoption method, results for the reporting period ended December 31, 2019 are presented under the new standard, while prior period results continue to be reported under the previous standard. All other 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,December 31, 2019 and 2018 are not necessarily indicative of the results to be expected for the entire year.
 
The financial statements have been prepared assuming that the Company will continue as a going concern, but due to recurring losses from operations which are expected for the foreseeable future, and future liquidity needs, there is substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Refer to discussion in Note B.
 
Summary of Significant Accounting Policies:
 
Research and Office Equipment and Leasehold Improvements – The leased manufacturing facility is recorded at total project costs incurred and is depreciated over the 20-year useful life of the building. Research and office equipment is recorded at cost and depreciated using the straight-line method over estimated useful lives of five to seven years. Leasehold improvements are depreciated over the shorter of the estimated useful life of the asset or the term of the lease. Repairs and maintenance which do not extend the life of the asset are expensed when incurred. The fixed assets are reviewed on a quarterly basis to determine if any of the assets are impaired.
 
Patents - Patent expenditures are capitalized and amortized using the straight-line method over the shorter of the expected useful life or the legal life of the patent (17 years). In the event changes in technology or other circumstances impair the value or life of the patent, appropriate adjustment in the asset value and period of amortization is made. An impairment loss is recognized when estimated future undiscounted cash flows expected to result from the use of the asset, and from its disposition, areis less than the carrying value of the asset. The amount of the impairment loss would be the difference between the estimated fair value of the asset and its carrying value.
 
Research and Development Costs - Research and development costs are expensed as incurred. Management accrues Clinical Research Organization (“CRO”) expenses and clinical trial study expenses based on services performed and relies on the CROs to provide estimates of those costs applicable to the completion stage of a study. Estimated accrued CRO costs are subject to revisions as such studies progress to completion. The Company charges revisions to estimated expense in the period in which the facts that give rise to the revision become known.

 
Income Taxes - The Company uses the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating and tax loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company records a valuation allowance to reduce the deferred tax assets to the amount that is more likely than not to be recognized.  A full valuation allowance was recorded against the deferred tax assets as of June 30,December 31, 2019 and September 30, 2018.2019.

On December 22, 2017, the “Tax Cuts and Jobs Act” (the “Tax Act"), was signed into law by the President of the United States (U.S.). The Tax Act includes significant changes to corporate taxation, including reduction of the U.S. corporate tax rate from 35% to 21%, effective January 1, 2018, limitation of the tax deduction for interest expense to 30% of earnings (except for certain small businesses), limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks. The Company has accounted for the income tax effects of the Act in applying FASB ASC 740 to the current reporting period. Because the Company records a valuation allowance for its entire deferred income tax asset, there was no impact to the amounts reported in the Company’s financial statements resulting from the Tax Act.
 
Derivative Instruments – The Company has entered into financing arrangements that consist of freestanding derivative instruments that contain embedded derivative features. The Company accounts for these arrangements in accordance with Accounting Standards Codification (ASC) 815, “Accounting for Derivative Instruments and Hedging Activities.” In accordance with accounting principles generally accepted in the United States (U.S. GAAP), derivative instruments and hybrid instruments are recognized as either assets or liabilities in the balance sheet and are measured at fair value with gains or losses recognized in earnings or other comprehensive income depending on the nature of the derivative or hybrid instruments. The Company determines the fair value of derivative instruments and hybrid instruments based on available market data using appropriate valuation models considering all the rights and obligations of each instrument. The derivative liabilities are re-measured at fair value at the end of each interim period.
 
Deferred Rent– Certain of the Company’s operating leases provide for minimum annual payments that adjust over the life of the lease.  The aggregate minimum annual payments are expensed on a straight-line basis over the minimum lease term. The Company recognizes a deferred rent liability for rent escalations when the amount of straight-line rent exceeds the lease payments, and reduces the deferred rent liability when the lease payments exceed the straight-line rent expense.  For tenant improvement allowances and rent holidays, the Company records a deferred rent liability and amortizes the deferred rent over the lease term as a reduction to rent expense.
Leases –Leases are categorized as either operating or capital leases at inception. Operating lease costs are recognized on a straight-line basis over the term of the lease. An asset and a corresponding liability for the capital lease obligation are established for the cost of capital leases. The capital lease obligation is amortized over the life of the lease. For build-to-suit leases, the Company establishes an asset and liability for the estimated construction costs incurred to the extent that it is involved in the construction of structural improvements or takes construction risk prior to the commencement of the lease. Upon occupancy of facilities under build-to-suit leases, the Company assesses whether these arrangements qualify for sales recognition under the sale-leaseback accounting guidance. If a lease does not meet the criteria to qualify for a sale-leaseback transaction, the established asset and liability remain on the Company's balance sheet.
Stock-Based Compensation – Compensation cost for all stock-based awards is measured at fair value as of the grant date in accordance with the provisions of ASC 718 “Compensation – Stock Compensation.” The fair value of stock options is calculated using the Black-Scholes option pricing model. The Black-Scholes model requires various judgmental assumptions including volatility and expected option life. The stock-based compensation cost is recognized on the straight-line allocation method as an expense over the requisite service or vesting period.
 
Equity instruments issued to non-employees are accounted for in accordance with ASC 505-50, “Equity-Based Payments to Non-Employees.” Accordingly, compensation is recognized when goods or services are received and is measured using the Black-Scholes valuation model. The Black-Scholes model requires various judgmental assumptions regarding the fair value of the equity instruments at the measurement date and the expected life of the options.
 
The Company has Incentive Stock Option Plans, Non-Qualified Stock Option Plans, a Stock Compensation Plan, Stock Bonus Plans and an Incentive Stock Bonus Plan. In some cases, these Plans are collectively referred to as the "Plans". All Plans have been approved by the stockholders.
 
The Company’s stock options are not transferable, and the actual value of the stock options that an employee may realize, if any, will depend on the excess of the market price on the date of exercise over the exercise price. The Company has based its assumption for stock price volatility on the variance of daily closing prices of the Company’s stock. The risk-free interest rate assumption was based on the U.S. Treasury rate at date of the grant with term equal to the expected life of the option. Forfeitures are accounted for when they occur. The expected term of options represents the period that options granted are expected to be outstanding and has been determined based on an analysis of historical exercise behavior. If any of the assumptions used in the Black-Scholes model change significantly, stock-based compensation expense for new awards may differ materially in the future from that recorded in the current period.
 

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

Newly Adopted Accounting Pronouncements
Effective October 1, 2019, the Company adopted Accounting Standards Update (“ASU”) 2016-02, Leases and its related amendments (collectively referred to as Topic 842 and codified as “ASC 842”). ASC 842 requires that lessees recognize right-of-use assets and lease liabilities that are measured at the present value of the future lease payments at the lease commencement date. Subsequent measurement, including the presentation of expenses and cash flows, depends on the classification of the lease as either a finance lease or an operating lease. The Company elected the optional transition method that allows for a cumulative-effect adjustment in the period of adoption and did not restate prior periods. The Company also elected the transition package of three practical expedients which eliminates the requirements to reassess prior conclusions about lease identification, lease classification, and initial direct costs. Further, the Company elected a short-term lease exception policy, permitting the option to not apply the recognition requirements of this standard to short-term leases (i.e., leases with terms of 12 months or less) and an accounting policy to account for lease and non-lease components as a single component. The Company’s lease portfolio includes both finance and operating leases. The impact of adopting ASC 842 was to increase long term assets by approximately $1.0 million, decrease total liabilities by approximately $0.9 million and record a cumulative effect adjustment of approximately $0.1 million to opening accumulated deficit. The adoption of ASC 842 will not have a significant impact on the Company’s statements of operations or cash flows.
In June 2018, the Financial Accounting Standards Board ("FASB") issued ASU 2018-07, Compensation—Stock Compensation (Topic 718), (“ASU 2018-07”), which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees, and thus, the accounting for share-based payments to non-employees will be substantially aligned. The Company adopted ASU No. 2018-07 as of October 1, 2019 with no impact on its financial statements and related disclosures.
New Accounting Pronouncements
 
In JuneAugust 2018, the Financial Accounting Standards Board ("FASB")FASB issued ASU 2018-07,2018-13, “Fair Value Measurement - Disclosure Framework (Topic Compensation—Stock Compensation (Topic 718820),” (“ASU 2018-7”2018-13”), which expands. The updated guidance improves the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply thedisclosure requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost. Under current GAAP, non-employee share-based payment awards are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever can be more reliably measured. Under ASU 2018-07, non-employee share-based payments would be measured at the grant-date fair value of the equity instruments an entity is obligated to issue when the good has been delivered or the service has been rendered and any other conditions necessary to earn the right to benefit from the instruments have been satisfied. Under current GAAP, the measurement date for equity classified non-employee share-based payment awards is the earlier of the date at which a commitment for performance by the counterparty is reached or the date at which the counterparty’s performance is complete. Under ASU 2018-07, equity-classified nonemployee share-based payment awards are measured at the grant date.measurements. The definition of the termgrant dateis amended to generally state the date at which agrantorand agranteereach a mutual understanding of the key terms and conditions of a share-based payment award. The amendments in this Update areupdated guidance becomes effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year.the Company on October 1, 2021. Early adoption is permitted but no earlier than an entity’s adoption date of Topic 606. An entity should only remeasure liability-classified awards that have not been settled by the date of adoption and equity classified awards for which a measurement date has not been established through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. Upon transition, the entity is required to measure these non-employee awards at fair value as of the adoption date. The entity must not remeasure awards that are completed.any removed or modified disclosures. The Company is currently evaluatingassessing the timing and impact of adopting the adoption of the standard will have on the Company’s financial position and results of operations.updated provisions.
 
