CEL SCI CORP - Quarter Report: 2019 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 (Mark One)

☒            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2019

OR

☐          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to ______________.

 

Commission File Number 001-11889

CEL-SCI CORPORATION

 

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

 

8229 Boone Boulevard, Suite 802

 Vienna, Virginia 22182

 Address of principal executive offices

 (703) 506-9460

 Registrant's telephone number, including area code

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) had been subject to such filing requirements for the past 90 days.

Yes ☒                                                                           No ☐

 

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

 

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

 

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

 

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

 

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

 

Class of Stock	No. Shares Outstanding	Date
Common	34,805,299	August 13, 2019

  

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

 

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	CVM	NYSE American

TABLE OF CONTENTS

 

PART I FINANCIAL INFORMATION

 

Item 1.		Page
	Condensed Balance Sheets at June 30, 2019 and September 30, 2018 (unaudited)	3
	Condensed Statements of Operations for the nine months ended June 30, 2019 and 2018 (unaudited)	4
	Condensed Statements of Operations for the three months ended June 30, 2019 and 2018 (unaudited)	5
	Condensed Statements of Cash Flows for the nine months ended June 30, 2019 and 2018 (unaudited)	6
	Notes to Condensed Financial Statements (unaudited)	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures about Market Risks	24
Item 4.	Controls and Procedures	24
PART II
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 6.	Exhibits	25
	Signatures	26

 

 

CEL-SCI CORPORATION

CONDENSED BALANCE SHEETS

(UNAUDITED)

 

	JUNE 30,	SEPTEMBER 30,
ASSETS	2019	2018
Current Assets:
Cash and cash equivalents	$9,485,495	$10,310,044
Receivables	118,264	118,657
Prepaid expenses	233,784	364,622
Inventory used for R&D and manufacturing	754,825	645,238
Total current assets	10,592,368	11,438,561
Plant, property and equipment, net	15,948,864	16,218,851
Patent costs, net	272,488	258,093
Deposits	1,670,917	1,670,917
Total Assets	$28,484,637	$29,586,422
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$2,078,800	$5,743,913
Accrued expenses	122,030	205,310
Due to employees	761,027	764,941
Derivative instruments, current portion	1,249,835	2,498,606
Other current liabilities	16,009	14,029
Total current liabilities	4,227,701	9,226,799
Derivative instruments, net of current portion	9,482,995	6,818,458
Lease liability	13,475,704	13,379,962
Deferred income	126,849	126,795
Other liabilities	25,084	33,492
Total liabilities	27,338,333	29,585,506
Commitments and Contingencies
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value-200,000 shares authorized;
-0- shares issued and outstanding	-	-
Common stock, $.01 par value - 600,000,000 shares authorized;
34,066,914 and 28,034,487 shares issued and outstanding
at June 30, 2019 and September 30, 2018, respectively	340,669	280,346
Additional paid-in capital	349,683,796	331,312,184
Accumulated deficit	(348,878,161)	(331,591,614)
Total stockholders' equity	1,146,304	916
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$28,484,637	$29,586,422

 

See notes to condensed financial statements.

 

 

CEL-SCI CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

NINE MONTHS ENDED JUNE 30, 2019 and 2018

(UNAUDITED)

 

	2019	2018
Grant income	$386,121	$297,045
Operating Expenses:
Research and development	7,956,203	7,713,873
General and administrative	6,981,079	5,823,694
Total operating expenses	14,937,282	13,537,567
Operating loss	(14,551,161)	(13,240,522)
Other income	54,575	52,984
(Loss) gain on derivative instruments	(3,316,384)	187,967
Other non-operating gain (loss)	1,877,197	(171,468)
Interest expense, net	(1,350,774)	(3,739,494)
Net loss available to common shareholders	$(17,286,547)	$(16,910,533)
Net loss per common share
Basic and Diluted	$(0.58)	$(1.17)
Weighted average common shares outstanding
Basic and Diluted	30,046,241	14,486,351

 

See notes to condensed financial statements.

 

 

CEL-SCI CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2019 and 2018

(UNAUDITED)

 

	2019	2018
Grant income	$108,938	$86,459
Operating Expenses:
Research and development	2,298,555	2,425,562
General and administrative	3,020,482	1,748,971
Total operating expenses	5,319,037	4,174,533
Operating loss	(5,210,099)	(4,088,074)
Other income	18,448	17,711
Loss on derivative instruments	(7,905,519)	(8,618)
Other non-operating gain (loss)	1,455,844	(149,359)
Interest expense, net	(443,442)	(1,786,228)
Net loss available to common shareholders	$(12,084,768)	$(6,014,568)
Net loss per common share
Basic and Diluted	$(0.37)	$(0.36)
Weighted average common shares outstanding
Basic and Diluted	33,051,888	16,651,297

 

See notes to condensed financial statements.

