PROSPECTUS 424(b)(3)
Commission File No. 333-97171
CEL-SCI CORPORATION
16,465,000 shares of Common Stock
By means of this prospectus two private investors of CEL-SCI Corporation
are offering to sell up to 16,465,000 shares of CEL-SCI's common stock which may
be issued upon the conversion of promissory notes sold by CEL-SCI as well as
shares of common stock issuable upon the exercise of CEL-SCI's Series G
warrants. The actual number of shares issuable upon the conversion of the
promissory notes will vary depending upon the price of CEL-SCI's common stock at
the time of conversion. In addition, the shares issuable upon the exercise of
the Series G warrants may increase as the result of future sales of CEL-SCI's
common stock at prices below either the warrant exercise price or the market
value of CEL-SCI's common stock. See "Comparative Share Data" for information
concerning the terms of the convertible promissory notes and the Series G
warrants. An additional 65,000 shares are being offered for sale by an officer
of CEL-SCI.
The securities offered by this prospectus are speculative and involve a high
degree of risk and should be purchased only by persons who can afford to lose
their entire investment. Prospective investors should consider certain important
factors described under "Risk Factors" beginning on page 4 of this prospectus.
These Securities Have Not Been Approved or Disapproved by the Securities and
Exchange Commission Nor Has the Commission Passed Upon the Accuracy or Adequacy
of this Prospectus. Any Representation to the Contrary is a Criminal Offense.
CEL-SCI's common stock is traded on the American Stock Exchange. On
September 17, 2002 the closing price of CEL-SCI's common stock on the American
Stock Exchange was $0.25.
The date of this prospectus is September 18, 2002
PROSPECTUS SUMMARY
THIS SUMMARY IS QUALIFIED BY THE MORE DETAILED INFORMATION APPEARING ELSEWHERE
IN THIS PROSPECTUS.
CEL-SCI
CEL-SCI Corporation was formed as a Colorado corporation in 1983. CEL-SCI
is involved in the research and development of certain drugs and vaccines.
CEL-SCI manufactures MULTIKINE, its first, and main product, using CEL-SCI's
proprietary cell culture technologies. CEL-SCI is testing MULTIKINE to determine
if it is effective in creating an anti-cancer immune response in head and neck
cancer patients, and in HIV-infected women with Human Papilloma Virus induced
cervical dysplasia, the precursor stage before the development of cervical
cancer.
LEAPS, another technology of CEL-SCI, is being tested by CEL-SCI to
determine if it is effective in developing potential treatments and/or vaccines
against various diseases. Present target diseases are AIDS, herpes simplex,
malaria, prostate cancer and breast cancer.
Before human testing can begin with respect to a drug or biological
product, preclinical studies are conducted in laboratory animals to evaluate the
potential efficacy and the safety of a product. Human clinical studies generally
involve a three-phase process. The initial clinical evaluation, Phase I,
consists of administering the product and testing for safe and tolerable dosage
levels. Phase II trials continue the evaluation of safety and determine the
appropriate dosage for the product, identify possible side effects and risks in
a larger group of subjects, and provide preliminary indications of efficacy.
Phase III trials consist of testing for actual clinical efficacy within an
expanded group of patients at geographically dispersed test sites.
CEL-SCI has funded the costs associated with the clinical trials relating
to CEL-SCI's technologies, research expenditures and CEL-SCI's administrative
expenses with the public and private sales of shares of CEL-SCI's common stock
and borrowings from third parties, including affiliates of CEL-SCI.
CEL-SCI does not expect to develop commercial products for several years,
if at all. CEL-SCI has had operating losses since its inception, had an
accumulated deficit of approximately $(78,810,000) at June 30, 2002 and expects
to incur substantial losses for the foreseeable future.
CEL-SCI's executive offices are located at 8229 Boone Blvd., #802, Vienna,
Virginia 22182, and its telephone number is (703) 506-9460.
THE OFFERING
Securities Offered:
By means of this prospectus two private investors are offering to sell
shares of CEL-SCI's common stock issuable upon the conversion of CEL-SCI's
promissory notes sold by CEL-SCI or upon the exercise of CEL-SCI's Series G
warrants. CEL-SCI refers to the owners of these shares as the selling
shareholders in this prospectus. An additional 65,000 shares are being offered
for sale by an officer of CEL-SCI.
Common Stock Outstanding: As of August 31, 2002 CEL-SCI had
36,241,054 shares of common stock issued and
outstanding. The number of outstanding shares does
not give effect to shares which may be issued upon
the exercise and/or conversion of options, warrants
or other convertible securities held by the selling
shareholders or other persons. See "Comparative
Share Data".
Risk Factors: The purchase of the securities offered by this
prospectus involves a high degree of risk. Risk
factors include the lack of revenues and history of
loss, need for additional capital and need for FDA
approval. See the "Risk Factors" section of this
prospectus for additional Risk Factors.
AMEX Symbol: CVM
Summary Financial Data
Results of Operations:
Year Ended Nine Months Ended
September 30, 2001 June 30, 2002
Investment Income and Other
Revenues: $ 670,092 $ 376,805
Expenses:
Research and Development 7,762,213 3,993,047
Depreciation and Amortization 209,121 170,317
General and Administrative 3,432,437 1,282,948
Interest Expense -- 1,900,504
---------------- ---------
Net Loss $(10,733,679) $(6,970,011)
============= ============
Loss per common share
(basic and diluted) $(0.51) $(0.32)
Weighted average common
Shares outstanding 21,824,273 26,508,757
Balance Sheet Data:
September 30, 2001 June 30, 2002
------------------ -------------
Working Capital $2,807,229 $ 313,250
Total Assets 4,508,920 3,356,153
Long-Term Liabilities 507,727 79,625
Shareholders' Equity 4,001,193 1,351,700
Forward Looking Statements
This prospectus contains various forward-looking statements that are based
on CEL-SCI's beliefs as well as assumptions made by and information currently
available to CEL-SCI. When used in this prospectus, the words "believe",
"expect", "anticipate", "estimate" and similar expressions are intended to
identify forward-looking statements. Such statements may include statements
regarding seeking business opportunities, payment of operating expenses, and the
like, and are subject to certain risks, uncertainties and assumptions which
could cause actual results to differ materially from projections or estimates.
Factors which could cause actual results to differ materially are discussed at
length under the heading "Risk Factors". Should one or more of the enumerated
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those anticipated, estimated
or projected. Investors should not place undue reliance on forward-looking
statements, all of which speak only as of the date made.
RISK FACTORS
Investors should be aware that this offering involves the risks described
below, which could adversely affect the price of CEL-SCI's common stock. In
addition to the other information contained in this prospectus, the following
factors should be considered carefully in evaluating an investment in the shares
offered by this prospectus.
RISKS RELATED TO CEL-SCI
Since CEL-SCI Has Earned Only Limited Revenues and Has a History of Losses,
CEL-SCI Will Require Additional Capital to Remain in Operation.
CEL-SCI has had only limited revenues since it was formed in 1983. Since
the date of its formation and through June 30, 2002 CEL-SCI incurred net losses
of approximately $(78,810,000). During the years ended September 30, 1999, 2000
and 2001 CEL-SCI suffered losses of $(7,490,725), $(8,478,397) and
$(10,733,679), respectively. CEL-SCI has relied principally upon the proceeds of
public and private sales of securities to finance its activities to date. All of
CEL-SCI's potential products are in the early stages of development, and any
commercial sale of these products will be many years away. Accordingly, CEL-SCI
expects to incur substantial losses for the foreseeable future.
There can be no assurance CEL-SCI will be profitable. At the present time,
CEL-SCI intends to use available funds to finance CEL-SCI's operations.
Accordingly, while payment of dividends rests within the discretion of the Board
of Directors, no common stock dividends have been declared or paid by CEL-SCI.
CEL-SCI does not presently intend to pay dividends on its common stock and there
can be no assurance that common stock dividends will ever be paid.
If Cost Estimates for Clinical Trials and Research Are Inaccurate, CEL-SCI Will
Require Additional Capital.
CEL-SCI's estimates of the costs associated with future clinical trials
and research may be substantially lower than the actual costs of these
activities. If CEL-SCI's cost estimates are incorrect, CEL-SCI will need
additional funding for its research efforts.
If Cel-Sci cannot obtain additional capital, Cel-Sci may have to delay or
postpone development and research expenditures which may influence Cel-Sci's
ability to produce a timely and competitive product.