In February 2016, the FASB issued ASU 2016-02, Leases, which will require most leases (except of leases with terms of less than one year) to be recognized on the balance sheet as an asset and a lease liability. Leases will be classified as an operating lease or a financing lease. Operating leases are expensed using the straight-line method whereas financing leases will be treated similarly to a capital lease under the current standard. The new standard will be effective for annual and interim periods, within those fiscal years, beginning after December 15, 2018, but early adoption is permitted. The new standard must be presented using the modified retrospective method beginning with the earliest comparative period presented.As permitted by the guidance, the Company has an option to retain the original lease classification and historical accounting for initial direct costs for leases existing prior to the adoption date. Furthermore, the Company will not have to reassess contracts entered into prior to the adoption date for the existence of a lease. The Company also has an option not to restate prior periods for the impact of the adoption of the new standard and may instead recognize a cumulative-effect adjustment to beginning retained earnings as of October 1, 2019 for any prior period income statement effects identified. The Company is evaluating the effect that adoption of this new standard will have on the Company’s financial statements and related disclosures.
The Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its financial statements.

 
B.
OPERATIONS AND FINANCING
 
The Company has incurred significant costs since its inception for the acquisition of certain patented and unpatented proprietary technology and know-how relating to the human immunological defense system, patent applications, research and development, administrative costs, construction of laboratory facilities, and clinical trials.  The Company has funded such costs with proceeds from loans and the public and private sale of its common stock.  The Company will be required to raise additional capital or find additional long-term financing to continue with its research efforts.  The ability to raise capital may be dependent upon market conditions that are outside the control of the Company. The ability of the Company to complete the necessary clinical trials and obtain FDA approval for the sale of products to be developed on a commercial basis is uncertain. Ultimately, the Company must complete the development of its products, obtain the appropriate regulatory approvals and obtain sufficient revenues to support its cost structure. The Company is taking cost-cutting initiatives, as well as exploring other sources of funding, to finance operations over the next 12 months. The Company believes that there is a high likelihood that it will continue to receive funds from private and public offerings and warrant exercisesconversions similar to the way it has received funds duringsubstantially funded operations for the past 12 months. However, there can be no assurance that the Company will be able to raise sufficient capital to support its operations.
 
The Company is currently in the final stages of its large multi-national Phase 3 clinical trial for head and neck cancer with its partners TEVA Pharmaceuticals and Orient Europharma. To finance the study beyond the next twelve months, the Company plans to raise additional capital in the form of corporate partnerships, warrant exercises, debt issuances and/or equity financings. The Company believes that it will be able to obtain additional financing because it has done so consistently in the past.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 may have to curtail its operations until it can raise the required funding.

 
The financial statements have been prepared assuming the Company will continue as a going concern, but due to the Company’s recurring losses from operations and future liquidity needs, there is substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
Since the Company launched its Phase 3 clinical trial for Multikine, the Company has incurred expenses of approximately $54.7$57.0 million as of June 30,December 31, 2019 on direct costs for the Phase 3 clinical trial. The Company estimates it will incur additional expenses of approximately $5.6$3.3 million for the remainder of the Phase 3 clinical trial. It should be noted that thisThis estimate is based only on the information currently available in the Company’s contracts with the Clinical Research Organizations responsible for managing the Phase 3 clinical trial and does not include other related costs, e.g., the manufacturing of the drug. This number may be affected by the rate of death accumulation in the study, foreign currency exchange rates, and many other factors, some of which cannot be foreseen today. It is therefore possible that the cost of the Phase 3 clinical trial will be higher than currently estimated.
 
Nine hundred twenty-eight (928) head and neck cancer patients have been enrolled and have completed treatment in the Phase 3 study. The study end point is a 10% increase in overall survival of patients between the two main comparator groups in favor of the group receiving the Multikine treatment regimen. The determination if the study end point has beenis met will occur when there are a total of 298 deaths in those two groups.
 

C.
STOCKHOLDERS’ EQUITY
 
The changes in stockholders’ equity duringProceeds from the nine months ended June 30, 2019 are as follows:Sale of Common Stock
 
 
 
 
 
 
 
 
 
Additional
 
 
 
 
 
 
 
 
 
Common
 
 
Stock
 
 
Paid-In
 
 
Accumulated
 
 
 
 
 
 
 Shares
 
 
Amount
 
 
Capital
 
 
Deficit
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BALANCES AT OCTOBER 1, 2018
  28,034,487 
 $280,346 
 $331,312,184 
 $(331,591,614)
 $916 
Warrant exercises
  298,682 
  2,987 
  646,766 
  - 
  649,753 
401(k) contributions paid in common stock
  12,279 
  123 
  35,118 
  - 
  35,241 
 
    
    
    
    
    
Stock issued to nonemployees for services
  62,784 
  628 
  201,752 
  - 
  202,380 
Shares returned for settlement of clinical research costs
  (564,905)
  (5,649)
  5,649 
  - 
  - 
Equity based compensation - employees
  - 
  - 
  573,660 
  - 
  573,660 
Net income
  - 
  - 
  - 
  1,245,902 
  1,245,902 
 
    
    
    
    
    
BALANCES AT DECEMBER 31, 2018
  27,843,327 
  278,435 
  332,775,129 
  (330,345,712)
  2,707,852 
 
    
    
    
    
    
Warrant exercises
  1,523,933 
  15,239 
  2,640,395 
  - 
  2,655,634 
401(k) contributions paid in common stock
  10,419 
  104 
  36,779 
  - 
  36,883 
Stock issued to nonemployees for services
  77,449 
  774 
  224,855 
  - 
  225,629 
Equity based compensation - employees
  (3,500)
  (35)
  530,865 
  - 
  530,830 
Shares issued for settlement of clinical research costs
  500,000 
  5,000 
  1,285,000 
  - 
  1,290,000 
Stock issuance costs
  - 
  - 
  (43,625)
  - 
  (43,625)
Net loss
  - 
  - 
  - 
  (6,447,681)
  (6,447,681)
 
    
    
    
    
    
BALANCES AT MARCH 31, 2019
  29,951,628 
  299,517 
  337,449,398 
  (336,793,393)
  955,522 
 
    
    
    
    
    
Warrant exercises
  4,014,109 
  40,141 
  10,212,680 
  - 
  10,252,821 
401(k) contributions paid in common stock
  4,339 
  43 
  36,318 
  - 
  36,361 
Stock issued to nonemployees for services
  20,825 
  208 
  140,062 
  - 
  140,270 
Equity based compensation - employees
  (4,000)
  (40)
  1,521,861 
  - 
  1,521,821 
Option exercises
  42,770 
  428 
  96,862 
  - 
  97,290 
Purchase of stock by officers and directors
  37,243 
  372 
  234,625 
  - 
  234,997 
Stock issuance costs
  - 
  - 
  (8,010)
  - 
  (8,010)
Net loss
  - 
  - 
  - 
  (12,084,768)
  (12,084,768)
BALANCES AT JUNE 30, 2019
  34,066,914 
 $340,669 
 $349,683,796 
 $(348,878,161)
 $1,146,304 
In December 2019, the Company sold 606,395 shares of common stock at a public offering price of $9.07 per share and received aggregate proceeds of approximately $5.0 million.
 