 

 

CEL-SCI CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED JUNE 30, 2019 and 2018

(UNAUDITED)

 

	2019	2018
Net loss	$(17,286,547)	$(16,910,533)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization	513,028	485,710
Share-based payments for services	688,070	349,319
Share-based payments for interest	-	80,716
Equity based compensation	2,626,311	2,193,402
Common stock contributed to 401(k) plan	108,485	109,073
Shares issued for settlement of clinical research costs	1,290,000	2,957,400
Loss on prepaid research and development	-	471,157
Loss (gain) on derivative instruments	3,316,384	(187,967)
Amortization of debt discount	-	1,956,424
Inducement expense	-	291,234
Capitalized lease interest	95,742	125,044
(Increase)/decrease in assets:
Receivables	393	98,829
Prepaid expenses	11,047	122,627
Inventory used for R&D and manufacturing	(109,587)	44,364
Deposits	-	150,000
Increase/(decrease) in liabilities:
Accounts payable	(3,567,182)	(1,960,438)
Accrued expenses	(113,280)	(74,856)
Due to employees	(3,914)	548,982
Other liabilities	(2,544)	4,819
Net cash used in operating activities	(12,433,594)	(9,144,694)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment	(171,321)	(1,015)
Expenditures for patent costs	(115,476)	(2,437)
Net cash used in investing activities	(286,797)	(3,452)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock and warrants	-	7,091,536
Payments of stock issuance costs	(90,224)	(94,773)
Proceeds from exercise of warrants	11,657,590	2,133,677
Proceeds from exercise of options	97,290	-
Proceeds from the purchase of stock by officers and directors	234,997	-
Payments on obligations under capital lease	(3,811)	(5,082)
Net cash provided by financing activities	11,895,842	9,125,358
NET DECREASE IN CASH AND CASH EQUIVALENTS	(824,549)	(22,788)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	10,310,044	2,369,438
CASH AND CASH EQUIVALENTS, END OF PERIOD	$9,485,495	$2,346,650

 

See notes to condensed financial statements.

 

 

CEL-SCI CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED JUNE 30, 2019 and 2018

 

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

 

	2019	2018
Capitalizable patent costs included in current liabilities	$30,000	$61,501
Capital lease obligation included in accounts payable	$434	$408
Exercise of derivative liabilities	$1,900,618	$784,119
Stock issuance costs included in current liabilities	$8,010	$-
Prepaid consulting services paid with issuance of common stock	$(119,791)	$113,786
Notes payable converted into common shares	$-	$2,294,300
Cash paid for interest expense	$1,355,676	$1,312,664

 

See notes to condensed financial statements.

 

 

CEL-SCI CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

THREE MONTHS ENDED JUNE 30, 2019 AND 2018 (UNAUDITED)

 

 

Basis of Presentation

 

The accompanying condensed financial statements of CEL-SCI Corporation (the Company) are unaudited and certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission. While management of the Company believes that the disclosures presented are adequate to make the information presented not misleading, these interim condensed financial statements should be read in conjunction with the financial statements and notes included in the Company’s annual report on Form 10-K for the year ended September 30, 2018.

 

In the opinion of management, the accompanying unaudited condensed financial statements contain all accruals and adjustments (each of which is of a normal recurring nature) necessary for a fair presentation of the Company’s financial position as of June 30, 2019 and the results of its operations for the nine and three months then ended. The condensed balance sheet as of September 30, 2018 is derived from the September 30, 2018 audited financial statements. Significant accounting policies have been consistently applied in the interim financial statements. The results of operations for the nine and three months ended June 30, 2019 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, which are expected for the foreseeable future, and future liquidity needs, there is substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Refer to discussion in Note B.

 

Summary of Significant Accounting Policies:

 

Research and Office Equipment and Leasehold Improvements – The leased manufacturing facility is recorded at total project costs incurred and is depreciated over the 20-year useful life of the building. Research and office 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. The fixed assets 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 in 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 its 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.

 

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 charges revisions to estimated expense in the period in which the facts that give rise to the revision become known.

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, 2019 and September 30, 2018.