Clinical and other studies necessary to obtain approval of a new drug can
be time consuming and costly, especially in the United States, but also in
foreign countries. The different steps necessary to obtain regulatory approval,
especially that of the Food and Drug Administration, involve significant costs
and may require several years to complete. CEL-SCI expects that it will need
additional financing over an extended period of time in order to fund the costs
of future clinical trials, related research, and general and administrative
expenses. Although CEL-SCI's equity line of credit agreement is expected to be a
source of funding, the amounts which CEL-SCI is able to draw from the equity
line during each drawdown period may not satisfy CEL-SCI's capital needs.
Any failure to obtain or any delay in obtaining required regulatory approvals
may adversely affect the ability of CEL-SCI or potential licensees to
successfully market any products they may develop.
Therapeutic agents, drugs and diagnostic products are subject to approval,
prior to general marketing, by the FDA in the United States and by comparable
agencies in most foreign countries. The process of obtaining FDA and
corresponding foreign approvals is costly and time consuming, particularly for
pharmaceutical products such as those which might ultimately be developed by
CEL-SCI, VTI or its licensees, and there can be no assurance that such approvals
will be granted. Also, the extent of adverse government regulations which might
arise from future legislative or administrative action cannot be predicted.
CEL-SCI has, at the present time, only one source of multikine and if this
source could not, for any reason, supply CEL-SCI with Multikine, CEL-SCI
estimates that it would take approximately six to ten months to obtain supplies
of Multikine under an alternative manufacturing arrangement, in which case
CEL-SCI may have to delay its research and development activities.
CEL-SCI has an agreement with an unrelated corporation for the production,
until 2006, of Multikine. CEL-SCI does not know what cost it would incur to
obtain an alternative source of supply.
CEL-SCI may not be able to achieve or maintain a competitive position and other
technological developments may result in CEL-SCI's proprietary technologies
becoming uneconomical or obsolete.
The biomedical field in which CEL-SCI is involved is undergoing rapid and
significant technological change. The successful development of therapeutic
agents from CEL-SCI's compounds, compositions and processes through
CEL-SCI-financed research or as a result of possible licensing arrangements with
pharmaceutical or other companies, will depend on its ability to be in the
technological forefront of this field.
Many pharmaceutical and biotechnology companies are developing products
for the prevention or treatment of cancer and infectious diseases. Many of these
companies have substantial financial, research and development, and marketing
resources and are capable of providing significant long-term competition either
by establishing in-house research groups or by forming collaborative ventures
with other entities. In addition, both smaller companies and non-profit
institutions are active in research relating to cancer and infectious diseases
and are expected to become more active in the future.
CEL-SCI's Patents Might Not Protect CEL-SCI's Technology from competitors, in
which case CEL-SCI may not have any advantage over competitors in selling any
products which it may develop.
Certain aspects of CEL-SCI's technologies are covered by U.S. and foreign
patents. In addition, CEL-SCI has a number of patent applications pending. There
is no assurance that the applications still pending or which may be filed in the
future will result in the issuance of any patents. Furthermore, there is no
assurance as to the breadth and degree of protection any issued patents might
afford CEL-SCI. Disputes may arise between CEL-SCI and others as to the scope
and validity of these or other patents. Any defense of the patents could prove
costly and time consuming and there can be no assurance that CEL-SCI will be in
a position, or will deem it advisable, to carry on such a defense. Other private
and public concerns, including universities, may have filed applications for, or
may have been issued, patents and are expected to obtain additional patents and
other proprietary rights to technology potentially useful or necessary to
CEL-SCI. The scope and validity of such patents, if any, the extent to which
CEL-SCI may wish or need to acquire the rights to such patents, and the cost and
availability of such rights are presently unknown. Also, as far as CEL-SCI
relies upon unpatented proprietary technology, there is no assurance that others
may not acquire or independently develop the same or similar technology.
CEL-SCI's first MULTIKINE patent expired in 2000. Since CEL-SCI does not know if
it will ever be able to sell MULTIKINE on a commercial basis, CEL-SCI cannot
predict what effect the expiration of this patent will have on CEL-SCI.
Notwithstanding the above, CEL-SCI believes that trade secrets and later issued
patents will protect the technology associated with Multikine.
Although CEL-SCI has product liability insurance for Multikine, the successful
prosecution of a product liability case against CEL-SCI could have a materially
adverse effect upon its business if the amount of any judgment exceeds CEL-SCI's
insurance coverage.
CEL-SCI is dependent for its success on the continued availability of its
executive officers and the loss of management and scientific personnel could
adversely affect CEL-SCI.
The loss of the services of any of CEL-SCI's executive officers could have
an adverse effect on CEL-SCI's business. CEL-SCI does not carry key man life
insurance on any of its officers. CEL-SCI's future success will also depend upon
its ability to attract and retain qualified scientific personnel. There can be
no assurance that CEL-SCI will be able to hire and retain such necessary
personnel.
RISKS RELATED TO THIS OFFERING
Since the market price for CEL-SCI's common stock is volatile, investors in this
offering may not be able to sell any of CEL-SCI's shares at a profit.
The market price of CEL-SCI's common stock, as well as the securities of
other biopharmaceutical and biotechnology companies, have historically been
highly volatile, and the market has from time to time experienced significant
price and volume fluctuations that are unrelated to the operating performance of
particular companies. Factors such as fluctuations in CEL-SCI's operating
results, announcements of technological innovations or new therapeutic products
by CEL-SCI or its competitors, governmental regulation, developments in patent
or other proprietary rights, public concern as to the safety of products
developed by CEL-SCI or other biotechnology and pharmaceutical companies, and
general market conditions may have a significant effect on the market price of
CEL-SCI's common stock.
Shares Issuable Upon the Conversion of Options, Warrants and Convertible
Securities or in Connection with the Equity Line of Credit May Substantially
Increase the Number of Shares Available for Sale in the Public Market and May
Depress the Price of CEL-SCI's common stock.
Options
CEL-SCI has issued options to its officers, directors, employees and
consultants which allow the holders to acquire additional shares of CEL-SCI's
common stock. In some cases CEL-SCI has agreed that, at its expense, it will
make appropriate filings with the Securities and Exchange Commission so that the
securities issuable upon the exercise of the options will be available for
public sale. Such filings could result in substantial expense to CEL-SCI and
could hinder future financings by CEL-SCI.
Until the options expire, the holders will have an opportunity to profit
from any increase in the market price of CEL-SCI's common stock without assuming
the risks of ownership. Holders of the options may exercise them at a time when
CEL-SCI could obtain additional capital on terms more favorable than those
provided by the options. The exercise of the options will dilute the voting
interest of the owners of presently outstanding shares of CEL-SCI's common stock
and may adversely affect the ability of CEL-SCI to obtain additional capital in
the future. The sale of the shares of common stock issuable upon the exercise of
the options could adversely affect the market price of CEL-SCI's stock.
Series E Preferred Stock and Warrants
In December 1999 and January 2000, CEL-SCI sold 1,148,592 shares of its
common stock, plus Series A and Series B warrants, to three private investors.
The Series A warrants permitted the holders of the warrants to purchase 402,007
shares of CEL-SCI's common stock at a price of $2.925 per share at any time
prior to December 8, 2002. The Series B warrants allowed the holders to acquire
additional shares of CEL-SCI's common stock at a nominal price in the event the
price of CEL-SCI's common stock fell below $2.4375 per share prior to certain
fixed vesting dates, the first of which in December 2000. On the first fixed
vesting date the price of CEL-SCI's common stock was $1.54. Pursuant to the
terms of the Series B warrants, which have since expired, the holders of the
warrants, in December 2000, received 274,309 additional shares of CEL-SCI's
common stock. The share of common stock sold by CEL-SCI in the December 1999 and
January 2000 private offerings have since been resold by the investors, and as a
result no additional shares are issuable by the terms of the Series B warrants.
In March 2000, CEL-SCI sold an additional 1,026,666 shares of its common
stock, plus Series C and Series D warrants, to the same three private investors.
