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Document and Entity Information
9 Months Ended
Jun. 30, 2013
Jul. 30, 2013
Document And Entity Information
Entity Registrant Name CEL SCI CORP
Entity Central Index Key 0000725363
Document Type 10-Q
Document Period End Date Jun 30, 2013
Amendment Flag false
Current Fiscal Year End Date --09-30
Is Entity a Well-known Seasoned Issuer? No
Is Entity a Voluntary Filer? No
Is Entity's Reporting Status Current? Yes
Entity Filer Category Accelerated Filer
Entity Common Stock, Shares Outstanding 309,905,272
Document Fiscal Period Focus Q3
Document Fiscal Year Focus 2013
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BALANCE SHEETS (USD $)
Jun. 30, 2013
Sep. 30, 2012
ASSETS
Cash and cash equivalents $ 3,484,070 $ 3,941,042
Receivables 163,739 158,614
Prepaid expenses 840,287 1,306,041
Inventory used for R&D and manufacturing 1,135,592 1,384,484
Deferred rent - current portion 612,012 651,768
Total current assets 6,235,700 7,441,949
RESEARCH AND OFFICE EQUIPMENT AND LEASEHOLD IMPROVEMENTS-- less accumulated depreciation and amortization of $2,919,127 and $2,711,792 538,415 630,948
PATENT COSTS--less accumulated amortization of $1,148,214 and $1,313,046 335,336 384,278
DEFERRED RENT - net of current portion 5,569,714 5,939,358
DEPOSITS 2,070,917 1,670,917
TOTAL ASSETS 14,750,082 16,067,450
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable 1,176,344 592,867
Accrued expenses 583,525 191,214
Due to employees 87,930 20,178
Deferred rent - current portion 7,783 4,195
Lease obligations - current portion 7,891 0
Related party loan 1,104,057 1,104,057
Total current liabilities 2,967,530 1,912,511
Derivative instruments 3,819,836 6,983,690
Deferred revenue 126,545 126,500
Deferred rent-net of current portion 9,369 12,317
Lease obligations - net of current portion 23,102 0
Deposits held 5,000 5,000
Total liabilities 6,951,382 9,040,018
COMMITMENTS AND CONTINGENCIES      
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value - authorized 200,000 shares, issued and outstanding, -0- 0 0
Common stock, $.01 par value - authorized 600,000,000 shares; issued and outstanding 309,855,272 and 273,113,332 shares at June 30, 2013 and September 30, 2012, respectively 3,098,553 2,731,133
Additional paid-in capital 215,160,858 207,285,920
Accumulated deficit (210,460,711) (202,989,621)
Total stockholders' equity 7,798,700 7,027,432
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 14,750,082 $ 16,067,450
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BALANCE SHEETS (Parenthetical) (USD $)
Jun. 30, 2013
Sep. 30, 2012
Assets
Accumulated Depreciation and Amortization for Research and Office Equipment and Leasehold Improvements $ 2,919,127 $ 2,711,792
Accumulated Amortization for Patents $ 1,148,214 $ 1,313,046
Stockholders Equity
Preferred Stock Shares 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 Shares Par Value $ 0.01 $ 0.01
Common Stock Shares Authorized 600,000,000 600,000,000
Common Stock Shares Issued 309,855,272 273,113,332
Common Stock Shares Outstanding 309,855,272 273,113,332
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STATEMENTS OF OPERATIONS (USD $)
3 Months Ended 9 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Income Statement [Abstract]
GRANT INCOME AND OTHER $ 113,728 $ 35,000 $ 144,133 $ 146,567
OPERATING EXPENSES:
Research and development (9 months excluding R&D depreciation of $208,750 and $338,350, respectively, included below and 3 months excluding R&D depreciation of $47,931 and $109,867, respectively, included below) 3,769,538 2,469,166 9,208,900 7,519,586
Depreciation and amortization 79,008 109,718 302,871 391,571
General & administrative 1,778,381 1,669,214 5,428,897 5,154,141
Total operating expenses 5,626,927 4,248,098 14,940,668 13,065,298
OPERATING LOSS (5,513,199) (4,213,098) (14,796,535) (12,918,731)
GAIN ON DERIVATIVE INSTRUMENTS 1,079,392 3,390,389 7,363,854 142,532
INTEREST INCOME 29,027 28,665 89,394 86,393
INTEREST EXPENSE (42,693) (41,402) (127,803) (220,812)
NET LOSS (4,447,473) (835,446) (7,471,090) (12,910,618)
ISSUANCE OF ADDITIONAL SHARES DUE TO RESET PROVISIONS 0 (250,000)
MODIFICATION OF WARRANTS (59,531) 0 (59,531) (325,620)
INDUCEMENT WARRANTS 0 (1,593,000)
NET LOSS AVAILABLE TO COMMON SHAREHOLDERS $ (4,507,004) $ (835,446) $ (7,530,621) $ (15,079,238)
NET LOSS PER COMMON SHARE
BASIC $ (0.01) $ 0 $ (0.03) $ (0.06)
DILUTED $ (0.02) $ (0.02) $ (0.05) $ (0.06)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
BASIC 309,306,502 258,467,582 300,383,239 244,738,972
DILUTED 309,306,502 258,467,582 300,383,239 244,738,972
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STATEMENTS OF OPERATIONS (Parenthetical) (USD $)
3 Months Ended 9 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Expenses
Depreciation $ 47,931 $ 109,867 $ 208,750 $ 338,350
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STATEMENTS OF CASH FLOWS (USD $)
9 Months Ended
Jun. 30, 2013
Jun. 30, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (7,471,090) $ (12,910,618)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 302,871 391,571
Issuance of common stock, warrants and options for services 364,318 402,708
Extension of stock options issued to consultants 0 54,789
Extension of options issued to employees 0 36,990
Employee option cost 2,087,718 1,724,375
Common stock contributed to 401 (k) plan 119,190 115,693
Impairment loss on abandonment of patents 10,651 37,352
Loss on retired equipment 4,199 9,016
Gain on derivative instruments (7,363,854) (142,532)
(Increase)/decrease in assets:
Receivables (5,125) 431,684
Deferred rent 409,400 450,374
Prepaid expenses 529,511 406,305
Inventory used for R&D and manufacturing 248,892 198,648
Deposits (400,000) 0
Increase/(decrease) in liabilities:
Accounts payable 560,521 (36,259)
Accrued expenses 392,311 (96,513)
Due to employees 67,752 3,443
Deferred rent liability 640 (3,880)
Deferred revenue 45 1,500
Deposits held 0 5,000
Net cash used in operating activities (10,142,050) (8,920,354)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment (93,419) (43,222)
Expenditures for patent costs (24,446) (78,959)
Net cash used in investing activities (117,865) (122,181)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 9,807,375 14,289,518
Proceeds from exercise of warrants and stock options 0 2,664,539
Payments on convertible debt 0 (4,950,000)
Payments on oblgations under capital leases (4,432) 0
Net cash provided by financing activities 9,802,943 12,004,057
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (456,972) 2,961,522
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,941,042 4,260,594
CASH AND CASH EQUIVALENTS, END OF PERIOD 3,484,070 7,222,116
ISSUANCE OF WARRANTS:
Increase in derivative liabilities (4,200,000) (6,706,667)
Decrease in additional paid-in capital 4,200,000 6,706,667
Total 0 0
ISSUANCE OF ADDITIONAL SHARES
Increase in common stock 0 (8,333)
Increase in additional paid-in capital 0 (241,667)
Decrease in additional paid-in capital 0 250,000
Total 0 0
EXERCISE OF DERIVATIVE LIABILITIES:
Decrease in derivative liabilities 0 122,367
Increase in additional paid-in capital 0 (122,367)
Total 0 0
MODIFICATION OF WARRANTS:
Increase additional paid-in capital (59,531) (325,620)
Decrease in additional paid-in capital 59,531 325,620
INDUCEMENT WARRANTS:
Increase in additional paid-in capital 0 (1,593,000)
Decrease in additional paid-in capital 0 1,593,000
Total 0 0
ISSUANCE OF COMMON STOCK FOR PREPAID SERVICES:
Increase in additional paid-in capital (117,090) (141,333)
Increase in prepaid expenses 117,090 141,333
Total 0 0
PATENT COSTS INCLUDED IN ACCOUNTS PAYABLE
Increase in patent costs 13,145 0
Increase in accounts payable (13,145) 0
Total 0 0
NON CASH RESEARCH AND OFFICE EQUIPMENT PURCHASES
Increase in research and office equipment 45,236 0
Increase in accounts payable (8,614) 0
Increase in capital lease obligation (36,622) 0
Total 0 0
CAPITAL LEASE PAYMENTS INCLUDED IN ACCOUNTS PAYABLE:
Decrease in capital lease obligation 1,197 0
Increase in accounts payable (1,197) 0
Total 0 0
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash expenditures for interest expense $ 126,950 $ 336,316
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A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
9 Months Ended
Jun. 30, 2013
Notes to Financial Statements
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying condensed financial statements of CEL-SCI Corporation (the Company) are unaudited and certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission. While management of the Company believes that the disclosures presented are adequate to make the information presented not misleading, these interim condensed financial statements should be read in conjunction with the financial statements and notes included in the Company’s annual report on Form 10-K for the year ended September 30, 2012.

