CEL-SCI Corporation (CEL-SCI) - 10-Q Summary
Business Context and Reporting Period
Company: CEL-SCI Corporation
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: March 31, 2011
Business Overview: CEL-SCI is a biotechnology company focused on the development of Multikine, a cancer drug currently in Phase III clinical trials. The company has not generated revenue from product sales and relies on capital raises, grants, and financing to fund operations. As of March 31, 2011, the company had 207,940,300 shares of common stock outstanding.
Key Financial Metrics
| Metric | Six Months Ended Mar 31, 2011 |
Six Months Ended Mar 31, 2010 |
|---|---|---|
| Total Revenue | $706,633 | $60,600 |
| Net Loss | $(20,280,556) | $18,414,998 (Income) |
| Net Loss Available to Common Shareholders | $(21,348,925) | $16,982,542 (Income) |
| Net Loss Per Share (Basic) | $(0.10) | $0.09 |
| Cash and Cash Equivalents (Ending) | $17,741,339 | $34,011,770 |
| Net Cash Used in Operating Activities | $(10,548,198) | $(5,852,986) |
| Total Assets | $30,770,807 | $37,804,985 |
| Total Liabilities | $20,120,324 | $9,950,220 |
| Stockholders' Equity | $10,650,483 | $27,854,765 |
Note: The 2010 period included a significant non-cash gain on derivative instruments of $27.86 million, resulting in net income, whereas the 2011 period included a $12 million "Other Expenses" charge related to a legal settlement.
Material Changes vs. Prior Period
- Revenue: Increased significantly to $706,633 from $60,600, primarily driven by a $684,200 grant earned under the Patient Protection and Affordable Care Act (PPACA). Rent income ceased as the sublease of the manufacturing facility ended.
- Net Income/Loss: Shifted from a net income of $18.4 million in the prior year to a net loss of $20.3 million. The prior year income was largely due to a $27.9 million gain on derivative instruments. The current year loss was driven by a $12 million charge for a legal settlement and a $1.1 million gain on derivatives (compared to $27.9 million previously).
- Liquidity: Cash and cash equivalents decreased by $8.8 million to $17.7 million. This decline was due to operating cash outflows of $10.5 million, partially offset by $1.8 million in financing proceeds.
- Liabilities: Total liabilities increased by over $10 million, largely due to the accrual of the $12 million legal settlement obligation and an increase in accrued expenses.
Guidance, Outlook, Risks, and Unusual Items
- Legal Settlement (Unusual Item): On May 16, 2011 (subsequent to the period end), the company settled a lawsuit with thirteen hedge funds. The settlement requires a $3 million cash payment and the issuance of $9 million in securities (convertible notes and preferred stock). The total $12 million obligation was accrued in the March 31, 2011 financial statements. The securities are convertible at $0.67 per share; if the stock price remains above this level, cash outflows may be reduced as holders convert to equity.
- Phase III Clinical Trial: The company commenced the Phase III clinical trial for Multikine in December 2010. The net cost is estimated at $25-$26 million. Partners are contributing to the cost, but the company expects to fund the majority.
- Liquidity Outlook: Management believes it has sufficient capital to support operations for more than the next twelve months, citing cash on hand and access to capital via an "at-the-market" sales agreement with McNicoll Lewis & Vlak (MLV).
- Risks: The company has no product revenue and depends on raising additional capital. There is no assurance of FDA approval for Multikine. The legal settlement imposes restrictions on dividends, new debt, and asset transfers.
Investor Verification Checklist
- Settlement Terms: Verify the final closing of the $12 million legal settlement and the extent to which the $9 million in securities are converted to equity versus paid in cash, based on the stock price performance relative to the $0.67 conversion price.
- Cash Burn Rate: Monitor the rate of cash consumption against the $17.7 million cash balance, specifically regarding the $25-$26 million cost of the Phase III trial and the $3 million immediate cash settlement payment.
- Derivative Liabilities: Review the fair value of outstanding derivative instruments (warrants), which totaled $5.6 million at period end, as fluctuations in stock price will continue to impact net income/loss.
- Grant Funding: Confirm the receipt of the remaining PPACA grant funds ($112,060 receivable at period end) and the timeline for future grant eligibility.
- Related Party Loan: Note the $1.1 million loan from the President/Director, which bears 15% interest and is secured by a lien on substantially all company assets.