UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from _______________ to ______________.
Commission File Number
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| |
State or other jurisdiction of incorporation |
| (IRS) Employer Identification Number |
Address of principal executive offices
(
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 |
|
|
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.
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).
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 | |
☒ | 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
Class of Stock | No. Shares Outstanding | Date |
Common | August 3, 2022 |
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
| 2 |
| Table of Contents |
CEL-SCI CORPORATION | ||||||||
CONDENSED BALANCE SHEETS | ||||||||
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| JUNE 30, |
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| SEPTEMBER 30, |
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ASSETS |
| 2022 |
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| 2021 |
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| (UNAUDITED) |
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Current assets: |
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Cash and cash equivalents |
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U.S. Treasury Bills |
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Receivables |
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Prepaid expenses |
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Supplies used for R&D and manufacturing |
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Total current assets |
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Finance lease right of use assets |
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Operating lease right of use assets |
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Property and equipment, net |
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Patent costs, net |
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Deposits |
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Total assets |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities: |
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Accounts payable |
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Accrued expenses |
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Due to employees |
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Derivative instruments, current portion |
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Lease liabilities, current portion |
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Total current liabilities |
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Finance lease obligations, net of current portion |
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Operating lease obligations, net of current portion |
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Other liabilities |
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Total liabilities |
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Commitments and contingencies |
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STOCKHOLDERS' EQUITY |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total stockholders' equity |
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
| $ |
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| $ |
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See notes to condensed financial statements. | ||||||||
| 3 |
| Table of Contents |
CEL-SCI CORPORATION | ||||||||
CONDENSED STATEMENTS OF OPERATIONS | ||||||||
NINE MONTHS ENDED JUNE 30, 2022 and 2021 | ||||||||
(UNAUDITED) | ||||||||
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| 2022 |
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| 2021 |
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Operating expenses: |
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Research and development |
| $ |
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| $ |
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General and administrative |
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Total operating expenses |
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Operating loss |
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Gain (loss) on derivative instruments |
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Other non-operating (loss) gain |
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Interest expense, net |
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Net loss |
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Modification of warrants |
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Net loss available to common shareholders |
| $ | ( | ) |
| $ | ( | ) |
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Net loss per common share - basic |
| $ | ( | ) |
| $ | ( | ) |
Weighted average common shares outstanding - basic |
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Net loss per common share - diluted |
| $ | ( | ) |
| $ | ( | ) |
Weighted average common shares outstanding - diluted |
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See notes to condensed financial statements. | ||||||||
| 4 |
| Table of Contents |
CEL-SCI CORPORATION | ||||||||
CONDENSED STATEMENTS OF OPERATIONS | ||||||||
THREE MONTHS ENDED JUNE 30, 2022 and 2021 | ||||||||
(UNAUDITED) | ||||||||
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| 2022 |
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| 2021 |
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Operating Expenses: |
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Research and development |
| $ |
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| $ |
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General and administrative |
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Total operating expenses |
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Operating loss |
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Gain on derivative instruments |
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Other non-operating gains |
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Interest expense, net |
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Net loss |
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| ( | ) |
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| ( | ) |
Modification of warrants |
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| ( | ) |
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Net loss available to common shareholders |
| $ | ( | ) |
| $ | ( | ) |
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Net loss per common share - basic |
| $ | ( | ) |
| $ | ( | ) |
Weighted average common shares outstanding - basic |
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Net loss per common share - diluted |
| $ | ( | ) |
| $ | ( | ) |
Weighted average common shares outstanding - diluted |
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See notes to condensed financial statements. | ||||||||
| 5 |
| Table of Contents |
CEL-SCI CORPORATION | ||||||||||||||||||||
STATEMENTS OF STOCKHOLDERS' EQUITY | ||||||||||||||||||||
(UNAUDITED) | ||||||||||||||||||||
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| Additional |
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| Common Stock |
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| Paid-In |
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| Accumulated |
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| Shares |
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| Amount |
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| Capital |
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| Deficit |
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| Total |
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BALANCES AT OCTOBER 1, 2021 |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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Warrant exercises |
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Equity based compensation - employees |
|
| - |
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|
| - |
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| 3,262,296 |
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| - |
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| 3,262,296 |
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| 401(k) contributions paid in common stock |
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Stock and options issued to nonemployees for service |
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Option exercises |
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Share issuance costs |
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| - |
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| ( | ) |
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| ( | ) | ||
Net loss |
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| - |
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BALANCES AT DECEMBER 31, 2021 |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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Warrant exercises |
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Equity based compensation - employees |
|
| - |
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| - |
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| 3,392,706 |
|
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| - |
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| 3,392,706 |
|
| 401(k) contributions paid in common stock |
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Stock and options issued to nonemployees for service |
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| |||||
Share issuance costs |
|
| - |
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| ( | ) |
|
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| ( | ) | ||
Net loss |
|
| - |
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| ( | ) |
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| ( | ) | ||
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BALANCES AT MARCH 31, 2022 |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
| ||||
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Equity based compensation - employees |
|
| - |
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| - |
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| 2,447,772 |
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| - |
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| 2,447,772 |
|
| 401(k) contributions paid in common stock |
|
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Stock and options issued to nonemployees for service |
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| |||||
Modification of warrants |
|
| - |
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| ||||
Share issuance costs |
|
| - |
|
|
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| ( | ) |
|
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|
| ( | ) | ||
Net loss |
|
| - |
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| ( | ) |
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| ( | ) | ||
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BALANCES AT JUNE 30, 2022 |
|
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|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| ||||
| 6 |
| Table of Contents |
CEL-SCI CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY continued
(UNAUDITED)
|
| Common Stock |
|
| Paid-In |
|
| Accumulated |
|
|
|
| |||||||||
|
| Shares |
|
| Amount |
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| Capital |
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| Deficit |
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| Total |
| ||||||
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BALANCES AT OCTOBER 1, 2020 |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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Proceeds from the sale of common stock |
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| ||||||
Warrant exercises |
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| ||||||
Equity based compensation - employees |
|
| ( | ) |
|
| ( | ) |
|
| 3,296,329 |
|
|
| - |
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| ||
| 401(k) contributions paid in common stock |
|
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Stock and options issued to nonemployees for service |
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Option exercises |
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| ||||||
Modification of warrants |
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| - |
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| |||||
Share issuance costs |
|
| - |
|
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| ( | ) |
|
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| ( | ) | |||
Net loss |
|
| - |
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| ( | ) |
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| ( | ) | |||
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| |
BALANCES AT DECEMBER 31, 2020 |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
| |||||
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Warrant exercises |
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| ||||||
Equity based compensation - employees |
|
| - |
|
|
| - |
|
|
| 3,282,742 |
|
|
| - |
|
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| 3,282,742 |
| |
| 401(k) contributions paid in common stock |
|
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| ||||||
Stock and options issued to nonemployees for service |
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| ||||||
Option exercises |
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| ||||||
Share issuance costs |
|
| - |
|
|
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|
| ( | ) |
|
|
|
|
| ( | ) | |||
Net loss |
|
| - |
|
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| ( | ) |
|
| ( | ) | |||
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| |
BALANCES AT MARCH 31, 2021 |
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| |||||
|
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| |
Proceeds from the sale of common stock |
|
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| ||||||
Warrant exercises |
|
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|
|
|
|
|
|
|
|
| ||||||
Equity based compensation - employees |
|
| - |
|
|
| - |
|
|
| 3,511,359 |
|
|
| - |
|
|
| 3,511,359 |
| |
| 401(k) contributions paid in common stock |
|
|
|
|
|
|
|
|
|
|
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| ||||||
Stock and options issued to nonemployees for service |
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| ||||||
Option exercises |
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| ||||||
Modification of warrants |
|
| - |
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|
|
|
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| |||||
Share issuance costs |
|
| - |
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) | |||
Net loss |
|
| - |
|
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|
|
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| ( | ) |
|
| ( | ) | |||
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| |
BALANCES AT JUNE 30, 2021 |
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| |||||
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| |
See notes to condensed financial statements. | |||||||||||||||||||||
| 7 |
| Table of Contents |
CEL-SCI CORPORATION | ||||||||
CONDENSED STATEMENTS OF CASH FLOWS | ||||||||
NINE MONTHS ENDED JUNE 30, 2022 and 2021 | ||||||||
(UNAUDITED) | ||||||||
|
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|
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|
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| ||
|
| 2022 |
|
| 2021 |
| ||
|
|
|
|
|
|
| ||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
Adjustments to reconcile net loss to |
|
|
|
|
|
|
|
|
net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
| ||
Share-based payments for services |
|
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|
|
|
| ||
Equity based compensation |
|
|
|
|
|
| ||
Common stock contributed to 401(k) plan |
|
|
|
|
|
| ||
Gain on short-term investments |
|
| ( | ) |
|
| ( | ) |
Loss on patent impairment |
|
|
|
|
|
| ||
Gain (loss) on derivative instruments |
|
| ( | ) |
|
|
| |
Modification of warrants |
|
|
|
|
|
| ||
(Increase)/decrease in assets: |
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|
Receivables |
|
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|
|
| ||
Prepaid expenses |
|
|
|
|
|
| ||
Supplies used for R&D and manufacturing |
|
| ( | ) |
|
| ( | ) |
Deposits |
|
|
|
|
| ( | ) | |
Increase/(decrease) in liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
| ( | ) |
|
|
| |
Accrued expenses |
|
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|
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| ||
Due to employees |
|
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|
|
| ||
Other liabilities |
|
|
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|
|
| ||
|
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|
|
|
|
|
|
|
Net cash used in operating activities |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Proceeds from maturity (purchases) of US treasury bills |
|
|
|
|
| ( | ) | |
Purchases of property and equipment |
|
| ( | ) |
|
| ( | ) |
Expenditures for patent costs |
|
| ( | ) |
|
|
| |
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
|
|
| ( | ) | |
|
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|
|
|
|
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|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock |
|
|
|
|
|
| ||
Share issuance costs |
|
| ( | ) |
|
| ( | ) |
Proceeds from exercises of warrants and options |
|
|
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|
|
| ||
Proceeds from landlord funding of leasehold improvements |
|
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|
|
| ||
Payments on obligations under finance lease |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities |
|
| ( | ) |
|
|
| |
|
|
|
|
|
|
|
|
|
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS |
|
| ( | ) |
|
|
| |
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, END OF PERIOD |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
See notes to condensed financial statements. | ||||||||
| 8 |
| Table of Contents |
CEL-SCI CORPORATION | ||||||||
CONDENSED STATEMENTS OF CASH FLOWS | ||||||||
NINE MONTHS ENDED JUNE 30, 2022 and 2021 | ||||||||
(UNAUDITED) | ||||||||
|
|
|
|
|
|
| ||
|
| 2022 |
|
| 2021 |
| ||
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
|
| ||
Property and equipment included in current liabilities |
| $ |
|
| $ |
| ||
Assets purchased under finance leases |
| $ |
|
| $ |
| ||
Capitalizable patent costs included in current liabilities |
| $ |
|
| $ |
| ||
Changes to right of use assets and liabilities |
| $ |
|
| $ |
| ||
Finance lease obligation included in accounts payable |
| $ |
|
| $ |
| ||
Prepaid consulting services paid with issuance of common stock |
| $ |
|
| $ |
| ||
Accrued consulting services to be paid with issuance of common stock |
| $ |
|
| $ |
| ||
Exercise of derivative liabilities |
| $ |
|
| $ |
| ||
Financing costs included in current liabilities |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
See notes to condensed financial statements. | ||||||||
| 9 |
| Table of Contents |
CEL-SCI CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 2022 AND 2021 (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 (U.S. GAAP) 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, 2021.