The Series C warrants permitted the holders of the warrants to purchase 413,344
shares of CEL-SCI's common stock at a price of $8.50 per share at any time prior
to March 21, 2003. The Series D warrants originally allowed the holders, to the
extent they held any shares purchased in the March 2000 offering, to acquire
additional shares of CEL-SCI's common stock at a nominal price in the event the
price of CEL-SCI's common stock fell below $7.50 per share prior to certain
fixed vesting dates, the first of which was in March 2001. On the first fixed
vesting date the price of CEL-SCI's common stock was $1.47 and on the second,
and final vesting date, the price of CEL-SCI's common stock was $1.08. As a
result, and in accordance with the terms of the Series D warrants, the private
investors were entitled to receive 5,734,155 additional shares of CEL-SCI's
common stock of which 3,520,123 shares had been issued and 959,340 shares had
been sold as of August 15, 2001.
On August 16, 2001 the three private investors exchanged the shares of
CEL-SCI's common stock which they owned, plus their unexercised Series D
Warrants, for 6,288 shares of CEL-SCI's Series E Preferred stock. Each Series E
Preferred share is convertible into shares of CEL-SCI's common stock on the
basis of one Series E Preferred share for shares of common stock equal in number
to the amount determined by dividing $1,000 by the lesser of $5 or 93% of the
average closing bid prices (the "Conversion Price") of CEL-SCI's common stock on
the American Stock Exchange for the five days prior to the date of each
conversion notice. As of August 31, 2002 4,796 Series E Preferred shares had
been converted into 4,461,468 shares of CEL-SCI's common stock.
As part of this transaction the three private investors also exchanged
their Series A and Series C warrants for new Series E warrants. The Series E
warrants collectively allow the holders to purchase up to 815,351 additional
shares of CEL-SCI's common stock at a price of $1.19 per share at any time prior
to August 16, 2004.
The sale of common stock issued or issuable upon the exercise of the
Series E warrants, or the conversion of the Series E Preferred stock, or the
perception that such sales could occur, could adversely affect the market price
of CEL-SCI's common stock.
Equity Line of Credit
An unknown number of shares of common stock, which may be sold by means of
a separate registration statement filed with the Securities and Exchange
Commission, are issuable under a equity line of credit arrangement to Paul
Revere Capital Partners. As CEL-SCI sells shares of its common stock to Paul
Revere Capital Partners under the equity line of credit, and Paul Revere Capital
Partners sells the common stock to third parties, the price of CEL-SCI's common
stock may decrease due to the additional shares in the market. If CEL-SCI
decides to draw down on the equity line of credit as the price of its common
stock decreases, CEL-SCI will be required to issue more shares of its common
stock for any given dollar amount invested by Paul Revere Capital Partners,
subject to the minimum selling price specified by CEL-SCI. The more shares that
are issued under the equity line of credit, the more CEL-SCI's then outstanding
shares will be diluted and the more CEL-SCI's stock price may decrease. Although
Paul Revere Capital Partners has agreed not to engage in any short selling
during the term of the equity line of credit, any decline in the price of
CEL-SCI's common stock may encourage short sales by others, which could place
further downward pressure on the price of CEL-SCI's common stock. Short selling
is a practice of selling shares which are not owned by a seller with the
expectation that the market price of the shares will decline in value after the
sale. See "Comparative Share Data" for more information concerning the equity
line.
Convertible Notes and Series F Warrants
In December 2001 and January 2002, CEL-SCI sold convertible notes, plus
Series F warrants, to a group of private investors for $1,600,000. At the
holder's option the notes are convertible into shares of CEL-SCI's common stock
equal in number to the amount determined by dividing each $1,000 of note
principal to be converted by the Conversion Price. The Conversion Price is 76%
of the average of the three lowest daily trading prices of CEL-SCI's common
stock on the American Stock Exchange during the 20 trading days immediately
prior to the conversion date. If CEL-SCI sells any additional shares of common
stock, or any securities convertible into common stock at a price below the then
applicable Conversion Price or the market price of its common stock, the
Conversion Price may be subject to adjustment. As of August 31, 2002 notes in
the principal amount of $1,440,000 had been converted into 5,487,476 shares of
CEL-SCI's common stock.
The Series F warrants presently allow the holders to purchase up to
905,500 shares of CEL-SCI's common stock at a price of $0.24 per share at any
time prior to December 31, 2008.
The sale of common stock upon the conversion of the notes or the exercise
of the Series F warrants, or the perception that such sales could occur, could
adversely affect the market price of CEL-SCI's common stock.
Convertible Notes and Series G Warrants
In July and September 2002 CEL-SCI sold convertible notes, plus Series G
warrants, to a group of private investors for $1,300,000. At the holder's option
the notes are convertible into shares of CEL-SCI's common stock equal in number
to the amount determined by dividing each $1,000 of note principal to be
converted by the Conversion Price. The Conversion Price is 70% of the average of
the three lowest daily trading prices of CEL-SCI's common stock on the American
Stock Exchange during the 15 trading days immediately prior to the conversion
date. If CEL-SCI sells any additional shares of common stock, or any securities
convertible into common stock at a price below the then applicable Conversion
Price or the market price of its common stock, the Conversion Price may be
subject to adjustment.
CEL-SCI has filed a registration statement with the Securities and
Exchange Commission, of which this prospectus is a part, in order that the
shares of common stock issued upon the conversion of the notes or the exercise
of the Series G warrants may be resold in the public market.
The Series G warrants allow the holders to purchase up to 900,000 shares
of CEL-SCI's common stock at a price of $0.25 per share at any time prior to
July 12, 2009. If CEL-SCI sells any additional shares of common stock, or any
securities convertible into common stock, at a price below the then applicable
warrant exercise price or the market price of CEL-SCI's common stock, the
warrant exercise price and the number of shares of common stock issuable upon
the exercise of the warrant may be subject to adjustment.
The sale of common stock upon the conversion of the notes or the exercise
of the Series G warrants, or the perception that such sales could occur, could
adversely affect the market price of CEL-SCI's common stock.
CEL-SCI may be required to make payments to the holders of the Convertible Notes
and the Series G warrants, in which case CEL-SCI will require additional
funding.
As explained in the preceding risk factor the shares of CEL-SCI's common
stock issuable upon the conversion of the promissory notes sold in July 2002
will be issued at a discount to the market price of CEL-SCI's common stock. In
addition the terms of the Series G warrants provide that the exercise price of
the Series G warrants may be adjusted to a price which is below the market price
of CEL-SCI's common stock on the date the warrants were issued ($0.24).
The actual number of shares issuable upon the conversion of the notes and
the exercise of the Series G warrants (if any) will vary depending upon a number
of factors, including the price of CEL-SCI's common stock at certain dates.
CEL-SCI's common stock trades on the American Stock Exchange. The rules of
the AMEX require a corporation, the securities of which are listed on the AMEX,
to obtain shareholder approval if 20% or more of a corporation's common stock
will be sold in a private offering and below the greater of the book value or
market price of the corporation's common stock.
For purposes of applying this particular rule to the convertible notes and
Series G warrants, the AMEX will consider the issuance of any common stock upon
the conversion of the notes to be a sale of CEL-SCI's common stock at less than
market price. If any of the Series G warrants are exercised at a price below the
market price of CEL-SCI's common stock on the date the warrants were issued the
AMEX will consider these shares to have been sold at less than market price.
Consequently, the AMEX rule would prohibit CEL-SCI from issuing more than
6,743,436 shares of common stock as a result of the conversion of the notes or
the exercise of the Series G warrants, if exercised at a price which is less
than $0.24 per share, unless shareholder approval is obtained for the issuance
of the additional shares.
It is possible, depending upon the future market price of CEL-SCI's common
stock, that more than 6,743,436 shares could be issued upon the conversion of
the notes and the exercise, at price below $0.24 per share, of the Series G
warrants.
In order to avoid any violation of the AMEX rules relating to the issuance
of shares below the market price of CEL-SCI's common stock, the terms of the
notes and the Series G warrants provide that no more than 6,743,436 shares may
be issued unless CEL-SCI obtains shareholder approval for the issuance of such
additional shares.
If CEL-SCI fails to obtain or elects not to obtain shareholder approval
for the issuance of the additional shares CEL-SCI will be required to pay the
holders of the notes 130% of the then outstanding principal balance of the notes
plus an amount equal to the then market value of the shares which would
otherwise be issuable upon the exercise of the Series G warrants had shareholder
approval been obtained.
