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, 2021
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 Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
| Trading Symbol(s) |
| Name of Each Exchange on Which Registered |
Common Stock |
| CVM |
| NYSE American |
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 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:
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
|
| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Exchange Act Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
Class of Stock |
| No. Shares Outstanding |
| Date |
Common |
|
|
|
|
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
| 2 |
| Table of Contents |
CEL-SCI CORPORATION | CEL-SCI CORPORATION | CEL-SCI CORPORATION | ||||||||||||||
CONDENSED BALANCE SHEETS | CONDENSED BALANCE SHEETS | CONDENSED BALANCE SHEETS | ||||||||||||||
|
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|
|
|
|
| ||||||
|
| JUNE 30, |
| SEPTEMBER 30, |
|
| DECEMBER 31, |
| SEPTEMBER 30, |
| ||||||
ASSETS |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2021 |
| ||||
|
| (UNAUDITED) |
|
|
|
| (UNAUDITED) |
|
|
| ||||||
Current Assets: |
|
|
|
|
| |||||||||||
Current assets: |
|
|
|
|
| |||||||||||
Cash and cash equivalents |
| $ | 35,957,715 |
| $ | 15,508,909 |
|
| $ | 37,109,917 |
| $ | 36,060,148 |
| ||
U.S. Treasury Bills |
| 11,152,245 |
| 0 |
|
| 0 |
| 6,151,385 |
| ||||||
Receivables |
| 54,922 |
| 54,922 |
|
| 54,922 |
| 54,922 |
| ||||||
Prepaid expenses |
| 978,575 |
| 1,313,432 |
|
| 723,782 |
| 998,482 |
| ||||||
Supplies used for R&D and manufacturing |
| 1,579,245 |
| 820,052 |
|
| 2,067,723 |
| 2,006,584 |
| ||||||
Deposits - current portion |
|
| 8,712 |
|
|
| 0 |
| ||||||||
Short-term deposits |
|
| 1,910,917 |
|
|
| 0 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Total current assets |
| 49,731,414 |
| 17,697,315 |
|
| 41,867,261 |
| 45,271,521 |
| ||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Finance lease right of use assets |
| 13,125,302 |
| 13,811,849 |
|
| 12,252,663 |
| 12,691,921 |
| ||||||
Operating lease right of use assets |
| 1,046,648 |
| 1,198,958 |
|
| 2,014,185 |
| 2,056,178 |
| ||||||
Property and equipment, net |
| 13,548,079 |
| 5,843,993 |
|
| 13,290,109 |
| 13,663,562 |
| ||||||
Patent costs, net |
| 279,366 |
| 313,422 |
|
| 247,521 |
| 275,866 |
| ||||||
Deposits |
|
| 1,910,917 |
|
|
| 1,670,917 |
|
|
| 0 |
|
|
| 1,910,917 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total Assets |
| $ | 79,641,726 |
|
| $ | 40,536,454 |
| ||||||||
Total assets |
| $ | 69,671,739 |
|
| $ | 75,869,965 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
| |||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
| |||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Current Liabilities: |
|
|
|
|
| |||||||||||
Current liabilities: |
|
|
|
|
| |||||||||||
Accounts payable |
| $ | 2,144,455 |
| $ | 2,023,067 |
|
| $ | 1,192,825 |
| $ | 1,675,813 |
| ||
Accrued expenses |
| 868,443 |
| 510,515 |
|
| 899,901 |
| 859,216 |
| ||||||
Due to employees |
| 532,620 |
| 448,022 |
|
| 475,039 |
| 265,993 |
| ||||||
Derivative instruments, current portion |
| 918,704 |
| 213,787 |
|
| 2,195 |
| 437,380 |
| ||||||
Lease liabilities, current portion |
|
| 692,478 |
|
|
| 1,070,123 |
|
|
| 763,535 |
|
|
| 698,665 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total current liabilities |
| 5,156,700 |
| 4,265,514 |
|
| 3,333,495 |
| 3,937,067 |
| ||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Derivative instruments, net of current portion |
| 0 |
| 3,551,826 |
| |||||||||||
Finance lease liabilities, net of current portion |
| 13,603,297 |
| 11,753,100 |
| |||||||||||
Operating lease liabilities, net of current portion |
| 962,985 |
| 1,114,340 |
| |||||||||||
Finance lease obligations, net of current portion |
| 12,880,449 |
| 13,252,364 |
| |||||||||||
Operating lease obligations, net of current portion |
| 1,981,340 |
| 2,021,308 |
| |||||||||||
Other liabilities |
|
| 125,000 |
|
|
| 125,000 |
|
|
| 125,000 |
|
|
| 125,000 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total liabilities |
| 19,847,982 |
| 20,809,780 |
|
| 18,320,284 |
| 19,335,739 |
| ||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Commitments and Contingencies |
|
|
|
|
| |||||||||||
Commitments and contingencies |
| 0 |
| 0 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
STOCKHOLDERS’ EQUITY |
|
|
|
|
| |||||||||||
Preferred stock, $.01 par value-200,000 shares authorized; |
|
|
|
|
| |||||||||||
-0- shares issued and outstanding |
| 0 |
| 0 |
| |||||||||||
Common stock, $.01 par value - 600,000,000 shares authorized; |
|
|
|
|
| |||||||||||
42,963,391 and 38,730,150 shares issued and outstanding |
|
|
|
|
| |||||||||||
at June 30, 2021 and September 30, 2020, respectively |
| 429,634 |
| 387,302 |
| |||||||||||
STOCKHOLDERS' EQUITY |
|
|
|
|
| |||||||||||
Preferred stock, $.01par value-200,000shares authorized; -0- shares issued and outstanding |
| 0 |
| 0 |
| |||||||||||
Common stock, $.01par value - 600,000,000shares authorized; 43,259,013and 43,207,183shares issued and outstanding at December 31, 2021 and September 30, 2021, respectively |
| 432,590 |
| 432,072 |
| |||||||||||
Additional paid-in capital |
| 469,355,665 |
| 401,174,675 |
|
| 477,897,883 |
| 474,298,566 |
| ||||||
Accumulated deficit |
|
| (409,991,555 | ) |
|
| (381,835,303 | ) |
|
| (426,979,018 | ) |
|
| (418,196,412 | ) |
|
|
|
|
|
|
|
|
|
|
| ||||||
Total stockholders’ equity |
|
| 59,793,744 |
|
|
| 19,726,674 |
| ||||||||
Total stockholders' equity |
|
| 51,351,455 |
|
|
| 56,534,226 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
| $ | 79,641,726 |
|
| $ | 40,536,454 |
| ||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
| $ | 69,671,739 |
|
| $ | 75,869,965 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
See notes to condensed financial statements. | See notes to condensed financial statements. | See notes to condensed financial statements. | ||||||||||||||
| 3 |
| Table of Contents |
CEL-SCI CORPORATION | CEL-SCI CORPORATION | CEL-SCI CORPORATION | ||||||||||||||
CONDENSED STATEMENTS OF OPERATIONS | CONDENSED STATEMENTS OF OPERATIONS | CONDENSED STATEMENTS OF OPERATIONS | ||||||||||||||
NINE MONTHS ENDED JUNE 30, 2021 and 2020 | ||||||||||||||||
THREE MONTHS ENDED DECEMBER 31, 2021 and 2020 | THREE MONTHS ENDED DECEMBER 31, 2021 and 2020 | |||||||||||||||
(UNAUDITED) | (UNAUDITED) | (UNAUDITED) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Grant income |
| $ | 0 |
| $ | 530,106 |
| |||||||||
|
|
|
|
|
| |||||||||||
Operating Expenses: |
|
|
|
|
| |||||||||||
Operating expenses: |
|
|
|
|
| |||||||||||
Research and development |
| 17,818,373 |
| 12,680,430 |
|
| $ | 6,083,167 |
| $ | 5,414,760 |
| ||||
General and administrative |
|
| 9,902,120 |
|
|
| 8,389,821 |
|
|
| 2,760,208 |
|
|
| 3,316,156 |
|
Total operating expenses |
|
| 27,720,493 |
|
|
| 21,070,251 |
|
|
| 8,843,375 |
|
|
| 8,730,916 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Operating loss |
| (27,720,493 | ) |
| (20,540,145 | ) |
| (8,843,375 | ) |
| (8,730,916 | ) | ||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Other (expense) income |
| (8,213 | ) |
| 38,741 |
| ||||||||||
Loss on derivative instruments |
| (991,562 | ) |
| (3,565,347 | ) | ||||||||||
Warrant inducement expense |
| 0 |
| (805,753 | ) | |||||||||||
Gain on derivative instruments |
| 364,596 |
| 932,836 |
| |||||||||||
Other non-operating gains |
| 1,436,473 |
| 774,245 |
|
| (30,793 | ) |
| 121,606 |
| |||||
Interest expense, net |
|
| (872,457 | ) |
|
| (777,898 | ) |
|
| (273,034 | ) |
|
| (260,390 | ) |
|
|
|
|
|
|
|
|
|
|
| ||||||
Net loss |
| (28,156,252 | ) |
| (24,876,157 | ) |
| (8,782,606 | ) |
| (7,936,864 | ) | ||||
Modification of warrants |
|
| (350,861 | ) |
|
| (21,734 | ) |
|
| - |
|
|
| (85,779 | ) |
|
|
|
|
|
|
|
|
|
|
| ||||||
Net loss available to common shareholders |
| $ | (28,507,113 | ) |
| $ | (24,897,891 | ) |
| $ | (8,782,606 | ) |
| $ | (8,022,643 | ) |
|
|
|
|
|
|
|
|
|
|
| ||||||
Net loss per common share - basic |
| $ | (0.71 | ) |
| $ | (0.69 | ) | ||||||||
Weighted average common shares outstanding - basic |
| 39,907,624 |
| 36,230,092 |
| |||||||||||
Net loss per common share |
|
|
|
|
| |||||||||||
BASIC and DILUTED |
| $ | (0.20 | ) |
| $ | (0.21 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Net loss per common share - diluted |
| $ | (0.74 | ) |
| $ | (0.69 | ) | ||||||||
Weighted average common shares outstanding - diluted |
| 40,158,321 |
| 36,230,092 |
| |||||||||||
Weighted average common shares outstanding |
|
|
|
|
| |||||||||||
BASIC |
| 43,077,961 |
| 38,670,247 |
| |||||||||||
DILUTED |
| 43,083,420 |
| 38,767,286 |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
See notes to condensed financial statements. | ||||||||||||||||
|
| |||||||||||||||
See notes to condensed financial statements.
| 4 |
| Table of Contents |
CEL-SCI CORPORATION | ||||||||
CONDENSED STATEMENTS OF OPERATIONS | ||||||||
THREE MONTHS ENDED JUNE 30, 2021 and 2020 | ||||||||
(UNAUDITED) | ||||||||
|
|
|
|
|
|
| ||
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Grant income |
| $ | 0 |
|
| $ | 195,874 |
|
|
|
|
|
|
|
|
|
|
Operating Expenses: |
|
|
|
|
|
|
|
|
Research and development |
|
| 7,182,099 |
|
|
| 3,969,070 |
|
General and administrative |
|
| 3,274,480 |
|
|
| 3,192,403 |
|
Total operating expenses |
|
| 10,456,579 |
|
|
| 7,161,473 |
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
| (10,456,579 | ) |
|
| (6,965,599 | ) |
|
|
|
|
|
|
|
|
|
Other (expense) income |
|
| (8,213 | ) |
|
| 1,845 |
|
Gain (loss) on derivative instruments |
|
| 1,116,619 |
|
|
| (1,282,829 | ) |
Warrant inducement expense |
|
| 0 |
|
|
| (805,753 | ) |
Other non-operating gains (losses) |
|
| 761,237 |
|
|
| (950,935 | ) |
Interest expense, net |
|
| (351,332 | ) |
|
| (273,708 | ) |
|
|
|
|
|
|
|
|
|
Net loss |
|
| (8,938,268 | ) |
|
| (10,276,979 | ) |
Modification of warrants |
|
| (265,082 | ) |
|
| 0 |
|
|
|
|
|
|
|
|
|
|
Net loss available to common shareholders |
| $ | (9,203,350 | ) |
| $ | (10,276,979 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share - basic |
| $ | (0.22 | ) |
| $ | (0.27 | ) |
Weighted average common shares outstanding - basic |
|
| 41,020,485 |
|
|
| 37,453,539 |
|
|
|
|
|
|
|
|
|
|
Net loss per common share - diluted |
| $ | (0.25 | ) |
| $ | (0.27 | ) |
Weighted average common shares outstanding - diluted |
|
| 41,231,082 |
|
|
| 37,453,539 |
|
|
|
|
|
|
|
|
|
|
See notes to condensed financial statements. | ||||||||
CEL-SCI CORPORATION | ||||||||||||||||||||
STATEMENTS OF STOCKHOLDERS' EQUITY | ||||||||||||||||||||
(UNAUDITED) | ||||||||||||||||||||
|
|
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|
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|
|
|
|
|
|
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|
|
|
| |||||
|
|
|
|
|
|
|
| Additional |
|
|
|
|
|
|
| |||||
|
| Common Stock |
|
| Paid-In |
|
| Accumulated |
|
|
|
| ||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Total |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
BALANCES AT OCTOBER 1, 2021 |
|
| 43,207,183 |
|
| $ | 432,072 |
|
| $ | 474,298,566 |
|
| $ | (418,196,412 | ) |
| $ | 56,534,226 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant exercises |
|
| 19,705 |
|
|
| 197 |
|
|
| 157,757 |
|
|
| 0 |
|
|
| 157,954 |
|
Equity based compensation - employees |
|
| - |
|
|
| 0 |
|
|
| 3,262,296 |
|
|
| 0 |
|
|
| 3,262,296 |
|
401(k) contributions paid in common stock |
|
| 7,605 |
|
|
| 76 |
|
|
| 52,479 |
|
|
| 0 |
|
|
| 52,555 |
|
Stock and options issued to nonemployees for service |
|
| 18,020 |
|
|
| 180 |
|
|
| 142,980 |
|
|
| 0 |
|
|
| 143,160 |
|
Option exercises |
|
| 6,500 |
|
|
| 65 |
|
|
| 29,770 |
|
|
| 0 |
|
|
| 29,835 |
|
Share issuance costs |
|
| - |
|
|
| 0 |
|
|
| (45,965 | ) |
|
| 0 |
|
|
| (45,965 | ) |
Net loss |
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| (8,782,606 | ) |
|
| (8,782,606 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCES AT DECEMBER 31, 2021 |
|
| 43,259,013 |
|
| $ | 432,590 |
|
| $ | 477,897,883 |
|
| $ | (426,979,018 | ) |
| $ | 51,351,455 |
|
|
|
|
|
|
|
|
| Additional |
|
|
|
|
|
|
| |||||
|
| Common Stock |
|
| Paid-In |
|
| Accumulated |
|
|
|
| ||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Total |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
BALANCES AT OCTOBER 1, 2020 |
|
| 38,730,150 |
|
| $ | 387,302 |
|
| $ | 401,174,675 |
|
| $ | (381,835,303 | ) |
| $ | 19,726,674 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from the sale of common stock |
|
| 1,000,000 |
|
|
| 10,000 |
|
|
| 13,549,500 |
|
|
| 0 |
|
|
| 13,559,500 |
|
Warrant exercises |
|
| 15,000 |
|
|
| 150 |
|
|
| 89,100 |
|
|
| 0 |
|
|
| 89,250 |
|
Equity based compensation - employees |
|
| (2,000 | ) |
|
| (20 | ) |
|
| 3,296,329 |
|
|
| 0 |
|
|
| 3,296,309 |
|
401(k) contributions paid in common stock |
|
| 3,564 |
|
|
| 36 |
|
|
| 41,635 |
|
|
| 0 |
|
|
| 41,671 |
|
Stock and options issued to nonemployees for service |
|
| 15,044 |
|
|
| 150 |
|
|
| 152,300 |
|
|
| 0 |
|
|
| 152,450 |
|
Option exercises |
|
| 5,300 |
|
|
| 53 |
|
|
| 23,458 |
|
|
| 0 |
|
|
| 23,511 |
|
Modification of warrants |
|
| - |
|
|
| 0 |
|
|
| 192 |
|
|
| 0 |
|
|
| 192 |
|
Share issuance costs |
|
| - |
|
|
| 0 |
|
|
| (117,021 | ) |
|
| 0 |
|
|
| (117,021 | ) |
Net loss |
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| (7,936,864 | ) |
|
| (7,936,864 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCES AT DECEMBER 31, 2020 |
|
| 39,767,058 |
|
| $ | 397,671 |
|
| $ | 418,210,168 |
|
| $ | (389,772,167 | ) |
| $ | 28,835,672 |
|
See notes to condensed financial statements.