 

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, 2013 and the results of its operations for the nine and three-month periods then ended.  The condensed balance sheet as of September 30, 2012 is derived from the September 30, 2012 audited financial statements.  Significant 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, 2013 and 2012 are not necessarily indicative of the results to be expected for the entire year.

 

 

 

Significant accounting policies are as follows:

 

 

Research and Office Equipment and Leasehold Improvements - 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.

 

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, is 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 expenditures are expensed as incurred.

 

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 was recorded against the deferred tax assets as of June 30, 2013 and September 30, 2012.

 

 

Derivative Instruments - The Company has entered into financing arrangements that consist of freestanding derivative instruments or are hybrid instruments that contain embedded derivative features.  The Company has also issued warrants to various parties in connection with work performed by these parties.  The Company accounts for these arrangements in accordance with ASC 815, “Accounting for Derivative Instruments and Hedging Activities”.  The Company also accounts for warrants in accordance with ASC 815. In accordance with accounting principles generally accepted in the United States (“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, giving consideration to all of the rights and obligations of each instrument.  The derivative liabilities are remeasured at fair value at the end of each interim period as long as they are outstanding.

 

Deferred Rent (Asset) - The deferred rent is discussed at Note G.  Consideration paid, including deposits, related to operating leases is recorded as a deferred rent asset and amortized as rent expense over the lease term.  Interest on the deferred rent is calculated at 3% on the funds deposited on the manufacturing facility and is included in deferred rent.  This interest income will be used to offset future rent.

 

Stock-Based Compensation - Compensation cost for all employee stock-based awards 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.  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 attribution method as 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 the Company’s management to make 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 and Stock Bonus Plans. In some cases these Plans are collectively referred to as the "Plans".  All Plans (have been approved by the stockholders. A summary chart and description of activity of the Plans for the nine months and three months ended June 30, 2013 and 2012 follows in Note C. For further discussion of the Stock Option Plans, Stock Compensation Plan and Stock Bonus Plans, see the Company’s Form 10-K for the year ended September 30, 2012.

 

 

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B. NEW ACCOUNTING PRONOUNCEMENTS
9 Months Ended
Jun. 30, 2013
Accounting Changes and Error Corrections [Abstract]
B. NEW ACCOUNTING PRONOUNCEMENTS

B.           NEW ACCOUNTING PRONOUNCEMENTS

 

  There are no significant new accounting pronouncements that would impact the condensed financial statements.

 

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C. STOCKHOLDERS EQUITY
9 Months Ended
Jun. 30, 2013
Notes to Financial Statements
C. STOCKHOLDERS' EQUITY

C.           STOCKHOLDERS’ EQUITY

 

Stock options, stock bonuses and compensation granted by the Company as of June 30, 2013 are detailed in the following chart.  Each option represents the right to purchase one share of the Company’s common stock.

 

Name of Plan  

Total

Shares

Reserved

Under Plans

   

Shares

Reserved for

Outstanding

Options

   

Shares

Issued as

Stock Bonus

Compensation

   

Remaining

Options/Shares

Under Plans

 
                         
Incentive Stock Option Plans     21,100,000       13,898,275       N/A       3,245,225  
Non-Qualified Stock Option                                
   Plans     57,760,000       34,476,781       N/A       16,761,069  
Stock Bonus Plans     15,940,000       N/A       8,707,753       7,224,685  
Stock Compensation Plan     13,500,000       N/A       6,886,531       6,613,469  

 

There were 14,475,664 and 6,679,372 options granted to employees and directors during the nine months ended June 30, 2013 and 2012, respectively. There were 100,000 and 3,559,000 options granted to employees and directors during the three months ended June 30, 2013 and 2012, respectively.  The Company cancelled 100,000 and -0- options during the three months ended June 30, 2013 and 2012, respectively.

 

In December 2012, the Company offered employees and directors holding options that were scheduled to expire on April 1, 2013 the opportunity to forfeit these options and have new options issued with an expiration date of December 17, 2017. All twelve employees and directors eligible for this offer accepted the terms. This resulted in the cancellation of 3,874,664 options priced at $0.22 per share and the concurrent issuance of the same number of options at $0.28 per share. In accordance with ASC 718, the Company recorded the incremental compensation cost of the options. The incremental compensation cost is the excess of the fair value of the replacement award over the fair value of the cancelled award at the cancellation date.  At the cancellation date, the incremental compensation cost was $477,879.

 

In November 2011, the Company modified the number of options issued to certain employees and directors, as well as the exercise prices and the expiration dates of the options. This resulted in the cancellation of 3,900,465 options priced between $0.54 and $1.94 per share and the issuance of 3,120,372 options exercisable at $0.30 per share. In accordance with ASC 718, the incremental compensation cost was $409,370.  In December 2011, the Company extended the expiration date of certain employee options resulting in an additional option cost of $36,990.

 

 

 

 

 

Stock-Based Compensation Expense

 

    Nine months Ended June 30,  
    2013     2012  
             
Employees   $ 2,087,718     $ 1,761,365  
 Non-employees   $ 364,318     $ 457,497  

 

    Three months Ended June 30,  
    2013     2012  
             
Employees   $ 564,369     $ 463,314  
 Non-employees   $ 155,963     $ 213,789  


 

Derivative Liabilities, Warrants and Other Options

 

Below is a chart showing the derivative liabilities and the number of warrants outstanding at June 30, 2013:

 

Warrant Issue Date   Shares Issuable upon Exercise of Warrant     Exercise Price   Expiration Date   Reference  
                       
Series N 8/18/08     5,187,709       0.30   8/18/14     1  
Series A 6/24/09     1,303,472       0.50   12/24/14     1  
C. Schleuning (Series A) 7/8/09     167,500       0.50   1/8/15     1  
Series B 9/4/09     500,000       0.68   9/4/14     1  
Series C 8/20/09 - 8/26/09     4,634,886       0.55   2/20/15     1  
Series E 9/21/09     714,286       1.75   8/12/14     1  
Series F 10/6/11     12,000,000       0.40   10/6/14     1  
Series G 10/6/11     666,667       0.40   8/12/14     1  
Series H 1/26/12     12,000,000       0.50   8/1/15     1  
Series Q 6/21/12     12,000,000       0.50   12/22/15     1  
Series R 12/6/12     26,250,000       0.40   12/6/16     1  
                             
Series L 4/18/07     250,000       0.75   4/17/14     2  
Series L (repriced) 4/18/07     700,000       0.25   4/2/15     2  
Series M (modified) 4/18/07     6,000,000       0.34   7/31/14     2  
                             
Series P 2/10/12     5,900,000       0.45   3/6/17     3  
                             
Private Investors 7//18/05- 6/30/09     7,409,375       0.56 - 0.82       1/26/14 - 7/18/14     4  
                             

Warrants held by

Officer and Director

6/24/09- 7/6/09     3,497,539       0.40 - 0.50   12/24/14 - 1/6/15     5  
Consultants 2/15/05 - 12/28/12     1,407,500       0.28 - 2.00   5/20/14 – 12/27/17     6  
                             

 

 

 

 

 

1.   Derivative Liabilities

 

 

See below for details of the balances of derivative instruments at June 30, 2013 and September 30, 2012.

 

    June 30,
2013
    September 30,
2012
 
Series A through E warrants   $ 127,118     $ 786,989  
Series N warrants     259,385       830,034  
Series F and G warrants     253,333       1,646,667  
Series H warrants     480,000       1,800,000  
Series Q warrants     600,000       1,920,000  
Series R warrants     2,100,000       -  
                 
Total derivative liabilities   $ 3,819,836     $ 6,983,690  
                 

 

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, which includes an adjustment to the number of shares issuable upon the exercise of the warrant in the event that the Company makes certain equity offerings in the future at a price lower than the exercise prices of the warrant instruments.  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 revalued at the end of each reporting period through their expiration.  Any change in fair value between the respective reporting dates is recognized as a gain or loss.

 

Series K and Series A through E Warrants

 

The Company accounted for the Series K and A through E warrants as derivative liabilities in accordance with ASC 815.  These warrants do not qualify for equity accounting and must be accounted for as a derivative liability since the Warrant Agreement provides the holder with the right, at its option, to require the Company to a cash settlement of the warrants at Black-Scholes value in the event of a Fundamental Transaction, as defined in the Warrant Agreement.  Since the occurrence of a Fundamental Transaction is not entirely within the Company's control, there exist circumstances that would require net-cash settlement of the warrants while holders of shares would not receive a cash settlement.

