Rule 424(b)(3)
333-4218
PROSPECTUS CEL-SCI CORPORATION
250,000 Shares of Common Stock
This Prospectus relates to the offer and sale of up to 250,000 shares
of Common Stock to the holders of the Company's Convertible Notes if and when
the holders of such Notes elect to convert the Notes into shares of the
Company's Common Stock. The holders of the Convertible Notes may resell these
shares from time to time in the public market. The holders of the Convertible
Notes, to the extent they convert their Notes into shares of Common Stock, are
sometimes referred to in this Prospectus as the "Selling Shareholders". The
Company will not receive any proceeds from the resale of the shares by the
Selling Shareholders. The Selling Shareholders have advised the Company that
they will offer the shares through broker/dealers at market prices with
customary commissions being paid by the Selling Shareholders. The costs of
registering the shares offered by the Selling Shareholders are being paid by the
Company. The Selling Shareholders will pay all other costs of the sale of the
shares offered by them. See "Selling Shareholders".
THESE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK AND
SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE
INVESTMENT. FOR A DESCRIPTION OF CERTAIN IMPORTANT FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS, SEE "RISK FACTORS" BEGINNING ON PAGE 12 OF
THIS PROSPECTUS AND "DILUTION".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
On May 30, 1996 the closing prices of the Company's Common Stock and
Warrants on the NASDAQ National Market System were $11.37 and $0.63,
respectively. See "Market Information".
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of l934 and in accordance therewith is
required to file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Copies of
any such reports, proxy statements and other information filed by the
Company can be inspected and copied at the public reference facility
maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. and at the Commission's Regional offices in New York
(7 World Trade Center, Suite 1300, New York, New York 10048) and
Chicago (Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511). Copies of such material can be
obtained from the Public Reference Section of the Commission at its
office in Washington, D.C. 20549 at prescribed rates. The Company has
filed with the Commission a Registration Statement on Form S-1
(together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Act"),
with respect to the Units offered hereby. This Prospectus does not
contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the
rules and regulations of the Commission. For further information,
reference is made to the Registration Statement.
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PROSPECTUS SUMMARY
THIS SUMMARY SHOULD BE READ IN CONJUNCTION WITH, AND IS
QUALIFIED IN ITS ENTIRETY BY, THE MORE DETAILED INFORMATION AND
FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS.
The Company
CEL-SCI Corporation (the "Company") was formed as a Colorado
corporation in 1983. The Company is involved in the research and
development of certain drugs and vaccines. The Company's first
product, MULTIKINETM, manufactured using the Company's proprietary
cell culture technologies, is a combination, or "cocktail", of natural
human interleukin2 ("IL-2") and certain lymphokines and cytokines.
MULTIKINE is being tested to determine if it is effective in improving
the immune response of advanced cancer pantients. The Company's
second product, HGP30, is being tested to determine if it is an
effective treatment/ vaccine against the AIDS virus. In addition, the
Company recently acquired a new patented T-cell Modulation Process
which uses "heteroconjugates" to direct the body to chose a specific
immune response. The Company intends to use this new technology to
improve the cellular immune response of persons vaccinated with HGP-
30.
Before human testing can begin with respect to a drug or
biological product, preclinical studies are conducted in laboratory
animals to evaluate the potential efficacy and the safety of a
product. Human clinical studies generally involve a three-phase
process. The initial clinical evaluation, Phase I, consists of
administering the product and testing for safe and tolerable dosage
levels. Phase II trials continue the evaluation of immunogenicity and
determine the appropriate dosage for the product, identify possible
side effects and risks in a larger group of subjects, and provide
preliminary indications of efficacy. Phase III trials consist of
testing for actual clinical efficacy for safety within an expanded
group of patients at geographically dispersed test sites. See
"Business Government Regulation" for a more detailed description of
the foregoing.
Between 1983 and 1986 the Company was primarily involved in
funding pre-clinical and Phase I clinical trials of MULTIKINE. These
trials were con ducted at St. Thomas's Hospital Medical School in
London, England pursuant to authority granted by England's Department
of Health and Social Security. In July, 1991 physicians at a southern
Florida medical institution began human clinical trials using
MULTIKINE. The focus of these trials was the treatment of metastatic
malignant melanoma and unresectable head and neck cancer using
MULTIKINE. The clinical trials in Florida were conducted pursuant to
approvals obtained by the medical institution from the Florida
Department of Health and Rehabilitative Services.
In March 1995, the Canadian Health Protection Branch, Health
and Welfare Ministry gave clearance to the Company to start a phase
I/II cancer study using Multikine. The study, which will enroll up to
30 head and neck cancer patients who have failed conventional
treatments, is expected to be conducted at the Ottawa Regional Cancer
Center and HotelDieu de Montreal Hospital. The study is designed to
evaluate safety, tumor responses and immune responses in
patients treated with multiple courses of Multikine. The length of
time that each patient will remain on the investigational treatment
will depend on the patient's response to treatment. In May l995, the
U.S. Food and Drug Administration (FDA) authorized the export of the
Company's Multikine drug to Canada for purposes of this study.
In February 1996 the FDA authorized the Company to conduct two
human clinical studies using MULTIKINE. The studies will focus on
prostate and head and neck cancer. The prostate study will be
conducted at Jefferson Hospital in Philadelphia, Pennsylvania and will
involve up to 15 prostate cancer patients who have failed on hormonal
therapy. The head and neck cancer study will involve up to 30 cancer
patients who have failed using conventional therapies. The Company is
currently evaluating clinical centers in the U.S. for purposes of the
study. The head and neck cancer study in the U.S. will be conducted in
conjunction with the Company's Canadian head and neck cancer study.
In October 1995 Viral Technologies, Inc. ("VTI") became a
wholly owned subsidiary of the Company. VTI is engaged in the
development of a pos sible treatment/vaccine for AIDS. VTI's technology
may also have application in the treatment of AIDS-infected individuals
and the diagnosis of AIDS. VTI's AIDS treatment/vaccine, HGP-30, has
completed certain Phase I human clinical trials. In the Phase I
trials, the vaccine was administered to volunteers who were not
infected with the HIV virus in an effort to determine safe and
tolerable dosage levels.
Product licensure in a foreign country or under state
authority does not mean that the product will be licensed by the FDA
and there are no assurances that the Company or VTI will receive any
approval of the FDA or any other governmental entity for the
manufacturing and/or marketing of a product. Consequently, the
commencement of the manufacturing and marketing by the Company or VTI
of any product is, in all likelihood, many years away. See "Business".
The lack of government approval for the Company's or VTI's
products will prevent the Company and VTI from generally marketing
their products. Delays in obtaining government approval or the failure
to obtain government approval may have a material adverse impact upon
the Company's operations.
All of the Company's products are in the early stages of
development. The Company does not expect to develop commercial products
for several years, if at all. The Company has had operating losses
since its inception, has an accumulated deficit of approximately
$27,014,000 at March 31, 1996, and expects to incur substantial losses
for the foreseeable future.
The Company's executive offices are located at 66 Canal Center
Plaza, Suite 510, Alexandria, Virginia 22314, and its telephone number
is (703) 5495293.
THE OFFERING
Securities Offered: Up to 250,000 shares of Common Stock are
offered to the holders of the Company's
Convertible Notes if and when the holders of
such Notes elect to convert the Notes into
shares of the Company's Common Stock. The
holders of the Convertible Notes, to the extent
they convert their notes into shares of Common
Stock, may resell these shares from time to
time in the public market. The holders of the
Convertible Notes are sometimes referred to in
this Prospectus as the "Selling Shareholders".
The Company will not receive any proceeds from
the sale of the shares offered by the Selling
Shareholders. See "Selling Shareholders".
Common Stock Outstand-
ing Prior To and After
Offering: As of the date of this Prospectus, the
Company had 6,328,581 shares of Common Stock
issued and outstanding. Assuming all of the
Convertible Notes are converted to shares of
the Company's Common Stock, there will be
6,578,581 shares of Common Stock issued and
outstanding. The number of outstanding shares
before and after this Offering does not give
effect to shares which may be issued upon the
exercise and/or conversion of options, warrants
or other convertible securities previously
issued by the Company. See "Dilution and
Comparative Share Data", "Selling Shareholders"
and "Description of Securities". Risk Factors:
The purchase of the Securities offered by this
Prospectus involves a high degree of risk.
Risk factors include the following: lack of
revenues and history of loss, need for
additional capital, government regulation, need
for FDA approval, and dilution. See "Risk
Factors."
NASDAQ Symbols: Common Stock: CELI
Warrants: CELIW
Summary Financial Data
For the Years Ended September 30,
1995 1994 1993 1992 1991
Investment Income &
Other Revenues $423,765 $ 624,670 $ 997,964 $434,180 $35,972
Expenses:
Research and
Development 1,824,661 2,896,l09 1,307,042 481,697 108,771
Depreciation
and Amortization 262,705 138,755 55,372 33,536 32,582
General and
Administrative 1,713,912 1,621,990 1,696,119 1,309,475 795,015
Equity in loss of
joint venture 501,125 394,692 344,423 260,388 290,166
Net Loss$(3,878,638)$(4,426,876)$(2,404,992)$(1,650,916)$(1,190,562)
Loss per common share $(0.89) $(1.06) $(0.58) $(0.42) $(0.35)
Weighted average
common shares
outstanding 4,342,628 4,185,240 4,155,431 3,953,233 3,400,546
Six Months Ended March 31, 1996
1995
Investment Income & Other Revenues $ 110,320 $207,917
Expenses:
Research and Development 1,750,694 1,149,943
Depreciation and Amortization 139,962 133,986
General and Administrative 1,219,719 778,248
Equity in loss of joint venture 3,772 290,340
Net Loss $(3,003,827) $(2,144,600)
Loss per common share $(0.52) $(0.51)
Weighted average common shares
outstanding 5,825,011 4,188,244
Balance Sheet Data:
September 30,
1995 1994 1993 1992 1991
Working Capital $3,983,699 $5,795,191 $10,296,472 $13,043,012 $682,831
Total Assets 6,359,011 8,086,670 11,633,090 13,769,504 1,611,899
Total Liabilities 1,516,978 l,407,602 688,231 467,086 672,595
Shareholders'
Equity 4,842,033 6,679,068 10,944,859 13,302,4l8 939,304
March 31, 1996
Working Capital $4,136,693
Total Assets $5,861,027
Total Liabilities $2,022,319
Shareholders' Equity $3,838,708
No dividends have been declared by the Company since its
inception.
GLOSSARY OF TECHNICAL TERMS
AIDS. Acquired Immune Deficiency Syndrome. A severe viral
di-
sease of the immune system leading to other lethal
infec tions and malignancies.
Amino acids. Building blocks of proteins.
Antibody. A protein produced by certain white blood cells in
humans
and animals in response to a substance seen as non
self, that is a foreign antigen (such as a virus or
bacteria). An antibody binds specifically to a
single antigen.
Antigen. Any substance seen as foreign by the immune system
and
which triggers an antibody or cell-mediated response
from the body's immune system.
B-Cells. A type of lymphocyte which produces antibodies in
response
to antigens.
Cytokines. Peptides which regulate the functions and/or growth
of
other cells. Lymphokines are a type of cytokine.
HIV. Human Immunodeficiency Virus. The virus responsible
for
AIDS and related diseases.
Lymphocytes. A type of white blood cells divided into two
classes,
B-cells and T-cells.
Lymphyokine. A specific group of hormones which regulate and
modify
the
various functions of both T-cells and B-cells.
There are many lymphokines, each of which is thought
to have distinctive chemical and functional
properties. IL-2 is
but one of these lymphokines.
Macrophage. A cell found in the body that has the ability to
kill
vir-
uses, bacteria, fungi and cancer cells, often by
engulfing the targeted organism or cell.
Peptide. Two or more amino acids joined by a linkage called
a
pep-
tide bond.
Proteins. A molecule composed of amino acids. There are
many
types
of proteins, all carrying out a number of
different func tions essential for cell growth.
T-Cells. A type of lymphocyte which will amplify or
suppress
anti-
body formation by B-cells, and can also directly
destroy "foreign" cells by activating "killer
cells".
Virus. A submicroscopic organism that contains genetic
information
but cannot reproduce itself. To replicate, it must
invade another cell and use parts of that cell's
reproductive machinery.
RISK FACTORS
An investment in the Company's Securities involves a high
degree of risk. Prospective investors are advised that they may lose
all or part of their investment. Prospective investors should
carefully review the following risk factors.
Offering Proceeds. This Offering is being made to holders
of Con vertible Notes previously sold by the Company for $1,250,000
to certain pri vate investors. The holders of the Notes have the
right to convert the Notes into shares of the Company's Common Stock
upon certain terms, and without any additional payment to the
Company. See "Description of Securities." Accordingly, the Company
will not receive any proceeds from the issuance of the shares if the
Notes are converted into shares of the Company's Common Stock.
Lack of Revenues and History of Loss. The Company has had only
limited revenues since it was formed in 1983. Since the date of its
formation and through March 31, 1996, the Company has incurred net
losses of approximately $27,014,000. During the years ended September
30, 1993, 1994 and 1995 the Company suffered losses of $2,404,992,
$4,426,876 and $3,878,638 respectively. The Company has relied
principally upon the proceeds of public and private sales of
securities to finance its activities to date.
See "Management's Discussion and Analysis". All of the Company's
potential products are in the early stages of development, and any
commercial sale of these products will be many years away.
Accordingly, the Company expects to incur substantial losses for the
foreseeable future.
Need for Additional Capital. Clinical and other studies
necessary to obtain approval of a new drug can be time consuming and
costly, especially in the United States, but also in foreign
countries. The different steps necessary to obtain regulatory
approval, especially that of the Food and Drug Administration
("FDA"), involve significant costs. The Company expects that it will
need additional financing in order to fund the costs of future
clinical trials, related research, and general and administrative
expenses. The Company may be forced to delay or postpone development
and research expenditures if the Company is unable to secure adequate
sources of funds. These delays in development may have an adverse
effect on the Company's ability to produce a timely and competitive
product. There can be no assurance that the Company will be able to
obtain additional funding from other sources. See "Management's
Discussion and Analysis".
Viral Technologies, Inc. ("VTI"), a wholly-owned subsididary
of the Company, is dependent upon funding from the Company for its
operations and research programs. See "Business Viral Technologies,
Inc.".
Cost Estimates. The Company's estimates of the costs
associated with future clinical trials and research may be
substantially lower than the actual costs of these activities. If
the Company's cost estimates are incorrect, the Company will need
additional funding for its research efforts. See "Management's
Discussion and Analysis".
Government Regulation FDA Approval. Products which may be
de
veloped by the Company or Viral Technologies, Inc. (or which may be
developed by affiliates or licensees) will require regulatory
approvals prior to sale. In particular, therapeutic agents and
diagnostic products are subject to approval, prior to general
marketing, by the FDA in the United States and by comparable agencies
in most foreign countries. The process of obtaining FDA and
corresponding foreign approvals is costly and time consuming,
particularly for pharmaceutical products such as those which might
ultimately be developed by the Company, Viral Technologies, Inc. or
its licensees, and there can be no assurance that such approvals will
be granted. Any failure to obtain or any delay in obtaining such
approvals may adversely affect the ability of potential licensees or
the Company to successfully market any products developed. Also, the
extent of adverse government regulations which might arise from
future legislative or administrative action cannot be predicted. The
clinical trial which the Company's affiliate, Viral Technologies,
Inc., is conducting in California is regulated by government agencies
in California and obtaining approvals from states for clinical trials
is likewise expensive and time consuming. See "Business Government
Regulation."
