CEL-SCI (CVM) - 2024 Q1 - Quarterly Report

Item 1. Financial Information This section presents the company's unaudited condensed financial statements and accompanying notes for the period ended December 31, 2023 Condensed Balance Sheets The company's condensed balance sheets show a decrease in total assets and stockholders' equity from September 30, 2023, to December 31, 2023, primarily driven by a reduction in cash and cash equivalents and an accumulated deficit | Metric | Dec 31, 2023 ($) | Sep 30, 2023 ($) | | :----------------------------- | :----------- | :----------- | | Cash and cash equivalents | $3,241,440 | $4,145,735 | | Total current assets | $6,154,453 | $6,918,420 | | Total assets | $28,710,215 | $30,528,250 | | Total current liabilities | $4,867,310 | $5,585,846 | | Total liabilities | $16,059,955 | $17,313,360 | | Total stockholders' equity | $12,650,260 | $13,214,890 | Condensed Statements of Operations For the three months ended December 31, 2023, the company reported a reduced net loss compared to the same period in 2022, primarily due to lower operating expenses, particularly in research and development | Operating Expense | 2023 (3 months) ($) | 2022 (3 months) ($) | | :------------------------ | :-------------- | :-------------- | | Research and development | $4,352,509 | $5,392,546 | | General and administrative | $2,133,378 | $2,258,003 | | Total operating expenses | $6,485,887 | $7,650,549 | | Operating loss | $(6,485,887) | $(7,650,549) | | Net loss | $(6,709,524) | $(7,853,509) | | Net loss per common share – basic and diluted | $(0.14) | $(0.18) | Condensed Statements of Stockholders' Equity Stockholders' equity decreased from $13.2 million at September 30, 2023, to $12.7 million at December 31, 2023, despite proceeds from common stock sales and equity-based compensation, primarily due to the net loss incurred during the period | Metric | Sep 30, 2023 ($) | Dec 31, 2023 ($) | | :-------------------------- | :----------- | :----------- | | Common Stock Shares | 47,422,304 | 50,018,601 | | Common Stock Amount | $474,223 | $500,186 | | Additional Paid-In Capital | $499,832,063 | $505,950,994 | | Accumulated Deficit | $(487,091,396) | $(493,800,920) | | Total Stockholders' Equity | $13,214,890 | $12,650,260 | - Proceeds from the sale of common stock during the three months ended December 31, 2023: $4,980,000[12] - Equity based compensation for employees during the three months ended December 31, 2023: $1,383,909[12] Condensed Statements of Cash Flows Cash and cash equivalents significantly decreased by $0.9 million for the three months ended December 31, 2023, primarily due to cash used in operating activities, partially offset by proceeds from common stock issuance | Cash Flow Activity | 2023 (3 months) ($) | 2022 (3 months) ($) | | :------------------------------------ | :-------------- | :-------------- | | Net cash used in operating activities | $(4,887,928) | $(4,666,649) | | Net cash used in investing activities | $(64,861) | $(53,580) | | Net cash provided by financing activities | $4,048,494 | $65,410 | | NET DECREASE IN CASH AND CASH EQUIVALENTS | $(904,295) | $(4,654,819) | | CASH AND CASH EQUIVALENTS, END OF PERIOD | $3,241,440 | $18,017,319 | Notes to Condensed Financial Statements These notes provide critical context to the financial statements, detailing accounting policies, liquidity, equity changes, commitments, and going concern risk A. Basis of Presentation and Summary of Significant Accounting Policies This section outlines the basis of financial statement preparation, key accounting policies, and the company's going concern assessment - The accompanying condensed financial statements are unaudited and prepared in accordance with U.S. GAAP, with certain information and footnote disclosures omitted as per SEC rules for interim reports[21] - Substantial doubt exists about the Company's ability to continue as a going concern due to recurring losses from operations and future liquidity needs[24] - Key accounting policies include cash and cash equivalents, property and equipment, supplies used for R&D and manufacturing, patents, leases, share-based compensation, research and development costs, net loss per common share, income taxes, and impairment of long-lived assets[25][26][27][28][29][30][34][35][36][37] - The Company adopted ASU 2016-13 (Financial Instruments – Credit Losses) effective October 1, 2023, using a modified retrospective transition method, with no impact on its financial position, results of operations, or cash flows[39] B. Liquidity The company's liquidity section details its historical funding sources, ongoing capital requirements, and the substantial doubt regarding its ability to continue as a going concern - The Company has incurred significant costs since inception for R&D, manufacturing, and clinical trials, funded primarily by proceeds from loans and the public/private sale of its securities[41] - Additional capital is required to continue efforts to bring Multikine to market, with