The changes in stockholders’ deficit during the nine months ended June 30, 2018 are as follows:
 
 
 
 
 
 
 
 
Additional
 
 
 
 
 
 
 
 
 
 Common
 
 
Stock
 
 
Paid-In
 
 
Accumulated
 
 
 
 
 
 
 Shares
 
 
Amount
 
 
Capital
 
 
Deficit
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BALANCES AT OCTOBER 1, 2017
  11,903,133 
 $119,031 
 $296,298,401 
 $(299,754,409)
 $(3,336,977)
 
    
    
    
    
    
Sale of common stock
  1,289,478 
  12,895 
  2,437,105 
  - 
  2,450,000 
401(k) contributions paid in common stock
  18,984 
  190 
  35,690 
  - 
  35,880 
Stock issued to nonemployees for services
  13,705 
  137 
  25,270 
  - 
  25,407 
Equity based compensation - employees
  - 
  - 
  1,448,098 
  - 
  1,448,098 
Warrants issued with notes payable
  - 
  - 
  656,382 
  - 
  656,382 
Conversion of notes payable to common stock
  32,751 
  328 
  74,672 
  - 
  75,000 
Net loss
  - 
  - 
  - 
  (6,187,830)
  (6,187,830)
BALANCES AT DECEMBER 31, 2017
  13,258,051 
  132,581 
  300,975,618 
  (305,942,239)
  (4,834,040)
 
    
    
    
    
    
Sale of common stock
  2,501,145 
  25,011 
  4,652,130 
  - 
  4,677,141 
401(k) contributions paid in common stock
  25,901 
  259 
  36,261 
  - 
  36,520 
Stock issued to nonemployees for services
  124,082 
  1,241 
  227,254 
  - 
  228,495 
Equity based compensation - employees
  - 
  - 
  279,817 
  - 
  279,817 
Conversion of notes payable to common stock
  55,373 
  554 
  108,746 
  - 
  109,300 
Shares issued for settlement of clinical research costs
  660,000 
  6,600 
  1,240,800 
  - 
  1,247,400 
Stock issuance cost
  - 
  - 
  (94,773)
  - 
  (94,773)
Net loss
  - 
  - 
  - 
  (4,708,135)
  (4,708,135)
BALANCES AT MARCH 31, 2018
  16,624,552 
  166,246 
  307,425,853 
  (310,650,374)
  (3,058,275)
 
    
    
    
    
    
Warrant exercises
  1,117,644 
  11,177 
  2,906,619 
  - 
  2,917,796 
401(k) contributions paid in common stock
  39,862 
  399 
  36,274 
  - 
  36,673 
Stock issued to nonemployees for services
  81,604 
  816 
  208,387 
  - 
  209,203 
Equity based compensation - employees
  - 
  - 
  465,487 
  - 
  465,487 
Conversion of notes payable and interest to common stock
  1,106,806 
  11,068 
  2,179,648 
  - 
  2,190,716 
Shares issued for settlement of clinical research costs
  600,000 
  6,000 
  1,704,000 
  - 
  1,710,000 
Warrants issued with notes payable
  - 
  - 
  291,234 
  - 
  291,234 
Net loss
  - 
  - 
  - 
  (6,014,568)
  (6,014,568)
BALANCES AT JUNE 30, 2018
  19,570,468 
 $195,706 
 $315,217,502 
 $(316,664,942)
 $(1,251,734)
Equity Compensation
 
Underlying share information for equity compensation plans as of June 30,December 31, 2019 is as follows:
 
Name of Plan
 
Total Shares Reserved Under Plans
 
 
Shares Reserved for Outstanding Options
 
 
Shares Issued
 
 
Remaining Options/Shares
Under Plans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Incentive Stock Options Plans
  138,400 
  99,962 
  N/A 
  385 
Non-Qualified Stock Option Plans
  6,387,200 
  6,193,237 
  N/A 
  115,156 
Stock Bonus Plans
  783,760 
  N/A 
  327,267 
  456,460 
Stock Compensation Plan
  634,000 
  N/A 
  122,221 
  493,369 
Incentive Stock Bonus Plan
  640,000 
  N/A 
  616,500 
  23,500 

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 
  89,895 
  N/A 
  213 
Non-Qualified Stock Option Plans
  6,387,200 
  6,129,285 
  N/A 
  111,170 
Stock Bonus Plans
  783,760 
  N/A 
  335,700 
  448,027 
Stock Compensation Plan
  634,000 
  N/A 
  133,908 
  481,682 
Incentive Stock Bonus Plan
  640,000 
  N/A 
  616,500 
  23,500 
 
Underlying share information for equity compensation plans as of September 30, 20182019 is as follows:
 
Name of Plan
 
Total Shares Reserved Under Plans
 
 
Shares Reserved for Outstanding Options
 
 
Shares Issued
 
 
Remaining Options/Shares Under Plans
 
 
Total Shares Reserved Under Plans
 
 
Shares Reserved for Outstanding Options
 
 
Shares Issued
 
 
Remaining Options/Shares Under Plans
 
 
 
 
 
 
 
Incentive Stock Option Plans
  138,400 
  123,558 
  N/A 
  385 
  138,400 
  89,895 
  N/A 
  213 
Non-Qualified Stock Option Plans
  3,387,200 
  3,036,569 
  N/A 
  309,526 
  6,387,200 
  6,128,321 
  N/A 
  112,166 
Stock Bonus Plans
  783,760 
  N/A 
  297,230 
  486,497 
  783,760 
  N/A 
  331,226 
  452,501 
Stock Compensation Plan
  134,000 
  N/A 
  118,590 
  15,410 
  634,000 
  N/A 
  130,183 
  485,407 
Incentive Stock Bonus Plan
  640,000 
  N/A 
  624,000 
  16,000 
  640,000 
  N/A 
  616,500 
  23,500 

 
Stock option activity:
 
 
Nine Months Ended June 30,
 
 
 
 2019
 
 
 2018
 
Granted
  3,268,862 
  1,858,108 
Exercised
  42,770 
  - 
Expired
  29,322 
  26,395 
Forfeited
  63,698 
  1,393 
 
 
Three Months Ended December 31,
 
 
 
2019
 
 
2018
 
Options granted
  1,000 
  500 
Options expired
  36 
  2,400 
 
 
 
Three Months Ended June 30,
 
 
 
2019
 
 
2018
 
Granted
  3,268,362 
  1,847,808 
Exercised
  42,770 
  - 
Expired
  26,922 
  2,016 
Forfeited
  39,505 
  - 
Stock-Based Compensation Expense
 
During the quarter ended June 30, 2019, the Company adopted the 2019 Stock Compensation Plan, which authorized the issuance of up to 500,000 shares of common stock to officers, directors, employees and consultants.
 
 
Three months Ended December 31,
 
 
 
2019
 
 
2018
 
Employees
 $1,800,225 
 $573,660 
Non-employees
 $155,740 
 $238,904 
 
Employee stock based compensation expense includes the expense related to options issued or vested and restricted stock.stock granted. Non-employee expense includes the expense related to options and stock issued to consultants expensed over the period of their service contracts. Stock based compensation expense is included in general and administrative expenses on the statements of operations.
 
Non-employee stock based compensation expense includes the value of shares and options issued under consulting arrangements. At June 30, 2019 and September 30, 2018, approximately $88,000 and $207,000, respectively, are included in prepaid expenses.

Warrants and Non-Employee Options
 
The following chart represents the warrants and non-employee options outstanding at June 30,December 31, 2019:
 
Warrant
 
Issue Date
 
Shares Issuable upon Exercise
of Warrants
 
 
Exercise Price
 
Expiration Date
Warrant/Options
Issue Date
 
Shares Issuable upon Exercise
of Warrants/ Options
 
 
Exercise Price
 
Expiration Date
 
   Reference
 
Series N
 
8/18/2008
  85,339 
 $3.00 
2/18/20208/18/2008
  85,339 
 $3.00 
2/18/2020
  * 
Series V
 
5/28/2015
  810,127 
 $19.75 
5/28/20205/28/2015
  810,127 
 $19.75 
5/28/2020
  * 
Series UU
 
6/11/2018
  163,544 
 $2.80 
6/11/20206/11/2018
  154,810 
 $2.80 
6/11/2020
  * 
Series W
 
10/28/2015
  688,930 
 $16.75 
10/28/202010/28/2015
  688,930 
 $16.75 
10/28/2020
  * 
Series X
 
1/13/2016
  120,000 
 $9.25 
1/13/20211/13/2016
  120,000 
 $9.25 
1/13/2021
  * 
Series Y
 
2/15/2016
  26,000 
 $12.00 
2/15/20212/15/2016
  26,000 
 $12.00 
2/15/2021
  * 
Series ZZ
 
5/23/2016
  20,000 
 $13.75 
5/18/20215/23/2016
  20,000 
 $13.75 
5/18/2021
  * 
Series BB
 
8/26/2016
  16,000 
 $13.75 
8/22/20218/26/2016
  16,000 
 $13.75 
8/22/2021
  * 
Series Z
 
5/23/2016
  264,000 
 $13.75 
11/23/20215/23/2016
  264,000 
 $13.75 
11/23/2021
  * 
Series FF
 
12/8/2016
  68,048 
 $3.91 
12/1/202112/8/2016
  68,048 
 $3.91 
12/1/2021
  * 
Series CC
 
