cvm_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to ______________.

Commission File Number 001-11889

CEL-SCI CORPORATION

Colorado		84-0916344
State or other jurisdiction incorporation		(IRS) Employer Identification Number

8229 Boone Boulevard, Suite 802

Vienna, Virginia 22182

Address of principal executive offices

(703) 506-9460

Registrant's telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Trading Symbol(s)		Name of Each Exchange on Which Registered
Common Stock		CVM		NYSE American

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) had been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Exchange Act Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Class of Stock		No. Shares Outstanding		Date
Common		47,260,097		August 8, 2023

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION

Item 1.		Page

	Condensed Balance Sheets at June 30, 2023 (unaudited) and September 30, 2022	3

	Condensed Statements of Operations for the nine months ended June 30, 2023 and 2022 (unaudited)	4

	Condensed Statements of Operations for the three months ended June 30, 2023 and 2022 (unaudited)	5

	Condensed Statements of Stockholders’ Equity for the nine months ended June 30, 2023 and 2022 (unaudited)	6

	Condensed Statements of Cash Flows for the nine months ended June 30, 2023 and 2022 (unaudited)	8

	Notes to Condensed Financial Statements (unaudited)	10

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosures about Market Risks	24

Item 4.	Controls and Procedures	24

PART II

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25

Item 6.	Exhibits	25

	Signatures	26

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CEL-SCI CORPORATION
CONDENSED BALANCE SHEETS

	JUNE 30,			SEPTEMBER 30,
ASSETS	2023			2022
	(UNAUDITED)
Current assets:
Cash and cash equivalents	$	5,135,070		$	22,672,138
Prepaid expenses		462,848			762,063
Supplies used for R&D and manufacturing		2,109,978			2,001,715
Deposits		23,850			-

Total current assets		7,731,746			25,435,916

Finance lease right of use assets		9,583,440			10,937,797
Operating lease right of use assets		1,746,355			1,884,464
Property and equipment, net		10,674,725			11,889,029
Patent costs, net		183,074			212,201
Deposits		2,319,101			-
Supplies used for R&D and manufacturing		80,527			164,299

Total assets	$	32,318,968		$	50,523,706

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable	$	1,742,651		$	1,618,290
Accrued expenses		1,141,292			842,492
Due to employees		499,661			471,488
Finance lease obligation, current portion		1,718,038			1,560,553
Operating lease obligation, current portion		190,831			170,928

Total current liabilities		5,292,473			4,663,751

Finance lease obligations, net of current portion		10,406,939			11,721,368
Operating lease obligations, net of current portion		1,705,157			1,850,380
Other liabilities		125,000			125,000

Total liabilities		17,529,569			18,360,499

Commitments and contingencies

STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value; 200,000 shares authorized; 0 shares issued and outstanding		-			-
Common stock, $0.01 par value; 600,000,000 shares authorized; 44,748,437 and 43,448,317 shares issued and outstanding at June 30, 2023 and September 30, 2022, respectively		447,484			434,484
Additional paid-in capital		493,802,607			486,625,816
Accumulated deficit		(479,460,692	)		(454,897,093	)

Total stockholders' equity		14,789,399			32,163,207

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	32,318,968		$	50,523,706

See notes to condensed financial statements.

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CEL-SCI CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 2023 and 2022
(UNAUDITED)

	2023			2022

Operating expenses:
Research and development	$	17,203,823		$	18,893,857
General and administrative		6,804,729			8,220,768
Total operating expenses		24,008,552			27,114,625

Operating loss		(24,008,552	)		(27,114,625	)

Gain on derivative instruments		-			366,791
Other non-operating losses		-			(30,793	)
Interest expense, net		(493,522	)		(1,460,055	)
Other expense		(61,525	)		-

Net loss		(24,563,599	)		(28,238,682	)
Modification of warrants		(171,552	)		(294,409	)

Net loss available to common shareholders	$	(24,735,151	)	$	(28,533,091	)

Net loss per common share – basic and diluted	$	(0.57	)	$	(0.66	)
Weighted average common shares outstanding – basic and diluted		43,761,395			43,124,972

See notes to condensed financial statements.

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CEL-SCI CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2023 and 2022
(UNAUDITED)

	2023			2022

Operating expenses:
Research and development	$	5,727,789		$	6,286,873
General and administrative		2,453,968			2,432,518
Total operating expenses		8,181,757			8,719,391

Operating loss		(8,181,757	)		(8,719,391	)

Interest expense, net		(181,670	)		(913,193	)
Other expense		(3,854	)		-

Net loss		(8,367,281	)		(9,632,584	)

Modification of Warrants		-			(294,409	)

Net loss available to common shareholders	$	(8,367,281	)	$	(9,926,993	)

Net loss per common share – basic and diluted	$	(0.19	)	$	(0.23	)
Weighted average common shares outstanding – basic and diluted		44,254,363			43,174,775

See notes to condensed financial statements.

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CEL-SCI CORPORATION

STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

							Additional
	Common Stock						Paid-In			Accumulated
	Shares			Amount			Capital			Deficit			Total

BALANCES AT SEPTEMBER 30, 2022		43,448,317			434,484			486,625,816			(454,897,093	)		32,163,207

Warrant exercises		217,752			2,177			445,114			-			447,291
Equity based compensation - employees		-			-			1,703,931			-			1,703,931
401(k) contributions paid in common stock		21,331			213			49,965			-			50,178
Stock and options issued to nonemployees for service		40,236			402			91,221			-			91,623
2014 Incentive Stock Forfeited		(2,000	)		(20	)		(11,080	)		-			(11,100	)
Net loss		-			-			-			(7,853,509	)		(7,853,509	)
BALANCES AT DECEMBER 31, 2022		43,725,636			437,256			488,904,967			(462,750,602	)		26,591,621

Equity based compensation - employees		-			-			1,743,288			-			1,743,288
401(k) contributions paid in common stock		23,627			236			54,629			-			54,865
Stock and options issued to nonemployees for service		38,562			386			100,249			-			100,635
Net loss		-			-			-			(8,342,809	)		(8,342,809	)
BALANCES AT MARCH 31, 2023		43,787,825			437,878			490,803,133			(471,093,411	)		20,147,600

Equity based compensation - employees		-			-			1,551,319			-			1,551,319
401(k) contributions paid in common stock		12,855			129			52,534			-			52,663
Stock and options issued to nonemployees for service		36,523			365			135,304			-			135,669
Proceeds from the sale of common stock		913,234			9,132			1,382,765			-			1,391,897
2014 Incentive Stock Forfeited		(2,000	)		(20	)		(11,080	)		-			(11,100	)
Share issuance costs		-			-			(111,368	)		-			(111,368	)
Net loss		-			-			-			(8,367,281	)		(8,367,281	)
BALANCES AT JUNE 30, 2023		44,748,437			447,484			493,802,607			(479,460,692	)		14,789,399

See notes to condensed financial statements.