Dependence on Others to Manufacture Product. The Company
has an agreement with an unrelated corporation for the production,
until 1997, of MULTIKINE for research and testing purposes. At
present, this is the Company's only source of MULTIKINE. If this
corporation could not, for any reason, supply the Company with
MULTIKINE, the Company estimates that it would take approximately six
to ten months to obtain supplies of MULTIKINE under an alternative
manufacturing arrangement. The Company does not know what cost it
would incur to obtain this alternative source of supply.
Licensed Technology Potential Conflicts of Interest. The
Com pany's clinical studies and research have been focused on
compounds, compositions and processes which were licensed to the
Company by Sittona Company, B.V. ("Sittona") in 1983. Maximilian de
Clara, the Company's president and a director, acquired control of
Sittona in 1985. Any commercial products developed by the Company
and based upon the technology licensed by Sittona will belong to
Sittona, subject to the Company's right to manufacture and sell such
products in accordance with the terms of the licensing agreement. The
Company's license remains in effect until the expiration or
abandonment of all patent rights or until the compounds, compositions
and processes subject to the license enter into the public domain,
whichever is later. The license may be terminated earlier for other
reasons, including the insolvency of the Company. Accordingly, a
conflict of interest may arise between the Company and Mr. de Clara
concerning the Company's continued rights to the licensed technology.
Any future transactions between the Company and Sittona will be
subject to the review and approval by a majority of the Company's
disinterested directors. See "Business Compounds and Processes
Licensed to the Company", and "Management Transactions with Related
Parties".
Technological Change. The biomedical field in which the
Company is involved is undergoing rapid and significant technological
change. The suc cessful development of therapeutic agents and
diagnostic products from the compounds, compositions and processes
licensed to the Company, through Company financed research or as a
result of possible licensing arrangements with pharmaceutical or
other companies, will depend on its ability to be in the
technological forefront of this field. There can be no assurance
that the Company will achieve or maintain such a competitive position
or that other technological developments will not cause the Company's
proprietary technologies to become uneconomical or obsolete.
Patents. Since 1983 the Company, on behalf of the owners of
the compounds, compositions and processes licensed to the Company,
has filed applications for United States and foreign patents covering
certain aspects of the technology. Although the Company has paid the
costs of applying for and obtaining patents, the technology covered
by the patents is not owned by the Company, but by an affiliated
party which has licensed the technology to the Company. As of the
date of this Prospectus nine patents have been issued in the United
States and three patents have been issued in Europe. There is no
assurance that the applications still pending or which may be filed
in the future will result in the issuance of any patents.
Furthermore, there is no assurance as to the breadth and degree of
protection any issued patents might afford the owners of the patents
and the Company. Disputes may arise between the owners of the patents
or the Company and others as to the scope, validity and ownership
rights of these or other patents. Any defense of the patents could
prove costly and time consuming and there can be no assurance that
the Company or the owners of the patents will be in a position, or
will deem it advisable, to carry on such a defense. Other private
and public concerns, including universities, may have filed
applications for, or may have been issued, patents and are expected
to obtain additional patents and other proprietary rights to
technology potentially useful or necessary to the Company. The scope
and validity of such patents, if any, the extent to which the Company
or the owners of the patents may wish or need to acquire the rights
to such patents, and the cost and availability of such rights are
presently unknown. Also, as far as the Company relies upon
unpatented proprietary technology, there is no assurance that others
may not acquire or independently develop the same or similar
technology. The first patent licensed to the Company will expire in
the year 2000. Since the Company's Investigational New Drug
application relating to MULTIKINE has only recently been cleared by
the FDA, and since the Company does not know if it will ever be able
to sell Multikine on a commercial basis, the Company cannot predict
what effect the expiration of this patent will have on the Company.
Notwithstanding the above, the Company believes that later issued
patents will protect the technology associated with Multikine past
the year 2000. See "Business Compounds and Processes Licensed to the
Company".
Product Liability and Lack of Insurance. Although the
Company has product liability insurance for its HGP-30 vaccine, at
the present time, the Company does not have product liability
insurance for MULTIKINE. The successful prosecution of a product
liability case against the Company could have a materially adverse
effect upon its business.
Dependence on Management and Scientific Personnel. The
Company is dependent for its success on the continued availability of
its executive officers. The loss of the services of any of the
Company's executive officers could have an adverse effect on the
Company's business. The Company does not carry key man life insurance
on any of its officers. The Company's future success will also depend
upon its ability to attract and retain qualified scientific
personnel. There can be no assurance that the Company will be able
to hire and retain such necessary personnel. See "Management".
NASDAQ Listing. Since February, 1992, the Company's common
stock and warrants have been listed on the NASDAQ National Market
System. In May, 1996 the Company was advised by the NASD that the
Company's securities may be delisted from the National Market System.
In the event of a delisting, the Company's securities would not
automatically be eligible for trading on the NASDAQ SmallCap market.
Although the Company has requested the NASD to maintain the Company's
listing on the NASDAQ National Market System, the Company plans to
file an application to have the Company's common stock traded on the
NASDAQ SmallCap Market in the event the Company's securities were
removed from the NASDAQ National Market System. Among other
requirements for an initial listing on the NASDAQ SmallCap Market,
the NASD requires the bid price of a security be at least $3.00 per
share.
Although the Company believes that it meets all requirements
neces sary to have the Company's securities listed on the NASDAQ
SmallCap Market, in the event the Company's securities were removed
from the National Market System, there can be no assurance that the
Company's listing application for the NASDAQ SmallCap Market will be
approved.
The NASD requires, for continued inclusion on NASDAQ, that
the Com pany must maintain $2,000,000 in assets, $200,000 market
value of the public float, $1,000,000 in net worth and that the bid
price of the Company's Common Stock, must be at least $1.00, or in
the alternative, that the Company have (i) a net worth of at least
$2,000,000 and (ii) that the public float be at least $1,000,000. As
the Company does not have any control over the market price of its
Common Stock, the Company cannot assure it will be able to comply
with the requirements concerning the market value of the Company's
publicly traded securities. If the Company's securities were
delisted from the NASDAQ system, the Company's securities would trade
in the unorganized interdealer over-the-counter market through the
OTC Bulletin Board which provides significantly less liquidity than
the NASDAQ system. Securities which are not traded on the NASDAQ
system may be more difficult to sell and may be subject to more price
volatility than NASDAQ listed securities.
If the Company's Common Stock and/or Warrants were delisted
from NASDAQ, trades in such securities may then be subject to Rule
15g-9 under the Securities Exchange Act of 1934, which rule imposes
certain requirements on broker/dealers who sell securities subject to
the rule to persons other than established customers and accredited
investors. For transactions covered by the rule, brokers/dealers
must make a special suitability determination for purchasers of the
securities and receive the purchaser's written agreement to the
transaction prior to sale. Rule 15g-9, if applicable to sales of the
Company's securities, may affect the ability of broker/dealers to
sell the Company's securities and may also affect the ability of
owners of the Company's common stock or warrants to sell such
securities in the secondary market and may otherwise affect the
trading market in the Company's securities.
The Securities and Exchange Commission has also adopted rules
that regulate broker/dealer practices in connection with transactions
in "penny stocks". Penny stocks generally are equity securities with
a price of less than $5.00 (other than securities registered on
certain national securities exchanges or quoted on the NASDAQ system.
The penny stock rules require a broker/dealer, prior to a transaction
in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document prepared by the Commission that
provides information about penny stocks and the nature and level of
risks in the penny stock market. The broker/dealer also must provide
the customer with current bid and offer quotations for the penny
stock, the compensation of the broker/dealer and its salesperson in
the transaction, and monthly account statements showing the market
value of each penny stock held in the customer's account. The bid
and offer quotations, and the broker/dealer and salesperson
compensation information, must be given to the customer orally or in
writing prior to effecting the transaction and must be given to the
customer in writing before or with the customer's confirmation.
These disclosure requirements may have the effect of reducing the
level of trading activity in the secondary market for a stock that
becomes subject to the penny stock rules. If the Company's securities
become subject to the penny stock rules, persons owning the Company's
common stock or warrants may find it more difficult to sell the
common stock or warrants.
Shares Available for Resale. As of March 31, 1996, there were
6,328,581 shares of the Company's Common Stock issued and
outstanding. Approximately 200,000 of these shares have not been
registered under the Securities Act of l933, as amended (the "Act"),
and are "restricted securities" as defined by Rule l44 of the Act.
Rule l44 provides, in essence, that shareholders, after holding
restricted securities for a period of two years may, every three
months, sell in ordinary brokerage transactions an amount equal to
the greater of 1% of the Company's then outstanding Common stock or
the average weekly trading volume, if any, of the stock during the
four calendar weeks preceding the sale. Nonaffiliates of the Company
who hold restricted securities for a period of three years may, under
certain prescribed conditions, sell their securities without regard
to any of the requirements of the Rule. As of the date of this
Offering Memorandum, substantially all shares of restricted stock
were available for resale pursuant to Rule l44. Sales of restricted
stock may have a depressive effect on the market price of the
Company's Common Stock. Such sales might also impede future
financing by the Company.
Options, Warrants and Convertible Securities. The Company
has is sued options, warrants and other convertible securities
("Derivative Securi ties") which allow the holders to acquire
additional shares of the Company's Common Stock. In some cases the
Company has agreed that, at its expense, will make appropriate
filings with the Securities and Exchange Commission so that the
securities underlying certain Derivative Securities will be available
for public sale. Such filings could result in substantial expense to
the Company and could hinder future financings by the Company.
For the terms of these Derivative Securities, the holders thereof
will have an opportunity to profit from any increase in the market
price of the Company's Common Stock without assuming the risks of
ownership. Holders of such Derivative Securities may exercise and/or
convert them at a time when the Company could obtain additional
capital on terms more favorable than those provided by the Derivative
Securities. The exercise or conversion of the Derivative Securities
will dilute the voting interest of the owners of presently
outstanding shares of the Company's Common Stock and may adversely
affect the ability of the Company to obtain additional capital in the
future. The sale of the shares of Common Stock issuable upon the
exercise or conversion of the Derivative Securities could adversely
affect the market price of the Company's stock. See "Dilution and
Comparative Share Data". Competition. The competition in the
research, development and com mercialization of products which may be
used in the prevention or treatment of cancer and AIDS is intense.
Major pharmaceutical and chemical companies, as well as specialized
genetic engineering firms, are developing products for these
diseases. Many of these companies have substantial financial,
research and development, and marketing resources and are capable of
providing significant long-term competition either by establishing in-
house research groups or by forming collaborative ventures with other
entities. In addition, both smaller companies and non-profit
institutions are active in research relating to cancer and AIDS and
are expected to become more active in the future.
The clinical trials sponsored to date by the Company and VTI have
not been approved by the FDA, but rather have been conducted pursuant
to approvals obtained from regulatory agencies in England, Canada and
certain states. Since the results of these clinical trials may not
be accepted by the FDA, companies which are conducting clinical
trials approved by the FDA may have a competitive advantage in that
the products of such companies are further advanced in the regulatory
process than those of the Company or VTI.
Lack of Dividends. There can be no assurance that the operations of
the Company will result in any revenues or will be profitable. At
the pre sent time, the Company intends to use available funds to
finance the Company's operations. Accordingly, while payment of
dividends rests within the discretion of the Board of Directors, no
dividends have been declared or paid by the Company. The Company
does not presently intend to pay dividends and there can be no
assurance that dividends will ever be paid. Pursuant to the terms of
a loan agreement with a bank, the Company may not pay any dividends
without the consent of the bank.
Dilution. Persons purchasing the securities offered by this
Pros pectus will suffer an immediate dilution in the per share net
tangible book value of their Common Stock. See "Dilution and
Comparative Share Data."
Preferred Stock. The Company's Articles of Incorporation authorize
the Company's Board of Directors to issue up to 200,000 shares of
Preferred Stock. The provisions in the Company's Articles of
Incorporation relating to the Preferred Stock would allow the
Company's directors to issue Preferred Stock with multiple votes per
share and dividends rights which would have priority over any
dividends paid with respect to the Company's Common Stock. The
issuance of Preferred Stock with such rights may make the removal of
management difficult even if such removal would be considered
beneficial to shareholders generally, and will have the effect of
limiting shareholder participation in certain transactions such as
mergers or tender offers if such transactions are not favored by
incumbent management.
DILUTION AND COMPARATIVE SHARE DATA
As of March 31, 1996, the present shareholders of the Company
owned 6,328,581 shares of Common Stock, which had a net tangible book
value of approximately $0.42 per share. The following table
illustrates the comparative stock ownership of the other stockholders
of the Company as compared to the investors in this Offering assuming
all shares offered are sold.
Shares outstanding (1) 6,328,581
Shares to be issued upon conversion of
Convertible Notes based on closing price
of the Company's common stock on May 30, 1996 ($11.37)
250,000
Shares outstanding (pro forma basis) (1) 6,578,581
Net tangible book value per share
at March 31, 1996 $0.42
Equity ownership by present shareholders
after this offering 96%
Equity ownership by investors in this
Offering 4%
(1) Amount excludes shares which may be issued upon the exercise
and/or con version of options, warrants and other convertible
securities previously issued by the Company. See table below.
The purchasers of the securities offered by this Prospectus will
suffer an immediate dilution if the price paid for the securities
offered is greater than the net tangible book value of the Company's
Common Stock.
"Net tangible book value" is the amount that results from
subtracting the total liabilities and intangible assets of the Company
from its total assets. "Dilution" is the difference between the
offering price and the net tangible book value of shares immediately
after the Offering.
As of March 31, 1996 the Company had 6,328,581 shares of Common
Stock issued and outstanding. The following table reflects the
additional shares which may be issued as the result of the exercise of
outstanding options and warrants or the conversion of other securities
issued by the Company.
Number of Note
Shares Reference
Outstanding as of March 31, 1996 6,328,581
Shares Subject to this Offering:
Shares issuable upon conversion of Notes 250,000 A
Shares outstanding upon the completion of
this Offering (assuming all shares
offered are sold) 6,578,581
Other Shares Which May Be Issued:
Shares issuable upon exercise of
warrants held by Investors in Company's
June and September 1995
Offerings 286,828 B
Shares issuable upon exercise of
warrants issued to Selling Agent, or its assigns,
in connection with the Company's June and
September 1995 Private Offerings 150,000 C
Shares issuable upon exercise of
warrants sold in Company's 1992
Public Offering 517,500 D
Shares issuable upon exercise of
warrants sold to Underwriter in connection with
Company's 1992 Public Offering 90,000 E
Shares issuable upon conversion of
Series A Preferred Stock 437,500 F
Shares issuable upon exercise of
options granted to Company's officers,
directors, employees and consultants 981,926 G
9,042,335
A. In March 1996 the Company sold $l,250,000 of Convertible Notes
("Notes") to two persons. The Notes are convertible from time to
time in whole or in part, into shares of the Company's Common
Stock. The conversion price is the lesser of (i) $5 per share or
(ii) 80% of the average closing bid price of the Company's Common
Stock during the five trading days immediately preceding the date
of such conversion. Notwithstanding the above, the conversion
price may not be less than $2.40 per share. The Notes are payable
on December 1, 1996 and accrue interest at 10% per annum. The
shares issuable upon the conversion of these Notes are offered by
means of this Prospectus. See "Selling Shareholders".
B. In June and September 1995 the Company sold, in private offerings,
1,150,000 Units, at $2.00 per Unit, to five persons (the "Private
Inves tors"). Each Unit consisted of one share of Common Stock
and one Warrant. Each Warrant originally entitled the holder to
purchase one additional share of Common Stock at a price of $3.25
per share at any time prior to June 30, 1997. The Company agreed
to register the shares of Common Stock sold in these Private
Offerings (1,150,000 shares), as well as the shares
of Common Stock issuable upon the exercise of the Warrants
(1,150,000 shares) and to pay all expenses in connection with such
registration, exclusive of commissions and the fees and expenses
of counsel for the Private Investors. On November 30, 1995 the
Company and the Private Investors agreed to reduce the exercise
price of the Warrants to $1.60 per share in return for the
commitment on the part of the Private Investors to exercise
312,500 Warrants ($500,000) prior to December 23, 1995 and an
additional 312,500 Warrants ($500,000) prior to January 31, 1996.