12/8/2016
  611,463 
 $5.00 
12/8/202112/8/2016
  277,463 
 $5.00 
12/8/2021
  * 
Series HH
 
2/23/2017
  6,500 
 $3.13 
2/16/20222/23/2017
  6,500 
 $3.13 
2/16/2022
  * 
Series AA
 
8/26/2016
  200,000 
 $13.75 
2/22/20228/26/2016
  200,000 
 $13.75 
2/22/2022
  * 
Series JJ
 
3/14/2017
  9,450 
 $3.13 
3/8/20223/14/2017
  9,450 
 $3.13 
3/8/2022
  * 
Series LL
 
4/30/2017
  26,398 
 $3.59 
4/30/20224/30/2017
  26,398 
 $3.59 
4/30/2022
  * 
Series MM
 
6/22/2017
  893,491 
 $1.86 
6/22/20226/22/2017
  893,491 
 $1.86 
6/22/2022
  * 
Series NN
 
7/24/2017
  473,798 
 $2.52 
7/24/20227/24/2017
  473,798 
 $2.52 
7/24/2022
  * 
Series OO
 
7/31/2017
  60,000 
 $2.52 
7/31/20227/31/2017
  40,000 
 $2.52 
7/31/2022
 2
Series II
 
3/14/2017
  95,000 
 $3.00 
9/14/2022
Series RR
 
10/30/2017
  495,326 
 $1.65 
10/30/202210/30/2017
  457,116 
 $1.65 
10/30/2022
  * 
Series SS
 
12/19/2017
  514,476 
 $2.09 
12/18/202212/19/2017
  460,012 
 $2.09 
12/18/2022
  2 
Series TT
 
2/5/2018
  760,758 
 $2.24 
2/5/20232/5/2018
  459,421 
 $2.24 
2/5/2023
  2 
Series PP
 
8/28/2017
  112,500 
 $2.30 
2/28/2023
Series WW
 
7/2/2018
  1,950 
 $1.63 
6/28/2023
Series VV
 
7/2/2018
  90,000 
 $1.75 
1/2/20247/2/2018
  82,500 
 $1.75 
1/2/2024
  * 
Consultants
 
7/28/17
  10,000 
 $2.18 
7/27/20277/28/17
  10,000 
 $2.18 
7/27/2027
  3 
* No current period changes to these warrants
 

 
1.
Derivative Liabilities
 
The table below presents the fair value of the warrant liabilities at the balance sheet dates:
 
 
June 30,
2019
 
 
September 30,
2018
 
 
December 31,
2019
 
 
September 30,
2019
 
Series S warrants
 $- 
 $33 
Series V warrants
  1,249,835 
  770,436 
 $119,411 
 $674,442 
Series W warrants
  2,131,237 
  999,081 
  1,042,133 
  1,193,507 
Series Z warrants
  1,172,626 
  487,767 
  1,098,996 
  1,109,545 
Series ZZ warrants
  72,185 
  34,215 
  62,791 
  77,638 
Series AA warrants
  963,990 
  380,474 
  851,930 
  916,908 
Series BB warrants
  64,256 
  28,456 
  64,397 
  63,966 
Series CC warrants
  3,699,989 
  1,779,724 
  1,733,579 
  1,710,898 
Series DD warrants
  - 
  1,249,287 
Series EE warrants
  - 
  1,249,287 
Series FF warrants
  433,091 
  188,921 
  453,374 
  446,185 
Series GG warrants
  - 
  607,228 
Series HH warrants
  44,050 
  58,816 
  45,739 
  45,657 
Series II warrants
  660,020 
  660,135 
Series JJ warrants
  64,252 
  88,642 
  66,729 
  66,599 
Series KK warrants
  - 
  656,930 
Series LL warrants
  177,299 
  77,632 
  182,722 
  182,965 
Total warrant liabilities
 $10,732,830 
 $9,317,064 
 $5,721,801 
 $6,488,310 
    
The table below presents the gains/(losses) on the warrant liabilities for the nine months ended June 30:
 
 
2019 
 
 
2018 
 
Series S warrants
 $33 
 $(756,261)
Series V warrants
  (479,399)
  22,842 
Series W warrants
  (1,132,156)
  18,478 
Series Z warrants
  (684,859)
  34,682 
Series ZZ warrants
  (37,970)
  2,103 
Series AA warrants
  (583,516)
  28,337 
Series BB warrants
  (35,800)
  1,988 
Series CC warrants
  (2,007,287)
  181,244 
Series DD warrants
  1,249,287 
  5,492 
Series EE warrants
  1,249,287 
  5,492 
Series FF warrants
  (244,170)
  23,119 
Series GG warrants
  195,228 
  170,131 
Series HH warrants
  (22,859)
  7,962 
Series II warrants
  (593,960)
  250,578 
Series JJ warrants
  (32,954)
  11,970 
Series KK warrants
  (55,622)
  169,808 
Series LL warrants
  (99,667)
  10,002 
Net (loss) gain on warrant liabilities
 $(3,316,384)
 $187,967 

The table below presents the gains/gains and (losses) on the warrant liabilities for the three months ended June 30:December 31:
 
 
 2019
 
 
 2018
 
 
2019
 
 
  2018
 
Series S warrants
 $- 
 $(768,188)
 $- 
 $33 
Series V warrants
  (974,251)
  26,389 
  555,031 
  556,332 
Series W warrants
  (1,748,184)
  42,609 
  151,374 
  626,850 
Series Z warrants
  (799,690)
  26,587 
  10,549 
  204,121 
Series ZZ warrants
  (50,608)
  1,914 
  14,847 
  14,323 
Series AA warrants
  (676,784)
  19,661 
  64,978 
  157,219 
Series BB warrants
  (43,536)
  1,695 
  (431)
  12,110 
Series CC warrants
  (2,346,985)
  139,325 
  (22,681)
  665,606 
Series DD warrants
  - 
  36 
  - 
  1,249,287 
Series EE warrants
  - 
  36 
  - 
  1,249,287 
Series FF warrants
  (278,773)
  15,818 
  (7,189)
  69,062 
Series GG warrants
  88,478 
  132,712 
  - 
  212,782 
Series HH warrants
  (33,501)
  5,279 
  (82)
  20,951 
Series II warrants
  (709,303)
  199,970 
  - 
  230,589 
Series JJ warrants
  (48,880)
  7,960 
  (130)
  31,462 
Series KK warrants
  (169,089)
  132,884 
  - 
  228,095 
Series LL warrants
  (114,413)
  6,695 
  243 
  28,197 
Net loss on warrant liabilities
 $(7,905,519)
 $(8,618)
Net gain on warrant liabilities
 $766,509 
 $5,556,306 
  
The Company reviews all outstanding warrants in accordance with the requirements of ASC 815. This topic provides that an entity should use a two-step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions. The warrant agreements provide for adjustments to the exercise price for certain dilutive events. Under the provisions of ASC 815, the warrants are not considered indexed to the Company’s stock because future equity offerings or sales of the Company’s stock are not an input to the fair value of a “fixed-for-fixed” option on equity shares, and equity classification is therefore precluded.
 
In accordance with ASC 815, derivative liabilities must be measured at fair value upon issuance and re-valued at the end of each reporting period through expiration. Any change in fair value between the respective reporting dates is recognized as a gain or loss.
 
Expiration of Derivative

Changes in Warrant Liabilities
 
On December 10, 2018, 1,360,960 Series DD and 1,360,960 Series EE warrants, with an exercise price of $4.50 expired. The expiration dates of these warrants had been previously extended and such modifications were reflected in the fair value measurements of the warrants on the dates of modification.
On October 11, 2018, 327,729 Series S warrants, with an exercise price of $31.25 expired. The exercise price of these warrants had been previously repriced under temporarily revised terms. During the quarter ended June 30, 2018 and under the revised terms, 709,391 previously outstanding warrants were exercised for total proceeds of approximately $1.2 million,
 
2. 2.
Changes in Equity Warrants
Exercise of Equity Warrants
The following warrants recorded as equity were exercised during the three months ended December 31, 2019.
Warrants
 
Warrants Exercised
 
 
Exercise Price
 
 
 
Proceeds
 
Series OO
  10,000 
 $2.52 
 $25,200 
Series SS
  22,632 
 $2.09 
  47,301 
Series TT
  100,628 
 $2.24 
  224,600 
 
  132,900 
    
 $297,101 
The following warrants recorded as equity were exercised during the three months ended December 31, 2018.
Warrants
 
Warrants Exercised
 
 
Exercise Price
 
 
 
Proceeds
 
Series PP
  60,000 
 $2.30 
 $138,000 
Series SS
  152,632 
 $2.09 
  319,001 
Series TT
  86,050 
 $2.24 
  192,752 
 
