# CEL Sci Corp: Form 10-K for the period ended Sep 30, 2023 - Company: [CEL Sci Corp](/companies/cvm.md) (CIK 725363) - Form: 10-K - Filed: 2023-12-21 - Accepted by EDGAR: Dec 21, 2023, 21:15 ET - Period: 2023-09-30 - Accession: 0001654954-23-015877 - Inline XBRL: yes - Main document: https://www.sec.gov/Archives/edgar/data/725363/000165495423015877/cvm_10k.htm - All documents and exhibits: https://www.sec.gov/Archives/edgar/data/725363/000165495423015877/ ## Figures reported in this filing Standardized XBRL line items for the period ended 2023-09-30. | Line item | Period | Value | XBRL concept | | --- | --- | ---: | --- | | Research and development | 12 months, 2022-10-01 to 2023-09-30 | $22.5m | us-gaap:ResearchAndDevelopmentExpense | | Operating income | 12 months, 2022-10-01 to 2023-09-30 | −$31.5m | us-gaap:OperatingIncomeLoss | | Interest expense | 12 months, 2022-10-01 to 2023-09-30 | $675.4k | us-gaap:InterestExpense | | Net income | 12 months, 2022-10-01 to 2023-09-30 | −$32.2m | us-gaap:NetIncomeLoss | | Operating cash flow | 12 months, 2022-10-01 to 2023-09-30 | −$22.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities | | Capital expenditure | 12 months, 2022-10-01 to 2023-09-30 | $361.9k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment | | Current assets | at 2023-09-30 | $6.9m | us-gaap:AssetsCurrent | | Total assets | at 2023-09-30 | $30.5m | us-gaap:Assets | | Current liabilities | at 2023-09-30 | $5.6m | us-gaap:LiabilitiesCurrent | | Total liabilities | at 2023-09-30 | $17.3m | us-gaap:Liabilities | | Shareholders' equity | at 2023-09-30 | $13.2m | us-gaap:StockholdersEquity | ## Business As filed, 75,653 characters. ### CEL-SCI’s PRODUCT CANDIDATES CEL-SCI Corporation is a clinical-stage biotechnology company dedicated to research and development directed at improving the treatment of cancer and other diseases by using the immune system, the body’s natural defense system. CEL-SCI is currently focused on the development of the following product candidates and technologies: 1\) Multikine, an investigational immunotherapy under development for the potential treatment of certain head and neck cancers; and 2\) L.E.A.P.S. (Ligand Epitope Antigen Presentation System) technology, or LEAPS, with several product candidates under development for the potential treatment of rheumatoid arthritis. None of CEL-SCI’s product candidates have been approved for sale, barter or exchange by the Food and Drug Administration (FDA) or any other regulatory agency for any use to treat disease in humans nor has the safety or efficacy of these products been established for any use. There can be no assurance that obtaining marketing approval from the FDA in the United States and by comparable agencies in most foreign countries will be granted. ### MULTIKINE AND THE PHASE III CLINICAL TRIAL RESULTS **Immunotherapy is a large, high growth market.** Immunotherapies use the patient’s own immune system to fight disease. These “targeted therapies” are at the forefront of modern cancer research. A recent Bloomberg report from January 2023 asserted that: The global cancer immunotherapy market is expected to reach USD $196.45 billion by 2030, registering CAGR of 7.2% during the forecast period, according to a new report by Grand View Research, Inc. The rising adoption of the immunotherapy over other therapy options for cancer owing to its targeted action is anticipated to increase the adoption during the forecast period. Moreover, increasing regulatory approvals from authoritarian establishments for novel immunotherapy used for oncology is also expected to further fuel the market growth. Source: https://www.bloomberg.com/press-releases/2023-01-18/cancer-immunotherapy-market-worth-196-45-billion-by-2030-grand-view-research-inc CEL-SCI hopes to participate in this growing market with its lead investigational therapy Multikine® (Leukocyte Interleukin, Injection). Multikine has already been tested in about 750 human patients in multiple clinical trials, including a well-controlled, multicenter, global, 928 patient Phase III randomized controlled trial. Multikine is unique among approved cancer immunotherapies because it is *given first*, right after diagnosis and before surgery. CEL-SCI believes that the Phase III clinical trial demonstrated that Multikine caused tumors to reduce in size and/or caused the disease to “downstage” within just a few weeks of treatment before surgery. Importantly, patients with these reductions and/or downstages had their *risk of death cut in half after five years* of follow up. CEL-SCI is discussing with regulators in Europe, the U.K., the U.S., and Canada to prepare for seeking marketing authorization and approval for immediate patient access to Multikine without waiting for the results of a confirmatory trial. In 2023, the Multikine target patient population is estimated to include about 145,000 patients per year worldwide, with more than two-thirds of those outside the United States. Global growth rates of eligible cases are expected to rise 30% by 2030. (https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10304137) 3 **What is Multikine and who is it for?** Multikine is a biological medicinal immunotherapy comprising a mixture of natural cytokines and small biological molecules. Multikine is injected around the tumor and adjacent lymph nodes for three weeks as a first-line treatment *before* the standard of care (SOC), which is surgery followed by either radiotherapy or chemoradiotherapy. Multikine’s rationale for use is to incite a locoregional immune response against the tumor before the local immune system has been compromised by the standard of care and/or disease progression. The Multikine target population is treatment-naïve adult patients with resectable locally advanced primary squamous cell carcinoma of the head and neck (SCCHN) in the oral cavity or soft palate and who present with no nodal involvement (N0) and no extracapsular spread (ECS) as determined by PET-CT/MRI. In addition, eligible patients must also have low tumor programmed death-ligand 1 (PD-L1) expression (defined as tumor proportion score (TPS)\<10)). PD-L1 is a protein receptor on the tumor surface that helps the tumor repel the immune system. CEL-SCI believes low PD-L1 patients would be more likely to respond to Multikine because their tumors have lower defenses against the patient’s immune system. CEL-SCI estimates that low PD-L1 patients represent about 70% of locally advanced primary SCCHN patients. **Multikine leads to longer survival with no safety issues.** Clinical investigations of Multikine have demonstrated the following in the target population: - ***risk of death cut in half at five years*** versus the control; - 28.6% absolute 5-year overall survival benefit versus control (p=0.0015); - 0.349 hazard ratio vs control (95% CIs \[0.18, 0.66\], Wald p=0.0012); - \>35% rate of pre-surgery reductions and/or downstages (p\<0.01); and - low PD-L1 tumor expression (vs high PD-L1 where Keytruda and Opdivo work best). There were no demonstrable safety signals or toxicities observed in about 750 Multikine-treated subjects across multiple clinical trials. Adverse event (AE) and serious adverse event (SAE) incidences were not significantly different among treatment and control groups. There were no Multikine-related deaths and only two discontinuations. Multikine-related AEs before surgery were local and resolved after surgery. Although the literature reports that some of Multikine’s components may be toxic when administered systemically (e.g., TNFα, IFN γ, IL-1β), these toxicities did not emerge with Multikine, even at doses many times higher than those administered in the Phase III trial, primarily due to Multikine’s delivery by local injection and dosage. CEL-SCI published its data as abstracts and posters at the annual conferences for the 2022 American Society of Clinical Oncology (ASCO), 2022 and 2023 European Society for Medical Oncology (ESMO), and the 2023 European Head and Neck Society’s (EHNS’s) annual European Conference On Head And Neck Oncology (ECHNO) and the 2023 European Society for Therapeutic Radiology and Oncology (ESTRO). These publications can be accessed at http://www.cel-sci.com. **Multikine works by inducing pre-surgical responses.** CEL-SCI observed statistically significant pre-surgical responses after Multikine treatment, and therefore CEL-SCI believes in the following: - Multikine causes pre-surgical responses; - Pre-surgical responses lead to longer life; - Therefore, selecting more patients predicted to have a pre-surgical response should lead to much better survival in the target population. 4 A “pre-surgical response” is a significant change in disease before surgery. CEL-SCI saw two kinds of responses in the Phase III trial. First, there were “reductions” in the size of the tumor—a reduction of 30% or more qualified as a “pre-surgical reduction” or “PSR” for short. Second, there were disease “downstages,” (e.g., the disease improved from Stage IV to Stage III). CEL-SCI calls this a “pre-surgical downstaging” or “PSD” for short. CEL-SCI’s 2022 ESMO cancer conference presentation reported on PSR, and CEL-SCI’s new 2023 ESMO presentation reported on PSD. Across the whole Phase III trial, PSRs were seen in 8.5% of Multikine patients compared to *none* in the control group. PSDs were seen in 22% of Multikine patients as compared to 13% in the control group. Because Multikine was the only therapy given to these patients before surgery, it is CEL-SCI’s strong belief that Multikine had to be the cause of the higher rates of PSR and PSD. These data are presented visually below. The taller blue columns show PSR and PSD rates in all 529 Multikine-treated patients in the Phase III trial, and the gray columns show PSR and PSD rates for all 394 control patients. The p-values above the columns show comparisons between Multikine and the control groups. With Multikine, statistically speaking, CEL-SCI believes there is a better than a 95% chance that the increases in PSR/PSD in the Phase III study were caused by Multikine. It was not enough for us to show that Multikine likely leads to PSRs and PSDs as compared to a control group, CEL-SCI also had to test if PSRs and PSDs lead to improved survival. CEL-SCI’s Phase III trial demonstrated that PSR patients were 72% likely to be alive after five years, whereas control patients were only about 49% likely to be alive after five years. Patients with PSD saw similar improvement in CEL-SCI’s Phase III trial. Their five-year chance of survival was approximately 68%. Therefore, CEL-SCI’s Phase III trial demonstrated statistically that those patients who had PSR or PSD resulting from Multikine lived longer than those who were not treated with Multikine. It is important to note that these results are from the entire Phase III study population, not from a subgroup. The p-values of less than 0.005 means there was at least a 99.5% chance that these results are due to Multikine rather than random chance. The likelihood of living at least five years is shown in the graphic below for patients with PSR (blue), patients with PSD (orange) and patients who did not receive Multikine (gray). 5 **CEL-SCI’s target population can be readily selected by doctors upon diagnoses using standard tests.