| 5 |
| Table of Contents |
CEL-SCI CORPORATION | ||||||||||||||||||||
STATEMENTS OF STOCKHOLDERS’ EQUITY | ||||||||||||||||||||
(UNAUDITED) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
| Additional |
|
|
|
|
|
|
| |||||
|
| Common |
|
| Stock |
|
| Paid-In |
|
| Accumulated |
|
|
|
| |||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Total |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
BALANCES AT OCTOBER 1, 2020 |
|
| 38,730,150 |
|
| $ | 387,302 |
|
| $ | 401,174,675 |
|
| $ | (381,835,303 | ) |
| $ | 19,726,674 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from the sale of common stock |
|
| 1,000,000 |
|
|
| 10,000 |
|
|
| 13,549,500 |
|
|
| 0 |
|
|
| 13,559,500 |
|
Warrant exercises |
|
| 15,000 |
|
|
| 150 |
|
|
| 89,100 |
|
|
| 0 |
|
|
| 89,250 |
|
Equity based compensation - employees |
|
| (2,000 | ) |
|
| (20 | ) |
|
| 3,296,329 |
|
|
| 0 |
|
|
| 3,296,309 |
|
401(k) contributions paid in common stock |
|
| 3,564 |
|
|
| 36 |
|
|
| 41,635 |
|
|
| 0 |
|
|
| 41,671 |
|
Stock and options issued to nonemployees for service |
|
| 15,044 |
|
|
| 150 |
|
|
| 152,300 |
|
|
| 0 |
|
|
| 152,450 |
|
Option exercises |
|
| 5,300 |
|
|
| 53 |
|
|
| 23,458 |
|
|
| 0 |
|
|
| 23,511 |
|
Modification of warrants |
|
| - |
|
|
| 0 |
|
|
| 192 |
|
|
| 0 |
|
|
| 192 |
|
Share issuance costs |
|
| - |
|
|
| 0 |
|
|
| (117,021 | ) |
|
| 0 |
|
|
| (117,021 | ) |
Net loss |
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| (7,936,864 | ) |
|
| (7,936,864 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCES AT DECEMBER 31, 2020 |
|
| 39,767,058 |
|
|
| 397,671 |
|
|
| 418,210,168 |
|
|
| (389,772,167 | ) |
|
| 28,835,672 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant exercises |
|
| 991,239 |
|
|
| 9,912 |
|
|
| 7,928,929 |
|
|
| 0 |
|
|
| 7,938,841 |
|
Equity based compensation - employees |
|
| - |
|
|
| 0 |
|
|
| 3,282,742 |
|
|
| 0 |
|
|
| 3,282,742 |
|
401(k) contributions paid in common stock |
|
| 3,347 |
|
|
| 33 |
|
|
| 51,387 |
|
|
| 0 |
|
|
| 51,420 |
|
Stock and options issued to nonemployees for service |
|
| 13,486 |
|
|
| 135 |
|
|
| 379,142 |
|
|
| 0 |
|
|
| 379,277 |
|
Option exercises |
|
| 48,845 |
|
|
| 489 |
|
|
| 138,299 |
|
|
| 0 |
|
|
| 138,788 |
|
Share issuance costs |
|
| - |
|
|
| 0 |
|
|
| (13,828 | ) |
|
| 0 |
|
|
| (13,828 | ) |
Net loss |
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| (11,281,120 | ) |
|
| (11,281,120 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCES AT MARCH 31, 2021 |
|
| 40,823,975 |
|
|
| 408,240 |
|
|
| 429,976,839 |
|
|
| (401,053,287 | ) |
|
| 29,331,792 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from the sale of common stock |
|
| 1,610,000 |
|
|
| 16,100 |
|
|
| 33,787,826 |
|
|
| 0 |
|
|
| 33,803,926 |
|
Warrant exercises |
|
| 437,312 |
|
|
| 4,373 |
|
|
| 1,375,117 |
|
|
| 0 |
|
|
| 1,379,490 |
|
Equity based compensation - employees |
|
| - |
|
|
| 0 |
|
|
| 3,511,359 |
|
|
| 0 |
|
|
| 3,511,359 |
|
401(k) contributions paid in common stock |
|
| 6,111 |
|
|
| 61 |
|
|
| 53,144 |
|
|
| 0 |
|
|
| 53,205 |
|
Stock and options issued to nonemployees for service |
|
| 13,184 |
|
|
| 132 |
|
|
| 266,936 |
|
|
| 0 |
|
|
| 267,068 |
|
Option exercises |
|
| 72,809 |
|
|
| 728 |
|
|
| 463,434 |
|
|
| 0 |
|
|
| 464,162 |
|
Modification of warrants |
|
| - |
|
|
| 0 |
|
|
| 24,195 |
|
|
| 0 |
|
|
| 24,195 |
|
Share issuance costs |
|
| - |
|
|
| 0 |
|
|
| (103,185 | ) |
|
| 0 |
|
|
| (103,185 | ) |
Net loss |
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| (8,938,268 | ) |
|
| (8,938,268 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCES AT JUNE 30, 2021 |
|
| 42,963,391 |
|
| $ | 429,634 |
|
| $ | 469,355,665 |
|
| $ | (409,991,555 | ) |
| $ | 59,793,744 |
|
CEL-SCI CORPORATION | ||||||||
CONDENSED STATEMENTS OF CASH FLOWS | ||||||||
THREE MONTHS ENDED DECEMBER 31, 2021 and 2020 | ||||||||
(UNAUDITED) | ||||||||
|
|
|
|
|
|
| ||
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Net loss |
| $ | (8,782,606 | ) |
| $ | (7,936,864 | ) |
Adjustments to reconcile net loss to |
|
|
|
|
|
|
|
|
net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 887,930 |
|
|
| 550,682 |
|
Share-based payments for services |
|
| 218,318 |
|
|
| 248,660 |
|
Equity based compensation |
|
| 3,262,296 |
|
|
| 3,296,309 |
|
Common stock contributed to 401(k) plan |
|
| 52,555 |
|
|
| 41,671 |
|
Gain on short-term investments |
|
| (615 | ) |
|
| - |
|
Loss on patent impairment |
|
| 30,793 |
|
|
| - |
|
Gain on derivative instruments |
|
| (364,596 | ) |
|
| (932,836 | ) |
Modification of warrants |
|
| - |
|
|
| 192 |
|
(Increase)/decrease in assets: |
|
|
|
|
|
|
|
|
Receivables |
|
| - |
|
|
| 532,328 |
|
Prepaid expenses |
|
| 144,542 |
|
|
| (332,785 | ) |
Supplies used for R&D and manufacturing |
|
| (61,139 | ) |
|
|
|
|
Increase/(decrease) in liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
| (523,152 | ) |
|
| 532,679 |
|
Accrued expenses |
|
| 95,685 |
|
|
| 143,028 |
|
Due to employees |
|
| 209,046 |
|
|
| 10,718 |
|
Other liabilities |
|
| 24,997 |
|
|
| 18,319 |
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
| (4,805,946 | ) |
|
| (3,827,899 | ) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Proceeds from maturity of US treasury bills |
|
| 6,152,000 |
|
|
| - |
|
Purchases of property and equipment |
|
| (17,036 | ) |
|
| (3,149,820 | ) |
Expenditures for patent costs |
|
| (22,741 | ) |
|
| - |
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
| 6,112,223 |
|
|
| (3,149,820 | ) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock |
|
| - |
|
|
| 13,559,500 |
|
Payments of stock issuance costs |
|
| (32,800 | ) |
|
| (79,499 | ) |
Proceeds from exercises of warrants and options |
|
| 117,200 |
|
|
| 70,911 |
|
Payments on obligations under finance lease |
|
| (340,908 | ) |
|
| (221,620 | ) |
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities |
|
| (256,508 | ) |
|
| 13,329,292 |
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH AND CASH EQUIVALENTS |
|
| 1,049,769 |
|
|
| 6,351,573 |
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
|
| 36,060,148 |
|
|
| 15,508,909 |
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, END OF PERIOD |
| $ | 37,109,917 |
|
| $ | 21,860,482 |
|
|
|
|
|
|
|
|
|
|
| ||||||||
See notes to condensed financial statements.
| 6 |
| Table of Contents |
CEL-SCI CORPORATION | ||||||||||||||||||||
STATEMENTS OF STOCKHOLDERS’ EQUITY continued | ||||||||||||||||||||
(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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2,146,195 |
|
|
| 2,146,195 |
|
Issuance of common stock |
|
| 606,395 |
|
|
| 6,064 |
|
|
| 5,043,939 |
|
|
| 0 |
|
|
| 5,050,003 |
|
Warrant exercises |
|
| 132,900 |
|
|
| 1,329 |
|
|
| 295,772 |
|
|
| 0 |
|
|
| 297,101 |
|
Equity based compensation - employees |
|
| - |
|
|
| 0 |
|
|
| 1,800,225 |
|
|
| 0 |
|
|
| 1,800,225 |
|
401(k) contributions paid in common stock |
|
| 4,474 |
|
|
| 45 |
|
|
| 40,892 |
|
|
| 0 |
|
|
| 40,937 |
|
Stock issued to nonemployees for service |
|
| 15,819 |
|
|
| 158 |
|
|
| 84,289 |
|
|
| 0 |
|
|
| 84,447 |
|
Purchase of stock by officer |
|
| 3,725 |
|
|
| 37 |
|
|
| 24,963 |
|
|
| 0 |
|
|
| 25,000 |
|
Share issuance costs |
|
| - |
|
|
| 0 |
|
|
| (92,150 | ) |
|
| 0 |
|
|
| (92,150 | ) |
Net loss |
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| (5,531,360 | ) |
|
| (5,531,360 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCES AT DECEMBER 31, 2019 |
|
| 35,995,089 |
|
|
| 359,951 |
|
|
| 365,705,533 |
|
|
| (357,111,419 | ) |
|
| 8,954,065 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from the sale of common stock |
|
| 721,459 |
|
|
| 7,215 |
|
|
| 7,860,414 |
|
|
| 0 |
|
|
| 7,867,629 |
|
Warrant exercises |
|
| 562,100 |
|
|
| 5,621 |
|
|
| 4,313,085 |
|
|
| 0 |
|
|
| 4,318,706 |
|
Equity based compensation - employees |
|
| - |
|
|
| 0 |
|
|
| 1,780,979 |
|
|
| 0 |
|
|
| 1,780,979 |
|
401(k) contributions paid in common stock |
|
| 3,376 |
|
|
| 34 |
|
|
| 38,925 |
|
|
| 0 |
|
|
| 38,959 |
|
Stock issued to nonemployees for service |
|
| 17,120 |
|
|
| 171 |
|
|
| 234,853 |
|
|
| 0 |
|
|
| 235,024 |
|
Purchase of stock by officers and directors |
|
| 16,787 |
|
|
| 168 |
|
|
| 159,822 |
|
|
| 0 |
|
|
| 159,990 |
|
Option exercises |
|
| 20,480 |
|
|
| 205 |
|
|
| 49,693 |
|
|
| 0 |
|
|
| 49,898 |
|
Share issuance costs |
|
| - |
|
|
| 0 |
|
|
| (199,372 | ) |
|
| 0 |
|
|
| (199,372 | ) |
Net loss |
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| (9,067,818 | ) |
|
| (9,067,818 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCES AT MARCH 31, 2020 |
|
| 37,336,411 |
|
|
| 373,365 |
|
|
| 379,943,932 |
|
|
| (366,179,237 | ) |
|
| 14,138,060 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from the sale of common stock |
|
| 94,575 |
|
|
| 946 |
|
|
| 1,073,861 |
|
|
| 0 |
|
|
| 1,074,807 |
|
Warrant exercises |
|
| 849,845 |
|
|
| 8,498 |
|
|
| 10,147,777 |
|
|
| 0 |
|
|
| 10,156,275 |
|
Equity based compensation - employees |
|
| - |
|
|
| 0 |
|
|
| 3,109,127 |
|
|
| 0 |
|
|
| 3,109,127 |
|
401(k) contributions paid in common stock |
|
| 2,875 |
|
|
| 29 |
|
|
| 42,866 |
|
|
| 0 |
|
|
| 42,895 |
|
Stock issued to nonemployees for service |
|
| 14,811 |
|
|
| 148 |
|
|
| 205,233 |
|
|
| 0 |
|
|
| 205,381 |
|
Shares issued for settlement of clinical research costs |
|
| 150,000 |
|
|
| 1,500 |
|
|
| 1,768,000 |
|
|
| 0 |
|
|
| 1,769,500 |
|
Option exercises |
|
| 73,719 |
|
|
| 737 |
|
|
| 275,678 |
|
|
| 0 |
|
|
| 276,415 |
|
Modification of warrants |
|
| - |
|
|
| 0 |
|
|
| 5,554 |
|
|
| 0 |
|
|
| 5,554 |
|
Warrant issuances |
|
| - |
|
|
| 0 |
|
|
| 805,753 |
|
|
| 0 |
|
|
| 805,753 |
|
Share issuance costs |
|
| - |
|
|
| 0 |
|
|
| (418,497 | ) |
|
| 0 |
|
|
| (418,497 | ) |
Net loss |
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| (10,276,979 | ) |
|
| (10,276,979 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCES AT JUNE 30, 2020 |
|
| 38,522,236 |
|
| $ | 385,223 |
|
| $ | 396,959,284 |
|
| $ | (376,456,216 | ) |
| $ | 20,888,291 |
|
CEL-SCI CORPORATION | ||||||||
CONDENSED STATEMENTS OF CASH FLOWS | ||||||||
THREE MONTHS ENDED DECEMBER 31, 2021 and 2020 | ||||||||
|
|
|
|
|
|
| ||
|
| 2021 |
|
| 2020 |
| ||
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
|
| ||
Property and equipment included in current liabilities |
| $ | 469,005 |
|
| $ | 1,700,969 |
|
Capitalizable patent costs included in current liabilities |
| $ | - |
|
| $ | 15,000 |
|
Finance lease obligation included in accounts payable |
| $ | 771 |
|
| $ | 1,752 |
|
Prepaid consulting services paid with issuance of common stock |
| $ | 233,753 |
|
| $ | 243,687 |
|
Exercise of derivative liabilities |
| $ | 70,589 |
|
| $ | 41,850 |
|
Financing costs included in current liabilities |
| $ | 13,165 |
|
| $ | 88,021 |
|
|
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ | 290,212 |
|
| $ | 277,618 |
|
|
|
|
|
|
|
|
|
|
| ||||||||
See notes to condensed financial statements.