Prior to May 31,1996 the Private Investors collectively sold
1,698,582 shares of Common Stock which they acquired in the
Private Offerings. By means of a separate Registration Statement,
the shares of Common Stock purchased by the Private Investors in
these Offerings, as well as the shares issuable upon the exercise
of the Warrants described above, have been registered for public
sale.
C. In connection with the Company's June and September Private
Offerings, Neidiger/Tucker/Bruner, Inc., the Sales Agent for these
offerings, re ceived a commission, a non-accountable expense
allowance and warrants to purchase (i) 57,500 shares of the
Company's Common Stock at $2.00 per share, (ii) 57,500 shares at
$2.40 per share, and (ii) an additional 115,000 shares at $3.25
per share. Prior to May 31, 1996 the Sales Agent (and/or its
assigns) collectively exercised Warrants pertaining to 80,000
shares of the Company's Common Stock. By means of a separate
Registration Statement, 17,500 shares of Common Stock issuable
upon the exercise of the remaining Warrants issued to the Sales
Agent have been registered for public sale.
D. See "Description of Securities".
E. The Underwriter's Warrants provide that the Company, at its
expense, will make appropriate filings with the Securities and
Exchange Commission so that the securities underlying the
Underwriter's Warrants will be available for public sale.
F. In May 1996 the Company sold 3,500 shares of its Series A
Preferred Stock (the "Preferred Shares") for $3,500,000 or $1,000 per
share. At the purchasers' option, up to 1,750 Preferred Shares are
convertible, on or after 60 days from the closing date of the purchase
of such shares (the "Closing"), into shares of the Company's Common
Stock on the basis of one share of Preferred Stock for shares of
Common Stock equal in number to the amount determined by dividing
$1,000 by 85% of the Closing Price of the Company's Common Stock. All
Preferred Shares are convertible, on or after 90 days from the
Closing, on the basis of one share of Preferred Stock for shares of
the Company's Common Stock equal in number to the amount determined by
dividing $1,000 by 83% of the Closing Price of the Company's Common
Stock. The term "Closing Price" is defined as the average closing bid
price of the Company's Common Stock over the five-day trading period
ending on the day prior to the conversion of the Preferred Stock.
Notwithstanding the above, the conversion price may not be less than
$3.00 nor more than $8.00, except that if the Closing Price is less
than $3.00, then the conversion price will be equal to the Closing
Price. The Preferred Shares, if issued, are entitled to a quarterly
dividend of $17.50 per share. Any Preferred Shares which are
outstanding on the second anniversary of the Closing will be
automatically converted into shares of the Company's Common Stock. The
Preferred Shares have a liquidation preference over the Company's
Common Stock. By means of a separate Registration Statement, the
shares of Common Stock issuable upon the conversion of the Series A
Preferred Stock have been registered for public sale.
G. The options are exercisable at prices ranging from $2.87 to $19.70
per share. The Company may also grant options to purchase 117,407
additional shares under its Incentive Stock Option and Non-Qualified
Stock Option Plans. See "Management Stock Option and Bonus Plans".
MARKET INFORMATION
As of March 31, 1996, there were approximately 3,000 record
holders of the Company's Common Stock and approximately 100 record
holders of the Company's Warrants. The Company has not issued any
shares of preferred stock. The Company's Common Stock and Warrants are
traded on the National Association of Securities Dealers Automatic
Quotation ("NASDAQ") System. Set forth below are the range of high and
low bid quotations for the periods indicated as reported by NASDAQ,
and as adjusted for the 10 for 1 reverse stock split which was
approved by the Company's shareholders on April 28, 1995 and became
effective on May 1, 1995. The market quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commissions and may not
necessarily represent actual transactions.
Quarter
Ending Common Stock Warrants
High Low High Low
12/31/93 $20.00 $13.40 $0.94 $0.41
3/31/94 $18.10 $10.30 $0.75 $0.28
6/30/94 $10.90 $8.10 $0.31 $0.19
9/30/94 $10.30 $5.60 $0.21 $0.12
12/31/94 $7.50 $3.40 $0.25 $0.09
3/31/95 $4.00 $3.75 $0.22 $0.13
6/30/95 $5.30 $2.78 $0.15 $0.06
9/30/95 $5.46 $3.56 $0.28 $0.09
12/31/95 $4.75 $2.28 $0.25 $0.09
3/31/96 $7.12 $2.68 $0.28 $0.03
Holders of Common Stock are entitled to receive such dividends as
may be declared by the Board of Directors out of funds legally
available therefor and, in the event of liquidation, to share pro
rata in any distribution of the Company's assets after payment of
liabilities. The Board of Directors is not obligated to declare a
dividend. The Company has not paid any dividends and the Company
does not have any current plans to pay any dividends. Pursuant to
the terms of a loan agreement with a bank, the Company may not pay
any dividends without the consent of the bank. See Note 5 to the
Company's September 30, 1995 financial statements.
The provisions in the Company's Articles of Incorporation relating
to the Company's Preferred Stock would allow the Company's directors
to issue Preferred Stock with rights to multiple votes per share and
dividends rights which would have priority over any dividends paid
with respect to the Company's Common Stock. The issuance of
Preferred Stock with such rights may make more difficult the removal
of management even if such removal would be considered beneficial to
shareholders generally, and will have the effect of limiting
shareholder participation in certain transactions such as mergers or
tender offers if such transactions are not favored by incumbent
management.
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction
with the more detailed financial statements, related notes and other
financial information included herein. See also "Management's
Discussion and Analysis".
For the Years Ended September 30,
1995 1994 1993 1992 1991
Investment Income &
Other Revenues $423,765 $ 624,670 $ 997,964 $ 434,180 $35,972
Expenses:
Research and
Development 1,824,661 2,896,l09 1,307,042 481,697 108,771
Depreciation
and Amortization 262,705 138,755 55,372 33,536 32,582
General and
Administrative 1,713,912 1,621,990 1,696,119 1,309,475 795,015
Equity in loss of
joint venture 501,125 394,692 344,423 260,388 290,166
Net
Loss $(3,878,638)$(4,426,876) $(2,404,992) $(1,650,916) $(1,190,562)
Loss per common share $(0.89) $(1.06) $(0.58) $(0.42) $(0.35)
Weighted average
common shares
outstanding 4,342,628 4,185,240 4,155,431 3,953,233 3,400,546
Six Months Ended March 31,
1996 1995
Investment Income & Other Revenues $ 110,320 $207,917
Expenses:
Research and Development 1,750,694 1,149,943
Depreciation and Amortization 139,962 133,986
General and Administrative 1,219,719 778,248
Equity in loss of joint venture 3,772 290,340
Net Loss $(3,003,827)$(2,144,600)
Loss per common share $(0.52) $(0.51)
Weighted average common shares
outstanding 5,825,011 4,188,244
Balance Sheet Data:
September 30,
1995 1994 1993 1992 1991
Working
Capital $3,983,699 $5,795,191 $10,296,472 $13,043,012 $682,831
Total Assets 6,359,011 8,086,670 11,633,090 13,769,504 1,611,899
Total Liabilities 1,516,978 l,407,602 688,231 467,086 672,595
Shareholders'
Equity 4,842,033 6,679,068 10,944,859 13,302,4l8 939,304
March 31, 1996
Working Capital $4,136,693
Total Assets $5,861,027
Total Liabilities $2,022,319
Shareholders' Equity $3,838,708
No dividends have been declared by the Company since its inception.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
Six Months Ended March 31, 1996
Interest income during the six months ending March 31, 1996
reflects interest accrued on investments.
Prior to October 30, 1995, VTI was owned 50% by the Company and
50% by Alpha 1 Biomedicals, Inc. Effective October 30, 1995 the
Company acquired Alpha 1's interest in VTI in exchange for 159,170
shares of the Company's common stock. Prior to this acquisition the
Company accounted for its investment in VTI using the equity method
of accounting. Following the acquisition of the remaining 50%
interest in
VTI on October 30, 1995, the financial statements of VTI have been
consolidated with those of the Company.
The acquisition of VTI was accounted for under the purchase
method of accounting. Since the acquisition represented primarily
research and development costs, the purchase price for the remaining
50% interest in VTI was expensed and caused research and development
expense for the three months ended December 31, 1995 to increase
significantly.
The consolidation of VTI's financial statements with those of
the Company also had the following effects:
1. Interest income declined from the comparable period in
the previous year since interest income associated with the Company's
loans to VTI was eliminated upon consolidation.
2. Current research and development expenses increased due
to the inclusion of VTI's research and development expenses with those
of the Company (the Company's research and development costs, separate
from those of VTI's, decreased by approximately $100,000 due to cost
savings achieved from using the Company's laboratory which became
operational in January 1995).
3. General and administrative expenses increased due to the
inclusion of VTI's general and administrative expenses.
4. Capitalized patent costs increased significantly.
Fiscal 1995
Revenues for the year ended September 30, 1995 consisted
primarily of interest earned on funds received from the Company's
February 1992 public offering. The interest income and investment
balances have declined from the previous year as funds were used for
ongoing expenses and equipping the Company's new laboratory. Research
and development expenses decreased due to the use of the Company's
laboratory for research programs and the completion of a research and
development project relating to the Company's manufacturing process.
General and administrative expenses increased as the result of the
expenses (approximately $100,000) associated with the Company's 1995
annual meeting of shareholders. The Company did not have any meetings
of its shareholders during fiscal 1994. Significant components of
general and administrative expenses during this year were salaries and
employee benefits ($341,000), automobile, travel and expense
reimbursements ($271,000), shareholder communications and investor
relations ($245,000), legal and accounting ($134,000), and officers and
directors liability insurance ($138,000). Losses associated with the
Company's joint venture interest in VTI increased due to an increase in
VTI's research and development expenditures.
Fiscal 1994
Interest income during the year ending September 30, 1994
decreased from the prior year as a portion of the Company's investments
were sold to pay for operating expenses. Research and development
expenses increased due to the commencement of several new research
projects, all of which pertained to the Company's MULTIKINE product.
Significant components of general and administrative expenses during
this year were salaries and employee benefits ($442,039), travel and
expense reimbursements ($294,217), shareholder communications and
investor relations ($267,070), legal and accounting ($151,879), and
officers and directors liability insurance ($147,564). Fiscal 1993
Investment income during the year ending September 30, 1993
increased as the Company had use of the funds from its February, 1992
public offering for twelve months in fiscal 1993 as opposed to six
months in fiscal 1992. Research and development expenses increased due
to the commencement of several new research projects, all of which
pertained to the Company's MULTIKINE drug. General and administrative
expenses increased due to an increase in the cost of Directors and
Officers insurance, the implementation of an employee 401(K) plan, and
the addition of new employees during the year. Significant components
of general and administrative expenses during this year were salaries
and employee benefits ($342,150), travel and expense reimbursements
($266,007), shareholder communications and investor relations
($341,024), legal and accounting ($107,254), officers and directors
liability insurance ($113,690), and the cost of indemnifying an officer
and director for losses sustained as the result of actions taken on
behalf of the Company ($202,500). Losses associated with the Company's
joint venture interest in VTI increased due to an increase in VTI's
research and development expenditures.
Liquidity and Capital Resources
The Company has had only limited revenues from operations
since its inception in March l983. The Company has relied upon
proceeds realized from the public and private sale of its Common Stock
to meet its funding requirements. Funds raised by the Company have
been expended primarily in connection with the acquisition of an
exclusive worldwide license to certain patented and unpatented
proprietary technology and knowhow relating to the human immunological
defense system, the funding of VTI's research and development program,
patent applications, the repayment of debt, the continuation of Company-
sponsored research and development, administrative costs and
construction of laboratory facilities. Inasmuch as the Company does
not anticipate realizing revenues until such time as it enters into
licensing arrangements regarding the technology and knowhow licensed to
it (which could take a number of years), the Company is mostly
dependent upon the proceeds from the sale of its securities to meet all
of its liquidity and capital resource requirements.
In February, 1992, the Company received net proceeds of
approximately $13,800,000 from the sale, in a public offering, of
517,500 shares of Common Stock and 5,175,000 Warrants. Every ten
Warrants entitle the holder to purchase one additional share of Common
Stock at a price of $46.50 per share prior to February 7, 1997.
In June and September, l995, the Company completed private
offerings whereby it sold a total of 1,150,000 units at $2.00 per unit.
Each unit consisted of one share of Common Stock and one Warrant. Each
Warrant entitles the holder to purchase one additional share of Common
Stock at a price of $3.25 per share at any time prior to June 30, 1997.
The net proceeds to the Company from these offerings, after the payment
of Sales Agent's commissions and other offering expenses, were
approximately $2,000,000. On November 30, 1995 the Company and the
investors in these Private Offerings agreed to reduce the exercise
price of the Warrants to $1.60 per share in return for the commitment
on the part of the investors to exercise 312,500 Warrants ($500,000)
prior to December 23, 1995 and an additional 312,500 Warrants
($500,000) prior to January 31, 1996.
In March 1996 the Company sold $l,250,000 of Convertible Notes
("Notes") to two persons. The Notes are convertible from time to time
in whole or in part, into shares of the Company's Common Stock. The
conversion price is the lesser of (i) $5 per share or (ii) 80% of the
average closing bid price of the Company's Common Stock during the five
trading days immediately preceding the date of such conversion.
Notwithstanding the above, the conversion price may not be less than
$2.40 per share. The Notes are payable on December 1, 1996 and accrue
interest at 10% per annum. The shares issuable
upon the conversion of the Notes are being offered by means of this
Prospectus. See "Selling Shareholders".
In May 1996 the Company sold, in a private transaction, 3,500
shares of its Series A Preferred Stock (the "Preferred Shares") for
$3,500,000 or $1,000 per share. At the purchasers' option, up to 1,750
Preferred Shares are convertible, on or after 60 days from the closing
date of the purchase of such shares (the "Closing"), into shares of the
Company's Common Stock on the basis of one share of Preferred Stock for
shares of Common Stock equal in number to the amount determined by
dividing $1,000 by 85% of the Closing Price of the Company's Common
Stock. All Preferred Shares are convertible, on or after 90 days from
the Closing, on the basis of one share of Preferred Stock for shares of
the Company's Common Stock equal in number to the amount determined by
dividing $1,000 by 83% of the Closing Price of the Company's Common
Stock. The term "Closing Price" is defined as the average closing bid
price of the Company's Common Stock over the five-day trading period
ending on the day prior to the conversion of the Preferred Stock.
Notwithstanding the above, the conversion price may not be less than
$3.00 nor more than $8.00, except that if the Closing Price is less
than $3.00, then the conversion price will be equal to the Closing
Price. The Preferred Shares, if issued, are entitled to a quarterly
dividend of $17.50 per share. Any Preferred Shares which are
outstanding on the second anniversary of the Closing will be
automatically converted into shares of the Company's Common Stock. The
Preferred Shares have a liquidation preference over the Company's
Common Stock. By means of a separate Registration Statement, the
shares of Common Stock issuable upon the conversion of the Series A
Preferred Stock have been registered for public sale.
During fiscal 1996 the Company plans to fund its U.S. and Canadian
clinical trials involving MULTIKINE. During fiscal 1996 the Company
also plans to provide VTI with the funding needed to continue VTI's
clinical trials. It should be noted that substantial additional funds
will be needed for more extensive clinical trials which will be
necessary before the Company or VTI will be able to apply to the FDA
for approval to sell any products which may be developed on a
commercial basis throughout the United States.