COMPARATIVE SHARE DATA
Number of Note
Shares Reference
Shares outstanding as of August 31, 2002 36,241,054
Shares to be sold in this Offering:
Shares issuable upon conversion of 7,300,000 A
promissory notes
Shares issuable upon exercise of 900,000 A
Series G warrants
The number of shares outstanding as of August 31, 2002 excludes shares
which may be issued in connection with CEL-SCI's line of credit or upon the
exercise of other options, warrants, or convertible securities previously issued
by CEL-SCI. See table below.
Other Shares Which May Be Issued:
--------------------------------
The following table lists additional shares of CEL-SCI's common stock
which may be issued pursuant to the equity line of credit agreement and as the
result of the exercise of other outstanding options or warrants issued by
CEL-SCI:
Number of Note
Shares Reference
Shares issuable upon conversion of Series E Unknown B
Preferred stock
Shares issuable upon exercise of Series E 815,351 B
warrants
Shares issuable pursuant to equity line of credit: Unknown C
Shares issuable upon exercise of equity line
warrants 200,800 C
Shares issuable upon conversion of promissory
notes 1,231,000 D
Shares issuable upon exercise of Series F warrants 905,500 D
Shares issuable upon exercise of options 255,000 E
granted to investor relations consultants
Shares issuable upon exercise of options and 5,717,142 F
warrants granted to CEL-SCI's officers,
directors, employees, consultants, and third parties
Shares issuable upon exercise of Public Warrants 116,405 G
A. In July and September 2002, CEL-SCI sold convertible notes, plus Series G
warrants, to a group of private investors for $1,300,000. At the holder's option
the notes are convertible into shares of CEL-SCI's common stock equal in number
to the amount determined by dividing each $1,000 of note principal to be
converted by the Conversion Price. The Conversion Price is 70% of the average of
the 3 lowest daily trading prices of CEL-SCI's common stock on the American
Stock Exchange during the 15 trading days immediately prior to the conversion
date. The Conversion Price may not be less than $0.18. However, if CEL-SCI's
common stock trades for less than $0.24 per share for a period of 20 consecutive
trading days, the $0.18 minimum price will no longer be applicable. In addition,
if CEL-SCI sells any additional shares of common stock, or any securities
convertible into common stock at a price below the then applicable Conversion
Price or the market price of its common stock, the Conversion Price may be
subject to adjustment.
The Series G warrants allow the holders to initially purchase up to
900,000 shares of CEL-SCI's common stock at a price of $0.25 per share at any
time prior to July 12, 2009. If CEL-SCI sells any additional shares of common
stock, or any securities convertible into common stock, at a price below the
then applicable warrant exercise price or the market price of CEL-SCI's common
stock, the warrant exercise price and the number of shares of common stock
issuable upon the exercise of the warrant may be subject to adjustment. Every
three months following the date of this prospectus the warrant exercise price
will be adjusted to an amount equal to 110% of the Conversion Price of the notes
on that date, provided that the adjusted price is lower than the warrant
exercise price on that date.
The actual number of additional shares issuable upon the conversion of
the notes which remain outstanding will vary depending upon a number of factors,
including the price of CEL-SCI's common stock at certain dates. Accordingly, the
number of shares which may be issued upon the conversion of the notes cannot be
determined at this time. However, based upon the market price of CEL-SCI's
common stock on August 30, 2002, CEL-SCI would be required to issue
approximately 7,300,000 shares of common stock if all of the notes, including
notes in the principal amount of $800,000 sold in September 2002, were converted
on August 30, 2002.
See "Description of Securities - Convertible Notes and Series G Warrants"
for information concerning potential adjustments to the conversion price, the
warrant exercise price, and other terms of the notes and the Series G warrants.
B. In December 1999 and January 2000, CEL-SCI sold 1,148,592 shares of its
common stock, plus Series A and Series B warrants, to Advantage Fund II, Koch
Investment Group Limited and Mooring Capital Fund LLC for $2,800,000. The Series
A warrants allowed the holders to purchase up to 402,007 shares of CEL-SCI's
common stock at a price of $2.925 per share at any time prior to December 8,
2002. CEL-SCI issued 274,309 shares of common stock upon the exercise of the
Series B warrants, which have since expired.
In March 2000, CEL-SCI sold 1,026,666 shares of its common stock, plus
Series C and Series D warrants, to the same private investors referred to above
for $7,700,000. The Series C warrants allowed the holders to purchase up to
413,344 shares of CEL-SCI's common stock at a price of $8.50 per share at any
time prior to March 21, 2003. The Series D warrants allowed the holders, to the
extent they held any shares purchased in the March 2000 offering, to acquire
additional shares of CEL-SCI's common stock at a nominal price in the event the
price of CEL-SCI's common stock fell below $7.50 per share prior to certain
fixed vesting dates. On the first fixed vesting date the price of CEL-SCI's
common stock was $1.47 and on the second, and final vesting date, the price of
CEL-SCI's common stock was $1.08. As a result, and in accordance with the terms
of the Series D warrants, the private investors were entitled to receive
5,734,155 additional shares of CEL-SCI's common stock, of which 3,520,123 shares
had been issued and 959,340 shares had been sold as of August 15, 2001.
On August 16, 2001 CEL-SCI, Advantage Fund II and Koch Investment Group
agreed to restructure the terms of the Series A, C and D warrants in the
following manner:
Advantage Fund II, Koch Investment Group Limited and Mooring Capital Fund
LLC exchanged the 3,588,564 shares of CEL-SCI's common stock which they owned,
plus their unexercised Series D Warrants, for 6,288 shares of CEL-SCI's Series E
Preferred stock. At the holder's option, each Series E Preferred share is
convertible into shares of CEL-SCI's common stock on the basis of one Series E
Preferred share for shares of common stock equal in number to the amount
determined by dividing $1,000 by the lesser of $5 or 93% of the average closing
bid prices (the "Conversion Price") of CEL-SCI's common stock on the American
Stock Exchange for the five days prior to the date of each conversion notice.
Notwithstanding the above, a maximum 923 shares of common stock are
issuable upon the conversion of each Series E Preferred share prior to August
16, 2003.
Each Series E Preferred share can be redeemed by CEL-SCI at a price of
$1,200 per share, plus accrued dividends, at any time prior to July 18, 2003. At
any time on or after July 18, 2003 and prior to the close of business on August
16, 2003 CEL-SCI may redeem any outstanding Series E Preferred shares at a price
of $1,000 per share.
Preferred shares that have not been redeemed or converted by August 16,
2003 will automatically convert to twice the number of shares of common stock
which such shares would otherwise convert into based upon the Conversion Price
on such date. On August 16, 2003 CEL-SCI will also be required to issue the
holders of any Series E Preferred shares which are then outstanding Series E
warrants which will allow the holders of the warrants to purchase shares of
CEL-SCI's common stock equal in number to 33% of the common shares which were
issued upon the conversion of the remaining Series E Preferred shares. These
warrants, if issued, will be exercisable at any time prior to August 17, 2006 at
a price equal to 110% of the volume weighted average price of CEL-SCI's common
stock for the five days prior to August 16, 2003.
Each Series E Preferred share is entitled to a quarterly dividend of $60
per share, payable in cash. Dividends not declared will accumulate. Except as
otherwise provided by law the Series E Preferred shares do not have any voting
rights. The Series E Preferred shares have a liquidation preference over
CEL-SCI's common stock.
As part of this transaction the three investors exchanged their Series A
and Series C warrants for new Series E warrants. The Series E warrants
collectively allow the holders to purchase up to 815,351 additional shares of
CEL-SCI's common stock at a price of $1.19 per share at any time prior to August
16, 2004.
With respect to the shares issuable upon the conversion of the Series E
Preferred shares or the exercise of the Series E warrants, Advantage II and Koch
have each agreed to limit their respective weekly sales of CEL-SCI's common
stock to 9% of the average of the four prior weeks traded volume as listed by
Bloomberg, while Mooring Financial will limit its weekly sales of CEL-SCI's
common stock to 2.14% of the average of the four prior weeks trading volume as
listed by Bloomberg. If CEL-SCI's trading volume reaches 200,000 shares or more
on any given day, each of Advantage II and Koch will be allowed to sell an
additional 4.5% of that day's trading volume on each of that day and the
following day, while Mooring Financial will be allowed to sell an additional 1%
of that day's trading volume on each of that day and the following day.