  298,682 
    
 $649,753 
3. 
Options and Shares Issued to Consultants
During the three months ended December 31, 2019 and 2018, respectively, the Company issued 15,819 and 62,784 shares of restricted common stock to consultants for services. The weighted average grant date fair value of the shares issued to consultants was $7.18 and $3.22 during the three months ended December 31, 2019 and 2018, respectively. 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 three months ended December 31, 2019 and 2018, the Company recorded total expense of approximately $156,000 and $239,000, respectively, relating to these consulting agreements. At December 31, 2019 and September 30, 2019, approximately $159,000 and $230,000, respectively, are included in prepaid expenses. During the three months ended December 31, 2019 and 2018, 0 and 2,400 options, respectively, expired that were issued to consultants as payment for services rendered. As of December 31, 2019, 10,000 options issued to consultants remained outstanding, all of which were issued from the Non-Qualified Stock Option plans and are fully vested.
4. 
Securities Purchase AgreementsAgreement
 
The Company has entered into severala Securities Purchase Agreements (SPAs)Agreement with Ergomed plc, one of itsthe Company’s Clinical Research Organizations responsible for managing the Company’s Phase 3 clinical trial, to facilitate a partial payment of amounts due Ergomed. Under the Agreements,Agreement, the Company issued Ergomed shares of common stock as a forbearance fee in exchange for Ergomed’s agreement to provisionally forbear collection of the payables in an amount equal tothat the net proceeds from the sales of thethose shares issued towould reduce outstanding amounts due Ergomed. Upon issuance, the Company expenses the full value of the shares as Other Non-Operating Gain/Lossnon-operating gain/loss and subsequently offsets the expense as amounts are realized through the sale by Ergomed and reduces accounts payable to Ergomed. Any amounts received from the sale of the shares in excess of the payables will be applied towards the satisfaction of any future amounts owed.
 

During the quarters ended December 31, 2019 and 2018, respectively, the Company realized approximately $0.8 million and $1.2 million through the sale by Ergomed of 98,350 and 353,995 shares of the Company’s common stock and the Company reduced the payables to Ergomed and credited Other Operating Gain by those amounts. No shares were issued to Ergomed during the quarters ended December 31, 2019 and 2018.
 
On December 31, 2018, the expiration date of the prior SPA expired. Pursuant to that arrangement,agreement, Ergomed returned 564,905 unsold shares for cancellation. The par value of those shares was reclassed from Common Stock to Additional Paid-In Capital on the balance sheet.
On January 9, 2019, the Company entered into a new SPA under which it issued Ergomed 500,000 restricted shares of the Company’s common stock valued at approximately $1.3 million. This current SPA expires on December 31, 2019.
During the nine months ended June 30, 2019 and 2018, respectively, the Company decreased Accounts Payable by approximately $3.2 million and $2.8 million through the sale of 808,769 and 1,538,129 shares, respectively, by Ergomed.
The following table summarizes the Other Non-Operating Gains (Loss) for the nine and three months ended June 30, 2019 and 2018 relating to these agreements:
 
 
Nine Months Ended
 
 
Three Months Ended
 
 
 
6/30/2019
 
 
6/30/2018
 
 
6/30/2019
 
 
6/30/2018
 
Amount realized through the sale of shares
 $3,167,197 
 $2,785,932 
 $1,455,844 
 $1,560,641 
Fair value of shares upon issuance
  1,290,000 
  2,957,400 
  - 
  1,710,000 
Other non-operating gain (loss)
 $1,877,197 
 $(171,468)
 $1,455,844 
 $( 149,359)
 
As of June 30,December 31, 2019, Ergomed holds 45,226held 99,650 shares and may sell the shares or return the shares to the Company for cancellation until December 31, 2019.
3.
Incentive Stock Bonus Plan
During the nine and three months ended June 30, 2019, respectively, 7,500 and 4,000 shares of common stock issued from the 2014 Incentive Stock Bonus Plan were forfeited.resale.
 
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 particularan 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,December 31, 2019:
 
 
 
Quoted Prices in Active Markets for Identical Assets or Liabilities
 (Level 1)
 
 
Significant Other Observable Inputs
 (Level 2)
 
 
Significant Unobservable Inputs
 (Level 3)
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative instruments
 $- 
 $- 
 $10,732,830 
 $10,732,830 
 
 
Quoted Prices in Active Markets for Identical Assets or Liabilities
 (Level 1)
 
 
Significant Other Observable Inputs
 (Level 2)
 
 
Significant Unobservable Inputs
 (Level 3)
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative instruments
 $- 
 $- 
 $5,721,801 
 $5,721,801 

 
The table below sets forth the assets and liabilities measured at fair value on a recurring basis, by input level, in the condensed balance sheet at September 30, 2018:2019:
 
 
 
Quoted Prices in Active Markets for Identical Assets or Liabilities
(Level 1)
 
 
Significant Other Observable Inputs
(Level 2)
 
 
Significant Unobservable Inputs
(Level 3)
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative instruments
 $33 
 $- 
 $9,317,031 
 $9,317,064 
 
 
Quoted Prices in Active Markets for Identical Assets or Liabilities
(Level 1)
 
 
Significant Other Observable Inputs
(Level 2)
 
 
Significant Unobservable Inputs
(Level 3)
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative instruments
 $- 
 $- 
 $6,488,310 
 $6,488,310 
  
The following sets forth the reconciliation of beginning and ending balances related to fair value measurements using significant unobservable inputs (Level 3) for the three months ended June 30,December 31, 2019 and the year ended September 30, 2018:2019:
 
 
Nine Months
 
 
Year Ended
 
 
Ended 
 
 
September 30, 
 
 
3 months ended
 
 
12 months ended
 
 
June 30, 2019
 
 
2018
 
 
December 31, 2019
 
 
September 30, 2019
 
 
 
 
 
 
 
Beginning balance
 $9,317,031 
 $2,020,629 
 $6,488,310 
 $9,317,031 
Issuances
  - 
  - 
Exercises
  (1,900,618)
  (595,780)
  - 
  (3,589,357)
Realized and unrealized (gains) and losses
  3,316,417 
  7,892,182 
  (766,509)
  760,636 
Ending balance
 $10,732,830 
 $9,317,031 
 $5,721,801 
 $6,488,310 
    
The fair values of the Company’s derivative instruments disclosed above under Level 3 are primarily derived from valuation models where significant inputs such as historical price and volatility of the Company’s stock, as well as U.S. Treasury Bill rates, are observable in active markets.
 
E.
RELATED PARTY TRANSACTIONS
 
During the quarter ended June 30,December 31, 2019, the Company received security purchase agreements from five officers and directors of the Company for the purchase of 30,612 restricted shares of the Company’s common stock. The shares were sold at the aggregate fair market value on the closing date of approximately $210,000. Also during the current quarter, the Company’s CEO purchased 6,6313,725 shares of restricted common stock forat an aggregate fair market value of $25,000.
 
F.
COMMITMENTSCOMMITMENTS AND CONTINGENCIES
  
Clinical Research Agreements 
 
Under co-development and revenue sharing agreements with Ergomed, Ergomed agreed to contribute up to $12 million towards the Company’s Phase 3 Clinical Trial in the form of discounted clinical services in exchange for a single digit percentage of milestone and royalty payments, up to a specific maximum amount. The Company accounted for the co-development and revenue sharing agreements in accordance with ASC 808 “Collaborative Arrangements”. The Company determined the payments to Ergomed are within the scope of ASC 730 “Research and Development.” Therefore, the Company records the discount on the clinical services as a credit to research and development expense on its Statements of Operations. Since the inception of the agreement with Ergomed, the Company has incurred research and development expenses of approximately $30.3$31.8 million for Ergomed’s services. This amount is net of Ergomed’s discount of approximately $10.2$10.8 million. During the ninethree months ended June 30,December 31, 2019 and 2018, the Company recorded, net of Ergomed’s discount, approximately $2.2 million and $2.4 million, respectively, as research and development expense related to Ergomed’s services. During the three months ended June 30, 2019 and 2018, the Company recorded, net of Ergomed’s discount, approximately $0.7$0.9 million and $0.8 million, respectively, as research and development expense related to Ergomed’s services.
 

 
Lease Agreements
The Company determines whether a contract contains a lease at the inception of a contract by determining if the contract conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. The Company leases certain real estate, machinery, equipment and office equipment for varying periods. Many of these leases include an option to either renew or terminate the lease. For purposes of calculating lease liabilities, these options are included in the lease term when it is reasonably certain that the Company will exercise such options. The incremental borrowing rate utilized to calculate the lease liabilities is based on the information available at commencement date, as most of the leases do not provide an implicit borrowing rate. Short-term leases, defined as leases with initial terms of 12 months or less, are not reflected on the balance sheet. Lease expense for such short-term leases is not material. For purposes of calculating lease liabilities, lease and non-lease components are combined.
 