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					Additional
	Common Stock				Paid-In			Accumulated
	Shares		Amount		Capital			Deficit			Total

BALANCES AT SEPTEMBER 30, 2021		43,207,183		432,072		474,298,566			(418,196,412	)		56,534,226

Warrant exercises		19,705		197		157,757			-			157,954
Equity based compensation - employees		-		-		3,262,296			-			3,262,296
401(k) contributions paid in common stock		7,605		76		52,479			-			52,555
Stock and options issued to nonemployees for service		18,020		180		142,980			-			143,160
Option exercises		6,500		65		29,770			-			29,835
Share issuance costs		-		-		(45,965	)		-			(45,965	)
Net loss		-		-		-			(8,782,606	)		(8,782,606	)
BALANCES AT DECEMBER 31, 2021		43,259,013		432,590		477,897,883			(426,979,018	)		51,351,455

Warrant exercises		5,500		55		13,805			-			13,860
Equity based compensation - employees		-		-		3,392,706			-			3,392,706
401(k) contributions paid in common stock		14,614		146		57,371			-			57,517
Stock and options issued to nonemployees for service		25,475		255		139,797			-			140,052
Share issuance costs		-		-		(4,550	)		-			(4,550	)
Net loss		-		-		-			(9,823,492	)		(9,823,492	)
BALANCES AT MARCH 31, 2022		43,304,602		433,046		481,497,012			(436,802,510	)		45,127,548

Equity based compensation - employees		-		-		2,447,772			-			2,447,772
401(k) contributions paid in common stock		12,640		126		57,082			-			57,208
Stock and options issued to nonemployees for service		38,287		383		121,883			-			122,266
Modification of warrants		-		-		634,713			-			634,713
Share issuance costs		-		-		(28,560	)		-			(28,560	)
Net loss		-		-		-			(9,632,584	)		(9,632,584	)
BALANCES AT JUNE 30, 2022		43,355,529		433,555		484,729,902			(446,435,094	)		38,728,363

See notes to condensed financial statements.

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CEL-SCI CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 2023 and 2022
(UNAUDITED)

	2023			2022

Net loss	$	(24,563,599	)	$	(28,238,682	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,959,681			2,845,978
Non-cash lease expense		12,788			49,390
Share-based payments for services		473,723			603,147
Equity-based compensation		4,976,338			9,102,774
Common stock contributed to 401(k) plan		157,706			167,280
Gain on short-term investments		-			(615	)
Loss on patent impairment		-			30,793
Gain on derivative instruments		-			(366,791	)
Modification of warrants		-			634,713
Loss on receivables		-			54,922
(Increase)/decrease in assets:
Prepaid expenses		208,419			147,192
Supplies used for R&D and manufacturing		(24,491	)		(166,453	)
Deposits		(2,342,951	)		1,910,917
Increase/(decrease) in liabilities:
Accounts payable		66,616			(410,536	)
Accrued expenses		243,800			78,729
Due to employees		28,173			230,012

Net cash used in operating activities		(17,803,797	)		(13,327,230	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturity of US treasury bills		-			6,152,000
Purchases of property and equipment		(361,892	)		(621,826	)
Expenditures for patent costs		-			(22,741	)

Net cash (used in) provided by investing activities		(361,892	)		5,507,433

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock		1,391,897			-
Payments of stock issuance costs		(53,196	)		(50,515	)
Proceeds from exercises of warrants		447,291			101,225
Proceeds from the exercises of stock options		-			29,835
Proceeds from landlord funding of lease improvements		-			786,454
Payments on obligations under finance leases		(1,157,371	)		(1,033,677	)

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, BEGINNING OF PERIOD		22,672,138			36,060,148

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	5,135,070		$	28,073,673

See notes to condensed financial statements.

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CEL-SCI CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 2023 and 2022

	2023		2022
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Changes to right of use assets and liabilities	$	-	$	16,268
Finance lease obligation included in accounts payable	$	927	$	1,800
Prepaid consulting services paid with issuance of common stock	$	327,927	$	221,242
Exercise of derivative liabilities	$	-	$	70,589
Assets purchased under finance leases	$	-	$	32,409
Financing costs included in current liabilities	$	58,172	$	28,560
Accrued consulting services to be paid with common stock	$	110,000	$	110,000

Cash paid for interest	$	809,495	$	872,023

See notes to condensed financial statements.

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CEL-SCI CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

NINE MONTHS ENDED JUNE 30, 2023 AND 2022 (UNAUDITED)

A. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying condensed financial statements of CEL-SCI Corporation (the Company) are unaudited and certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission. While management of the Company believes that the disclosures presented are adequate to make the information presented not misleading, these interim condensed financial statements should be read in conjunction with the financial statements and notes included in the Company’s annual report on Form 10-K for the year ended September 30, 2022.

In the opinion of management, the accompanying unaudited condensed financial statements contain all adjustments necessary for a fair presentation of the Company’s financial position as of June 30, 2023 and the results of its operations for the nine months then ended. The condensed balance sheet as of September 30, 2022 is derived from the September 30, 2022 audited financial statements.

Due to recurring losses from operations and future liquidity needs, there is substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Refer to discussion in Note B.

Summary of Significant Accounting Policies:

Cash and Cash Equivalents – Cash and cash equivalents consist principally of unrestricted cash on deposit and short-term money market funds. The Company considers all highly liquid investments with a maturity when purchased of less than three months to be cash equivalents.

U.S. Treasury Bills – U.S. Treasury Bills (“T-bills”) are highly liquid short-term investments with maturity dates of greater than 3 months, but less than one year. These investments are recorded at fair value.

Property and Equipment – Property and equipment is recorded at cost and depreciated using the straight-line method over estimated useful lives of five to seven years. Leasehold improvements are depreciated over the shorter of the estimated useful life of the asset or the term of the lease. Repairs and maintenance which do not extend the life of the asset are expensed when incurred. Property and equipment is reviewed on a quarterly basis to determine if any of the assets are impaired.

Supplies used for R&D and manufacturing – Supplies are consumable items kept on hand to support the Company’s R&D and manufacturing operations. Supplies are recorded at cost and are charged to expense as they are used in operations.