In October, 1994, the Company completed the construction of its
own research laboratory in a facility leased by the Company. The cost
of modify ing the leased space and providing the equipment for the
research laboratory was approximately $1,200,000. In August 1994 the
Company obtained a loan to fund the majority of the costs for the
research laboratory. As of September 30, 1995 the Company owed
approximately $811,000 on this loan. Principal and interest on the
loan is due monthly. The loan matures in 1999 and bears interest at 2%
plus the prime lending rate.
The Company expects that it will spend approximately $2,500,000 on
research and development during the twelve month period ending
September 30, 1996. This amount includes VTI's estimated research and
development expenses during fiscal 1996. Prior to October 1995, VTI's
research and development expenses were shared 50% by the Company and
50% by Alpha 1 Biomedicals, Inc. VTI became a wholly-owned subsidiary
of the Company in October 1995 when the Company purchased Alpha 1's 50%
interest in VTI. The Company plans to use its existing financial
resources to fund its research and development program during this
period.
Other than funding its research and development program and the
costs associated with its research laboratory, the Company does not
have any material capital commitments.
The Company expects that its existing financial resources will
satisfy the Company's capital requirements at least through December
1996. In the absence of revenues, the Company will be required to raise
additional funds through the sale of securities, debt financing or
other arrangements in order to continue with its research efforts after
that date. However, there can be no assurance that such financing will
be available or be available on favorable terms.
BUSINESS
CEL-SCI Corporation (the "Company") was formed as a Colorado
corporation in 1983. The Company is involved in the research and
development of certain drugs and vaccines. The Company's first
product, MULTIKINETM, manufactured using the Company's proprietary cell
culture technologies, is a combination, or "cocktail", of natural human
interleukin2 ("IL-2") and certain lymphokines and cytokines. MULTIKINE
is being tested to determine if it is effective in improving the immune
response of advanced cancer pantients. The Company's second product,
HGP30, is being tested to determine if it is an effective treatment/
vaccine against the AIDS virus. In addition, the Company recently
acquired a new patented T-cell Modulation Process which uses
"heteroconjugates" to direct the body to chose a specific immune
response. The Company intends to use this new technology to improve
the cellular immune response of persons vaccinated with HGP-30.
Since its inception the focus of the Company's product
development efforts has been on conducting clinical trials to test its
proprietary tech nologies. The Company intends to continue testing its
MULTIKINE product in clinical trials with the objective of establishing
its efficacy as a treatment for solid tumors and possibly other
diseases. An additional aim of the Company is to further corroborate
the present data (obtained in connection with the Company's research
programs and human clinical trials) in regard to the ability of
MULTIKINE to restore the immune system of people suffering from certain
illnesses.
The cost of acquiring its exclusive license and the costs
associated with the clinical trials relating to the Company's MULTIKINE
technologies, the cost of research at various institutions and the
Company's administrative expenses have been funded with the public and
private sales of shares of the Company's Common Stock and borrowings
from third parties, including affiliates of the Company.
In October 1995 Viral Technologies, Inc. ("VTI") became a wholly owned
subsidiary of the Company. VTI is engaged in the development of a
possible vaccine for AIDS. VTI's technology may also have application
in the treatment of AIDS-infected individuals and the diagnosis of
AIDS. VTI's AIDS vaccine, HGP-30, has completed certain Phase I human
clinical trials. In the Phase I trials, the vaccine was administered
to volunteers who were not infected with the HIV virus in an effort to
determine safe and tolerable dosage levels.
PRODUCT DEVELOPMENT PLAN
In March l995, the Canadian Health Protection Branch, Health
and Welfare Ministry gave clearance to the Company to start a phase
I/II cancer study using Multikine. The study, which will enroll up to
30 head and neck cancer patients who have failed conventional
treatments, is expected to be conducted at the Ottowa Regional Cancer
Center and the Hotel-Dieu de Montreal Hospital in Canada. The study is
designed to evaluate safety, tumor responses and immune responses in
patients treated with multiple courses of Multikine. The length of
time that each patient will remain on the investigational treatment
will depend on the patient's response to treatment. In May l995, the
U.S. Food and Drug Administration (FDA) authorized the export of the
Company's Multikine drug to Canada for purposes of this study.
In February 1996 the FDA authorized the Company to conduct two
human clinical studies using MULTIKINE. The studies will focus on
prostate and head and neck cancer. The prostate study will be
conducted at Jefferson Hospital in Philadelphia, Pennsylvania and will
involve up to 15 prostate cancer patients who have failed on hormonal
therapy. The head and neck cancer study will involve up to 30 cancer
patients who have failed using conventional therapies. The Company is
currently evaluating clinical centers in the U.S. for purposes of the
study. The head and neck cancer study in the U.S. will be conducted in
conjunction with the Company's Canadian head and neck cancer study.
Viral Technologies, Inc. ("VTI") completed its Phase I trials in
California and in April 1995, with the approval of the California Food
and Drug Branch ("FDB"), started a new clinical study with the HGP30
AIDS vaccine. The study involves HIV-negative volunteers who
participated in the 1993 Phase I study. Following vaccinations with
HGP30, certain volunteers donated blood for a SCID mouse HIV challenge
study. Infection in the SCID mice by virus was determined and
confirmed by two different assays. A significantly larger percentage
of SCID mice given blood from vaccinated volunteers showed no HIV
infection after virus challenge when compared to mice given blood from
unvaccinated donors. In November 1995 VTI received permission from the
FDB to begin Phase I human clinical trials with HIV infected
volunteers. These trials began in December 1995. See "Viral
Technologies, Inc." below for additional information concerning VTI.
There can be no assurance that either the Company or VTI will
be successful in obtaining approvals from any regulatory authority to
conduct further clinical trials or to manufacture and sell their
products. The lack of regulatory approval for the Company's or VTI's
products will prevent the Company and VTI from generally marketing
their products. Delays in obtaining regulatory approval or the failure
to obtain regulatory approval in one or more countries may have a
material adverse impact upon the Company's operations.
BACKGROUND OF HUMAN IMMUNOLOGICAL SYSTEM
The function of the immunological system is to protect the body
against infectious agents, including viruses, bacteria, parasites and
malig nant (cancer) cells. An individual's ability to respond to
infectious agents and to other substances (antigens) recognized as
foreign by the body's immune system is critical to health and
survival. When the immune response is adequate, infection is usually
combatted effectively and recovery follows. Severe infection can occur
when the immune response is inadequate. Such immune deficiency can be
present from birth but, in adult life, it is frequently acquired as a
result of intense sickness or as a result of the administration of
chemotherapeutic drugs and/or radiation. It is also recognized that,
as people reach middle age and thereafter, the immune system
grows weaker.
Two classes of white blood cells, macrophages and
lymphocytes, are believed to be primarily responsible for immunity.
Macrophages are large cells whose principal immune activity is to
digest and destroy infectious agents. Lymphocytes are divided into
two sub-classes. One subclass of lymphocytes, B-cells, produces
antibodies in response to antigens. Antibodies have unique combining
sites (specificities) that recognize the shape of particular antigens
and bind with them. The combination of an antibody with an antigen
sets in motion a chain of events which may neutralize the effects of
the foreign substance. The other sub-class of lymphocytes, T-cells,
regulates immune responses. T cells, for example, amplify or suppress
antibody formation by Bcells, and can also directly destroy "foreign"
cells by activating "killer cells."
It is generally recognized that the interplay among T-cells,
B cells and the macrophages determines the strength and breadth of the
body's response to infection. It is believed that the activities of T
cells, B cells and macrophages are controlled, to a large extent, by a
specific group of hormones called lymphokines. Lymphokines regulate
and modify the various functions of both T-cells and B-cells. There
are many lymphokines, each of which is thought to have distinctive
chemical and functional properties. IL-2 is but one of these
lymphokines and it is on IL-2 and its synergy with other lymphokines
that the Company has focused its attention. Scientific and medical
investigation has established that IL-2 enhances immune responses by
causing activated Tcells to proliferate. Without such proliferation
no immune response can be mounted. Other lymphokines and cytokines
support T-cell and B-cellproliferation. However, IL-2 is the only
known lymphokine or cytokine which causes the proliferation of Tcells.
IL-2 is also known to activate Bcells in the absence of B-cell growth
factors.
Although IL-2 is one of the best characterized lymphokines
with anticancer potential, the Company is of the opinion that to have
optimum therapeutic value, IL-2 should be administered not as a single
substance but rather as a mixture of IL-2 and certain lymphokines and
cytokines, i.e. as a "cocktail". This approach, which was pioneered by
the Company, makes use of the synergism between these lymphokines. It
should be noted however that neither the FDA nor any other agency has
determined that the Company's MULTIKINE product will be effective
against any form of cancer.
It has been reported by researchers in the field of lymphokine
research that IL-2 can increase the number of killer T-cells produced
by the body, which improves the body's capacity to selectively destroy
specific tumor cells. Research and human clinical trials sponsored by
the Company have indicated a correlation between administration of
MULTIKINE to advanced cancer patients and immunological responses. On
the basis of these experimental results, the Company believes that
MULTIKINE may have application for the treatment of solid tumors in
humans.
The Company foresees three potential anti-cancer therapeutic
uses for MULTIKINE: (i) direct administration into the human body (in
vivo) as a modulator of the immune system, (ii) activation of a
patient's white blood cells outside the body with MULTIKINE, followed
by returning these activated cells to the patient; and (iii) a
combination of (i) and (ii).
RESEARCH AND DEVELOPMENT
In the past, the Company conducted its research pursuant to
arrange ments with various universities and research organizations.
The Company pro vided grants to these institutions for the conduct of
specific research pro jects as suggested by the Company's scientists
based upon the results of pre viously completed projects.
More recently the Company has decided to consolidate its
research activities in a Company-owned laboratory. The Company
believes that this new approach will be more effective in terms of
both cost and performance.
Between 1983 and 1986 the Company was primarily involved in
funding pre-clinical and Phase I clinical trials of its proprietary
MULTIKINE tech nologies. These trials were conducted at St. Thomas's
Hospital Medical School located in London, England under the direction
of Dudley C. Dumonde, M.D., PhD., a former member of the SAB, and
pursuant to approvals obtained from England's Department of Health and
Social Security.
In the Phase I trial in England (completed in 1987), forty-
nine pa tients suffering with various forms of solid cancers,
including malignant melanoma, breast cancer, colon cancer, and other
solid tumor types were treated with MULTIKINE. The product was
administered directly into the lymphatic system in a number of
patients. Significant and lasting lymphnode responses, which are
considered to be an indication of improvement in the patient's immune
responses, were observed in these patients. A principal conclusion of
the Phase I trials was that the side effects of the Company's products
in forty-nine patients were not severe, the treatment was well
tolerated and there was no long-term toxicity.
The results of the Phase I clinical study were encouraging
and the Company established protocols for future clinical trials. In
November, 1990, the Florida Department of Health and Rehabilitative
Services ("DHRS") gave the physicians at a southern Florida medical
institution approval to start a clinical cancer trial in Florida using
the Company's MULTIKINE product. The focus of the trial was
unresectable head and neck cancer (which is presently untreatable) and
was the first time that the natural MULTIKINE was administered to
cancer patients in a clinical trial in the United States.
Four patients with regionally advanced squamous cell cancer
of the head and neck were treated with the Company's MULTIKINE
product. The patients had previously received radical surgery followed
by x-ray therapy but developed recurrent tumors at multiple sites in
the neck and were diagnosed with terminal cancer. The patients had
low levels of lymphocytes and evidence of immune deficiency (generally
a characteristic of this type of cancer).
Significant tumor reduction occured in three of the four
patients as a result of the treatment with MULTIKINE. Negligible side
effects were observed and the patients were treated as outpatients.
Notwithstanding the above, it should be noted that these trials were
only preliminary and were only conducted on a small number of
patients. It remains to be seen if MULTIKINE will be effective in
treating any form of cancer.
See "Product Development Plan" above for information
concerning the Company's future research and development plans.
Proof of efficacy for anti-cancer drugs is a lengthy and
complex process. At this early stage of clinical investigation, it
remains to be proven that MULTIKINE will be effective against any form
of cancer. Even if some form of MULTIKINE is found to be effective in
the treatment of cancer, commercial use of MULTIKINE may be several
years away due to extensive safety and effectiveness tests that would
be necessary before required government approvals are obtained. It
should be noted that other companies and research teams are actively
involved in developing treatments and/or cures for cancer, and
accordingly, there can be no assurance that the Company's research
efforts, even if successful from a medical standpoint, can be
completed before those of its competitors.
Since 1983, and through September 30, 1995, approximately
$9,505,000 has been expended on Company-sponsored research and
development, including approximately $1,825,000, $2,896,000 and
$1,307,000 during the years ended September 30, 1995, 1994 and 1993,
respectively. The foregoing amounts do not include amounts spent by
Viral Technologies, Inc. on research and development. Since May, 1986
(the inception of VTI) and through September 30, 1995, VTI has spent
approximately $3,365,000 on research and development.
The Company has established a Scientific Advisory Board
("SAB") com prised of scientists distinguished in biomedical research
in the field of lymphokines and related areas. From time to time,
members of the SAB advise the Company on its research activities.
Institutions with which members of the SAB are affiliated have and may
in the future conduct Company-sponsored research. The SAB has in the
past and may in the future, at its discretion, invite other scientists
to opine in confidence on the merits of the Company sponsored
research. Members of the SAB receive $500 per month from the Com pany
and have also been granted options (for serving as members of the SAB)
which collectively allow for the purchase of up to 15,000 shares of
the Com pany's Common Stock. The options are exercisable at prices
ranging from $13.80 to $19.70 per share.
The members of the Company's SAB are:
Dr. Michael Chirigos former head of the Virus and Disease Modifi
cation Section, National Institutes of Health (NIH), National Cancer
Institute (NCI) from 1966-1981 and the Immuno Pharmacology Section,
NHI, NCI, Biological Response Modifier Program until 1985.
Dr. Evan M. Hersh Vice-Chairman, Department of Internal Medicine,
Chief, Section of Hematology/Oncology, Department of Internal
Medicine, Tucson, AZ. Director of Clinical Research, Arizona Cancer
Center, Tucson.
Dr. Michael J. Mastrangelo Director, Division of Medical
Oncolo gy, and Professor of Medicine, Jefferson Medical College,
Philadelphia, Penn sylvania.
Dr. Alan B. Morris, PhD. Professor, Department of Biological
Sciences, University of Warwick, Coventry, U.K.
VIRAL TECHNOLOGIES, INC.
Prior to October 1995, Viral Technologies, Inc. ("VTI"), a
Delaware corporation, was 50% owned by the Company and 50% owned by
Alpha 1 Biomedi cals, Inc. VTI is developing a vaccine technology
that may prove of commer cial value in the prevention, diagnosis and
treatment of AIDS. VTI holds the proprietary rights to certain
synthesized components of the p17 gag protein, which is the outer core
region of the AIDS virus (HIV-1). In October 1995, the Company
acquired Alpha 1's interest in VTI in exchange for 159,170 shares of
the Company's common stock.
VTI is involved in the development of a prototype preventive
and therapeutic vaccine against AIDS that is based on HGP-30, a thirty
amino acid synthetic peptide derived from the p17 region of the AIDS
virus. Evidence compiled by scientists at George Washington University
from toxicology studies with different animal species indicates that
the HGP-30 prototype vaccine does not appear to be toxic in animals.