 

 

On December 22, 2017, the “Tax Cuts and Jobs Act” (the “Tax Act"), was signed into law by the President of the United States (U.S.). The Tax Act includes significant changes to corporate taxation, including reduction of the U.S. corporate tax rate from 35% to 21%, effective January 1, 2018, limitation of the tax deduction for interest expense to 30% of earnings (except for certain small businesses), limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks. The Company has accounted for the income tax effects of the Act in applying FASB ASC 740 to the current reporting period. Because the Company records a valuation allowance for its entire deferred income tax asset, there was no impact to the amounts reported in the Company’s financial statements resulting from the Tax Act.

 

Derivative Instruments – The Company has entered into 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 accounting principles generally accepted in the United States (U.S. GAAP), derivative instruments and hybrid instruments are recognized as either assets or liabilities in 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.

 

Deferred Rent– Certain of the Company’s operating leases provide for minimum annual payments that adjust over the life of the lease.  The aggregate minimum annual payments are expensed on a straight-line basis over the minimum lease term. The Company recognizes a deferred rent liability for rent escalations when the amount of straight-line rent exceeds the lease payments, and reduces the deferred rent liability when the lease payments exceed the straight-line rent expense.  For tenant improvement allowances and rent holidays, the Company records a deferred rent liability and amortizes the deferred rent over the lease term as a reduction to rent expense.

 

Leases – Leases are categorized as either operating or capital leases at inception. Operating lease costs are recognized on a straight-line basis over the term of the lease. An asset and a corresponding liability for the capital lease obligation are established for the cost of capital leases. The capital lease obligation is amortized over the life of the lease. For build-to-suit leases, the Company establishes an asset and liability for the estimated construction costs incurred to the extent that it is involved in the construction of structural improvements or takes construction risk prior to the commencement of the lease. Upon occupancy of facilities under build-to-suit leases, the Company assesses whether these arrangements qualify for sales recognition under the sale-leaseback accounting guidance. If a lease does not meet the criteria to qualify for a sale-leaseback transaction, the established asset and liability remain on the Company's balance sheet.

 

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 on the straight-line allocation method as an expense over the requisite service or vesting period.

 

Equity instruments issued to non-employees are accounted for in accordance with ASC 505-50, “Equity-Based Payments to Non-Employees.” Accordingly, compensation is recognized when goods or services are received and is measured using the Black-Scholes valuation model. The Black-Scholes model requires various judgmental assumptions regarding the fair value of the equity instruments at the measurement date and the expected life of the options.

 

The Company has Incentive Stock Option Plans, Non-Qualified Stock Option Plans, a Stock Compensation Plan, Stock Bonus Plans and an Incentive Stock Bonus Plan. In some cases, these Plans are collectively referred to as the "Plans". All Plans have been approved by the 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. The Company has based its assumption for stock price volatility on the variance of daily closing prices of the Company’s stock. The risk-free interest rate assumption was based on the U.S. Treasury rate at date of the grant with 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.

 

 

Vesting of restricted stock granted under the Incentive Stock Bonus Plan is subject to service, performance and market conditions and meets the classification of equity awards. These awards were measured at market value on the grant-dates for issuances where the attainment of performance criteria is likely and 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.

 

New Accounting Pronouncements

 

In June 2018, the Financial Accounting Standards Board ("FASB") issued ASU 2018-07, Compensation—Stock Compensation (Topic 718), (“ASU 2018-7”), which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost. Under current GAAP, non-employee share-based payment awards are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever can be more reliably measured. Under ASU 2018-07, non-employee share-based payments would be measured at the grant-date fair value of the equity instruments an entity is obligated to issue when the good has been delivered or the service has been rendered and any other conditions necessary to earn the right to benefit from the instruments have been satisfied. Under current GAAP, the measurement date for equity classified non-employee share-based payment awards is the earlier of the date at which a commitment for performance by the counterparty is reached or the date at which the counterparty’s performance is complete. Under ASU 2018-07, equity-classified nonemployee share-based payment awards are measured at the grant date. The definition of the term grant date is amended to generally state the date at which a grantor and a grantee reach a mutual understanding of the key terms and conditions of a share-based payment award. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. An entity should only remeasure liability-classified awards that have not been settled by the date of adoption and equity classified awards for which a measurement date has not been established through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. Upon transition, the entity is required to measure these non-employee awards at fair value as of the adoption date. The entity must not remeasure awards that are completed. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position and results of operations.