The Company leases a manufacturing facility near Baltimore, Maryland (the San Tomas lease). The building was remodeled in accordance with the Company’s specifications so that it can be used by the Company to manufacture Multikine for the Company’s Phase 3 clinical trial and sales of the drug if approved by the FDA. The lease is for a term of twenty years and requires annual base rent to escalate each year at 3%. The Company is required to pay all real estate and personal property taxes, insurance premiums, maintenance expenses, repair costs and utilities. The lease allows the Company, at its election, to extend the lease for two ten-year periods or to purchase the building at the end of the 20-year lease. Thelease, which expires in October 2028. Upon lease inception in October 2008, the Company contributed approximately $9.3 million towards the tenant-directed improvements, of which $3.2 million, plus interest, is being refunded during years ninesix through twenty through reduced rental payments. The landlord paidAs of December 31, 2019, approximately $11.9$2.7 million towardsis remaining to be refunded through the purchaseduration of the building, land and the tenant-directed improvements. The Company placed the building in service in October 2008.
The Company was deemed to be the owner of the building for accounting purpose under the build-to-suit guidance in ASC 840-40-55. In addition to tenant improvements the Company incurred, the Company also recorded an asset for tenant-directed improvements and for the costs paid by the lessor to purchase the building and to perform improvements, as welllease term. This lease is classified as a corresponding liability for the landlord costs. Upon completion of the improvements, the Company did not meet the “sale-leaseback” criteria under ASC 840-40-25, Accounting for Lease, Sale-Leaseback Transactions, and therefore, treated the lease as a financing obligation. Thus, the asset and corresponding liability were not de-recognized.finance lease. As of June 30,October 1, 2019, and September 30, 2018, the leased building asset hasinitial improvements have a net book value of approximately $15.7$2.1 million and $16.1 million, respectively,are included in leasehold improvements on the balance sheet.
Upon adoption of ASC 842 on October 1, 2019, the Company recorded a finance lease right of use asset and the landlorda finance lease liability has a balance of approximately $13.5 million. As of December 31, 2019, the net book value of the finance lease right of use asset is approximately $13.1 million and $13.4the balance of the finance lease liability is approximately $13.3 million, respectively.of which approximately $0.8 million is current. These amounts include the San Tomas lease as well as several other smaller finance leases for office equipment. The leased building isfinance right of use assets are being depreciated using a straight-line method over the 20-yearunderlying lease termterms. Total cash paid related to a residual value.finance leases during the three months ended December 31, 2019 was approximately $468,000, of which approximately $295,000 was for interest. The landlord liabilityweighted average discount rate of the Company’s finance leases is being amortized over8.8% and the 20 years using the effective interest method. Lease payments allocatedweighted average time to the landlord liability are accounted for as debt service payments on that liability using the finance method of accounting per ASC 840-40-55.maturity is 8.8 years.
 
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,December 31, 2019 and September 30, 2018.2019.
 
Approximate future minimum lease payments under the San Tomas leasefinance leases as of June 30,December 31, 2019 are as follows:
 
Three months ending September 30, 2019
 $453,000 
Nine months ending September 30, 2020
 $1,416,000 
Year ending September 30,
    
    
2020
  1,872,000 
2021
  1,937,000 
  1,948,000 
2022
  2,004,000 
  2,010,000 
2023
  2,073,000 
  2,079,000 
2024
  2,145,000 
  2,146,000 
2025
  2,218,000 
Thereafter
  9,540,000 
  7,322,000 
Total future minimum lease obligation
  20,024,000 
  19,139,000 
Less imputed interest on financing obligation
  (6,548,000)
Net present value of lease financing obligation
 $13,476,000 
Less imputed interest on finance lease obligations
  (5,855,000)
Net present value of lease finance lease obligations
 $13,284,000 

 
The Company subleasesrents a portion of its rental space on a month-to-month term lease,basis, which requires a 30-day notice for termination. The sublease rental income for the nine months ended June 30, 2019 and 2018 was approximately $55,000 and $53,000, respectively. The sublease rental income for each of the three months ended June 30,December 31, 2019 and 2018 was approximately $18,000.
 
The Company leases two facilities under 60-month operating leases – the lease for its research and development laboratory under a 60-month lease which expires February 28, 2022.2022 and the lease for its office headquarters expires June 30, 2020. During the quarter ended December 31, 2019, the Company incurred approximately $70,000 in leasehold improvements costs for the research and development lab and is reasonably certain to renew the lease through February 28, 2027. The renewal period is included in the right of use asset and liability calculations. The operating lease includesleases include escalating rental payments. The Company is recognizing the related rent expense on a straight-line basis over the full 60-month termterms of the lease at the rateleases. Upon adoption of approximately $13,000 per month. As of June 30,ASC 842 on October 1, 2019, and September 30, 2018, the Company has recorded a deferred rentan operating lease right of use asset and an operating lease liability of approximately $14,000$1.0 million. As of December 31, 2019, the net book value of the operating lease right of use asset is approximately $0.9 million and $12,000, respectively.
the balance of the operating lease liability is approximately $1.0 million, of which approximately $0.1 million is current. The Company leases its office headquarters under a 60-monthincurred lease which expires June 30, 2020. Theexpense for operating lease includes escalating rental payments. The Company is recognizing the related rent expense on a straight-line basis over the full 60-month term of the lease at the rate approximately $8,000 per month. As of June 30, 2019 and September 30, 2018, the Company has recorded a deferred rent liabilityleases of approximately $9,000 and $14,000, respectively.

$68,000 for the three months ended December 31, 2019. Total cash paid related to operating leases during the three months ended December 31, 2019 was approximately $66,000.
 
As of June 30,December 31, 2019, material contractual obligations, excluding the San Tomas lease, consisting of non-cancelable operatingfuture minimum lease payments on operating leases are as follows:
 
Three months ending September 30, 2019 $66,000
Nine months ending September 30, 2020
 $173,000 
Year ending September 30,    
    
2020  238,000
2021  163,000
  163,000 
2022      69,000
  168,000 
Total $536,000
2023
  173,000 
2024
  178,000 
2025
  183,000 
Thereafter
  269,000 
Total future minimum lease obligation
  1,307,000 
Less imputed interest on operating lease obligation
  (338,000)
Net present value of operating lease obligation
 $969,000 
 
The Company leases office equipment under a capital lease arrangement. The term of the capital lease is 60 months and expires on October 31, 2021. The monthly lease payment is $505. The lease bears interest at an annual interest rate of 6.25%.
G.
.PATENTS
 
During the ninethree months ended June 30,December 31, 2019 and 2018, no patent impairment charges were recorded. For the nine and three months ended June 30,December 31, 2019 amortization of patent costs totaled approximately $72,000 and $49,000, respectively. For the nine and three months ended June 30, 2018, amortization of patent costs totaled approximately $53,000$13,000 and $34,000,$12,000, respectively. Approximate estimated future amortization expense is as follows:
 
Three months ending September 30, 2019
 $11,000 
Nine months ending September 30, 2020
 $39,000 
Year ending September 30,
    
    
2020
  43,000 
2021
  40,000 
  49,000 
2022
  36,000 
  45,000 
2023
  26,000 
  35,000 
2024
  21,000 
  27,000 
2025
  24,000 
Thereafter
  95,000 
  92,000 
Total
 $272,000 
 $311,000 
 

H.
LOSS(LOSS) EARNINGS PER COMMON SHARE
The following tables provide the details of the basic and diluted (loss) earnings per-share computations:
 
 
Three months ended December 31,
 
 
 
2019
 
 
2018
 
(Loss) earnings per share - basic
 
 
 
 
 
 
Net (loss) earnings available to common shareholders - basic
 $(5,475,160)
 $1,245,902 
Weighted average shares outstanding - basic
  35,084,279 
  27,985,327 
Basic (loss) earnings per common share
 $(0.16)
 $0.04 
 
    
    
(Loss) earnings per share - diluted
    
    
Net (loss) earnings available to common shareholders - basic
 $(5,475,160)
 $1,245,902 
Gain on derivatives (1)
  (243)
  (723,879)
Net (loss) earnings available to common shareholders - diluted
 $(5,474,403)
 $522,023 
 
    
    
Weighted average shares outstanding - basic
  35,084,279 
  27,985,327 
Incremental shares underlying dilutive-warrants and options (1)
  14,329 
  1,944,026 
Weighted average shares outstanding - diluted
  35,098,608 
  29,929,353 
Diluted (loss) earnings per common share
 $(0.16)
 $0.02 
 
    
    
 
(1) Includes Series LL warrants for the three months ended December 31, 2019 and Series GG, HH, II, JJ and KK warrants for the three months ended December 31, 2018.
 