** Having shown a potential causal link supported by strong statistics between Multikine and survival benefit, CEL-SCI believes that Multikine should be approved quickly. But recall that the Phase III study’s primary endpoint of 10% survival benefit was not met. How then can we say that Multikine actually benefits patients? The answer is that while Multikine has shown that it can help patients with PSR/PSD, there were not enough PSR/PSD in the Phase III study population to yield a 10% survival benefit for the whole population. In other words, the benefits from PSR/PSD were too diluted when averaged with the other patients in the study. None of this changes the fact that CEL-SCI observed statistical significance when analyzing Multikine’s ability to cause PSR/PSD and that these PSR/PSD statistically appear to lead to a higher chance of living five years or longer—CEL-SCI simply had to define a target population who would have a larger number of PSR/PSD. To do so, CEL-SCI analyzed Multikine’s biological mechanism of action, talked to regulators and physicians who knew best, and were guided by the Phase III data, including patient-specific data down at the cellular level. All this of course took time, but CEL-SCI believes it has succeeded and is ready to move forward. One of the first things we reported from the Phase III study was that Multikine was shown to work best in patients who were deemed “low risk” after surgery, about 40% of the study population. These patients saw a significant 14.1% absolute 5‑year survival benefit vs the control group. It made sense biologically that these patients would benefit most from Multikine, because they tended to have immune systems that were not yet compromised by the disease. “High risk” patients, by contrast, typically had lymph nodes invaded by the tumor, and needed chemotherapy after surgery. Because their lymph nodes were compromised, this made it harder for their immune systems to work, and they needed surgery as soon as possible without waiting an extra three weeks to receive Multikine. CEL-SCI initially developed criteria for selecting “low-risk” patients at diagnosis—i.e., those having no lymph nodes invaded by the tumor (N0) or only one lymph node invaded by the tumor (N1) as well as no extracapsular spread as determined by PET scan. CEL-SCI published these criteria at the ASCO conference in 2022. However, after discussions with regulators and physicians, CEL-SCI saw that outcomes could be improved if the N1 patients were excluded, and only the N0 patients were included in the target population. 6 CEL-SCI also saw from the Phase III data that Multikine was more effective for patients with low PD-L1 tumor expression than for patients with high PD-L1 expression. This analysis was pre-specified in the statistical analysis plan. Targeting low PD-L1 differentiates Multikine from other immunotherapies. For example, checkpoint inhibitors like Keytruda and Opdivo appear to best serve patients having high PD-L1, because these drugs work by blocking PD-L1 receptors. While none of these drugs are currently approved as a first-line treatment before surgery, even if such approvals were to come in the future, the large majority of patients in this group having low PD-L1 would still be expected to need Multikine. CEL-SCI’s target population is now directed to patients who present at diagnosis with N0 nodal involvement and no extracapsular spread and also with low PD-L1 tumor expression (defined as tumor proportions score (TPS) \< 10). These patients can be readily identified upon diagnosis with tests that physicians routinely use in cancer screening, a crucial achievement towards Multikine becoming available for use. For instance, a PET scan should be used to determine the N0 nodal status and no extracapsular spread, and a screening biopsy should be used to determine the low PD-L1 expression. Doctors already routinely screen head and neck cancer patients using PET scans and biopsy. Therefore, doctors can screen for Multikine patients without new tests or new costs. **Multikine cut the 5-year risk of death in half in the target population.** CEL-SCI’s results show that Multikine can cut the risk of death in half at five years versus the control group in the finalized target population. Survival increased from 45% in the control group to 73% in the Multikine group at five years. This means the risk of death fell to 27% in the Multikine group from 55% in the control, shown below. 7 ### Risk of Death Fell To 27% From 55% In The Target Population at Five Years Another way to see the survival benefit of Multikine in the target population is the Kaplan-Meier curve from our ESMO ’23 poster, shown below. On the vertical axis is the probability of survival and the horizontal axis is time in months. The blue Multikine line is far above the green control line, meaning the chance of survival is much higher in the Multikine group at every point in time compared to the control. These results had a low p-value of 0.0015, which is very significant as a statistical matter. CEL-SCI’s physician consultants tell it that the early separation of these two survival curves (e.g., at 12 months) adds validation to the potential positive effects of Multikine. 8 Another measure of survival benefit is called the “hazard ratio,” which compares the chances of dying between two different groups. Here, in the Multikine target population, the hazard ratio was 0.35, which means that deaths occurred in the Multikine group about one-third as frequently as in the control group. It is also important to note that the hazard ratio’s 95% confidence interval remained far below 1.0. In the case of Multikine, statistically speaking, there is a 95% chance that the hazard ratio would fall between 0.18 and 0.66 if Multikine were tested in the target population in another study. A hazard ratio of 0.66 as the “so called worst case scenario” is still below (better) than the hazard ratio required for most drug approvals. These positive survival outcomes—increased overall survival, reduced risk of death, widely separated Kaplan-Meier curves with early separation, low hazard ratio, low p-values, low confidence intervals—CEL-SCI believes were driven by high PSR/PSD rates in the target population, as shown in the graphic below: CEL-SCI relies on all of these data together to support its plan to request accelerated/conditional approval in the new target population without waiting until the completion of another clinical trial. **CEL-SCI’s regulatory strategy going forward is to seek immediate approval of Multikine wherever possible.** CEL-SCI intends to seek approval for Multikine based on the data generated to date, using a conditional approval pathway with a follow-on confirmatory study since the survival benefit is high and statistics are strong. This view is based on advice from regulators and consultants, and CEL-SCI believes that the accelerated/conditional approval regulatory pathways are specifically designed for our situation. 9 When the Phase III trial was designed, there was no evidentiary basis for excluding either of the low-risk or high-risk patient groups before surgery. Therefore, the study had to include a large percentage of high-risk patients with immune systems already compromised by disease. These subjects generally did not respond to Multikine. CEL-SCI has narrowed its target population as compared to the overall Phase III study population to focus on patients most likely to have PSR/PSD and to exclude the rest. CEL-SCI acknowledges that efficacy in the target population has not been tested prospectively, but CEL-SCI believes that the data generated to date already presents a compelling patient need in the target population that justifies immediate access to Multikine. This is why the conditional approval pathways were created in the first place. CEL-SCI intends to base its request for regulatory approval, in part, on our view that patients should not have to wait many more years before gaining access to the benefits of Multikine PSRs/PSDs and increased survival, particularly given Multikine’s safety profile and data that mechanistically and empirically supports the target population definition. The benefit-risk balance favoring immediate patient access to Multikine is described below: An “unmet need” is a factor for approval considered by all major regulatory bodies worldwide. In the Multikine target population, there is also a tremendous unmet need for improved survival. The current standard of care provides only about a 50/50 chance of surviving five years, whereas Multikine could increase that survival rate to over 70% based on the Phase III data. Chemotherapy has improved outcomes for some head and neck patients, but chemotherapy is only indicated for high-risk patients, who are not likely to fall within the Multikine target population. Currently available immunotherapies are given after surgery or where surgery is not indicated, in contrast to Multikine, which is given before surgery to patients with resectable tumors. Available checkpoint inhibitors work best on tumors with high PD-L1 expression, whereas Multikine works best in tumors with low PD-L1 expression. Therefore, Multikine’s target population is underserved, and will continue to be underserved, by current therapies, but Multikine can meet the need for improved survival. 10 The major regulatory bodies with whom we are working, U.S. FDA, Health Canada, European Medicine Agency (EMA) and the Medicines and Healthcare products Regulatory Agency (MHRA) in the United Kingdom (UK) all have conditional approval pathways designed for situations where the target population has not been fully tested prospectively and there is strong data supporting clinical benefit for patients. The reason is that regulators understand that in many cases patients should not have to wait for additional data before being offered the chance to benefit from a new drug. Every situation is different and depends on the specific facts. CEL-SCI had meetings with the FDA and Health Canada earlier in 2023, but they have not yet seen the new data presented for the first time on October 22, 2023 at the ESMO conference, and CEL-SCI plans to provide it to them in Q1 2024. In Canada, CEL-SCI plans to ask for conditional approval under their Notice of Compliance with Conditions (NOC/C) pathway, as they had suggested in April 2023. This permits approval of drugs based on safety and “promising” efficacy data while a post-market confirmatory study is ongoing. The approval can be given *before* the post-market study. In the U.S., the FDA has an accelerated approval pathway that is similar, but a new law in December 2022 requires enrollment in the confirmatory study to be underway before approval will be given in the U.S. Therefore, CEL-SCI plans to start this confirmatory trial as soon as possible in the new year and will then seek accelerated approval using data from that study as well. CEL-SCI’s first priority, however, is seeking approval in Europe and the UK, where CEL-SCI has submitted its final target population data. These are more than twice as many patients in the target population overseas than in North America. In Europe and the UK, CEL-SCI has submitted requests for Scientific Advice and are hopeful for meetings in H1 2024. Once a meeting date has been set, CEL-SCI will be able to discuss the data and gain advice on the path forward. It is possible that CEL-SCI may be advised at that time to proceed with formal application papers. ### CORPORATE HISTORY CEL-SCI was formed as a Colorado corporation in 1983. CEL-SCI’s principal office is located at 8229 Boone Boulevard, Suite 802, Vienna, VA 22182. CEL-SCI’s telephone number is 703-506-9460 and its website is www.cel-sci.com. CEL-SCI does not incorporate the information on its website into this report, and you should not consider it part of this report. CEL-SCI makes its electronic filings with the Securities and Exchange Commission (SEC), including its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports. These filings are available on its website free of charge as soon as practicable after they are filed or furnished to the SEC. ### MORE ABOUT MULTIKINE CEL-SCI’s lead investigational therapy, Multikine, is being developed as a potential therapeutic agent directed at using the immune system to produce an anti-tumor immune response. Data from CEL-SCI’s clinical trials suggest that Multikine may help the immune system “see” the tumor and then attack it, enabling the body’s own anti-tumor immune response to fight the tumor. Multikine is the trademark that CEL-SCI has registered for this investigational therapy, and this proprietary name is subject to review by the FDA, in connection with CEL-SCI’s future anticipated regulatory submission for approval in the United States. Multikine has not been licensed or approved for sale, barter or exchange by the FDA or any other regulatory agency, and neither its safety nor its efficacy have been established. Multikine is an immunotherapy product candidate comprised of a patented defined mixture of 14 human natural cytokines. If commercial approval is obtained, CEL-SCI intends to manufacture Multikine in a proprietary manner in CEL-SCI’s manufacturing facility near Baltimore, Maryland, USA. CEL-SCI spent many years and more than $200 million developing and validating the manufacturing process for Multikine. The pro-inflammatory cytokine mixture includes interleukins, interferons, chemokines and colony-stimulating factors, which contain elements of the body’s natural mix of defenses against cancer. 