SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): January 7, 2003
CEL-SCI CORPORATION
(Exact name of Registrant as specified in its charter)
Colorado 0-11503 84-0916344
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
8229 Boone Blvd. #802
Vienna, VA 22182
(Address of principal executive offices, including Zip Code)
Registrant's telephone number, including area code: (703) 506-9460
N/A
(Former name or former address if changed since last report)
Item 5. Other Events and Regulation FD Disclosure
On January 7, 2003, CEL-SCI sold Series H convertible notes, plus Series H
warrants, to a group of private investors for $600,000. The notes bear interest
at 7% per year, are due and payable on January 7, 2005 and are secured by
substantially all of CEL-SCI's assets. Interest is payable quarterly with the
first interest payment due on April 1, 2003. If CEL-SCI fails to make any
interest payment when due, the notes will become immediately due and payable.
At the holder's option the Series H notes are convertible into shares of
CEL-SCI's common stock equal in number to the amount determined by dividing each
$1,000 of note principal to be converted by the Conversion Price. The Conversion
Price is 76% of the average of the three lowest daily trading prices of
CEL-SCI's common stock on the American Stock Exchange during the 15 trading days
immediately prior to the conversion date. The Conversion Price may not be less
than $0.16. However, if CEL-SCI's common stock trades for less than $0.21 per
share for a period of 20 consecutive trading days, the $0.16 minimum price will
no longer be applicable. The Conversion Price will decline to 70% if the
registration statement which the Company has agreed to file with the Securities
and Exchange Commission has not been declared effective within 60 days after the
date the registration statement is filed, or (ii) the closing price of CEL-SCI's
common stock equals or exceeds $.50 on any trading day. The Conversion Price
will increase to 76% on the trading day following the date that the closing
price of CEL-SCI's common stock falls below $.50. The Conversion Price will
decline to 60% if (i) the registration statement which CEL-SCI has agreed to
file with the Securities and Exchange Commission has not been declared effective
within 75 days after the date the registration statement was filed, (ii) CEL-SCI
defaults in the performance of any material covenant, condition or agreement
with the holders of the notes or, (iii) CEL-SCI's common stock is delisted from
the American Stock Exchange.
If CEL-SCI sells any additional shares of common stock, or any securities
convertible into common stock at a price below the then applicable Conversion
Price, the Conversion Price will be lowered to the price at which the shares
were sold or the lowest price at which the securities are convertible, as the
case may be. If CEL-SCI sells any additional shares of common stock, or any
securities convertible into common stock at a price below the market price of
CEL-SCI's common stock, the Conversion Price will lowered by a percentage equal
to the price at which the shares were sold or the lowest price at which the
securities are convertible, as the case may be, divided by the then prevailing
market price of CEL-SCI's common stock. However the Conversion Price will not be
adjusted as the result of shares issued in connection with a Permitted
Financing. A Permitted Financing involves shares of common stock issued or sold:
- in connection with a merger or acquisition;
- upon the exercise of options or the issuance of common stock to
CEL-SCI's employees, officers, directors, consultants and
vendors in accordance with the Company's equity incentive
policies;
- pursuant to the conversion or exercise of securities which were
outstanding prior to January 7, 2003;
- pursuant to CEL-SCI's equity line of credit;
- to key officers of CEL-SCI in lieu of their respective salaries.
CEL-SCI has agreed to file a registration statement with the Securities
and Exchange Commission in order that the shares of common stock issuable upon
the conversion of the Series H notes or the exercise of the Series H warrants
may be resold in the public market. Upon the effective date of this registration
statement the holders of the Series H notes have agreed to purchase an
additional $750,000 of convertible notes from CEL-SCI. The additional $750,000
of notes will have the same terms as the Series H notes sold in January 2003.
CEL-SCI's agreement with the Series H note holders places the following
restrictions on CEL-SCI's operations. Any of the following restrictions may be
waived with the written consent of the holders of a majority of the principal
amount of the Series H notes outstanding at the time the consent is required.
o So long as the Series H notes are outstanding, and except as required by
the terms of CEL-SCI's Series E Preferred stock, CEL-SCI may not:
- declare or pay any dividends (other than a stock dividend or
stock split) or make any distributions to any holders of its
common stock, or
- purchase or otherwise acquire for value, directly or indirectly,
any common or preferred stock.
o Until the date that 50% of the Series H notes are no longer outstanding
CEL-SCI may not sell any common stock or any securities convertible into
common stock. However, this restriction will not apply to shares issued in
a Permitted Financing.
o If CEL-SCI maintains a balance of less than $1,000,000 in its bank account
in any month, it may draw down the maximum amount allowable for such month
under its equity line of credit. If CEL-SCI maintains a balance of greater
than $1,000,000 in its bank account in any month, it may only draw down a
maximum of $235,000 per month under the equity line of credit. The minimum
balance requirement will be increased to $1,500,000 when 50% of the balance
of each Series H note is no longer outstanding and 50% of all of the notes
in the aggregate are no longer outstanding.