As of August 31, 2002 4,796 Series E Preferred shares had been converted
into 4,461,468 shares of CEL-SCI's common stock. The actual number of shares
issuable upon the conversion of the Series E Preferred shares will vary
depending upon a number of factors, including the price of CEL-SCI's common
stock at certain dates. Accordingly, the number of shares of common stock which
will be issued upon the conversion of the Series E Preferred shares cannot be
determined at this time. However, prior to August 16, 2003, CEL-SCI would not be
required to issue more than additional 1,377,116 shares of its common stock upon
the conversion of the Series E Preferred shares.
C. An unknown number of shares of common stock are issuable under the equity
line of credit agreement between CEL-SCI and Paul Revere Capital Partners. As
consideration for extending the equity line of credit, CEL-SCI granted Paul
Revere Capital Partners warrants to purchase 200,800 shares of common stock at a
price of $1.64 per share at any time prior to April 11, 2004.
Under the equity line of credit agreement, Paul Revere Capital Partners
has agreed to provide CEL-SCI with up to $10,000,000 of funding prior to June
22, 2003. During this twenty-four month period, CEL-SCI may request a drawdown
under the equity line of credit by selling shares of its common stock to Paul
Revere Capital Partners and Paul Revere Capital Partners will be obligated to
purchase the shares. CEL-SCI may request a drawdown once every 22 trading days,
although CEL-SCI is under no obligation to request any drawdowns under the
equity line of credit.
During the 22 trading days following a drawdown request, CEL-SCI will
calculate the amount of shares it will sell to Paul Revere Capital Partners and
the purchase price per share. The purchase price per share of common stock will
be based on the daily volume weighted average price of CEL-SCI's common stock
during each of the 22 trading days immediately following the drawdown date, less
a discount of 11%.
CEL-SCI may request a drawdown by faxing a drawdown notice to Paul Revere
Capital Partners, Ltd., stating the amount of the drawdown and the lowest daily
volume weighted average price, if any, at which CEL-SCI is willing to sell the
shares. The lowest volume weighted average price will be set by CEL-SCI's Chief
Executive Officer in his sole and absolute discretion.
If CEL-SCI sets a minimum price which is too high and CEL-SCI's stock
price does not consistently meet that level during the 22 trading days after its
drawdown request, the amount CEL-SCI can draw and the number of shares CEL-SCI
will sell to Paul Revere Capital Partners will be reduced. On the other hand, if
CEL-SCI sets a minimum price which is too low and its stock price falls
significantly but stays above the minimum price, CEL-SCI will have to issue a
greater number of shares to Paul Revere Capital Partners based on the reduced
market price.
As of August 31, 2002 CEL-SCI had received net proceeds of $1,325,692 from
the sale of 2,381,993 shares of common stock pursuant to the terms of the equity
line of credit.
D. In December 2001 and January 2002, CEL-SCI sold convertible notes, plus
Series F warrants, to a group of private investors for $1,600,000. At the
holder's option the notes are convertible into shares of CEL-SCI's common stock
equal in number to the amount determined by dividing each $1,000 of note
principal to be converted by the Conversion Price. The Conversion Price is 76%
of the average of the 3 lowest daily trading prices of CEL-SCI's common stock on
the American Stock Exchange during the 20 trading days immediately prior to the
conversion date. If CEL-SCI sells any additional shares of common stock, or any
securities convertible into common stock at a price below the then applicable
Conversion Price or the market price of its common stock, the Conversion Price
may be subject to adjustment.
The Series F warrants presently allow the holders to purchase up to
905,500 shares of CEL-SCI's common stock at a price of $0.19 per share at any
time prior to December 31, 2008. If CEL-SCI sells any additional shares of
common stock, or any securities convertible into common stock, at a price below
the then applicable warrant exercise price or the market price of CEL-SCI's
common stock, the warrant exercise price and the number of shares of common
stock issuable upon the exercise of the warrant may be subject to adjustment.
Every three months after July 17, 2002 the warrant exercise price will be
adjusted to an amount equal to 110% of the Conversion Price of the notes on that
date, provided that the adjusted price is lower than the warrant exercise price
on that date.
As of August 31, 2002 notes in the principal amount of $1,440,000 had
been converted into 5,487,476 shares of CEL-SCI's common stock. The actual
number of additional shares issuable upon the conversion of the notes which
remain outstanding will vary depending upon a number of factors, including the
price of CEL-SCI's common stock at certain dates. Accordingly, the number of
shares which may be issued upon the conversion of the notes cannot be determined
at this time. However, based upon the market price of CEL-SCI's common stock on
August 30, 2002, CEL-SCI would be required to issue approximately 1,231,000
shares of common stock if the remaining outstanding notes were converted on
August 30, 2002.
See "Description of Securities - Convertible Notes and Series F Warrants"
for information concerning potential adjustments to the conversion price, the
warrant exercise price, and other terms of the notes and the Series F warrants.
E. CEL-SCI has granted options for the purchase of 255,000 shares of common
stock to certain investor relations consultants in consideration for services
provided to CEL-SCI. The options are exercisable at prices ranging between $1.63
and $5.00 per share and expire between September 2002 and June 2006.
F. The options are exercisable at prices ranging from $0.16 to $11.00 per share.
CEL-SCI may also grant options to purchase additional shares under its Incentive
Stock Option and Non-Qualified Stock Option Plans.
G. The Public Warrants are exercisable at $3.00 per share and expire on
February 6, 2003.
The shares referred to in Notes B through E are being, or will be, offered
for sale by means of separate registration statements which have been filed with
the Securities and Exchange Commission.
SELLING SHAREHOLDERS
This prospectus relates to shares of CEL-SCI's common stock issued or
issuable upon the conversion of promissory notes sold by CEL-SCI and upon the
exercise of CEL-SCI's Series G warrants. This prospectus also pertains to 65,000
shares of common stock which are being offered by Dr. Eyal Talor, an officer of
CEL-SCI.
The actual number of shares issuable upon the conversion of the promissory
notes will vary depending upon a number of factors, including the price of
CEL-SCI's common stock at the time the notes are converted. In addition, the
shares issuable upon the exercise of the Series G warrants may increase as the
result of future sales of CEL-SCI's common stock at prices below either the
warrant exercise price or the market value of CEL-SCI's common stock.
Accordingly, the number of shares which may be issued upon the conversion of the
promissory notes or the exercise of the Series G warrants cannot be determined
at this time.
The owners of the promissory notes and the Series G warrants, as well as
Dr. Talor are referred to in this prospectus as the "selling shareholders".
CEL-SCI will not receive any proceeds from the sale of the shares by the selling
shareholders.
The names of and the shares to be sold by the selling shareholders are:
Shares Shares
Which Which
May be May be
Acquired Acquired
Upon Upon Shares to Owner-
Conversion Exercise of be Sold ship
Shares of Promissory Series G in this After
Name Owned Notes (1) Warrants (2) Offering Offering
---------------- ------ ------------- ------------ -------- --------
SDS Merchant Fund, L.P. -- 7,300,000 900,000 8,200,000 --
Bristol Investment
Fund, Ltd. -- 7,300,000 900,000 8,200,000 --
Dr. Eyal Talor 90,000 -- -- 65,000 25,000
(1)Based upon the price of CEL-SCI's common stock as of August 30, 2002. At the
holder's option the notes are convertible into shares of CEL-SCI's common
stock equal in number to the amount determined by dividing each $1,000 of note
principal to be converted by the Conversion Price. The Conversion Price is 70%
of the average of the three lowest daily trading prices of CEL-SCI's common
stock on the American Stock Exchange during the 15 trading days immediately
prior to the conversion date. The Conversion Price may not be less than $0.18.
However, if CEL-SCI's common stock trades for less than $0.24 per share for a
period of 20 consecutive trading days, the $0.18 minimum price will no longer
be applicable. In addition, if CEL-SCI sells any additional shares of common
stock, or any securities convertible into common stock, at a price below the
then applicable Conversion Price or the market price of its common stock, the
Conversion Price may be subject to adjustment. See "Description of Securities
- Convertible Notes and Series G Warrants" for information concerning
potential adjustments to the Conversion Price and other terms of the notes.