    
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(loss) per share excludes the following securities because their inclusion would have been anti-dilutive as of June 30:December 31:
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
 
 
 
 
 
 
Options and Warrants
  7,742,857 
  12,567,982 
  7,009,959 
  3,175,384 
Unvested Restricted Stock
  552,000 
  312,000 
  304,500 
  312,000 
Total
  8,294,857 
  12,879,982 
  7,314,459 
  3,487,384 
 
I.
J. SUBSEQUENT EVENTS
 
Between July 1,Under the terms of the Underwriting Agreement for the public offering which closed in December 2019 and August 13, 2019,(Note C), the Company received approximately $2.6 million throughgranted the exercise of options and warrantsUnderwriters a 45-day option to purchase up to an additional 90,959 shares of common stock solely to cover over-allotments. The underwriter fully exercised this option in January 2020 resulting in additional net proceeds to the Company’s common stock.


Company of approximately $767,000.
 
ITEMItem 2. MANAGEMENT'SMANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
Liquidity and Capital Resources
 
The Company’s lead investigational therapy, Multikine® (Leukocyte Interleukin, Injection), is cleared for a Phase 3 clinical trial in advanced primary head and neck cancer by the regulators in twenty-four countries around the world, including the U.S.
 
Multikine (Leukocyte Interleukin, Injection) is the full name of this investigational therapy, which, for simplicity, is referred to in this report as Multikine. Multikine is the trademark that the Company has registered for this investigational therapy, and this proprietary name is subject to FDA review under the Company’s future anticipated regulatory submission for approval. Multikine has not been licensed or approved by the FDA or any other regulatory agency. Neither has its safety or efficacy been established for any use.

 
The Company also owns and is developing a pre-clinical technology called LEAPS (Ligand Epitope Antigen Presentation System).
 
All the Company’s projects are under development. Consequently, the Company cannot predict when it will be able to generate any revenue from the sale of any of its products.
 
Since inception, the Company has financed its operations through the sale of equity securities, convertible notes, loans and certain research grants. The Company’s expenses will continue to exceed its revenues as it continues the development of Multikine and brings other drug candidates into clinical trials. Until the Company becomes profitable, any or all of these financing vehicles or others may be utilized to assist in funding the Company’s capital requirements.
 
Capital raised by the Company has been expended primarily for patent applications, research and development, administrative costs, and the construction of the Company’s manufacturing and laboratory facilities. The Company does not anticipate realizing significant revenues until it entersentering into licensing arrangements for its technology and know-how or until it receives regulatory approval to sell its products (which could take several years). Thus, the Company has been dependent upon the proceeds from the sale of its securities to meet all its liquidity and capital requirements and anticipates having to do so in the future.
 
The Company will be required to raise additional capital or find additional long-term financing to continue with its research efforts. The ability to raise capital may be dependent upon market conditions that are outside the control of the Company. The ability of the Company to complete the necessary clinical trials and obtain FDA approval for the sale of products to be developed on a commercial basis is uncertain. Ultimately, the Company must complete the development of its products, obtain the appropriate regulatory approvals and obtain sufficient revenues to support its cost structure. The Company has been receiving millions of dollars from warrant exercises in the past 12 months. It has received approximately another $2.6 million since July 1, 2019. The Company is being funded through these warrant exercises. Should those warrant exercises stop, the Company will exploretaking cost-cutting initiatives, as well as exploring other sources of funding, to finance operations over the next 12 months. However, there can be no assurance that the Company will be able to raise sufficient capital to support its operations.
 
Since the Company launched its Phase 3 clinical trial for Multikine, the Company has incurred expenses of approximately $54.7$57.0 million as of June 30,December 31, 2019 on direct costs for the Phase 3 clinical trial. The Company estimates it will incur additional expenses of approximately $5.6$3.3 million for the remainder of the Phase 3 clinical trial. It should be noted that this estimate is based only on the information currently available fromin the Company’s contracts with the Clinical Research Organizations responsible for managing the Phase 3 clinical trial and does not include other related costs, e.g., the manufacturing of the drug. This number may be affected by the rate of death accumulation in the study, foreign currency exchange rates, and many other factors, some of which cannot be foreseen today. It is therefore possible that the cost of the Phase 3 clinical trial will be higher than currently estimated.
 
The Company uses two CRO’s to manage the global Phase 3 study; ICON and Ergomed, who are both international leaders in managing oncology trials. As of September 2016, the study was fully enrolled with 928 patients.
 
Under a co-development agreement, Ergomed agreed to contribute up to $12 million towards the study where it will perform clinical services in exchange for a single digit percentage of milestone and royalty payments, up to a specified maximum amount. Approximately $10.2$10.8 million of these credits were realized as of June 30,December 31, 2019.
 
During the ninethree months ended June 30,December 31, 2019, the Company’s cash decreasedincreased by approximately $0.8$0.9 million.  Significant components of this decrease includedincrease include approximately $5.0 million in net proceeds from the sale of common stock in a public offering and the exercise of warrants of approximately $0.3 million, offset by net cash used to fund the Company’s regular operations, including its Phase 3 clinical trial, of approximately $12.4$4.1 million, approximately $0.1 million of equipment purchases and approximately $0.3$0.2 million to purchase long term assets. Thein lease payments. During the three months ended December 31, 2018, the Company’s cash decreased by approximately $3.6 million.  Significant components of this decrease was offset byinclude net proceeds from the exercise of warrants of approximately $11.7$0.6 million, and employee stock purchasesoffset by net cash used to fund the Company’s regular operations, including its Phase 3 clinical trial, of approximately $0.2$4.2 million. During the nine months ended June 30, 2018, the Company’s cash remained constant. Cash used in operations of approximately $9.1 million was offset by approximately $9.1 million in cash provided by financing activities. Sources of financing during the nine months included approximately $7.0 million in proceeds from the issuance of common stock and warrants and $2.1 million in proceeds from the exercise of warrants.
 
During the ninethree months ended June 30,December 31, 2019, 5,836,724132,900 warrants were exercised at a weighted average exercise price of $2.00$2.24 for proceeds of approximately $11.7 million. These exercises include 4,014,109 warrants exercised during$0.3 million. During the three months ended June 30, 2019 for proceeds of approximately $8.4 million. During the nine and three months ended June 30,December 31, 2018, 1,117,644298,682 warrants were exercised at a weighted averagedaverage exercise price of $1.91$2.18 for proceeds of approximately $2.1 million.$0.6 million
 

 
The Company has entered into severala Securities Purchase Agreements (SPAs)Agreement with Ergomed plc, one of itsthe Company’s Clinical Research Organizations responsible for managing the Company’s Phase 3 clinical trial, to facilitate a partial payment of amounts due Ergomed. Under the Agreements,Agreement, the Company issued Ergomed shares of common stock in exchange for Ergomed’s agreement to provisionally forbear collection of the payables in an amount equal tothat the net proceeds from the sales of those shares would reduce outstanding amounts due Ergomed. Upon issuance, the Company expenses the full value of the shares as Other non-operating gain/loss and subsequently offsets the expense as amounts are realized through the sale of the Company’s shares issuedby Ergomed and reduces accounts payable to Ergomed. During the nine monthsquarters ended June 30,December 31, 2019 and 2018, respectively, the Company decreased Accounts Payable byrealized approximately $3.2$0.8 million and $2.8$1.2 million, fromrespectively, through the sale by Ergomed of 808,76998,350 and 1,538,129353,995 shares by Ergomed. As of June 30, 2019, Ergomed holds 45,226 sharesthe Company’s common stock and may sell the shares or return the shares to the Company for cancellation untilreduced accounts payable to Ergomed and credited Other operating gains by those amounts.
Current assets other than cash, remained constant at December 31, 2019. For more information regarding the SPAs refer to Note C above.
Inventory at June 30, 2019 increased by approximately $110,000 as compared to September 30, 2018. In addition, receivables remained constant, and2019. Receivables consist primarily of amounts due from the Company’s partners for reimbursed clinical study costs related to its Phase 3 clinical trial and amounts to be reimbursed for costs related to its Small Business Innovation Research (SBIR) grant.
 
Supplies are purchased for use in the Company’s manufacturing and R&D efforts and vary with the study requirements. During the three months ended December 31, 2019, the supplies increased by approximately $124,000 in support of the work on modifications of the manufacturing facility in order to prepare the facility to produce Multikine for commercial purposes and before the Company’s Biologics License Application (BLA) can be submitted to the FDA.
Results of Operations and Financial Condition
 
During the ninethree months ended June 30,December 31, 2019, research and development expenses increased by approximately $0.2$0.7 million, compared to the nine months ended June 30, 2018. During the three months ended June 30, 2019, research and development expenses decreased by approximately $0.1 millionor 21%, compared to the three months ended June 30,December 31, 2018. The majorityMajor components of this increase include approximately $0.7 million of cost incurred preparing the manufacturing facility for the potential commercial manufacture of Multikine, $0.5 million increase in employee stock option expense and $0.2 million increase in depreciation expense on the manufacturing facility as a result of adopting the new leasing standard. These increases were offset by a decrease of approximately $0.7 million in expenses related to the Company’s research and development expense relates to its on-going Phase 3 clinical trial. The Company is continuing the Phase 3 clinical trial and research and development expenses fluctuate based on the activity level of the clinical trial.
 