11 Multikine is designed to be used in a different way than cancer immunotherapy is generally being used. Generally, cancer immunotherapy is given to patients who have already failed other treatments such as surgery, radiation and/or chemotherapy and most of the time it is administered systemically. Multikine on the other hand is administered locally to treat tumors and their microenvironment before any other therapy has been administered because it is believed that this is the time when the immune system would be strongest and most amenable to activation against the tumor. For example, in the Phase III clinical trial, Multikine was injected locally around the tumor and near the adjacent draining lymph nodes for three weeks, five days a week as a first treatment before surgery, radiation and/or chemotherapy. The goal is to help the intact immune system recognize and kill the tumor micro metastases that usually cause recurrence of the cancer. In short, CEL-SCI believes that the local administration of Multikine before weakening of the immune system by surgery and radiation will result in better anti-tumor response than if Multikine were administered after surgery and radiation. In clinical studies of Multikine, administration of the investigational therapy to head and neck cancer patients has demonstrated the potential for lesser or no appreciable toxicity. #### Source: Adapted from Timar et al., Journal of Clinical Oncology 23(15) May 20, 2005 The first indication CEL-SCI is pursuing for its investigational drug product candidate Multikine is an indication for the neoadjuvant therapy in patients with squamous cell carcinoma of the head and neck, or SCCHN (hereafter also referred to as advanced primary head and neck cancer). In October 2023, CEL-SCI presented a poster at the European Society for Medical Oncology (EMSO) annual Congress that reported three major new advancements supporting Multikine’s approvability: | | | | --- | --- | | · | First, Multikine is most effective in patients having tumors with low PD-L1 expression, consisting of about 70% of the study population. (It should be noted that immune checkpoint inhibitors like Keytruda and Opdivo appear to work best in patients with tumors having high PD-L1 expression). | | · | Second, the Multikine target population can now be readily identified upon diagnosis, prior to surgery, using tests that physicians routinely use in cancer screenings. | | · | Third, Multikine patients in the target population saw a significant increase in 5-year overall survival, from 45% for control patients who did not receive Multikine to 73% for Multikine-treated patients. | | | Link to poster: https://cel-sci.com/wp-content/uploads/2023/10/ESMO-2023-Poster\_893P\_FINAL.pdf | 12 Previously, CEL-SCI published two abstracts and presented a poster related to its pivotal Phase III Multikine head and neck cancer clinical trial at the American Society of Clinical Oncology (ASCO) in June 2022. The abstract titles and corresponding links are as follows: - “*Leukocyte interleukin injection (LI) immunotherapy extends overall survival (OS) in treatment-naive low-risk (LR) locally advanced primary squamous cell carcinoma of the head and neck: The IT-MATTERS study.”* - Link to abstract: https://meetings.asco.org/abstracts-presentations/207201 - Link to poster: https://cel-sci.com/wp-content/uploads/2022/06/CEL-SCI-ASCO-2022-Poster-6032-June-6-Head-and-Neck-Cancer-1.pdf - “*Novel algorithm for assigning risk/disease-directed treatment (DDT) choice in locally advanced primary squamous cell carcinoma of the head and neck (SCCHN): Using pretreatment data only.”* - Link to abstract: https://meetings.asco.org/abstracts-presentations/207202/ Since CEL-SCI launched its Phase III clinical trial for Multikine, CEL-SCI has incurred expenses of approximately $64.4 million as of September 30, 2023 on direct costs for the Phase III clinical trial. CEL-SCI estimates it will incur additional expenses of approximately $0.7 million for the remainder of the Phase III clinical trial and the filing of the application for marketing approval to the regulators. It should be noted that this estimate is based only on the information currently available from the CROs responsible for managing the Phase III clinical trial and does not include other related costs, e.g., preparations for the potential commercial manufacture of the drug. Ultimately, the decision as to whether CEL-SCI’s drug product candidate is safe and effective can only be made by the FDA and/or by other regulatory authorities based upon an assessment of all of the data from an entire drug development program submitted as part of an application for marketing approval. As detailed in the Risk Factors section of this report, the completed Phase III clinical study for CEL-SCI’s investigational drug may not be able to be used as the pivotal study supporting a marketing application in the United States, and therefore a confirmatory study would need to be conducted to support a marketing application in the United States. #### Development Agreements for Multikine In August 2008, CEL-SCI signed an agreement with Teva Pharmaceutical Industries Ltd., or Teva, that gives Teva the exclusive right and license to market, distribute and sell Multikine, if approved, in Israel and Turkey for treatment of head and neck cancer. The agreement terminates on a country-by-country basis 10 years after the product launch in each country or upon a material breach or upon bankruptcy of either party. The agreement will automatically extend for additional two-year terms unless either party gives notice of its intent not to extend the agreement. If CEL-SCI develops Multikine for other oncology indications and Teva indicates a desire to participate, the parties have agreed to negotiate in good faith with respect to Teva’s participation and contribution in future clinical trials. Teva has agreed to use all reasonable efforts to obtain regulatory approval to market and sell Multikine in its territory at its own cost and expense. Pursuant to the agreement, it is CEL-SCI’s responsibility to supply Multikine and Teva’s responsibility to sell Multikine, if approved by regulatory authorities in the relevant countries. Net sales will be divided 50/50 between the two parties. Teva also initially agreed to fund certain activities relating to the conduct of a clinical trial in Israel as part of the global Phase III trial for Multikine. In July 2011, Serbia and Croatia were added to Teva’s territory, pursuant to a joinder agreement between CEL-SCI and PLIVA Hrvatska d.o.o., or PLIVA, an affiliate of Teva’s, subject to similar terms as described above. In January 2012, pursuant to an assignment and assumption agreement between CEL-SCI, Teva and GCP Clinical Studies Ltd., or GCP, Teva transferred all of its rights and obligations concerning the Phase III trial in Israel to GCP. 13 In consideration for the rights granted by CEL-SCI to PLIVA under the joinder agreement, CEL-SCI will be paid by PLIVA (in U.S. dollars): - · $100,000 upon EMA grant of Marketing Authorization for Multikine; - · $50,000 upon Croatia’s grant of reimbursement status for Multikine in Croatia; and - · $50,000 upon Serbia’s grant of reimbursement status for Multikine in Serbia. In November 2000, CEL-SCI signed an agreement with Orient Europharma Co., Ltd., or Orient Europharma, of Taiwan, which was amended in October 2008 and again in June 2010. Pursuant to this agreement, as amended, Orient Europharma has the exclusive marketing and distribution rights to Multikine, if approved by regulatory authorities, for head and neck cancer, naso-pharyngeal cancer and potentially cervical cancer indications in Taiwan, Singapore, Malaysia, Hong Kong, the Philippines, South Korea, Australia and New Zealand. CEL-SCI has granted Orient Europharma the first right of negotiation with respect to Thailand and China. The agreement requires Orient Europharma to fund 10% of the cost of the clinical trials needed to obtain marketing approvals in these countries for head and neck cancer, naso-pharyngeal cancer and potentially cervical cancer. If Multikine is approved for sale, Orient Europharma will purchase Multikine from CEL-SCI for 35% of the gross selling price in each country. Orient Europharma is obligated to use the same diligent efforts to develop, register, market, sell and distribute Multikine in its territory as with its own products or other licensed products. The agreement will terminate on a country-by-country basis 15 years after the product approval for Multikine in each country, at which point the agreement will be automatically extended for successive two year periods, unless either party gives notice of its intent not to extend the agreement. The agreement may also be terminated upon the bankruptcy of either party or material misrepresentations that are not cured within 60 days. If the agreement ends before the 15-year term through no fault of either party, CEL-SCI will reimburse Orient Europharma for a prorated part of Orient Europhorma’s costs towards the clinical trials of Multikine. If Orient Europharma fails to make certain minimum purchases of Multikine during the term of the agreement, Orient Europhorma’s rights to the territory will become non-exclusive. CEL-SCI has a licensing agreement with Byron Biopharma LLC, or Byron, under which CEL-SCI granted Byron an exclusive license to market and distribute Multikine in the Republic of South Africa, if approved. This license will terminate 20 years after marketing approval in South Africa or after the bankruptcy or uncured material breach by either party. After the 20-year period has expired, the agreement will be automatically extended for successive two year periods, unless either party gives notice of its intent not to extend the agreement. Pursuant to the agreement, Byron will be responsible for registering Multikine in South Africa. If Multikine is approved for sale in South Africa, CEL-SCI will be responsible for manufacturing the product, while Byron will be responsible for sales in South Africa. Sales revenues will be divided equally between CEL-SCI and Byron. ### ABOUT LEAPS CEL-SCI’s patented T-cell Modulation Process, referred to as LEAPS (Ligand Epitope Antigen Presentation System), uses “heteroconjugates” to direct the body to choose a specific immune response. LEAPS is designed to stimulate the human immune system to more effectively fight bacterial, viral and parasitic infections as well as autoimmune conditions, allergies, transplantation rejection and cancer, when it cannot do so on its own. LEAPS combines T-cell binding ligand peptides with small, disease associated, peptide antigens and may provide a new method to treat and prevent certain diseases. 