| 7 |
| Table of Contents |
CEL-SCI CORPORATION | ||||||||
CONDENSED STATEMENTS OF CASH FLOWS | ||||||||
NINE MONTHS ENDED JUNE 30, 2021 and 2020 | ||||||||
(UNAUDITED) | ||||||||
|
|
|
|
|
|
| ||
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Net loss |
| $ | (28,156,252 | ) |
| $ | (24,876,157 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 1,649,699 |
|
|
| 1,610,855 |
|
Share-based payments for services |
|
| 955,900 |
|
|
| 623,146 |
|
Equity based compensation |
|
| 10,090,410 |
|
|
| 6,690,331 |
|
Common stock contributed to 401(k) plan |
|
| 146,296 |
|
|
| 122,791 |
|
Shares issued for settlement of clinical research costs |
|
| 0 |
|
|
| 1,769,500 |
|
Gain on short-term investments |
|
| (6,578 | ) |
|
| 0 |
|
Loss on derivative instruments |
|
| 991,562 |
|
|
| 3,565,347 |
|
Warrant inducement expense |
|
| 0 |
|
|
| 805,753 |
|
Modification of warrants |
|
| 24,387 |
|
|
| 5,554 |
|
(Increase)/decrease in assets: |
|
|
|
|
|
|
|
|
Receivables |
|
| 0 |
|
|
| (192,242 | ) |
Prepaid expenses |
|
| 232,752 |
|
|
| (969,219 | ) |
Supplies used for R&D and manufacturing |
|
| (759,193 | ) |
|
| (4,648 | ) |
Deposits |
|
| (248,712 | ) |
|
| 0 |
|
Increase/(decrease) in liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
| 689,812 |
|
|
| (761,675 | ) |
Accrued expenses |
|
| 297,928 |
|
|
| 87,820 |
|
Due to employees |
|
| 84,598 |
|
|
| (166,310 | ) |
Other liabilities |
|
| 22,459 |
|
|
| (815 | ) |
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
| (13,984,932 | ) |
|
| (11,689,969 | ) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net purchases of U.S. Treasury Bills |
|
| (11,145,667 | ) |
|
| 0 |
|
Purchases of property and equipment |
|
| (8,628,648 | ) |
|
| (1,530,327 | ) |
Expenditures for patent costs |
|
| 0 |
|
|
| (39,975 | ) |
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
| (19,774,315 | ) |
|
| (1,570,302 | ) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock |
|
| 47,363,426 |
|
|
| 13,992,439 |
|
Payments of stock issuance costs |
|
| (207,673 | ) |
|
| (695,447 | ) |
Proceeds from the purchase of stock by officer |
|
| 0 |
|
|
| 184,990 |
|
Proceeds from exercises of warrants and options |
|
| 6,195,571 |
|
|
| 12,063,070 |
|
Proceeds from landlord funding of leasehold improvements |
|
| 1,613,546 |
|
|
| 0 |
|
Payments on obligations under finance lease |
|
| (756,817 | ) |
|
| (592,766 | ) |
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
| 54,208,053 |
|
|
| 24,952,286 |
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH AND CASH EQUIVALENTS |
|
| 20,448,806 |
|
|
| 11,692,015 |
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
|
| 15,508,909 |
|
|
| 8,444,774 |
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, END OF PERIOD |
| $ | 35,957,715 |
|
| $ | 20,136,789 |
|
|
|
|
|
|
|
|
|
|
See notes to condensed financial statements. | ||||||||
CEL-SCI CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 2021 AND 2020 (UNAUDITED)
A. | BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of Presentation | |
The accompanying condensed financial statements of CEL-SCI Corporation (the Company) are unaudited and certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission. While management of the Company believes that the disclosures presented are adequate to make the information presented not misleading, these interim condensed financial statements should be read in conjunction with the financial statements and notes included in the Company’s annual report on Form 10-K for the year ended September 30, 2021. | |
In the opinion of management, the accompanying unaudited condensed financial statements contain all adjustments necessary for a fair presentation of the Company’s financial position as of December 31, 2021 and the results of its operations for the three months then ended. The condensed balance sheet as of September 30, 2021 is derived from the September 30, 2021 audited financial statements. | |
The financial statements have been prepared assuming that the Company will continue as a going concern, but due to recurring losses from operations and future liquidity needs, there is substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Refer to discussion in Note B. | |
Summary of Significant Accounting Policies: | |
Cash and Cash Equivalents – Cash and cash equivalents consist principally of unrestricted cash on deposit and short-term money market funds. The Company considers all highly liquid investments with a maturity when purchased of less than three months as cash and cash equivalents. | |
U.S. Treasury Bills – U.S. Treasury Bills (“T-bills”) are highly liquid short-term investments with maturity dates of greater than 3 months, but less than one year. These investments are recorded at fair value. | |
Property and Equipment – Property and 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. Property and equipment is 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 to the asset value and period of amortization is made. An impairment loss is recognized when estimated future undiscounted cash flows expected to result from the use of the asset, and from disposition, are less than the carrying value of the asset. The amount of the impairment loss would be the difference between the estimated fair value of the asset and its carrying value. | |
Leases – The Company accounts for contracts that convey the right to control the use of identified property, plant or equipment over a period of time in exchange for consideration as leases upon inception. The Company leases certain real estate, machinery, laboratory equipment and office equipment over 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 the 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. |
| 8 |
| Table of Contents |
CEL-SCI CORPORATION | ||||||||
CONDENSED STATEMENTS OF CASH FLOWS | ||||||||
NINE MONTHS ENDED JUNE 30, 2021 and 2020 | ||||||||
|
|
|
|
|
|
| ||
|
| 2021 |
|
| 2020 |
| ||
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
|
| ||
Property and equipment included in current liabilities |
| $ | 589,400 |
|
| $ | 121,441 |
|
Capitalizable patent costs included in current liabilities |
| $ | 20,000 |
|
| $ | 0 |
|
Changes to right of use assets and liabilities |
| $ | 551,444 |
|
| $ | 399,032 |
|
Finance lease obligation included in accounts payable |
| $ | 1,328 |
|
| $ | 775 |
|
Prepaid consulting services paid with issuance of common stock |
| $ | 292,792 |
|
| $ | 11,706 |
|
Accrued consulting services to be paid with issuance of common stock |
| $ | 110,000 |
|
| $ | 110,000 |
|
Fair value of warrants liabilities on date of exercise |
| $ | 3,838,471 |
|
| $ | 3,035,325 |
|
Financing costs included in current liabilities |
| $ | 76,860 |
|
| $ | 30,152 |
|
|
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ | 876,779 |
|
| $ | 872,710 |
|
|
|
|
|
|
|
|
|
|
See notes to condensed financial statements. | ||||||||
Derivative Instruments – The Company has 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 ASC 815, derivative instruments and hybrid instruments are recognized as either assets or liabilities on the balance sheet and are measured at fair value with gains or losses recognized in earnings or other comprehensive income depending on the nature of the derivative or hybrid instruments. The Company determines the fair value of derivative instruments and hybrid instruments based on available market data using appropriate valuation models 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. | |
The Company adopted Accounting Standards Update (ASU) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity effective October 1, 2021. The amendments in this Update simplify and clarify the guidance in Subtopic 815-40. There was no financial impact in the period of adoption. | |
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 using the straight-line allocation method as expense over the requisite service or vesting period. | |
The Company has Incentive Stock Option Plans, Non-Qualified Stock Option Plans, Stock Compensation Plans, Stock Bonus Plans and an Incentive Stock Bonus Plan. These Plans are collectively referred to as the "Plans". All Plans have been approved by the Company’s stockholders. | |
The Company’s stock options are not transferable, and the actual value of the stock options that an employee may realize, if any, will depend on the excess of the market price on the date of exercise over the exercise price. For options issued with service conditions only, 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 is based on the U.S. Treasury rate at the date of grant with the 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. | |
Restricted stock granted under the Incentive Stock Bonus Plan and options granted under the 2021 and 2020 Non-Qualified Stock Option Plan are subject to service, performance and market conditions and meet the classification of equity awards. These awards were measured 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. | |
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 records revisions to estimated expense in the period in which the facts that give rise to the revision become known. | |
Net Loss Per Common Share – The Company calculates net loss per common share in accordance with ASC 260 “Earnings Per Share” (ASC 260). Basic and diluted net loss per common share was determined by dividing net loss applicable to common shareholders by the weighted average number of common shares outstanding during the period. The Company’s potentially dilutive shares, which include outstanding common stock options, unvested restricted stock and common stock warrants, have not been included in the computation of diluted net loss per share for all periods as the result would be anti-dilutive. |
| 9 |
| Table of Contents |
CEL-SCI CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 2021 AND 2020 (UNAUDITED)
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 December 31, 2021 and September 30, 2021. | |
The Company adopted ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes effective October 1, 2021. The new standard includes several provisions that simplify accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and increasing consistency and clarity for the users of financial statements. The adoption of ASU 2019-12 had no impact on the Company’s financial statements. | |
Use of Estimates – The preparation of financial statements in conformity U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying disclosures. These estimates are based on management’s best knowledge of current events and actions the Company may undertake in the future. Estimates are used in accounting for, among other items, inventory obsolescence, accruals, stock options, useful lives for depreciation and amortization of long-lived assets, right of use assets and lease liabilities, deferred tax assets and the related valuation allowance, and the valuation of derivative liabilities. Actual results could differ from estimates, although management does not generally believe such differences would materially affect the financial statements in any given year. However, in regard to the valuation of derivative liabilities determined using the Black-Scholes pricing model, significant fluctuations may materially affect the financial statements in a given year. Additionally, in calculating the right of use assets and lease liabilities, estimates and assumptions were used to determine the incremental borrowing rates and the expected lease terms. The Company considers the estimates used in valuing the derivative liabilities, stock options and the lease assets and liabilities to be significant. | |
New Accounting Pronouncements | |
The Company has considered all recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its financial statements. |
| OPERATIONS AND FINANCING |
On June 28, 2021, the Company announced results from its 9.5 year pivotal Phase 3 study for its immunotherapy Multikine® (Leukocyte Interleukin, Injection) in the treatment of advanced (stages III and IV) primary (previously untreated) squamous cell carcinoma of the head and neck (SCCHN). The Phase 3 results showed a long-term 5 year overall survival (OS) benefit in the treatment arm that received Multikine treatment followed by surgery and radiation. This survival benefit was robust and durable, with no safety issues, something not commonly seen with cancer drugs. In fact, the survival benefit increased over time and at 5 years the overall survival benefit reached an absolute 14.1% advantage for the Multikine treated arm over control (n=380, total study patients treated with surgery plus radiation), control arm 48.6%, Multikine arm 62.7% survival. |
| 10 |
| Table of Contents |
Leases – The Company accounts for contracts that convey the right to control the use of identified property, plant or equipment over a period of time in exchange for consideration, as leases upon inception. The Company leases certain real estate, machinery, laboratory equipment and office equipment over 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.
Liquidity | |
The Company has incurred significant costs since its inception for the acquisition of certain proprietary technology and scientific knowledge relating to the human immunological defense system, patent applications, research and development, administrative costs, construction of laboratory facilities and participation in clinical trials. The Company has funded such costs primarily with proceeds from loans and the public and private sale of its securities. The Company will be required to raise additional capital or find additional long-term financing to continue with its efforts to bring Multikine to market. 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 obtain approval from the U.S. Food and Drug Administration (FDA) 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 believes there is a high likelihood that it will continue to receive funds from private and public offerings and warrant exercises similarly to the way it has funded operations in the past. However, there can be no assurance that the Company will be able to raise sufficient capital to support its operations. | |
To finance the Company through marketing approval, the Company plans to raise additional capital in the form of warrant exercises, corporate partnerships, and debt and/or equity financings. The Company believes that it will be able to obtain additional financing because it has done so consistently in the past and because it showed great survival benefit in the Phase 3 study in one of the two treatment arms for advanced primary head and neck cancer. 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 such time as it is able to raise the required funding. | |
Primarily as a result of the Company’s losses incurred to date, the Company’s expected continued future losses, and the uncertainties associated with obtaining regulatory approval and ultimately commercializing its products, management has identified conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern. Management has evaluated the significance of those conditions and has concluded that here is sufficient cash on hand to meet the Company’s budgeted cash requirements, substantial doubt about the Company’s ability to continue as a going concern for more than twelve months from the date of these financial statements has been alleviated. | |
Impact of the COVID-19 Pandemic | |
In response to the global outbreak of COVID-19 and the World Health Organization’s classification of the outbreak as a pandemic, the Company continues to take the necessary precautions to ensure the safety of its employees and to minimize interruptions to its operations. Management follows the Centers for Disease Control and Prevention’s (“CDC”) guidance and the recommendations and restrictions provided by state and local authorities. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. As such, it is uncertain as to the full magnitude of impact the pandemic will have on the Company’s financial condition, liquidity and future results of operations. Management is actively monitoring the risks to public health and the impact of overall global business activity on its financial condition, liquidity, operations, suppliers, industry, and workforce. |
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 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, 2021 and September 30, 2020.
Derivative Instruments – The Company has 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 and annual reporting period.
Stock-Based Compensation – Compensation cost for stock-based awards to employees and non-employees 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 time vested stock options is calculated using the Black-Scholes option pricing model. The Black-Scholes model requires various judgmental assumptions including volatility and expected option life. The stock-based compensation cost is recognized on the straight-line allocation method as expense over the requisite service or vesting period.
The Company has Incentive Stock Option Plans, Non-Qualified Stock Option Plans, Stock Compensation Plans, 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 common stock. The risk-free interest rate assumption was based on the U.S. Treasury rate at date of the grant with the 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 and options granted under the 2021 and 2020 Non-Qualified Stock Option Plans are subject to service, performance and market conditions and meet 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 or the market condition is uncertain. The total compensation cost will be expensed over the estimated requisite service period.
