UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM 8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
Date of
Report (date of earliest event reported): November 17,
2017
CEL-SCI
CORPORATION
(Exact
name of Registrant as specified in its charter)
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Colorado
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001-11889
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84-0916344
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(State or other
jurisdiction of
incorporation)
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(Commission File
No.)
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(IRS
Employer Identification
No.)
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8229
Boone Boulevard, Suite 802
Vienna,
Virginia 22182
(Address
of principal executive offices, including Zip Code)
Registrant’s
telephone number, including area code:
(703) 506-9460
N/A
(Former
name or former address if changed since last report)
Item
4.02 (a).
Non-Reliance
on Previously Issued Financial Statements or a Related Audit Report
or Completed Interim Review.
In
November 2017, the Company discovered an error in the way it
accounted for the lease for its manufacturing facility. In
October 2008, the Company entered into
a lease arrangement whereby the Company leased a building owned by
a third party, but to which the owner made tenant-directed
improvements. Upon commencement of the lease, the Company accounted
for the arrangement as an operating lease under ASC 840,
Accounting for
Leases, whereby the total
minimum lease payment obligations under the leases were recognized
as monthly rent expense on a straight-line basis over the term of
the lease. The cost of the tenant improvements incurred were
capitalized as deferred rent and amortized over the 20-year lease
term.
It was determined that because the terms of the
original lease agreement required the Company to be responsible for
possible cost overruns, if there were any, the Company was deemed
to be the owner of the leased building for accounting purposes
under ASC 840-40-55. In addition to the costs it incurred and
capitalized for the tenant improvements, the Company should have
reflected an asset on its balance sheet for the costs paid by the
lessor to purchase the building and improve it, as well as a
corresponding liability. Upon completion of the improvements, the
Company did not meet the “sale-leaseback” criteria
under ASC 840-40-25, Accounting for Leases,
Sale-Leaseback Transactions due
to the Company’s significant continuing involvement with the
facility which is considered to be other than a normal leaseback as
defined in ASC 840-40-25 and therefore should have treated the
lease as a financing obligation and the asset and corresponding
liability should not be derecognized.
The
correction to the historical financial statements to apply ASC
840-40-25 does not affect the total cash payments the Company has
made or is obligated to make under the lease agreement, nor does it
change the total expense to be recognized over the lease term.
However, the timing and nature of the expenses are different under
this treatment as compared to operating lease treatment.
Specifically, the Company should have recognized depreciation
expense on the asset it is deemed to own and interest expense on
the associated lease financing obligation, instead of rental
expense.
Accordingly, on
November 17, 2017, the Audit Committee of the Board of Directors of
the Company concluded that the Company’s financial statements
and other financial data for the following periods and
Management’s Report on Internal Control over Financial
Reporting and the related Report of independent Registered
Accounting Firm on internal control over financial reporting
included in the Company’s annual Report on Form 10-K for the
fiscal year ended September 30, 2016 should no longer be relied
upon because of errors identified therein (collectively, the
“Non-reliance Periods”):
●
The quarterly
periods ended June 30, 2017, March 31, 2017 and December 31,
2016;
●
The quarterly
periods ended June 30, 2016, March 31, 2016 and December 31,
2015 and the fiscal year ended September 30, 2016;
●
The fiscal years
ended September 30, 2015 and 2014.
2
Accordingly,
investors should no longer rely upon the Company’s previously
released financial statements and other financial data for these
periods or any press releases or other shareholder communications
that relate to that information and Management’s Report on
Internal Control over Financial Reporting and the related Report of
independent Registered Accounting Firm on internal control over
financial reporting included in the Company’s annual Report
on Form 10-K for the fiscal year ended September 30, 2016.
The Company intends to file restated financial statements and other
financial data covering these periods as soon as practicable.
The Company intends to present the restated financial statements
and other financial data in amendments to its Quarterly Reports on
Form 10-Q for the quarters ended June 30, 2017, March 31,
2017 and December 31, 2016 and its Annual Report on Form 10-K
for the fiscal year ended September 30, 2016 (the “Restated
Filings”).
The
Audit Committee and management have discussed the matters disclosed
in this Item 4.02(a) of this Current Report on Form 8-K
with BDO USA, LLP, the Company’s independent registered
public accounting firm.