14 The ability to generate a specific immune response is important because many diseases are often not combated effectively due to the body’s selection of the “inappropriate” immune response. The capability to specifically reprogram an immune response may offer a more effective approach than existing vaccines and drugs in attacking an underlying disease. #### LEAPS Candidates: CEL-2000, CEL-4000 and DerG-PG275(Cit) (aka, CEL-5000) On September 19, 2017, CEL-SCI announced that it had been awarded a Phase 2 Small Business Innovation Research (SBIR) grant in the amount of $1.5 million from the National Institute of Arthritis and Musculoskeletal and Skin Diseases (NIAMS), which is part of the U.S. National Institutes of Health (NIH). This grant provided funding to allow CEL-SCI to advance its first LEAPS product candidate, CEL-4000, towards an Investigational New Drug (IND) application for a Phase 1 safety study, by funding IND enabling studies and additional mechanism of action studies, among other preclinical development activities. Work on CEL-4000 was conducted at CEL-SCI’s research laboratory and Rush University Medical Center in Chicago, Illinois in the laboratories of Tibor Glant, MD, Ph.D., Jorge O. Galante Professor of Orthopedic Surgery and Katalin Mikecz, MD, Ph.D. Professor of Orthopedic Surgery & Biochemistry. The SBIR grant was awarded based on published data described below by Dr. Glant's team in collaboration with CEL-SCI showing that the administration of a proprietary peptide using CEL-SCI's LEAPS technology prevented the development, and lessened the severity, including inflammation, of experimental proteoglycan induced arthritis (PGIA or GIA) when it was administered after the disease was induced in animals. This grant has been fully expended. As part of the follow-up to the grant funded work, CEL-SCI published a review comparing CEL-4000 and the new LEAPS peptide CEL-5000 to both the Janus kinase (JAK) inhibitors and disease modifying anti-rheumatic drugs (DMARDs) in use for RA and autoimmune arthritis. The article reviewed the mechanism of action and targets with pictorial graphics in the journal Biomedicines and can be found online at https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8772713/. In May 2019, CEL-SCI announced that a newly discovered LEAPS conjugate acts alone and can complement CEL-4000 therapeutically when administered in combination to an animal model of Rheumatoid Arthritis (RA). This new LEAPS conjugate appears to act on T cell pathways by a new mechanism that is different from the pathways used by the CEL-4000 vaccine. The data was presented at the American Association of Immunologists 103rd Annual Meeting (Immunology 2019) by Daniel Zimmerman, Ph.D., CEL-SCI’s Senior Vice President of Research, Cellular Immunology. The work was performed in conjunction with researchers at Rush University Medical Center, Chicago, Illinois and was funded by the SBIR Phase 2 Grant. In July 2019, one of CEL-SCI’s collaborators from Rush, Dr. Adrienn Markovics presented new LEAPS data at i-Chem2019, International Conference on Immunity and Immunochemistry. Data presented was for a new second RA conjugate discovered which acts alone and can complement the existing CEL-4000 RA vaccine in an animal model of RA. The combination of the two RA conjugates provided not only broader epitope coverage, but also a greater therapeutic effect than either conjugate alone. The LEAPS work was performed in conjunction with researchers at CEL-SCI on CEL-4000 and the newly discovered LEAPS conjugate, CEL-5000. Both conjugates were evaluated alone and in combination in the model of proteoglycan \[PG\] induced arthritis (PGIA) called recombinant PG G1 domain-induced arthritis (GIA), an autoimmune mouse model of RA. In February 2017 and November 2016, CEL-SCI announced preclinical data that demonstrate its investigational new drug candidate CEL-4000 has the potential to treat rheumatoid arthritis. This study was supported in part by the SBIR Phase I Grant and was conducted in collaboration with Drs. Katalin Mikecz and Tibor Glant, and their research team at Rush University Medical Center in Chicago, IL. This work was published in an article entitled “*An epitope-specific DerG-PG70 LEAPS vaccine modulates T cell responses and suppresses arthritis progression in two related murine models of rheumatoid arthritis”* and can be found online at https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5568759/. 15 Prior to the SBIR Phase 2 grant in 2014, CEL-SCI was awarded a Phase 1 SBIR grant in the amount of $225,000 from NIAMS. This grant funded the development of CEL-SCI’s LEAPS technology as a potential treatment for rheumatoid arthritis, an autoimmune disease of the joints. The work was conducted at Rush University Medical Center in Chicago, Illinois in the laboratories of Tibor Glant, MD, Ph.D., Katalin Mikecz, MD, Ph.D., and Allison Finnegan, Ph.D. Professor of Medicine. With the support of these SBIR grants, CEL-SCI is developing several new drug candidates, CEL-2000 and CEL-4000, as potential rheumatoid arthritis therapeutic treatments. The data from animal studies using the CEL-2000 treatment suggests that it could be used against rheumatoid arthritis with fewer administrations than those required by other anti-rheumatoid arthritis treatments currently on the market for arthritic conditions associated with the Th17 signature cytokine TNF-a. The preclinical data indicates these peptides could be used against rheumatoid arthritis where a Th1 signature cytokine (IFN-γ) is dominant. CEL-2000 and CEL-4000 each have the potential to become a personalized, disease-specific therapy, that acts at an earlier step in the disease process than current therapies, and which may be useful in patients not responding to existing rheumatoid arthritis therapies. CEL-SCI believes this represents a large unmet medical need in the rheumatoid arthritis market. In March 2015, CEL-SCI and its collaborators published a review article on vaccine therapies for rheumatoid arthritis based in part on work supported by the SBIR Phase 1 grant. The article is entitled “Rheumatoid arthritis vaccine therapies: perspectives and lessons from therapeutic Ligand Epitope Antigen Presentation System vaccines for models of rheumatoid arthritis” and was published in Expert Review of Vaccines 1 - 18 and can be found online at http://www.ncbi.nlm.nih.gov/pubmed/25787143. Accordingly, even though the various LEAPS candidates have not yet been given to humans, they have been tested in vitro with human cells. They have induced similar cytokine responses that were seen in these animal models, which may indicate that the LEAPS technology might translate to humans. The LEAPS candidates have demonstrated protection against lethal herpes simplex virus (HSV1) and H1N1 influenza infection, as a prophylactic or therapeutic agent in animals. They have also shown some level of activity in animals in two autoimmune conditions, curtailing and sometimes preventing disease progression in arthritis and myocarditis animal models. None of the LEAPS investigational products have been approved for sale, barter or exchange by the FDA or any other regulatory agency for any use to treat disease in animals or humans. The safety or efficacy of these products has not been established for any use. Lastly, no definitive conclusions can be drawn from the early-phase, preclinical-trials data involving these investigational products. Before obtaining marketing approval from the FDA in the United States, and by comparable agencies in most foreign countries, these product candidates must undergo rigorous preclinical and clinical testing which is costly and time consuming and subject to unanticipated delays. There can be no assurance that these approvals will be granted. ### INTELLECTUAL PROPERTY Patents and other proprietary rights are essential to CEL-SCI’s business. CEL-SCI files patent applications to protect its technologies, inventions and improvements that CEL-SCI considers important to the development of its business. CEL-SCI’S intellectual property portfolio covers its proprietary technologies, including Multikine and LEAPS, by multiple issued patents and pending patent applications in the United States and in key foreign markets. 16 On June 30, 2023, CEL-SCI filed a new patent application for Multikine based on novel findings from the Phase III study. This new application covers the use of Multikine for certain cancers, such as oral cavity and soft-palate tumors, that do not respond well to the use of checkpoint inhibitors in treatment. Multikine is protected by a U.S. patent, which is a composition-of-matter patent issued in May 2005 that, in its current format, expires in 2023. Additional composition-of-matter patents for Multikine have been issued in Japan (issued in November 2012 and currently set to expire in 2025) and three in Europe (issued in September 2015, May 2016 and October 2017, currently set to expire in 2025 and 2026). The most recent patent issued in October 2017, patent # EP 1 879 618 B1, titled “A Method for Modulating HLA Class II Tumor Cell Surface Expression With A Cytokine Mixture,” addresses Multikine’s mechanism of action to make tumors more visible to the immune system. This new patent is important because, along with the other Multikine issued patents, it addresses how Multikine enables the immune system to recognize and attack the tumor. One way tumor cells evade the immune system is by expressing human leukocyte antigens (HLA) on the tumor cell surface, thus appearing as ‘self’ to the immune cells and therefore the tumor cells are not attacked. It is important to note that the tumors of the Multikine-treated best responders in CEL-SCI’s prior Phase II studies had no HLA Class II expressed on the cell surface following Multikine treatment as compared to controls. This points to Multikine’s ability to modulate HLA expression on the tumor cell surface, thereby allowing the immune system to recognize and attack the tumor. In addition to the patents that offer certain protections for Multikine, the method of manufacture for Multikine, a complex biological product, is held by CEL-SCI as a trade secret. CEL-SCI considers this to be its best protection from competitors. LEAPS is protected by patents in the United States issued between January 2019 and June 2021. The LEAPS patents, which expire between 2027 and 2032, include overlapping claims, with composition of both matter (new chemical entity), process and methods-of-use, to maximize and extend the coverage in their current format. One issued U.S. application is a joint application with Northeast Ohio Medical University (“Neoucom”) and CEL-SCI will share the ability to use the patent, unless CEL-SCI licenses the rights to the patent from Neoucom. In October 2017 and October 2020, patents were issued in Europe for LEAPS, which expire in 2029 and 2034, respectively. CEL-SCI has five patent applications pending in the United States for LEAPS, which, if issued, would extend protection through 2040, subject to any potential patent term extensions. As of December 8, 2023, there were no contested proceedings and/or third party claims with respect to CEL-SCI’s patents or patent applications. ### MANUFACTURING FACILITY Before starting the Phase III clinical trial, for reasons related to regulatory considerations, CEL-SCI built a dedicated manufacturing facility to produce its investigational biological product candidate Multikine. This facility produced multiple clinical lots for the Phase III clinical trial and has also passed quality systems review by a European Union Qualified Person on several occasions. CEL-SCI expanded the manufacturing facility so CEL-SCI will be able to meet the expected demand for Multikine, if approval to sell the drug is granted. This expansion was completed at the end of 2021, allowing CEL-SCI employees to return to work inside the manufacturing facility. In October 2023, CEL-SCI announced that the commissioning of the manufacturing facility was substantially complete, a significant milestone toward a planned Biologics License Application (BLA) with several regulatory agencies for approval of Multikine in the treatment of head and neck cancer. CEL-SCI’s lease on the manufacturing facility expires on October 31, 2028. At that time CEL-SCI can either purchase the facility or extend its lease. See Item 2 of this report for more information concerning the terms of this lease. 17 ### GOVERNMENT REGULATION The FDA and other regulatory authorities at federal, state and local levels and in foreign countries extensively regulate, among other things, the research, development, testing, manufacture, quality control, import, export, safety, effectiveness, labeling, packaging, storage, distribution, record keeping, approval, advertising, promotion, marketing and post-approval monitoring and reporting of biologics such as those CEL-SCI is developing. CEL-SCI, along with third party contractors, will be required to navigate the various preclinical, clinical and commercial approval requirements of the governing regulatory agencies of the countries in which it wishes to conduct studies or seek approval or licensure of its product candidates. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local, and foreign statutes and regulations requires the expenditure of substantial time and financial resources. ### U.S. Food and Drug Administration Regulation of Biological Products In the United States, the FDA regulates biological products under the Federal Food, Drug, and Cosmetic Act, or FDCA, and the Public Health Service Act, or PHSA, and their implementing regulations. The process required by the FDA before biological product candidates may be marketed in the United States generally involves the following: - completion of preclinical laboratory tests and animal studies performed in accordance with the FDA’s Good Laboratory Practice, or GLP, regulations; - submission to the FDA of an investigational new drug application, or IND, which must become effective before clinical trials may begin and must be updated annually; - approval by an independent Institutional Review Board, or IRB, or ethics committee at each clinical site before the trial is initiated; - performance of adequate and well-controlled human clinical trials in compliance with Good Clinical Practice, or GCP, regulations to establish the safety, purity and potency of the proposed biologic product candidate for its intended purpose; - preparation of and submission to the FDA of a Biologics License Application, or BLA, after completion of clinical trials; - satisfactory completion of an FDA Advisory Committee review, if applicable; - a determination by the FDA within 60 days of its receipt of a BLA to file the application for review; - satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the proposed product is produced to assess compliance with current Good Manufacturing Practice, or cGMP, requirements and to assure that the facilities, methods and controls are adequate to preserve the biological product’s continued safety, purity and potency, and of selected clinical investigations to assess compliance with GCPs; and - FDA review and approval of the BLA to permit commercial marketing of the product for particular indications for use in the United States. Prior to commencing the first clinical trial with a product candidate in the U.S., CEL-SCI must submit an IND to the FDA. An IND is a request for authorization from the FDA to administer an investigational product to humans. The central focus of an IND submission is on the general investigational plan and the protocol(s) for human studies. The IND also includes results of animal and in vitro studies assessing the toxicology, pharmacokinetics, pharmacology, and pharmacodynamic characteristics of the product; chemistry, manufacturing, and controls information; and any available human data or literature to support the use of the investigational product. An IND must become effective before human clinical trials may begin. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises safety concerns or questions about the proposed clinical trial. In such a case, the IND may be placed on clinical hold and the IND sponsor and the FDA must resolve any outstanding concerns or questions before the clinical trial can begin. Submission of an IND therefore may or may not result in FDA authorization to commence a clinical trial. 18 Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with GCPs, which include the requirement that all research subjects provide their informed consent for their participation in any clinical study. Clinical trials are conducted under protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A separate submission to the existing IND must be made for each successive clinical trial conducted during product development and for any subsequent protocol amendments. Furthermore, an independent IRB for each site proposing to conduct the clinical trial must review and approve the plan for any clinical trial and its informed consent form before the clinical trial commences at that site, and must monitor the study until completed. Regulatory authorities, the IRB or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk. Some studies also include oversight by an independent group of qualified experts organized by the clinical study sponsor, known as a data safety monitoring board (DSMB) or independent data monitoring committee (IDMC), which provides recommendations for whether or not a study should move forward at designated check points based on access to certain data from the study and may suggest halting the clinical trial if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy. There are also requirements governing the reporting of ongoing clinical studies and clinical study results to public registries. For purposes of approval of a Biologics License Application, or BLA, human clinical trials are typically conducted in three or four sequential phases that may overlap. - Phase I — The investigational product is initially introduced into healthy human subjects or patients with the target disease or condition. These studies are designed to test the safety, dosage tolerance, absorption, metabolism and distribution of the investigational product in humans and the side effects associated with increasing doses. - Phase II — The investigational product is administered to a limited patient population with a specified disease or condition to evaluate the preliminary efficacy, optimal dosages and dosing schedule and to identify possible adverse side effects and safety risks. Multiple Phase II clinical trials may be conducted to obtain information prior to beginning larger and more expensive Phase III clinical trials. - Phase III — The investigational product is administered to an expanded patient population to further evaluate dosage, to provide statistically significant evidence of clinical efficacy and to further test for safety, generally at multiple geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk/benefit ratio of the investigational product and to provide an adequate basis for product approval. - Phase IV — In some cases, the FDA may require, or companies may voluntarily pursue, additional clinical trials after a product is approved to gain more information about the product. The FDA may also make these so-called Phase IV or post-marketing studies a condition to approval of the BLA. Phase I, Phase II and Phase III testing may not be completed successfully within a specified period, if at all, and there can be no assurance that the data collected will support FDA approval or licensure of the product. Concurrent with clinical trials, companies may complete additional animal studies and develop additional information about the biological characteristics of the product candidate, and must finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life. 19 #### BLA Submission and Review by the FDA Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, the results of product development, nonclinical studies and clinical trials are submitted to the FDA as part of a BLA requesting approval to market the product for one or more indications. The BLA must include all relevant data available from pertinent preclinical and clinical studies, including negative or ambiguous results as well as positive findings, together with detailed information relating to the product’s chemistry, manufacturing, controls, and proposed labeling, among other things. Data can come from company-sponsored clinical studies intended to test the safety and effectiveness of a use of the product, or from a number of alternative sources, including studies initiated by investigators. In most cases, the submission of a BLA is subject to a substantial application user fee. Under the goals and policies agreed to by the FDA under the Prescription Drug User Fee Act, or PDUFA, for original BLAs, the FDA’s goal is to review the BLA within ten months after it accepts the application for filing, or, if the product relates to an unmet medical need in a serious or life-threatening indication and has received a priority review designation, six months after the FDA accepts the application for filing. After filing the marketing application, the FDA reviews a BLA to determine, among other things, whether a product is safe, pure and potent and the facility in which it is manufactured, processed, packed, or held meets standards designed to assure the product’s continued safety, purity and potency. Before approving a BLA, the FDA will typically inspect the facility or facilities where the product is manufactured. The FDA will not approve a biological product for marketing unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving a BLA, the FDA will typically inspect one or more clinical sites to assure compliance with GCPs. If the FDA determines that the data provided in the application, or the manufacturing process or manufacturing facilities for the product are not acceptable, it will outline the deficiencies in the submission and often will request additional testing or information. Notwithstanding the submission of any requested additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. The FDA also may refer applications for novel biologic candidates which present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions, if any. The FDA is not bound by recommendations of an advisory committee, but it considers such recommendations when making decisions on approval. After the FDA evaluates a BLA and conducts inspections of manufacturing facilities where the biological product and/or its drug substance will be produced, the FDA may issue an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete but the application is not ready for approval. A Complete Response Letter may request additional information or clarification, including new clinical studies. The FDA may delay or refuse approval of a BLA if applicable regulatory criteria are not satisfied, require additional testing or information and/or require post-marketing testing and surveillance to monitor safety or efficacy of a product. If a Complete Response Letter is issued, the applicant may either resubmit the BLA, addressing all of the deficiencies identified in the letter, or withdraw the application. Even if such data and information are submitted, the FDA may decide that the re-submitted BLA does not satisfy the criteria for approval. 