C. | STOCKHOLDERS’ EQUITY |
Proceeds from the Sale of Common Stock | |
In December 2020, the Company sold 1,000,000shares of common stock at a public offering price of $14.65 per share and received aggregate proceeds of approximately $13.6 million. | |
Equity Compensation | |
Underlying share information for equity compensation plans as of December 31, 2021 is as follows: |
| 11 |
| Table of Contents |
Name of Plan |
| Total Shares Reserved |
|
| Shares Reserved for Outstanding Options |
|
| Shares |
|
| Remaining Options/Shares Under Plans |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Incentive Stock Option Plans |
|
| 138,400 |
|
|
| 76,829 |
|
|
| N/A |
|
|
| 213 |
|
Non-Qualified Stock Option Plans |
|
| 11,787,200 |
|
|
| 11,204,380 |
|
|
| N/A |
|
|
| 172,592 |
|
Stock Bonus Plans |
|
| 783,760 |
|
|
| N/A |
|
|
| 370,691 |
|
|
| 413,036 |
|
Stock Compensation Plans |
|
| 634,000 |
|
|
| N/A |
|
|
| 153,195 |
|
|
| 462,395 |
|
Incentive Stock Bonus Plan |
|
| 640,000 |
|
|
| N/A |
|
|
| 614,500 |
|
|
| 25,500 |
|
Newly Adopted Accounting Pronouncements
| Underlying share information for equity compensation plans as of September 30, 2021 is as follows: |
Name of Plan |
| Total Shares Reserved |
|
| Shares Reserved for Outstanding Options |
|
| Shares |
|
| Remaining Options/Shares Under Plans |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Incentive Stock Option Plans |
|
| 138,400 |
|
|
| 76,829 |
|
|
| N/A |
|
|
| 213 |
|
Non-Qualified Stock Option Plans |
|
| 11,787,200 |
|
|
| 10,972,880 |
|
|
| N/A |
|
|
| 410,592 |
|
Stock Bonus Plans |
|
| 783,760 |
|
|
| N/A |
|
|
| 363,086 |
|
|
| 420,641 |
|
Stock Compensation Plans |
|
| 634,000 |
|
|
| N/A |
|
|
| 153,195 |
|
|
| 462,395 |
|
Incentive Stock Bonus Plan |
|
| 640,000 |
|
|
| N/A |
|
|
| 614,500 |
|
|
| 25,500 |
|
Stock option activity: |
|
| ||||||
|
| Three Months Ended December31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Options granted |
|
| 251,000 |
|
|
| 7,500 |
|
Options exercised |
|
| 6,500 |
|
|
| 5,300 |
|
Options forfeited |
|
| 13,000 |
|
|
| 42,166 |
|
Options expired |
|
| - |
|
|
| 55 |
|
During the quarter ended December 31, 2021, the Company granted 250,000performance-based stock options from the 2020 Non-Qualified Stock Option Plan to officers. Each option entitles the holder to purchase one share of the Company’s common stock at a price of $10.48per share, the fair value on the date of issuance. The stock options will vest 100% upon approval of the first marketing application for any pharmaceutical based upon the Company’s Multikine technology in any of the USA, Canada, UK, Germany, France, Italy, Spain, Japan, or Australia. None of the options will be exercisable before November 19, 2022. All options which have not vested as of November 18, 2031 will be canceled. On the grant date, the options were valued using a Monte Carlo Simulation approach. A Monte Carlo Simulation is a statistical technique that is used to model probabilistic systems and establish the probabilities for a variety of outcomes. However, because attainment of the performance condition cannot be considered probable, no compensation cost is recognized relating to these options as of December 31, 2021. Management will re-assess the probability of achieving the performance condition at each reporting date. |
Stock-Based Compensation Expense |
|
| ||||||
|
| Three months Ended December 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Employees |
| $ | 3,262,296 |
|
| $ | 3,296,309 |
|
Non-employees |
| $ | 218,318 |
|
| $ | 248,660 |
|
Employee compensation expense includes the expense related to options and restricted stock that is expensed over the vesting periods. Non-employee expense includes the expense related to options and stock issued to consultants expensed over the period of the related service contracts. |
| 12 |
| Table of Contents |
| Warrants and Non-Employee Options | |
| The following chart represents the warrants and non-employee options outstanding at December 31, 2021: |
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 |
|
| 8/18/2022 |
| * |
| |
Series UU |
| 6/11/2018 |
|
| 93,603 |
|
| $ | 2.80 |
|
| 6/30/2022 |
| * |
| |
Series X |
| 1/13/2016 |
|
| 120,000 |
|
| $ | 9.25 |
|
| 7/13/2022 |
| * |
| |
Series Y |
| 2/15/2016 |
|
| 26,000 |
|
| $ | 12.00 |
|
| 8/15/2022 |
| * |
| |
Series HH |
| 2/23/2017 |
|
| 200 |
|
| $ | 3.13 |
|
| 2/16/2022 |
| * |
| |
Series AA |
| 8/26/2016 |
|
| 100,000 |
|
| $ | 13.75 |
|
| 2/22/2022 |
| * |
| |
Series MM |
| 6/22/2017 |
|
| 333,432 |
|
| $ | 1.86 |
|
| 6/22/2022 |
| * |
| |
Series NN |
| 7/24/2017 |
|
| 205,587 |
|
| $ | 2.52 |
|
| 7/24/2022 |
| 2 |
| |
Series RR |
| 10/30/2017 |
|
| 251,761 |
|
| $ | 1.65 |
|
| 10/30/2022 |
| * |
| |
Series SS |
| 12/19/2017 |
|
| 200,000 |
|
| $ | 2.09 |
|
| 12/18/2022 |
| * |
| |
Series TT |
| 2/5/2018 |
|
| 600 |
|
| $ | 2.24 |
|
| 2/5/2023 |
| * |
| |
Consultants |
| 7/28/2017 - 11/18/2020 |
|
| 15,000 |
|
| $2.18 $11.61 |
|
| 11/17/2022 - 7/27/2027 |
| * |
| ||
In August 2018, the FASB issued ASU 2018-13, ”Fair Value Measurement - Disclosure Framework-Changes* No current period changes to the Disclosure Requirements for Fair Value Measurement (Topic 820).” Under the new standard, the amount and reason for a transfer between Level 1 and Level 2 of the fair value hierarchy is no longer required to be disclosed, but public companies are required to disclose a range and weighted average of significant unobservable inputs for Level 3 fair value measurements. The Company adopted the new standard on July 1, 2020 with no impact to the Company’s financial statements.these warrants
1. | Derivative Liabilities |
| The table below presents the fair value of the warrant liabilities at the balance sheet dates: |
|
| December 31, 2021 |
|
| September 30, 2021 |
| ||
Series Z warrants |
| $ | - |
|
| $ | 64,787 |
|
Series AA warrants |
|
| 1,400 |
|
|
| 276,035 |
|
Series CC warrants |
|
| - |
|
|
| 94,961 |
|
Series HH warrants |
|
| 795 |
|
|
| 1,597 |
|
Total warrant liabilities |
| $ | 2,195 |
|
| $ | 437,380 |
|
| The table below presents the gains on the warrant liabilities for the three months ended December 31: |
|
| 2021 |
|
| 2020 |
| ||
Series W warrants |
| $ | - |
|
| $ | 73,570 |
|
Series Z warrants |
|
| 64,787 |
|
|
| 278,363 |
|
Series ZZ warrants |
|
| - |
|
|
| 51,867 |
|
Series AA warrants |
|
| 274,635 |
|
|
| 333,808 |
|
Series BB warrants |
|
| - |
|
|
| 30,632 |
|
Series CC warrants |
|
| 24,372 |
|
|
| 164,345 |
|
Series HH warrants |
|
| 802 |
|
|
| 251 |
|
Net gain on warrant liabilities |
| $ | 364,596 |
|
| $ | 932,836 |
|
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. |
| 13 |
| Table of Contents |
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. | |
Changes in Warrant Liabilities | |
During the three months ended December 31, 2021, 15,205 Series CC warrants were exercised at an exercise price of $5.00for gross proceeds of $76,000. During the three months ended December 31, 2020, 5,000 Series CC warrants were exercised at an exercise price of $5.00for gross proceeds of $25,000. | |
On December 8, 2021, 640 Series CC warrants, with an exercise price of $5.00, expired. On November 23, 2021, 184,800 Series Z warrants, with an exercise price of $13.75, expired. | |
On August 22, 2021, 16,000 Series BB warrants, with an exercise price of $13.75, expired. On October 28, 2020, 688,930 Series W warrants, with an exercise price of $16.75, expired. | |
2. | Equity Warrants |
Changes in Equity Warrants | |
During the three months ended December 31, 2021, 4,500 Series NN warrants were exercised at an exercise price of $2.52 for gross proceeds of $11,340. | |
During the three months ended December 31, 2020, 10,000 Series TT warrants were exercised at an exercise price of $2.24 for gross proceeds of $22,400. | |
On December 7, 2020, the expiration date of the Series N warrants was extended six months from February 18, 2021 to August 18, 2021. The incremental cost of this extension was approximately $1,000, which was recorded as a deemed dividend in the financial statements for the three months ended December 31, 2020. The Series N warrants are held by the de Clara Trust, of which the Company’s CEO, Geert Kersten, is a beneficiary. | |
On December 7, 2020, the expiration date of the Series X warrants was extended six months from January 13, 2021 to July 13, 2021. The incremental cost of this extension was approximately $85,000, which was recorded as a deemed dividend in the financial statements for the three months ended December 31, 2020. The Series X warrants are also held by the de Clara Trust. | |
On December 7, 2020, the expiration date of the Series Y warrants, which were issued in connection with a financing, was extended six months from February 15, 2021 to August 15, 2021. The incremental cost of this extension was approximately $41,000 and was recorded as additional paid-in capital. | |
On December 7, 2020, the expiration date of Series UU warrants was extended six months from December 31, 2020 to June 30, 2021. These warrants were previously issued as an inducement to convert notes payable into shares of common stock. The incremental cost of this extension was $192 and was recorded as interest expense for the three months ended December 31, 2020. The Series UU warrants are held by Geert Kersten, Patricia Prichep (current Officers of the Company) and the de Clara Trust. | |
3. | Options and Shares Issued to Consultants |
During the three months ended December 31, 2021 and 2020, the Company issued 18,020 and 15,044 shares of restricted common stock, respectively, to consultants for services. The weighted average grant date fair value of the shares issued to consultants was $9.93 and $12.45 per share, respectively, during the three months ended December 31, 2021 and 2020. | |
During the three months ended December 31, 2020, the Company issued to a consultant 5,000 options to purchase common stock with an exercise price of $11.61. The options are exercisable beginning May 18, 2021 and expire on November 17, 2022. The options were expensed on a straight-line basis over the six month vesting period at a fair value of approximately $28,000 or $5.65 per option. |
| 14 |
| Table of Contents |
As of December 31, 2021 and September 30, 2021, 15,000 options issued to consultants remained outstanding, all of which were issued from the Non-Qualified Stock Option plans. All 15,000 options are vested as of December 31, 2021. | |
During the three months ended December 31, 2021 and 2020, the Company recorded total expense of approximately $218,000 and $249,000, respectively, relating to the share based compensation under these consulting agreements. At December 31, 2021 and September 30, 2021, approximately $234,000and $364,000, respectively, are included in prepaid expenses. | |
4. | Securities Purchase Agreement |
The Company entered into a Securities Purchase Agreement with Ergomed plc (Ergomed), one of the Company’s CROs responsible for managing the Company’s Phase 3 clinical trial, to facilitate payment of amounts due to Ergomed. Under the Agreement, the Company issued Ergomed shares of common stock and the net proceeds from Ergomed's sales of those shares would reduce outstanding amounts due to Ergomed. Upon issuance, the Company expensed the full value of the shares as other non-operating gain/loss and subsequently offset the gain/loss as amounts were realized through the sale by Ergomed and reduced accounts payable to Ergomed. | |
No sales were made by Ergomed during the three months ended December 31, 2021. As of December 31, 2021, Ergomed had no shares for resale. During the three months ended December 31, 2020, the Company realized approximately $0.1 million through the sale by Ergomed of 9,000 shares of the Company’s common stock and the Company reduced the payables to Ergomed and credited Other Operating Gain by that amount. No shares were issued to Ergomed during the three months ended December 31, 2021 and 2020. |
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. Assumptions from market participants are used when pricing the asset or liabilities, given there is no readily available market information. |
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 an input to the fair value measurement requires judgment and may affect the placement within the fair value hierarchy levels. |
| 15 |
| Table of Contents |
The Company purchased short-term U.S. Treasury bills during the year ended September 30, 2021 that are classified as trading securities. Quoted market prices were applied to determine the fair value of short-term investments; therefore, they were categorized as Level 1 in the fair value hierarchy. The Treasury bills matured in December 2021 and yielded a weighted average interest rate of 0.10%. | |
As of December 31, 2021 and September 30, 2021, all of the Company’s derivative instruments are classified as Level 3 on the fair value hierarchy. | |
The following sets forth a reconciliation of beginning and ending balances related to fair value measurements using significant unobservable inputs (Level 3) for the three months ended December 31, 2021 and the year ended September 30, 2021: |
|
| 3 months ended December 31, 2021 |
|
| 12 months ended September 30, 2021 |
| ||
|
|
|
|
|
|
| ||
Beginning balance |
| $ | 437,380 |
|
| $ | 3,765,613 |
|
Issuances |
|
| 0 |
|
|
| 0 |
|
Exercises |
|
| (70,589 | ) |
|
| (4,023,091 | ) |
Realized and unrealized (gains) and losses |
|
| (364,596 | ) |
|
| 694,858 |
|
Ending balance |
| $ | 2,195 |
|
| $ | 437,380 |
|
The fair values of the Company’s derivative instruments disclosed above under Level 3 are primarily derived from valuation models where significant inputs such as historical price and volatility of the Company’s stock, as well as U.S. Treasury Bill rates, are observable in active markets. At December 31, 2021, the Company’s Level 3 derivative instruments have a weighted average fair value of $0.02 per share and a weighted average exercise price of $13.73 per share. Fair values were determined using a weighted average risk-free interest rate of 0.06% and weighted average volatility of 79%. The instruments have a weighted average time to maturity of 0.14 years. At September 30, 2021, the Company’s Level 3 derivative instruments have a weighted average fair value of $1.45 per share and a weighted average exercise price of $13.28 per share. Fair values were determined using a weighted average risk-free interest rate of 0.05% and volatility of 109%. The instruments have a weighted average time to maturity of 0.3 years. |
E. | RELATED PARTY TRANSACTIONS |
During the quarter ended December 31, 2021, the Company issued officers 250,000 options that vest upon FDA approval of the marketing application. See Note C for more information about the options. | |
On December 7, 2020, the expiration dates of the Series N and Series X warrants held by the de Clara Trust were extended by six months (Note C). The incremental cost of these modifications was approximately $86,000 and was recorded as a deemed dividend in the financial statements for the three months ended December 31, 2020. | |
On December 7, 2020, the expiration date of 93,603 Series UU warrants was extended from December 31, 2020 to June 30, 2021. The incremental cost of this extension was $192 and was recorded as interest expense for the three months ended December 31, 2020. The Series UU warrants are held by certain officers of the Company and were originally issued with convertible debt. |
| 16 |
| Table of Contents |
F. | COMMITMENTS AND CONTINGENCIES |
Clinical Research Agreements | |
Under co-development and revenue sharing agreements with Ergomed, Ergomed agreed to contribute up to $12 million towards the Company’s Phase 3 Clinical Trial in the form of discounted clinical services in exchange for a single digit percentage of milestone and royalty payments, up to a specific maximum amount. The Company accounted for the co-development and revenue sharing agreements in accordance with ASC 808 “Collaborative Arrangements”. The Company determined the payments to Ergomed are within the scope of ASC 730 “Research and Development.” Therefore, the Company records the discount on the clinical services as a credit to research and development expense on its statements of operations. Since the inception of the agreement with Ergomed, the Company has incurred research and development expenses of approximately $35.3 million for Ergomed’s services. This amount is net of Ergomed’s discount of approximately $11.7 million. During the three months ended December 31, 2021 and 2020, the Company recorded, net of Ergomed’s discount, approximately $0.2 million and $0.6 million, respectively, as research and development expense related to Ergomed’s services. | |
Lease Agreements | |
The Company leases a manufacturing facility near Baltimore, Maryland (the San Tomas lease). The building was remodeled in accordance with the Company’s specifications so that it can be used by the Company to manufacture Multikine for the Company’s Phase 3 clinical trial and sales of the drug if approved by the FDA. The lease is for a term of twenty years and requires annual base rent to escalate each year at 3%. The Company is required to pay all real estate and personal property taxes, insurance premiums, maintenance expenses, repair costs and utilities. The lease allows the Company, at its election, to extend the lease for two ten-year periods or to purchase the building at the end of the 20-year lease, which expires in October 2028. The renewal options are not included in the calculation of the right of use asset and lease liability because exercise of those options is not probable. | |
On December 31, 2021 and September 30, 2021, the net book value of the finance lease right of use asset is approximately $12.3 million and $12.7 million, respectively and the balance of the finance lease liability is approximately $13.5 million and $13.8 million, respectively, of which approximately $0.6 million is current in each quarter. These amounts include the San Tomas lease as well as several other smaller finance leases for office equipment. The finance right of use assets are being depreciated using the straight-line method over the underlying lease terms. Total cash paid related to finance leases during the three months ended December 31, 2021 and 2020 was approximately $0.6 million and $0.5 million, respectively, of which approximately $0.3 million was for interest in each quarter. As of December 31, 2021, the weighted average discount rate of the Company’s finance leases is 8.45% and the weighted average time to maturity is 6.8 years. | |