Patents - Patent expenditures are capitalized and amortized using the straight-line method over the shorter of the expected useful life or the legal life of the patent (17 years). In the event changes in technology or other circumstances impair the value or life of the patent, appropriate adjustments to the asset value and period of amortization are made. An impairment loss is recognized when estimated future undiscounted cash flows expected to result from the use of the asset, and from disposition, are less than the carrying value of the asset. The amount of the impairment loss would be the difference between the estimated fair value of the asset and its carrying value.

Leases – The Company accounts for contracts that convey the right to control the use of identified property, plant or equipment over a period of time in exchange for consideration as leases upon inception. The Company leases certain real estate, machinery, laboratory equipment and office equipment over varying periods. Many of these leases include an option to either renew or terminate the lease. For purposes of calculating lease liabilities, these options are included in the lease term when it is reasonably certain that the Company will exercise such options. The incremental borrowing rate utilized to calculate the lease liabilities is based on the information available at the commencement date, as most of the leases do not provide an implicit borrowing rate. Short-term leases, defined as leases with initial terms of 12 months or less, are not reflected on the balance sheet. Lease expense for such short-term leases is not material.

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Derivative Instruments – The Company has financing arrangements that consist of freestanding derivative instruments that contain embedded derivative features. The Company accounts for these arrangements in accordance with Accounting Standards Codification (ASC) 815, Accounting for Derivative Instruments and Hedging Activities. In accordance with ASC 815, derivative instruments and hybrid instruments are recognized as either assets or liabilities on the balance sheet and are measured at fair value with gains or losses recognized in earnings or other comprehensive income depending on the nature of the derivative or hybrid instruments. The Company determines the fair value of derivative instruments and hybrid instruments based on available market data using appropriate valuation models considering all the rights and obligations of each instrument. The derivative liabilities are re-measured at fair value at the end of each interim period.

The Company adopted Accounting Standards Update (ASU) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in an Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity effective October 1, 2021. The amendments in this Update simplify and clarify the guidance in Subtopic 815-40. There was no financial impact in the period of adoption.

Stock-Based Compensation – Compensation cost for all stock-based awards is measured at fair value as of the grant date in accordance with the provisions of ASC 718, Compensation – Stock Compensation. The fair value of stock options is calculated using the Black-Scholes option pricing model. The Black-Scholes model requires various judgmental assumptions including volatility and expected option life. The stock-based compensation cost is recognized using the straight-line method as expense over the requisite service or vesting period.

The Company has Incentive Stock Option Plans, Non-Qualified Stock Option Plans, Stock Compensation Plans, Stock Bonus Plans and an Incentive Stock Bonus Plan. These Plans are collectively referred to as the "Plans". All Plans have been approved by the Company’s stockholders.

The Company’s stock options are not transferable, and the actual value of the stock options that an employee may realize, if any, will depend on the excess of the market price on the date of exercise over the exercise price. For options issued with service conditions only, the Company has based its assumption for stock price volatility on the variance of daily closing prices of the Company’s stock. The risk-free interest rate assumption is based on the U.S. Treasury rate at the date of grant with the term equal to the expected life of the option. Forfeitures are accounted for when they occur. The expected term of options represents the period that options granted are expected to be outstanding and has been determined based on an analysis of historical exercise behavior. If any of the assumptions used in the Black-Scholes model change significantly, stock-based compensation expense for new awards may differ materially in the future from that recorded in the current period.

Restricted stock granted under the Incentive Stock Bonus Plan and options granted under the 2021 and 2020 Non-Qualified Stock Option Plan are subject to service, performance and market conditions and meet the classification of equity awards. These awards were measured at fair value on the grant dates using a Monte Carlo simulation for issuances where the attainment of performance criteria is uncertain. The total compensation cost will be expensed over the estimated requisite service period.

Research and Development Costs - Research and development costs are expensed as incurred. Management accrues Clinical Research Organization (“CRO”) expenses and clinical trial study expenses based on services performed and relies on the CROs to provide estimates of those costs applicable to the completion stage of a study. Estimated accrued CRO costs are subject to revisions as such studies progress to completion. The Company records revisions to estimated expense in the period in which the facts that give rise to the revision become known.

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Net Loss Per Common Share – The Company calculates net loss per common share in accordance with ASC 260, Earnings Per Share. Basic and diluted net loss per common share was determined by dividing net loss applicable to common shareholders by the weighted average number of common shares outstanding during the period. The Company’s potentially dilutive shares, which include outstanding common stock options, unvested restricted stock and common stock warrants, have not been included in the computation of diluted net loss per share for all periods as the result would be anti-dilutive.

Income Taxes – The Company accounts for income taxes in accordance with the provisions of ASC 740, Income Taxes, on a tax jurisdiction basis. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating and tax loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company records a valuation allowance to reduce the deferred tax assets to the amount that is more likely than not to be recognized. A full valuation allowance was recorded against the deferred tax assets as of June 30, 2023 and September 30, 2022.

The Company adopted ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes effective October 1, 2021. The new standard includes several provisions that simplify accounting for income taxes by removing certain exceptions to the general principles in ASC 740 and increasing consistency and clarity for the users of financial statements. The adoption of ASU 2019-12 had no impact on the Company’s financial statements.

Use of Estimates – The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying disclosures. These estimates are based on management’s best knowledge of current events and actions the Company may undertake in the future. Estimates are used in accounting for, among other items, 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, and the valuation of derivative liabilities. Actual results could differ from estimates, although management does not generally believe such differences would materially affect the financial statements in any given year. However, in regard to the valuation of derivative liabilities determined using the Black-Scholes option pricing model, significant fluctuations in stock price or other inputs may materially affect the financial statements in a given year. Additionally, in calculating the right of use assets and lease liabilities, estimates and assumptions were used to determine the incremental borrowing rates and the expected lease terms. The Company considers the estimates used in valuing the derivative liabilities, stock options and the lease assets and liabilities to be significant.

New Accounting Pronouncements - The Company has considered all recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its financial statements.

B. LIQUIDITY

The Company has incurred significant costs since its inception for the acquisition of certain proprietary technology and scientific knowledge relating to the human immunological defense system, patent applications, research and development, administrative costs, construction and expansion of manufacturing and laboratory facilities and participation in clinical trials. The Company has funded such costs primarily with proceeds from loans and the public and private sale of its securities. The Company will be required to raise additional capital or find additional long-term financing to continue with its efforts to bring Multikine to market. The ability to raise capital may be dependent upon market conditions that are outside the control of the Company. The ability of the Company to obtain approval from the U.S. Food and Drug Administration (FDA) for the sale of products to be developed on a commercial basis is uncertain. Ultimately, the Company must complete the development of its products, obtain the appropriate regulatory approvals and obtain sufficient revenues to support its cost structure.