 

 

In October 2011, 2,318,396 Series K warrants held by the investors were reset from $0.40 to $0.30.  In addition, the investors were issued 772,799 warrants exercisable at $0.30 per share at an initial cost of $30,912.  This cost was accounted for as a debit to loss on derivatives and a credit to derivative liabilities.

 

In February 2012, all the Series K warrants were exercised, and the Company received $927,359 from the exercise of Series K warrants to purchase 3,091,195 of the Company’s common shares. As of September 30, 2012, all Series K warrants had been exercised and no liability was recorded.  When the warrants were exercised, the value of these warrants was converted from derivative liabilities to equity.  For the nine months and three months ended June 30, 2012, Series K warrants transferred to equity totaled $122,367 and -0-, respectively. No gain or loss was recorded for the nine months and three months ended June 30, 2013.  For the nine months and three months ended June 30, 2012, the Company recorded a loss of $21,903 and $0, respectively, on Series K warrants.

 

For the nine months and three months ended June 30, 2013, the Company recorded a gain of $659,871 and $61,058, respectively, on the Series A through E derivative instruments. For the nine months and three months ended June 30, 2012, the Company recorded a gain of $314,949 and $644,951, respectively, on the Series A through E derivative instruments.

 

In June 2009, the Company issued 10,116,560 Series A warrants exercisable at $0.50 per share in connection with a financing.  The cost of the warrants of $2,775,021 was recorded as a debit to additional paid in capital and a credit to derivative liabilities.  As of June 30, 2013, 1,303,472 of these warrants remained outstanding.  As of June 30, 2013 and September 30, 2012, the values of the remaining derivative liabilities totaled $26,070 and $156,417, respectively.

 

In July 2009, the Company issued warrants to a private investor.  The 167,500 warrants were issued with an exercise price of $0.50 per share and valued at $43,550 using the Black Scholes method. The cost of the warrants was accounted for as a debit to additional paid in capital and a credit to derivative liabilities. As of June 30, 2013, 167,500 warrants remained outstanding.  As of June 30, 2013 and September 30, 2012, the values of the remaining derivative liabilities totaled $3,350 and $20,100, respectively.

 

In connection with a loan received and fully repaid in a prior period, the Company issued 500,000 Series B warrants with an exercise price of $0.68 per share. As of June 30, 2013, 500,000 Series B warrants remained outstanding.  As of June 30, 2013 and September 30, 2012, the fair values of the remaining Series B warrants were $5,000 and $40,000, respectively.

 

In connection with an August 2009 financing, the Company issued 5,392,218 Series C warrants exercisable at $0.55 per share.  As of June 30, 2013, 4,634,886 of these warrants remained outstanding.  As of June 30, 2013 and September 30, 2012, the fair values of the remaining Series C warrants were $92,698 and $556,186, respectively.

 

 

In September 2009, 714,286 Series E warrants were issued with an exercise price of $1.75 per share to the placement agent in connection with a financing.  As of June 30, 2013, 714,286 Series E warrants remained outstanding. As of June 30, 2013 and September 30, 2012, the fair values of the remaining Series E warrants were $0 and $14,286, respectively.

 

Series N Warrants

 

In August 2008 and June 2009, 3,890,782 Series N warrants were issued to two investors in connection with a financing and a reset provision.  In October 2011, the 3,890,782 warrants held by the investors were reset from $0.40 to $0.30.  In addition, the investors were issued 1,296,927 warrants exercisable at $0.30 per share at an initial cost of $220,478.  The cost was accounted for as a debit to loss on derivatives and a credit to derivative liabilities.

 

As of June 30, 2013, 5,187,709 Series N warrants remain outstanding. As of June 30, 2013 and September 30, 2012, the fair values of the Series N warrants were $259,385 and $830,034, respectively.  During the nine and three months ended June 30, 2013, the Company recorded a derivative gain on Series N warrants of $570,649  and $0 respectively.  During the nine and three months ended June 30, 2012, the Company recorded a derivative gain of $51,876 and $518,771, respectively.

 

Series F and G warrants

 

In October 2011, the Company issued 12,000,000 Series F warrants with an exercise price of $0.40 per share at any time prior to October 6, 2014 in connection with a financing.  The Company also issued 666,667 Series G warrants with an exercise price of $0.40 per share to the placement agent for this offering. The Series G warrants are exercisable at any time prior to August 12, 2014. The initial cost of the warrants of $2,146,667 was recorded as a debit to additional paid-in-capital and a credit to derivative liabilities.  As of June 30, 2013 and September 30, 2012, the fair values of the Series F and G warrants were $253,333 and $1,646,667, respectively. During the nine and three months ended June 30, 2013, the Company recorded a derivative gain of $1,393,334 and $253,334 respectively on the Series F and G warrants.  During the nine and three months ended June 30, 2012, the Company recorded a derivative gain of $120,000 and $1,266,667, respectively.

 

Series H Warrants

 

In January 2012, the Company issued 12,000,000 Series H warrants with an exercise price of $0.50 per share at any time on or after August 1, 2012 and prior to August 1, 2015 in connection with a financing.  The initial cost of the warrants of $2,400,000 was recorded as a debit to additional paid in capital and a credit to derivative liabilities. As of June 30, 2013 and September 30, 2012, the fair values of the Series H warrants were $480,000 and $1,800,000, respectively. During the nine and three months ended June 30, 2013, the Company recorded a derivative gain of $1,320,000 and $120,000 respectively on the Series H warrants.  During the nine and three months ended June 30, 2012, the Company recorded a derivative gain of $120,000 and $1,200,000, respectively.

 

 

Series Q Warrants

 

In June 2012, the Company issued 12,000,000 Series Q warrants with an exercise price of $0.50 per share in connection with a financing.  The Series Q warrants may be exercised at any time on or after December 22, 2012 and prior to December 22, 2015.  The initial cost of the warrants of $2,160,000 was recorded as a debit to additional paid-in capital and a credit to derivative liabilities. As of June 30, 2013 and September 30, 2012, the fair values of the Series Q warrants were $600,000 and $1,920,000, respectively.   During the nine and three months ended June 30, 2013 the Company recorded a derivative gain of $1,320,000 and $120,000, respectively, on the Series Q warrants. During the nine and three months ended June 30, 2012 the Company recorded a derivative loss of $240,000 on the Series Q warrants.

 

Series R Warrants

 

On December 4, 2012 the Company sold 35,000,000 shares of its common stock for $10,500,000, or $0.30 per share, in a registered direct offering.  The investors in this offering also received Series R warrants which entitle the investors to purchase up to 26,250,000 shares of the Company’s common stock.  The Series R warrants may be exercised at any time on or after June 6, 2013 and on or before December 6, 2016 at a price of $0.40 per share.   The Company paid the placement agent for this offering a cash commission of $682,500.  The initial cost of the warrants of $4,200,000 was recorded as a debit to additional paid-in capital and a credit to derivative liabilities. As of June 30, 2013, the fair value of the Series R warrants was $2,100,000.  During the nine and three months ended June 30, 2013, the Company recorded a derivative gain of $2,100,000 and $525,000, respectively, on the Series R warrants.

 

Senior Convertible Notes

 

In March 2012, the Company repaid the remaining Senior Secured Convertible Notes derived from the settlement, thereby completely eliminating the Senior Secured Convertible Notes, satisfying the settlement and having the lien on the Company’s assets removed.

 

The accounting for the Senior Secured Convertible Notes was within the scope of ASC 815.  Under ASC 815 or ASC 825, the Company may make an irrevocable election to initially and subsequently measure a hybrid financial instrument in its entirety at fair value.  Any change in fair value between the respective reporting dates shall be recognized as a gain or loss.  Based on the analysis of the Senior Secured Convertible Notes, the Company identified several embedded derivative features.  The Company elected, in accordance with ASC 825, to initially and subsequently carry the instrument at fair value without bifurcating the embedded derivatives.  For the nine and three months ended June 30, 2012, respectively, the Company recorded at gain of $49,000 and $0, respectively, on the Senior Convertible Notes.

 

 

 

2.         Series L, M and P Warrants

 

In April 2007, the Company completed a $15 million private financing.  Shares were sold at $0.75, a premium over the closing price of the previous two weeks.  The financing was accompanied by 10,000,000 warrants with an exercise price of $0.75 and 10,000,000 warrants with an exercise price of $2.00.  The warrants are known as Series L and Series M warrants, respectively. The warrants issued with the financing qualified for equity treatment in accordance with ASC 815. The cost of Series L and series M warrants were recorded as a debit and a credit to additional paid-in capital.