 

In February 2016, the FASB issued ASU 2016-02, Leases, which will require most leases (except of leases with terms of less than one year) to be recognized on the balance sheet as an asset and a lease liability. Leases will be classified as an operating lease or a financing lease. Operating leases are expensed using the straight-line method whereas financing leases will be treated similarly to a capital lease under the current standard. The new standard will be effective for annual and interim periods, within those fiscal years, beginning after December 15, 2018, but early adoption is permitted. The new standard must be presented using the modified retrospective method beginning with the earliest comparative period presented.  As permitted by the guidance, the Company has an option to retain the original lease classification and historical accounting for initial direct costs for leases existing prior to the adoption date. Furthermore, the Company will not have to reassess contracts entered into prior to the adoption date for the existence of a lease. The Company also has an option not to restate prior periods for the impact of the adoption of the new standard and may instead recognize a cumulative-effect adjustment to beginning retained earnings as of October 1, 2019 for any prior period income statement effects identified. The Company is evaluating the effect that adoption of this new standard will have on the Company’s financial statements and related disclosures.

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

 

 

The Company has incurred significant costs since its inception for the acquisition of certain patented and unpatented proprietary technology and know-how relating to the human immunological defense system, patent applications, research and development, administrative costs, construction of laboratory facilities, and clinical trials.  The Company has funded such costs with proceeds from loans and the public and private sale of its common stock.  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. The Company is taking cost-cutting initiatives, as well as exploring other sources of funding, to finance operations over the next 12 months. The Company believes that there is a high likelihood that it will continue to receive funds from warrant exercises similar to the way it has received funds during the past 12 months. However, there can be no assurance that the Company will be able to raise sufficient capital to support its operations.

 

The Company is currently in the final stages of its large multi-national Phase 3 clinical trial for head and neck cancer with its partners TEVA Pharmaceuticals and Orient Europharma. To finance the study beyond the next twelve months, the Company plans to raise additional capital in the form of corporate partnerships, debt issuances 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. 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 it can raise the required funding.

 

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

 

Since the Company launched its Phase 3 clinical trial for Multikine, the Company has incurred expenses of approximately $54.7 million as of June 30, 2019 on direct costs for the Phase 3 clinical trial. The Company estimates it will incur additional expenses of approximately $5.6 million for the remainder of the Phase 3 clinical trial. It should be noted that this estimate is based only on the information currently available in the Company’s contracts with the Clinical Research Organizations responsible for managing the Phase 3 clinical trial and does not include other related costs, e.g., the manufacturing of the drug. This number may be affected by the rate of death accumulation in the study, foreign currency exchange rates, and many other factors, some of which cannot be foreseen today. It is therefore possible that the cost of the Phase 3 clinical trial will be higher than currently estimated.

 

Nine hundred twenty-eight (928) head and neck cancer patients have been enrolled and have completed treatment in the Phase 3 study. The study end point is a 10% increase in overall survival of patients between the two main comparator groups in favor of the group receiving the Multikine treatment regimen. The determination if the study end point has been met will occur when there are a total of 298 deaths in those two groups.

 

 

 

The changes in stockholders’ equity during the nine months ended June 30, 2019 are as follows:

 

			Additional
	Common	Stock	Paid-In	Accumulated
	Shares	Amount	Capital	Deficit	Total
BALANCES AT OCTOBER 1, 2018	28,034,487	$280,346	$331,312,184	$(331,591,614)	$916
Warrant exercises	298,682	2,987	646,766	-	649,753
401(k) contributions paid in common stock	12,279	123	35,118	-	35,241
Stock issued to nonemployees for services	62,784	628	201,752	-	202,380
Shares returned for settlement of clinical research costs	(564,905)	(5,649)	5,649	-	-
Equity based compensation - employees	-	-	573,660	-	573,660
Net income	-	-	-	1,245,902	1,245,902
BALANCES AT DECEMBER 31, 2018	27,843,327	278,435	332,775,129	(330,345,712)	2,707,852
Warrant exercises	1,523,933	15,239	2,640,395	-	2,655,634
401(k) contributions paid in common stock	10,419	104	36,779	-	36,883
Stock issued to nonemployees for services	77,449	774	224,855	-	225,629
Equity based compensation - employees	(3,500)	(35)	530,865	-	530,830
Shares issued for settlement of clinical research costs	500,000	5,000	1,285,000	-	1,290,000
Stock issuance costs	-	-	(43,625)	-	(43,625)
Net loss	-	-	-	(6,447,681)	(6,447,681)
BALANCES AT MARCH 31, 2019	29,951,628	299,517	337,449,398	(336,793,393)	955,522
Warrant exercises	4,014,109	40,141	10,212,680	-	10,252,821
401(k) contributions paid in common stock	4,339	43	36,318	-	36,361
Stock issued to nonemployees for services	20,825	208	140,062	-	140,270
Equity based compensation - employees	(4,000)	(40)	1,521,861	-	1,521,821
Option exercises	42,770	428	96,862	-	97,290
Purchase of stock by officers and directors	37,243	372	234,625	-	234,997
Stock issuance costs	-	-	(8,010)	-	(8,010)
Net loss	-	-	-	(12,084,768)	(12,084,768)
BALANCES AT JUNE 30, 2019	34,066,914	$340,669	$349,683,796	$(348,878,161)	$1,146,304