In August 2020, the Company entered into an amendment to the San Tomas lease under which the landlord agreed to allow the Company to substantially upgrade the manufacturing facility in preparation for the potential commercial production of Multikine. The project was finished and the improvements were placed in service in October 2021. Total cost was $11.1 million, of which the landlord agreed to finance $2.4 million. Approximately $1.6 million of the landlord financing was received as of December 31 2021, and the remaining balance is expected to be received in the second quarter of fiscal year 2022. The landlord financing is being repaid through increased lease payments which started in March 2021 and extend over the remaining lease term. The repayment includes a base rent which escalates at 3% each year plus interest that accrues at 13.75% per year. The Company remeasured the lease liability to account for the modified payments using a 8.45% implicit interest rate. The rate was determined using a synthetic credit rating analysis prepared by an outside valuation specialist. Additionally, this financing is considered to be a lease incentive from the landlord and has been included in the calculation of the lease liability as it is realized. The leasehold improvements are recorded in property and equipment, were deemed to be placed in service in October 2021 and are being amortized over the remaining lease term. | |
The Company was required to deposit the equivalent of one year of base rent in accordance with the lease. Under the landlord’s $2.4 million financing arrangement, the Company was required to deposit an additional $0.2 million in March 2021. When the Company meets the minimum cash balance required by the lease, the deposit will be returned to the Company. During the quarter ended December 31, 2021, it was determined that the Company met the minimum cash requirement and the deposits were returned in January 2022. The approximate $1.9 million deposit is included in current assets at December 31, 2021 and non-current assets at September 30, 2021. |
| 17 |
| Table of Contents |
| Approximate future minimum lease payments under finance leases as of December 31, 2021 are as follows: |
Nine months ending September 30, 2022 |
| $ | 1,083,000 |
|
Year ending September 30, |
|
|
|
|
2023 |
|
| 2,569,000 |
|
2024 |
|
| 2,648,000 |
|
2025 |
|
| 2,733,000 |
|
2026 |
|
| 2,824,000 |
|
2027 |
|
| 2,919,000 |
|
Thereafter |
|
| 3,267,000 |
|
Total future minimum lease obligation* |
|
| 18,043,000 |
|
Less imputed interest on finance lease obligations |
|
| (4,539,000 | ) |
Net present value of finance lease obligations |
| $ | 13,504,000 |
|
| *Amount is net of landlord incentive of approximately $0.8 million expected to be received during the quarter ended March 31, 2022. | |
The Company leases two facilities under operating leases. The lease for the Company’s office headquarters will expire on November 30, 2025. The lease for its research and development laboratory was renewed in September 2021 for an additional ten years and will expire on February 29, 2032. The renewal was considered a modification for accounting purposes and the right of use asset and liability were remeasured as of the date of the renewal. This resulted in an increase of approximately $1.1 million to the operating lease right of use asset and liability. The operating leases include escalating rental payments. The Company is recognizing the related rent expense on a straight-line basis over the terms of the leases. As of December 31, 2021 and September 30, 2021, the net book value of the operating lease right of use assets is approximately $2.0 million and $2.1 million, respectively. As of December 31, 2021 and September 30, 2021, the balance of the operating lease liabilities is approximately $2.1 million. of which approximately $0.1 million, is current in each quarter. The Company incurred lease expense for operating leases of approximately $91,000 and $66,000, respectively, for the three months ended December 31, 2021 and 2020. Total cash paid related to operating leases during the three months ended December 31, 2021 and 2020 was approximately $66,000 and $48,000, respectively. The weighted average discount rate of the Company’s operating leases is 9.11% and the weighted average time to maturity is 9.5 years. | |
| As of December 31, 2021, future minimum lease payments on operating leases are as follows: |
Nine months ending September 30, 2022 |
| $ | 243,000 |
|
Year ending September 30, |
|
|
|
|
2023 |
|
| 348,000 |
|
2024 |
|
| 357,000 |
|
2025 |
|
| 366,000 |
|
2026 |
|
| 287,000 |
|
2027 |
|
| 277,000 |
|
Thereafter |
|
| 1,325,000 |
|
Total future minimum lease obligation |
|
| 3,203,000 |
|
Less imputed interest on operating lease obligation |
|
| (1,081,000 | ) |
Net present value of operating lease obligation |
| $ | 2,122,000 |
|
G. | PATENTS |
During the three months ended December 31, 2021, the Company recorded approximately $31,000 in patent impairment charges. No patent impairment charges were recorded during the three months ended December 2020. During the three months ended December 31, 2021 and 2020, amortization of patent costs totaled approximately $14,000 and $13,000, respectively. Approximate estimated future amortization expense is as follows: |
| 18 |
| Table of Contents |
Nine months ending September 30, 2022 |
| $ | 35,000 |
|
Year ending September 30, |
|
|
|
|
2023 |
|
| 38,000 |
|
2024 |
|
| 30,000 |
|
2025 |
|
| 28,000 |
|
2026 |
|
| 24,000 |
|
2027 |
|
| 21,000 |
|
Thereafter |
|
| 72,000 |
|
Total |
| $ | 248,000 |
|
H. | LOSS PER COMMON SHARE |
Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding during the period. For the years presented, the gain on warrant liabilities priced lower than the average market price during the period is excluded from the numerator and the incremental shares, determined using the treasury stock method, are added to the denominator in calculating diluted loss per share. | |
| The following tables provide the details of the basic and diluted loss per-share computations: |
|
| Three months ended December 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Loss per share – basic |
|
|
|
|
|
| ||
Net loss available to common shareholders - basic |
| $ | (8,782,606 | ) |
| $ | (8,022,643 | ) |
Weighted average shares outstanding - basic |
|
| 43,077,961 |
|
|
| 38,670,247 |
|
Basic loss per common share |
| $ | (0.20 | ) |
| $ | (0.21 | ) |
|
|
|
|
|
|
|
|
|
Loss per share – diluted |
|
|
|
|
|
|
|
|
Net loss available to common shareholders - basic |
| $ | (8,782,606 | ) |
| $ | (8,022,643 | ) |
Gain on derivatives (1) |
|
| (25,114 | ) |
|
| (164,073 | ) |
Net loss available to common shareholders - diluted |
| $ | (8,807,720 | ) |
| $ | (8,186,716 | ) |
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic |
|
| 43,077,961 |
|
|
| 38,670,247 |
|
Incremental shares underlying dilutive - warrants and options (1) |
|
| 5,459 |
|
|
| 97,039 |
|
Weighted average shares outstanding – diluted |
|
| 43,083,420 |
|
|
| 38,767,286 |
|
Diluted loss earnings per common share |
| $ | (0.20 | ) |
| $ | (0.21 | ) |
(1) | Includes Series CC and HH warrants for the three months ended December 31, 2021 and 2020. |
In accordance with the contingently issuable shares guidance of FASB ASC Topic 260, Earnings Per Share, the calculation of diluted net earnings (loss) per share excludes the following securities because their inclusion would have been anti-dilutive as of December 31: |
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Options and Warrants |
|
| 10,477,966 |
|
|
| 6,517,160 |
|
Unvested Restricted Stock |
|
| 151,250 |
|
|
| 302,500 |
|
Total |
|
| 10,629,216 |
|
|
| 6,819,660 |
|
J. | SUBSEQUENT EVENTS |
| The Company has evaluated subsequent events through the date these financial statements were filed and determined there are no subsequent events that require disclosure. |
| 19 |
| Table of Contents |
New Accounting PronouncementsItem 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In August 2020, the FASB issued ASU No. 2020-06 (“ASU 2020-06”) Debt—Debt with ConversionLiquidity and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The amendments in this Update simplify and clarify the guidance in Subtopic 815-40 and are effective for the Company for the fiscal year ending September 30, 2025, including interim periods within that fiscal year. Early adoption is permitted. The Company is currently evaluating the impact this ASU will have on the financial statements, but plans to early adopt the guidance and does not expect significant impact to the financial statements.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The new standard includes several provisions that simplify accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and increasing consistency and clarity for the users of financial statements. This standard will be effective for the Company on October 1, 2021. Early adoption is permitted. The Company is currently evaluating the impact this ASU will have on the financial statements.
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 FINANCINGCapital Resources
On June 28, 2021, the Company announced results from its 9.5 year pivotal Phase 3 study for its immunotherapy Multikine® (Leukocyte Interleukin, Injection) in the treatment of advanced (stages III and IV) primary (previously untreated) squamous cell carcinoma of the head and neck (SCCHN). The Phase 3 results showed a long-term 5-year overall survival (OS) benefit in the treatment arm that received Multikine treatment followed by surgery and radiation. This survival benefit was robust and durable, with no safety issues, something not commonly seen with cancer drugs. In fact, the survival benefit increased over time and at 5-years5 years the overall survival benefit reached an absolute 14.1% advantage for the Multikine treated arm over control (n=380, total study patients treated with surgery plus radiation), which is about a 29% improvement, control arm 48.6%, Multikine arm 62.7% survival.
The study used the standard of care treatment for advanced primary head and neck cancer patients as a comparison. The patients received surgery followed by either radiation or chemoradiation (chemotherapy and radiation at the same time), as determined by the physician. This means that there were 2 treatment arms, 1) surgery plus radiation or 2) surgery plus chemoradiation. The arm that received Multikine treatment followed by surgery and radiation showed great survival benefit, but when chemotherapy was added in the second treatment arm, the immunological effect of Multikine was negated. Therefore, when the two treatment arms were combined the study did not achieve its primary endpoint of a 10% improvement in overall survival.
However, the analysis of the separate treatment arms was prespecified in the protocol and carried out prior to the Company becoming unblinded. The OS benefit of 14.1% at 5 years for this treatment arm exceeded the 10% OS benefit set out for the study population as a whole. The OS results for this treatment arm are significant (two-sided p=0.0236, HR=0.68) and the effect is robust, durable and increasing over time. The results from the Phase 3 cancer study proved that Multikine met all of the protocol required benefits stated in the study protocol in patients in the treatment arm receiving surgery and radiation as their standard therapies. Based on this the Company will be filingaims to file for and seeking FDA approval for the use of Multikine in the treatment of advanced primary head and neck cancer in this patient population of about 210,000 patients annually worldwide.
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 has incurred significant costs since its inception for the acquisition of certain proprietary technology and scientific knowledge relating to the human immunological defense system, patent applications, research and development, administrative costs, construction and upgrade of laboratory facilities and clinical trials. The Company has funded such costs primarily with proceeds from loans and the public and private sale of its securities. The Company may be required to raise additional capital or find additional long-term financing to continue with its efforts to bring Multikine to market. 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 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 believes there is a high likelihood that it will continue to receive funds from private and public offerings and warrant exercises similar to the way it has substantially funded operations in the past. However, there can be no assurance that the Company will be able to raise sufficient capital to support its operations.
If the Company needs to raise capital, Management plans to raise additional capital in the form of warrant exercises, corporate partnerships, and debt and/or equity financings. The Company believes that it will be able to obtain additional financing because it has done so consistently in the past and because it showed great survival benefit in one of the two treatment arms for advanced primary head and neck cancer. 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 is able to raise the required funding.
Impact of COVID-19 Pandemic
In response to the global outbreak of COVID-19 and the World Health Organization’s classification of the outbreak as a pandemic, the Company continues to take the necessary precautions to ensure the safety of its employees and to minimize interruptions to its operations. Management follows the Centers for Disease Control and Prevention’s (“CDC”) guidance and the recommendations and restrictions provided by state and local authorities. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. As such, it is uncertain as to the full magnitude of impact the pandemic will have on the Company’s financial condition, liquidity and future results of operations. Management is actively monitoring the risks to public health and the impact of overall global business activity on its financial condition, liquidity, operations, suppliers, industry, and workforce.
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.
C. STOCKHOLDERS’ EQUITY
Proceeds from the Sale of Common Stock
In June 2021, the Company sold 1,400,000 shares of common stock at a public offering price of $22.62 per share and received aggregate net proceeds of approximately $29.4 million. The Company also granted the underwriters a 30-day option to purchase up to 210,000 additional shares of common stock to cover over-allotments. The underwriters fully exercised this option in June 2021, resulting in additional net proceeds to the Company of approximately $4.4 million.
In December 2020, the Company sold 1,000,000 shares of common stock at a public offering price of $14.65 per share and received aggregate proceeds of approximately $13.6 million.
In March 2020, the Company sold 630,500 shares of common stock at a public offering price of $12.22 per share and received aggregate net proceeds of approximately $7.1 million. Under the terms of the Underwriting Agreement the Company granted the Underwriters a 45-day option to purchase up to an additional 94,575 shares of common stock solely to cover over-allotments. The underwriter fully exercised this option in May 2020 resulting in additional net proceeds to the Company of approximately $1.1 million.
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 net proceeds of approximately $5.0 million. In January 2020, the underwriters of that offering fully exercised the option to purchase 90,959 additional shares of common stock at the public offering price of $9.07 per share for aggregate net proceeds to the Company of approximately $0.8 million.
Equity Compensation
Underlying share information for equity compensation plans as of June 30, 2021 is as follows:
Name of Plan |
| Total Shares Reserved |
|
| Shares Reserved for Outstanding Options |
|
| Shares |
|
| Remaining Options/Shares Under Plans |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Incentive Stock Options Plans |
|
| 138,400 |
|
|
| 76,829 |
|
|
| N/A |
|
|
| 213 |
|
Non-Qualified Stock Option Plans |
|
| 11,787,200 |
|
|
| 11,001,880 |
|
|
| N/A |
|
|
| 404,826 |
|
Stock Bonus Plans |
|
| 783,760 |
|
|
| N/A |
|
|
| 358,118 |
|
|
| 425,609 |
|
Stock Compensation Plans |
|
| 634,000 |
|
|
| N/A |
|
|
| 150,695 |
|
|
| 464,895 |
|
Incentive Stock Bonus Plan |
|
| 640,000 |
|
|
| N/A |
|
|
| 614,500 |
|
|
| 25,500 |
|
Stock option activity:
|
| Nine Months Ended June 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Options granted |
|
| 2,603,500 |
|
|
| 2,561,200 |
|
Options exercised |
|
| 126,954 |
|
|
| 94,199 |
|
Options forfeited |
|
| 42,166 |
|
|
| 1,000 |
|
Options expired |
|
| 9,374 |
|
|
| 1,180 |
|
|
| Three Months Ended June 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Options granted |
|
| 2,595,500 |
|
|
| 2,559,000 |
|
Options exercised |
|
| 72,809 |
|
|
| 73,719 |
|
Options forfeited |
|
| - |
|
|
| 16 |
|
Options expired |
|
| 9,307 |
|
|
| - |
|
During the quarter ended June 30, 2021, the Company adopted the 2021 Non-Qualified Stock Option Plan, which provides for the issuance of up to 1,800,000 options to purchase shares of common stock. On May 14, 2021, the Company granted 1,800,000 performance-based stock options from the 2021 Non-Qualified Stock Option Plan and 72,000 performance-based stock options from the 2020 Non-Qualified Stock Option Plan to officers and directors. Each option entitles the holder to purchase one share of the Company’s common stock at a price of $20.61 per share, the fair value on the date of issuance. The stock options will vest 100% upon the achievement of the following performance goal: (a) the filing of the first marketing application for any pharmaceutical based upon the Company’s Multikine technology, in the US, Canada, UK, Germany, France, Italy, Spain, Japan, or Australia or (b) the closing price of the Company’s common stock exceeds $42.00. None of the options will be exercisable before May 13, 2022. All options which have not vested as of May 13, 2031, will be canceled and will no longer be exercisable. The options were recorded in permanent equity in accordance with ASC 718, Compensation – Stock Compensation. On the grant date, the options were valued using a Monte Carlo Simulation approach. Monte Carlo Simulation is a statistical technique that is used to model probabilistic systems and establish the probabilities for a variety of outcomes. That valuation resulted in a per share fair value of $0.34 and an aggregate value of $636,480 on the grant date. The aggregate value will be expensed over the requisite service period of the options, which was determined to be 1.3 years. This resulted in compensation expense of approximately $64,000 recorded during the nine and three months ended June 30, 2021.
Stock-Based Compensation Expense
|
| Nine months Ended June 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Employees |
| $ | 10,090,410 |
|
| $ | 6,690,331 |
|
Non-employees |
| $ | 955,900 |
|
| $ | 623,146 |
|
|
| Three months Ended June 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Employees |
| $ | 3,511,359 |
|
| $ | 3,109,127 |
|
Non-employees |
| $ | 403,236 |
|
| $ | 275,919 |
|
Employee compensation expense includes the expense related to options and restricted stock expensed over their vesting period. Non-employee expense includes the expense related to options and stock issued to consultants expensed over the period of the related service contracts.