 

In November 2011, the Company reduced the exercise price of 1,600,000 Series L warrants to $0.34.  The additional cost of $86,826 was recorded as a debit and a credit to additional paid-in capital and was a deemed dividend. This cost is included in modification of warrants and increased the net loss available to shareholders on the statements of operations. In March 2012, 600,000 Series L warrants were exercised at a price of $0.34, and the Company received proceeds of $204,000.

 

In April 2012, 250,000 Series L warrants were transferred to a consultant exercisable at a price of $0.75 per share and were extended for two years from the current expiration date.  The additional value of $43,910 was accounted for as a credit to additional paid-in capital and a debit to general and administrative expense.  In June 2012, 101,669 Series L warrants with an exercise price of $0.75 per share, expired.  In April 2013, 1,000,000 Series L warrants were repriced to $0.25 and extended for two years to April 2, 2015 in return for a reduction in outstanding warrants to 700,000.  The additional cost of $59,531 was recorded as a debit and a credit to additional paid-capital and was a deemed dividend.  This cost was included in modification of warrants and increased the net loss available to shareholders on the statements of operations.  As of June 30, 2013, 700,000 of the Series L warrants at the reduced exercise price of $0.25 and 250,000 at the original exercise price of $0.75 remained outstanding.

 

In November 2011, the Company reduced the exercise price of 6,000,000 Series M warrants from $0.60 to $0.34. The additional cost of $238,794 was recorded as a debit and a credit to additional paid-capital and was a deemed dividend.  This cost was included in modification of warrants and increased the net loss available to shareholders on the statements of operations.  As of June 30, 2013, 6,000,000 Series M warrants at the reduced exercise price of $0.34 remained outstanding.

 

3.          Series O and P Warrants

 
 

In March 2009, as further consideration for its rights under a licensing agreement, Byron Biopharma LLC (“Byron”) purchased 3,750,000 Units from the Company at a price of $0.20 per Unit.  Each Unit consisted of one share of the Company’s common stock and two Series O warrants.  Each Series O warrant entitles the holder to purchase one share of the Company’s common stock at a price of $0.25 per share.  The Series O warrants expire on March 6, 2016.  The Units were accounted for as an equity transaction using the Black Scholes method to value the warrants.  The fair value of the warrants was calculated to be $1,015,771.  During the year end September 30, 2012, all Series O warrants were exercised and the Company received $1,625,000.

 

On February 10, 2012, the Company issued 5,900,000 Series P warrants to the former holder of the Series O warrants as an inducement for the early exercise of the remaining Series O warrants. Series O warrants entitled the holder to purchase 5,900,000 shares of the Company’s common stock at a price of $0.25 per share at any time on or prior to March 6, 2016.  The Series P warrants allow the holder to purchase up to 5,900,000 shares of the Company’s common stock at a price of $0.45 per share.  The Series P warrants are exercisable at any time on or after August 12, 2012 and prior to March 6, 2017.  The warrants were accounted for as an equity transaction using the Black-Scholes method to value the warrants.  The fair value of the warrants was calculated to be $1,593,000.  This cost was recorded as a debit and a credit to additional paid-in capital.  This cost was included in inducement warrants and increased the net loss available to shareholders on the condensed statements of operations.  As of June 30, 2013, 5,900,000 Series P warrants remained outstanding.

 

  

4.   Private Investor Warrants

 

 

 

Between May 2003 and April 2006, the Company issued 1,900,000 warrants as part of a financing to a private investor at exercise prices between $0.47 and $1.25 of which 700,000 warrants were exercised in April 2006.  The fair value of the warrants has been recorded as an addition to additional paid-in capital and also as a charge to additional paid-in capital since they qualified for equity accounting.  During the three months ended June 30, 2013, the 1,200,000 warrants with exercise prices between $0.47 and $1.25 expired.  As of June 30, 2013, none of these warrants remain outstanding.

 

Between July 2005 and May 2006, 1,925,000 warrants were issued to a private investor with an exercise price between $0.56 and $0.82 of which 600,000 were exercised in May 2006. As of June 30, 2013, 1,325,000 warrants remained outstanding.

 

In January 2009, as part of an amended lease agreement on the manufacturing facility, the Company repriced 3,000,000 warrants issued to the lessor in July 2007 at $1.25 per share and which were to expire on July 12, 2013. These warrants were repriced at $0.75 per share and expire on January 26, 2014. The cost of this repricing and extension of the warrants was $70,515 and was accounted for as a debit to the deferred rent asset and a credit to additional paid-in capital.  In addition, 787,500 additional warrants were given to the lessor of the manufacturing facility on the same date, exercisable at a price of $0.75 per share, and will expire on January 26, 2014. The cost of these warrants was $45,207 and was accounted for as a debit to the deferred rent asset and a credit to additional paid-in capital.  As of June 30, 2013, 3,787,500 warrants remained outstanding.

 

Between March 31 and June 30, 2009, 2,296,875 warrants were issued at $0.75 to the leaseholder on the manufacturing facility in consideration for the deferral of rent payments. As of June 30, 2013, 2,296,875 warrants remained outstanding.

 

5.   Warrants Held by Officer and Director

 

 

Between December 2008 and June 2009, Maximilian de Clara, the Company’s President and a director, loaned the Company $1,104,057.  In June 2009, the Company issued 1,648,244 warrants exercisable at $0.40 per share to Mr. de Clara.  The warrants are exercisable at any time prior to December 24, 2014.  These warrants were valued at $65,796 using the Black Scholes method.  In July 2009, as consideration for a further extension of the loan, the Company issued 1,849,295 warrants exercisable at $0.50 per share to Mr. de Clara that was amended for the second time.  These warrants were valued at $341,454 using the Black Scholes method and can be exercised at any time prior to January 6, 2015.  The first warrants were recorded as a discount to the loan and a credit to additional paid-in capital.  The second warrants were recorded as a debit to derivative loss of $831,230, a premium of $341,454 on the loan and a credit to additional paid in capital of $489,776.  The first warrants were amortized as interest expense at the time of the second amendment.  On the second amendment, $338,172 of the premium was amortized as a reduction to interest expense as of September 30, 2009.  The balance of the premium of $3,282 was amortized as a reduction to interest expense in October 2009.  As of June 30, 2013, 3,497,539 warrants remained outstanding. See Note E for additional information.

 

  

6.    Options and Shares Issued to Consultants

 

 

As of June 30, 2013, 1,407,500 options issued to consultants as payment for services remained outstanding, of which 1,312,000 options were issued from the Non-Qualified Stock Options plans.  On May 22, 2013, 30,000 options previously issued to a consultant from the Non-Qualified Stock Option plans expired.

 

In October 2012, the Company entered into a consulting agreement for public relations to be provided through March 31, 2013.  In May 2013, the Company extended the agreement for a six-month period ending September 30, 2013.  This contract totals $108,000 and includes a monthly retainer of 50,000 shares of restricted stock.  The common shares were issued at the fair market value on the grant date.  The aggregate fair market value of $130,500 and $37,000 for the nine and three months ended June 30, 2013 respectively, was recorded as a general and administrative expense.

 

 On December 28, 2012, the Company entered into a consulting agreement for services to be provided through December 27, 2013.  In consideration for the services to be provided, the Company issued the consultant 500,000 shares of common stock and 500,000 options to purchase common stock at a price of $0.28 per share.  The common shares were issued at the fair market value on the agreement date of $0.28.  The aggregate fair market value of $140,000 was recorded as a prepaid expense and is being charged to general and administrative expense over the period of service.  The fair value of the options issued, as calculated using the Black-Scholes method, was determined to be $98,150 and is also being charged to general and administrative expense over the period of service.  During the nine and three months ended June 30, 2013, the Company recorded $121,060 and $59,537 of expense relating to this consulting arrangement.  As of June 30, 2013 and September 30, 2012, the Company has recorded $117,090 and $53,333, respectively, in prepaid consulting expenses.

 

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D. FAIR VALUE MEASUREMENTS
9 Months Ended
Jun. 30, 2013
Fair Value Disclosures [Abstract]
D. FAIR VALUE MEASUREMENTS

D.           FAIR VALUE MEASUREMENTS

 

In accordance with ASC 820-10, 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

 

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 a particular input to the fair value measurement requires judgment and may affect the placement within the fair value hierarchy levels.