The HGP-30 vaccine being tested differs from most other vaccines
candidates in that its active component, the HGP-30 peptide, is
derived from the p17 core protein particles of the virus. Since HGP-
30 is a totally synthetic molecule containing no live virus, it cannot
cause infection. Unlike the envelope (i.e. outside) proteins, the p17
region of the AIDS virus appears to be relatively nonchanging. In
January, 1991, VTI was issued a United States patent covering the
production, use and sale of HGP-30. HGP-30 may also be effective in
treating persons infected with the AIDS virus.
Approval to start Phase I human clinical trials in Great Britain
using VTI's prototype AIDS vaccine HGP-30 was granted in April 1988.
The trial, the first in the European common market, began in May 1989
with 18 healthy (HIVnegative) volunteers given three different dosages
and was completed in December 1990. The trial results indicated that
five of eight volunteers vaccinated with HGP-30, and whose blood
samples were able to be tested, produced "killer" T-cell responses.
The vaccine also elicited cellmediated immunity responses in 7 out of
9 vaccinated volunteers and antibody responses in 15 out of 18
vaccinated volunteers.
In March, 1990, the California Department of Health Services
Food and Drug Branch (FDB) approved the first human testing (Phase I
trials) in the United States of HGP-30. The trials were conducted by
scientists at the University of Southern California and San Francisco
General Hospital. Twenty-one healthy HIV-negative volunteers at
medical centers in Los Angeles and San Francisco received escalating
doses of HGP-30 with no clinically significant adverse side effects.
The clinical studies confirmed earlier clinical trials in London.
In April 1995 VTI, with the approval of the FDB, began
another clinical trial in California using volunteers who received two
vaccinations. The volunteers receiving the two lowest dosage levels
were asked to donate blood for a SCID mouse HIV challenge study. The
SCID mouse is considered to be the best available animal model for HIV
because it lacks its own immune system and therefore permits human
cell growth. White blood cells from the five (5) vaccinated volunteers
and from normal donors were injected into groups of SCID mice. They
were then challenged with high levels of a different strain of the HIV
virus than the one from which HGP-30 is derived. Infection by virus
was determined and confirmed by two different assays, p24 antigen, a
component of the virus core, and reverse transcriptase activity, an
enzyme critical to HIV replication. A significantly larger percentage
of SCID mice given blood from vaccinated volunteers showed no HIV
infection after virus challenge when compared to mice given blood from
unvaccinated donors.
In November 1995 VTI received permission from the California
Food and Drug Branch ("FDB") to begin Phase I human clinical trials
with HIV infected volunteers. These trials began in December 1995.
VTI's AIDS vaccine/treatment is only in the initial stages of testing
and it remains to be seen if the vaccine/treatment will be effective
against the AIDS virus.
Although there has been important independent research showing
the possible significance of the p17 region of HIV-1, there can be no
assurance that any of VTI's technology will be effective in the
prevention, diagnosis or treatment of AIDS. There can be no assurance
that other companies will not develop a product that is more effective
or that VTI ultimately will be able to develop and bring a product to
market in a timely manner that would enable it to derive commercial
benefits.
VTI's research and development efforts are presently focused
on the evaluation of second generation formulations and delivery
systems for HGP-30 and related peptides to enhance HIV-specific
cellular immune responses.
In January 1991, VTI was awarded a U.S. patent covering the
exclusive production, use and sale of HGP-30. This patent is thought
to be the first U.S. patent for a portion of a "core" protein of the
HIV virus. In February 1993, VTI was awarded a European patent
covering HGP 30 and certain other peptides.
T-CELL MODULATION PROCESS
In January 1996 the Company acquired a new patented T-cell
Modulation Process which uses "heteroconjugates" to direct the body to
chose a specific immune response.
The ability to generate a specific immune response is
important be cause many diseases are often not combatted effectively
due to the body's selection of the "inappropriate" immune response.
The capability to specifi cally reprogram an immune response may offer
a more effective approach than existing vaccines and drugs in
attacking an underlying disease.
The Company intends to use this new technology to improve the
cellu lar immune response of VTI's HIV HGP-30 immunogen which is
currently in two clinical studies. In addition, the Company intends
to use the technology to develop a potential Tuberculosis (TB)
vaccine/treatment. TB is the largest killer of all infectious
diseases worldwide and new strains of drug resistant TB are emerging
daily. The technology is also a potential platform technology which
could also work with many other peptides. Using this new technology,
the Company is currently conducting in vitro laboratory and in vivo
animal studies.
The technology was acquired from Cell-Med, Incorporated
("CELL MED") in consideration for the Company's agreement to pay
certain liabilities of CELL-MED in the amount of approximately $6,000.
If the Company elects to retain ownership in the technology after
March 30, 1997, the Company must pay CELL-MED $200,000, plus
additional payments ranging between $100,000 and $600,000, depending
upon the Company's ability to obtain regulatory approval for clinical
studies using the technology. In addition, should the Company receive
FDA approval for the sale of any product incorporating the technology,
the Company is obligated to pay CELL MED an advance royalty of
$500,000, a royalty of 5% of the sales price of any product using the
technology, plus 15% of any amounts the Company receives as a result
of sublicensing the technology. So long as the Company retains rights
in the technology, the Company has also agreed to pay the future costs
associated with pursuing and or maintaining CELLMED's patent and
patent applications relating to the technology. As of February 29,
1996, CELL-MED had been issued patents in Australia and from the
European Patent Office covering the technology and had several U.S.
and foreign patent applications pending.
COMPOUNDS AND PROCESSES LICENSED TO THE COMPANY
The Company has acquired from Sittona Company, B.V., a
Netherlands corporation ("Sittona"), the exclusive worldwide rights to
patented IL-2 compounds, compositions and other processes and other
lymphokine-related compounds, compositions and processes which are the
subject of various patents, patent applications and disclosure
documents filed with the United States Patent and Trademark Office as
well as similar agencies of various foreign countries. Sittona
acquired its rights in the foregoing products and technology from
Hooper Trading Company N.V., and Shanksville Corporation N.V., both
Netherland Antilles corporations. Pursuant to the terms of the
license, the Company must pay to Sittona a royalty of l0% of all net
sales received by the Company in connection with the manufacture, use
or sale of the licensed compounds, compositions and processes and a
royalty of l5% of all license fees and royalties received by the
Company in connection with the grant by the Company of any sublicenses
for the manufacture, use or sale of the licensed compounds,
compositions and processes. On November 30, l983, a $l.4 million
advance royalty was paid by the Company to Sittona to acquire the
license. The license also requires the Company to bear the expense of
preparing, filing and processing patent applications and to obtain and
maintain patents in the United States and foreign countries on all
inventions, developments and improvements made by or on behalf of the
Company relating to the licensed compounds, compositions and
processes. In this regard the Company has caused patent applications
to be filed in several foreign countries and has undertaken the
processing of previously filed patent applications. The exclusive
license is to remain in effect until the expiration or abandonment of
all patent rights or until the compounds, compositions and processes
enter into the public domain, whichever is later. Sittona may also
terminate the license for breach of the agreement, fraud on the part
of the Company, or the bankruptcy or insolvency of the Company.
Sittona, Hooper Trading Company and Shanksville Corporation are all
controlled by Maximilian de Clara, the Company's President. See
"Management Transactions with Related Parties".
In 1987 a German company filed an opposition with the European Patent
Office with respect to one of the Company's European patents, alleging
that certain aspects of the patent in question were previously
disclosed to inventors during a conference held in Germany. A hearing
on the opposition was held and on October 12, 1990 the European Patent
Office rejected the opposition. The German company filing the
opposition appealed the decision of the European Patent Office. In
1992 the Appellate Tribunal of the European Patent Office upheld the
Company's process claims in the patent, while two minor claims were
denied. The Company does not believe that the denial by the European
Patent Office of these two minor process patent claims impairs the
value of this patent in any significant degree.
In February 1996 the Company filed a lawsuit against ImmunoRx
and Dr. John Hadden for contract breach, tortious interference of
contract and patent infringement concerning the Company's Multikine
drug. The lawsuit, filed in the U.S. Distrit Court for the Middle
District of Florida, seeks damages and the termination of certain
research and clinical studies being conducted by ImmunoRx and Dr.
Hadden. From 1984 to 1992, Dr. Hadden consulted with the Company,
performed research on Multikine and manufactured Multikine for the
Company's head and neck cancer study in Florida. In early 1993, Dr.
Hadden signed a separation agreement with the Company acknowledging
the Company's ownership of both Multikine and the research results.
The Company has learned that Dr. Hadden and ImmunoRx are apparently
making copies of Multikine, in contravention of the separation
agreement and the patents covering Multikine, and have begun clinical
studies in a foreign country using a copy of Multikine.
Process for the Production of IL-2 and IL-2 Product
The Company's exclusive license includes processes for the
production in high yields of natural human IL-2 using cell culture
techniques applied to normal human cells. Based upon the results of
the Company's research and human clinical trials, the Company believes
that "natural" IL-2 produced by cell culture technologies, such as the
Company's proprietary products, may have advantages over genetically
engineered, bacteria-produced IL-2 ("recombinant IL-2") manufactured
by other companies. There are basically two ways to produce IL-2 on a
commercial scale: (1) applying genesplicing techniques using bacteria
or other microorganisms to produce recombinant IL-2; or, (2) applying
cell culture technology using mammalian cells. Substantive
differences exist between recombinant IL-2 and IL-2 produced through
cell culture technology. For example: (1) cell cultured IL-2 is
glycosylated (has sugars attached). Sugar attachments play a crucial
role in cell recognition and have a significant effect on how fast a
body clears out proteins. Proteins produced through bacteria have no
sugar attachments and while recombinant IL-2 products produced from
recombinant yeast or insect cells are glycosylated, they are not so to
the right degree, or at the right locations. Cell cultured IL-2 has
the "right" sugar attachments at the right places; (2) there are also
structural differences related to folding (the way human proteins work
depends on their sequence folding); and (3) the cell cultured IL-2
"cocktail" is administered in small dosages as pioneered by Company
researchers. This formulation and dosage mimics the way immune
regulators are naturally found and function within the body. This
stands in stark contrast to the huge dosages required when recombinant
IL-2 is administered to patients. In addition, patients treated with
recombinant IL-2 usually suffer severe side effects.
Although mammalian cells (other than human cells) could be
genetically engineered to produce glycosylated IL-2 in larger
quantities than are produced by the Company's method, such mammalian
cells could not be genetically engineered to produce the combination
of human lymphokines and cytokines, which together with human
glycosylated IL-2 form the MULTIKINE product used by the Company. The
Company is of the opinion that glycosylated IL-2 genetically produced
from mammalian cells must be administered in large dosages before any
benefits are observed. Even then, the Company believes that only a
small percentage of patients will benefit from treatments consisting
only of glycosylated IL-2. In addition, large dosages of glycosylated
IL-2 can, as with recombinant IL 2, result in severe toxic reactions.
In contrast, the Company believes the synergy between glycosylated IL-
2 and certain other lymphokines/ cytokines allows MULTIKINE to be
administered in low dosages, thereby avoiding the severe toxic
reactions which often result when IL-2 is administered in large
dosages.
The technology licensed to the Company includes the basic
production method employing the use of normal white blood cells, an
improved production method based in part on this basic production
method, a serum-free and mitogenfree IL-2 product, and a method for
using this product in humans. Mitogens are used to stimulate cells to
produce specific materials (in this case, IL-2). Mitogens remaining in
the product of cell stimulation can cause allergic and anaphylactic
reactions if not removed from the cell product prior to introduction
into the body.
The Company's license also pertains to a cell culture process
for producing interleukin-2 and another type of cell process for
producing serum free and mitogen-free interleukin-2 preparations which
avoids a mitogen stimulation step and uses interleukin-1 and white
blood cells.
The Company's license further includes a process for
suppressing graft rejection in organ transplantation. This process
employs the use of an agent which blocks the activity of IL-2 in
proliferating T-cells which would otherwise destroy the transplanted
organ. The Company regards further research and development of this
process to involve a financial commitment beyond its present ability;
thus, while the Company intends to attempt to enter into licensing
arrangements with third parties concerning this process, it does
not presently intend to conduct further research into, or
development of, this process.
The Company has an agreement with an unrelated
corporation for the production, until 1997, of MULTIKINE for
research and testing purposes. At present, this is the Company's
only source of MULTIKINE. If this corporation could not, for any
reason, supply the Company with MULTIKINE, the Company estimates
that it would take approximately six to ten months to obtain
supplies of MULTIKINE under an alternative manufacturing
arrangement. The Company does not know what cost it would incur
to obtain this alternative source of supply.
GOVERNMENT REGULATION
The investigational agents and future products of the
Company are regulated in the United States under the Federal
Food, Drug and Cosmetic Act, the Public Health Service Act, and
the laws of certain states. The Federal Food and Drug
Administration (FDA) exercises significant regulatory control
over the clinical investigation and manufacture of pharmaceutical
products.
Prior to the time a pharmaceutical product can be
marketed in the United States for therapeutic use, approval of
the FDA must normally be ob tained. Certain states, however,
have passed laws which allow a state agency having functions
similar to the FDA to approve the testing and use of
pharmaceutical products within the state. In the case of either
FDA or state regulation, preclinical testing programs on animals,
followed by three phases of clinical testing on humans, are
typically required in order to establish product safety and
efficacy.
The first stage of evaluation, preclinical testing, must
be conducted in animals. After lack of toxicity has been
demonstrated, the test results are submitted to the FDA (or state
regulatory agency) along with a request for approval for further
testing which includes the protocol that will be followed in the
initial human clinical evaluation. If the applicable regulatory
authority does not object to the proposed experiments, the
investigator can proceed with Phase I trials. Phase I trials
consist of pharmacological studies on a relatively few number of
humans under rigidly controlled conditions in order to establish
lack of toxicity and a safe dosage range.
After Phase I testing is completed, one or more Phase II
trials are conducted in a limited number of patients to test the
product's ability to treat or prevent a specific disease, and the
results are analyzed for clinical efficacy and safety. If the
results appear to warrant confirmatory studies, the data is
submitted to the applicable regulatory authority along with the
protocol for a Phase III trial. Phase III trials consist of
extensive studies in large populations designed to assess the
safety of the product and the most desirable dosage in the
treatment or prevention of a specific disease. The results of
the clinical trials for a new biological drug are submitted to
the FDA as part of a product license application ("PLA").
In addition to obtaining FDA approval for a product, a
biologics establishment license application ("ELA") must be filed
in order to obtain FDA approval of the testing and manufacturing
facilities in which the product is produced. To the extent all
or a portion of the manufacturing process for a product is
handled by an entity other than the Company, the Company must
similarly receive FDA approval for the other entity's
participation in the manufacturing process. Domestic
manufacturing establishments are subject to inspections by the
FDA and by other Federal, state and local agencies and must
comply with Good Manufacturing Practices ("GMP") as appropriate
for production. In complying with GMP regulations, manufacturers
must continue to expend time, money and effort in the area of
production and quality control to ensure full technical
compliance.
The process of drug development and regulatory approval
requires substantial resources and many years. There can be no
assurance that regulatory approval will ever be obtained for
products developed by the Company. Approval of drugs and
biologicals by regulatory authorities of most foreign countries
must also be obtained prior to initiation of marketing in those
countries. The approval process varies from country to country
and the time period required in each foreign country to obtain
approval may be longer or shorter than that required for
regulatory approval in the United States.
The human clinical trials in Florida were authorized
pursuant to ap plications filed by physicians at a southern
Florida medical institution with the Florida Department of Health
and Rehabilitative Services ("DHRS"). VTI's Phase I clinical
trials were conducted pursuant to approvals obtained from the
California Department of Health Services Food and Drug Branch.