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, 2022 and the results of its operations for the nine and three months then ended. The condensed balance sheet as of September 30, 2021 is derived from the September 30, 2021 audited financial statements. All accounting policies have been consistently applied in the interim financial statements and the annual financial statements. The results of operations for the nine and three months ended June 30, 2022 are not necessarily indicative of the results to be expected for the entire year.
The financial statements have been prepared assuming that the Company will continue as a going concern, but 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 the 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 as cash equivalents.
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 are reviewed on a quarterly basis to determine if any of the assets are impaired.
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 (
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.
| 10 |
| Table of Contents |
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 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 upon adoption.
The Company adopted ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. This standard was issued to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. ASU 2021-04 is effective for fiscal years beginning after December 15, 2021, however, as permitted, the Company has elected to prospectively adopt the standard this quarter, effective as of October 1, 2021. Adoption of this standard had no impact on prior quarters within this fiscal year.
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 allocation 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 assumption for stock price volatility is based 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 Plans 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.
| 11 |
| Table of Contents |
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.
Net Loss Per Common Share – The Company calculates net loss per common share in accordance with ASC 260, “Earnings Per Share” (ASC 260). 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 uses the asset and liability method of accounting for income taxes. Under the asset and liability method, 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, 2022 and September 30, 2021.
The Company adopted ASU No. 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 Topic 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, obsolescence of supplies used for R&D and manufacturing, 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, regarding the valuation of derivative liabilities determined using the Black-Scholes pricing model, significant fluctuations 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.
| 12 |
| Table of Contents |
B. OPERATIONS AND FINANCING
On June 28, 2021, the Company announced results from 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 Phase 3 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. This meant that there were two 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.
Multikine is given for three weeks after cancer diagnosis, but before surgery and other treatments. In the peer-reviewed abstract presented at ASCO, a clear survival advantage for patients treated with Multikine prior to surgery in the surgery-plus-radiation arm of the IT-MATTERS study was described. The survival advantage was driven by objective data derived from patients in the intent-to-treat (ITT) population who had a significant number of early complete and partial tumor responses which occurred prior to surgery. Five patients in the study had their tumors completely disappear (confirmed by pathology) before surgery. In the ITT population as a whole, 8.5% of all Multikine-treated patients had a tumor response before surgery, but not a single tumor response before surgery was seen in the ITT control group before surgery, statistically a highly significant finding (p-value of less than 0.00000000001). This indicates that the likelihood of seeing these results by chance is less than 1 in ten billion. These results confirm findings from the Phase 1 and 2 studies with Multikine and provide direct evidence of Multikine’s anticancer activity.
| 13 |
| Table of Contents |
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. The Company believes there is a high likelihood that it will continue to receive funds from private and public offerings and warrant exercises similar to the way it has funded operations in the past. However, there can be no assurance that the Company will be able to raise sufficient capital to support its operations.
To finance the Company through marketing approval, the Company plans to raise additional capital in the form of warrant exercises, 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 it 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.
Primarily because of the losses incurred to date, the expected continued future losses, and the uncertainties associated with obtaining regulatory approval and ultimately commercializing its products, management has identified conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern. Management has evaluated the significance of those conditions and has concluded that there is sufficient cash on hand to meet the Company’s budgeted cash requirements. As a result, substantial doubt about the Company’s ability to continue as a going concern for more than twelve months from the date of these financial statements has been alleviated.
Impact of the COVID-19 Pandemic
In response to the global outbreak of COVID-19 and the World Health Organization’s classification of the outbreak as a pandemic, the Company continues to take the necessary precautions to ensure the safety of its employees and to minimize interruptions to its operations. Management follows the Centers for Disease Control and Prevention’s (CDC) guidance and the recommendations and restrictions provided by state and local authorities. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. As such, it is uncertain as to the full impact the pandemic will have on the Company’s future financial condition, liquidity and results of operations. Management is actively monitoring the risks to public health and the impact of overall global business activity on the Company’s financial condition, liquidity, operations, suppliers, industry, and workforce.
C. STOCKHOLDERS’ EQUITY
Proceeds from the Sale of Common Stock
In June 2021, the Company sold
| 14 |
| Table of Contents |
In December 2020, the Company sold
Equity Compensation
Underlying share information for equity compensation plans as of June 30, 2022 is as follows:
Name of Plan |
| Total Shares Reserved Under Plans |
|
| Shares Reserved for Outstanding Options |
|
| Shares Issued |
|
| Remaining Options/Shares Under Plans |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Incentive Stock Option Plans |
|
|
|
|
|
|
|
| N/A |
|
|
|
| |||
Non-Qualified Stock Option Plans |
|
|
|
|
|
|
|
| N/A |
|
|
|
| |||
Stock Bonus Plans |
|
|
|
|
| N/A |
|
|
|
|
|
|
| |||
Stock Compensation Plans |
|
|
|
|
| N/A |
|
|
|
|
|
|
| |||
Incentive Stock Bonus Plan |
|
|
|
|
| N/A |
|
|
|
|
|
|
| |||
Stock option activity:
|
| Nine Months Ended June 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Options granted |
|
|
|
|
|
| ||
Options exercised |
|
|
|
|
|
| ||
Options forfeited |
|
|
|
|
|
| ||
Options expired |
|
|
|
|
|
| ||
|
| Three Months Ended June 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Options granted |
|
|
|
|
|
| ||
Options exercised |
|
| - |
|
|
|
| |
Options forfeited |
|
| - |
|
|
| - |
|
Options expired |
|
|
|
|
|
| ||
During the three months ended June 30, 2022, the Company adopted the 2022 Non-Qualified Stock Option Plan, which provides for the issuance of up to
During the nine months ended June 30, 2022, the Company granted
| 15 |
| Table of Contents |
Stock-Based Compensation Expense
|
| Nine months Ended June 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Employees |
| $ |
|
| $ |
| ||
Non-employees |
| $ |
|
| $ |
| ||
|
| Three months Ended June 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Employees |
| $ |
|
| $ |
| ||
Non-employees |
| $ |
|
| $ |
| ||
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
Warrant/Options |
| Issue Date |
| Underlying Shares |
|
| Exercise Price |
|
| Expiration Date |
| Reference |
| |||
Series N |
|
|
|
|
| $ |
|
|
|
| 2 |
| ||||
Series UU |
|
|
|
|
| $ |
|
|
|
| 2 |
| ||||
Series X |
|
|
|
|
| $ |
|
|
|
| 2 |
| ||||
Series Y |
|
|
|
|
| $ |
|
|
|
| 2 |
| ||||
Series MM |
|
|
|
|
| $ |
|
|
|
| 2 |
| ||||
Series NN |
|
|
|
|
| $ |
|
|
|
| 2 |
| ||||
Series RR |
|
|
|
|
| $ |
|
|
| * |
| |||||
Series SS |
|
|
|
|
| $ |
|
|
| * |
| |||||
Series TT |
|
|
|
|
| $ |
|
|
| * |
| |||||
Consultants |
|
|
|
|
| $ |
|
|
| * |
| |||||
* | No current period changes to these warrants |
|
|
1. | Warrant Liabilities |
The table below presents the fair value of the warrant liabilities as of:
|
| June 30, 2022 |
|
| September 30, 2021 |
| ||
Series Z warrants |
| $ |
|
| $ |
| ||
Series AA warrants |
|
|
|
|
|
| ||
Series CC warrants |
|
|
|
|
|
| ||
Series HH warrants |
|
|
|
|
|
| ||
Total warrant liabilities |
| $ |
|
| $ |
| ||
The table below presents the net gains (losses) on the warrant liabilities for the nine months ended June 30:
|
| 2022 |
|
| 2021 |
| ||
Series W warrants |
| $ |
|
| $ |
| ||
Series Z warrants |
|
|
|
|
| ( | ) | |
Series ZZ warrants |
|
|
|
|
| ( | ) | |
Series AA warrants |
|
|
|
|
| ( | ) | |
Series BB warrants |
|
|
|
|
|
| ||
Series CC warrants |
|
|
|
|
| ( | ) | |
Series HH warrants |
|
|
|
|
|
| ||
Net gain (loss) on warrant liabilities |
| $ |
|
| $ | ( | ) | |
| 16 |
| Table of Contents |
The table below presents the net gains (losses) on the warrant liabilities for the three months ended June 30:
|
| 2022 |
|
| 2021 |
| ||
Series Z warrants |
| $ |
|
| $ |
| ||
Series ZZ warrants |
|
|
|
|
| ( | ) | |
Series AA warrants |
|
|
|
|
|
| ||
Series BB warrants |
|
|
|
|
|
| ||
Series CC warrants |
|
|
|
|
|
| ||
Series HH warrants |
|
|
|
|
|
| ||
Net gain loss on warrant liabilities |
| $ |
|
| $ |
| ||
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.