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To finance the Company through marketing approval, the Company plans to raise additional capital in the form of corporate partnerships, and debt and/or equity financings. The Company believes that it will be able to obtain additional financing because it has done so consistently in the past and because Multikine showed great survival benefit in the Phase 3 study in one of the two treatment arms for advanced primary head and neck cancer. However, there can be no assurance that the Company will be successful in raising additional funds on a timely basis or that the funds will be available to the Company on acceptable terms or at all. If the Company does not raise the necessary amounts of money, it may have to curtail its operations until such time as it is able to raise the required funding.

Due to the Company’s recurring losses from operations and future liquidity needs, there is substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

C. STOCKHOLDERS’ EQUITY

Proceeds from the Sale of Common Stock

In April 2023, the Company sold 794,117 shares of common stock at a public offering price of $1.70 per share and received aggregate proceeds of approximately $1.2 million. The Company granted the underwriters a 30-day option to purchase up to 119,117 additional shares of common stock to cover over-allotments. The underwriter fully exercised this option in May 2023, resulting in additional aggregate proceeds to the Company of approximately $190,000.

Equity Compensation

Underlying share information for equity compensation plans as of June 30, 2023 is as follows:

Name of Plan	Total Shares Reserved Under Plans

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:

	Nine Months Ended June 30,
	2023		2022
Options granted		6,500		1,975,250
Options exercised		-		6,500
Options forfeited		179,832		20,166
Options expired		58,787		13,614

	Three Months Ended June 30,
	2023		2022
Options granted		2,000		1,722,750
Options exercised		-		-
Options forfeited		57,500		-
Options expired		13,383		13,614

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On November 18, 2021, the Company granted 250,000 performance-based stock options from the 2020 Non-Qualified Stock Option Plan to officers. Each option entitles the holder to purchase one share of the Company’s common stock at a price of $10.48 per share, the fair value on the date of issuance. The stock options will vest 100% upon approval of the first marketing application for any pharmaceutical based upon the Company’s Multikine technology in the USA, Canada, UK, Germany, France, Italy, Spain, Japan, or Australia. All options which have not vested as of November 18, 2031 will be canceled. On the grant date, the options were valued using a Monte Carlo Simulation approach. A Monte Carlo Simulation is a statistical technique that is used to model probabilistic systems and establish the probabilities for a variety of outcomes. However, because attainment of the performance condition cannot be considered probable, no compensation cost was recognized relating to these options as of June 30, 2023. Management will re-assess the probability of achieving the performance condition at each reporting date.

Stock-Based Compensation Expense

	Nine Months Ended June 30,
	2023		2022
Employees	$	4,976,338	$	9,102,774
Non-employees	$	473,723	$	603,147

	Three months Ended June 30,
	2023		2022
Employees	$	1,540,219	$	2,447,772
Non-employees	$	188,001	$	200,877

Employee compensation expense includes the expense related to options and restricted stock that is expensed over the vesting periods. Non-employee expense includes the expense related to options and stock issued to consultants expensed over the period of the related service contracts.

Warrants and Non-Employee Options

The following chart represents the warrants and non-employee options outstanding at June 30, 2023:

Warrant/

Options

Issue Date

Shares Issuable upon Exercise

of Warrants/ Options

Exercise Price

Expiration Date

Reference

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

* No current period changes for these warrants

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1. Derivative Liabilities

The table below presents the gains on the warrant liabilities for the nine months ended June 30:

	2023		2022
Series Z warrants	$	-	$	64,787
Series AA warrants		-		276,035
Series CC warrants		-		24,372
Series HH warrants		-		1,597
Net gain on warrant liabilities	$	-	$	366,791

There were no gains or losses on warrant liabilities during the three months ended June 30, 2023 and 2022.

The Company reviews all outstanding warrants in accordance with the requirements of ASC 815. This topic provides that an entity should use a two-step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions. The warrant agreements provide for adjustments to the exercise price for certain dilutive events. Under the provisions of ASC 815, the warrants are not considered indexed to the Company’s stock because future equity offerings or sales of the Company’s stock are not an input to the fair value of a “fixed-for-fixed” option on equity shares, and equity classification is therefore precluded.

In accordance with ASC 815, derivative liabilities must be measured at fair value upon issuance and re-valued at the end of each reporting period through expiration. Any change in fair value between the respective reporting dates is recognized as a gain or loss.

Changes in Warrant Liabilities

As of June 30, 2023, no warrant liabilities were outstanding.

During the nine months ended June 30, 2022, 15,205 Series CC warrants were exercised at an exercise price of $5.00 for gross proceeds of $76,025. No Series CC warrants were exercised during the three months ended June 30, 2022.

In February 2022, 100,000 Series AA warrants, with an exercise price of $13.75 and 200 Series HH warrants with an exercise price of $3.13, expired. In December 2021, 640 Series CC warrants, with an exercise price of $5.00, expired. In November 2021, 184,800 Series Z warrants, with an exercise price of $13.75, expired.

2. Equity Warrants

Changes in Equity Warrants

During the nine months ended June 30, 2023, 600 Series TT warrants, with an exercise price of $2.24, expired. No warrants expired during the three months ended June 30, 2023.

During the nine months ended June 30, 2023, 17,752 Series RR warrants with an exercise price of $1.65 and 200,000 Series SS warrants with an exercise price of $2.09 were exercised for gross proceeds of $447,291. No Series RR or SS warrants were exercised during the three months ended June 30, 2023.

During the nine months ended June 30, 2022, 10,000 Series NN warrants were exercised at an exercise price of $2.52 for gross proceeds of $25,200. No warrants were exercised during the three months ended June 30, 2022.

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On October 28, 2022, the expiration date of the Series RR warrants was extended two years from October 30, 2022 to October 30, 2024. The incremental cost of this extension was approximately $172,000, which was recorded as a deemed dividend. The Series RR warrants are held by Geert Kersten, Patricia Prichep (current Officers of the Company) and the de Clara Trust, of which the Company’s CEO, Geert Kersten, is a beneficiary.