The actual number of additional shares issuable upon the conversion of the
notes which remain outstanding will vary depending upon a number of factors,
including the price of CEL-SCI's common stock at certain dates. Accordingly,
the number of shares which may be issued upon the conversion of the notes
cannot be determined at this time. However, based upon the market price of
CEL-SCI's common stock on August 30, 2002, CEL-SCI would be required to issue
approximately 7,300,000 shares of common stock if all of the notes, including
notes in the principal amount of $800,000 sold in September 2002, were
converted on August 30, 2002. CEL-SCI's agreement with the noteholders
requires CEL-SCI to register twice the number of shares that CEL-SCI would be
required to issued if all notes were converted on August 31, 2002 so that
additional shares will be available for sale if the price of CEL-SCI's common
stock declines.
(2)The Series G warrants allow the holders to initially purchase up to 900,000
shares of CEL-SCI's common stock at a price of $0.25 per share at any time
prior to July 12, 2009. If CEL-SCI sells any additional shares of common
stock, or any securities convertible into common stock, at a price below the
then applicable warrant exercise price or the market price of CEL-SCI's common
stock, the warrant exercise price and the number of shares of common stock
issuable upon the exercise of the warrant may be subject to adjustment. Every
three months following the date of this prospectus, the warrant exercise price
will be adjusted to an amount equal to 110% of the Conversion Price of the
notes on such date, provided that the adjusted price is lower than the warrant
exercise price on that date. CEL-SCI's agreement with the Series G warrant
holders requires CEL-SCI to register twice the number of shares which are
presently issuable upon the exercise of the warrants so that additional shares
will be available for sale in the event there is any adjustment to the number
of shares issuable upon the exercise of the warrants. See "Description of
Securities - Convertible Notes and Series G Warrants" for information
concerning potential adjustments to the warrant exercise price and other terms
of the Series G warrants.
For purposes of the foregoing table, it is assumed that all shares owned,
or which may be acquired, by the selling shareholders are sold to the public by
means of this prospectus.
Each note holder is prohibited from converting the notes to the extent
that such conversion would result in such holder, together with any affiliate of
the holder, beneficially owning in excess of 4.999% of the outstanding shares of
CEL-SCI's common stock following such conversion. This restriction may be waived
by each holder on not less than 61 days' notice to CEL-SCI. However, the 4.999%
limitation would not prevent each note holder from acquiring and selling in
excess of 4.999% of CEL-SCI's common stock through a series of acquisitions and
sales so long as the holder never beneficially owns more than 4.999% of
CEL-SCI's common stock at any one time.
Each Series G warrant holder is prohibited from exercising the warrants to
the extent that such exercise would result in such holder, together with any
affiliate of the warrant holder, beneficially owning in excess of 4.999% of the
outstanding shares of CEL-SCI's common stock following such exercise. This
restriction may be waived by each holder on not less than 61 days' notice to
CEL-SCI. However, the 4.999% limitation would not prevent each warrant holder
from acquiring and selling in excess of 4.999% of CEL-SCI's common stock through
a series of acquisitions and sales under the warrants so long as the warrant
holder never beneficially owns more than 4.999% of CEL-SCI's common stock at any
one time.
SDS Merchant Fund holds notes in the principal amount of $160,000 which
were sold in December 2001 and January 2002. SDS Merchant Fund and Bristol
Investment Fund, Ltd. hold Series F warrants which collectively allow these
funds to purchase 840,000 shares of CEL-SCI's common stock. See Note D to the
Comparative Share Data table.
Plan of Distribution
The selling shareholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The selling shareholders may use any one or more of the
following methods when selling shares:
o ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;
o an exchange distribution in accordance with the rules of the applicable
exchange;
o privately negotiated transactions;
o short sales;
o broker-dealers may agree with the Selling Stockholders to sell a specified
number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The selling shareholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
The selling shareholders may also engage in short sales against the box,
puts and calls and other transactions in securities of CEL-SCI or derivatives of
CEL-SCI securities and may sell or deliver shares in connection with these
trades. The selling shareholders may pledge their shares to their brokers under
the margin provisions of customer agreements. If a selling shareholder defaults
on a margin loan, the broker may, from time to time, offer and sell the pledged
shares.
Broker-dealers engaged by the selling shareholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling shareholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling shareholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The selling shareholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
CEL-SCI is required to pay all fees and expenses incident to the
registration of the shares, including fees and disbursements of counsel to the
selling shareholders. CEL-SCI has agreed to indemnify the selling shareholders
against certain losses, claims, damages and liabilities, including liabilities
under the Securities Act.
CEL-SCI has advised the selling shareholders that in the event of a
"distribution" of the shares owned by the selling shareholder, such selling
shareholders, any "affiliated purchasers", and any broker/dealer or other person
who participates in such distribution may be subject to Rule 102 under the
Securities Exchange Act of 1934 ("1934 Act") until their participation in that
distribution is completed. A "distribution" is defined in Rule 102 as an
offering of securities "that is distinguished from ordinary trading transactions
by the magnitude of the offering and the presence of special selling efforts and
selling methods". CEL-SCI has also advised the selling shareholders that Rule
102 under the 1934 Act prohibits any "stabilizing bid" or "stabilizing purchase"
for the purpose of pegging, fixing or stabilizing the price of the common stock
in connection with this offering. Rule 101 makes it unlawful for any person who
is participating in a distribution to bid for or purchase stock of the same
class as is the subject of the distribution.
CEL-SCI has agreed to indemnify the selling shareholders and any
securities broker/dealers who may be deemed to be underwriters against certain
liabilities, including liabilities under the Securities Act as underwriters or
otherwise.
DESCRIPTION OF SECURITIES
Common Stock
CEL-SCI is authorized to issue 100,000,000 shares of common stock, (the
"common stock"). Holders of common stock are each entitled to cast one vote for
each share held of record on all matters presented to shareholders. Cumulative
voting is not allowed; hence, the holders of a majority of the outstanding
common stock can elect all directors.
Holders of common stock are entitled to receive such dividends as may be
declared by the Board of Directors out of funds legally available therefor and,
in the event of liquidation, to share pro rata in any distribution of CEL-SCI's
assets after payment of liabilities. The board is not obligated to declare a
dividend. It is not anticipated that dividends will be paid in the foreseeable
future.
Holders of common stock do not have preemptive rights to subscribe to
additional shares if issued by CEL-SCI. There are no conversion, redemption,
sinking fund or similar provisions regarding the common stock . All of the
outstanding shares of Common stock are fully paid and non-assessable.
Preferred Stock
CEL-SCI is authorized to issue up to 200,000 shares of preferred stock.
CEL-SCI's Articles of Incorporation provide that the Board of Directors has the
authority to divide the preferred stock into series and, within the limitations
provided by Colorado statute, to fix by resolution the voting power,
designations, preferences, and relative participation, special rights, and the
qualifications, limitations or restrictions of the shares of any series so
established. As the Board of Directors has authority to establish the terms of,
and to issue, the preferred stock without shareholder approval, the preferred
stock could be issued to defend against any attempted takeover of CEL-SCI.
See "Comparative Share Data" for information concerning CEL-SCI's Series E
preferred stock.
Convertible Notes and Series F Warrants
In December 2001 and January 2002, CEL-SCI sold convertible notes, plus
Series F warrants, to a group of private investors for $1,600,000. The notes
bear interest at 7% per year, are due and payable on December 31, 2003 and are
secured by substantially all of the Company's assets. Interest is payable
quarterly. If the Company fails to make any interest payment when due, the notes
will become immediately due and payable.
At the holder's option the notes are convertible into shares of CEL-SCI's
common stock equal in number to the amount determined by dividing each $1,000 of
note principal to be converted by the Conversion Price. The Conversion Price is
76% of the average of the three lowest daily trading prices of CEL-SCI's common
stock on the American Stock Exchange during the 20 trading days immediately
prior to the conversion date.
If CEL-SCI sells any additional shares of common stock, or any securities
convertible into common stock at a price below the then applicable Conversion
Price, the Conversion Price will be lowered to the price at which the shares
were sold or the lowest price at which the securities are convertible, as the
case may be. If CEL-SCI sells any additional shares of common stock, or any
securities convertible into common stock at a price below the market price of
CEL-SCI's common stock, the Conversion Price will lowered by a percentage equal
to the price at which the shares were sold or the lowest price at which the
securities are convertible, as the case may be, divided by the then prevailing
market price of CEL-SCI's common stock. However the Conversion Price will not be
adjusted as the result of shares issued in connection with a Permitted
Financing. A Permitted Financing involves shares of common stock issued or sold:
- in connection with a merger or acquisition;
- upon the exercise of options or the issuance of common stock to
the Company's employees, officers, directors, consultants and
vendors in accordance with the Company's equity incentive
policies;
- pursuant to the conversion or exercise of securities which were
outstanding prior to December 31, 2001;
- pursuant to the Company's equity line of credit;
- to key officers of the Company in lieu of their respective
salaries.