During the nine months ended June 30, 2022,
The following warrants recorded as liabilities were exercised during the following periods:
|
| Nine Months Ended June 30, 2021 |
|
| Three Months Ended June 30, 2021 |
| ||||||||||||||||||
Warrants |
| Warrants Exercised |
|
| Exercise Price |
|
| Proceeds |
|
| Warrants Exercised |
|
| Exercise Price |
|
| Proceeds |
| ||||||
Series Z |
|
|
|
| $ |
|
| $ |
|
|
| - |
|
|
|
|
| $ |
| |||||
Series ZZ |
|
|
|
| $ |
|
|
|
|
|
|
|
| $ |
|
|
|
| ||||||
Series AA |
|
|
|
| $ |
|
|
|
|
|
| - |
|
|
|
|
|
|
| |||||
Series CC |
|
|
|
| $ |
|
|
|
|
|
|
|
| $ |
|
|
|
| ||||||
|
|
|
|
|
|
|
|
| $ |
|
|
|
|
|
|
|
|
| $ |
| ||||
In February 2022,
On October 28, 2020,
2. Equity Warrants
During the nine months ended June 30, 2022,
The following warrants recorded as equity were exercised during the following periods:
|
| Nine Months Ended June 30, 2021 |
|
| Three Months Ended June 30, 2021 |
| ||||||||||||||||||
Warrants |
| Warrants Exercised |
|
| Exercise Price |
|
| Proceeds |
|
| Warrants Exercised |
|
| Exercise Price |
|
| Proceeds |
| ||||||
Series MM |
|
|
|
| $ |
|
| $ |
|
|
|
|
| $ |
|
| $ |
| ||||||
Series NN |
|
|
|
| $ |
|
|
|
|
|
|
|
| $ |
|
|
|
| ||||||
Series RR |
|
|
|
| $ |
|
|
|
|
|
|
|
| $ |
|
|
|
| ||||||
Series SS |
|
|
|
| $ |
|
|
|
|
|
| - |
|
| $ |
|
|
|
| |||||
Series TT |
|
|
|
| $ |
|
|
|
|
|
|
|
| $ |
|
|
|
| ||||||
|
|
|
|
|
|
|
|
| $ |
|
|
|
|
|
|
|
|
| $ |
| ||||
| 17 |
| Table of Contents |
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 warrant extensions were recorded consistent with the accounting for the initial warrant issuances. The incremental costs of the Series N, Series X and Series Y warrant extensions were recorded as a deemed dividend and totaled approximately $
On June 28, 2021,
3. Options and Shares Issued to Consultants
During the nine months ended June 30, 2022 and 2021, the Company issued
No options were issued to consultants during the nine and three months ended June 30, 2022. During the nine months ended June 30, 2021, the Company issued a consultant
During the nine months ended June 30, 2022 and 2021, the Company recorded total expense of approximately $
| 18 |
| Table of Contents |
4. Securities Purchase Agreement
In prior years, the Company was party to a Securities Purchase Agreement (SPA) with Ergomed plc (Ergomed), one of the Company’s Clinical Research Organizations responsible for managing the Company’s Phase 3 clinical trial, to facilitate payment of amounts due to Ergomed. Under the Agreement, the Company issued Ergomed shares of common stock and the net proceeds from the sales of those shares reduced outstanding amounts due Ergomed. Upon issuance, the Company expensed the full value of the shares as other non-operating gain/loss and subsequently offset the gain or loss as amounts were realized through the sale of shares by Ergomed and reduced accounts payable to Ergomed. Ergomed resold the final balance of shares issued in the quarter ended September 30, 2021. No shares were issued during the periods presented. No sales were made by Ergomed during the nine and three months ended June 30, 2022. During the nine and three months ended June 30, 2021, respectively, the Company realized approximately $
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 assets or liabilities, given there is no readily available market information. |
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 Company purchased short-term U.S. Treasury bills during the year ended September 30, 2021 that are classified as trading securities. Quoted market prices were applied to determine the fair value of short-term investments; therefore, they were categorized as Level 1 in the fair value hierarchy. The Treasury bills matured in December 2021 and yielded a weighted average interest rate of
As of June 30, 2022, there were no outstanding derivative instruments. As of September 30, 2021, all the Company’s derivative instruments are classified as Level 3 of the fair value hierarchy.
| 19 |
| Table of Contents |
The following sets forth the reconciliation of beginning and ending balances related to fair value measurements using significant unobservable inputs (Level 3) for the nine months ended June 30, 2022 and the year ended September 30, 2021:
|
| Nine months ended |
|
| Twelve months ended |
| ||
|
| June 30, 2022 |
|
| September 30, 2021 |
| ||
|
|
|
|
|
|
| ||
Beginning balance |
| $ |
|
| $ |
| ||
Issuances |
|
|
|
|
|
| ||
Exercises |
|
| ( | ) |
|
| ( | ) |
Realized and unrealized net (gain) loss |
|
| ( | ) |
|
|
| |
Ending balance |
| $ |
|
| $ |
| ||
The fair values of the Company’s derivative instruments disclosed above under Level 3 are primarily derived from valuation models where significant inputs such as historical price and volatility of the Company’s stock, as well as U.S. Treasury Bill rates, are observable in active markets. On September 30, 2021, the Company’s Level 3 derivative instruments had a weighted average fair value of $
E. RELATED PARTY TRANSACTIONS
During the nine months ended June 30, 2022, the Company issued officers
On June 13, 2022, the expiration dates of certain warrants, some of which are held by related parties, were extended by twenty-four months (Note C). The incremental cost of the modification of the Series N and Series X warrants, held by the de Clara Trust, was approximately $
In June 2021, the expiration dates of the Series N, Series X, Series Y and Series UU warrants were extended one year. In December 2020, the expiration dates of the Series N, Series X, Series Y and Series UU warrants were extended six months. The incremental costs of the warrant extensions were recorded consistent with the accounting for the initial warrant issuances. The incremental costs of the Series N and Series X warrant extensions were recorded as a deemed dividend and totaled approximately $
F. COMMITMENTS AND CONTINGENCIES
Clinical Research Agreements
Under co-development and revenue sharing agreements with Ergomed, Ergomed agreed to contribute up to $
| 20 |
| Table of Contents |
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 probable.
On June 30, 2022 and September 30, 2021, the net book value of the finance lease right of use asset is approximately $
In August 2020, the Company entered 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 completed and the improvements were placed in service in October 2021. The total cost was $
The Company was required to deposit the equivalent of one year of base rent in accordance with the lease. Under the landlord’s $
Approximate future minimum lease payments under finance leases as of June 30, 2022 are as follows:
Three months ending September 30, 2022 |
| $ |
| |
Year ending September 30, |
|
|
|
|
2023 |
|
|
| |
2024 |
|
|
| |
2025 |
|
|
| |
2026 |
|
|
| |
2027 |
|
|
| |
Thereafter |
|
|
| |
Total future minimum lease obligation |
|
|
| |
Less imputed interest on finance lease obligations |
|
| ( | ) |
Net present value of finance lease obligations |
| $ |
|
| 21 |
| Table of Contents |
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 $
As of June 30, 2022, future minimum lease payments on operating leases are as follows:
Three months ending September 30, 2022 |
| $ |
| |
Year ending September 30, |
|
|
|
|
2023 |
|
|
| |
2024 |
|
|
| |
2025 |
|
|
| |
2026 |
|
|
| |
2027 |
|
|
| |
Thereafter |
|
|
| |
Total future minimum lease obligation |
|
|
| |
Less imputed interest on operating lease obligation |
|
| ( | ) |
Net present value of operating lease obligation |
| $ |
|
G. PATENTS
During the nine months ended June 30, 2022 and 2021, respectively, patent impairment charges of approximately $
Three months ending September 30, 2022 |
| $ |
| |
Year ending September 30, |
|
|
|
|
2023 |
|
|
| |
2024 |
|
|
| |
2025 |
|
|
| |
2026 |
|
|
| |
2027 |
|
|
| |
Thereafter |
|
|
| |
Total |
| $ |
|
| 22 |
| Table of Contents |
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. For the years presented, the gain on warrant liabilities priced lower than the average market price during the period is excluded from the numerator and the incremental shares, determined using the treasury stock method, are added to the denominator in calculating diluted loss per share.
