CEL-SCI (CVM) - 2023 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited condensed financial statements, comprehensive notes, management's discussion and analysis, and disclosures on market risks and internal controls Condensed Financial Statements This section presents the unaudited condensed financial statements for CEL-SCI Corporation, including balance sheets, statements of operations for three and nine months, statements of stockholders' equity, and statements of cash flows, providing a snapshot of the company's financial position and performance Condensed Balance Sheets This section provides a snapshot of the company's assets, liabilities, and equity at specific reporting dates Condensed Balance Sheets | Metric | June 30, 2023 (Unaudited) | September 30, 2022 | | :---------------------------------- | :-------------------------- | :------------------- | | ASSETS | | | | Cash and cash equivalents | $5,135,070 | $22,672,138 | | Total current assets | $7,731,746 | $25,435,916 | | Total assets | $32,318,968 | $50,523,706 | | LIABILITIES & EQUITY | | | | Total current liabilities | $5,292,473 | $4,663,751 | | Total liabilities | $17,529,569 | $18,360,499 | | Total stockholders' equity | $14,789,399 | $32,163,207 | | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $32,318,968 | $50,523,706 | - Total assets decreased by approximately $18.2 million from September 30, 2022, to June 30, 2023, primarily driven by a significant reduction in cash and cash equivalents[5] - Stockholders' equity decreased by approximately $17.4 million, indicating a decline in the company's net worth over the period[6] Condensed Statements of Operations (Nine Months Ended June 30, 2023 and 2022) This section details the company's revenues, expenses, and net loss for the nine-month periods ended June 30, 2023 and 2022 Condensed Statements of Operations (Nine Months Ended June 30, 2023 and 2022) | Metric | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | | :------------------------------------------ | :------------------------------ | :------------------------------ | | Research and development expenses | $17,203,823 | $18,893,857 | | General and administrative expenses | $6,804,729 | $8,220,768 | | Total operating expenses | $24,008,552 | $27,114,625 | | Operating loss | $(24,008,552) | $(27,114,625) | | Net loss | $(24,563,599) | $(28,238,682) | | Net loss per common share – basic and diluted | $(0.57) | $(0.66) | | Weighted average common shares outstanding | 43,761,395 | 43,124,972 | - Net loss decreased by approximately $3.67 million (13%) for the nine months ended June 30, 2023, compared to the same period in 2022, primarily due to lower operating expenses and reduced interest expense[42] - Research and development expenses decreased by 9% and general and administrative expenses decreased by 17% year-over-year[42] Condensed Statements of Operations (Three Months Ended June 30, 2023 and 2022) This section presents the company's revenues, expenses, and net loss for the three-month periods ended June 30, 2023 and 2022 Condensed Statements of Operations (Three Months Ended June 30, 2023 and 2022) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | | :------------------------------------------ | :------------------------------- | :------------------------------- | | Research and development expenses | $5,727,789 | $6,286,873 | | General and administrative expenses | $2,453,968 | $2,432,518 | | Total operating expenses | $8,181,757 | $8,719,391 | | Operating loss | $(8,181,757) | $(8,719,391) | | Net loss | $(8,367,281) | $(9,632,584) | | Net loss per common share – basic and diluted | $(0.19) | $(0.23) | | Weighted average common shares outstanding | 44,254,363 | 43,174,775 | - Net loss for the three months ended June 30, 2023, decreased by approximately $1.27 million (13%) compared to the same period in 2022[43] - Research and development expenses decreased by 9% while general and administrative expenses remained consistent year-over-year for the quarter[43] Condensed Statements of Stockholders' Equity This section outlines changes in the company's equity components, including common stock, additional paid-in capital, and accumulated deficit Condensed Statements of Stockholders' Equity | Metric | September 30, 2022 | June 30, 2023 | | :-------------------------------- | :----------------- | :----------------- | | Common Shares Outstanding | 43,448,317 | 44,748,437 | | Common Stock Amount | $434,484 | $447,484 | | Additional Paid-In Capital | $486,625,816 | $493,802,607 | | Accumulated Deficit | $(454,897,093) | $(479,460,692) | | Total Stockholders' Equity | $32,163,207 | $14,789,399 | - Total stockholders' equity decreased from $32.16 million at September 30, 2022, to $14.79 million at June 30, 2023, primarily due to accumulated net losses[9][44] - The company issued additional common shares through warrant exercises, 401(k) contributions, stock/options for non-employee services, and a public offering, increasing common shares outstanding and additional paid-in capital[9][44] Condensed Statements of Cash Flows This section presents the company's cash inflows and outflows from operating, investing, and financing activities for the nine-month periods Condensed Statements of Cash Flows | Metric | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | | :------------------------------------------ | :------------------------------ | :------------------------------ | | Net cash used in operating activities | $(17,803,797) | $(13,327,230) | | Net cash (used in) provided by investing activities | $(361,892) | $5,507,433 | | Net cash provided by (used in) financing activities | $628,621 | $(166,678) | | NET