CEL-SCI has filed a registration statement with the Securities and
Exchange Commission in order that the shares of common stock issued upon the
conversion of the notes or the exercise of the Series F warrants may be resold
in the public market.
As of August 31, 2002 notes in the principal amount of $1,440,000 had been
converted into 5,487,476 shares of CEL-SCI's common stock.
CEL-SCI's agreement with the note holders places the following
restrictions on CEL-SCI's operations. Any of the following restrictions may be
waived with the written consent of the holders of a majority of the principal
amount of the notes outstanding at the time the consent is required.
o So long as the notes are outstanding, and except as required by the terms of
CEL-SCI's Series E Preferred stock, CEL-SCI may not:
- declare or pay any dividends (other than a stock dividend or
stock split) or make any distributions to any holders of its
common stock, or
- purchase or otherwise acquire for value, directly or indirectly,
any common or preferred stock.
o Until the earlier of October 17, 2002 or the date all of the notes are no
longer outstanding CEL-SCI may not sell any common stock or any securities
convertible into common stock. However, this restriction will not apply to
shares issued in a Permitted Financing.
o If CEL-SCI maintains a balance of less than $1,000,000 in its bank account in
any month, it may draw down the maximum amount allowable for such month under
its equity line of credit. If CEL-SCI maintains a balance of greater than
$1,000,000 in its bank account in any month, it may only draw down a maximum of
$235,000 per month under the equity line of credit.
So long as the notes remain outstanding, the note holders will have a
first right of refusal to participate in any subsequent financings involving
CEL-SCI. If CEL-SCI enters into any subsequent financing on terms more favorable
than the terms governing the notes and warrants, then the note holders may
exchange notes and warrants for the securities sold in the subsequent financing.
Upon the occurrence of any of the following events CEL-SCI is required to
redeem the notes at a price equal to 130% of then outstanding principal balance
of the notes:
- the suspension from listing or the failure of CEL-SCI's common
stock to be listed on the American Stock Exchange for a period
of five consecutive trading days; or
- the effectiveness of the Registration Statement lapses for any
reason or the Registration Statement is unavailable to the note
holders and the lapse or unavailability continues for a period
of ten consecutive trading days, provided the cause of the lapse
or unavailability is not due to factors primarily within the
control of the note holders.
- any representation or warranty made by CEL-SCI to the note
holders proves to be materially inaccurate or CEL-SCI fails to
perform any material covenant or condition in its agreement with
the note holders.
- the completion of a merger or other business combination
involving CEL-SCI and as a result of which CEL-SCI is not the
surviving entity.
- a purchase, tender or exchange offer accepted by the holders of
more than 30% of CEL-SCI's outstanding shares of common stock.
- CEL-SCI files for protection from its creditors under the
federal bankruptcy code.
- CEL-SCI exceeds its draw down limits under it equity line of
credit.
Each Series F warrant presently allows the holder to purchase one share of
CEL-SCI's common stock at a price of $0.19 per share at any time prior to
December 31, 2008.
If CEL-SCI sells any additional shares of common stock, or any securities
convertible into common stock at a price below the then applicable warrant
exercise price, the warrant exercise price will be lowered to the price at which
the shares were sold or the lowest price at which the securities are
convertible, as the case may be. If the warrant exercise price is adjusted, the
number of shares of common stock issuable upon the exercise of the warrant will
be increased by the product of the number of shares of common stock issuable
upon the exercise of the warrant immediately prior to the sale multiplied by the
percentage by which the warrant exercise price is reduced.
If CEL-SCI sells any additional shares of common stock, or any securities
convertible into common stock at a price below the market price of CEL-SCI's
common stock, the warrant exercise price will be lowered by a percentage equal
to the price at which the shares were sold or the lowest price at which the
securities are convertible, as the case may be, divided by the then prevailing
market price of CEL-SCI's common stock. If the warrant exercise price is
adjusted, the number of shares of common stock issuable upon the exercise of the
warrant will be increased by the product of the number of shares of common stock
issuable upon the exercise of the warrant immediately prior to the sale
multiplied by the percentage determined by dividing the price at which the
shares were sold by the market price of CEL-SCI's common stock on the date of
sale.
However, neither the warrant exercise price nor the shares issuable upon
the exercise of the warrant will be adjusted as the result of shares issued in
connection with a Permitted Financing.
Every three months after July 17, 2002, the warrant exercise price will
be adjusted to an amount equal to 110% of the Conversion Price on such date,
provided that the adjusted price is lower than the warrant exercise price on
that date.
As of August 31, 2002 54,500 Series F warrants had been exercised.
Notwithstanding the above, the notes and Series G warrants sold by
CEL-SCI in July 2002 will not result in any change to the conversion price of
the notes referred to above or to the exercise price of the Series F warrants.
Convertible Notes and Series G Warrants
In July and September 2002 CEL-SCI sold convertible notes, plus Series G
warrants, to a group of private investors for $1,300,000. The notes bear
interest at 7% per year, are due and payable on July 12, 2004 and are secured by
substantially all of CEL-SCI's assets. Interest is payable quarterly with the
first interest payment due on October 1, 2002. If CEL-SCI fails to make any
interest payment when due, the notes will become immediately due and payable.
At the holder's option the notes are convertible into shares of CEL-SCI's
common stock equal in number to the amount determined by dividing each $1,000 of
note principal to be converted by the Conversion Price. The Conversion Price is
70% of the average of the three lowest daily trading prices of CEL-SCI's common
stock on the American Stock Exchange during the 15 trading days immediately
prior to the conversion date. The Conversion Price may not be less than $0.18.
However, if CEL-SCI's common stock trades for less than $0.24 per share for a
period of 20 consecutive trading days, the $0.18 minimum price will no longer be
applicable. The Conversion Price will decline from 70% to 60% if (i) on any
trading day after the effective date of the registration statement relating to
this prospectus the closing daily price of CEL-SCI's common stock multiplied by
the total number of shares of common stock traded on that day is less than
$29,977, (ii) CEL-SCI defaults in the performance of any material covenant,
condition or agreement with the holders of the notes or, (iii) CEL-SCI's common
stock is delisted from the American Stock Exchange.
If CEL-SCI sells any additional shares of common stock, or any securities
convertible into common stock at a price below the then applicable Conversion
Price, the Conversion Price will be lowered to the price at which the shares
were sold or the lowest price at which the securities are convertible, as the
case may be. If CEL-SCI sells any additional shares of common stock, or any
securities convertible into common stock at a price below the market price of
CEL-SCI's common stock, the Conversion Price will lowered by a percentage equal
to the price at which the shares were sold or the lowest price at which the
securities are convertible, as the case may be, divided by the then prevailing
market price of CEL-SCI's common stock. However the Conversion Price will not be
adjusted as the result of shares issued in connection with a Permitted
Financing. A Permitted Financing involves shares of common stock issued or sold:
- in connection with a merger or acquisition;
- upon the exercise of options or the issuance of common stock to
the Company's employees, officers, directors, consultants and
vendors in accordance with the Company's equity incentive
policies;
- pursuant to the conversion or exercise of securities which were
outstanding prior to July 12, 2002;
- pursuant to the Company's equity line of credit;
- to key officers of the Company in lieu of their respective
salaries.
CEL-SCI's agreement with the note holders places the following
restrictions on CEL-SCI's operations. Any of the following restrictions may be
waived with the written consent of the holders of a majority of the principal
amount of the notes outstanding at the time the consent is required.
o So long as the notes are outstanding, and except as required by the terms of
CEL-SCI's Series E Preferred stock, CEL-SCI may not:
- declare or pay any dividends (other than a stock dividend or
stock split) or make any distributions to any holders of its
common stock, or
- purchase or otherwise acquire for value, directly or indirectly,
any common or preferred stock.
o Until the later of January 1, 2003 or the date that 50% of the notes are no
longer outstanding CEL-SCI may not sell any common stock or any securities
convertible into common stock. However, this restriction will not apply to
shares issued in a Permitted Financing.
o If CEL-SCI maintains a balance of less than $1,000,000 in its bank account in
any month, it may draw down the maximum amount allowable for such month under
its equity line of credit. If CEL-SCI maintains a balance of greater than
$1,000,000 in its bank account in any month, it may only draw down a maximum of
$235,000 per month under the equity line of credit. After January 1, 2003 the
minimum balance requirement will be increased to $1,500,000 when 50% of the
balance of each Note is no longer outstanding and 50% of all of the Notes in the
aggregate are no longer outstanding.