On June 13, 2022, the expiration dates of the Series N, Series X, Series Y, Series UU, Series MM and Series NN warrants were extended two years. The incremental costs of the Series N, Series X and Series Y warrant extensions were recorded as a deemed dividend and totaled approximately $294,000 for the three and nine months ended June 30, 2022. The Series N and Series X warrants are held by the de Clara Trust. The incremental cost of the Series MM, Series NN and Series UU warrant extensions of approximately $635,000 was recorded as interest expense for the three and nine months ended June 30, 2022. The Series UU warrants and a portion of the Series MM and Series NN warrants are held by Geert Kersten, Patricia Prichep (current officers of the Company) and the de Clara Trust.

3. Options and Shares Issued to Consultants

During the nine months ended June 30, 2023 and 2022, the Company issued 115,321 and 81,782 shares, respectively, of restricted common stock to consultants for services. The weighted average grant date fair value of the shares issued to consultants was $2.45 and $5.40 during the nine months ended June 30, 2023 and 2022, respectively. During the three months ended June 30, 2023 and 2022, the Company issued 36,523 and 38,287 shares, respectively, of restricted common stock to consultants for services. The weighted average grant date fair value of the shares issued to consultants was $2.41 and $3.52, respectively, during the three months ended June 30, 2023 and 2022, respectively. The aggregate values of the issuances of restricted common stock and common stock options are recorded as prepaid expenses and are charged to general and administrative expenses over the periods of service.

During the nine months ended June 30, 2023, 5,000 options with an exercise price of $11.61 issued to a consultant expired.

As of June 30, 2023, 10,000 options issued to consultants remained outstanding, all of which were issued from the Non-Qualified Stock Option plans. All 10,000 options are vested as of June 30, 2023.

During the nine months ended June 30, 2023 and 2022, the Company recorded total expense of approximately $474,000 and $603,000, respectively, relating to the share-based compensation under these consulting agreements. During the three months ended June 30, 2023 and 2022, the Company recorded total expense of approximately $188,000 and $201,000, respectively, relating to the share-based compensation under these consulting agreements. On June 30, 2023 and September 30, 2022, consulting fees of approximately $204,000 and $295,000, respectively, are included in current assets as prepaid expenses and will be amortized over the remaining service periods.

D. FAIR VALUE MEASUREMENTS

In accordance with ASC 820-10, Fair Value Measurements, the Company determines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company generally applies the income approach to determine fair value. This method uses valuation techniques to convert future amounts to a single present amount. The measurement is based on the value indicated by current market expectations with respect to those future amounts.

ASC 820-10 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to active markets for identical assets and liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The Company classifies fair value balances based on the observability of those inputs. The three levels of the fair value hierarchy are as follows:

	·	Level 1 – Observable inputs such as quoted prices in active markets for identical assets or liabilities

	·	Level 2 – Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and amounts derived from valuation models where all significant inputs are observable in active markets

	·	Level 3 – Unobservable inputs that reflect management’s assumptions. Assumptions from market participants are used when pricing the asset or liabilities, given there is no readily available market information.

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For disclosure purposes, assets and liabilities are classified in their entirety in the fair value hierarchy level based on the lowest level of input that is significant to the overall fair value measurement. The Company’s assessment of the significance of an input to the fair value measurement requires judgment and may affect the placement within the fair value hierarchy levels.

The following sets forth a reconciliation of beginning and ending balances related to fair value measurements using significant unobservable inputs (Level 3):

	Nine months ended June 30, 2023		Nine months ended June 30, 2022

Beginning balance	$	-	$	437,380
Issuances		-		-
Exercises		-		(70,589	)
Realized and unrealized (gains) and losses		-		(366,791	)
Ending balance	$	-	$	-

The fair values of the Company’s derivative instruments disclosed above under Level 3 are primarily derived from valuation models which include significant inputs such as the Company’s historical stock price, the volatility of the Company’s stock and U.S. Treasury Bill rates. At June 30, 2023 and September 30, 2022, the Company did not have any Level 3 derivative instruments.

E. RELATED PARTY TRANSACTIONS

On October 28, 2022, the expiration dates of the Series RR warrants held by Geert Kersten, Patricia Prichep (current Officers of the Company) and the de Clara Trust, of which the Company’s CEO, Geert Kersten, is a beneficiary were extended by two years. The incremental cost of these modifications was $171,552 and was recorded as a deemed dividend in the financial statements for the nine months ended June 30, 2023.

F. COMMITMENTS AND CONTINGENCIES

Clinical Research Agreement

Under co-development and revenue sharing agreements with Ergomed, Ergomed agreed to contribute up to $12 million towards the Company’s Phase 3 Clinical Trial in the form of discounted clinical services in exchange for a single digit percentage of milestone and royalty payments, up to a specific maximum amount. The Company accounted for the co-development and revenue sharing agreements in accordance with ASC 808, Collaborative Arrangements. The Company determined the payments to Ergomed are within the scope of ASC 730, Research and Development. Therefore, the Company records the discount on the clinical services as a credit to research and development expense on its statements of operations. Since the inception of the agreement with Ergomed, the Company has incurred research and development expenses of approximately $35.7 million for Ergomed’s services. This amount is net of Ergomed’s discount of approximately $11.8 million. During the nine months ended June 30, 2023 and 2022, the Company recorded, net of Ergomed’s discount, approximately $0.1 million and $0.4 million, respectively, as research and development expense related to Ergomed’s services. During the three months ended June 30, 2023 and 2022, the Company recorded, net of Ergomed’s discount, approximately $0.1 million and $0.1 million, respectively, as research and development expense related to Ergomed’s services.

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Lease Agreements

The Company leases a manufacturing facility near Baltimore, Maryland (the San Tomas lease). The building was remodeled in accordance with the Company’s specifications so that it can be used by the Company to manufacture Multikine for the Company’s Phase 3 clinical trial and sales of the drug if approved by the FDA. The lease is for a term of twenty years and requires annual base rent to escalate each year at 3%. The Company is required to pay all real estate and personal property taxes, insurance premiums, maintenance expenses, repair costs and utilities. The lease allows the Company, at its election, to extend the lease for two ten-year periods or to purchase the building at the end of the 20-year lease, which expires in October 2028. The renewal options are not included in the calculation of the right of use asset and lease liability because exercise of those options is not reasonably certain.

On June 30, 2023 and September 30, 2022, the net book value of the finance lease right of use asset is approximately $9.6 million and $10.9 million, respectively, and the balance of the finance lease liability is approximately $12.1 million and $13.3 million, respectively, of which approximately $1.7 million and $1.6 million, respectively, is current. These amounts include the San Tomas lease as well as several other smaller finance leases for office equipment. The finance right of use assets are being depreciated using the straight-line method over the underlying lease terms. Total cash paid related to finance leases during the nine months ended June 30, 2023 and 2022 was approximately $1.9 million for both periods, respectively, of which approximately $0.8 million was for interest in each nine-month period. As of June 30, 2023, the weighted average discount rate of the Company’s finance leases is 8.45% and the weighted average time to maturity is 5.34 years.