plans to raise funds through corporate partnerships, debt, and/or equity financings[41][42] - Substantial doubt exists about the Company's ability to continue as a going concern due to recurring losses from operations and future liquidity needs[43] C. Stockholders' Equity This section details changes in stockholders' equity, including common stock sales, equity compensation plans, stock option activity, and restricted share issuances - In November 2023, the Company sold 2,490,000 shares of common stock at $2.00 per share, receiving approximately $5.0 million in aggregate gross proceeds[44] Equity Compensation Plan Shares Reserved (as of Dec 31, 2023) | Name of Plan | Shares Reserved | | :------------------------- | :-------------- | | Incentive Stock Option Plans | 138,400 | | Non-Qualified Stock Option Plans | 15,787,200 | | Stock Bonus Plans | 1,283,760 | | Stock Compensation Plans | 634,000 | | Incentive Stock Bonus Plan | 640,000 | Stock Option Activity (Three Months Ended Dec 31) | Activity | 2023 | 2022 | | :--------------- | :--- | :--- | | Options granted | - | 2,500 | | Options exercised | - | - | | Options forfeited | 11,000 | 96,832 | | Options expired | - | 45,400 | Share-Based Compensation Expense (Three Months Ended Dec 31) | Category | 2023 ($) | 2022 ($) | | :------------- | :----------- | :----------- | | Employees | $1,383,909 | $1,692,831 | | Non-employees | $218,386 | $148,858 | - No warrants recorded as equity were exercised during the three months ended December 31, 2023; however, 217,752 warrants were exercised in the same period of 2022 for $447,291 in proceeds[48][49] - The Company issued 88,573 restricted common shares to consultants for services in Q4 2023, compared to 40,236 shares in Q4 2022[50] D. Related Party Transactions This section describes transactions with related parties, including the extension of Series RR warrants held by officers and a trust - No restricted shares of the Company's common stock were purchased by related parties during the three months ended December 31, 2023[54] - On October 28, 2022, the expiration date of the Series RR warrants, held by current officers (Geert Kersten, Patricia Prichep) and a trust (beneficiary Geert Kersten), was extended two years, resulting in an incremental cost of approximately $172,000 recorded as a deemed dividend[55] E. Commitments and Contingencies This section outlines the company's contractual obligations, including a co-development agreement, finance leases, and operating leases - 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 the form of discounted clinical services, with approximately $11.9 million realized as of December 31, 2023[55] - The Company leases a manufacturing facility (San Tomas lease) classified as a finance lease, with a 20-year term expiring in October 2028, requiring annual base rent escalation of 3%[56][57] - A deposit of approximately $2.3 million was required in January 2023 for the San Tomas lease due to the Company falling below a stipulated cash threshold[58] Future Minimum Lease Payments Under Finance Leases (as of Dec 31, 2023) | Period | Amount ($) | | :-------------------------------- | :----------- | | Nine months ending Sep 30, 2024 | $1,995,000 | | Year ending Sep 30, 2025 | $2,741,000 | | Year ending Sep 30, 2026 | $2,832,000 | | Year ending Sep 30, 2027 | $2,923,000 | | Year ending Sep 30, 2028 | $3,015,000 | | Year ending Sep 30, 2029 | $252,000 | | Total future minimum lease obligation | $13,758,000 | - The Company leases two facilities under operating leases, with the office headquarters lease expiring in November 2025 and the research and development laboratory lease expiring in February 2032[60] Future Minimum Lease Payments on Operating Leases (as of Dec 31, 2023) | Period | Amount ($) | | :-------------------------------- | :----------- | | Nine months ending Sep 30, 2024 | $268,000 | | Year ending Sep 30, 2025 | $366,000 | | Year ending Sep 30, 2026 | $287,000 | | Year ending Sep 30, 2027 | $277,000 | | Year ending Sep 30, 2028 | $285,000 | | Year ending Sep 30, 2029 | $294,000 | | Thereafter | $746,000 | | Total future minimum lease obligation | $2,523,000 | G. Patents This section details patent amortization expenses and estimated future amortization, noting no impairment during the period - No impairment of patent costs occurred during the three months ended December 31, 2023, or 2022[62] - Amortization expense for patents totaled approximately $9,000 in Q4 2023 and $10,000 in Q4 2022, with a weighted average amortization period of approximately 8 years[62] Estimated Future Patent Amortization | Period | Amount ($) | | :-------------------------------- | :----------- | | Nine months ending Sep 30, 2024 | $23,000 | | Year ending Sep 30, 2025 | $29,000 | | Year ending Sep 30, 2026 | $25,000 | | Year ending Sep 30, 2027 | $22,000 | | Year ending Sep 30, 2028 | $19,000 | | Year ending Sep 30, 2029 | $16,000 | | Thereafter | $54,000 | | Total | $188,000 | H. Loss Per Common Share This section presents the calculation