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, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2021 |
|
| 2021 |
| ||||
Loss per share - basic |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net loss available to common shareholders - basic |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Weighted average shares outstanding - basic |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic loss per common share |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share - diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss available to common shareholders - basic |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Unrealized gain on derivatives (1) |
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) | ||
Net loss available to common shareholders – diluted |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Incremental shares underlying dilutive “in the money” warrants (1) |
|
| - |
|
|
|
|
|
| - |
|
|
|
| ||
Weighted average shares outstanding - diluted |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Diluted loss per common share |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| (1) | Includes shares issuable upon the exercise of the Series Z, AA, BB, CC and HH warrants for the nine and three months ended June 30, 2021. |
In accordance with the contingently issuable shares guidance of FASB ASC Topic 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:
|
| 2022 |
|
| 2021 |
| ||
|
|
|
|
|
|
| ||
Options and Warrants |
|
|
|
|
|
| ||
Unvested Restricted Stock |
|
|
|
|
|
| ||
Total |
|
|
|
|
|
| ||
J. SUBSEQUENT EVENTS
On August 2 2022, the Company appointed Dr. Gail K. Naughton to the Company's Board of Directors.
| 23 |
| Table of Contents |
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
On June 28, 2021, the Company announced results from 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 Phase 3 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. This meant that there were two 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 this 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 US and other countries.
On May 27, 2022, the Company announced the American Society of Clinical Oncology (ASCO) published two abstracts related to our pivotal Phase 3 Multikine head and neck cancer clinical trial. The poster was presented by the Company’s Chief Scientific Officer, Eyal Talor, Ph.D. at the 2022 ASCO Annual Meeting on June 6, 2022 in Chicago, Illinois. The abstract titles and corresponding links are as follows:
| 1. | “Leukocyte interleukin injection (LI) immunotherapy extends overall survival (OS) in treatment-naive low-risk (LR) locally advanced primary squamous cell carcinoma of the head and neck: The IT-MATTERS study.” |
|
| o | Link to abstract: https://meetings.asco.org/abstracts-presentations/207201 |
|
|
|
|
|
| o | Link to poster: https://cel-sci.com/wp-content/uploads/2022/06/CEL-SCI-ASCO-2022-Poster-6032-June-6-Head-and-Neck-Cancer-1.pdf |
| 2. | “Novel algorithm for assigning risk/disease-directed treatment (DDT) choice in locally advanced primary squamous cell carcinoma of the head and neck (SCCHN): Using pretreatment data only.” |
|
| o | Link to abstract: https://meetings.asco.org/abstracts-presentations/207202/ |
| 24 |
| Table of Contents |
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, nor 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 has product candidates under development for the potential treatment of rheumatoid arthritis.
All of the Company’s projects are under development. Consequently, the Company cannot predict when it will be able to generate any revenue from the sale of any of its products.
Since inception, the Company has financed its operations through the sale of equity securities, convertible notes, loans and certain research grants. The Company’s expenses will continue to exceed its revenues as it continues the development of Multikine and brings other drug candidates into clinical trials. Until the Company becomes profitable, any or all of these financing vehicles or others may be utilized to assist in funding 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.
| 25 |
| Table of Contents |
As of June 30, 2022, the Company has incurred approximately $63.6 million of direct costs for the Phase 3 clinical trial and the filing of the clinical study report to the FDA since the Company launched its Phase 3 clinical trial for Multikine. The Company estimates it will incur additional expenses of approximately $0.9 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, 2022.
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 $1.1 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 and approximately $0.1 million in proceeds from the exercise of options and warrants.
During the nine months ended June 30, 2021, the Company’s cash increased by approximately $20.4 million after the purchase of $11.1 million of U.S. Treasury bills (T-bills). Not including the purchase of the T-bills, cash increased by approximately $31.6 million. Significant components of the increase include approximately $47.2 million in net proceeds from the sale of common stock through public offerings, approximately $6.2 million in proceeds from the exercise of warrants and options, and receipt of approximately $1.6 million in lease incentives, offset by net cash used to fund the Company’s operations, including its Phase 3 clinical trial, of approximately $14.0 million, approximately $8.6 million of equipment and leasehold improvement expenditures and approximately $0.8 million in lease payments.
In October 2021, the Company completed a major upgrade of its leased manufacturing facility to prepare for the potential commercial production of Multikine. Total costs of this upgrade were approximately $11.1 million, of which the landlord of the property financed $2.4 million. The landlord financing is being repaid through increased lease payments over the remaining term of the lease.
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. During the nine months ended June 30, 2021, 1,443,551 warrants were exercised at a weighted average exercise price of $3.86 for total proceeds of approximately $5.6 million. These exercises include 437,312 warrants exercised during the three months ended June 30, 2021 for proceeds of approximately $1.1 million and a weighted average exercise price of $2.59.
Results of Operations and Financial Condition
The Company incurred a net operating loss of approximately $27.1 million for the nine months ended June 30, 2022. This net operating loss consists of significant non-cash expenses including approximately $9.1 million in stock-based employee compensation and approximately $2.8 million in depreciation and amortization expense and approximately $0.6 million in warrant modification expenses. The Company incurred a net operating loss of approximately $8.7 million for the three months ended June 30, 2022. This net operating loss consists of significant non-cash expenses including approximately $2.4 million in employee stock-based compensation and approximately $1.0 million in depreciation and amortization expense and approximately $0.6 million in warrant modification expenses.
During the nine months ended June 30, 2022, research and development expenses increased by approximately $1.1 million, or 6%, compared to the nine months ended June 30, 2021. Major components of this increase include approximately $1.1 million increase in employee stock compensation expense and approximately $1.2 million increase in depreciation, primarily related to leasehold improvements to the manufacturing facility that were placed in service in October 2021, an increase of approximately $0.8 million of costs incurred to prepare for the potential commercial sale of Multikine, and an increase of approximately $0.1 million in other miscellaneous research and development expenses. These increases were offset by a decrease of approximately $2.1 million in costs related to the Phase 3 clinical study. During the three months ended June 30, 2022, research and development expenses decreased by approximately $0.9 million, or 12%, compared to the three months ended June 30, 2021. Major components of this decrease include approximately $1.5 million less costs related to the Phase 3 clinical study offset by approximately $0.4 million increase in depreciation, primarily of leasehold improvements to the manufacturing facility that were placed in service in October 2021, and a net increase of approximately $0.2 million in other research and development expenses.
| 26 |
| Table of Contents |
During the nine months ended June 30, 2022, general and administrative expenses decreased by approximately $1.7 million, or 17%, compared to the nine months ended June 30, 2021. This decrease is primarily due to a decrease in employee stock compensation expense of approximately $2.0 million offset by a $0.3 million increase in other net general and administrative expenses. During the three months ended June 30, 2022, general and administrative expenses decreased by approximately $0.8 million, or 26%, compared to the three months ended June 30, 2021. This decrease is primarily due to a decrease in employee stock compensation expense of approximately $1.0 million offset by a $0.2 million increase in other net general and administrative expenses.
The approximate $0.4 million gain on derivative instruments for the nine months ended June 30, 2022 varies significantly from the $1.0 million loss on derivative instruments for the nine months ended June 30, 2021. The variance is the result of the change in fair value of the derivative liabilities at the respective balance sheet dates, which is caused mainly by fluctuation in the share price of the Company’s common stock. All derivative warrants have been exercised or have expired as of June 30, 2022, and therefore, unless additional liability classified warrants are issued, there will be no additional gain or loss reported.
Other non-operating gain primarily relates to the Securities Purchase Agreement (SPA) with Ergomed plc as described in Item 4 under Note C. Under the SPA, the Company issued Ergomed shares of common stock and the net proceeds from the sales of those shares reduces outstanding amounts due Ergomed. Upon issuance, the Company expensed the full value of the shares as other non-operating gain/loss and subsequently offset the gain or loss as amounts were realized through the sale by Ergomed and reduced accounts payable to Ergomed. The amount of the gain or loss is a result of the timing of shares issued to Ergomed and the subsequent re-sale of those shares. There was no activity under the agreement during the nine months ended June 30, 2022. During the nine and three months ended June 30, 2021, the Company realized approximately $1.4 million and $0.8 million, respectively, in value upon the resale of shares. Ergomed resold the final balance of shares issued in the quarter ended September 30, 2021.