 

The table below sets forth the assets and liabilities measured at fair value on a recurring basis, by input level, in the condensed balance sheet at June 30, 2013:

 

 

    Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)    

Significant Other Observable

Inputs (Level 2)

    Significant Unobservable Inputs (Level 3)     Total  
                         
Derivative instruments   $ -     $ -     $ 3,819,836     $ 3,819,836  
                                 

 

The table below sets forth the assets and liabilities measured at fair value on a recurring basis, by input level, in the condensed balance sheet at September 30, 2012:

 

    Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)    

Significant Other Observable

Inputs (Level 2)

    Significant Unobservable Inputs (Level 3)     Total  
                         
Derivative instruments   $ -     $ -     $ 6,983,690     $ 6,983,690  
                                 

 

 

 

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, 2013 and the year ended September 30, 2012:

 

    June 30,     September 30,  
    2013     2012  
Beginning balance   $ 6,983,690     $ 7,261,073  
Issuances     4,200,000       6,706,667  
Settlements     -       (5,072,367 )
Realized and unrealized gains                
recorded in earnings     (7,363,854 )     (1,911,683 )
Ending balance   $ 3,819,836     $ 6,983,690  

 

The fair values of the Company’s derivative instruments disclosed above 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.

 

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E. LOANS FROM OFFICER
9 Months Ended
Jun. 30, 2013
Notes to Financial Statements
E. LOANS FROM OFFICER AND INVESTOR

E.           LOANS FROM OFFICER

 

The Company’s President, and a director, Maximilian de Clara, loaned the Company $1,104,057.  The loan from Mr. de Clara bears interest at 15% per year and is secured by a lien on substantially all of the Company’s assets.  The Company does not have the right to prepay the loan without Mr. de Clara’s consent.  The loan was initially payable at the end of March 2009, but was extended.  At the time the loan was originally due, and in accordance with the loan agreement, the Company issued Mr. de Clara warrants to purchase 1,648,244 shares of the Company’s common stock at a price of $0.40 per share.  The warrants are exercisable at any time prior to December 24, 2014.  In June 2009, the loan with Mr. de Clara was extended for the second time to July 6, 2014, but, at Mr. de Clara’s option, the loan may be converted into shares of the Company’s common stock.  The number of shares which will be issued upon any conversion will be determined by dividing the amount to be converted by $0.40.  As further consideration for the second extension, Mr. de Clara received warrants to purchase 1,849,295 shares of the Company’s common stock at a price of $0.50 per share at any time prior to January 6, 2015.  On May 13, 2011, to recognize Mr. de Clara’s willingness to agree to subordinate his note to the convertible preferred shares and convertible debt as part of the settlement agreement, the Company extended the maturity date of the note to July 6, 2015.

 

During the nine months ended June 30, 2013 and 2012, the Company paid $124,206 in interest expense to Mr. de Clara.  During the three months ended June 30, 2013 and 2012, the Company paid $41,402 in interest expense to Mr. de Clara.

 

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F. OPERATIONS, FINANCING
9 Months Ended
Jun. 30, 2013
Notes to Financial Statements
F. OPERATIONS, FINANCING

F.           OPERATIONS, FINANCING

 

The Company has incurred significant costs since its inception in connection with 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 the public and private sale of its common and preferred stock.  The Company will be required to raise additional capital or find additional long-term financing in order to continue with its research efforts.  To date, the Company has not generated any revenue from product sales.  The ability of the Company to complete the necessary clinical trials and obtain Federal Drug Administration (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 currently running a large multi-national Phase III clinical trial for head and neck cancer with its partners TEVA Pharmaceuticals and Orient Europharma. The Company believes that it has enough capital to support its operations until year end and believes that it has ready access to new equity capital should the need arise. To finance the study beyond the next 12 months, the Company plans to raise additional capital in the form of corporate partnerships, debt and/or equity financings. The Company believes that it will be able to obtain additional financing since Multikine is a Phase III product designed to treat cancer and 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 or that funds will be available to the Company on acceptable terms or at all.  If the Company does not raise the necessary amounts of money, the Company will either have to slow down or delay the Phase III clinical trial or even significantly curtail its operations until such time as it is able to raise the required funding.  The Company’s expenditures for fiscal year 2012 included several non-recurring items that amounted to approximately $5 million dollars, which were the settlement payments related to a lawsuit, which will not recur in fiscal year 2013, thereby reducing the Company’s expenditures.  On December 4, 2012, the Company raised $10.5 million from several institutional investors. The Company paid Chardan Capital Markets, LLC, the placement agent for this offering, a cash commission of $682,500. 

 

On April 23, 2013, the Company announced that it has replaced the clinical research organization (CRO) running its Phase III clinical trial. Under a co-development agreement, Ergomed will contribute up to $10 million towards the study in the form of offering discounted clinical services in exchange for a single digit percentage of milestone and royalty payments, up to a specified maximum amount, only from sales of Multikine for head and neck cancer.

 

The Company estimates the total cash cost of the Phase III trial, with the exception of the parts that will be paid by its licensees, Teva Pharmaceuticals and Orient Europharma, will be approximately $36.7 million going forward.  This is in addition to approximately $8.2 million which has been paid as of June 30, 2013. The estimate is based on the information currently available in the Company’s contracts with the Clinical Research Organization responsible for managing the Phase III trial.  This number can be affected by the speed of enrollment, 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 III trial will be higher than currently estimated.

 

The condensed 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 condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.  The Company is working on a number of collaborations that it believes will help the Company attract capital and interest from the financial community.

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G. COMMITMENTS AND CONTINGENCIES
9 Months Ended
Jun. 30, 2013
Commitments and Contingencies Disclosure [Abstract]
G. COMMITMENTS AND CONTINGENCIES

G.           COMMITMENTS AND CONTINGENCIES

 

Clinical Research Agreements

 

In March 2013, the Company entered into an agreement with Aptiv Solutions to provide certain clinical research services in accordance with a master service agreement.   The Company will reimburse Aptiv for costs incurred.  In May 2013, the Company made an advance payment of $400,000.  An additional advance payment of $200,000 is due on August 1, 2013.  The funds advanced will be credited back in $150,000 annual increments from December 2014 through December of 2017.

 

 

In April 2013, the Company entered into a co-development and revenue sharing agreement with Ergomed.  Under the agreement, Ergomed will contribute up to $10 million towards the Company’s Phase III clinical trial in the form of offering discounted clinical services in exchange for a single digit percentage of milestone and royalty payments, up to a specified maximum amount.

 

The Company accounted for the co-development and revenue sharing agreement in accordance with ASC 808 “Collaborative Arrangements”.  The Company determined the payments to Erogmed are within the scope of Topic 730 “Research and Development” expense. Therefore, the Company will record the discount on the clinical services as a credit to research and development expense on its Statement of Operations.  During the nine and three months ending June 30, 2013, the Company recorded approximately $315,000 as research and development expense. This amount was net of Ergomed’s discount of approximately $114,000.

 

Lease Agreements

 

In August 2007, the Company leased a building near Baltimore, Maryland.  The building, which consists of approximately 73,000 square feet, 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 III clinical trial and sales of the drug if approved by the FDA.  The lease is for a term of twenty years and requires an annual base rent to escalate each year at 3%.  The Company is required to pay all real 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.

 

The amortization of the deferred rent for the nine months ended June 30, 2013 and 2012 was $489,902 and $528,498, respectively. The amortization of the deferred rent for the three months ended June 30, 2013 and 2012 was $161,866 and $174,773, respectively. 

 

The Company was required to deposit the equivalent of one year of base rent in accordance with the contract.  When the Company meets the minimum cash balance required by the lease, the deposit will be returned to the Company. The $1,670,917 deposit is included in non-current assets at June 30, 2013.

  

On December 7, 2011, the Company entered into a sublease for a period of four months commencing on December 10, 2011.  The Company receives $5,150 per month in rent for the subleased space.  The lease is now a month to month term lease with a 30 day notice requirement for termination.

 

The Company leases its research and development laboratory under a 60 month lease which expires February 28, 2017.  The operating lease includes escalating rental payments.  The Company is recognizing the related rent expense on a straight line basis over the full 60 month term of the lease at the rate of $11,360 per month.  As of June 30, 2013 and September 30, 2012, the Company has recorded a deferred rent liability of $3,393 and $1,033, respectively.

 

The Company leases office headquarters under a 36 month lease which expires June 30, 2015. The operating lease includes escalating rental payments.  The Company is recognizing the related rent expense on a straight line basis over the full 36 month term of the lease at the rate $7,864 per month.  As of June 30, 2013 and September 30, 2012, the Company has recorded a deferred rent liability of $13,759 and $15,479, respectively.

 

During the nine months ended June 30, 2013, the Company leased office equipment under a capital lease arrangement. The term of the capital lease is 48 months and expires on September 30, 2016.  The monthly lease payment is $1,025.  The lease bears interest at approximately 16% per annum.