20 If a product receives regulatory approval, such approval is limited to the conditions of use (e.g., patient population, indication) described in the application. Further, depending on the specific risk(s) to be addressed, the FDA may require that contraindications, warnings or precautions be included in the product labeling, require that post-approval trials, including Phase IV clinical trials, be conducted to further assess a product’s safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution and use restrictions or other risk management mechanisms under a Risk Evaluation and Mitigation Strategy, or REMS, plan if it determines that a REMS is necessary to ensure that the benefits of the product outweigh its risks and to assure the safe use of the biological product, which can materially affect the potential market and profitability of the product. The REMS plan could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. The FDA also may condition approval on, among other things, changes to proposed labeling or the development of adequate controls and specifications. Once approved, the FDA may withdraw the product approval if compliance with pre- and post-marketing regulatory standards is not maintained or if problems occur after the product reaches the marketplace. The FDA may prevent or limit further marketing of a product based on the results of post- marketing trials or surveillance programs. After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and approval. #### Expedited Review and Approval A sponsor may seek approval of its product candidate under programs designed to accelerate the FDA’s review and approval of new drugs and biological products that meet certain criteria. Specifically, new drugs and biological products are eligible for fast track designation if they are intended to treat a serious or life-threatening condition and demonstrate the potential to address unmet medical needs for the condition. For a fast track product, the FDA may consider sections of the BLA for review on a rolling basis before the complete application is submitted if relevant criteria are met. A fast track designated product candidate may also qualify for priority review. Under the accelerated approval program, the FDA may approve a BLA on the basis of either a surrogate endpoint that is reasonably likely to predict a clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. Post-marketing studies or completion of ongoing studies after marketing approval are generally required to verify the biologic’s clinical benefit in relationship to the surrogate endpoint or ultimate outcome in relationship to the clinical benefit. In addition, the Food and Drug Administration Safety and Innovation Act, or FDASIA, which was enacted and signed into law in 2012, established the new Breakthrough Therapy designation. A sponsor may seek FDA designation of its product candidate as a breakthrough therapy if the product candidate is intended, alone or in combination with one or more other drugs or biologics, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the therapy may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. Sponsors may request the FDA to designate a breakthrough therapy at the time of or any time after the submission of an IND, but ideally before an end-of-phase 2 meeting with the FDA. If the FDA designates a breakthrough therapy, it may take actions appropriate to expedite the development and review of the application, which may include holding meetings with the sponsor and the review team throughout the development of the therapy; providing timely advice to, and interactive communication with, the sponsor regarding the development of the drug to ensure that the development program to gather the nonclinical and clinical data necessary for approval is as efficient as practicable; involving senior managers and experienced review staff, as appropriate, in a collaborative, cross-disciplinary review; assigning a cross-disciplinary project lead for the FDA review team to facilitate an efficient review of the development program and to serve as a scientific liaison between the review team and the sponsor; and considering alternative clinical trial designs when scientifically appropriate, which may result in smaller trials or more efficient trials that require less time to complete and may minimize the number of patients exposed to a potentially less efficacious treatment. 21 Fast Track designation, priority review and breakthrough therapy designation do not change the standards for approval but may expedite the development or approval process. #### Post-Approval Requirements All therapeutic products manufactured or distributed pursuant to FDA approval or licensure are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to record-keeping, reporting of adverse experiences, periodic reporting, product sampling and distribution, and advertising and promotion of the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval. There also are continuing, annual user fee requirements under the PDUFA for any marketed products and the establishments at which such products are manufactured, as well as new application fees for supplemental applications containing clinical data. Biologic manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP requirements, which impose significant procedural and documentation requirements. Changes to the manufacturing process are strictly regulated, and, depending on the significance of the change, may require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting requirements on manufacturers. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance. CEL-SCI cannot be certain that it, or CEL-SCI’s present or future suppliers, will be able to comply with the cGMP regulations and other FDA regulatory requirements. If CEL-SCI is not able to comply with these requirements, the FDA may, among other things, take enforcement action or seek sanctions against use, impose restrictions on a product or its manufacturer, require CEL-SCI to recall a product from distribution, or withdraw approval of the BLA. The FDA may withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical studies to assess new safety risks; or imposition of distribution restrictions or other restrictions under a REMS program. Other potential consequences include, among other things: - restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls; - fines, warning letters or holds on post-approval clinical studies; - refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product license approvals; 22 - product seizure or detention, or refusal to permit the import or export of products; - injunctions or the imposition of civil or criminal penalties; and - consent decrees, corporate integrity agreements, debarment, or exclusion from federal healthcare programs; or mandated modification of promotional materials and labeling and the issuance of corrective information. The FDA closely regulates the marketing, labeling, advertising and promotion of drugs and biologics. A company can make only those claims relating to safety and efficacy, purity and potency that are approved by the FDA and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of unapproved, or “off-label,” uses. Failure to comply with these requirements can result in, among other things, adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties. Physicians may prescribe legally available products for uses that are not described in the product’s labeling and that differ from those tested and approved by the FDA. Such off-label uses are common across medical specialties. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturer’s communications on the subject of off-label use of their products. #### Orphan Drug Designation Under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs or biologics intended to treat a rare disease or condition that affects fewer than 200,000 individuals in the United States, or if it affects more than 200,000 individuals in the United States and there is no reasonable expectation that the cost of developing and making the drug for this type of disease or condition will be recovered from sales in the United States. In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and user-fee waivers. In addition, if a product receives the first FDA approval for the indication for which it has orphan designation, the product is entitled to orphan drug exclusivity, which means the FDA may not approve any other application to market a drug for the same indication for a period of 7 years, except in limited circumstances, such as a showing of clinical superiority over the product with orphan exclusivity. Orphan drug exclusivity also could block the approval of one of CEL-SCI’s products for seven years if a competitor obtains approval of a product before CEL-SCI does, for the same indication CEL-SCI is seeking, or if CEL-SCI’s product candidate is determined to be contained within the scope of the competitor’s product for the same indication or disease. If one of CEL-SCI’s products designated as an orphan drug receives marketing approval for an indication broader than that which is designated, it may not be entitled to orphan drug exclusivity. Orphan drug status in the European Union has similar, but not identical, requirements and benefits. Orphan drug designation must be requested before submitting a BLA to the FDA for review and approval. After the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. Multikine has received Orphan Drug Status from the FDA. 23 ### Other U.S. Health Care Laws CEL-SCI’s sales, promotion, medical education and other activities following product approval will be subject to regulation by numerous regulatory and law enforcement authorities in the United States in addition to the FDA, including potentially the Federal Trade Commission, the Department of Justice, the Centers for Medicare and Medicaid Services, other divisions of the Department of Health and Human Services and state and local governments. CEL-SCI’s promotional and scientific/educational programs must comply with the anti-kickback provisions of the Social Security Act, the Foreign Corrupt Practices Act, the False Claims Act, the Physician Payments Sunshine Act, the Veterans Health Care Act and similar state laws. Depending on the circumstances, failure to meet these applicable regulatory requirements can result in criminal prosecution, fines or other penalties, exclusion from government health care programs, injunctions, recall or seizure of products, total or partial suspension of production, denial or withdrawal of pre-marketing product approvals, private “qui tam” actions brought by individual whistleblowers under the False Claims Act in the name of the government or refusal to allow CEL-SCI to enter into supply contracts, including government contracts. ### Coverage, Pricing and Reimbursement in the U.S. Sales of pharmaceutical products depend significantly on the availability of third-party coverage and reimbursement. Third-party payors include government health administrative authorities, managed care providers, private health insurers and other organizations. These third-party payors are increasingly challenging the price and examining the cost-effectiveness of medical products and services. In addition, significant uncertainty exists as to the reimbursement status of newly approved healthcare products and new drug classes, including biological products such as CEL-SCI’s product candidates. CEL-SCI may need to conduct expensive clinical studies to demonstrate the comparative cost-effectiveness of its products. The product candidates that CEL-SCI develops may not be considered cost-effective. It is time consuming and expensive for CEL-SCI to seek reimbursement from third- party payors. Reimbursement may not be available or sufficient to allow CEL-SCI to sell its products on a competitive and profitable basis. The United States and some foreign jurisdictions are considering or have enacted a number of legislative and regulatory proposals to change the healthcare system in ways that could affect CEL-SCI’s ability to sell its products profitably. Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives. ### Foreign Regulation In addition to regulations in the United States, CEL-SCI will be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of its products to the extent CEL-SCI chooses to develop or sell any products outside of the United States. The approval process varies from country to country and the time may be longer or shorter than that required to obtain FDA approval. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country. 