None of the clinical trials involving the Company's MULTIKINE
product (including the prior trials conducted in London, England)
have been conducted under the approval of the FDA and there are
no assurances that clinical trials conducted under approval from
state authorities or conducted in foreign countries will be
accepted by the FDA. Product licensure in a foreign country or
under state authority does not mean that the product will be
licensed by the FDA and there are no assurances that the Company
will receive any approval of the FDA or any other governmental
entity for the manufacturing and/or marketing of a product.
Consequently, the commencement of the manufacturing and marketing
of any Company product is, in all likelihood, many years away.
COMPETITION AND MARKETING
Many companies, nonprofit organizations and governmental
institutions are conducting research on lymphokines. Competition
in the development of therapeutic agents and diagnostic products
incorporating lymphokines is intense. Large, well-established
pharmaceutical companies are engaged in lymphokine research and
development and have considerably greater resources than the
Company has to develop products. The establishment by these large
companies of in-house research groups and of joint research
ventures with other entities is already occurring in these areas
and will probably become even more prevalent. In addition,
licensing and other collaborative arrangements between
governmental and other nonprofit institutions and commercial
enterprises, as well as the seeking of patent protection of
inventions by nonprofit institutions and researchers, could
result in strong competition for the Company. Any new
developments made by such organizations may render the Company's
licensed technology and know-how obsolete.
Several biotechnology companies are producing IL-2-like
compounds. The Company believes, however, that it is the only
producer of a patented IL 2 product using a patented cell-culture
technology with normal human cells. The Company foresees that its
principle competition will come from producers of genetically-
engineered IL-2-like products. However, it is the Company's
belief, based upon growing scientific evidence, that its natural
IL-2 products have advantages over the genetically engineered, IL-
2-like products. Evidence indicates that genetically engineered,
IL-2-like products, which lack sugar molecules and typically are
not water soluble, may be recognized by the immunological system
as a foreign agent, leading to a measurable antibody build-up and
thereby possibly voiding their therapeutic value. Furthermore,
the Com pany's research has established that to have optimum
therapeutic value IL-2 should be administered not as a single
substance but rather as an IL-2 rich mixture of certain
lymphokines and other proteins, i.e. as a "cocktail". If these
differences prove to be of importance, and if the therapeutic
value of its MULTIKINE product is conclusively established, the
Company believes it will be able to establish a strong
competitive position in a future market.
The Company has not established a definitive plan for
marketing nor has it established a price structure for the
Company's saleable products. However, the Company intends, if the
Company is in a position to begin commercialization of its
products, to enter into written marketing agreements with various
major pharmaceutical firms with established sales forces. The
sales forces in turn would probably target the Company's products
to cancer centers, physicians and clinics involved in
immunotherapy.
Competition to develop treatments for the control of AIDS is
intense. Many of the pharmaceutical and biotechnology companies
around the world are devoting substantial sums to the exploration
and development of technologies useful in these areas. VTI's
development of its experimental HGP-30 AIDS Vaccine, if
successful, would likely face intense competition from other
companies seeking to find alternative or better ways to prevent
and treat AIDS.
Both the Company and VTI may encounter problems, delays and
additional expenses in developing marketing plans with outside
firms. In addition, the Company and VTI may experience other
limitations involving the proposed sale of their products, such
as uncertainty of third-party reimbursement. There is no
assurance that the Company or VTI can successfully market any
products which they may develop or market them at competitive
prices.
The clinical trials funded to date by the Company and VTI
have not been approved by the FDA, but rather have been conducted
pursuant to approvals obtained from regulatory agencies in
England, Canada and certain states. Since the results of these
clinical trials may not be accepted by the FDA, companies which
are conducting clinical trials approved by the FDA may have a
competitive advantage in that the products of such companies are
further advanced in the regulatory process than those of the
Company or VTI.
PROPERTIES
The Company's MULTIKINE product used in its pre-clinical
and Phase I clinical trials in England was manufactured at a
pilot plant at St. Thomas' Hospital Medical School using the
Company's patented production methods and equipment owned by the
Company. The MULTIKINE product used in the Florida clinical
trials was manufactured in Florida. In February, 1993, the
Company signed an agreement with a third party whereby the third
party constructed a facility designed to produce the Company's
MULTIKINE product. The Company paid the third party the cost of
constructing this facility (approximately $200,000) in accordance
with the Company's specifications.
In October, 1994 the Company completed the construction of a
research laboratory in space leased by the Company. The cost of
modifying and equipping this space for the Company's purposes was
approximately $1,200,000.
The Company leases office space at 66 Canal Center Plaza,
Alexandria, Virginia at a monthly rental of approximately $8,200
per month. The Company believes this arrangement is adequate for
the conduct of its present business.
EMPLOYEES
As of March 31, 1996 the Company, together with VTI,
employed
24 persons on a full-time basis.
MANAGEMENT
Officers and Directors
Name Age Position
Maximilian de Clara 65 Director and President
Geert R. Kersten, Esq. 37 Director, Chief Executive
Officer, Secretary and
Treasurer
Patricia B. Prichep 43 Vice President of
Operations
M. Douglas Winship 45 Vice President of
Regulatory Affairs and Quality
Assurance
Dr. Eyal Talor 40 Vice President of Research
and Manufacturing
Dr. Prem S. Sarin 61 Vice President of Research
for Viral Technologies,
Inc.
Dr. Daniel H. Zimmerman 54 Vice President of Cellular
Immunology
Mark V. Soresi 43 Director
F. Donald Hudson 62 Director
Edwin A. Shalloway 60 Director
The directors of the Company serve in such capacity until the
next annual meeting of the Company's shareholders and until their
successors have been duly elected and qualified. The officers of the
Company serve at the discretion of the Company's directors.
Mr. Maximilian de Clara, by virtue of his position as an
officer and director of the Company, may be deemed to be the "parent"
and "founder" of the Company as those terms are defined under
applicable rules and regulations of the Securities and Exchange
Commission.
The principal occupations of the Company's officers and
directors, during the past several years, are as follows:
Maximilian de Clara. Mr. de Clara has been a director of the
Com pany since its inception in March, l983, and has been president of
the Company since July, l983. Prior to his affiliation with the
Company, and since at least l978, Mr. de Clara was involved in the
management of his personal investments and personally funding research
in the fields of biotechnology and biomedicine. Mr. de Clara attended
the medical school of the University of Munich from l949 to l955, but
left before he received a medical degree. During the summers of l954
and l955, he worked as a research assistant at the University of
Istanbul in the field of cancer research. For his efforts and
dedication to research and development in the fight against cancer and
AIDS, Mr. de Clara was awarded the "Pour le Merit" honorary medal of
the Austrian Military Order "Merito Navale" as well as the honor cross
of the Austrian Albert Schweitzer Society.
Geert R. Kersten, Esq. Mr. Kersten was Director of Corporate
and Investment Relations for the Company between February, 1987 and
October, 1987. In October of 1987, he was appointed Vice President of
Operations. In December, 1988, Mr. Kersten was appointed director of
the Company. Mr. Kersten also became the Company's secretary and
treasurer in 1989. In May, 1992, Mr. Kersten was appointed Chief
Operating Officer and in February, 1995, Mr. Kersten became the
Company's Chief Executive Officer. In previous years, Mr. Kersten
worked as a financial analyst with Source Capital, Ltd., an investment
advising firm in McLean, Virginia. Mr. Kersten is a stepson of
Maximilian de Clara, who is the President and a Director of the
Company. Mr. Kersten attended George Washington University in
Washington, D.C. where he earned a B.A. in Accounting and an M.B.A.
with emphasis on International Finance. He also attended law school at
American University in Washington, D.C. where he received a Juris
Doctor degree.
Patricia B. Prichep has been the Company's Vice President of
Operations since March, 1994. Between December, 1992 and March, 1994,
Ms. Prichep was the Company's Director of Operations. From June, 1990
to December, 1992, Ms. Prichep was the Manager of Quality and
Productivity for the NASD's Management, Systems and Support Department.
Between 1982 and 1990, Ms. Prichep was Vice President and Operations
Manager for Source Capital, Ltd.
M. Douglas Winship has been the Company's Vice President of
Regula tory Affairs and Quality Assurance since April, 1994. Between
1988 and April, 1994, Mr. Winship held various positions with Curative
Technologies, Inc., including Vice President of Regulatory Affairs and
Quality Assurance (1991-1994).
Dr. Eyal Talor has been the Company's Vice President of Research
and Manufacturing since March, 1994. From October, 1993 until March,
1994, Dr. Talor was Director of Research, Manufacturing and Quality
Control, as well as the Director of the Clinical Laboratory, for
Chesapeake Biological Laboratories, Inc. From 1991 to 1993, Dr. Talor
was a scientist with SRA Technologies, Inc., as well as the director of
SRA's Flow Cytometry Laboratory (19911993) and Clinical Laboratory
(19921993). During 1992 and 1993, Dr. Talor was also the Regulatory
Affairs and Safety Officer For SRA. Since 1987, Dr. Talor has held
various positions with the John Hopkins University, including course
coordinator for the School of Continuing Studies (1989-Present),
research associate and lecturer in the Department of Immunology and
Infectious Diseases (1987-1991), and associate professor (1991-
Present).
Prem S. Sarin, Ph.D. has been the Vice President of Research for
Viral Technologies, Inc. (the Company's wholly-owned subsidiary) since
May 1, 1993. Dr. Sarin was an Adjunct Professor of Biochemistry at the
George Washington University School of Medicine, Washington, D.C., from
19861992. From 1975-1991 Dr. Sarin held the position of Deputy Chief,
Laboratory of Tumor Cell Biology at the National Cancer Institute
(NCI), NIH, Bethesda, Maryland. Dr. Sarin was a Senior Investigator
(1974-1975) and a Visiting Scientist (1972-1974) at the Laboratory of
Tumor Cell Biology at NCI, NIH. From 19711972 Dr. Sarin held the
position of Director, Department of Molecular Biology, Bionetics
Research Laboratory, Bethesda, Maryland.
Daniel H. Zimmerman, Ph.D. has been the Company's Vice President
of Cellular Immunology since January 1996. Dr. Zimmerman founded CELL
MED, Inc. and was its president from 1987-1995. From 1973 to 1987 Dr.
Zimmerman served in various positions at Electronucleonics, Inc.
including Scientist, Senior Scientist, Technical Director and Program
Manager. From 1969-1973 Dr. Zimmerman was a Senior Staff Fellow at
NIH.
Mark V. Soresi. Mr. Soresi became a director of the Company in
July, 1989. In 1982, Mr. Soresi founded, and since that date has been
the president and Chief Executive Officer of REMAC(R), Inc. REMAC(R)
is in volved in the clean-up of hazardous and toxic waste dump sites.
Mr. Soresi attended George Washington University in Washington, D.C.
where he earned a Bachelor of Science in Chemistry.
F. Donald Hudson. F. Donald Hudson has been a director of the
Com pany since May, 1992. From December 1994 to October 1995 Mr.
Hudson was President and Chief Executive Officer of VIMRx
Pharmaceuticals, Inc. Between 1990 and 1993, Mr. Hudson was President
and Chief Executive Officer of Neuromedica, Inc., a development stage
company engaged in neurological research. Until January, 1989, Mr.
Hudson served as Chairman and Chief Executive Officer of Transgenic
Sciences, Inc. (now TSI Corporation), a publicly held biotechnology
corporation which he founded in January, 1987. From October, 1985 until
January, 1987, Mr. Hudson was a director of Organogenesis, Inc., a
publicly held biotechnology corporation of which he was a founder, and
for five years prior thereto was Executive Vice President and a
director of Integrated Genetics, Inc., a corporation also engaged in
biotechnology which he co-founded and which was publicly traded until
its acquisition in 1989 by Genzyme, Inc.
Edwin A. Shalloway, Esq. Mr. Shalloway has been a director of
the Company since May, 1992. Mr. Shalloway is and has been since 1964,
a partner in the law firm of Sherman and Shalloway which specializes
in matters of patent law. Mr. Shalloway attended the University of
Georgia where he earned a Bachelor of Science and Bachelor of Arts
degrees. Mr. Shalloway received his law degree from the American
University in Washington, D.C. Mr. Shalloway is also the President of
the International Licensing Executive Society.
All of the Company's officers devote substantially all of
their time on the Company's business. Messrs. Soresi, Hudson and
Shalloway, as directors, devote only a minimal amount of time to the
Company.
The Company has an audit committee whose members are Geert R.
Kersten, F. Donald Hudson and Edwin A. Shalloway.
Executive Compensation
The following table sets forth in summary form the
compensation re ceived by (i) the Chief Executive Officer of the
Company and (ii) by each other executive officer of the Company who
received in excess of $100,000 during the fiscal year ended September
30, 1995.
Annual Compensation Long Term Compensation
Re- All
Other stric- Other
Annual ted LTIP Com-
Name and Compen Stock Options Pay pensa-
Principal Fiscal Salary Bonus sation Awards Granted outs tion
Position Year (1) (2) (3) (4) (5) (6) (7)
Maximilian de
Clara, 1995 - - $95,181 - 225,000 - -
President 1994 - - $93,752 - 70,000 - -
1993 - - $59,376 - - - -
Geert R.
Kersten, 1995 $164,801 - $ 9,426 - 224,750 - $3,911
Chief
Executive 1994 $182,539 - $ 8,183 - 50,000 - $4,497
Officer,
Secretary 1993 $163,204 - $ 6,046 - - - $3,289
and Treasurer
M. Douglas
Winship, 1995 $113,500 - $ 1,200 - 22,000 - $2,100
Vice President of
Regulatory Affairs
Suzanne Beckner, 1995 $102,250 - - 25,000 - $2,830
Vice President of
Clinical Development*
* Dr. Beckner resigned her position with the Company in November
1995.
(1) The dollar value of base salary (cash and non-cash) received.
(2) The dollar value of bonus (cash and non-cash) received.
(3) Any other annual compensation not properly categorized as salary
or bonus, including perquisites and other personal benefits,
securities or property. Amounts in the table represent
automobile, parking and other transportation expenses.
(4) During the period covered by the Table, no shares of
restricted stock were issued as compensation for services to the
persons listed in the table. As of September 30, 1995, the
number of shares of the Company's common stock, owned by the
officers included in the table above, and the value of such
shares at such date, based upon the market price of the Company's
common stock were:
Name Shares Value
Maximilian de Clara 5,000 $23,100
Geert R. Kersten 84,940 $392,423
Dividends may be paid on shares of restricted stock owned by the
Company's officers and directors, although the Company has no
plans to pay dividends. Mr. Winship and Ms. Beckner did not own
any shares of the Company's Common Stock at September 30, 1995.
(5) The shares of Common Stock to be received upon the exercise of
all stock options granted during the period covered by the Table.
The amounts in this table include options granted in prior years
but which were repriced during the year ending September 30,
1995. See "Ten Year Option/SAR Repricings" table below.
(6) "LTIP" is an abbreviation for "Long-Term Incentive Plan". An
LTIP is any plan that is intended to serve as an incentive for
performance to occur over a period longer than one fiscal year.
Amounts reported in this column represent payments received
during the applicable fiscal year by the named officer pursuant
to an LTIP.
(7) All other compensation received that the Company could not
properly report in any other column of the Table including annual
Company contributions or other allocations to vested and unvested
defined contribution plans, and the dollar value of any insurance
premiums paid by, or on behalf of, the Company with respect to term
life insurance for the benefit of the named executive officer, and
the full dollar value of the remainder of the premiums paid by, or on
behalf of, the Company. Amounts in the table represent contributions
made by the Company to a 401(k) pension plan on behalf of persons
named in the table.
Long Term Incentive Plans Awards in Last Fiscal Year
None.