Warrants and Non-Employee Options
The following chart represents the warrants and non-employee options outstanding at June 30, 2021:
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 |
|
| 8/18/2022 |
|
| 2 |
|
Series UU |
| 6/11/2018 |
|
| 93,603 |
|
| $ | 2.80 |
|
| 6/30/2022 |
|
| 2 |
|
Series X |
| 1/13/2016 |
|
| 120,000 |
|
| $ | 9.25 |
|
| 7/13/2022 |
|
| 2 |
|
Series Y |
| 2/15/2016 |
|
| 26,000 |
|
| $ | 12.00 |
|
| 8/15/2022 |
|
| 2 |
|
Series BB |
| 8/26/2016 |
|
| 16,000 |
|
| $ | 13.75 |
|
| 8/22/2021 |
| * |
| |
Series Z |
| 5/23/2016 |
|
| 184,800 |
|
| $ | 13.75 |
|
| 11/23/2021 |
| * |
| |
Series CC |
| 12/8/2016 |
|
| 41,345 |
|
| $ | 5.00 |
|
| 12/8/2021 |
|
| 1 |
|
Series HH |
| 2/23/2017 |
|
| 200 |
|
| $ | 3.13 |
|
| 2/16/2022 |
| * |
| |
Series AA |
| 8/26/2016 |
|
| 100,000 |
|
| $ | 13.75 |
|
| 2/22/2022 |
| * |
| |
Series MM |
| 6/22/2017 |
|
| 333,432 |
|
| $ | 1.86 |
|
| 6/22/2022 |
|
| 2 |
|
Series NN |
| 7/24/2017 |
|
| 217,838 |
|
| $ | 2.52 |
|
| 7/24/2022 |
|
| 2 |
|
Series RR |
| 10/30/2017 |
|
| 251,761 |
|
| $ | 1.65 |
|
| 10/30/2022 |
|
| 2 |
|
Series SS |
| 12/19/2017 |
|
| 220,800 |
|
| $ | 2.09 |
|
| 12/18/2022 |
| * |
| |
Series TT |
| 2/5/2018 |
|
| 100,868 |
|
| $ | 2.24 |
|
| 2/5/2023 |
|
| 2 |
|
Consultants |
| 7/28/2017 – 11/18/2020 |
|
| 15,000 |
|
| $ | 2.18 - $11.61 |
|
| 11/17/2022 - 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, 2021 |
|
| September 30, 2020 |
| ||
Series W warrants |
| $ | - |
|
| $ | 73,570 |
|
Series Z warrants |
|
| 429,996 |
|
|
| 1,207,902 |
|
Series ZZ warrants |
|
| - |
|
|
| 75,044 |
|
Series AA warrants |
|
| 263,818 |
|
|
| 1,082,212 |
|
Series BB warrants |
|
| 16,696 |
|
|
| 65,173 |
|
Series CC warrants |
|
| 206,978 |
|
|
| 1,259,712 |
|
Series HH warrants |
|
| 1,216 |
|
|
| 2,000 |
|
Total warrant liabilities |
| $ | 918,704 |
|
| $ | 3,765,613 |
|
The table below presents the gains (losses) on the warrant liabilities for the nine months ended June 30:
|
| 2021 |
|
| 2020 |
| ||
Series V warrants |
| $ | - |
|
| $ | 185,652 |
|
Series W warrants |
|
| 73,570 |
|
|
| (614,696 | ) |
Series Z warrants |
|
| (113,094 | ) |
|
| (742,495 | ) |
Series ZZ warrants |
|
| (98,692 | ) |
|
| (38,319 | ) |
Series AA warrants |
|
| (306,606 | ) |
|
| (547,454 | ) |
Series BB warrants |
|
| 48,477 |
|
|
| (44,620 | ) |
Series CC warrants |
|
| (596,001 | ) |
|
| (1,245,627 | ) |
Series FF warrants |
|
| - |
|
|
| (319,706 | ) |
Series HH warrants |
|
| 784 |
|
|
| (35,024 | ) |
Series JJ warrants |
|
| - |
|
|
| (64,992 | ) |
Series LL warrants |
|
| - |
|
|
| (98,066 | ) |
Net loss on warrant liabilities |
| $ | (991,562 | ) |
| $ | (3,565,347 | ) |
The table below presents the gains (losses) on the warrant liabilities for the three months ended June 30:
|
| 2021 |
|
| 2020 |
| ||
Series V warrants |
| $ | - |
|
| $ | 107,191 |
|
Series W warrants |
|
| - |
|
|
| (247,327 | ) |
Series Z warrants |
|
| 583,404 |
|
|
| (430,619 | ) |
Series ZZ warrants |
|
| (87,162 | ) |
|
| (33,734 | ) |
Series AA warrants |
|
| 355,215 |
|
|
| (220,831 | ) |
Series BB warrants |
|
| 64,678 |
|
|
| (37,592 | ) |
Series CC warrants |
|
| 199,256 |
|
|
| (419,350 | ) |
Series HH warrants |
|
| 1,228 |
|
|
| (567 | ) |
Net (gain) loss on warrant liabilities |
| $ | 1,116,619 |
|
| $ | (1,282,829 | ) |
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.
Changes in Warrant Liabilities
On June 25, 2020, 135,963 Series V warrants, with an exercise price of $13.75 expired. The warrants were valued at approximately $211,000 on the date of expiration.
On May 26, 2020, the Company lowered the exercise price of 810,127 Series V warrants from $19.75 to $13.75 per share and extended the expiration date of the Series V warrants from May 28, 2020 to June 25, 2020. The incremental cost of this modification combined with the mark-to-market gain recorded upon exercise of certain warrants and the expiration of the remaining warrants, resulted in a net gain of approximately $107,000 for the nine and three months ended June 30, 2020.
On October 28, 2020, 688,930 Series W warrants, with an exercise price of $16.75 expired.
Exercise of Warrant Liabilities
The following warrants recorded as liabilities were exercised during the periods ended June 30, 2021.
|
| Three Months |
|
| Nine Months |
| ||||||||||||||||||
Warrants |
| Warrants Exercised |
|
| Exercise Price |
|
| Proceeds |
|
| Warrants Exercised |
|
| Exercise Price |
|
| Proceeds |
| ||||||
Series Z |
|
| - |
|
|
| - |
|
| $ | 0 |
|
|
| 79,200 |
|
| $ | 13.75 |
|
| $ | 1,089,000 |
|
Series ZZ |
|
| 19,200 |
|
| $ | 13.75 |
|
|
| 264,000 |
|
|
| 20,000 |
|
| $ | 13.75 |
|
|
| 275,000 |
|
Series AA |
|
| - |
|
|
| - |
|
|
| 0 |
|
|
| 100,000 |
|
| $ | 13.75 |
|
|
| 1,375,000 |
|
Series CC |
|
| 5,000 |
|
| $ | 5.00 |
|
|
| 25,000 |
|
|
| 107,298 |
|
| $ | 5.00 |
|
|
| 536,490 |
|
|
|
| 24,200 |
|
|
|
|
|
| $ | 289,000 |
|
|
| 306,498 |
|
|
|
|
|
| $ | 3,275,490 |
|
The following warrants recorded as liabilities were exercised during the periods ended June 30, 2020.
|
| Three Months |
|
| Nine Months |
| ||||||||||||||||||
Warrants |
| Warrants Exercised |
|
| Exercise Price |
|
| Proceeds |
|
| Warrants Exercised |
|
| Exercise Price |
|
| Proceeds |
| ||||||
Series V |
|
| 674,164 |
|
| $ | 13.75 |
|
| $ | 9,269,755 |
|
|
| 674,164 |
|
| $ | 13.75 |
|
| $ | 9,269,755 |
|
Series CC |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 123,820 |
|
| $ | 5.00 |
|
|
| 619,100 |
|
Series FF |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 68,048 |
|
| $ | 3.91 |
|
|
| 265,812 |
|
Series HH |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 6,300 |
|
| $ | 3.13 |
|
|
| 19,687 |
|
Series JJ |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 9,450 |
|
| $ | 3.13 |
|
|
| 29,531 |
|
Series LL |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 26,398 |
|
| $ | 3.59 |
|
|
| 94,867 |
|
|
|
| 674,164 |
|
|
|
|
|
| $ | 9,269,755 |
|
|
| 908,180 |
|
|
|
|
|
| $ | 10,298,752 |
|
2. Equity Warrants
Changes in Equity Warrants
On June 28, 2021, the expiration dates of the Series N, Series X, Series Y and Series UU warrants were extended one year. On December 7, 2020, the expiration dates were extended six months. The incremental costs of the warrant extensions were recorded consistent with the accounting for the initial warrant issuances. The incremental costs of the Series N and Series X warrant extensions were recorded as a deemed dividend and totaled approximately $351,000and $265,000 for the nine and three months ended June 30, 2021, respectively. The Series N and Series X warrants are held by the de Clara Trust, of which the Company’s CEO, Geert Kersten, is a beneficiary. The incremental cost of the Series Y warrants extension was recorded as additional paid in capital and totaled approximately $103,000 and $62,000 for the nine and three months ended June 30,2021. The incremental cost of the Series UU warrant extension was recorded as interest expense, because these warrants were initially issued as an inducement to convert notes payable into common stock, and totaled approximately $24,000for the nine and three months ended June 30,2021. The Series UU warrants are held by Geert Kersten, Patricia Prichep (current Officers of the Company) and the de Clara Trust.
On May 26, 2020, the Company provided that for each Series V warrant exercised by an accredited investor on or before June 10, 2020 the former holder of the Series V warrant received one Series XX warrant. Every Series XX warrant will allow the holder to purchase one share of the Company’s common stock at a price of $18.00 per share at any time on or before September 10, 2020. For every two Series V warrant exercised by an accredited investor after June 10, 2020 but on or before June 25, 2020 the former holder of the Series V warrant received one Series YY warrant. Every Series YY warrants will allow the holder to purchase one share of the Company’s common stock at a price of $20.00 per share at any time on or before September 25, 2020. In June 2020, 461,953 Series XX warrants and 101,839 Series YY warrants were issued to the former holders of the Series V warrants. The Company recognized an inducement expense equal to the fair value of the Series XX and Series YY warrants issued as of the date the inducement offers were accepted. The fair values of the Series XX and Series YY warrants were calculated to be approximately $629,000 and $177,000, respectively, and are included as inducement expense in the statements of operations for the nine and three months ended June 30, 2020. The Series XX and YY warrants qualify for equity treatment in accordance with ASC 815.
On May 8, 2020, the expiration date of 93,593 Series UU warrants were extended by six months. The incremental cost of this extension was approximately $6,000 and was recorded as interest expense for the nine and three months ended June 30, 2020. As noted above, the Series UU warrants are held by current officers of the Company and the de Clara Trust.
On January 23, 2020, the expiration date of the Series N warrants was extended by six months. The incremental cost of this extension was approximately $22,000 and was recorded as a deemed dividend in the financial statements for the nine and three months ended June 30, 2020. The Series N warrants are held by the de Clara Trust, of which the Company’s CEO, Geert Kersten, is a beneficiary.
Exercise of Equity Warrants
The following warrants recorded as equity were exercised during the periods ended June 30, 2021.
|
| Three Months |
|
| Nine Months |
| ||||||||||||||||||
Warrants |
| Warrants Exercised |
|
| Exercise Price |
|
| Proceeds |
|
| Warrants Exercised |
|
| Exercise Price |
|
| Proceeds |
| ||||||
Series MM |
|
| 147,929 |
|
| $ | 1.86 |
|
| $ | 275,148 |
|
|
| 464,201 |
|
| $ | 1.86 |
|
| $ | 863,414 |
|
Series NN |
|
| 109,170 |
|
| $ | 2.52 |
|
|
| 275,108 |
|
|
| 131,004 |
|
| $ | 2.52 |
|
|
| 330,130 |
|
Series RR |
|
| 95,799 |
|
| $ | 1.65 |
|
|
| 158,068 |
|
|
| 165,888 |
|
| $ | 1.65 |
|
|
| 273,715 |
|
Series SS |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 105,264 |
|
| $ | 2.09 |
|
|
| 220,002 |
|
Series TT |
|
| 60,214 |
|
| $ | 2.24 |
|
|
| 134,879 |
|
|
| 270,696 |
|
| $ | 2.24 |
|
|
| 606,359 |
|
|
|
| 413,112 |
|
|
|
|
|
| $ | 843,204 |
|
|
| 1,137,053 |
|
|
|
|
|
| $ | 2,293,620 |
|
The following warrants recorded as equity were exercised during the periods ended June 30, 2020.
|
| Three Months |
|
| Nine Months |
| ||||||||||||||||||
Warrants |
| Warrants Exercised |
|
| Exercise Price |
|
| Proceeds |
|
| Warrants Exercised |
|
| Exercise Price |
|
| Proceeds |
| ||||||
Series NN |
|
| - |
|
|
| - |
|
| $ | - |
|
|
| 98,253 |
|
| $ | 2.52 |
|
| $ | 247,598 |
|
Series OO |
|
| 10,000 |
|
| $ | 2.52 |
|
|
| 25,200 |
|
|
| 50,000 |
|
| $ | 2.52 |
|
|
| 126,000 |
|
Series SS |
|
| 39,474 |
|
| $ | 2.09 |
|
|
| 82,500 |
|
|
| 156,580 |
|
| $ | 2.09 |
|
|
| 327,252 |
|
Series TT |
|
| 10,000 |
|
| $ | 2.24 |
|
|
| 22,400 |
|
|
| 188,125 |
|
| $ | 2.24 |
|
|
| 421,400 |
|
Series UU |
|
| 61,207 |
|
| $ | 2.80 |
|
|
| 171,380 |
|
|
| 61,207 |
|
| $ | 2.80 |
|
|
| 171,380 |
|
Series VV |
|
| 55,000 |
|
| $ | 1.75 |
|
|
| 96,250 |
|
|
| 82,500 |
|
| $ | 1.75 |
|
|
| 144,375 |
|
|
|
| 175,681 |
|
|
|
|
|
| $ | 397,730 |
|
|
| 636,665 |
|
|
|
|
|
| $ | 1,438,005 |
|
3. Options and Shares Issued to Consultants
During the nine months ended June 30, 2021 and 2020, the Company issued 41,714 and 47,750 shares, respectively, of restricted common stock to consultants for services. The weighted average grant date fair value of the shares issued to consultants was $19.47 and $11.60 during the nine months ended June 30, 2021 and 2020, respectively. During the three months ended June 30, 2021 and 2020, the Company issued 13,184 and 14,811 shares, respectively, of restricted common stock to consultants for services. The weighted average grant date fair value of the shares issued to consultants was $23.39 and $16.41, respectively, during the three months ended June 30, 2021 and 2020. 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.
Additionally, during the nine months ended June 30, 2021, the Company issued to a consultant 5,000 options to purchase common stock with an exercise price of $11.61. The options were exercisable beginning May 18, 2021 and expire on November 17, 2022. The options are being expensed on a straight-line basis over the six-month vesting period at a fair value of approximately $28,000 or $5.65 per option. No options were issued to consultants during the three months ended June 30, 2021. No options were issued to consultants during the nine months ended June 30, 2020.
As of June 30, 2021 and September 30, 2020, respectively, 15,000 and 10,000 options issued to consultants remained outstanding, all of which were issued from the Non-Qualified Stock Option plans and of which 10,000 are vested as of the balance sheet dates.
During the nine months ended June 30, 2021 and 2020, the Company recorded total expense of approximately $956,000 and $623,000, respectively, relating to these consulting agreements. At June 30, 2021 and September 30, 2020, consulting fees of approximately $293,000 and $395,000, respectively, are included in prepaid expenses.