24 ## Properties As filed, 2,185 characters. CEL-SCI leases office space at 8229 Boone Blvd., Suite 802, Vienna, Virginia at a monthly rental of approximately $8,000. The lease on the office space expires on November 30, 2025. CEL-SCI believes this arrangement is adequate for the conduct of its present business. CEL-SCI has a 17,900 square foot laboratory located in Baltimore, Maryland. The laboratory is leased by CEL-SCI at a cost of approximately $22,000 per month. During the period ended September 30, 2021, the laboratory lease was extended ten years and expires on February 29, 2032. In August 2007, CEL-SCI leased a building near Baltimore, Maryland (the San Tomas lease). The building, which consists of approximately 73,000 square feet, has been remodeled in accordance with CEL-SCI’s specifications so that it can be used by CEL-SCI to manufacture Multikine for CEL-SCI’s Phase III clinical trial and sales of the drug, if approved by the FDA. The lease expires on October 31, 2028 and required annual base rent payments of approximately $2.6 million during the twelve months ended September 30, 2023. The annual base rent escalates each year at 3% beginning on November 1st. CEL-SCI is also required to pay all real estate and personal property taxes, insurance premiums, maintenance expenses, repair costs and utilities, which were approximately $76,000 per month as of September 30, 2023. The lease allows CEL-SCI, at its election, to extend the lease for two ten-year periods or to purchase the building at the end of the 20-year lease. In August 2020, the Company entered into an amendment to the San Tomas lease agreement under which the landlord agreed to allow the Company to substantially upgrade the manufacturing facility in preparation for the potential commercial production of Multikine. The total cost of the upgrades was $11.1 million. The landlord agreed to finance the final $2.4 million of the costs incurred. The Company started repaying these costs on March 1, 2021 through increased lease payments which will continue over the remaining lease term. The repayment includes a base rent which escalates at 3% each year plus interest that accrues at 13.75% per year on the $2.4 million financed. ## Management's discussion and analysis As filed, 17,969 characters. The following discussion should be read in conjunction with the financial statements and the related notes thereto appearing elsewhere in this report. Multikine (Leukocyte Interleukin, Injection) which, for simplicity, is referred to in this report as Multikine, is the trademark that the Company has registered for this investigational therapy, and this proprietary name is subject to FDA review under the Company’s future anticipated regulatory submission for approval. Multikine has not been licensed or approved by the FDA or any other regulatory agency. Neither has its safety or efficacy been established for any use. CEL-SCI also owns and is developing a pre-clinical technology called LEAPS (Ligand Epitope Antigen Presentation System). CEL-SCI is using its LEAPS technology platform to investigate its lead peptide-based immunotherapy (CEL-4000) as a vaccine treatment for rheumatoid arthritis. All of CEL-SCI’s projects are under development. As a result, CEL-SCI cannot predict when it will be able to generate any revenue from the sale of any of its products. Since inception, CEL-SCI has financed its operations through the issuance of equity securities, convertible notes, loans and certain research grants. CEL-SCI will likely continue to generate net operating losses as it continues the development of Multikine and brings other drug candidates into clinical trials. Until such time as CEL-SCI becomes profitable, any or all of these financing vehicles or others may be utilized to assist CEL-SCI’s capital requirements. 51 ### Results of Operations The Company incurred a net operating loss of approximately $31.5 million for the twelve months ended September 30, 2023. This net operating loss consists of significant non-cash expenses accounting for approximately 33% of the operating loss. The non-cash operating expenses include approximately $6.3 million in stock-based employee compensation and approximately $4.0 million in depreciation and amortization expense. During the year ended September 30, 2023, research and development expenses decreased by approximately $2.9 million, or 11%, compared to the year ended September 30, 2022. Major components of this decrease include an approximately $2.9 million decrease in employee stock compensation expense and a decrease of approximately $1.7 million in costs related to the Phase III clinical study. These decreases were offset by an increase of approximately $1.7 million of costs incurred to prepare for the potential commercial sale of Multikine. During the year ended September 30, 2023, general and administrative expenses decreased by approximately $1.7 million, or 16%, compared to the year ended September 30, 2022. This decrease is primarily due to a decrease in employee stock compensation expense of approximately $2.2 million offset by a $0.5 million increase in other net general and administrative expenses. During the years ended September 30, 2023 and 2022, CEL-SCI recorded a derivative gain of approximately $0.0 million and a gain of approximately $0.4 million, respectively. This variation was the result of no fair value adjustments made during the period since all of the derivative warrants expired during the year ended September 30, 2022. No derivative gains or losses were recorded during the year ended September 30, 2023. Net interest expense decreased by approximately $0.4 million for the year ended September 30, 2023 compared to the year ended September 30, 2022. This decrease is primarily due to the Company earning approximately $0.3 million more in interest income and approximately $0.1 million less in interest expense from its finance leases during the year ended September 30, 2023 compared to the year ended September 30, 2022. ### Research and Development Expenses CEL-SCI’s research and development efforts involved Multikine and LEAPS. The table below shows the research and development expenses associated with each project during the reporting periods. | | Year ended September 30, 2023 | 2022 | | --- | ---: | ---: | | Multikine | $22,098,222 | $24,251,629 | | LEAPS | 373,274 | 1,103,717 | | Total research and development | $22,471,496 | $25,355,346 | CEL-SCI’s Phase III clinical trial began in December 2010 after the completion and validation of CEL-SCI’s dedicated manufacturing facility. The Phase III clinical trial was fully enrolled in September 2016, reached its primary endpoint in April 2020 and achieved database lock in December 2020. The data was unblinded in June 2021, the primary endpoint results were announced in June 2021, additional data was presented at ASCO 2022, ESMO 2022, ECHNO 2023, ESTRO 2023 and ESMO 2023. As part of CEL-SCI’s global regulatory approval strategy, CEL-SCI concurrently plans to pursue filings for marketing authorization in the United States, Canada, United Kingdom and Europe. 52 As explained in Item 1 of this report, clinical and other studies necessary to obtain regulatory approval of a new drug involve significant costs and require several years to complete. The extent of the Company’s clinical trials and research programs are primarily based upon the amount of capital available to the Company and the extent to which the Company has received regulatory approvals for clinical trials. The inability of the Company to conduct clinical trials or research, whether due to a lack of capital or regulatory approval, will prevent the Company from completing the studies and research required to obtain regulatory approval for any products which the Company is developing. Without regulatory approval, the Company will be unable to sell any of its products. Since all of the Company’s projects are under development, the Company cannot predict when it will be able to generate any revenue from the sale of any of its products. ### Liquidity and Capital Resources CEL-SCI has had only limited revenues from operations since its inception in March 1983. CEL-SCI has relied primarily upon capital generated from the public and private offerings of its common stock and convertible notes. In addition, CEL-SCI has utilized short-term loans to meet its capital requirements. Capital raised by CEL-SCI has been used to acquire an exclusive worldwide license to use, and later purchase, certain patented and unpatented proprietary technology and know-how relating to the human immunological defense system and for clinical trials. Capital has also been used for patent applications, debt repayment, research and development, administrative costs, and for CEL-SCI’s laboratory and manufacturing facilities. CEL-SCI does not anticipate realizing significant revenues until it enters into licensing arrangements regarding its technology and know-how or until it receives regulatory approval to sell its products (which could take a number of years). As a result, CEL-SCI has been dependent primarily upon the proceeds from the sale of its securities to meet all of its liquidity and capital requirements and anticipates having to do so in the future. During fiscal year 2023 and 2022, CEL-SCI raised net proceeds of approximately $6.4 million and $0.1 million, respectively, through a combination of the sale of common stock and the exercise of warrants and options. In August 2007, CEL-SCI leased a building near Baltimore, Maryland. The building, which consists of approximately 73,000 square feet, has been remodeled in accordance with CEL-SCI’s specifications so that it can be used by CEL-SCI to manufacture Multikine for CEL-SCI’s Phase III clinical trials and sales of the drug if approved by the FDA. The lease expires on October 31, 2028, and required annual base rent payments of approximately $2.6 million during the twelve months ended September 30, 2023. See Item 2 of this report for more information concerning the terms of this lease. The following charts list the warrants that were exercised and the proceeds received during the years ended September 30, 2023 and 2022. #### Fiscal Year 2023 | Warrants | Warrants Exercised | Exercise Price | Proceeds | | --- | ---: | ---: | ---: | | Series RR | 17,752 | $1.65 | $29,291 | | Series SS | 200,000 | $2.09 | 418,000 | | | 217,752 | | $447,291 | 53 #### Fiscal Year 2022 | Warrants | Warrants Exercised | Exercise Price | Proceeds | | --- | ---: | ---: | ---: | | Series CC | 15,205 | $5.00 | $76,025 | | Series NN | 10,000 | $2.52 | 25,200 | | | 25,205 | | $101,225 | During the year ended September 30, 2023, the Company’s cash decreased by approximately $18.5 million. The significant component of this decrease included cash used to fund the Company’s regular operations of approximately $22.8 million, which includes the approximate $2.3 million deposit made to the Company’s landlord as a result of falling below certain cash requirements per the San Tomas lease. Other components of this decrease include approximately $0.4 million used to make leasehold improvements and acquire research and development equipment, and approximately $1.6 million in payments on the Company’s finance leases. These decreases were offset by approximately $5.8 million and $0.5 million of cash received from issuance of common stock and exercise of warrants, respectively. During the year ended September 30, 2022, the Company used approximately $19.6 million, or approximately $1.6 million per month, in cash, after considering the maturity and transfer to cash of the remaining $6.2 million in U.S. Treasury bills (T-bills). Significant components of this decrease include cash used to fund the Company’s regular operations of approximately $18.2 million, the purchase of property and equipment for approximately $0.6 million, approximately $0.2 million in share issuance costs and approximately $1.4 million in lease payments. These outflows are offset by approximately $0.8 million in lease incentives received from the landlord to partially offset costs of the manufacturing facility upgrade. During the year ended September 30, 2023, 217,752 warrants were exercised at a weighted average exercise price of $2.05 for total proceeds of approximately $0.45 million. Prepaid expenses decreased by approximately $0.2 million during the year ended September 30, 2023 as compared to September 30, 2022 primarily due to the timing of payments and recognition of related expenses. Supplies are purchased for use in the Company’s manufacturing and R&D efforts. During the year ended September 30, 2023, the supplies increased by approximately $0.2 million in support of the work to validate and prepare the manufacturing facility to produce Multikine for commercial purposes and before the Company’s Biologics License Application (BLA) can be submitted to the FDA. Primarily as a result of CEL-SCI’s losses incurred to date, its expected continued future losses, and limited cash balances, CEL-SCI has included a disclosure in its financial statements expressing substantial doubt about its ability to continue as a going concern. CEL-SCI has included this disclosure on numerous occasions in the preceding years. #### Future Capital Requirements CEL-SCI’s material capital commitments include funding operating losses, funding its research and development program and making required lease payments. Additionally, the Company recently completed upgrading the manufacturing facility to prepare for the potential commercial production of Multikine. Total costs of this upgrade were approximately $11.1 million. The landlord of the property agreed to finance the final $2.4 million of costs and allow for the repayment through increased lease payments which began on March 1, 2021. As of September 30, 2022, the landlord had provided approximately all $2.4 million of the agreed funding. Because of the change in lease payments, the new financing arrangement was considered a lease modification. 