DECREASE IN CASH AND CASH EQUIVALENTS | $(17,537,068) | $(7,986,475) | | CASH AND CASH EQUIVALENTS, END OF PERIOD | $5,135,070 | $28,073,673 | - Net cash used in operating activities increased by approximately $4.48 million (34%) in the nine months ended June 30, 2023, compared to the prior year[11] - Cash and cash equivalents significantly decreased by $17.54 million, resulting in an ending balance of $5.14 million as of June 30, 2023[11] Notes to Condensed Financial Statements The notes provide detailed explanations of the accounting policies, significant estimates, and specific financial statement line items, including liquidity concerns, equity transactions, fair value measurements, related party agreements, commitments, patent amortization, and loss per share calculations A. Basis of Presentation and Summary of Significant Accounting Policies This section outlines the principles used in preparing the financial statements and summarizes the key accounting policies adopted by the company - The unaudited condensed financial statements are prepared in accordance with U.S. GAAP, with certain information and footnote disclosures omitted as permitted by SEC rules for interim reports[23] - The Company's ability to continue as a going concern is in substantial doubt due to recurring operating losses and future liquidity needs[24][37] - Key accounting policies include recording property and equipment at cost and depreciating over 5-7 years, capitalizing patent expenditures and amortizing over 17 years or useful life, and recognizing lease liabilities based on incremental borrowing rates[26][27][52] - Stock-based compensation is measured at fair value on the grant date using the Black-Scholes model for options with service conditions and Monte Carlo simulation for awards with performance/market conditions[32][55][56] B. Liquidity This section addresses the company's ability to meet its short-term and long-term financial obligations and its plans for future capital raising - Due to recurring losses and future capital requirements, there is substantial doubt about the Company's ability to continue as a going concern[37][60] - The Company plans to raise additional capital through corporate partnerships, debt, and/or equity financings, citing past success and positive Phase 3 study results for Multikine as reasons for optimism[61] - Failure to raise necessary funds may lead to curtailment of operations[61] C. Stockholders' Equity This section details transactions affecting the company's equity, including stock sales, equity compensation, and warrant activities Proceeds from the Sale of Common Stock This section reports on the capital raised through the issuance and sale of common stock - In April 2023, the Company sold 794,117 shares of common stock at $1.70 per share, generating approximately $1.2 million in aggregate proceeds[38] - The underwriters fully exercised their 30-day option in May 2023, purchasing an additional 119,117 shares for approximately $190,000[90] Equity Compensation This section details the company's stock option activity, including grants, exercises, forfeitures, and expirations Equity Compensation Activity | Metric | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | | :---------------- | :------------------------------ | :------------------------------ | | Options granted | 6,500 | 1,975,250 | | Options exercised | - | 6,500 | | Options forfeited | 179,832 | 20,166 | | Options expired | 58,787 | 13,614 | - In November 2021, 250,000 performance-based stock options were granted to officers, vesting upon FDA approval of Multikine in specific regions; no compensation cost was recognized as of June 30, 2023, due to the uncertainty of the performance condition[91] Stock-Based Compensation Expense This section presents the expenses recognized for stock-based awards granted to employees and non-employees Stock-Based Compensation Expense | Category | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | | :----------- | :------------------------------ | :------------------------------ | | Employees | $4,976,338 | $9,102,774 | | Non-employees | $473,723 | $603,147 | | Total | $5,450,061 | $9,705,921 | | | | | | Category | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | | :----------- | :------------------------------- | :------------------------------- | | Employees | $1,540,219 | $2,447,772 | | Non-employees | $188,001 | $200,877 | | Total | $1,728,220 | $2,648,649 | - Total stock-based compensation expense for employees and non-employees decreased significantly for both the nine-month and three-month periods ended June 30, 2023, compared to the prior year[92] Warrants and Non-Employee Options This section provides details on outstanding warrants and options issued to non-employees, including their terms and exercise activity Outstanding Warrants and Non-Employee Options | Warrant/Options | Issue Date | Shares Issuable | Exercise Price | Expiration Date | | :---------------- | :--------- | :-------------- | :------------- | :-------------- | | Series N | 8/18/2008 | 85,339 | $3.00 | 8/18/2024 | | Series UU | 6/11/2018 | 93,603 | $2.80 | 6/30/2024 | | Series X | 1/13/2016 | 120,000 | $9.25 | 7/13/2024 | | Series Y | 2/15/2016 | 26,000 | $12.00 | 8/15/2024 | | Series MM | 6/22/2017 | 333,432 | $1.86 | 6/22/2024 | | Series NN | 7/24/2017 | 200,087 | $2.52 | 7/24/2024 | | Series RR | 10/30/2017 | 234,009 | $1.65 | 10/30/2024 | | Consultant Options | 7/28/2017 | 10,000 | $2.18 | 7/27/2027 | - As of June 30, 2023, no derivative liabilities were outstanding, compared to $366,791 in net gain on warrant liabilities for the nine months ended June 30, 2022[69][96][106] - During