4. Securities Purchase Agreement
The Company entered into a Securities Purchase Agreement (SPA) with Ergomed plc (“Ergomed”), one of the Company’s Clinical Research Organizations responsible for managing the Company’s Phase 3 clinical trial, to facilitate payment of amounts due to Ergomed. Under the Agreement, the Company issued Ergomed shares of common stock and the net proceeds from the sales of those shares reduces 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 by Ergomed and reduces accounts payable to Ergomed. No shares were issued during the periods presented. The following amounts were realized through the resale of shares and are included in Other non-operating gains for the periods noted.
|
| Nine Months Ended |
|
| Three Months Ended |
| ||||||||||
|
| June 30, 2021 |
|
| June 30, 2020 |
|
| June 30, 2021 |
|
| June 30, 2020 |
| ||||
Realized through the resale of shares |
| $ | 1,436,473 |
|
| $ | 2,539,245 |
|
| $ | 761,237 |
|
| $ | 818,565 |
|
Fair value of shares upon issuance |
|
| 0 |
|
|
| 1,769,500 |
|
|
| 0 |
|
|
| 1,769,500 |
|
Other non-operating gain (loss) |
| $ | 1,436,473 |
|
| $ | 769,745 |
|
| $ | 761,237 |
|
| $ | (950,935 | ) |
As of June 30, 2021, Ergomed held 27,021 shares for 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:
| ||
| ||
|
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 an input to the fair value measurement requires judgment and may affect the placement within the fair value hierarchy levels.
The Company purchased short-term T-bills during the nine months ended June 30, 2021 that are classified as trading securities. Quoted market prices were applied to determine the fair value of short-term investments, therefore they were categorized as Level 1 on the fair value hierarchy. The T-bills were recorded at fair market value, which includes an unrealized gain of approximately $2,000. The T-bills have maturity dates ranging from July through December 2021 and yield a weighted average interest rate of 0.09%.
The Company measures its warrant liabilities at fair value. At June 30, 2021 and September 30, 2020, all warrant liabilities were measured using unobservable inputs, and therefore were categorized as a Level 3 to the fair value hierarchy.
The following sets forth the reconciliation of beginning and ending balances related to fair value measurements using significant unobservable inputs (Level 3) for the nine months ended June 30, 2021 and the year ended September 30, 2020:
|
| Nine months ended |
|
| Twelve months ended |
| ||
|
| June 30, 2021 |
|
| September 30, 2020 |
| ||
|
|
|
|
|
|
| ||
Beginning balance |
| $ | 3,765,613 |
|
| $ | 6,488,310 |
|
Issuances |
|
| - |
|
|
| - |
|
Exercises |
|
| (3,838,471 | ) |
|
| 3,071,775 | ) |
Realized and unrealized net loss |
|
| 991,562 |
|
|
| 349,078 |
|
Ending balance |
| $ | 918,704 |
|
| $ | 3,765,613 |
|
The fair values of the Company’s derivative instruments disclosed above under Level 3 are primarily derived from valuation models where significant inputs such as historical price and volatility of the Company’s stock, as well as U.S. Treasury Bill rates, are observable in active markets.
E. RELATED PARTY TRANSACTIONS
On June 28, 2021, the expiration dates of the Series N and Series X warrants held by the de Clara Trust, of which the Company’s CEO, Geert Kersten, is a beneficiary, were extended by twelve months (Note C). The incremental cost of these modifications was approximately $265,000 and was recorded as a deemed dividend in the financial statements for the nine and three months ended June 30, 2021.
On June 28, 2021, the expiration date of 93,603 Series UU warrants was extended by twelve months (Note C). The incremental cost of this extension was $24,000 and was recorded as interest expense for the nine and three months ended June 30, 2021. The Series UU warrants are held by certain officers of the Company and the de Clara Trust and were originally issued with convertible debt.
On December 7, 2020, the expiration dates of the Series N and Series X warrants held by the de Clara Trust, of which the Company’s CEO, Geert Kersten, is a beneficiary, were extended by six months (Note C). The incremental cost of these modifications was approximately $86,000 and was recorded as a deemed dividend in the financial statements for the nine months ended June 30, 2021.
On December 7, 2020, the expiration date of 93,603 Series UU warrants was extended from December 31, 2020 to June 30, 2021. The incremental cost of this extension was $192 and was recorded as interest expense for the nine months ended June 30, 2021. The Series UU warrants are held by certain officers of the Company and were originally issued with convertible debt.
During the nine months ended June 30, 2020, certain officers and directors of the Company purchased 20,512 shares of restricted common stock at an aggregate fair market value of approximately $185,000. No shares were purchased during the three months ended June 30, 2020.
On January 23, 2020, the expiration date of the Series N warrants was extended to February 18, 2021. The incremental cost of this extension was approximately $22,000, which was recorded as a deemed dividend in the financial statements for the nine months ended June 30, 2020. The Series N warrants are held by the de Clara Trust, of which the Company’s CEO, Geert Kersten, is a beneficiary.
F. COMMITMENTS AND CONTINGENCIES
Clinical Research Agreements
Under co-development and revenue sharing agreements with Ergomed, Ergomed agreed to contribute up to $12 million towards the Company’s Phase 3 Clinical Trial in the form of discounted clinical services in exchange for a single digit percentage of milestone and royalty payments, up to a specific maximum amount. The Company accounted for the co-development and revenue sharing agreements in accordance with ASC 808 “Collaborative Arrangements.” The Company determined the payments to Ergomed are within the scope of ASC 730 “Research and Development.” Therefore, the Company records the discount on the clinical services as a credit to research and development expense on its Statements of Operations. Since the inception of the agreement with Ergomed, the Company has incurred research and development expenses of approximately $34.8 million for Ergomed’s services. This amount is net of Ergomed’s discount of approximately $11.7 million. During the nine months ended June 30, 2021 and 2020, the Company recorded, net of Ergomed’s discount, approximately $1.4 million and $1.3 million, respectively, as research and development expense related to Ergomed’s services.
Lease Agreements
The Company leases a manufacturing facility near Baltimore, Maryland (the San Tomas lease). The building was remodeled in accordance with the Company’s specifications so that it can be used by the Company to manufacture Multikine for the Company’s Phase 3 clinical trial and sales of the drug if approved by the FDA. The lease is for a term of twenty years and requires annual base rent to escalate each year at 3%. The Company is required to pay all real estate and personal property taxes, insurance premiums, maintenance expenses, repair costs and utilities. The lease allows the Company, at its election, to extend the lease for two ten-year periods or to purchase the building at the end of the 20-year lease, which expires in October 2028.
In August 2020, the Company entered into an amendment to the San Tomas lease agreement under which the landlord agreed to allow the Company to substantially upgrade the manufacturing facility in preparation for the potential commercial production of Multikine. The estimated cost of the upgrades is $10.7 million, of which approximately $10.5 million has been incurred as of June 30, 2021. The landlord agreed to finance the final $2.4 million of the costs incurred which will be repaid through increased lease payments over the remaining lease term starting on March 1, 2021. The repayment will include a base rent which escalates at 3% each year plus interest that accrues at 13.75% per year. The Company remeasured the right of use liability to account for the modified payments using a 8.45% implicit interest rate. Additionally, this financing is considered to be a lease incentive from the landlord and has been included in the calculation of the lease liability as it is realized. Approximately $1.6 million was received as of June 30, 2021. The total value of the leasehold improvements will be recorded in property and equipment and will be amortized over the remaining lease term when the assets are placed in service.
During June 2021, CEL-SCI determined that it used an incorrect discount rate to calculate the opening ROU asset and lease liability balances upon adoption of ASC 842. In addition, CEL-SCI determined that the discount rate used to calculate the modification of a finance lease during the quarter ended March 31, 2021 was also incorrect. CEL-SCI engaged an outside valuation specialist to perform a synthetic credit rating analysis to determine an appropriate rate for both the discount rate upon adoption, and the rate used for the lease modification. The revised rate upon adoption of ASC 842 was calculated to be 10.19% compared to the previously used rate of 8.80%, and the revised rate for the lease modification was calculated to be 8.45% compared to the previous rate of 10.00%. CEL-SCI performed an assessment and determined that the impact in the change of interest rates at September 30, 2020 is not material and would have decreased the right of use assets by $712,000 and the related lease liability by $683,000 and increased the net loss by $29,000. As a result, the error was corrected in the quarterly period ended June 30, 2021 as an out of period adjustment.
The net impact of correcting these errors resulted in an increase of approximately $0.5 million to the right of use assets and lease liabilities as of June 30, 2021. For the nine months ended June 30, 2021, this resulted in an increase of expense of approximately $27,000, which is recorded as expense in the nine and three months ended June 30, 2021. There is no impact to the Company’s cash flows as a result of the adjustment.
At June 30, 2021 and September 30, 2020, the net book value of the finance lease right of use asset is approximately $13.1 million and $13.8 million, respectively and the balance of the finance lease liability is approximately $14.1 million and $12.7 million, respectively, of which approximately $0.5 million and $0.9 million is current as of June 30, 2021, and September 30, 2020, respectively. These amounts include the San Tomas lease as well as several other smaller finance leases for office equipment. The finance right of use assets are being depreciated using a straight-line method over the underlying lease terms. Total cash paid related to finance leases during the nine months ended June 30, 2021 and 2020 was approximately $1.6 million, of which approximately $0.9 million was for interest. The weighted average discount rate of the Company’s finance leases is 8.45% and the weighted average time to maturity is 7.3 years.
The Company was required to deposit the equivalent of one year of base rent in accordance with the original lease. Under the landlord’s $2.4 million financing arrangement, the Company was required to deposit an additional $0.2 million during the quarter ended June 30, 2021. As of June 30, 2021 and September 30, 2020, respectively, the approximate $1.9 million and $1.7 million deposit is included in non-current assets.
Approximate future minimum lease payments under finance leases as of June 30, 2021 are as follows:
Nine months ending September 30, 2021 (1) |
| $ | (182,000 | ) |
Years ending September 30, |
|
|
|
|
2022 |
|
| 2,486,000 |
|
2023 |
|
| 2,569,000 |
|
2024 |
|
| 2,648,000 |
|
2025 |
|
| 2,733,000 |
|
2026 |
|
| 2,824,000 |
|
Thereafter |
|
| 6,186,000 |
|
Total future minimum finance lease obligation |
|
| 19,264,000 |
|
Less: imputed interest on financing lease obligation |
|
| (5,126,000 | ) |
Net present value of financing lease obligation |
| $ | 14,138,000 |
|
|
|
|
|
|
(1) Amount is net of landlord incentive of $0.8 million expected to be received in 2021 | ||||
Effective April 30, 2020, the Company terminated a month-to-month arrangement with a sub-lessee as the sub-leased space is needed 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. The sublease rental income for the nine and three months ended June 30, 2020 was approximately $39,000 and $2,000, respectively.
The Company leases two facilities under 60-month operating leases. The lease for its research and development laboratory expires February 28, 2022 and the lease for its office headquarters expires on November 30, 2025. The operating leases include escalating rental payments. The Company is recognizing the related rent expense on a straight-line basis over the full 60-month terms of the leases. As of June 30, 2021 and September 30, 2020, the net book value of the operating lease right of use assets is approximately $1.0 million and $1.2 million, respectively. As of June 30, 2021 and September 30, 2020, the balance of the operating lease liabilities is approximately $1.1 million and $1.3 million, of which approximately $200,000 and $100,000, respectively, is current. The Company incurred lease expense for operating leases of approximately $0.2 million for the nine months ended June 30, 2021 and 2020. The Company incurred lease expense for operating leases of approximately $66,000 and $67,000, respectively, for the three months ended June 30, 2021 and 2020. Total cash paid related to operating leases during the nine months ended June 30, 2021 and 2020 was approximately $176,000 and $198,000 respectively. Total cash paid related to operating leases during the three months ended June 30, 2021 and 2020 was approximately $64,000 and $66,000 respectively. The weighted average discount rate of the Company’s operating leases is 10.2% and the weighted average time to maturity is 5.9 years.
As of June 30, 2021, future minimum lease payments on operating leases are as follows:
Three months ending September 30, 2021 |
| $ | 66,000 |
|
Year ending September 30, |
|
|
|
|
2022 |
|
| 267,000 |
|
2022 |
|
| 275,000 |
|
2024 |
|
| 281,000 |
|
2025 |
|
| 288,000 |
|
2026 |
|
| 207,000 |
|
Thereafter |
|
| 80,000 |
|
Total future minimum lease obligation |
|
| 1,464,000 |
|
Less imputed interest on operating lease obligation |
|
| (344,000 | ) |
Net present value of operating lease obligation |
| $ | 1,120,000 |
|
G. PATENTS
During the nine months ended June 30, 2021 and 2020, no patent impairment charges were recorded. For the nine months ended June 30, 2021 and 2020, amortization of patent costs totaled approximately $39,000 and $40,000, respectively. For the three months ended June 30, 2021 and 2020, amortization of patent costs totaled approximately $13,000 and $14,000, respectively. Approximate estimated future amortization expense is as follows:
Three months ending September 30, 2021 |
| $ | 13,000 |
|
Year ending September 30, |
|
|
|
|
2022 |
|
| 48,000 |
|
2023 |
|
| 38,000 |
|
2024 |
|
| 31,000 |
|
2025 |
|
| 28,000 |
|
2026 |
|
| 24,000 |
|
Thereafter |
|
| 97,000 |
|
Total |
| $ | 279,000 |
|
H. LOSS PER COMMON SHARE
The following tables provide the details of the basic and diluted loss per-share computations:
|
| Nine months ended June 30, |
|
| Three months ended June 30, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Loss per share - basic |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net loss available to common shareholders - basic |
| $ | (28,507,113 | ) |
| $ | (24,897,891 | ) |
| $ | (9,203,350 | ) |
| $ | (10,276,979 | ) |
Weighted average shares outstanding - basic |
|
| 39,907,624 |
|
|
| 36,230,992 |
|
|
| 41,020,485 |
|
|
| 37,453,539 |
|
Basic loss per common share |
| $ | (0.71 | ) |
| $ | (0.69 | ) |
| $ | (0.22 | ) |
| $ | (0.27 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share - diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss available to common shareholders - basic |
| $ | (28,507,113 | ) |
| $ | (24,897,891 | ) |
| $ | (9,203,350 | ) |
| $ | (10,276,979 | ) |
Unrealized gain on derivatives (1) |
|
| (1,236,514 | ) |
|
| - |
|
|
| (1,233,597 | ) |
|
| - |
|
Net loss available to common shareholders - diluted |
| $ | (29,743,627 | ) |
| $ | (24,897,891 | ) |
| $ | (10,436,947 | ) |
| $ | (10,276,979 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic |
|
| 39,907,624 |
|
|
| 36,230,992 |
|
|
| 41,020,485 |
|
|
| 37,453,539 |
|
Incremental shares underlying dilutive “in the money” warrants (1) |
|
| 250,697 |
|
|
| - |
|
|
| 210,597 |
|
|
| - |
|
Weighted average shares outstanding - diluted |
|
| 40,158,321 |
|
|
| 36,230,992 |
|
|
| 41,231,082 |
|
|
| 37,453,539 |
|
Diluted loss per common share |
| $ | (0.74 | ) |
| $ | (0.69 | ) |
| $ | (0.25 | ) |
| $ | (0.27 | ) |
(1) Includes shares issuable upon the exercise of the Series Z, AA, BB, CC and HH warrants for the nine and three months ended June 30, 2021.
In accordance with the contingently issuable shares guidance of FASB ASC Topic 260, Earnings Per Share, the calculation of diluted net earnings (loss) per share excludes the following securities because their inclusion would have been anti-dilutive as of June 30:
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Options and Warrants |
|
| 6,979,170 |
|
|
| 7,651,718 |
|
Unvested Restricted Stock |
|
| 166,500 |
|
|
| 311,873 |
|
Total |
|
| 7,145,670 |
|
|
| 7,963,591 |
|
J. SUBSEQUENT EVENTS
On July 7, 2021, the Company received security purchase agreements for the purchase of 27,500 restricted shares of the Company’s common stock at the closing price on July 6, 2021 of $8.00. The de Clara Trust, of which the Company’s CEO, Geert Kersten, is a beneficiary invested $200,000 and two directors of the Company invested $10,000 each.