So long as the Series H notes remain outstanding, the note holders will
have a first right of refusal to participate in any subsequent financings
involving CEL-SCI. If CEL-SCI enters into any subsequent financing on terms more
favorable than the terms governing the notes and warrants, then the Series H
note holders may exchange their notes and warrants for the securities sold in
the subsequent financing.
Upon the occurrence of any of the following events CEL-SCI is required to
redeem the Series H notes at a price equal to 130% of then outstanding principal
balance of the notes:
- the suspension from listing or the failure of CEL-SCI's common
stock to be listed on the American Stock Exchange for a period
of five consecutive trading days; or
- the Registration Statement which CEL-SCI has agreed to file with
the Securities and Exchange Commission has not been declared
effective by April 7, 2003.
- the effectiveness of the Registration Statement lapses for any
reason or the Registration Statement is unavailable to the note
holders and the lapse or unavailability continues for a period
of ten consecutive trading days, provided the cause of the lapse
or unavailability is not due to factors primarily within the
control of the note holders.
- any representation or warranty made by CEL-SCI to the note
holders proves to be materially inaccurate or CEL-SCI fails to
perform any material covenant or condition in its agreement with
the note holders.
- the completion of a merger or other business combination
involving CEL-SCI and as a result of which CEL-SCI is not the
surviving entity.
- a purchase, tender or exchange offer accepted by the holders of
more than 30% of CEL-SCI's outstanding shares of common stock.
- CEL-SCI's shareholders fail to approve the issuance of the
shares of CEL-SCI's common stock upon the conversion of the
Series H notes or the exercise of the Series H warrants
- CEL-SCI files for protection from its creditors under the
federal bankruptcy code.
- CEL-SCI exceeds its draw down limits under it equity line of
credit.
The Series H warrants allow the holders to initially purchase up to
1,100,000 shares of CEL-SCI's common stock at a price of $0.25 per share at any
time prior to January 7, 2010.
If CEL-SCI sells any additional shares of common stock, or any securities
convertible into common stock at a price below the then applicable exercise
price of the Series H warrants, the warrant exercise price will be lowered to
the price at which the shares were sold or the lowest price at which the
securities are convertible, as the case may be. If the warrant exercise price is
adjusted, the number of shares of common stock issuable upon the exercise of the
warrant will be increased by the product of the number of shares of common stock
issuable upon the exercise of the warrant immediately prior to the sale
multiplied by the percentage by which the warrant exercise price is reduced.
If CEL-SCI sells any additional shares of common stock, or any securities
convertible into common stock at a price below the market price of CEL-SCI's
common stock, the exercise price of the Series H warrants will be lowered by a
percentage equal to the price at which the shares were sold or the lowest price
at which the securities are convertible, as the case may be, divided by the then
prevailing market price of CEL-SCI's common stock. If the warrant exercise price
is adjusted, the number of shares of common stock issuable upon the exercise of
the warrant will be increased by the product of the number of shares of common
stock issuable upon the exercise of the warrant immediately prior to the sale
multiplied by the percentage determined by dividing the price at which the
shares were sold by the market price of CEL-SCI's common stock on the date of
sale.
However, neither the exercise price of the Series H warrants nor the
shares issuable upon the exercise of the warrant will be adjusted as the result
of shares issued in connection with a Permitted Financing.
On the date that the registration statement which CEL-SCI has agreed to
file is declared effective by the Securities and Exchange Commission, and every
three months following the effective date, the exercise price of the Series H
warrants will be adjusted to an amount equal to 110% of the Conversion Price on
such date, provided that the adjusted price is lower than the warrant exercise
price on that date.
Item 7. Financial Statements and Exhibits
Exhibit Number Description
10 Note and Warrant Purchase Agreement (together with
schedule required by Instruction 2 to Item 601 of
Regulation S-K) pertaining to Series H notes and
warrants, together with the following exhibits to
the Note and Warrant Purchase Agreement:
A. List of Investors
B. Form of Note
C. Form of Warrant
D. Form of Escrow Agreement
E. Transfer Agent Instructions
F. Form of Legal Opinion
G. Form of Security Agreement
H. Form of Lock-Up Agreement
I. Form of Registration Rights Agreement
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: January 13, 2003
CEL-SCI CORPORATION
By: /s/ Geert R. Kersten
Geert R. Kersten, Chief Executive Officer