 

 

The changes in stockholders’ deficit during the nine months ended June 30, 2018 are as follows:

 

			Additional
	Common	Stock	Paid-In	Accumulated
	Shares	Amount	Capital	Deficit	Total
BALANCES AT OCTOBER 1, 2017	11,903,133	$119,031	$296,298,401	$(299,754,409)	$(3,336,977)
Sale of common stock	1,289,478	12,895	2,437,105	-	2,450,000
401(k) contributions paid in common stock	18,984	190	35,690	-	35,880
Stock issued to nonemployees for services	13,705	137	25,270	-	25,407
Equity based compensation - employees	-	-	1,448,098	-	1,448,098
Warrants issued with notes payable	-	-	656,382	-	656,382
Conversion of notes payable to common stock	32,751	328	74,672	-	75,000
Net loss	-	-	-	(6,187,830)	(6,187,830)
BALANCES AT DECEMBER 31, 2017	13,258,051	132,581	300,975,618	(305,942,239)	(4,834,040)
Sale of common stock	2,501,145	25,011	4,652,130	-	4,677,141
401(k) contributions paid in common stock	25,901	259	36,261	-	36,520
Stock issued to nonemployees for services	124,082	1,241	227,254	-	228,495
Equity based compensation - employees	-	-	279,817	-	279,817
Conversion of notes payable to common stock	55,373	554	108,746	-	109,300
Shares issued for settlement of clinical research costs	660,000	6,600	1,240,800	-	1,247,400
Stock issuance cost	-	-	(94,773)	-	(94,773)
Net loss	-	-	-	(4,708,135)	(4,708,135)
BALANCES AT MARCH 31, 2018	16,624,552	166,246	307,425,853	(310,650,374)	(3,058,275)
Warrant exercises	1,117,644	11,177	2,906,619	-	2,917,796
401(k) contributions paid in common stock	39,862	399	36,274	-	36,673
Stock issued to nonemployees for services	81,604	816	208,387	-	209,203
Equity based compensation - employees	-	-	465,487	-	465,487
Conversion of notes payable and interest to common stock	1,106,806	11,068	2,179,648	-	2,190,716
Shares issued for settlement of clinical research costs	600,000	6,000	1,704,000	-	1,710,000
Warrants issued with notes payable	-	-	291,234	-	291,234
Net loss	-	-	-	(6,014,568)	(6,014,568)
BALANCES AT JUNE 30, 2018	19,570,468	$195,706	$315,217,502	$(316,664,942)	$(1,251,734)

 

Underlying share information for equity compensation plans as of June 30, 2019 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 Options Plans	138,400	99,962	N/A	385
Non-Qualified Stock Option Plans	6,387,200	6,193,237	N/A	115,156
Stock Bonus Plans	783,760	N/A	327,267	456,460
Stock Compensation Plan	634,000	N/A	122,221	493,369
Incentive Stock Bonus Plan	640,000	N/A	616,500	23,500

 

 

Underlying share information for equity compensation plans as of September 30, 2018 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	138,400	123,558	N/A	385
Non-Qualified Stock Option Plans	3,387,200	3,036,569	N/A	309,526
Stock Bonus Plans	783,760	N/A	297,230	486,497
Stock Compensation Plan	134,000	N/A	118,590	15,410
Incentive Stock Bonus Plan	640,000	N/A	624,000	16,000

 

Stock option activity:

	Nine Months Ended June 30,
	2019	2018
Granted	3,268,862	1,858,108
Exercised	42,770	-
Expired	29,322	26,395
Forfeited	63,698	1,393

 

	Three Months Ended June 30,
	2019	2018
Granted	3,268,362	1,847,808
Exercised	42,770	-
Expired	26,922	2,016
Forfeited	39,505	-

 

During the quarter ended June 30, 2019, the Company adopted the 2019 Stock Compensation Plan, which authorized the issuance of up to 500,000 shares of common stock to officers, directors, employees and consultants.