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, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
MULTIKINE |
| $ | 18,035,279 |
|
| $ | 16,582,740 |
|
| $ | 6,039,977 |
|
| $ | 6,849,923 |
|
LEAPS |
|
| 858,578 |
|
|
| 1,235,633 |
|
|
| 246,896 |
|
|
| 332,176 |
|
TOTAL |
| $ | 18,893,857 |
|
| $ | 17,818,373 |
|
| $ | 6,286,873 |
|
| $ | 7,182,099 |
|
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 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.
| 27 |
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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. Share-based compensation cost to employees is measured at fair value as of the grant date in accordance with the provisions of ASC 718. 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, 2021. The application of these critical accounting policies and estimates has been discussed with the Audit Committee of the Company’s Board of Directors.
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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Company does not believe that it has any significant exposures 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 and Chief Financial Officer, the Company has conducted an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures as of June 30, 2022. 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. Based on the evaluation, the Chief Executive and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of June 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 quarter ended June 30, 2022 that have materially affected, or are 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, 2022 the Company issued 81,782 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
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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 |
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Date: August 12, 2022 | By: | /s/ Geert Kersten |
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| Geert Kersten |
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| Principal Executive Officer* |
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* Also signing in the capacity of the Principal Accounting and Financial Officer.
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EXHIBIT 31
CERTIFICATIONS
I, Geert Kersten, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of CEL-SCI Corporation; |
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| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, considering the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects, the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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| a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and |
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| d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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| a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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| b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| August 12, 2022 | By: | /s/ Geert Kersten | |
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| Geert Kersten | |
| Principal Executive Officer |
CERTIFICATIONS
I, Geert Kersten, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of CEL-SCI Corporation; |
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| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, considering the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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| a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and |
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| d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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| a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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| b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| August 12, 2022 | By: | /s/ Geert Kersten | |
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| Geert Kersten | |
| Principal Financial Officer |
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EXHIBIT 32
In connection with the Quarterly Report of CEL-SCI Corporation (the “Company”) on Form 10-Q for the period ending June 30, 2022 as filed with the Securities and Exchange Commission (the “Report”), Geert Kersten, the Principal Executive and Principal Financial Officer of the Company, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:
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| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of the Company. |
| By: | /s/ Geert Kersten | ||
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| Geert Kersten | |
| Principal Executive and | |||
| Principal Financial Officer | |||
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| August 12, 2022 |
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CONDENSED BALANCE SHEETS (Parenthetical) - $ / shares |
Jun. 30, 2022 |
Sep. 30, 2021 |
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| CONDENSED BALANCE SHEETS | ||
| Preferred Stock, Par Value | $ 0.01 | $ 0.01 |
| Preferred Stock, Shares Authorized | 200,000 | 200,000 |
| Preferred Stock, Shares Issued | 0 | 0 |
| Preferred Stock, Shares Outstanding | 0 | 0 |
| Common Stock, Par Value | $ 0.01 | $ 0.01 |
| Common Stock, Shares Authorized | 600,000,000 | 600,000,000 |
| Common Stock, Shares Issued | 43,355,529 | 43,207,183 |
| Common Stock, Shares Outstanding | 43,355,529 | 43,207,183 |
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) 1 - USD ($) |
9 Months Ended | |
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Jun. 30, 2022 |
Jun. 30, 2021 |
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| Operating expenses: | ||
| Research and development | $ 18,893,857 | $ 17,818,373 |
| General and administrative | 8,220,768 | 9,902,120 |
| Total operating expenses | 27,114,625 | 27,720,493 |
| Operating loss | (27,114,625) | (27,720,493) |
| Gain (loss) on derivative instruments | 366,791 | (991,562) |
| Other non-operating (loss) gain | (30,793) | 1,428,260 |
| Interest expense, net | (1,460,055) | (872,457) |
| Net loss | (28,238,682) | (28,156,252) |
| Modification of warrants | (294,409) | (350,861) |
| Net loss available to common shareholders | $ (28,533,091) | $ (28,507,113) |
| Net loss per common share - basic | $ (0.66) | $ (0.71) |
| Weighted average common shares outstanding - basic | 43,124,972 | 39,907,624 |
| Net loss per common share - diluted | $ (0.66) | $ (0.74) |
| Weighted average common shares outstanding - diluted | 43,124,972 | 40,158,321 |
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) |
3 Months Ended | |
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Jun. 30, 2022 |
Jun. 30, 2021 |
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| Operating Expenses: | ||
| Research and development | $ 6,286,873 | $ 7,182,099 |
| General and administrative | 2,432,518 | 3,274,480 |
| Total operating expenses | 8,719,391 | 10,456,579 |
| Operating loss | (8,719,391) | (10,456,579) |
| Gain on derivative instruments | 0 | 1,116,619 |
| Other non-operating gains | 0 | 753,024 |
| Interest expense, net | (913,193) | (351,332) |
| Net loss | (9,632,584) | (8,938,268) |
| Modification of warrants | (294,409) | (265,082) |
| Net loss available to common shareholders | $ (9,926,993) | $ (9,203,350) |
| Net loss per common share - basic | $ (0.23) | $ (0.22) |
| Weighted average common shares outstanding - basic | 43,174,775 | 41,020,485 |
| Net loss per common share - diluted | $ (0.23) | $ (0.25) |
| Weighted average common shares outstanding - diluted | 43,174,775 | 41,231,082 |
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) |
9 Months Ended | |
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Jun. 30, 2022 |
Jun. 30, 2021 |
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| SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||
| Property and equipment included in current liabilities | $ 0 | $ 589,400 |
| Assets purchased under finance leases | 32,409 | 0 |
| Capitalizable patent costs included in current liabilities | 0 | 20,000 |
| Changes to right of use assets and liabilities | 16,268 | 551,444 |
| Finance lease obligation included in accounts payable | 1,800 | 1,328 |
| Prepaid consulting services paid with issuance of common stock | 221,242 | 292,792 |
| Accrued consulting services to be paid with issuance of common stock | 110,000 | 110,000 |
| Exercise of derivative liabilities | 70,589 | 3,838,471 |
| Financing costs included in current liabilities | 28,560 | 76,860 |
| Cash paid for interest | $ 872,023 | $ 876,779 |
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
9 Months Ended |
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Jun. 30, 2022 | |
| Common Stock | |
| Basis Of Presentation And Summary Of Significant Accounting Policies | 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 (U.S. GAAP) 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, 2021.
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, 2022 and the results of its operations for the nine and three months then ended. The condensed balance sheet as of September 30, 2021 is derived from the September 30, 2021 audited financial statements. All accounting policies have been consistently applied in the interim financial statements and the annual financial statements. The results of operations for the nine and three months ended June 30, 2022 are not necessarily indicative of the results to be expected for the entire year.
The financial statements have been prepared assuming that the Company will continue as a going concern, but 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 the 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 as cash equivalents.
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 are reviewed on a quarterly basis to determine if any of the assets are impaired.
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 adjustment to the asset value and period of amortization is 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. 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 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 upon adoption.
The Company adopted ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. This standard was issued to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. ASU 2021-04 is effective for fiscal years beginning after December 15, 2021, however, as permitted, the Company has elected to prospectively adopt the standard this quarter, effective as of October 1, 2021. Adoption of this standard had no impact on prior quarters within this fiscal year.
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 allocation 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 assumption for stock price volatility is based 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 Plans 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.
Net Loss Per Common Share – The Company calculates net loss per common share in accordance with ASC 260, “Earnings Per Share” (ASC 260). 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 uses the asset and liability method of accounting for income taxes. Under the asset and liability method, 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, 2022 and September 30, 2021.
The Company adopted ASU No. 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 Topic 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, obsolescence of supplies used for R&D and manufacturing, 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, regarding the valuation of derivative liabilities determined using the Black-Scholes pricing model, significant fluctuations 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. |
OPERATIONS AND FINANCING |
9 Months Ended |
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Jun. 30, 2022 | |
| OPERATIONS AND FINANCING | |
| Operations And Financing | B. OPERATIONS AND FINANCING
On June 28, 2021, the Company announced results from 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 Phase 3 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. This meant that there were two 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.
Multikine is given for three weeks after cancer diagnosis, but before surgery and other treatments. In the peer-reviewed abstract presented at ASCO, a clear survival advantage for patients treated with Multikine prior to surgery in the surgery-plus-radiation arm of the IT-MATTERS study was described. The survival advantage was driven by objective data derived from patients in the intent-to-treat (ITT) population who had a significant number of early complete and partial tumor responses which occurred prior to surgery. Five patients in the study had their tumors completely disappear (confirmed by pathology) before surgery. In the ITT population as a whole, 8.5% of all Multikine-treated patients had a tumor response before surgery, but not a single tumor response before surgery was seen in the ITT control group before surgery, statistically a highly significant finding (p-value of less than 0.00000000001). This indicates that the likelihood of seeing these results by chance is less than 1 in ten billion. These results confirm findings from the Phase 1 and 2 studies with Multikine and provide direct evidence of Multikine’s anticancer activity.
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. The Company believes there is a high likelihood that it will continue to receive funds from private and public offerings and warrant exercises similar to the way it has funded operations in the past. However, there can be no assurance that the Company will be able to raise sufficient capital to support its operations.
To finance the Company through marketing approval, the Company plans to raise additional capital in the form of warrant exercises, 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 it 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.
Primarily because of the losses incurred to date, the expected continued future losses, and the uncertainties associated with obtaining regulatory approval and ultimately commercializing its products, management has identified conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern. Management has evaluated the significance of those conditions and has concluded that there is sufficient cash on hand to meet the Company’s budgeted cash requirements. As a result, substantial doubt about the Company’s ability to continue as a going concern for more than twelve months from the date of these financial statements has been alleviated.