Expected Impact of the Restatements
The
restatements will correct an accounting error impacting the
Company’s financial statements and other financial data in
the Non-reliance Periods. The amounts disclosed below reflect
the Company’s current expectations relating to the effect of
each of these errors on the Non-reliance Periods. The Company has
determined that the net cumulative effect on each of the
Non-reliance Periods is material, and the Company expects to
discuss in more detail the impact of the individual errors in the
Company’s restated financial statements and other financial
data in the Restated Filings. The accounting error was
determined to be a material weakness in the Company’s
internal control over financial reporting as of September 30, 2016
relating to the Company’s financial close process including
the accounting for leases and the assessment of impairment of
long-lived assets.
A
material weakness is a deficiency, or a combination of
deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement
of the company’s annual or interim financial statements will
not be prevented or detected on a timely basis.
The
errors that caused the Company to conclude that the Non-reliance
Periods could not be relied upon were identified during the course
of the preparation of its financial statements and other financial
data for its fiscal year ended September 30, 2017, as well as
its assessment of its disclosure controls and procedures and
internal control over financial reporting as of the date. The
errors will be corrected in the restated financial statements and
other financial data included in the Restated Filings. The
Company will also revise Management’s Report on Internal
Control over Financial Reporting and its evaluation of disclosure
controls and procedures to reflect the conclusions by the
Company’s management that internal control over financial
reporting and disclosure control and procedures were not effective
as of September 30, 2016. Furthermore, BDO USA, LLP will also
revise its attestation report in the Restated Filing. The Company
has not yet completed its final determination and review of the
items listed below, and therefore the listed amounts are
preliminary and subject to change. While the Company expects
to report the estimated adjustments described herein, there can be
no assurance that the final adjustments will not differ materially
from the estimated amounts discussed herein, or that additional
errors will not be identified.
The
Company is in the process of, but has not yet completed, its
determination of the degree to which these errors will have an
effect on the classification of the primary captions reported in
its statements of cash flows for any period.
Based
on its review to date, the Company preliminarily anticipates that
the restatements will result in the estimated adjustments to its
audited and unaudited income statements identified in the tables
below:
3
Fiscal 2017
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Three months ended
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6/30/2017
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3/31/2017
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12/31/2016
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Net
(loss) income:
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Originally
reported
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$(4,445,708)
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$(8,409,489)
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$3,536,802
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Adjustment
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(18,355)
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(17,002)
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(15,649)
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Restated
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$(4,464,063)
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$(8,426,491)
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$3,521,153
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(LPS)
EPS – diluted (a)
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$(0.53)
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$(1.15)
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$0.32
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(a)
For
comparison purposes, per share amounts for all quarters presented
herein reflect a 1:25 reverse stock split which was effective as of
June 15, 2017. Other than the adjustments for the reverse stock
split, the related (LPS) EPS numbers are the same as previously
reported.
Fiscal 2016
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Year ended
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Three months ended
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9/30/2016
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6/30/2016
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3/31/2016
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12/31/2015
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Net
(loss) income:
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Originally
reported
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$(11,466,498)
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$(3,849,324)
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$(8,844,855)
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$2,341,813
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Adjustment
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(45,994)
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(12,282)
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(10,675)
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(9,079)
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Restated
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$(11,512,492)
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$(3,861,606)
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$(8,855,530)
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$2,332,734
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(LPS)
EPS – diluted (a)
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$(2.37)
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$(0.78)
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$(1.87)
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$0.53
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(a)
For
comparison purposes, per share amounts for all quarters presented
herein reflect a 1:25 reverse stock split which was effective as of
June 15, 2017. Other than the adjustments for the reverse stock
split, the related (LPS) EPS numbers are the same as previously
reported.
Fiscal 2015
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Year ended
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Three months ended
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9/30/2015
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6/30/2015
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3/31/2015
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12/31/2014
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Net
loss:
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Originally
reported
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$(34,674,646)
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$(4,429,137)
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$(12,556,236)
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$(7,845,318)
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Adjustment
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(17,564)
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(5,275)
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(3,459)
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(1,665)
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Restated
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$(34,692,210)
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$(4,434,412)
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$(12,559,695)
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$(7,846,983)
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LPS
- diluted (a)
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$(10.51)
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$(1.63)
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$(4.14)
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$(3.42)
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(a)
For
comparison purposes, per share amounts for all quarters presented
herein reflect a 1:25 reverse stock split which was effective as of
June 15, 2017. Other than the adjustments for the reverse stock
split, the related (LPS) EPS numbers are the same as previously
reported.