During the nine and three months ended June 30,December 31, 2019, general and administrative expenses increased by approximately $1.2$0.9 million, and $1.3 millionor 56%, compared to the nine and three months ended June 30,December 31, 2018. The increase over the nine month period is primarily due to an increase in public relations costs of approximately $0.8Approximately $0.7 million of which approximately $0.3 millionthe change relates to equity based compensation. The increase in equity based public relations cost is primarily the result of the timing of the expense recognized with the timing of the services provided. In addition, the nine month period increase is due to an increase in employee stock based compensation expense. The remaining increase consists of approximately $0.4$0.2 million as a resultin net other general and administrative account variations.
The gains on derivative instruments of employee stock options granted during the quarter ended June 30, 2019. The increaseapproximately $0.8 million and $5.6 million for the three months ended June 30,December 31, 2019 is primarily due to, the previously mentioned, employee stock based compensation from the grant of the employee stock options during the quarter ended June 30, 2019.
The loss on derivative instruments of approximately $3.3 million and $7.9 million for the nine and three months ended,2018, respectively, is the result of the change in fair value of the derivative liabilities during the respective periods. The gain on derivative instruments of approximately $0.2 million for the nine months ended June 30, 2018 and the de minimus loss on derivative instruments for the three months ended June 30, 2018 were the result of the change in fair value of the derivative liabilities during the respective quarters. These changes were caused mainly by fluctuation in the share price of the Company’s common stock.
 
Other non-operating gain (loss) for the nine and three months ended June 30, 2019 and 2018 is a result of shares issued to Ergomed to facilitate partial payments of amounts due to Ergomed under the SPA mentioned above. For more information regarding the SPAs refer to Note C above.
Net interest expense decreased by approximately $2.4 million for the nine months ended June 30, 2019 compared to the nine months ended June 30, 2018. Net interest expense decreased by approximately $1.3$0.2 million for the three months ended June 30,December 31, 2019 compared to the three months ended June 30,December 31, 2018. The prior periods includeddecrease is due to a decrease in interest expense and the amortization of a discountrates on the notes payableCompany’s finance leases that were converted by September 30, 2018.re-measured in connection with the adoption of ASC 842, Leases.
 


Research and Development Expenses
 
The Company’s research and development efforts involve Multikine and LEAPS. The table below shows the research and development expenses associated with each project.
 
 
Three months ended December 31,
 
 
Nine months ended June 30,
 
 
 Three months ended June 30,
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
 
 
 
MULTIKINE
 $7,389,101 
 $7,210,355 
 $2,131,154 
 $2,220,634 
 $3,956,444 
 $3,250,278 
LEAPS
  567,102 
  503,518 
  167,401 
  204,928 
  240,169 
  221,436 
    
TOTAL
 $7,956,203 
 $7,713,873 
 $2,298,555 
 $2,425,562 
 $4,196,613 
 $3,471,714 
 
Clinical and other studies necessary to obtain regulatory approval of a new drug involve significant costs and require several years to complete. The extent of the Company’s clinical trials and research programs are primarily based upon the amount of capital available to the Company and the extent to which the Company has received regulatory approvals for clinical trials. The inability of the Company to conduct clinical trials or research, whether due to a lack of capital or regulatory approval, will prevent the Company from completing the studies and research required to obtain regulatory approval for any products which the Company is developing. Without regulatory approval, the Company will be unable to sell any of its products. Since all of the Company’s projects are under development, the Company cannot predict when it will be able to generate any revenue from the sale of any of its products.

 
Critical Accounting Estimates and Policies
 
Management’s discussion and analysis of the Company’s financial condition and results of operations is based on its unaudited condensed financial statements. The preparation of these financial statements is based on the selection of accounting policies and the application of significant accounting estimates, some of which require management to make judgments, estimates and assumptions that affect the amounts reported in the financial statements and notes. The Company believes some of the more critical estimates and policies that affect its financial condition and results of operations are in the areas of operating leases and stock-based compensation. For more information regarding the Company’s critical accounting estimates and policies, see Part II, Item 7 of the Company’s Annual Report on Form 10-K10-K/A for the year ended September 30, 2018.2019. The application of these critical accounting policies and estimates has been discussed with the Audit Committee of the Company’s Board of Directors.
 
ITEMItem 3. QUANTITATIVEQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
 
The Company does not believe that it has any significant exposures to market risk.
 
ITEMItem 4. CONTROLSCONTROLS AND PROCEDURES
 
Evaluation of Disclosure Controls and Procedures
 
Under the direction and with the participation of the Company’s management, including the Company’s Chief Executive and Chief Financial Officer, the Company has conducted an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures as of June 30,December 31, 2019. The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its periodic reports with the Securities and Exchange Commission is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and regulations, and that such information is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Company’s disclosure controls and procedures are designed to provide a reasonable level of assurance of reaching its desired disclosure control objectives. Based on the evaluation, the Chief Executive and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were not effective as of JuneDecember 31, 2019.
CEL-SCI’s management is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal control over financial reporting. As defined by the Securities and Exchange Commission, internal control over financial reporting is a process designed by, or under the supervision of CEL-SCI’s Chief Executive and Principal Financial and Accounting Officer and implemented by CEL-SCI’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of CEL-SCI’s financial statements in accordance with U.S. generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Geert Kersten, CEL-SCI’s Chief Executive and Principal Financial and Accounting Officer, evaluated the effectiveness of CEL-SCI’s internal control over financial reporting as of September 30, 2019 based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, or the COSO Framework. Management’s assessment included an evaluation of the design of CEL-SCI’s internal control over financial reporting and testing of the operational effectiveness of those controls.

On December 20, 2019, CEL-SCI discovered an error in the EDGAR filed Form 10-K report. The Company’s Statements of Cash Flows for the years ended September 30, 2019 and 2018 were not included, in their entirety, in the EDGAR filed Form 10-K report filed on December 16, 2019 with the SEC. However, the entire Statements of Cash Flows were included in the Interactive Data Files (“XBRL”) which were filed on December 16, 2019. The omission of the Statements of Cash Flows was the result of a failure of the Company to perform an adequate review of the EDGAR Form 10-K proof to ensure that the filing was accurate and complete. The failure of the Company to perform an adequate review of the EDGAR Form 10-K proof is a control deficiency that constitutes a material weakness.
In order to remediate this material weakness, the Company will change certain control activities to include the following:
     ● The Company will compare the final EDGAR proofs with the Company reports that are provided to the EDGAR filing service to ensure that the EDGAR proofs are accurate and complete.
Based on the evaluation of CEL-SCI’s internal control over financial reporting as of September 30, 2019, and the material weakness identified above, Mr. Kersten concluded that as of such date, CEL-SCI's internal control over financial reporting was not effective.
 
Changes in Internal Control over Financial Reporting
 
There waswere no changeother changes in the Company’s internal control over financial reporting that occurred during the quarter ended June 30,December 31, 2019 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
 

 
PART II
 
ITEMItem 2. UnregisteredUnregistered Sales of Equity Securities and Use of Proceeds.
 
During the ninethree months ended June 30,December 31, 2019 the Company issued 161,05815,819 restricted shares of common stock to consultants for investor relations services.
 
The Company relied upon the exemption provided by Section 4(a)(2) of the Securities Act of 1933 with respect to the issuance of these shares. The individuals who acquired these shares were sophisticated investors and were provided full information regarding the Company’s business and operations. There was no general solicitation in connection with the offer or sale of these securities. The individuals who acquired these shares acquired them for their own accounts. The certificates representing these shares bear a restricted legend which provides they cannot be sold except pursuant to an effective registration statement or an exemption from registration. No commission or other form of remuneration was given to any person in connection with the issuance of these shares.
 
ITEMItem 6. 6. ExhibitsExhibits
 
Number                Exhibit
31
Rule 13a-14(a) Certifications
32
Section 1350 Certifications
Number
Exhibit
31
Rule 13a-14(a) Certifications
32
Section 1350 Certifications
 
 
 

 
SIGNATURES
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 CEL-SCI CORPORATION 
    
Date: August 14, 2019February 7, 2020By:  /s/  Geert Kersten 
  Geert Kersten  
  Principal Executive Officer*  
 
 
 
 
 
 
* Also signing in the capacity of the Principal Accounting and Financial Officer.
 
 
 
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