Impact of the COVID-19 Pandemic
In response to the global outbreak of COVID-19 and the World Health Organization’s classification of the outbreak as a pandemic, the Company continues to take the necessary precautions to ensure the safety of its employees and to minimize interruptions to its operations. Management follows the Centers for Disease Control and Prevention’s (CDC) guidance and the recommendations and restrictions provided by state and local authorities. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. As such, it is uncertain as to the full impact the pandemic will have on the Company’s future financial condition, liquidity and results of operations. Management is actively monitoring the risks to public health and the impact of overall global business activity on the Company’s financial condition, liquidity, operations, suppliers, industry, and workforce. |
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| Stockholders' Equity | C. STOCKHOLDERS’ EQUITY
Proceeds from the Sale of Common Stock
In June 2021, the Company sold 1,400,000 shares of common stock at a public offering price of $22.62 per share and received aggregate net proceeds of approximately $29.4 million. The Company also granted the underwriters a 30-day option to purchase up to 210,000 additional shares of common stock to cover over-allotments. The underwriters fully exercised this option in June 2021, resulting in additional net proceeds to the Company of approximately $4.4 million. In December 2020, the Company sold 1,000,000 shares of common stock at a public offering price of $14.65 per share and received aggregate proceeds of approximately $13.6 million.
Equity Compensation
Underlying share information for equity compensation plans as of June 30, 2022 is as follows:
Stock option activity:
During the three months ended June 30, 2022, the Company adopted the 2022 Non-Qualified Stock Option Plan, which provides for the issuance of up to 2,000,000 options to purchase shares of common stock.
During the nine months ended June 30, 2022, 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. None of the options will be exercisable before November 19, 2022. 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 is recognized relating to these options as of June 30, 2022. Management re-assesses the probability of achieving the performance condition at each reporting date. Stock-Based Compensation Expense
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 table below presents the fair value of the warrant liabilities as of:
The table below presents the net gains (losses) on the warrant liabilities for the nine months ended June 30:
The table below presents the net gains (losses) on the warrant liabilities for the three months ended June 30:
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.
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 warrants were exercised during the three months ended June 30, 2022.
The following warrants recorded as liabilities were exercised during the following periods:
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.
On October 28, 2020, 688,930 Series W warrants, with an exercise price of $16.75, expired.
2. Equity Warrants
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.
The following warrants recorded as equity were exercised during the following periods:
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 warrant extensions were recorded consistent with the accounting for the initial warrant issuances. 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 nine and three months ended June 30, 2022. The Series N and Series X warrants are held by the de Clara Trust, of which the Company’s CEO, Geert Kersten, is a trustee and beneficiary. The incremental cost of the Series MM, Series NN and Series UU warrant extensions were recorded as interest expense, because these warrants were originally issued with convertible notes payable and totaled approximately $635,000 for the nine and three 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.
On June 28, 2021, the expiration dates of the Series N, Series X, Series Y and Series UU warrants were extended one year. On December 7, 2020, the expiration dates of the Series N, Series X, Series Y and Series UU warrants were extended six months. The incremental costs of the warrant extensions were recorded consistent with the accounting for the initial warrant issuances. The incremental costs of the Series N and Series X warrant extensions were recorded as a deemed dividend and totaled approximately $351,000 and $265,000 for the nine and three months ended June 30, 2021, respectively. The Series N and Series X warrants are held by the de Clara Trust. The incremental cost of the Series Y warrant extension was recorded as additional paid in capital and totaled approximately $103,000 and $62,000 for the nine and three months ended June 30, 2021. The incremental cost of the Series UU warrant extension was recorded as interest expense because these warrants were initially issued as an inducement to convert notes payable into common stock. The Series UU warrants are held by Geert Kersten, Patricia Prichep and the de Clara Trust.
3. Options and Shares Issued to Consultants
During the nine months ended June 30, 2022 and 2021, the Company issued 81,782 and 41,714 shares, respectively, of restricted common stock to consultants for services. The weighted average grant date fair value of the shares issued to consultants was $5.40 and $19.47 during the nine months ended June 30, 2022 and 2021, respectively. During the three months ended June 30, 2022 and 2021, the Company issued 38,287 and 13,184 shares, respectively, of restricted common stock to consultants for services. The weighted average grant date fair value of the shares issued to consultants was $3.52 and $23.39, respectively, during the three months ended June 30, 2022 and 2021. 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.
No options were issued to consultants during the nine and three months ended June 30, 2022. During the nine months ended June 30, 2021, the Company issued a consultant 5,000 options to purchase common stock with an exercise price of $11.61, at an aggregate fair value of approximately $28,000 and an expiration date of November 17, 2022. As of June 30, 2022 and September 30, 2021, 15,000 options issued to consultants were outstanding, all of which were issued from the Non-Qualified Stock Option plans and all of which are vested as of the balance sheet dates.
During the nine months ended June 30, 2022 and 2021, the Company recorded total expense of approximately $603,000 and $956,000, respectively, relating to the share-based compensation under these consulting agreements. During the three months ended June 30, 2022 and 2021, the Company recorded total expense of approximately $201,000 and $403,000, respectively, relating to the share-based compensation under these consulting agreements. On June 30, 2022 and September 30, 2021, consulting fees of approximately $221,000 and $364,000, respectively, are included in prepaid expenses. 4. Securities Purchase Agreement
In prior years, the Company was party to a Securities Purchase Agreement (SPA) with Ergomed plc (Ergomed), one of the Company’s Clinical Research Organizations responsible for managing the Company’s Phase 3 clinical trial, to facilitate payment of amounts due to Ergomed. Under the Agreement, the Company issued Ergomed shares of common stock and the net proceeds from the sales of those shares reduced outstanding amounts due Ergomed. Upon issuance, the Company expensed the full value of the shares as other non-operating gain/loss and subsequently offset the gain or loss as amounts were realized through the sale of shares by Ergomed and reduced accounts payable to Ergomed. Ergomed resold the final balance of shares issued in the quarter ended September 30, 2021. No shares were issued during the periods presented. No sales were made by Ergomed during the nine and three months ended June 30, 2022. During the nine and three months ended June 30, 2021, respectively, the Company realized approximately $1.4 million and $0.8 million through the sale by Ergomed of 111,500 and 36,000 shares of common stock and the Company reduced the payable to Ergomed and credited other operating gain by those amounts. |
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FAIR VALUE MEASUREMENTS |
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| FAIR VALUE MEASUREMENTS | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Measurements | 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:
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 Company purchased short-term U.S. Treasury bills during the year ended September 30, 2021 that are classified as trading securities. Quoted market prices were applied to determine the fair value of short-term investments; therefore, they were categorized as Level 1 in the fair value hierarchy. The Treasury bills matured in December 2021 and yielded a weighted average interest rate of 0.10%.
As of June 30, 2022, there were no outstanding derivative instruments. As of September 30, 2021, all the Company’s derivative instruments are classified as Level 3 of the fair value hierarchy. The following sets forth the reconciliation of beginning and ending balances related to fair value measurements using significant unobservable inputs (Level 3) for the nine months ended June 30, 2022 and the year ended September 30, 2021:
The fair values of the Company’s derivative instruments disclosed above under Level 3 are primarily derived from valuation models where significant inputs such as historical price and volatility of the Company’s stock, as well as U.S. Treasury Bill rates, are observable in active markets. On September 30, 2021, the Company’s Level 3 derivative instruments had a weighted average fair value of $1.45 per share and a weighted average exercise price of $13.28 per share. Fair values were determined using a weighted average risk-free interest rate of 0.05% and volatility of 109% and the instruments had a weighted average time to maturity of 0.3 years as of September 30, 2021. |
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RELATED PARTY TRANSACTIONS |
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| RELATED PARTY TRANSACTIONS | |
| Related Party Transactions | E. RELATED PARTY TRANSACTIONS
During the nine months ended June 30, 2022, the Company issued officers 250,000 options that vest upon FDA approval of the marketing application. See Note C for more information about the options.
On June 13, 2022, the expiration dates of certain warrants, some of which are held by related parties, were extended by twenty-four months (Note C). The incremental cost of the modification of the Series N and Series X warrants, held by the de Clara Trust, was approximately $264,000 and was recorded as a deemed dividend in the financial statements for the nine and three months ended June 30, 2022. The incremental cost of the modification of the Series MM, Series NN and Series UU warrants, relating to those warrants held by the de Clara Trust and certain officers of the Company, was approximately $457,000 and was recorded as interest expense for the nine and three months ended June 30, 2022. This accounting treatment is consistent with the original recording of these warrants which were issued with convertible debt. All warrants holders were given the same modified terms.
In June 2021, the expiration dates of the Series N, Series X, Series Y and Series UU warrants were extended one year. In December 2020, the expiration dates of the Series N, Series X, Series Y and Series UU warrants were extended six months. The incremental costs of the warrant extensions were recorded consistent with the accounting for the initial warrant issuances. The incremental costs of the Series N and Series X warrant extensions were recorded as a deemed dividend and totaled approximately $351,000 and $265,000 for the nine and three months ended June 30, 2021, respectively. The incremental cost of the Series UU warrant extension was recorded as interest expense and totaled approximately $24,000 for the nine and three months ended June 30, 2021. |
COMMITMENTS AND CONTINGENCIES |
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| Commitments And Contingencies | F. COMMITMENTS AND CONTINGENCIES
Clinical Research Agreements
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 $35.5 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, 2022 and 2021, the Company recorded, net of Ergomed’s discount, approximately $0.5 million and $1.4 million, respectively, of research and development expense related to Ergomed’s services. During the three months ended June 30, 2022 and 2021, 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. 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 probable.