 

In May 2003, CEL-SCI entered into a licensing agreement with Eastern Biotech. The agreement provides for future royalty payments up to 2% of the net sales of Multikine worldwide until May 20, 2033.  In March 2013, the Company’s President Maximilian de Clara notified CEL-SCI that Eastern Biotech had offered to sell him the royalty rights for $500,000.  Mr. de Clara, in turn, offered this opportunity to the Company before accepting it himself.  On March 11, 2013 the Board of Directors, without Mr. de Clara present, decided not to pursue this opportunity, and shortly thereafter, Mr. de Clara purchased the royalty rights.

 

 

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H. PATENTS
9 Months Ended
Jun. 30, 2013
Accounting Policies [Abstract]
H. PATENTS

 H.           PATENTS

 

During the nine months ended June 30, 2013 and 2012, the Company recorded patent impairment charges of $10,651 and $37,352, respectively.  For the nine months ended June 30, 2013 and 2012, amortization of patent costs totaled $75,882 and $54,118, respectively. During the three months ended June 30, 2013 and 2012, the Company recorded patent impairment charges of $0 and $16,018, respectively.  For the three months ended June 30, 2013 and 2012, amortization of patent costs totaled $26,441 and $16,459, respectively.  The Company estimates that future amortization expense will be as follows:

 

Three months ending September 30, 2013   $ 9,842  
Year ending September 30,        
2014     34,063  
2015     34,063  
2016     34,063  
2017     34,063  
2018     33,728  
Thereafter     155,514  
Total   $ 335,336  

 

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I. EARNINGS PER SHARE
9 Months Ended
Jun. 30, 2013
Accounting Policies [Abstract]
I. EARNINGS PER SHARE

 I.           EARNINGS PER SHARE

 

The Company’s diluted earnings per share (EPS) are as follows for June 30, 2013 and 2012.  For the  nine-months ended June 30, 2013 and 2012, the computation of dilutive net loss per share excluded options and warrants to purchase approximately 3,771,000 and 9,856,000 shares, respectively, of common stock because their inclusion would have an anti-dilutive effect.

 

    Nine Months Ended June 30, 2013  
          Weighted        
    Net Loss     Average Shares     EPS  
                   
Basic loss per share   $ (7,530,621 )     300,383,239     $ (0.03 )
Gain on derivatives     (7,363,854 )                
Dilutive loss per share   $ (14,894,475 )     300,383,239     $ (0.05 )
                         
    Three Months Ended June 30, 2013  
            Weighted          
    Net Loss     Average Shares     EPS  
                         
Basic loss per share   $ (4,507,004 )     309,306,502     $ (0.01 )
Gain on derivatives     (1,079,392 )                
Dilutive loss per share   $ (5,586,396 )     309,306,502     $ (0.02 )

 

 

 

 

    Nine Months Ended June 30, 2012  
          Weighted        
    Net Loss     Average Shares     EPS  
                   
Basic loss per share   $ (15,079,238 )     244,738,972     $ (0.06 )
Gain on derivatives     (142,532 )                
Dilutive loss per share   $ (15,221,770 )     244,738,972     $ (0.06 )

 

    Three Months Ended June 30, 2012  
          Weighted        
    Net Loss     Average Shares     EPS  
                   
Basic loss per share   $ (835,446 )     258,467,582     $ (0.00 )
Gain on derivatives     (3,390,389 )                
Dilutive loss per share   $ (4,225,835 )     258,467,582     $ (0.02 )
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J. SUBSEQUENT EVENTS
9 Months Ended
Jun. 30, 2013
Subsequent Events [Abstract]
J. SUBSEQUENT EVENTS

I.   SUBSEQUENT EVENTS

 

 

The Company has evaluated subsequent events through the date these financial statements were filed and determined there are no subsequent events that require disclosure.

 

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A. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (POLICIES)
9 Months Ended
Jun. 30, 2013
A. Organization And Summary Of Significant Accounting Policies Policies
Basis of Presentation

The accompanying condensed financial statements of CEL-SCI Corporation (the Company) are unaudited and certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission. While management of the Company believes that the disclosures presented are adequate to make the information presented not misleading, these interim condensed financial statements should be read in conjunction with the financial statements and notes included in the Company’s annual report on Form 10-K for the year ended September 30, 2012.

 

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, 2013 and the results of its operations for the nine and three-month periods then ended.  The condensed balance sheet as of September 30, 2012 is derived from the September 30, 2012 audited financial statements.  Significant 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, 2013 and 2012 are not necessarily indicative of the results to be expected for the entire year.

Research and Office Equipment and Leasehold Improvements

Research and Office Equipment and Leasehold Improvements - 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.

 

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 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, is 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 - Research and development expenditures are expensed as incurred.

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 was recorded against the deferred tax assets as of June 30, 2013 and September 30, 2012.

Derivative Instruments

Derivative Instruments - The Company has entered into financing arrangements that consist of freestanding derivative instruments or are hybrid instruments that contain embedded derivative features.  The Company has also issued warrants to various parties in connection with work performed by these parties.  The Company accounts for these arrangements in accordance with ASC 815, “Accounting for Derivative Instruments and Hedging Activities”.  The Company also accounts for warrants in accordance with ASC 815. In accordance with accounting principles generally accepted in the United States (“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, giving consideration to all of the rights and obligations of each instrument.  The derivative liabilities are remeasured at fair value at the end of each interim period as long as they are outstanding.

 

Deferred Rent (Asset)

Deferred Rent (Asset) - The deferred rent is discussed at Note G.  Consideration paid, including deposits, related to operating leases is recorded as a deferred rent asset and amortized as rent expense over the lease term.  Interest on the deferred rent is calculated at 3% on the funds deposited on the manufacturing facility and is included in deferred rent.  This interest income will be used to offset future rent.

 

Stock-Based Compensation

Stock-Based Compensation - Compensation cost for all employee stock-based awards 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.  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 attribution method as 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 the Company’s management to make 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 and Stock Bonus Plans. In some cases these Plans are collectively referred to as the "Plans".  All Plans (have been approved by the stockholders. A summary chart and description of activity of the Plans for the nine months and three months ended June 30, 2013 and 2012 follows in Note C. For further discussion of the Stock Option Plans, Stock Compensation Plan and Stock Bonus Plans, see the Company’s Form 10-K for the year ended September 30, 2012.

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C. STOCKHOLDERS EQUITY (Tables)
9 Months Ended
Jun. 30, 2013
C. Stockholders Equity Tables
Stock options, stock bonuses and compensation granted by the Company
Name of Plan  

Total

Shares

Reserved

Under Plans

   

Shares

Reserved for

Outstanding

Options

   

Shares

Issued as

Stock Bonus

Compensation

   

Remaining

Options/Shares

Under Plans

 
                         
Incentive Stock Option Plans     21,100,000       13,898,275       N/A       3,245,225  
Non-Qualified Stock Option                                
   Plans     57,760,000       34,476,781       N/A       16,761,069  
Stock Bonus Plans     15,940,000       N/A       8,707,753       7,224,685  
Stock Compensation Plan     13,500,000       N/A       6,886,531       6,613,469  
Schedule of employees and non-employees stock compensation

Stock-Based Compensation Expense

 

    Nine months Ended June 30,  
    2013     2012  
             
Employees   $ 2,087,718     $ 1,761,365  
 Non-employees   $ 364,318     $ 457,497  

 

    Three months Ended June 30,  
    2013     2012  
             
Employees   $ 564,369     $ 463,314  
 Non-employees   $ 155,963     $ 213,789  
Derivative Liabilities, Warrants and Other Options

Below is a chart showing the derivative liabilities and the number of warrants outstanding at June 30, 2013:

 

Warrant Issue Date   Shares Issuable upon Exercise of Warrant     Exercise Price   Expiration Date   Reference  
                       
Series N 8/18/08     5,187,709       0.30   8/18/14     1  
Series A 6/24/09     1,303,472       0.50   12/24/14     1  
C. Schleuning (Series A) 7/8/09     167,500       0.50   1/8/15     1  
Series B 9/4/09     500,000       0.68   9/4/14     1  
Series C 8/20/09 - 8/26/09     4,634,886       0.55   2/20/15     1  
Series E 9/21/09     714,286       1.75   8/12/14     1  
Series F 10/6/11     12,000,000       0.40   10/6/14     1  
Series G 10/6/11     666,667       0.40   8/12/14     1  
Series H 1/26/12     12,000,000       0.50   8/1/15     1  
Series Q 6/21/12     12,000,000       0.50   12/22/15     1  
Series R 12/6/12     26,250,000       0.40   12/6/16     1  
                             
Series L 4/18/07     250,000       0.75   4/17/14     2  
Series L (repriced) 4/18/07     700,000       0.25   4/2/15     2  
Series M (modified) 4/18/07     6,000,000       0.34   7/31/14     2  
                             
Series P 2/10/12     5,900,000       0.45   3/6/17     3  
                             
Private Investors 7//18/05- 6/30/09     7,409,375       0.56 - 0.82       1/26/14 - 7/18/14     4  
                             

Warrants held by

Officer and Director

6/24/09- 7/6/09     3,497,539       0.40 - 0.50   12/24/14 - 1/6/15     5  
Consultants 2/15/05 - 12/28/12     1,407,500       0.28 - 2.00   5/20/14 – 12/27/17     6  
                             

 

Tabular disclosure of derivative liabilities at fair value

See below for details of the balances of derivative instruments at June 30, 2013 and September 30, 2012.