of basic and diluted loss per common share, including anti-dilutive securities excluded from the calculation Loss Per Share – Basic and Diluted (Three Months Ended Dec 31) | Metric | 2023 | 2022 | | :------------------------------------ | :----------- | :----------- | | Net loss available to common ($) | $(6,709,524) | $(8,025,061) | | Weighted average shares outstanding | 48,470,600 | 43,440,387 | | Basic and diluted loss per common share ($) | $(0.14) | $(0.18) | Anti-Dilutive Securities Excluded from Diluted EPS (as of Dec 31) | Security Type | 2023 | 2022 | | :-------------------- | :----------- | :----------- | | Options and Warrants | 15,839,028 | 13,917,352 | | Unvested Restricted Stock | 147,250 | 149,250 | | Total | 15,986,278 | 14,066,602 | J. Subsequent Events This section reports significant events occurring after the balance sheet date, including a recent common stock offering - On February 9, 2024, the Company sold 3,875,000 shares of common stock at a public offering price of $2.00 per share, generating approximately $7.8 million in gross proceeds[65] 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, liquidity, capital resources, and operational results for the period Company Overview CEL-SCI Corporation is a clinical-stage biotechnology company focused on developing immunotherapies, with its lead investigational therapy, Multikine, targeting head and neck cancers, and LEAPS technology for rheumatoid arthritis - CEL-SCI is a clinical-stage biotechnology company dedicated to research and development aimed at improving cancer and other disease treatments by utilizing the immune system[66] - The Company's primary product candidates are Multikine (Leukocyte Interleukin, Injection) for head and neck cancers and L.E.A.P.S. (Ligand Epitope Antigen Presentation System) technology for rheumatoid arthritis[66][69] - The global cancer immunotherapy market is expected to reach USD $196.45 billion by 2030, with a Compound Annual Growth Rate (CAGR) of 7.2%[68] Multikine and Phase III Clinical Trial Results Multikine, an investigational immunotherapy, showed significant survival benefits in a Phase III trial for a specific head and neck cancer population, leading to accelerated approval pathway pursuit - Multikine is unique among approved cancer immunotherapies as it is given first, right after diagnosis and before surgery, to incite a locoregional immune response against the tumor[68][71] - The target patient population for Multikine includes treatment-naïve adult patients with resectable locally advanced primary squamous cell carcinoma of the head and neck (SCCHN) in the oral cavity or soft palate, who have no lymph node involvement (N0) and low PD-L1 tumor expression (TPS<10)[72][86] - In the target population, Multikine cut the 5-year risk of death in half versus the control group, increasing survival from 45% to 73% at five years[87] - Multikine demonstrated a 28.6% absolute 5-year overall survival benefit versus control (p=0.0015) and a hazard ratio of 0.349 (95% CIs [0.18, 0.66]) in the target population[77][91] - Statistically significant pre-surgical responses (reductions of 30%+ or disease downstages) were observed in Multikine patients, and these responses were shown to lead to longer life[75][77][79][81] - No demonstrable safety signals or toxicities were observed in approximately 750 Multikine-treated subjects across multiple clinical trials, with no Multikine-related deaths[73] - CEL-SCI plans to seek immediate approval for Multikine through conditional/accelerated approval pathways in Europe, the UK, Canada, and the U.S., based on existing data and a planned confirmatory study[94][100][101] - Multikine addresses a tremendous unmet need for improved survival in its target population, as current standard of care provides only about a 50/50 chance of surviving five years, and existing immunotherapies work best on high PD-L1 tumors or are given after surgery[98] Liquidity and Capital Resources The company relies on equity and debt financing, facing going concern doubts due to recurring losses, with cash decreasing by $0.9 million in Q4 2023 from operating activities - The Company has historically financed its operations through equity securities, convertible notes, loans, and research grants, and anticipates continued reliance on securities sales due to ongoing net operating losses[103][104] - Substantial doubt exists about the Company's ability to continue as a going concern due to recurring losses from operations and future liquidity needs[105] - Direct costs for the Phase 3 clinical trial and filing of the clinical study report totaled approximately $64.5 million as of December 31, 2023, with an estimated $0.7 million additional expenses for completion[106] - Cash and cash equivalents decreased by approximately $0.9 million during the three months ended December 31, 2023, primarily due to $4.9 million used in operating activities and $0.4 million in finance lease payments, partially offset by $4.5 million net proceeds from