In August 2020, the Company entered into an amendment to the San Tomas lease under which the landlord agreed to allow the Company to substantially upgrade the manufacturing facility in preparation for the potential commercial production of Multikine. The project was finished and the improvements were placed in service in October 2021. Total cost was $11.1 million, of which the landlord agreed to finance $2.4 million. The landlord financing is being repaid through increased lease payments which started in March 2021 and extend over the remaining lease term. The repayment includes a base rent which escalates at 3% each year plus interest that accrues at 13.75% per year. The Company remeasured the lease liability to account for the modified payments using a 8.45% implicit interest rate. The rate was determined using a synthetic credit rating analysis prepared by an outside valuation specialist. Additionally, this financing is considered to be a lease incentive from the landlord and has been included in the calculation of the lease liability as it is realized. The entire $2.4 million was received from the landlord as of September 30, 2022. The leasehold improvements are recorded in property and equipment, were deemed to be placed in service in October 2021 and are being amortized over the remaining lease term.

On January 11, 2023, the Company was required to deposit approximately $2.3 million to its landlord, equivalent to one year’s rent, for falling below the stipulated cash threshold in accordance with the San Tomas lease. The amount will be included as an asset on the balance sheet until the Company meets the minimum cash balance required and the deposit is returned.

Approximate future minimum lease payments under finance leases as of June 30, 2023 are as follows:

Three months ending September 30, 2023	$	646,000
Year ending September 30,
2024		2,655,000
2025		2,741,000
2026		2,832,000
2027		2,923,000
2028		3,015,000
Thereafter		252,000
Total future minimum lease obligation		15,064,000
Less imputed interest on finance lease obligations		(2,939,000	)
Net present value of finance lease obligations	$	12,125,000

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The Company leases two facilities under operating leases. The lease for the Company’s office headquarters will expire on November 30, 2025. The lease for its research and development laboratory was renewed in September 2021 for an additional ten years and will expire on February 29, 2032. The renewal was considered a modification for accounting purposes and the right of use asset and liability were remeasured as of the date of the renewal. This resulted in an increase of approximately $1.1 million to the operating lease right of use asset and liability. The operating leases include escalating rental payments. The Company is recognizing the related rent expense on a straight-line basis over the terms of the leases. As of June 30, 2023 and September 30, 2022, the net book value of the operating lease right of use assets is approximately $1.7 million and $1.9 million, respectively. As of June 30, 2023 and September 30, 2022, the balance of the operating lease liabilities is approximately $1.9 million and $2.0 million respectively, of which approximately $0.2 million, is current in each quarter. The Company incurred lease expense for operating leases of approximately $0.3 million for both the nine months ended June 30, 2023 and 2022, respectively. Total cash paid related to operating leases during the nine months ended June 30, 2023 and 2022 was approximately $0.3 and $0.2 million, respectively. The weighted average discount rate of the Company’s operating leases is 10.2% and the weighted average time to maturity is 7.94 years.

As of June 30, 2023, future minimum lease payments on operating leases are as follows:

Three months ending September 30, 2023	$	88,000
Year ending September 30,
2024		357,000
2025		366,000
2026		287,000
2027		277,000
2028		285,000
Thereafter		1,040,000
Total future minimum lease obligation		2,700,000
Less imputed interest on operating lease obligation		(804,000	)
Net present value of operating lease obligation	$	1,896,000

G. PATENTS

During the nine months ended June 30, 2023 and 2022, the Company recorded approximately $0 and $31,000 in patent impairment charges. No patent impairment charges were recorded during the three months ended June 30, 2023 and 2022. For the nine months ended June 30, 2023 and 2022, amortization of patent costs totaled approximately $29,000 and $39,000, respectively. For the three months ended June 30, 2023 and 2022, amortization of patent costs totaled approximately $9,000 and $12,000, respectively. Approximate estimated future amortization expense is as follows:

Three months ending September 30, 2023	$	9,000
Year ending September 30,
2024		30,000
2025		28,000
2026		24,000
2027		21,000
2028		17,000
Thereafter		54,000
Total	$	183,000

H. LOSS PER COMMON SHARE

Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding during the period.

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The following tables provide the details of the basic and diluted loss per-share computations:

	Nine months ended June 30,						Three months ended June 30,
	2023			2022			2023			2022
Loss per share – basic and diluted
Net loss available to common shareholders – basic and diluted	$	(24,735,151	)	$	(28,533,091	)	$	(8,367,281	)	$	(9,926,993	)
Weighted average shares outstanding – basic and diluted		43,761,395			43,124,972			44,254,363			43,174,775
Basic and diluted loss per common share	$	(0.57	)	$	(0.66	)	$	(0.19	)	$	(0.23	)

In accordance with the contingently issuable shares guidance of ASC 260, Earnings Per Share, the calculation of diluted net earnings (loss) per share excludes the following securities because their inclusion would have been anti-dilutive as of June 30:

	2023		2022

Options and Warrants		13,824,365		14,295,501
Unvested Restricted Stock		147,250		151,250
Total		13,971,615		14,446,751

J. SUBSEQUENT EVENTS

On July 17, 2023, the Company sold 2,500,000 shares of common stock at a public offering price of $2.00 per share for aggregate net proceeds of approximately $4.6 million.

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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The Company has completed its 9.5 year pivotal Phase 3 study for its immunotherapy Multikine® (Leukocyte Interleukin, Injection) in the treatment of advanced (stages III and IV) primary (previously untreated) squamous cell carcinoma of the head and neck (SCCHN). The results have been posted on www.clinicaltrials.gov. The Phase 3 study results showed a long-term 5-year overall survival (OS) benefit in the treatment arm that received Multikine treatment followed by surgery and radiation. This survival benefit was robust and durable, with no safety issues, something not commonly seen with cancer drugs. In fact, the survival benefit increased over time and at 5 years the overall survival benefit reached an absolute 14.1% advantage for the Multikine treated arm over control (n=380, total study patients treated with surgery plus radiation), control arm 48.6%, Multikine arm 62.7% survival.

