CEL-SCI Corporation — Form 10-Q Summary
Reporting period: Quarter and six months ended March 31, 2012, the second quarter of CEL-SCI’s fiscal year. Financial statements are unaudited. CEL-SCI is a development-stage biotechnology company; it reported no product-sales revenue.
Key financial metrics
| Metric | Three months ended March 31, 2012 | Six months ended March 31, 2012 |
|---|---|---|
| Grant income and other | $106,543 | $111,567 |
| Operating expenses | $4,368,900 | $8,817,200 |
| Operating loss | $4,262,357 | $8,705,633 |
| Net loss available to common shareholders | $10,086,959 | $14,243,792 |
| Loss per common share | $0.04 | $0.06 |
| Cash used in operating activities | Not separately provided | $5,792,249 |
- At March 31, 2012, cash and cash equivalents were $5.27 million, total current assets were $9.28 million, total assets were $18.38 million, and stockholders’ equity was $6.24 million.
- Total liabilities were $12.14 million, including $9.98 million of derivative liabilities. The company reported no remaining convertible note balance; a $1.10 million loan from its president remained outstanding, bears 15% interest, and was extended to July 2015.
- Cash increased $1.01 million over the six-month period. Financing included $9.17 million from common-stock issuance and $2.66 million from warrant and option exercises; the company paid $4.95 million of convertible debt principal.
Changes versus prior comparable periods
- Six-month grant income and other fell to $111,567 from $706,633, principally because grant funding had largely been earned in the prior period. Management reported the final grant funds were received in October for amounts earned before September 30, 2011.
- Six-month R&D expense declined to $5.05 million from $6.31 million; G&A declined slightly to $3.48 million from $3.53 million. Management attributed lower G&A mainly to reduced litigation-related legal fees.
- Six-month operating loss improved to $8.71 million from $9.41 million. Net loss available to common shareholders improved to $14.24 million from $21.35 million, but the prior period included $12.0 million of litigation-related other expense. The current period included a $3.25 million derivative loss, versus a $1.12 million derivative gain in the prior period.
- Operating cash use declined to $5.79 million from $10.55 million. Management cited lower Phase III trial start-up costs and lower legal fees; the prior-period cash-flow comparison also included a large increase in accrued expenses.
- Shares outstanding rose to 256.6 million at March 31, 2012 from 214.7 million at September 30, 2011. The company issued equity in October 2011 and January 2012 and received proceeds from warrant exercises.
Outlook, risks and unusual items
- CEL-SCI was conducting a multinational Phase III trial of Multikine for advanced head and neck cancer. The estimated net cost to the company was approximately $26 million, with two partners expected to pay part of the trial costs. Multikine was investigational and had not been approved; its safety and efficacy were not established.
- Management said cash on hand and access to capital markets should support operations for more than 12 months, and planned to raise capital during fiscal 2012 to expand the trial and fund operations through March 2013. The filing also states that recurring losses and future liquidity needs create substantial doubt about the company’s ability to continue as a going concern. Additional financing is not assured; insufficient funding could delay or curtail the trial and operations.
- The company continued to depend on equity, debt, grants, or other financing and did not anticipate significant revenue until licensing arrangements or regulatory approval. Timing of product revenue was uncertain.
- The $9.98 million derivative liability is measured using Level 3 fair-value inputs, and changes in the company’s share price contributed to volatile noncash gains and losses. The company also recorded $1.59 million related to inducement warrants and $250,000 associated with anti-dilution reset shares during the six-month period.
- CEL-SCI paid the remaining convertible-note balance on March 1, 2012, completing its settlement obligations and releasing the lien on its assets. Its 20-year manufacturing-facility lease and $1.67 million landlord deposit remain relevant to liquidity; the deposit is returnable when lease minimum-cash requirements are met.
- Management reported effective disclosure controls as of March 31, 2012 and no change in internal control over financial reporting during the first six months of fiscal 2012.
Important facts for investors to verify
- Whether planned financing is available on acceptable terms and whether cash and liquidity are sufficient to sustain operations and the Phase III program.
- Current Phase III trial progress, expected remaining company-funded costs, partner contributions, and any regulatory developments for Multikine.
- The terms, valuation sensitivity, and potential settlement or dilution effects of outstanding warrants and the $9.98 million derivative liability.
- Conditions and timing for return of the $1.67 million landlord deposit, alongside ongoing facility lease obligations.
- Share-count changes and potential dilution from outstanding options and warrants; the filing reports 256,697,698 common shares outstanding on May 3, 2012.