 

Employee stock based compensation expense includes the expense related to options issued or vested and restricted stock. Non-employee expense includes the expense related to options and stock issued to consultants expensed over the period of their service contracts. Stock based compensation expense is included in general and administrative expenses on the statements of operations.

 

Non-employee stock based compensation expense includes the value of shares and options issued under consulting arrangements. At June 30, 2019 and September 30, 2018, approximately $88,000 and $207,000, respectively, are included in prepaid expenses.

 

 

Warrants and Non-Employee Options

 

The following chart represents the warrants and non-employee options outstanding at June 30, 2019:

 

Warrant		Issue Date	Shares Issuable upon Exercise of Warrants	Exercise Price	Expiration Date
Series N		8/18/2008	85,339	$3.00	2/18/2020
Series V		5/28/2015	810,127	$19.75	5/28/2020
Series UU		6/11/2018	163,544	$2.80	6/11/2020
Series W		10/28/2015	688,930	$16.75	10/28/2020
Series X		1/13/2016	120,000	$9.25	1/13/2021
Series Y		2/15/2016	26,000	$12.00	2/15/2021
Series ZZ		5/23/2016	20,000	$13.75	5/18/2021
Series BB		8/26/2016	16,000	$13.75	8/22/2021
Series Z		5/23/2016	264,000	$13.75	11/23/2021
Series FF		12/8/2016	68,048	$3.91	12/1/2021
Series CC		12/8/2016	611,463	$5.00	12/8/2021
Series HH		2/23/2017	6,500	$3.13	2/16/2022
Series AA		8/26/2016	200,000	$13.75	2/22/2022
Series JJ		3/14/2017	9,450	$3.13	3/8/2022
Series LL		4/30/2017	26,398	$3.59	4/30/2022
Series MM		6/22/2017	893,491	$1.86	6/22/2022
Series NN		7/24/2017	473,798	$2.52	7/24/2022
Series OO		7/31/2017	60,000	$2.52	7/31/2022
Series II		3/14/2017	95,000	$3.00	9/14/2022
Series RR		10/30/2017	495,326	$1.65	10/30/2022
Series SS		12/19/2017	514,476	$2.09	12/18/2022
Series TT		2/5/2018	760,758	$2.24	2/5/2023
Series PP		8/28/2017	112,500	$2.30	2/28/2023
Series WW		7/2/2018	1,950	$1.63	6/28/2023
Series VV		7/2/2018	90,000	$1.75	1/2/2024
Consultants		7/28/17	10,000	$2.18	7/27/2027

 

 

 

The table below presents the fair value of the warrant liabilities at the balance sheet dates:

	June 30, 2019	September 30, 2018
Series S warrants	$-	$33
Series V warrants	1,249,835	770,436
Series W warrants	2,131,237	999,081
Series Z warrants	1,172,626	487,767
Series ZZ warrants	72,185	34,215
Series AA warrants	963,990	380,474
Series BB warrants	64,256	28,456
Series CC warrants	3,699,989	1,779,724
Series DD warrants	-	1,249,287
Series EE warrants	-	1,249,287
Series FF warrants	433,091	188,921
Series GG warrants	-	607,228
Series HH warrants	44,050	58,816
Series II warrants	660,020	660,135
Series JJ warrants	64,252	88,642
Series KK warrants	-	656,930
Series LL warrants	177,299	77,632
Total warrant liabilities	$10,732,830	$9,317,064

 

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

	2019	2018
Series S warrants	$33	$(756,261)
Series V warrants	(479,399)	22,842
Series W warrants	(1,132,156)	18,478
Series Z warrants	(684,859)	34,682
Series ZZ warrants	(37,970)	2,103
Series AA warrants	(583,516)	28,337
Series BB warrants	(35,800)	1,988
Series CC warrants	(2,007,287)	181,244
Series DD warrants	1,249,287	5,492
Series EE warrants	1,249,287	5,492
Series FF warrants	(244,170)	23,119
Series GG warrants	195,228	170,131
Series HH warrants	(22,859)	7,962
Series II warrants	(593,960)	250,578
Series JJ warrants	(32,954)	11,970
Series KK warrants	(55,622)	169,808
Series LL warrants	(99,667)	10,002
Net (loss) gain on warrant liabilities	$(3,316,384)	$187,967