November 2023 financing[108] - During the three months ended December 31, 2022, cash decreased by approximately $4.7 million, primarily due to cash used to fund regular operations, including the Phase 3 clinical trial[109] Results of Operations and Financial Condition The company reported a net operating loss of $6.5 million for Q4 2023, a decrease from the prior year, primarily due to reduced research and development and general and administrative expenses - The Company incurred a net operating loss of approximately $6.5 million for the three months ended December 31, 2023, which included significant non-cash expenses such as $1.6 million in share-based compensation and $1.0 million in depreciation and amortization[111] - Research and development expenses decreased by approximately $1.0 million (19%) in Q4 2023 compared to Q4 2022, mainly due to lower costs for commercial sale preparation, Phase 3 study expenses, and employee stock compensation[112] - General and administrative expenses decreased by approximately $0.1 million (6%) in Q4 2023 compared to Q4 2022, primarily due to reduced consulting fees and employee stock compensation[113] - Net interest expense remained relatively constant at approximately $0.2 million for both the three months ended December 31, 2023, and 2022[114] Research and Development Expenses R&D expenses for Q4 2023 totaled $4.35 million, primarily for Multikine, significantly reduced from Q4 2022, and contingent on capital and regulatory approvals Research and Development Expenses (Three Months Ended Dec 31) | Project | 2023 ($) | 2022 ($) | | :-------- | :----------- | :----------- | | MULTIKINE | $4,329,252 | $5,294,377 | | LEAPS | $23,257 | $98,169 | | TOTAL | $4,352,509 | $5,392,546 | - The extent of the Company's clinical trials and research programs is primarily based upon the amount of capital available and the extent of regulatory approvals, with the inability to conduct these preventing product commercialization[116] Critical Accounting Estimates Management's financial reporting relies on critical accounting estimates for leases and share-based compensation, requiring significant judgment in valuation - Critical accounting estimates include inventory obsolescence, accruals, stock options, useful lives for depreciation and amortization of long-lived assets, right-of-use assets and lease liabilities, deferred tax assets, and the related valuation allowance[38] - Significant judgment is required for measuring finance and operating lease right-of-use assets and lease liabilities (determining estimated lease term and incremental borrowing rate) and for valuing stock options (using Black-Scholes and Monte-Carlo models with various judgmental assumptions)[120] Item 3. Quantitative and Qualitative Disclosures about Market Risks The Company assesses that it does not have any significant exposure to market risk - The Company does not believe that it has any significant exposure to market risk[122] Item 4. Controls and Procedures Management concluded disclosure controls were ineffective as of December 31, 2023, due to material weaknesses, with no material internal control changes during the quarter - The Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were not effective as of December 31, 2023, due to material weaknesses described in the Annual Report on Form 10-K for the year ended September 30, 2023[124] - There were no changes in the Company's internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting during the three months ended December 31, 2023[125] PART II This section covers unregistered sales of equity securities, other information, and exhibits, concluding with the report's signatures Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q4 2023, the Company issued 88,573 restricted common shares to consultants for investor relations services, relying on Section 4(a)(2) exemption - During the three months ended December 31, 2023, the Company issued 88,573 restricted shares of common stock to consultants for investor relations services[127] - The Company relied upon the exemption provided by Section 4(a)(2) of the Securities Act of 1933 for the issuance of these shares[127] Item 5. Other Information No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers during the quarter ended December 31, 2023 - None of the Company's directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the quarterly period ending December 31, 2023[129] Item 6. Exhibits The report includes Rule 13a-14(a) Certifications and Section 1350 Certifications as exhibits Exhibits | Number | Exhibit | | :----- | :-------------------------- | | 31 | Rule 13a-14(a) Certifications | | 32 | Section 1350 Certifications | Signatures The report was duly signed on February 14, 2024, by Geert Kersten, Principal Executive Officer and Principal Accounting and Financial Officer - The report was signed on behalf of CEL-SCI CORPORATION by Geert Kersten, Principal Executive Officer and Principal Accounting and Financial Officer, on February 14, 2024[131]