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
On June 28, 2021, the Company announced results from its 9.5 year pivotal Phase 3 study for its immunotherapy Multikine® (Leukocyte Interleukin, Injection) in the treatment of advanced (stages III and IV) primary (previously untreated) squamous cell carcinoma of the head and neck (SCCHN). The Phase 3 results showed a long-term 5-year overall survival (OS) benefit in the treatment arm that received Multikine treatment followed by surgery and radiation. This survival benefit was robust and durable, with no safety issues, something not commonly seen with cancer drugs. In fact, the survival benefit increased over time and at 5-years the overall survival benefit reached an absolute 14.1% advantage for the Multikine treated arm over control (n=380, total study patients treated with surgery plus radiation), which is about a 29% improvement, control arm 48.6%, Multikine arm 62.7% survival.
The study used the standard of care treatment for advanced primary head and neck cancer patients as a comparison. The patients received surgery followed by either radiation or chemoradiation (chemotherapy and radiation at the same time), as determined by the physician. This means that there were 2 treatment arms, 1) surgery plus radiation or 2) surgery plus chemoradiation. The arm that received Multikine treatment followed by surgery and radiation showed great survival benefit, but when chemotherapy was added in the second treatment arm, the immunological effect of Multikine was negated. Therefore when the two treatment arms were combined the study did not achieve its primary endpoint of a 10% improvement in overall survival.
However, the analysis of the separate treatment arms was prespecified in the protocol and carried out prior to the Company becoming unblinded. The OS benefit of 14.1% at 5 years for this treatment arm exceeded the 10% OS benefit set out for the study population as a whole. The OS results for this treatment arm are significant (two-sided p=0.0236, HR=0.68) and the effect is robust, durable and increasing over time. The results from the Phase 3 cancer study proved that Multikine met all of the protocol required benefits stated in the study protocol in patients in the treatment arm receiving surgery and radiation as their standard therapies. Based on this the Company will be filing for and seeking FDA approval for the use of Multikine in the treatment of advanced primary head and neck cancer in this patient population of about 210,000 patients annually worldwide.
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. Neitheragency, nor 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). The Company has product candidates under development for the potential treatment of rheumatoid arthritis and to potentially treat the COVID-19 coronavirus.arthritis.
All of 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.
| 20 |
| Table of Contents |
Capital raised by the Company has been expended primarily for patent applications, research and development, administrative costs, and the construction and upgrade of the Company’s manufacturing and laboratory facilities. The Company does not anticipate realizing significant revenues until entering into licensing arrangements for its technology and know-how or until it receives regulatory approval to sell its products and enters into licensing arrangements for its technology and know-how (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 maywill be required to raise additional capital or find additional long-term financing to continue with its efforts to bring Multikine to market.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 believes there is a high likelihood that it will continue to receive funds from private and public offerings and warrant exercises similar to the way it has substantially funded operations in the past. 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 $62.6 million as of June 30,December 31, 2021 on direct costs for the Phase 3 clinical trial.trial and the filing of the clinical study report to the FDA. The Company estimates it will incur additional expenses of approximately $4.3$1.2 million for the remainder of the Phase 3 clinical trial and the filing of the clinical study report to the FDA. It should be noted that this estimate is based only on the information currently available from the Clinical Research OrganizationsCROs 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 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’sCROs to manage the global Phase 3 study; ICON and Ergomed, whichwho are both international leaders in managing oncology trials.
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 $11.6$11.7 million of these credits werethe committed $12 million contribution has been realized as of June 30,December 31, 2021.
During the ninethree months ended June 30,December 31, 2021, the Company’sCompany used approximately $5.1 million in cash, increased by approximately $20.4before considering the maturity and transfer to cash of the remaining $6.2 million after the purchase of $11.1 million ofin U.S. Treasury bills (T-bills). Net of the purchase of the T-bills, cash increased by approximately $31.6 million.bills. Significant components of thethis increase include approximately $47.2 million in net proceeds from the sale of common stock through public offerings, approximately $6.2 million in proceeds from the exercise of warrants and options, and receipt of approximately $1.6 million in lease incentives , offset by net cash used to fund the Company’s regular operations, including its Phase 3 clinical trial, of approximately $14.0$4.8 million approximately $8.6 million of equipment and leasehold improvement expenditures and approximately $0.8$0.3 million in lease payments.
During the ninethree months ended June 30,December 31, 2020, the Company’s cash increased by approximately $11.7$6.4 million. Significant components of this increase include approximately $14.0 million in net proceeds from the sale of common stock through public offerings, approximately $12.1 million in proceeds fromand the exercise of warrants and options and employee stock purchases of approximately $0.2$13.6 million, offset by net cash used to fund the Company’s regular operations, including its Phase 3 clinical trial, of approximately $11.7$3.8 million, expenditures for leasehold improvements and equipment of approximately $3.2 million, and approximately $0.2 million in lease payments.
Prepaid expenses decreased by approximately $0.3 million, or 28%, at December 31, 2021 as compared to September 30, 2021 primarily due to the utilization of amounts paid in advance to Ergomed.
During the three months ended December 31, 2021, the Company completed a major upgrade of its leased manufacturing facility to prepare for the potential commercial production of its products. Total costs of this upgrade were approximately $11.1 million, of which the landlord of the property agreed to finance $2.4 million. As of December 31, 2021, approximately $1.6 million of equipmentthe landlord financing was received and leasehold improvement expenditures, approximately $0.7the remaining $0.8 million foris expected to be received in the second quarter of fiscal year 2022. The landlord financing is being repaid through increased lease payments over the remaining term of stock issuance costs and approximately $0.6 million in lease payments.the lease.
During the ninethree months ended June 30,December 31, 2021, 1,443,55119,705 warrants were exercised at a weighted average exercise price of $3.86$4.43 for total proceeds of approximately $5.6 million. These exercises include 437,312 warrants exercised during$87,000. During the three months ended June 30, 2021 for proceeds of approximately $1.1 million and a weighted average exercise price of $2.59. During the nine months ended June 30,December 31, 2020, 1,544,84515,000 warrants were exercised at a weighted average exercise price of $7.60$3.16 for total proceeds of approximately $11.7 million. These exercises include 849,845 warrants exercised during three months ended June 30, 2020 for proceeds of approximately $9.7 million and a weighted average exercise price of $11.38.
The Company entered into a Securities Purchase Agreement with Ergomed plc, one of the Company’s Clinical Research Organizations responsible for managing the Company’s Phase 3 clinical trial, to facilitate a payment of amounts due Ergomed. Under the Agreement, the Company issued Ergomed shares of common stock and the net proceeds from the sales of those shares reduces outstanding amounts due Ergomed. Upon issuance, the Company expenses the full value of the shares as Other non-operating gain or loss and subsequently offsets the expense as amounts are realized through the sale of the Company’s shares by Ergomed and reduces accounts payable to Ergomed. During the nine months ended June 30, 2021 and 2020, the Company realized approximately $1.4 million and $2.5 million, respectively, through the sale by Ergomed of 75,500 and 237,479 shares of the Company’s common stock, and the Company reduced accounts payable to Ergomed and credited Other operating gains by those amounts. (As disclosed in Item 4 under Note C). During the nine months ended June 30, 2020, the Company issued Ergomed 150,000 shares of common stock valued at approximately $1.8 million.
Prepaid expenses decreased by approximately $0.3 million during the nine months ended June 30, 2021 as compared to September 30, 2020 primarily due to the timing of payments and recognition of related expenses relating to the Company’s Phase 3 clinical trial status.$47,000.
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Supplies are purchased for use in the Company’s manufacturing and R&D efforts and vary with the study requirements. During the nine months ended June 30, 2021, the supplies increased by approximately $0.8 million in support of the work on modifications of the manufacturing facility 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.
During the nine and three months ended June 30, 2021, the Company incurred approximately $7.9 million and $1.0 million, respectively, in costs to upgrade its manufacturing facility to prepare for the potential commercial production of its products. Total estimated costs of this upgrade are approximately $10.6 million. The landlord of the property has agreed to finance the final $2.4 million of costs and allow for the repayment through increased lease payments beginning March 1, 2021. Approximately $1.6 million of the total funding was provided during the three months June 30, 2021. Because of the change in lease payments, the new financing arrangement was considered a lease modification. The modification along with the accounting for the landlord’s lease incentive resulted in an increase of approximately $0.5 million in the right of use asset and liability relating to this lease. The lease incentive is expected to be fully realized by September 2021.
Results of Operations and Financial Condition
During the nine and three months ended June 30, 2021, grant income decreased by approximately $0.5 million and $0.2 million, respectively, or 100%, compared to the nine and three months ended June 30, 2020. Prior year grant income included amounts earned on a Small Business Innovation Research (SBIR) grant, which was not received in the current year. The nature and amount of grants awarded depends on the timing and availability of such funds.
During the nine months ended June 30,December 31, 2021, research and development expenses increased by approximately $5.1$0.7 million, or 41%12%, compared to the ninethree months ended June 30,December 31, 2020. Major components of this increase include approximately $1.8$0.6 million increase in employee stock compensation expense and an$0.3 million in depreciation of leasehold improvements to the manufacturing facility that were placed in service in October 2022. This increase of approximately $3.6 millionis offset by overall reductions in expenses related to the Company’s on-going Phase 3 clinical trial. These increases were offset by a decrease of approximately $0.3 million instudy and other miscellaneous research and development expenses. costs of approximately $0.2 million.
During the three months ended June 30,December 31, 2021, researchgeneral and developmentadministrative expenses increaseddecreased by approximately $3.2$0.6 million, or 81%17%, compared to the three months ended June 30,December 31, 2020. Major componentsA major component of this increase include approximately $2.8the decrease is an approximate $0.6 million in expenses related to the Company’s on-going Phase 3 clinical trial and $0.5 million increasedecrease in employee stock compensation expense. These increases were offset bycosts resulting from a $0.1 million decreasechange in other miscellaneous research and development expenses.the requisite service period for the performance-based stock options.
During the nine months ended June 30, 2021, general and administrative expenses increased by approximately $1.5 million, or 18%, compared to the nine months ended June 30, 2020. The increase primarily relates to an increase in employee stock compensation expense. During the three months ended June 30,December 31, 2021 general and administrative expenses increased by2020, the Company recorded derivative gains of approximately $0.1million, or 3%, compared to the three months ended June 30, 2020, primarily relating to an increase in stock compensation expense.
The gain on derivatives instruments increased by approximately $2.6$0.4 million for the nine months ended June 30, 2021 as compared to the nine months ended June 30. 2020. The gain on derivative instruments increased by approximately $2.4and $0.9 million, for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020. The variance isrespectively. This variation was the result of the change in fair value of the derivative liabilities atduring the respective period ends which iswas caused mainly by fluctuationfluctuations in the share price of the Company’s common stock.
Other non-operating gain increased $0.7 Net interest expense, which consists primarily of interest paid on lease liabilities, remained relatively constant at approximately $0.3 million and $1.7 million, respectively, for both the nine and three months ended June 30, 2021 as compared to the nine and three months ended June 30, 2020. This gain relates to the SPA described in Item 4 under Note C. The amount of the gain or loss is a result of the timing of shares issued to Ergomed and the subsequent re-sale of those shares. During the nine-month periods ended June 30,December 31, 2021 and 2020, the Company realized approximately $1.4 million and $2.5 million, respectively, in value upon the resale of shares. During the three-month periods ended June 30, 2021 and 2020, the Company realized approximately $0.8 million in value upon the resale of shares. Additionally, during the nine months ended June 30, 2020, the Company issued 150,000 shares to Ergomed and recorded a non-operating loss equal to the fair value of those shares of approximately $1.8 million.December 31, 2020.
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, |
|
| 2021 |
| 2020 |
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|
| 2021 |
| 2020 |
| 2021 |
| 2020 |
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|
|
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MULTIKINE |
| $ | 16,582,740 |
| $ | 11,342,872 |
| $ | 6,849,923 |
| $ | 3,382,709 |
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| $ | 5,791,419 |
| $ | 5,011,950 |
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LEAPS |
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| 1,235,633 |
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|
| 1,337,558 |
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|
| 332,176 |
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|
| 586,361 |
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|
| 291,748 |
|
|
| 402,810 |
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|
|
|
|
|
| |||||||||||||||||||
TOTAL |
| $ | 17,818,373 |
|
| $ | 12,680,430 |
|
| $ | 7,182,099 |
|
| $ | 3,969,070 |
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| $ | 6,083,167 |
|
| $ | 5,414,760 |
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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.
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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.
The measurement of the finance and operating lease right-of-use asset and lease liabilities requires the determination of an estimated lease term and an incremental borrowing rate, which involves complex judgment by management. Significant judgment is required by management to develop inputs and assumptions used to determine the incremental borrowing rate for lease contracts. Share-based compensation cost to employees is measured at fair value as of the grant date in accordance with the provisions of ASC 718. The fair value of the stock options is calculated using the Black-Scholes option pricing model which requires various judgmental assumptions including volatility and expected option life. The compensation cost is recognized as expense over the requisite service or vesting period. Performance-based options are valued using a Monte-Carlo simulation model, which requires inputs based on estimates, including the likelihood of the occurrence of performance and market conditions, volatility and expected option life.
For more information regarding the Company’s critical accounting estimates and policies, see Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended September 30, 2020.2021. The application of these critical accounting policies and estimates has been discussed with the Audit Committee of the Company’s Board of Directors.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Company does not believe that it has any significant exposures to market risk.
Item 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the direction and with the participation of the Company’s management, including the Company’s Chief Executive and Chief Financial Officer, the Company has conducted an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures as of June 30,December 31, 2021. 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 Company’s Chief Executive and PrincipalChief Financial and Accounting Officer has concluded that the Company’s disclosure controls and procedures were not effective as of June 30,December 31, 2021.
Management’s Report on Internal Control over Financial Reporting
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.
Under the supervision and with the participation of management, including CEL-SCI’s Principal Executive and Principal Financial Officer, CEL-SCI evaluated the effectiveness of its internal control over financial reporting as of December 31, 2021 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. CEL-SCI's Chief Executive and Principal Financial and Accounting Officer concluded that as of such date, CEL-SCI's internal control over financial reporting was effective.
Changes in Internal Control over Financial Reporting
In the first quarter of 2021, the Company implemented additional controls over financial reporting which include a thorough review of all leases and relevant accounting guidance such that the accounting for any leases complies with Generally Accepted Accounting Principles. The Company implemented additional controls during the current quarter and engaged an outside valuation specialist to perform a synthetic credit rating analysis to determine an appropriate rate to use in determining the lease liabilities recorded upon initial adoption and as leases are modified, if applicable.
There were no other changes in the Company’s internal control over financial reporting that occurred during the quarterthree months ended June 30,December 31, 2021 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the ninethree months ended June 30,December 31, 2021, the Company issued 41,71418,020 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.
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Item 6. Exhibits
Number | Exhibit | ||
3(a) | Articles of Incorporation | Incorporated by reference to Exhibit 3(a) of CEL-SCI's combined Registration Statement on Form S-1 and Post-Effective Amendment ("Registration Statement"), Registration Nos. 2-85547-D and 33-7531. | |
3(b) | Amended Articles | Incorporated by reference to Exhibit 3(a) of CEL-SCI's Registration Statement on Form S-1, Registration Nos. 2-85547-D and 33-7531. | |
3(c) | Amended Articles (Name change only) | Incorporated by reference to Exhibit 3(c) of CEL-SCI's Registration Statement on Form S-1 Registration Statement (No. 33-34878). | |
3(d) | By laws (as amended) | Incorporated by reference to Exhibit 3(d) of CEL-SCI's Post-Effective Amendment No. 3 to Registration Statement on Form S-1 (No. 333-229295). | |
Incorporated by reference to Exhibit 4 filed with CEL-SCI’s 8-K report dated October 30, 2020. | |||
4(f) | 2014 Incentive Stock Bonus Plan | Filed with this Amendment No. 2 to CEL-SCI’s annual report on Form 10-K for the year ended September 30, 2014. | |
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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 |
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Date: | By: | /s/ Geert Kersten |
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| Geert Kersten |
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| Principal Executive Officer* |
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* Also signing in the capacity of the Principal Accounting and Financial Officer.