Employee Pension, Profit Sharing or Other Retirement Plans
During 1993 the Company implemented a defined contribution retire
ment plan, qualifying under Section 401(k) of the Internal Revenue
Code and covering substantially all the Company's employees. The
Company's contribution is equal to the lesser of 3% of each
employee's salary, or 50% of the employee's contribution. The 1995
expenses for this plan were $24,913. Other than the 401(k) Plan, the
Company does not have a defined benefit, pension plan, profit sharing
or other retirement plan.
Compensation of Directors
Standard Arrangements. The Company currently pays its directors
$1,500 per quarter, plus expenses. The Company has no standard
arrangement pursuant to which directors of the Company are
compensated for any services provided as a director or for committee
participation or special assignments.
Other Arrangements. The Company has from time to time granted
options to its outside directors, Mr. Soresi, Mr. Hudson and Mr.
Shalloway. See Stock Options below for additional information
concerning options granted to the Company's directors.
Employment Contracts
Effective August 1, 1994, the Company entered into a three
year em ployment agreement with Mr. Kersten. The employment agreement
provides that during the period between August 1, 1994 and July 31,
1995, the Company will pay Mr. Kersten an annual salary of $198,985.
During the years ending August 31, 1996 and 1997, the Company will pay
Mr. Kersten a salary of $218,883 and $240,771 respectively. In the
event that there is a material reduction in Mr. Kersten's authority,
duties or activities, or in the event there is a change in the control
of the Company, then the agreement allows Mr. Kersten to resign from
his position at the Company and receive a lump-sum payment from the
Company equal to 18 months salary. For purposes of the employment
agreement, a change in the control of the Company means the sale of
more than 50% of the outstanding shares of the Company's Common Stock,
or a change in a majority of the Company's directors. Pursuant to the
agreement, the Company also agreed to grant Mr. Kersten, in accordance
with the Company's 1994 Incentive Stock Option Plan, options to
purchase 50,000 shares of the Company's Common Stock.
Compensation Committee Interlocks and Insider Participation
The Company has a compensation committee comprised of all of
the Company's directors, with the exception of Mr. Kersten. During
the year ended September 30, 1995, Mr. de Clara was the only officer
participating in deliberations of the Company's compensation committee
concerning executive officer compensation. See "Transactions witih
Related Parties" below for information concerning transactions between
the Company and Mr. de Clara.
During the year ended September 30, 1995, no director of the
Company was also an executive officer of another entity, which had an
executive offi cer of the Company serving as a director of such entity
or as a member of the compensation committee of such entity.
Stock Options
The following tables set forth information concerning the
options granted, during the fiscal year ended September 30, 1995, to
the persons named below, and the fiscal year-end value of all
unexercised options (regardless of when granted) held by these
persons.
Options Granted During Fiscal Year Ending September 30, l995
Potential
Individual Grants (1) Realizable Value at
% of Total Assumed Annual Rates
Options of Stock Price
Granted to Exercise Appreciation for
Options Employees in Price Per Expiration Option Term (3)
Name Granted(#) Fiscal Year Share 1) Date 5% 10%
Maximilian 15,000 $2.87 3/19/01 $ 14,550 $30,750
de Clara 70,000 $2.87 11/1/01 $ 67,900 $176,400
70,000 $2.87 7/29/04 $272,300 $272,300
70,000 $3.87 7/31/05 $240,100 $501,200
225,000 32%
Geert R. 50,000 (2) $2.87 1/10/98 $ 20,500 $42,000
Kersten 750 $2.87 3/28/98 $ 287 $705
4,000 $2.87 10/31/99 $ 2,440 $5,320
10,000 $2.87 10/31/00 $ 7,900 $17,500
10,000 $2.87 3/19/01 $ 9,700 $22,100
50,000 $2.87 11/01/01 $ 48,500 $110,700
50,000 $2.87 7/29/04 $ 79,000 $194,500
50,000 $3.87 7/31/05 $171,500 $358,000
224,750 32%
M. Douglas 2,000 (2) $2.87 1/10/98 $ 720 $1,660
Winship 15,000 $2.87 4/4/04 $ 23,700 $58,350
5,000 $3.87 7/31/05 $ 17,150 $35,800
22,000 3%
Suzanne 5,000 (2) $2.87 1/10/98 $ 1,750 $4,150
Beckner 8,000 $2.87 7/11/04 $ 12,640 $31,120
12,000 $3.87 7/31/05 $ 41,160 $85,920
25,000 3.5%
(1) Includes options granted in prior fiscal years but which were
repriced in June 1995. See "Ten-Year Option/SAR Repricings" table
below.
(2) Options were granted in accordance with the Company's 1995 salary
reduction plan. Pursuant to the salary reduction plan, any
employee of the Company was allowed to receive options in exchange
for a one time reduction in such employee's salary.
(3) The potential realizable value of the options shown in the table
assuming the market price of the Company's Common Stock
appreciates in value from the date of the grant to the end of the
option term at 5% or 10%.
Option Exercises and Year End Option Values
Value of Unex-
Number of ercised In the-
Unexercised Money Options at
Options Fiscal Year-End
Shares (3) (4)
Acquired Value
on Exercise Realized Exercisable/ Exercisable/
Name (1) (2) Unexercisable Unexercisable
Maximilian de Clara 108,334/116,666 $189,584/$134,165
Geert R. Kersten 85,750/139,000 $150,062/$193,250
M. Douglas Winship 5,000/ 17,000 $ 8,750/$24,750
Suzanne Beckner 2,667/ 22,333 $ 4,667/$27,083
(1) The number of shares received upon exercise of options during the
fiscal year ended September 30, 1995.
(2) With respect to options exercised during the Company's fiscal year
ended September 30, 1995, the dollar value of the difference
between the option exercise price and the market value of the
option shares purchased on the date of the exercise of the
options.
(3) The total number of unexercised options held as of September 30,
1995, separated between those options that were exercisable and
those options that were not exercisable.
(4) For all unexercised options held as of September 30, 1995, the
aggregate dollar value of the excess of the market value of the stock
underlying those options (as of September 30, 1995) over the exercise
price of those unexercised options. Values are shown separately for
those options that were exercisable, and those options that were not
yet exercisable, on September 30, 1995.
Ten-Year Option/SAR Repricings
In June 1995 the Company lowered the exercise price on options
held by all of the Company's officers, directors and employees to
$2.87 per share. The options subject to this repricing allowed for the
purchase of up to 444,250 shares of the Company's Common Stock and
included options previously granted to those persons listed below.
The Company's Board of Directors lowered the exercise of these options
since at the time of repricing (June 10, 1995), the options no longer
provided a benefit to the option holders due to the difference between
the exercise price of the options and the market price of the
Company's Common Stock. The following table provides more information
concerning the repricing of these options.
Number of Length
of
Securities Market Exercise Original
Op-
Underlying Price of Price at tion Term
Options/ Stock at Time of Remaining at
SARs Re- Repricing Repricing New Date of Re-
priced or or Amend or Amend Exercise pricing or
Name Date Amended (#) ment ($) ment ($) Price($) Amendment
Maximilian 6/10/95 15,000 $2.87 $10.90 $2.87 63 mos.
de Clara 70,000 $2.87 $20.90 $2.87 70 mos.
70,000 $2.87 $8.70 $2.87 108 mos.
Geert R. 6/10/95 50,000 $2.87 $4.10 $2.87 30 mos.
Kersten 750 $2.87 $11.60 $2.87 33 mos.
4,000 $2.87 $4.00 $2.87 52 mos.
10,000 $2.87 $8.40 $2.87 64 mos.
10,000 $2.87 $10.90 $2.87 68 mos.
50,000 $2.87 $20.90 $2.87 76 mos.
50,000 $2.87 $8.70 $2.87 108 mos.
M. Douglas 6/10/95 2,000 $2.87 $4.10 $2.87 30 mos.
Winship 15,000 $2.87 $11.20 $2.87 105 mos.
Suzanne 6/10/95 5,000 $2.87 $4.10 $2.87 30 mos.
Beckner 8,000 $2.87 $6.80 $2.87 107 mos.
Stock Option and Bonus Plans
The Company has two Incentive Stock Option Plans, three NonQualified
Stock Option Plans and a Stock Bonus Plan. A summary description of
these Plans follows. In some cases these Plans are collectively referred
to as the "Plans".
Incentive Stock Option Plan. The two Incentive Stock Option
Plans collectively authorize the issuance of up to 200,000 shares of
the Company's Common Stock to persons that exercise options granted
pursuant to the Plan. Only Company employees may be granted options
pursuant to the Incentive Stock Option Plan.
To be classified as incentive stock options under the Internal
Reve nue Code, options granted pursuant to the Plans must be exercised
prior to the following dates:
(a) The expiration of three months after the date on
which an option holder's employment by the Company is
terminated (except if such termination is due to the
death or permanent and total disability);
(b) The expiration of 12 months after the date on which
an option holder's employment by the Company is
terminated, if such termination is due to the Employee's
permanent and total disability;
(c) In the event of an option holder's death while in
the employ of the Company, his executors or
administrators may exercise, within three months
following the date of his death, the option as to any of
the shares not previously exercised;
The total fair market value of the shares of Common Stock (determined
at the time of the grant of the option) for which any employee may be
granted options which are first exercisable in any calendar year may
not exceed $100,000.
Options may not be exercised until one year following the
date of grant. Options granted to an employee then owning more than
10% of the Common Stock of the Company may not be exercisable by its
terms after five years from the date of grant. Any other option
granted pursuant to the Plan may not be exercisable by its terms after
ten years from the date of grant.
The purchase price per share of Common Stock purchasable
under an option is determined by the Committee but cannot be less than
the fair market value of the Common Stock on the date of the grant of
the option (or 110% of the fair market value in the case of a person
owning more than 10% of the Company's outstanding shares).
Non-Qualified Stock Option Plan. The three Non-Qualified
Stock Op tion Plans collectively authorize the issuance of up to
960,000 shares of the Company's Common Stock to persons that exercise
options granted pursuant to the Plans. The Company's employees,
directors, officers, consultants and advisors are eligible to be
granted options pursuant to the Plans, provided however that bona fide
services must be rendered by such consultants or advisors and such
services must not be in connection with the offer or sale of
securities in a capital-raising transaction. The option exercise price
is determined by the Committee but cannot be less than the market
price of the Company's Common Stock on the date the option is granted.
Stock Bonus Plan. Up to 40,000 shares of Common Stock may be
granted under the Stock Bonus Plan. Such shares may consist, in whole
or in part, of authorized but unissued shares, or treasury shares.
Under the Stock Bonus Plan, the Company's employees, directors,
officers, consultants and advisors are eligible to receive a grant of
the Company's shares, provided however that bona fide services must be
rendered by consultants or advisors and such services must not be in
connection with the offer or sale of securities in a capital-raising
transaction.
Other Information Regarding the Plans. The Plans are
administered by the Company's Compensation Committee ("the
Committee"), each member of which is a director of the Company. The
members of the Committee were selected by the Company's Board of
Directors and serve for a one-year tenure and until their successors
are elected. A member of the Committee may be removed at any time by
action of the Board of Directors. Any vacancies which may occur on
the Committee will be filled by the Board of Directors. The Committee
is vested with the authority to interpret the provisions of the Plans
and supervise the administration of the Plans. In addition, the
Committee is empowered to select those persons to whom shares or
options are to be granted, to determine the number of shares subject
to each grant of a stock bonus or an option and to determine when, and
upon what conditions, shares or options granted under the Plans will
vest or otherwise be subject to forfeiture and cancellation.
In the discretion of the Committee, any option granted
pursuant to the Plans may include installment exercise terms such that
the option becomes fully exercisable in a series of cumulating
portions. The Committee may also accelerate the date upon which any
option (or any part of any options) is first exercisable. Any shares
issued pursuant to the Stock Bonus Plan and any options granted
pursuant to the Incentive Stock Option Plan or the NonQualified Stock
Option Plan will be forfeited if the "vesting" schedule established by
the Committee administering the Plan at the time of the grant is not
met. For this purpose, vesting means the period during which the
employee must re main an employee of the Company or the period of time
a nonemployee must provide services to the Company. At the time an
employee ceases working for the Company (or at the time a non-employee
ceases to perform services for the Company), any shares or options not
fully vested will be forfeited and cancelled. At the discretion of the
Committee payment for the shares of Common Stock underlying options
may be paid through the delivery of shares of the Company's Common
Stock having an aggregate fair market value equal to the option price,
provided such shares have been owned by the option holder for at least
one year prior to such exercise. A combination of cash and shares of
Common Stock may also be permitted at the discretion of the Committee.
Options are generally non-transferable except upon death of
the op tion holder. Shares issued pursuant to the Stock Bonus Plan
will generally not be transferable until the person receiving the
shares satisfies the vest ing requirements imposed by the Committee
when the shares were issued.
The Board of Directors of the Company may at any time, and
from time to time, amend, terminate, or suspend one or more of the
Plans in any manner they deem appropriate, provided that such
amendment, termination or suspension will not adversely affect rights
or obligations with respect to shares or options previously granted.
The Board of Directors may not, without shareholder approval: make any
amendment which would materially modify the eligibility requirements
for the Plans; increase or decrease the total number of shares of
Common Stock which may be issued pursuant to the Plans except in the
case of a reclassification of the Company's capital stock or a
consolidation or merger of the Company; reduce the minimum option
price per share; extend the period for granting options; or materially
increase in any other way the benefits accruing to employees who are
eligible to participate in the Plans.
Prior Stock Option and Bonus Plan. The Company previously
had in effect a Stock Option and Bonus Plan ("the 1987 Plan") which
provided for the grant to the Company's officers, directors, employees
and consultants of either (i) shares of the Company's Common Stock for
services rendered or (ii) options to purchase shares of Common Stock.
The 1987 Plan was terminated by the Company in 1992. Since the 1987
Plan was terminated, no further options will be granted and no further
bonus shares will be issued pursuant to the 1987 Plan. However,
options previously granted may nevertheless still be exercised
according to the terms of the options. Prior to the termination of the
1987 Plan, the Company granted options to purchase 189,250 shares of
the Company's Common Stock. To date, options to purchase 6,000 shares
have been exercised. In June, 1995 the Company cancelled options to
purchase 176,250 shares that had previously been granted under this
Plan and reissued options for the same number of shares under the
Company's other stock option plans. See "Option Summary" below. Option
Summary. The following sets forth certain information, as of March
31, 1996, concerning the stock options granted by the Company. Each
option represents the right to purchase one share of the Company's
Common Stock.
Total Shares
Shares Reserved for Remaining
Reserved Outstanding Options
Name of Plan Under Plan Options Under Plan
1987 Stock Option and Bonus Plan 200,000 7,000 (1)
1992 Incentive Stock Option Plan 100,000 94,050 3,283
1992 Non-Qualified Stock Option
Plan 60,000 45,000 -
1994 Incentive Stock Option Plan 100,000 100,000 -
1994 Non-Qualified Stock Option
Plan 100,000 97,250 2,750
1995 Non-Qualified Stock Option
Plan 800,000 638,626 111,374
TOTAL: 981,926 117,407
(1) This Plan was terminated in 1992 and as a result, no new options
will be granted pursuant to this Plan.
As of March 31, 1996, 1,500 shares had been issued pursuant
to the Company's 1992 Stock Bonus Plan. All of these shares were
issued during the fiscal year ending September 30, 1994.