the nine months ended June 30, 2023, 217,752 equity warrants (Series RR and SS) were exercised for gross proceeds of $447,291[98] - The expiration date of Series RR warrants was extended by two years in October 2022, resulting in an incremental cost of approximately $172,000 recorded as a deemed dividend[100][106] - The Company issued 115,321 restricted common shares to consultants for services during the nine months ended June 30, 2023, with a weighted average grant date fair value of $2.45[75] D. Fair Value Measurements This section describes the company's methodology for measuring fair value and the classification of financial instruments within the fair value hierarchy - The Company classifies fair value balances using a three-level hierarchy, prioritizing observable inputs (Level 1) and giving lowest priority to unobservable inputs (Level 3)[77][79] - As of June 30, 2023, and September 30, 2022, the Company did not have any Level 3 derivative instruments[80] E. Related Party Transactions This section discloses transactions and agreements with parties that have a special relationship with the company Clinical Research Agreement This section details the co-development and revenue sharing agreement for the company's Phase 3 Clinical Trial - Under a co-development and revenue sharing agreement, Ergomed agreed to contribute up to $12 million towards the Company's Phase 3 Clinical Trial in exchange for milestone and royalty payments[107][156] - Approximately $11.8 million of Ergomed's committed $12 million contribution has been realized as of June 30, 2023, recorded as a credit to research and development expense[107][156] F. Commitments and Contingencies This section outlines the company's contractual obligations and potential liabilities arising from various agreements and legal matters Lease Agreements This section provides details on the company's finance and operating lease obligations and related assets - The net book value of finance lease right-of-use assets was approximately $9.6 million and finance lease liabilities were approximately $12.1 million as of June 30, 2023[83] - Total cash paid for finance leases was approximately $1.9 million for both nine-month periods ended June 30, 2023 and 2022[83] - The Company deposited approximately $2.3 million with its landlord in January 2023 due to falling below a stipulated cash threshold for the San Tomas lease[109] - Operating lease right-of-use assets were approximately $1.7 million and operating lease liabilities were approximately $1.9 million as of June 30, 2023[112] G. Patents This section reports on patent-related expenses, including impairment charges and amortization costs - No patent impairment charges were recorded for the nine or three months ended June 30, 2023, compared to $31,000 for the nine months ended June 30, 2022[113] - Amortization of patent costs totaled approximately $29,000 for the nine months ended June 30, 2023, and $9,000 for the three months ended June 30, 2023[113] H. Loss Per Common Share This section details the calculation of basic and diluted loss per common share for the reporting periods Loss Per Common Share | Metric | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | | :------------------------------------------ | :------------------------------ | :------------------------------ | | Net loss available to common shareholders | $(24,735,151) | $(28,533,091) | | Weighted average shares outstanding | 43,761,395 | 43,124,972 | | Basic and diluted loss per common share | $(0.57) | $(0.66) | | | | | | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | | :------------------------------------------ | :------------------------------- | :------------------------------- | | Net loss available to common shareholders | $(8,367,281) | $(9,926,993) | | Weighted average shares outstanding | 44,254,363 | 43,174,775 | | Basic and diluted loss per common share | $(0.19) | $(0.23) | - Potentially dilutive shares (options, warrants, unvested restricted stock) were excluded from diluted EPS calculations for all periods as their inclusion would be anti-dilutive[85][114] J. Subsequent Events This section discloses significant events that occurred after the balance sheet date but before the financial statements were issued - On July 17, 2023, the Company sold 2,500,000 shares of common stock at $2.00 per share, generating approximately $4.6 million in aggregate net proceeds[115] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance and condition, highlighting the progress of its lead immunotherapy Multikine, liquidity challenges, and key factors influencing operating results and accounting estimates Overview This section provides a general summary of the company's business, key product developments, and strategic direction - The Company completed its 9.5-year pivotal Phase 3 study for Multikine in advanced head and neck cancer, showing a 14.1% absolute 5-year overall survival benefit in the surgery plus radiation treatment arm (62.7% vs. 48.6% for control)[137][138] - The overall study did not meet its primary endpoint of a 10% improvement in overall survival when both treatment arms (radiation and chemoradiation) were combined, as chemotherapy negated Multikine's immunological effect[117] - Commercialization of Multikine in Canada may be possible as early as 2024, with the Company preparing an application for Notice of Compliance with Conditions (NOCC) approval as advised by Health Canada[119] - The Company is also developing LEAPS (Ligand Epitope Antigen Presentation System) technology, with CEL-4000 as a lead peptide-based immunotherapy for rheumatoid arthritis in pre-clinical development[139] Liquidity