54 For information on employment contracts, see Item 11 of this report. Further, CEL-SCI has contingent obligations with vendors for work that will be completed in relation to the Phase III trial. The timing of these obligations cannot be determined at this time. CEL-SCI estimates it will incur additional expenses of approximately $0.7 million for the filing of the clinical study report with the FDA. It should be noted that this estimate is based only on the information currently available from the CROs responsible for managing the Phase III clinical trial and does not include other related costs, e.g., the manufacturing of the drug. CEL-SCI will need to raise additional funds, either through debt or equity financings or a partnering arrangement, to bring Multikine to market. The ability of CEL-SCI to complete the necessary clinical trials and obtain FDA approval for the sale of products to be developed on a commercial basis is uncertain. However, it is possible that CEL-SCI will not be able to generate enough cash to continue operations at its current level. CEL-SCI’s management has engaged in fundraising for over 25 years and believes that the manner in which it is proceeding will produce the best possible outcome for the shareholders. There can be no assurances that CEL-SCI will be successful in raising additional funds. Clinical and other studies necessary to obtain regulatory approval of a new drug involve significant costs and require several years to complete. The extent of CEL-SCI’s clinical trials and research programs are primarily based upon the amount of capital available to CEL-SCI and the extent to which CEL-SCI has received regulatory approvals for clinical trials. The inability of CEL-SCI to conduct clinical trials or research, whether due to a lack of capital or regulatory approval, will prevent CEL-SCI from completing the studies and research required to obtain regulatory approval for any products which CEL-SCI is developing. Without regulatory approval, CEL-SCI will be unable to sell any of its products. In the absence of revenues, CEL-SCI will be required to raise additional funds through the sale of securities, debt financings or other arrangements in order to continue with its research efforts. However, there can be no assurance that such financing will be available or be available on favorable terms. Ultimately, CEL-SCI must complete the development of its products, obtain appropriate regulatory approvals and obtain sufficient revenues to support its cost structure. Since all of CEL-SCI’s projects are under development, CEL-SCI cannot predict with any certainty the funds required for future research and clinical trials, the timing of future research and development projects, or when it will be able to generate any revenue from the sale of any of its products. CEL-SCI's cash flow and earnings are subject to fluctuations due to changes in interest rates on its bank accounts, and, to an immaterial extent, foreign currency exchange rates. ### Critical Accounting Policies CEL-SCI's significant accounting policies are more fully described in Note 3 to the financial statements included as part of this report. However, certain accounting policies are particularly important to the portrayal of CEL-SCI’s financial position and results of operations and require the application of significant judgments by management. As a result, the financial statements are subject to an inherent degree of uncertainty. In applying those policies, management uses its judgment to determine the appropriate assumptions to be used in the determination of certain estimates. These estimates are based on CEL-SCI's historical experience, terms of existing contracts, observance of trends in the industry and information available from outside sources, as appropriate. Management believes that the following critical accounting policies require the most significant judgments and estimates with respect to the preparation of CEL-SCI’s financial statements. 55 *Lease Accounting –*The measurement of the finance and operating lease right-of-use asset and lease liabilities requires the determination of an estimated lease term and an incremental borrowing rate, which involves complex judgment by management. The determination of the incremental borrowing rates for new and modified lease contracts is a critical accounting policy. Significant judgment is required by management to develop inputs and assumptions used to determine the incremental borrowing rate for lease contracts. *Share-based Compensation–* Share-based compensation cost to employees and nonemployees is measured at fair value as of the grant date in accordance with the provisions of ASC 718. The fair value of the stock options is calculated using the Black-Scholes option pricing model. The Black-Scholes model requires various judgmental assumptions including volatility and expected option life. The compensation cost is recognized as expense over the requisite service or vesting period. Performance-based options are valued using a Monte-Carlo simulation model, which requires inputs based on estimates, including the likelihood of the occurrence of performance and market conditions, volatility and expected option life. *Impairment of long-lived assets –* CEL-SCI’s fixed assets are made up of leasehold improvements, furniture, and equipment. ASC 360-10 requires that a long-lived asset group be reviewed for impairment only when events or changes in circumstances indicate that the carrying amount of the long-lived asset (group) might not be recoverable. CEL-SCI’s recurring losses are a triggering event that could indicate impairment of long-lived assets such as fixed assets. CEL-SCI reviews these assets in accordance with ASC 360-10-35-21 to determine if events or changes in circumstances indicate the existence of impairment. If indicators of impairment exist, the Company tests for recoverability, then, if necessary, measures and records the impairment. The amount of the impairment loss would be the amount by which the carrying amount of the asset (group) exceeds its fair value. ## Controls and procedures As filed, 5,939 characters. #### Evaluation of Disclosure Controls and Procedures Under the direction and with the participation of CEL-SCI’s management, including CEL-SCI’s Chief Executive Officer and Chief Financial Officer, CEL-SCI carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures as of September 30, 2023. CEL-SCI maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its periodic reports with the Securities and Exchange Commission is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and regulations, and that such information is accumulated and communicated to CEL-SCI’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. CEL-SCI’s disclosure controls and procedures are designed to provide a reasonable level of assurance of reaching its desired disclosure control objectives. CEL-SCI’s Chief Executive and Principal Financial Officer has concluded that, due to the material weaknesses described below, CEL-SCI’s disclosure controls and procedures were not effective as of September 30, 2023. ### Management’s Report on Internal Control over Financial Reporting CEL-SCI’s management is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal control over financial reporting. As defined by the Securities and Exchange Commission, internal control over financial reporting is a process designed by, or under the supervision of CEL-SCI’s principal executive officer and principal financial officer and implemented by CEL-SCI’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of CEL-SCI’s financial statements in accordance with U.S. generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Under the supervision and with the participation of management, including CEL-SCI’s Chief Executive and Principal Financial Officer, CEL-SCI evaluated the effectiveness of its internal control over financial reporting as of September 30, 2023 based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, or the COSO Framework. Management’s assessment included an evaluation of the design of CEL-SCI’s internal control over financial reporting and testing of the operational effectiveness of those controls. CEL-SCI's Chief Executive and Financial Officer concluded that as of such date, CEL-SCI's internal control over financial reporting was not effective. #### Material Weaknesses in Internal Control Over Financial Reporting A material weakness (as defined in Rule 12b-2 under the Exchange Act) is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of CEL-SCI’s annual or interim financial statements will not be prevented or detected on a timely basis. As previously reported, the Company did not maintain effective information technology general controls related to logical access within certain information technology systems that support our financial reporting process. As a result of this material weakness, certain activity level controls that are dependent on information derived from these information technology systems were also deemed to be ineffective. This material weakness continues to exist as of September 30, 2023. In addition, CEL-SCI identified a material weakness related to the operating effectiveness of certain management review controls. As of September 30, 2023, CEL-SCI has remediated the vast majority of these; however, not enough time has passed to ensure the operating effectiveness. #### Remediation of Material Weaknesses In order to remediate these material weaknesses, CEL-SCI will continue to (i) evaluate and implement enhanced process controls around the logical access to information technology systems and (ii) enhance the operating effectiveness of management review controls. CEL-SCI is committed to maintaining a strong internal control environment and implementing measures designed to help ensure that control deficiencies contributing to the material weaknesses are remediated as soon as possible. Notwithstanding the material weaknesses described above, CEL-SCI’s management has concluded that the consolidated financial statements included in this Annual Report on Form 10-K present fairly, in all material respects, our financial position, results of operations and cash flows in conformity with GAAP. 57 #### Changes in Internal Control over Financial Reporting CEL-SCI changed certain control activities over financial reporting in order to remediate certain material weaknesses that existed as of September 30, 2023. CEL-SCI implemented the following: (i) evaluating and implementing enhanced process controls around the logical access to information technology systems and (ii) enhancing the operating effectiveness of management review controls. Other than as described above, there have been no other changes in CEL-SCI’s internal control over financial reporting occurred during the fiscal year ended September 30, 2023 that has materially affected, or is reasonably likely to materially affect, CEL-SCI’s internal control over financial reporting. Filed Dec 21, 2023. Source: SEC EDGAR, the filing index for accession 0001654954-23-015877. Last ingested by Listed: Oct 24, 2026, 14:55 ET. No prices; not investment advice.