 

    June 30,
2013
    September 30,
2012
 
Series A through E warrants   $ 127,118     $ 786,989  
Series N warrants     259,385       830,034  
Series F and G warrants     253,333       1,646,667  
Series H warrants     480,000       1,800,000  
Series Q warrants     600,000       1,920,000  
Series R warrants     2,100,000       -  
                 
Total derivative liabilities   $ 3,819,836     $ 6,983,690  
                 

 

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D. FAIR VALUE MEASUREMENTS (Tables)
9 Months Ended
Jun. 30, 2013
D. Fair Value Measurements Tables
Measured at fair value on a recurring basis

The table below sets forth the assets and liabilities measured at fair value on a recurring basis, by input level, in the condensed balance sheet at June 30, 2013:

 

 

    Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)    

Significant Other Observable

Inputs (Level 2)

    Significant Unobservable Inputs (Level 3)     Total  
                         
Derivative instruments   $ -     $ -     $ 3,819,836     $ 3,819,836  
                                 

 

The table below sets forth the assets and liabilities measured at fair value on a recurring basis, by input level, in the condensed balance sheet at September 30, 2012:

 

    Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)    

Significant Other Observable

Inputs (Level 2)

    Significant Unobservable Inputs (Level 3)     Total  
                         
Derivative instruments   $ -     $ -     $ 6,983,690     $ 6,983,690  
Reconciliation of beginning and ending balances related to fair value measurements using significant unobservable inputs (Level 3)

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, 2013 and the year ended September 30, 2012:

 

    June 30,     September 30,  
    2013     2012  
Beginning balance   $ 6,983,690     $ 7,261,073  
Issuances     4,200,000       6,706,667  
Settlements     -       (5,072,367 )
Realized and unrealized gains                
recorded in earnings     (7,363,854 )     (1,911,683 )
Ending balance   $ 3,819,836     $ 6,983,690  
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H. PATENTS (Tables)
9 Months Ended
Jun. 30, 2013
H. Patents Tables
Schedule of total estimated future amortization

The Company estimates that future amortization expense will be as follows:

 

Three months ending September 30, 2013   $ 9,842  
Year ending September 30,        
2014     34,063  
2015     34,063  
2016     34,063  
2017     34,063  
2018     33,728  
Thereafter     155,514  
Total   $ 335,336  
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I. EARNINGS PER SHARE (Tables)
9 Months Ended
Jun. 30, 2013
I. Earnings Per Share Tables
Computation of dilutive net loss per share

 

    Nine Months Ended June 30, 2013  
          Weighted        
    Net Loss     Average Shares     EPS  
                   
Basic loss per share   $ (7,530,621 )     300,383,239     $ (0.03 )
Gain on derivatives     (7,363,854 )                
Dilutive loss per share   $ (14,894,475 )     300,383,239     $ (0.05 )
                         
    Three Months Ended June 30, 2013  
            Weighted          
    Net Loss     Average Shares     EPS  
                         
Basic loss per share   $ (4,507,004 )     309,306,502     $ (0.01 )
Gain on derivatives     (1,079,392 )                
Dilutive loss per share   $ (5,586,396 )     309,306,502     $ (0.02 )

 

 

 

 

    Nine Months Ended June 30, 2012  
          Weighted        
    Net Loss     Average Shares     EPS  
                   
Basic loss per share   $ (15,079,238 )     244,738,972     $ (0.06 )
Gain on derivatives     (142,532 )                
Dilutive loss per share   $ (15,221,770 )     244,738,972     $ (0.06 )

 

    Three Months Ended June 30, 2012  
          Weighted        
    Net Loss     Average Shares     EPS  
                   
Basic loss per share   $ (835,446 )     258,467,582     $ (0.00 )
Gain on derivatives     (3,390,389 )                
Dilutive loss per share   $ (4,225,835 )     258,467,582     $ (0.02 )

 

 