On June 30, 2022 and September 30, 2021, the net book value of the finance lease right of use asset is approximately $11.4 million and $12.7 million, respectively, and the balance of the finance lease liability is approximately $13.6 million and $13.8 million, respectively, of which approximately $1.5 million and $0.6 million is current on June 30, 2022 and September 30, 2021, respectively. 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, 2022 and 2021 was approximately $1.9 million and $1.6 million, respectively, of which approximately $0.9 million was for interest in each nine-month period. As of June 30, 2022, the weighted average discount rate of the Company’s finance leases is 8.45% and the weighted average time to maturity is 6.3 years.
In August 2020, the Company entered 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 completed and the improvements were placed in service in October 2021. The total cost was $11.1 million, of which the landlord financed $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 an 8.45% implicit interest rate. The rate was determined using a synthetic credit rating analysis prepared by an outside valuation specialist. The financing is accounted for as a lease incentive from the landlord and is included in the calculation of the lease liability as it was realized. The leasehold improvements are recorded in property and equipment and are being amortized over the remaining lease term.
The Company was required to deposit the equivalent of one year of base rent in accordance with the lease. Under the landlord’s $2.4 million financing arrangement, the Company deposited an additional $0.2 million in March 2021. Because the Company met the minimum cash balance required by the lease, the full balance of the deposit was returned to the Company in January 2022. If the Company’s cash balance falls below the required balance, the Company will be required to re-deposit these funds with the landlord. The approximate $1.9 million deposit is included in non-current assets on September 30, 2021.
Approximate future minimum lease payments under finance leases as of June 30, 2022 are as follows:
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, 2022 and September 30, 2021, the net book value of the operating lease right of use assets is approximately $1.9 million and $2.1 million, respectively. As of June 30, 2022 and September 30, 2021, the balance of the operating lease liabilities is approximately $2.1 million, of which approximately $0.2 million and $0.1 million is current on June 30, 2022 and September 30, 2021, respectively. The Company incurred lease expense for operating leases of approximately $272,000 and $198,000, respectively, for the nine months ended June 30, 2022 and 2021. The Company incurred lease expense for operating leases of approximately $91,000 and $66,000, respectively, for the three months ended June 30, 2022 and 2021. Total cash paid related to operating leases during the nine months ended June 30, 2022 and 2021 was approximately $199,000 and $176,000, respectively. The weighted average discount rate of the Company’s operating leases is 9.09% and the weighted average time to maturity is 9.0 years.
As of June 30, 2022, future minimum lease payments on operating leases are as follows:
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PATENTS |
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| PATENTS | ||||||||||||||||||||||||||||||||||||||||||||||
| Patents | G. PATENTS
During the nine months ended June 30, 2022 and 2021, respectively, patent impairment charges of approximately $31,000 and $0, were recorded. No patent impairment charges were recorded during the three months ended June 30, 2022 and 2021. For the nine months ended June 30, 2022 and 2021, amortization of patent costs totaled approximately $39,000 in each period. For the three months ended June 30, 2022 and 2021, amortization of patent costs totaled approximately $12,000 and $13,000, respectively. Approximate estimated future amortization expense is as follows:
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LOSS PER COMMON SHARE |
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| Loss Per Common Share | 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. For the years presented, the gain on warrant liabilities priced lower than the average market price during the period is excluded from the numerator and the incremental shares, determined using the treasury stock method, are added to the denominator in calculating diluted loss per share.
The following tables provide the details of the basic and diluted loss per-share computations:
In accordance with the contingently issuable shares guidance of FASB ASC Topic 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:
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SUBSEQUENT EVENTS |
9 Months Ended |
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Jun. 30, 2022 | |
| SUBSEQUENT EVENTS | |
| Subsequent Events | J. SUBSEQUENT EVENTS
On August 2 2022, the Company appointed Dr. Gail K. Naughton to the Company's Board of Directors. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
9 Months Ended |
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Jun. 30, 2022 | |
| BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
| Cash And Cash Equivalents | 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 as cash equivalents. |
| Property And Equipment | 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 are reviewed on a quarterly basis to determine if any of the assets are impaired. |
| Patents | 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 adjustment to the asset value and period of amortization is 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 | 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. |
| Derivative Instruments | 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 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 upon adoption.
The Company adopted ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. This standard was issued to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. ASU 2021-04 is effective for fiscal years beginning after December 15, 2021, however, as permitted, the Company has elected to prospectively adopt the standard this quarter, effective as of October 1, 2021. Adoption of this standard had no impact on prior quarters within this fiscal year. |
| Stock-based Compensation | 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 allocation 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 assumption for stock price volatility is based 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 Plans 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 - 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. |
| Net Loss Per Common Share | Net Loss Per Common Share – The Company calculates net loss per common share in accordance with ASC 260, “Earnings Per Share” (ASC 260). 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 | Income Taxes – The Company uses the asset and liability method of accounting for income taxes. Under the asset and liability method, 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, 2022 and September 30, 2021.
The Company adopted ASU No. 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 Topic 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 | 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, obsolescence of supplies used for R&D and manufacturing, 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, regarding the valuation of derivative liabilities determined using the Black-Scholes pricing model, significant fluctuations 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. |
STOCKHOLDERS EQUITY (Table) |
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| STOCKHOLDERS EQUITY | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule options, stock bonuses and compensation granted by the company |
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| Schedule of stock option activity |
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| Schedule of Stock-Based Compensation Expense |
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| Schedule of Warrants and Non-Employee Options |
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| Schedule of fair value of the warrant liabilities |
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| Schedule of gains (losses) on the warrant liabilities |
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| Schedule of warrants recorded as liabilities |
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| Schedule of warrants recorded as equity |
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FAIR VALUE MEASUREMENTS (Tables) |
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| Reconciliation Of Beginning And Ending Balances Related To Fair Value Measurements Using Significant Unobservable Inputs (level 3) |
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COMMITMENTS AND CONTINGENCIES (Tables) |
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| Commitments and contingencies | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule Of Future Minimum Payments Under Operating Leases |
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PATENTS (Table) |
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| Commitments and contingencies | ||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of patents |