The study used the standard of care treatment for advanced primary head and neck cancer patients as a comparison. The patients received surgery followed by either radiation or chemoradiation (chemotherapy and radiation at the same time), as determined by the physician based on pathology from surgery. This meant that there were 2 distinctly different treatment arms, 1) surgery plus radiation or 2) surgery plus chemoradiation. The arm that received Multikine treatment followed by surgery and radiation showed great survival benefit, but when chemotherapy was added in the second treatment arm, the immunological effect of Multikine was negated. Therefore, when the two treatment arms were combined the study did not achieve its primary endpoint of a 10% improvement in overall survival.

The analysis of the separate treatment arms (radiation and chemoradiation) was prespecified in the protocol and carried out prior to the Company becoming unblinded. The OS benefit of 14.1% at 5 years for the surgery plus radiation treatment arm exceeded the 10% OS benefit set out for the study population as a whole. The OS results for this treatment arm are significant (two-sided p=0.0236, HR=0.68) and the effect is robust, durable and increasing over time, and advanced primary head and neck cancer represents an unmet medical need. The Company believes that these results for one treatment arm in the Phase 3 cancer study of Multikine are very meaningful and is working on the best way to bring Multikine to market in the United States, Canada, the United Kingdom and Europe.

Multikine (Leukocyte Interleukin, Injection) is the full name of this investigational therapy, which, for simplicity, is referred to in this report as Multikine. Multikine is the trademark that the Company has registered for this investigational therapy, and this proprietary name is subject to FDA review under the Company’s future anticipated regulatory submission for approval. Multikine has not been licensed or approved by the FDA or any other regulatory agency. Neither has its safety or efficacy been established for any use.

The Company also owns and is developing a pre-clinical technology called LEAPS (Ligand Epitope Antigen Presentation System). The Company is using its LEAPS technology platform to investigate its lead peptide-based immunotherapy (CEL-4000) as a potential therapeutic vaccine treatment of rheumatoid arthritis.

All of the Company’s projects are under development. Commercialization of Multikine in Canada may be possible as early as 2024. The Company had a productive pre-submission meeting with Canada’s regulator, Health Canada, which advised the Company to request advance consideration for approval under a Notice of Compliance with Conditions (NOCC) policy which facilitates earlier access to promising new drugs for patients suffering from serious, life-threatening or severely debilitating diseases. The Company is preparing an application for the NOCC approval as suggested and plans to file it by early next year. If Health Canada grants the NOCC, then it is possible that the Company could begin commercialization of Multikine in 2024.

The Company will collaborate closely with other regulators to determine the best regulatory path toward market approval in the United States, the United Kingdom and Europe.

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Liquidity and Capital Resources

Since inception, the Company has financed its operations through the issuance of equity securities, convertible notes, loans and certain research grants. The Company will likely continue to generate net operating losses as it continues the development of Multikine and brings other drug candidates into clinical trials. Until such time as the Company becomes profitable, any or all of these financing vehicles or others may be utilized to assist the Company’s capital requirements.

Capital raised by the Company has been expended primarily for patent applications, research and development, administrative costs, and the construction and upgrade of the Company’s manufacturing and laboratory facilities. The Company does not anticipate realizing significant revenues until entering into licensing arrangements for its technology and know-how or until it receives regulatory approval to sell its products (which could take several years). Thus, the Company has been dependent upon the proceeds from the sale of its securities to meet all of the Company’s liquidity and capital requirements and anticipates having to do so in the future.

The Company will be required to raise additional capital or find additional long-term financing to continue with its research efforts. The ability to raise capital may be dependent upon market conditions that are outside the control of the Company. The ability of the Company to complete the necessary clinical trials and obtain FDA approval for the sale of products to be developed on a commercial basis is uncertain. Ultimately, the Company must complete the development of its products, obtain the appropriate regulatory approvals and obtain sufficient revenues to support its cost structure. However, there can be no assurance that the Company will be able to raise sufficient capital to support its operations.

Since the Company launched its Phase 3 clinical trial for Multikine, the Company has incurred expenses of approximately $64.3 million as of June 30, 2023 on direct costs for the Phase 3 clinical trial and the filing of the clinical study report to the FDA. The Company estimates it will incur additional expenses of approximately $0.7 million for the remainder of the Phase 3 clinical trial and the filing of the clinical study report to the FDA. It should be noted that this estimate is based only on the information currently available from the CROs responsible for managing the Phase 3 clinical trial and does not include other related costs, e.g., the manufacturing of the drug.

The Company uses two CROs to manage the global Phase 3 study; ICON and Ergomed, who are both international leaders in managing oncology trials.

Under a co-development agreement, Ergomed agreed to contribute up to $12 million towards the study where it will perform clinical services in exchange for a single digit percentage of milestone and royalty payments, up to a specified maximum amount. Approximately $11.8 million of the committed $12 million contribution has been realized as of June 30, 2023.

During the nine months ended June 30, 2023, the Company’s cash decreased by approximately $17.5 million. The significant component of this decrease included cash used to fund the Company’s regular operations of approximately $17.8 million, which includes the approximate $2.3 million deposit made to the Company’s landlord as a result of falling below certain cash requirements per the San Tomas lease. Other components of this decrease include approximately $0.4 million used to make leasehold improvements and acquire research and development equipment, and approximately $1.2 million in payments on the Company’s finance leases. These decreases were offset by approximately $1.4 million and $0.5 million of cash received from issuance of common stock and exercise of warrants, respectively.

During the nine months ended June 30, 2022, the Company used approximately $14.1 million in cash, after considering the maturity and transfer to cash of the remaining $6.2 million in U.S. Treasury bills (T-bills). Significant components of this decrease include cash used to fund the Company’s regular operations, including its Phase 3 clinical trial, of approximately $13.3 million, leasehold improvement costs of approximately $0.6 million and approximately $1.0 million in lease payments. These outflows are offset by approximately $0.8 million in lease incentives received from the landlord to partially offset costs of the manufacturing facility upgrade.

Prepaid expenses decreased by approximately $0.3 million, or 39%, at June 30, 2023 as compared to September 30, 2022 primarily due to a decrease in the amounts prepaid in personal property tax on the San Tomas facility.

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During the nine months ended June 30, 2023, 217,752 warrants were exercised at a weighted average exercise price of $2.05 for total proceed of approximately $0.5 million. During the nine months ended June 30, 2022, 25,205 warrants were exercised at a weighted average exercise price of $4.02 for total proceeds of approximately $0.1 million.