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C. STOCKHOLDERS EQUITY (Details)
Jun. 30, 2013
Incentive Stock Option Plans
Total Shares Reserved Under Plans 21,100,000
Shares Reserved forOutstanding Options 13,898,275
Shares Issued as Stock Compensation   
Remaining Options/Shares Under Plans 3,245,225
Non-Qualified Stock Option Plans
Total Shares Reserved Under Plans 57,760,000
Shares Reserved forOutstanding Options 34,476,781
Shares Issued as Stock Compensation   
Remaining Options/Shares Under Plans 16,761,069
Stock Bonus Plans
Total Shares Reserved Under Plans 15,940,000
Shares Reserved forOutstanding Options   
Shares Issued as Stock Compensation 8,707,753
Remaining Options/Shares Under Plans 7,224,685
Stock Compensation Plan
Total Shares Reserved Under Plans 13,500,000
Shares Reserved forOutstanding Options   
Shares Issued as Stock Compensation 6,886,531
Remaining Options/Shares Under Plans 6,613,469
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C. STOCKHOLDERS EQUITY (Details 1) (USD $)
3 Months Ended 9 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
C. Stockholders Equity Details 1
Employees $ 564,369 $ 463,314 $ 2,087,718 $ 1,761,365
Non-employees $ 155,963 $ 213,789 $ 364,318 $ 457,497
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C. STOCKHOLDERS EQUITY (Details 2) (USD $)
Jun. 30, 2013
Series N [Member]
STOCKHOLDERS' EQUITY
Issue Date Aug 18, 2008
Shares Issuable upon Exercise of Warrant 5,187,709
Exercise Price $ 0.3
Expiration Date Aug 18, 2014
Series A [Member]
STOCKHOLDERS' EQUITY
Issue Date Jun 24, 2009
Shares Issuable upon Exercise of Warrant 1,303,472
Exercise Price $ 0.5
Expiration Date Dec 24, 2014
CSchleuningSeriesAMember
STOCKHOLDERS' EQUITY
Issue Date Jul 8, 2009
Shares Issuable upon Exercise of Warrant 167,500
Exercise Price $ 0.5
Expiration Date Jan 8, 2015
Series B [Member]
STOCKHOLDERS' EQUITY
Issue Date Sep 4, 2009
Shares Issuable upon Exercise of Warrant 500,000
Exercise Price $ 0.68
Expiration Date Sep 4, 2014
Series C [Member]
STOCKHOLDERS' EQUITY
Shares Issuable upon Exercise of Warrant 4,634,886
Exercise Price $ 0.55
Expiration Date Feb 20, 2015
Issue Start date Aug 20, 2009
Issue End Date Aug 26, 2009
Series E [Member]
STOCKHOLDERS' EQUITY
Issue Date Sep 21, 2009
Shares Issuable upon Exercise of Warrant 714,286
Exercise Price $ 1.75
Expiration Date Aug 12, 2014
Series F [Member]
STOCKHOLDERS' EQUITY
Issue Date Oct 6, 2011
Shares Issuable upon Exercise of Warrant 12,000,000
Exercise Price $ 0.4
Expiration Date Oct 6, 2014
Series G [Member]
STOCKHOLDERS' EQUITY
Issue Date Oct 6, 2011
Shares Issuable upon Exercise of Warrant 666,667
Exercise Price $ 0.4
Expiration Date Aug 12, 2014
Series H [Member]
STOCKHOLDERS' EQUITY
Issue Date Jan 26, 2012
Shares Issuable upon Exercise of Warrant 12,000,000
Exercise Price $ 0.5
Expiration Date Aug 1, 2015
Series Q [Member]
STOCKHOLDERS' EQUITY
Issue Date Jun 21, 2012
Shares Issuable upon Exercise of Warrant 12,000,000
Exercise Price $ 0.5
Expiration Date Dec 22, 2015
SeriesRMember
STOCKHOLDERS' EQUITY
Issue Date Dec 6, 2012
Shares Issuable upon Exercise of Warrant 26,250,000
Exercise Price $ 0.4
Expiration Date Dec 6, 2016
Series L [Member]
STOCKHOLDERS' EQUITY
Issue Date Apr 18, 2007
Shares Issuable upon Exercise of Warrant 250,000
Exercise Price $ 0.75
Expiration Date Apr 17, 2014
Series L Repriced [Member]
STOCKHOLDERS' EQUITY
Issue Date Apr 18, 2007
Shares Issuable upon Exercise of Warrant 700,000
Exercise Price $ 0.25
Expiration Date Apr 2, 2015
Series M Modified
STOCKHOLDERS' EQUITY
Issue Date Apr 18, 2007
Shares Issuable upon Exercise of Warrant 6,000,000
Exercise Price $ 0.34
Expiration Date Jul 31, 2014
Series P [Member]
STOCKHOLDERS' EQUITY
Issue Date Feb 10, 2012
Shares Issuable upon Exercise of Warrant 5,900,000
Exercise Price $ 0.45
Expiration Date Mar 6, 2017
Private Investors [Member]
STOCKHOLDERS' EQUITY
Shares Issuable upon Exercise of Warrant 7,409,375
Issue Start date Jul 18, 2005
Issue End Date Jun 30, 2009
Expiration start date Jan 26, 2014
Expiration end date Jul 18, 2014
Exercise Price Minimum $ 0.56
Exercise Price Maximum $ 0.82
Warrants Held by Officer And Director [Member]
STOCKHOLDERS' EQUITY
Shares Issuable upon Exercise of Warrant 3,497,539
Issue Start date Jun 24, 2009
Issue End Date Jul 6, 2009
Expiration start date Dec 14, 2014
Expiration end date Jan 6, 2015
Exercise Price Minimum $ 0.4
Exercise Price Maximum $ 0.5
Consultants [Member]
STOCKHOLDERS' EQUITY
Shares Issuable upon Exercise of Warrant 1,407,500
Issue Start date Feb 15, 2005
Issue End Date Dec 28, 2012
Expiration start date May 20, 2014
Expiration end date Dec 27, 2017
Exercise Price Minimum $ 0.28
Exercise Price Maximum $ 2
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C. STOCKHOLDERS EQUITY (Details 3) (USD $)
Jun. 30, 2013
Sep. 30, 2012
C. Stockholders Equity Details 3
Series A through E $ 127,118 $ 786,989
Series N 259,385 830,034
Series F and G warrants 253,333 1,646,667
Series H warrants 480,000 1,800,000
Series Q warrants 600,000 1,920,000
Series R warrants 2,100,000 0
Total derivative liabilities $ 3,819,836 $ 6,983,690
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C. STOCKHOLDERS EQUITY (Details Narrative) (USD $)
3 Months Ended 9 Months Ended 12 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Sep. 30, 2012
Options granted to employees and directors 100,000 3,559,000 14,475,664 6,679,372
Options cancelled 100,000 0
Received from warrants exercised $ 1,625,000
SeriesKwarrantsMember
Warrants transferred to equity 0 122,367
Loss on warrants 0 21,903
Gain on warrants 0 0
Series A through E warrants
Gain on warrants 61,058 644,951 659,871 314,949
Series A [Member]
Warrants outstanding 1,303,472 1,303,472
Fair value of outstanding warrants 26,070 26,070 156,417
Private Investors [Member]
Warrants outstanding 167,500 167,500
Derivative liability 3,350 3,350 20,100
Series B [Member]
Warrants outstanding 500,000 500,000
Fair value of outstanding warrants 5,000 5,000 40,000
Series C [Member]
Warrants outstanding 4,634,886 4,634,886
Fair value of outstanding warrants 92,698 92,698 556,186
Series E [Member]
Warrants outstanding 714,286 714,286
Fair value of outstanding warrants 0 0 14,286
Series N [Member]
Gain on warrants 0 518,771 570,649 51,876
Warrants outstanding 5,187,709 5,187,709
Fair value of outstanding warrants 259,385 259,385 830,034
SeriesFAndGWarrantsMember
Gain on warrants 253,334 1,266,667 1,393,334 120,000
Fair value of outstanding warrants 253,333 253,333 1,646,667
Series H [Member]
Gain on warrants 120,000 1,200,000 1,320,000 120,000
Fair value of outstanding warrants 480,000 480,000 1,800,000
Series Q [Member]
Loss on warrants 240,000 240,000
Gain on warrants 120,000 1,320,000
Fair value of outstanding warrants 600,000 600,000 1,920,000
SeriesRMember
Gain on warrants 525,000 2,100,000
Fair value of outstanding warrants 2,100,000 2,100,000
Senior Convertible Notes
Gain on warrants 0 49,000
Series L [Member]
Warrants outstanding 950,000 950,000
Series M Modified [Member]
Warrants outstanding 6,000,000 6,000,000
Series P [Member]
Warrants outstanding 5,900,000 5,900,000
Private Investor Warrants
Warrants outstanding 1,325,000 1,325,000
Private Investor Warrants
Warrants outstanding 3,787,500 3,787,500
Private Investor Warrants
Warrants outstanding 2,296,875 2,296,875
Warrants Held by Officer And Director [Member]
Warrants outstanding 3,497,539 3,497,539
Consultants [Member]
Expense recorded for consulting arrangement 59,537 121,060
Prepaid consulting expenses 117,090 117,090 $ 53,333
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D. FAIR VALUE MEASUREMENTS (Details) (USD $)
Jun. 30, 2013
Sep. 30, 2012
Level1
Derivative instruments $ 0 $ 0
Level2
Derivative instruments 0 0
Level3
Derivative instruments 3,819,836 6,983,690
Total
Derivative instruments $ 3,819,836 $ 6,983,690
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D. FAIR VALUE MEASUREMENTS (Details 1) (USD $)
9 Months Ended 12 Months Ended
Jun. 30, 2013
Sep. 30, 2012
D. Fair Value Measurements Details 1
Beginning balance $ 6,983,690 $ 7,261,073
Issuances 4,200,000 6,706,667
Settlements 0 (5,072,367)
Realized and unrealized gains recorded in Earnings Recorded in earnings (7,363,854) (1,911,683)
Ending balance $ 3,819,836 $ 6,983,690
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E. LOANS FROM OFFICER (Details Narrative) (USD $)
3 Months Ended 9 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
E. Loans From Officer Details Narrative
Interest expense paid to Mr. de Clara $ 41,402 $ 41,402 $ 124,206 $ 124,206
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G. COMMITMENTS AND CONTINGENCIES (Details Narrative) (USD $)
3 Months Ended 9 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Sep. 30, 2012
Research and development expense $ 3,769,538 $ 2,469,166 $ 9,208,900 $ 7,519,586
Amortization of the deferred rent 161,866 174,773 489,902 528,498
Rent deposit included in non-current assets 1,670,917 1,670,917
R & D deferred rent liability 3,393 3,393 1,033
Deferred rent liability 13,759 13,759 15,479
Office equipment leased under a capital lease arrangement During the nine months ended June 30, 2013, the Company leased office equipment under a capital lease arrangement. The term of the capital lease is 48 months and expires on September 30, 2016. The monthly lease payment is $1,025. The lease bears interest at approximately 16% per annum.
Collaborative Arrangements Erogmed
Research and development expense $ 315,000 $ 315,000
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H. PATENTS (Details) (USD $)
Jun. 30, 2013
Sep. 30, 2012
H. Patents Details
Three months ending September 30, 2013 $ 9,842
Year ending September 30, 2014 34,063
Year ending September 30, 2015 34,063
Year ending September 30, 2016 34,063
Year ending September 30, 2017 34,063
Year ending September 30, 2018 33,728
Thereafter 155,514
Total $ 335,336 $ 384,278
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H. PATENTS (Details Narrative) (USD $)
3 Months Ended 9 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
H. Patents Details Narrative
Patent impairment charges $ 0 $ 16,018 $ 10,651 $ 37,352
Amortization of patent costs $ 26,441 $ 16,459 $ 75,882 $ 54,118
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I. EARNINGS PER SHARE (Details) (USD $)
3 Months Ended 9 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Net Loss $ (4,507,004) $ (835,446) $ (7,530,621) $ (15,079,238)
EPS-Diluted $ (0.02) $ (0.02) $ (0.05) $ (0.06)
EPS-Basic $ (0.01) $ 0 $ (0.03) $ (0.06)
Basic EPS
Net Loss (4,507,004) (835,446) (7,530,621) (15,079,238)
Weighted Average Shares 309,306,502 258,467,582 300,383,239 244,738,972
EPS-Basic $ (0.01) $ 0 $ (0.03) $ (0.06)
Derivative liabilities gain
Net Loss (1,079,392) (3,390,389) (7,363,854) (142,532)
Dilutive EPS
Net Loss $ (5,586,396) $ (4,225,835) $ (14,894,475) $ (15,221,770)
Weighted Average Shares 309,306,502 258,467,582 300,383,239 244,738,972
EPS-Diluted $ (0.02) $ (0.02) $ (0.05) $ (0.06)
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I. EARNINGS PER SHARE (Details Narrative)
9 Months Ended
Jun. 30, 2013
Jun. 30, 2012
I. Earnings Per Share Details Narrative
Options and warrants excluded from earnings per share due to anti-dilutive effect 3,771,000 9,856,000
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