4
Additionally, the
Company’s audited and unaudited balance sheets will be
restated as follows:
Fiscal 2017
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Balance
Sheet
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6/30/2017
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3/31/2017
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12/31/2016
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Total
assets
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$8,437,326
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$8,725,839
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$9,927,889
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Adjustment
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13,386,081
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13,354,561
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13,323,442
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Restated
total assets
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$21,823,407
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$22,080,400
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$23,251,331
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Total
liabilities
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$13,746,687
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$11,802,043
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$5,494,598
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Adjustment
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13,160,232
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13,110,357
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13,062,236
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Restated
total liabilities
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$26,906,919
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$24,912,400
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$18,556,834
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Total
stockholders' (deficit) equity
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$(5,309,361)
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$(3,076,204)
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$4,433,291
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Adjustment
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225,849
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244,204
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261,206
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Restated
stockholders' (deficit)
equity
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$(5,083,512)
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$(2,832,000)
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$4,694,497
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9/30/2016
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9/30/2015
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Total
assets
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$11,598,247
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$15,447,603
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Adjustment
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13,287,878
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13,106,099
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Restated
total assets
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$24,886,125
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$28,553,702
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Total
liabilities
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$12,554,315
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$20,532,722
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Adjustment
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13,011,023
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12,783,250
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Restated
total liabilities
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$25,565,338
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$33,315,972
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Total
stockholders' deficit
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$(956,068)
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$(5,085,119)
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Adjustment
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276,855
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322,849
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Restated
stockholders' deficit
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$(679,213)
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$(4,762,270)
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Additional Accounting Review and Financial Statement
Preparation
The
Company has not released financial results for the year ended
September 30, 2017, but those financial statements when filed, will
reflect the impact of the above noted correction.
The
above statements regarding the expected impact of the restatement
and the expected timing of the Company’s filings constitute
forward-looking statements that are based on the Company’s
current expectations. The final amounts and the detailed
presentation of the restatement will be included in the Restated
Filings after the Company has completed its work on the restatement
and the Audit Committee has completed its final review of the
financial statements and other financial data for the Non-reliance
Periods. There can be no assurance that this financial information
will not change, possibly materially, before the Company files the
Restated Filings. See “Disclosures About
Forward-Looking Statements” below.
5
Disclosures About Forward-Looking Statements
This
Form 8-K contains certain “forward-looking
statements” relating to the Company. All statements,
other than statements of historical fact included herein, are
“forward-looking statements,” including statements
regarding the timing of filing of, and the outcome of the
Company’s work in connection with, completing certain
financial statements and other financial data. These
forward-looking statements are often identified by the use of
forward-looking terminology such as “intends,”
“expects” or similar expressions and involve known and
unknown risks and uncertainties. Although the Company
believes that the expectations reflected in these forward-looking
statements are reasonable, they do involve assumptions, risks, and
uncertainties, and these expectations may prove to be
incorrect. Investors should not place undue reliance on these
forward-looking statements, which speak only as of the date of this
filing. The Company disclaims any intention or obligation to
update or revise any forward-looking information, whether as a
result of new information, future events or otherwise, except as
required by applicable securities laws. These uncertainties
include, but are not limited to, the risk that additional
information may arise during the course of the Company’s
ongoing accounting review that would require the Company to make
additional adjustments or revisions or to restate further the
financial statements and other financial data in the Non-reliance
Periods and/or additional historical periods, and the time required
to complete the financial statements and other financial data and
accounting review. For additional information and risk
factors that could affect the Company, see its Form 10-K for
the year ended September 30, 2016 as filed with the Securities and
Exchange Commission. The information contained in this filing is
made as of the date hereof, even if subsequently made available by
the Company on its website or otherwise.
6
SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
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CEL-SCI
CORPORATION
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Date:
November 22, 2017 |
By:
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/s/
Geert
Kersten
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Geert
Kersten
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Chief Executive Officer |
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7