Transactions with Related Parties
The technology and know-how licensed to the Company was
developed by a group of researchers under the direction of Dr. Hans-
Ake Fabricius and was assigned, during l980 and l98l, to Hooper
Trading Company, N.V., a Netherlands Antilles' corporation ("Hooper"),
and Shanksville Corporation, also a Netherlands Antilles corporation
("Shanksville"). Mr. de Clara and Dr. Fabricius own 50% and 30%,
respectively, of each of these companies. The technology and know-how
assigned to Hooper and Shanksville was licensed to Sittona Company,
B.V., a Netherlands corporation ("Sittona"), effective September, l982
pursuant to a licensing agreement which requires Sittona to pay to
Hooper and Shanksville royalties on income received by Sittona
respecting the technology and know-how licensed to Sittona. In l983,
Sittona licensed this technology to the Company and received from the
Company a $1,400,000 advance royalty payment. At such time as the
Company generates revenues from the sale or sublicense of this
technology, the Company will be required to pay royalties to Sittona
equal to l0% of net sales and l5% of the licensing royalties received
from third parties. In that event, Sittona, pursuant to its licensing
agreements with Hooper and Shanksville, will be required to pay to
those companies a minimum of l0% of any royalty payments received from
the Company.
In l985, Mr. de Clara acquired all of the issued and
outstanding stock of Sittona. Mr. de Clara and Dr. Fabricius, because
of their ownership interests in Hooper and Shanksville, could receive
approximately 50% and 30% respectively of any royalties paid by
Sittona to Hooper and Shanksville, and Mr. de Clara, through his
interest in all three companies (Hooper, Shanksville and Sittona),
will receive up to 95% of any royalties paid by the Company.
Legal Matters
During the year ended September 30, 1993, the Company paid
Mr. de Clara approximately $23,000 for legal expenses incurred by Mr.
de Clara in defending a legal action brought against Mr. de Clara by
an unrelated third party who claimed that Mr. de Clara owed the third
party 25,000 shares of the Company's Common Stock as a fee for
introducing the Company (in 1985) to persons who allegedly were
willing to (but did not) provide funds to the Company. Although the
Company was not a party to this proceeding, the Company's Board of
Directors has determined, based upon information supplied by Mr. de
Clara, that the third party's claims against Mr. de Clara arose as a
result of Mr. de Clara's efforts to obtain funding for the Company.
Accordingly, the Board of Directors determined that Mr. de Clara was
entitled by law to indemnification and in October, 1993, the Company
issued 25,000 shares of its common stock to the third party claiming
the shares from Mr. de Clara.
The Securities and Exchange Commission found that between
1988 and 1991 Mr. de Clara failed to timely file reports of beneficial
ownership re quired by the Securities Exchange Act of 1934. In May,
1992, the Commission entered an order requiring Mr. de Clara to file
reports of beneficial owner ship on a timely basis.
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of May 31, 1996,
information with respect to the only persons owning beneficially 5% or
more of the outstanding Common Stock and the number and percentage of
outstanding shares owned by each director and officer and by the
officers and directors as a group. Unless otherwise indicated, each
owner has sole voting and investment powers over his shares of Common
Stock.
Number of Percent of
Name and Address Shares (1) Class
(4)
Maximilian de Clara 48,334 (2) *
Bergstrasse 79
6078 Lungern,
Obwalden, Switzerland
Geert R. Kersten 251,690 (3) 4.1%
66 Canal Center Plaza
Suite 510
Alexandria, VA 223l4
Patricia B. Prichep 18,030 *
66 Canal Center Plaza
Suite 510
Alexandria, VA 223l4
M. Douglas Winship 12,000 *
66 Canal Center Plaza
Suite 510
Alexandria, VA 223l4
Dr. Eyal Talor 9,334 *
66 Canal Center Plaza
Suite 510
Alexandria, VA 223l4
Dr. Prem Sarin 10,000 *
66 Canal Center Plaza
Suite 510
Alexandria, VA 22314
Mark Soresi 14,375 *
l0l0 Wayne Ave., 8th Floor
Silver Spring, MD 209l0
F. Donald Hudson 10,500 *
53 Mt. Vernon Street
Boston, MA 02108
Edwin A. Shalloway 10,500 *
413 North Washington Street
Alexandria, VA 22314
All Officers and Directors
as a Group (10 persons) 384,763 6.0%
*Less than 1%
(1) Includes shares issuable prior to August 1, 1996 upon the
exercise of options or warrants granted to the following persons:
Options or Warrants Exercisable
Name Prior to August 1,
1996
Maximilian de Clara 43,334
Geert R. Kersten 146,750
Patricia B. Prichep 15,000
M. Douglas Winship 12,000
Dr. Eyal Talor 7,834
Mark Soresi 12,500
F. Donald Hudson 10,500
Edwin A. Shalloway 10,500
Dr. Prem Sarin 10,000
See "Management" for information concerning outstanding
stock options.
(2) All shares are held of record by Milford Trading, Ltd., a
corporation organized pursuant to the laws of Liberia. All of
the issued and outstanding shares of Milford Trading, Ltd. are
owned beneficially by Mr. de Clara.
(3) Amount includes shares held in trust for the benefit of Mr.
Kersten's minor children. Geert R. Kersten is the stepson of
Maximilian de Clara.
(4) Amount excludes shares issuable upon the conversion of the
Company's Convertible Notes as well as shares which may be
issued upon the exercise and/or conversion of other options,
warrants and convertible securities previously issued by the
Company. See "Dilution and ComparativeShare Data".
SELLING SHAREHOLDERS
In March l996 the Company sold $l,250,000 of Convertible Notes
("Notes") to two persons. The Notes are convertible from time to
time, in whole or in part, into shares of the Company's Common
Stock upon certain terms. See "Description of Securities". The
holders of the Convertible Notes, to the event they convert their
Notes into shares of Common Stock, are sometimes referred to in
this Prospectus as the "Selling Shareholders" and the shares
issuable upon the conversion of the Notes are being offered by
means of this Prospectus. The Company will not receive any
proceeds from the sale of the shares by the Selling Shareholders.
The names and addresses of the Selling Shareholders are:
Shares Which
may be Ac Shares to Share
Shares quired Upon be Sold in Owner-
Presently Conversion This ship After
Name and Address Owned of Notes (1) Offering (2) Offering
Killeba Holdings, S.A. - 240,000 240,000 -
102 Langeherr Entalse
Street
Antwerp, 2018 BELGIUM
Rita Folger - 10,000 10,000 -
c/o Oscar Folger
521 Fifth Avenue
24th Floor
New York, NY 10175
(1) Represents shares issuable upon the conversion of the Notes based
upon the closing price of the Company's Common Stock on May 30,
1996 ($11.37). The actual number of shares to be issued upon the
conversion of the Notes will depend upon the price of the
Company's Common Stock at the time of conversion.
(2) Assumes all shares owned, or which may be acquired, by the Selling
Share holders, are sold to the public by means of this Prospectus.
Manner of Sale. The shares of Common Stock owned, or which
may be acquired, by the Selling Shareholders may be offered and sold
by means of this Prospectus from time to time as market conditions
permit in the overthecounter market, or otherwise, at prices and terms
then prevailing or at prices related to the then-current market price,
or in negotiated
transactions. These shares may be sold by one or more of the
following methods, without limitation: (a) a block trade in which a
broker or dealer so engaged will attempt to sell the shares as agent
but may position and resell a portion of the block as
principal to facilitate the transaction; (b) purchases by a broker or
dealer as principal and resale by such broker or dealer for its
account pursuant to this Prospectus; (c) ordinary brokerage
transactions and transactions in which the broker solicits purchasers;
and (d) face-toface transactions between sellers and purchasers
without a broker/dealer. In effecting sales, brokers or dealers
engaged by the Selling Shareholders may arrange for other brokers or
dealers to participate. Such brokers or dealers may receive
commissions or discounts from Selling Shareholders in amounts to be
negotiated. Such brokers and dealers and any other participating
brokers or dealers may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales.
DESCRIPTION OF SECURITIES
Common Stock
The Company is authorized to issue 100,000,000 shares of Common
Stock, (the "Common Stock"). Holders of Common Stock are each
entitled to cast one vote for each share held of record on all
matters presented to shareholders. Cumulative voting is not
allowed; hence, the holders of a majority of the outstanding
Common Stock can elect all directors.
Holders of Common Stock are entitled to receive such
dividends as
may be declared by the Board of Directors out of funds legally
available therefor and, in the event of liquidation, to share
pro rata in any
distribution of the Company's assets after payment of liabilities.
The board is not obligated to declare a dividend. It is not
anticipated that dividends will be paid in the foreseeable future.
Holders of Common Stock do not have preemptive rights to
subscribe to additional shares if issued by the Company. There are
no conversion, redemption, sinking fund or similar provisions
regarding the Common Stock. All of the outstanding shares of Common
Stock are fully paid and nonassessable and all of the shares of
Common Stock offered as a component of the Units will be, upon
issuance, fully paid and nonassessable. Preferred Stock
The Company is authorized to issue up to 200,000 shares of
Preferred Stock. The Company's Articles of Incorporation provide
that the Board of Directors has the authority to divide the Preferred
Stock into series and, within the limitations provided by Colorado
statute, to fix by resolution the voting power, designations,
preferences, and relative participation, special rights, and the
qualifications, limitations or restrictions of the shares of any
series so established. As the Board of Directors has authority to
establish the terms of, and to issue, the Preferred Stock without
shareholder approval, the Preferred Stock could be issued to defend
against any attempted takeover of the Company.
See "Dilution and Comparative Share Data" for information
concerning the Company's Series A Preferred Stock.
Publicly Traded Warrants
In connection with the Company's February, 1992 public
offering, the Company issued 5,175,000 Warrants. Every ten Warrants
entitle the holder to purchase one share of the Company's Common
Stock at a price of $46.50 per share prior to February 7, 1997. The
Company, upon 30-days notice, may accelerate the expiration date of
the Warrants, provided, however, that at the time the Company gives
such notice of acceleration (1) the Company has in effect a current
registration statement covering the
shares of Common Stock issuable upon the exercise of the Warrants and
(2) at any time during the 30 day period preceding such notice, the
average closing bid price of the Company's Common Stock has been at
least 20% higher than the warrant exercise price for 15 consecutive
trading days. If the expiration date is accelerated, all Warrants not
exercised within the 30-day period will expire.
Other provisions of the Warrants are set forth below. This
information is subject to the provisions of the Warrant Certificate
representing the Warrants.
1. Holders of the Warrants may sell the Warrants rather
than exer cise them. However, there can be no assurance that a
market will develop or continue as to the Warrants.
2. Unless exercised within the time provided for exercise,
the Warrants will automatically expire.
3. The exercise price of the Warrants may not be increased
during the term of the Warrants, but the exercise price may be
decreased at the dis cretion of the Company's Board of Directors by
giving each Warrant holder no tice of such decrease. The exercise
period for the Warrants may be extended by the Company's Board of
Directors giving notice of such extension to each Warrant holder of
record.
4. There is no minimum number of shares which must be
purchased upon exercise of the Warrants.
5. The holders of the Warrants in certain instances are
protected against dilution of their interests represented by the
underlying shares of Common Stock upon the occurrence of stock
dividends, stock splits, reclassifications, and mergers.
6. The holders of the Warrants have no voting power and are
not entitled to dividends. In the event of a liquidation, dissolution,
or winding up of the Company, holders of the Warrants will not be
entitled to participate in the distribution of the Company's assets.
Convertible Notes
In March 1996 the Company sold $l,250,000 of Convertible Notes
("Notes") to two persons. The Notes are convertible from time to time
in whole or in part, into shares of the Company's Common Stock. The
conversion price is the lesser of (i) $5 per share or (ii) 80% of the
average closing bid
price of the Company's Common Stock during the five trading days
immediately preceding the date of such conversion. Notwithstanding the
above, the conversion price may not be less than $2.40 per share. The
Notes are payable on December 1, 1996 and accrue interest at 10% per
annum. The shares issuable upon the conversion of the Notes are being
offered by means of this Prospectus.
Transfer Agent
American Securities Transfer, Inc., of Denver, Colorado, is the
transfer agent for the Company's Common Stock.
LITIGATION
In February 1996 the Company filed a lawsuit against ImmunoRx
and Dr. John Hadden for contract breach, tortious interference of
contract and patent infringement concerning the Company's Multikine
drug. The lawsuit, filed in the U.S. Distrit Court for the Middle
District of Florida, seeks damages and the termination of certain
research and clinical studies being conducted by ImmunoRx and Dr.
Hadden. From 1984 to 1992, Dr. Hadden consulted with the Company,
performed research on Multikine and manufactured Multikine for the
Company's head and neck cancer study in Florida. In early 1993, Dr.
Hadden signed a separation agreement with the Company acknowledging the
Company's ownership of both Multikine and the research results. The
Company has learned that Dr. Hadden and ImmunoRx are apparently making
copies of Multikine, in contravention of the separation agreement and
the patents covering Multikine, and have begun clinical studies in a
foreign country using a copy of Multikine. See "Business Compounds and
Processes Licensed to the Company".
EXPERTS
The financial statements as of September 30, 1995 and 1994 and
for each of the three years in the period ended September 30, 1995
included in this prospectus have been audited by Deloitte & Touche LLP,
independent audi tors, as stated in their report appearing herein, and
are so included in re liance upon the report of such firm given upon
their
authority as experts in accounting and auditing.
INDEMNIFICATION
The Company's Bylaws authorize indemnification of a director,
officer, employee or agent of the Company against expenses incurred by
him in connection with any action, suit, or proceeding to which he is
named a party by reason of his having acted or served in such capacity,
except for liabilities arising from his own misconduct or negligence in
performance of his duty. In addition, even a director, officer,
employee, or agent of the Company who was found liable for misconduct
or negligence in the performance of his duty may obtain such
indemnification if, in view of all the circumstances in the case, a
court of competent jurisdiction determines such person is fairly and
reasonably entitled to indemnification. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted
to directors, officers, or persons controlling the Company pursuant to
the foregoing provisions, the Company has been informed that in the
opinion of the Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Act and is therefore
unenforceable.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange
Commission, 450 5th Street, N.W., Washington, D.C. 20001, a
Registration Statement under the Securities Act of l933, as amended,
with respect to the securities offered hereby. This Prospectus does
not contain all of the information set forth in the Registration
Statement. For further information with respect to the Company and
such securities, reference
is made to the Registration Statement and to the Exhibits filed
therewith. Statements contained in this Prospectus as to the contents
of any contract or other documents are summaries which are not
necessarily complete, and in each instance reference is made to the
copy of such contract or other document filed as an Exhibit to the
Registration Statement, each such statement
being qualified in all respects by such reference. Copies of each
document may be inspected at the Commission's offices at 450 Fifth
Street, N.W., Washington, D.C., 20549, and at the Northeast Regional
Office, 7 World Trade Center, 13th Floor, New York, New York 10048 and
the Midwest Regional Office, Suite 1400, 500 West Madison Street,
Chicago, Illinois 60681-2511. Copies may be obtained at the
Washington, D.C. office upon payment of the charges prescribed by the
Commission. 2226D
No dealer, salesman or other person has been authorized to
give any information or to make any representations, other than those
contained in this Prospectus. Any information or representation not
contained in this Prospectus must not be relied upon as having been
authorized by the Company. This Prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy, the securities
offered hereby in any state or other jurisdiction to any person to
whom it is unlawful to make such offer or solicitation. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under
any circumstances, create an implication that there has been no change
in the affairs of the Company since the date hereof.
TABLE OF CONTENTS
Page Prospectus Summary ...........................................
7
Glossary of Technical Terms ..................................
10
Risk Factors .................................................
11
Dilution and Comparative Share Data ..........................
17
Market Information ...........................................
21
Selected Financial Data ......................................
22
Management's Discussion and Analysis .........................
23
Business
..................................................... 27
Management
................................................... 40
Principal Shareholders
....................................... 52
Selling Shareholders
......................................... 54
Description of Securities
.................................... 55
Litigation
................................................... 57
Experts
...................................................... 57
Indemnification
.............................................. 57
Additional Information
....................................... 58
Financial Statements
250,000 Shares of Common Stock
CEL-SCI CORPORATION
PROSPECTUS