Results of Operations and Financial Condition

The Company incurred a net operating loss of approximately $24.0 million for the nine months ended June 30, 2023. This net operating loss consists of significant non-cash expenses including approximately $5.0 million in stock-based employee compensation and approximately $3.0 million in depreciation and amortization expense. The Company incurred a net operating loss of approximately $8.2 million for the three months ended June 30, 2023. This net operating loss consists of significant non-cash expenses including approximately $1.5 million in stock-based employee compensation and approximately $1.0 million in depreciation and amortization expense.

During the nine months ended June 30, 2023, research and development expenses decreased by approximately $1.7 million, or 9%, compared to the nine months ended June 30, 2022. Major components of this decrease include approximately $2.3 million decrease in employee stock compensation expense, and approximately $0.8 million decrease in expenses related to the Phase 3 study. These decreases were offset by an increase of approximately $1.3 million of costs incurred to prepare for the potential commercial sale of Multikine and a net increase of approximately $0.1 million in other research and development costs. During the three months ended June 30, 2023, research and development expenses decreased by approximately $0.6 million, or 9%, compared to the three months ended June 30, 2022. Major components of this decrease include approximately $0.6 million decrease in employee stock compensation expense and $0.3 million in costs related to the Phase 3 clinical study and other research and development costs of approximately $0.2 million. These decreases are offset by increases in costs incurred to prepare for the potential commercial sale of Multikine of approximately $0.5 million

During the nine months ended June 30, 2023, general and administrative expenses decreased by approximately $1.4 million, or 17%, compared to the nine months ended June 30, 2022. This decrease is primarily due to a decrease in employee stock compensation expense of approximately $1.9 million offset by a $0.5 million net increase in other general and administrative expenses. During the three months ended June 30, 2023, general and administrative expenses remained consistent with the three months ended June 30, 2022.

During the nine months ended June 30, 2023 and 2022, the Company recorded derivative gains of approximately $0 million and $0.4 million, respectively. This variation was the result of the change in fair value of the derivative liabilities during the period which was caused by fluctuations in the share price of the Company’s common stock. No derivative gains or losses were recorded during the three months ended June 30, 2023 and 2022.

During the nine months ended June 30, 2023 net interest expense decreased by approximately $1.0 million compared to the nine months ended June 30, 2022. This decrease is primarily due to the Company incurring approximately $0.7 million in interest expense from the modification of warrants during the nine months ended June 30, 2022 and the Company earning approximately $0.3 million more in interest income during the nine months ended June 30, 2023 compared to the nine months ended June 30, 2022. During the three months ended June 30, 2023 net interest expense decreased by approximately $0.7 million compared to the three months ended June 30, 2022. This decrease is primarily due to the Company incurring approximately $0.7 million in interest expense from the modification of warrants during the three months ended June 30, 2022.

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Research and Development Expenses

The Company’s research and development efforts involve Multikine and LEAPS. The table below shows the research and development expenses associated with each project.

	Nine Months Ended June 30,				Three months ended June 30,
	2023		2022		2023		2022

MULTIKINE	$	16,919,843	$	18,035,279	$	5,661,214	$	6,039,977
LEAPS		283,980		858,578		66,575		246,896
TOTAL	$	17,203,823	$	18,893,857	$	5,727,789	$	6,286,873

Clinical and other studies necessary to obtain regulatory approval of a new drug involve significant costs and require several years to complete. The extent of the Company’s clinical trials and research programs are primarily based upon the amount of capital available to the Company and the extent to which the Company has received regulatory approvals for clinical trials. The inability of the Company to conduct clinical trials or research, whether due to a lack of capital or regulatory approval, will prevent the Company from completing the studies and research required to obtain regulatory approval for any products which the Company is developing. Without regulatory approval, the Company will be unable to sell any of its products. Since all of the Company’s projects are under development, the Company cannot predict when it will be able to generate any revenue from the sale of any of its products.

Critical Accounting Estimates and Policies

Management’s discussion and analysis of the Company’s financial condition and results of operations is based on its unaudited condensed financial statements. The preparation of these financial statements is based on the selection of accounting policies and the application of significant accounting estimates, some of which require management to make judgments, estimates and assumptions that affect the amounts reported in the financial statements and notes.

The Company believes some of the more critical estimates and policies that affect its financial condition and results of operations are in the areas of leases and stock-based compensation.

The measurement of the finance and operating lease right-of-use asset and lease liabilities requires the determination of an estimated lease term and an incremental borrowing rate, which involves complex judgment by management. Significant judgment is required by management to develop inputs and assumptions used to determine the incremental borrowing rate for lease contracts. The fair value of the stock options is calculated using the Black-Scholes option pricing model which requires various judgmental assumptions including volatility and expected option life. The compensation cost is recognized as expense over the requisite service or vesting period. Performance-based options are valued using a Monte-Carlo simulation model, which requires inputs based on estimates, including the likelihood of the occurrence of performance and market conditions, volatility and expected option life.

For more information regarding the Company’s critical accounting estimates and policies, see Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended September 30, 2022. The application of these critical accounting policies and estimates has been discussed with the Audit Committee of the Company’s Board of Directors.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

The Company does not believe that it has any significant exposure to market risk.

Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the direction and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, the Company carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures as of June 30, 2023. The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its periodic reports with the Securities and Exchange Commission is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and regulations, and that such information is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Company’s disclosure controls and procedures are designed to provide a reasonable level of assurance of reaching its desired disclosure control objectives.

The Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were not effective as of June 30, 2023 due to the material weaknesses described in the Company's Annual Report on Form 10-K for the year ended September 30, 2022.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting that occurred during the three months ended June 30, 2023 that have materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

During the nine months ended June 30, 2023, the Company issued 115,321 restricted shares of common stock to consultants for investor relations services.

The Company relied upon the exemption provided by Section 4(a)(2) of the Securities Act of 1933 with respect to the issuance of these shares. The individuals who acquired these shares were sophisticated investors and were provided full information regarding the Company’s business and operations. There was no general solicitation in connection with the offer or sale of these securities. The individuals who acquired these shares acquired them for their own accounts. The certificates representing these shares bear a restricted legend which provides they cannot be sold except pursuant to an effective registration statement or an exemption from registration. No commission or other form of remuneration was given to any person in connection with the issuance of these shares.

Item 6. Exhibits

Number		Exhibit

31.1		Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer

31.2		Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer

32		Section 1350 Certifications

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CEL-SCI CORPORATION

Date: August 10 , 2023	By:	/s/ Geert Kersten
		Geert Kersten
		Principal Executive Officer*

* Also signing in the capacity of the Principal Accounting and Financial Officer.

SEC Form 10-Q filed by Cel-Sci Corporation