So long as the notes remain outstanding, the note holders will have a
first right of refusal to participate in any subsequent financings involving
CEL-SCI. If CEL-SCI enters into any subsequent financing on terms more favorable
than the terms governing the notes and warrants, then the note holders may
exchange notes and warrants for the securities sold in the subsequent financing.
Upon the occurrence of any of the following events CEL-SCI is required to
redeem the notes at a price equal to 130% of then outstanding principal balance
of the notes:
- the suspension from listing or the failure of CEL-SCI's common
stock to be listed on the American Stock Exchange for a period
of five consecutive trading days; or
- the effectiveness of the Registration Statement lapses for any
reason or the Registration Statement is unavailable to the note
holders and the lapse or unavailability continues for a period
of ten consecutive trading days, provided the cause of the lapse
or unavailability is not due to factors primarily within the
control of the note holders.
- any representation or warranty made by CEL-SCI to the note
holders proves to be materially inaccurate or CEL-SCI fails to
perform any material covenant or condition in its agreement with
the note holders.
- the completion of a merger or other business combination
involving CEL-SCI and as a result of which CEL-SCI is not the
surviving entity.
- a purchase, tender or exchange offer accepted by the holders of
more than 30% of CEL-SCI's outstanding shares of common stock.
- CEL-SCI's shareholders fail to approve the issuance of the
shares of CEL-SCI's common stock upon the conversion of the
notes or the exercise of the Series G warrants
- CEL-SCI files for protection from its creditors under the
federal bankruptcy code.
- CEL-SCI exceeds its draw down limits under it equity line of
credit.
The Series G warrants allow the holders to initially purchase up to
900,000 shares of CEL-SCI's common stock at a price of $0.25 per share at any
time prior to July 12, 2009.
If CEL-SCI sells any additional shares of common stock, or any securities
convertible into common stock at a price below the then applicable warrant
exercise price, the warrant exercise price will be lowered to the price at which
the shares were sold or the lowest price at which the securities are
convertible, as the case may be. If the warrant exercise price is adjusted, the
number of shares of common stock issuable upon the exercise of the warrant will
be increased by the product of the number of shares of common stock issuable
upon the exercise of the warrant immediately prior to the sale multiplied by the
percentage by which the warrant exercise price is reduced.
If CEL-SCI sells any additional shares of common stock, or any securities
convertible into common stock at a price below the market price of CEL-SCI's
common stock, the warrant exercise price will be lowered by a percentage equal
to the price at which the shares were sold or the lowest price at which the
securities are convertible, as the case may be, divided by the then prevailing
market price of CEL-SCI's common stock. If the warrant exercise price is
adjusted, the number of shares of common stock issuable upon the exercise of the
warrant will be increased by the product of the number of shares of common stock
issuable upon the exercise of the warrant immediately prior to the sale
multiplied by the percentage determined by dividing the price at which the
shares were sold by the market price of CEL-SCI's common stock on the date of
sale.
However, neither the warrant exercise price nor the shares issuable upon
the exercise of the warrant will be adjusted as the result of shares issued in
connection with a Permitted Financing.
On the date that the registration statement which CEL-SCI has agreed to
file is declared effective by the Securities and Exchange Commission, and every
three months following the effective date, the warrant exercise price will be
adjusted to an amount equal to 110% of the Conversion Price on such date,
provided that the adjusted price is lower than the warrant exercise price on
that date.
Transfer Agent
Computershare Trust Co., Inc., of Denver, Colorado, is the transfer agent
for CEL-SCI's common stock.
EXPERTS
The consolidated financial statements of CEL-SCI Corporation as of
September 30, 2001 and 2000, and for each of the three years in the period ended
September 30, 2001 incorporated by reference in this prospectus from CEL-SCI's
Annual Report on Form 10-K for the year ended September 30, 2001, have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
INDEMNIFICATION
CEL-SCI's bylaws authorize indemnification of a director, officer,
employee or agent of CEL-SCI against expenses incurred by him in connection with
any action, suit, or proceeding to which he is named a party by reason of his
having acted or served in such capacity, except for liabilities arising from his
own misconduct or negligence in performance of his duty. In addition, even a
director, officer, employee, or agent of CEL-SCI who was found liable for
misconduct or negligence in the performance of his duty may obtain such
indemnification if, in view of all the circumstances in the case, a court of
competent jurisdiction determines such person is fairly and reasonably entitled
to indemnification. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, or persons
controlling CEL-SCI pursuant to the foregoing provisions, CEL-SCI has been
informed that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
ADDITIONAL INFORMATION
CEL-SCI is subject to the requirements of the Securities Exchange Act of
l934 and is required to file reports, proxy statements and other information
with the Securities and Exchange Commission. Copies of any such reports, proxy
statements and other information filed by CEL-SCI can be read and copied at the
Commission's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.,
20549. The public may obtain information on the operation of the Public
Reference Room by calling the Commission at 1-800-SEC-0330. The Commission
maintains an Internet site that contains reports, proxy and information
statements, and other information regarding CEL-SCI. The address of that site is
http://www.sec.gov.
CEL-SCI will provide, without charge, to each person to whom a copy of
this prospectus is delivered, including any beneficial owner, upon the written
or oral request of such person, a copy of any or all of the documents
incorporated by reference below (other than exhibits to these documents, unless
the exhibits are specifically incorporated by reference into this prospectus).
Requests should be directed to:
CEL-SCI Corporation
8229 Boone Blvd., #802
Vienna, Virginia 22182
(703) 506-9460
The following documents filed with the Commission by CEL-SCI (Commission
File No. 0-11503) are incorporated by reference into this prospectus:
CEL-SCI's Annual Report on Form 10-K for the fiscal year ended September
30, 2001.
CEL-SCI's Quarterly Report on Form 10-Q for the period ended December 31,
2002.
CEL-SCI's Quarterly Report on Form 10-Q for the period ended March 31,
2002.
CEL-SCI's Quarterly Report on Form 10-Q for the period ended June 30,
2002.
CEL-SCI's Proxy Statement relating to CEL-SCI's March 14, 2002 Annual
Meeting of Shareholders.
All documents filed with the Securities and Exchange Commission by CEL-SCI
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of this prospectus and prior to the termination of this offering shall
be deemed to be incorporated by reference into this prospectus and to be a part
of this prospectus from the date of the filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
shall be deemed to be modified or superseded for the purposes of this prospectus
to the extent that a statement contained in this prospectus or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this prospectus.
CEL-SCI has filed with the Securities and Exchange Commission a
Registration Statement under the Securities Act of l933, as amended, with
respect to the securities offered by this prospectus. This prospectus does not
contain all of the information set forth in the Registration Statement. For
further information with respect to CEL-SCI and such securities, reference is
made to the Registration Statement and to the exhibits filed with the
Registration Statement. Statements contained in this prospectus as to the
contents of any contract or other documents are summaries which are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference. The
Registration Statement and related exhibits may also be examined at the
Commission's internet site.
No dealer salesman or other person has been authorized to give any
information or to make any representations, other than those contained in this
prospectus. Any information or representation not contained in this prospectus
must not be relied upon as having been authorized by CEL-SCI. This prospectus
does not constitute an offer to sell, or a solicitation of an offer to buy, the
securities offered hereby in any state or other jurisdiction to any person to
whom it is unlawful to make such offer or solicitation. Neither the delivery of
this prospectus nor any sale made hereunder shall, under any circumstances,
create an implication that there has been no change in the affairs of CEL-SCI
since the date of this prospectus.
TABLE OF CONTENTS
Page
Prospectus Summary.......................................... 2
Risk Factors................................................ 4
Comparative Share Data...................................... 11
Selling Shareholders........................................ 17
Description of Securities................................... 20
Experts..................................................... 27
Indemnification............................................. 28
Additional Information...................................... 28
Common stock
CEL-SCI CORPORATION
PROSPECTUS