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NET LOSS PER COMMON SHARE (Tables) |
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| LOSS PER COMMON SHARE | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule Of Reconciliation Of The Numerators And Denominators Of The Basic And Diluted Per-share Computations |
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| Schedule Of Anti-dilutive Securities |
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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) |
9 Months Ended |
|---|---|
Jun. 30, 2022 | |
| Patent Useful Life | 9 years |
| Patents [Member] | |
| Patent Useful Life | 17 years |
| Minimum [Member] | |
| Property And Equipment Useful Life | 5 years |
| Maximum [Member] | |
| Property And Equipment Useful Life | 7 years |
STOCKHOLDERS EQUITY (Details) |
Jun. 30, 2022
shares
|
|---|---|
| Incentive Stock Option Plans [Member] | |
| Total Shares Reserved Under Plans | 138,400 |
| Shares Reserved For Outstanding Options | 75,329 |
| Remaining Options/shares Under Plans | 213 |
| Non-Qualified Stock Option Plans [Member] | |
| Total Shares Reserved Under Plans | 13,787,200 |
| Shares Reserved For Outstanding Options | 12,909,350 |
| Remaining Options/shares Under Plans | 455,508 |
| Stock Bonus Plans [Member] | |
| Total Shares Reserved Under Plans | 783,760 |
| Remaining Options/shares Under Plans | 385,782 |
| Shares Issued | 397,945 |
| Stock Compensation Plan [Member] | |
| Total Shares Reserved Under Plans | 634,000 |
| Remaining Options/shares Under Plans | 462,395 |
| Shares Issued | 153,195 |
| Incentive Stock Bonus Plan [Member] | |
| Total Shares Reserved Under Plans | 640,000 |
| Remaining Options/shares Under Plans | 25,500 |
| Shares Issued | 614,500 |
STOCKHOLDERS EQUITY (Details 1) - shares |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
|
| STOCKHOLDERS EQUITY | ||||
| Options Granted | 1,722,750 | 2,595,500 | 1,975,250 | 2,603,500 |
| Options Exercised | 0 | 72,809 | 6,500 | 126,954 |
| Options Forfeited | 0 | 0 | 20,166 | 42,166 |
| Options Expired | 13,614 | 9,307 | 13,614 | 9,374 |
STOCKHOLDERS EQUITY (Details 2) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
|
| STOCKHOLDERS EQUITY | ||||
| Employees Stock Based Compensation Expense | $ 2,447,772 | $ 3,511,359 | $ 9,102,774 | $ 10,090,410 |
| Non- Employees Stock Based Compensation Expense | $ 200,877 | $ 403,236 | $ 603,147 | $ 955,900 |
STOCKHOLDERS EQUITY (Details 4) - USD ($) |
3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
Sep. 30, 2021 |
|
| STOCKHOLDERS EQUITY | |||||
| Series Z Warrants | $ 0 | $ 0 | $ 64,787 | ||
| Series Aa Warrants | 0 | 0 | 276,035 | ||
| Series Cc Warrants | 0 | 0 | 94,961 | ||
| Series Hh Warrants | 0 | 0 | 1,597 | ||
| Total Warrant Liabilities | 0 | 0 | $ 437,380 | ||
| Gains On Series W Warrants | 0 | $ 73,570 | |||
| Gains On Series Z Warrants | 0 | $ 583,404 | 64,787 | (113,094) | |
| Gains On Series Zz Warrants | 0 | (87,162) | 0 | (98,692) | |
| Gains On Series Aa Warrants | 0 | 355,215 | 276,035 | (306,606) | |
| Gains On Series Bb Warrants | 0 | 64,678 | 0 | 48,477 | |
| Gains On Series Cc Warrants | 0 | 199,256 | 24,372 | (596,001) | |
| Gains On Series Hh Warrants | 0 | 1,228 | 1,597 | 784 | |
| Net Gain On Warrant Liabilities | $ 0 | $ 1,116,619 | $ 366,791 | $ (991,562) | |
STOCKHOLDERS EQUITY (Details 5) - USD ($) |
1 Months Ended | 3 Months Ended | 9 Months Ended | |
|---|---|---|---|---|
Feb. 28, 2022 |
Nov. 30, 2021 |
Jun. 30, 2021 |
Jun. 30, 2021 |
|
| Proceeds | $ 289,000 | $ 3,275,490 | ||
| Warrants Exercised | 24,200 | 306,498 | ||
| Proceeds | $ 843,204 | $ 2,293,620 | ||
| Series Z [Member] | ||||
| Warrants Exercised | 0 | 79,200 | ||
| Proceeds | $ 0 | $ 1,089,000 | ||
| Exercise Price | $ 13.75 | $ 0 | $ 13.75 | |
| Series ZZ [Member] | ||||
| Warrants Exercised | 19,200 | 20,000 | ||
| Proceeds | $ 264,000 | $ 275,000 | ||
| Exercise Price | $ 13.75 | $ 13.75 | ||
| Series AA [Member] | ||||
| Warrants Exercised | 0 | 100,000 | ||
| Proceeds | $ 0 | $ 1,375,000 | ||
| Exercise Price | $ 13.75 | $ 0 | $ 13.75 | |
| Series CC [Member] | ||||
| Warrants Exercised | 5,000 | 107,298 | ||
| Proceeds | $ 25,000 | $ 536,490 | ||
| Exercise Price | $ 5.00 | $ 5.00 | ||
STOCKHOLDERS EQUITY (Details 6) - USD ($) |
3 Months Ended | 9 Months Ended |
|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2021 |
|
| Proceeds | $ 843,204 | $ 2,293,620 |
| Warrants Exercised | 413,112 | 1,137,053 |
| Warrants Exercised | 24,200 | 306,498 |
| Series MM [Member] | ||
| Proceeds | $ 275,148 | $ 863,414 |
| Warrants Exercised | 147,929 | 464,201 |
| Exercise Price | $ 1.86 | $ 1.86 |
| Series NN [Member] | ||
| Proceeds | $ 275,108 | $ 330,130 |
| Warrants Exercised | 109,170 | 131,004 |
| Exercise Price | $ 2.52 | $ 2.52 |
| Series RR [Member] | ||
| Proceeds | $ 158,068 | $ 273,715 |
| Warrants Exercised | 95,799 | 165,888 |
| Exercise Price | $ 1.65 | $ 1.65 |
| Series SS [Member] | ||
| Proceeds | $ 0 | $ 220,002 |
| Warrants Exercised | 0 | 105,264 |
| Exercise Price | $ 2.09 | $ 2.09 |
| Series TT [Member] | ||
| Proceeds | $ 134,879 | $ 606,359 |
| Warrants Exercised | 60,214 | 270,696 |
| Exercise Price | $ 2.24 | $ 2.24 |
FAIR VALUE MEASUREMENTS (Details) - USD ($) |
9 Months Ended | 12 Months Ended |
|---|---|---|
Jun. 30, 2022 |
Sep. 30, 2021 |
|
| FAIR VALUE MEASUREMENTS | ||
| Beginning Balance | $ 437,380 | $ 3,765,613 |
| Issuances | 0 | 0 |
| Exercises | (70,589) | (4,023,091) |
| Realized And Unrealized (gains) And Losses | (366,791) | 694,858 |
| Ending balance | $ 0 | $ 437,380 |
FAIR VALUE MEASUREMENTS (Details Narrative) - $ / shares |
9 Months Ended | 12 Months Ended |
|---|---|---|
Jun. 30, 2022 |
Sep. 30, 2021 |
|
| Fair Value Inputs Level 1 (Level 1) | ||
| Weighted Average Interest Rate | 0.10% | |
| Fair Value, Inputs, Level 3 [Member] | ||
| Weighted Average Risk Free Interest Rate | 0.05% | |
| Weighted Average Fair Value, Derivative Instruments | $ 1.45 | |
| Weighted Average Exercise Price, Derivative Instruments | $ 13.28 | |
| Volatility Rate | 109.00% | |
| Weighted Average Time To Maturity Year | 3 months 18 days |
RELATED PARTY TRANSACTIONS (Details Narrative ) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
|
| Officer [Member] | ||||
| Options Issued | 250,000 | |||
| De Clara Trust [Member] | ||||
| Deemed Dividend After Net Loss To Arrive At Net Loss Available Common Shareholders | $ 264,000 | $ 265,000 | $ 264,000 | $ 351,000 |
| Interest expense | $ 457,000 | $ 24,000 | $ 457,000 | $ 24,000 |
COMMITMENTS AND CONTINGENCIES (Details) |
Jun. 30, 2022
USD ($)
|
|---|---|
| Commitments and contingencies | |
| Three months ending September 30, 2022 | $ 625,000 |
| 2023 | 2,576,000 |
| 2024 | 2,655,000 |
| 2025 | 2,741,000 |
| 2026 | 2,832,000 |
| 2027 | 2,923,000 |
| Thereafter | 3,267,000 |
| Total Future Minimum Lease Obligation | 17,619,000 |
| Less: Imputed Interest On Financing Lease Obligation | (3,985,000) |
| Net Present Value Of Finance Lease Obligations | $ 13,634,000 |
COMMITMENTS AND CONTINGENCIES (Details 1) |
Jun. 30, 2022
USD ($)
|
|---|---|
| Commitments and contingencies | |
| Three months ending September 30, 2022 | $ 86,000 |
| 2023 | 348,000 |
| 2024 | 357,000 |
| 2025 | 366,000 |
| 2026 | 287,000 |
| 2027 | 277,000 |
| Thereafter | 1,325,000 |
| Total Future Minimum Lease Obligation | 3,046,000 |
| Less Imputed Interest On Operating Lease Obligation | (986,000) |
| Net Present Value Of Operating Lease Obligation | $ 2,060,000 |
PATENTS (Details) |
Jun. 30, 2022
USD ($)
|
|---|---|
| PATENTS | |
| Three months ending September 30, 2022 | $ 10,000 |
| 2023 | 38,000 |
| 2024 | 30,000 |
| 2025 | 28,000 |
| 2026 | 24,000 |
| 2027 | 21,000 |
| Thereafter | 71,000 |
| Total | $ 222,000 |
PATENTS (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
|
| PATENTS | ||||
| Patent Impairment Charges | $ 0 | $ 0 | $ 31,000 | $ 0 |
| Amortization Of Patent Costs | $ 12,000 | $ 13,000 | $ 39,000 | $ 39,000 |
LOSS PER COMMON SHARE (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
|
| LOSS PER COMMON SHARE | ||||
| Net loss available to common shareholders - basic | $ (9,926,993) | $ (9,203,350) | $ (28,533,091) | $ (28,507,113) |
| Weighted average shares outstanding - basic | 43,174,775 | 41,020,485 | 43,124,972 | 39,907,624 |
| Basic loss per common share | $ (0.23) | $ (0.22) | $ (0.66) | $ (0.71) |
| Loss per share- diluted | ||||
| Net loss available to common shareholders -basic | $ (9,926,993) | $ (9,203,350) | $ (28,533,091) | $ (28,507,113) |
| Unrealized gain on derivatives | 0 | (1,233,597) | 0 | (1,236,514) |
| Net loss available to common shareholders - diluted | $ (9,926,993) | $ (10,436,947) | $ (28,533,091) | $ (29,743,627) |
| Weighted average shares outstanding - basic | 43,174,775 | 41,020,485 | 43,124,972 | 39,907,624 |
| Incremental shares underlying dilutive "in the money" warrants | 0 | 210,597 | 0 | 250,697 |
| Weighted average shares outstanding - diluted | 43,174,775 | 41,231,082 | 43,124,972 | 40,158,321 |
| Diluted loss per common share | $ (0.23) | $ (0.25) | $ (0.66) | $ (0.74) |
LOSS PER COMMON SHARE (Details 1) - shares |
9 Months Ended | |
|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
|
| Antidilutive Securities | 14,446,751 | 7,145,670 |
| Options and Warrants | ||
| Antidilutive Securities | 14,295,501 | 6,979,170 |
| Unvested Restricted Stock [Member] | ||
| Antidilutive Securities | 151,250 | 166,500 |