and Capital Resources This section discusses the company's cash position, funding sources, and future capital requirements to support its operations and development activities - The Company has historically financed operations through equity issuances, convertible notes, loans, and research grants, and anticipates continued reliance on these methods due to ongoing net operating losses[121][141] - Cash and cash equivalents decreased by approximately $17.5 million during the nine months ended June 30, 2023, primarily due to $17.8 million used in operations, including a $2.3 million landlord deposit[143] - The Company incurred approximately $64.3 million in direct costs for the Phase 3 clinical trial as of June 30, 2023, with an estimated $0.7 million remaining[142] - The Company will need to raise additional capital to continue research efforts and achieve regulatory approval, with no assurance of obtaining sufficient funds on acceptable terms[155] Results of Operations and Financial Condition This section analyzes the company's financial performance, including operating expenses, net interest expense, and derivative gains, for the reporting periods - Net operating loss for the nine months ended June 30, 2023, was approximately $24.0 million, including $5.0 million in stock-based employee compensation and $3.0 million in depreciation and amortization[125] Operating Expenses and Other Items | Expense Category | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | Change ($) | Change (%) | | :----------------------- | :------------------------------ | :------------------------------ | :--------- | :--------- | | Research and Development | $17,203,823 | $18,893,857 | $(1,689,034) | -9% | | General and Administrative | $6,804,729 | $8,220,768 | $(1,416,039) | -17% | | Net Interest Expense | $(493,522) | $(1,460,055) | $966,533 | -66% | | Derivative Gains | $0 | $366,791 | $(366,791) | -100% | - The decrease in R&D expenses was primarily due to a $2.3 million decrease in employee stock compensation and an $0.8 million decrease in Phase 3 study expenses, partially offset by a $1.3 million increase in commercialization preparation costs[159] - Net interest expense decreased by approximately $1.0 million, mainly due to $0.7 million in interest expense from warrant modifications in the prior year and $0.3 million more interest income in the current period[160] Critical Accounting Estimates and Policies This section highlights the accounting policies and estimates that require significant judgment and can materially impact the financial statements - Critical accounting estimates include those related to leases (lease term, incremental borrowing rate) and stock-based compensation (Black-Scholes model assumptions, Monte-Carlo simulation for performance-based options)[149][163] - Management's judgments, estimates, and assumptions in these areas significantly affect the reported financial condition and results of operations[162][163] Item 3. Quantitative and Qualitative Disclosures about Market Risks The Company states that it does not believe it has any significant exposure to market risk - The Company does not believe it has any significant exposure to market risk[151] Item 4. Controls and Procedures This section addresses the effectiveness of the Company's disclosure controls and procedures and internal control over financial reporting, noting material weaknesses identified in the prior annual report Evaluation of Disclosure Controls and Procedures This section reports on the assessment of the effectiveness of the company's disclosure controls and procedures - The Company's CEO and CFO concluded that disclosure controls and procedures were not effective as of June 30, 2023, due to material weaknesses previously described in the Annual Report on Form 10-K for September 30, 2022[152][164] Changes in Internal Control over Financial Reporting This section discloses any material changes in the company's internal control over financial reporting during the reporting period - No changes in internal control over financial reporting occurred during the three months ended June 30, 2023, that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[153] PART II. OTHER INFORMATION This section includes disclosures on unregistered sales of equity securities, a list of exhibits, and the report's signatures Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the issuance of unregistered equity securities, specifically restricted common stock to consultants for investor relations services, and affirms compliance with Securities Act exemptions - During the nine months ended June 30, 2023, the Company issued 115,321 restricted shares of common stock to consultants for investor relations services[153] - The issuance relied on the exemption provided by Section 4(a)(2) of the Securities Act of 1933, with shares acquired by sophisticated investors for their own accounts and bearing a restricted legend[166] Item 6. Exhibits This section lists the exhibits filed with the quarterly report, including certifications from the Principal Executive Officer and Principal Financial Officer - Exhibits include Rule 13a-14(a)/15d-14(a) Certifications from the Principal Executive Officer (31.1) and Principal Financial Officer (31.2), and Section 1350 Certifications (32)[154][167] Signatures The report is duly signed on behalf of CEL-SCI Corporation by its Principal Executive Officer, Geert Kersten, who also serves as the Principal Accounting and Financial Officer - The report was signed by Geert Kersten, Principal Executive Officer, on August 10, 2023, who also serves as the Principal Accounting and Financial Officer[168]