CELSCISci Corp Reports Operating Results (10-Q)

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Feb 09, 2011
CELSCISci Corp (CVM, Financial) filed Quarterly Report for the period ended 2010-12-31.

Celsci Corp. has a market cap of $146.7 million; its shares were traded at around $0.7175 with and P/S ratio of 959.2. Celsci Corp. had an annual average earning growth of 10.2% over the past 5 years.

Highlight of Business Operations:

The Company has two partners who have agreed to participate in and pay for part

of the Phase III clinical trial for Multikine. The Company has substantial

capital for its operations and can raise another $30 million under the sales

agreement with McNicoll Lewis & Vlak, LLC (MLV) (see Note I). On December 29,

2010, the Company announced that it has commenced the Phase III clinical trial

for Multikine. The net cost to the Company of the Phase III clinical trial is

estimated to be $25 - $26 million.



During the three-month period ended December 31, 2010, the Company's cash

decreased by $5,714,472, which includes approximately $2.1 million in

prepayments for the Phase III clinical trial which the Company expects to be

used during fiscal year 2011, compared to an increase in cash of $2,473,363

during the three months ended December 31, 2009. For the three months ended

December 31, 2010 and 2009, cash used in operating activities totaled $6,434,536

and $3,678,783, respectively. For the three months ended December 31, 2010 and

2009, cash provided by financing activities totaled $749,794 and $6,157,450,

respectively. Cash used by investing activities was $29,730 and $5,304,

respectively, for the three months ended December 31, 2010 and 2009. The use of

cash in investing activities consisted primarily of purchases of equipment and

legal costs incurred in patent applications.



In August 2007, the Company leased a building near Baltimore, Maryland. The

building, which consists of approximately 73,000 square feet, was remodeled in

accordance with the Company specifications so that it can be used by the Company

to manufacture Multikine for the Company's Phase III clinical trial and sales of

the drug if approved by the FDA. The lease is for a term of twenty years and

required an annual base rent payments of $1,575,000 during the first year of the

lease. The annual base rent escalates each year at 3%. The Company is also

required to pay all real and personal property taxes, insurance premiums,

maintenance expenses, repair costs and utilities. The lease allows the Company,

at its election, to extend the lease for two ten-year periods or to purchase the

building at the end of the 20-year lease. The lease required the Company to pay

$3,150,000 towards the remodeling costs, which will be recouped by reductions in

the annual base rent of $303,228 in years six through twenty of the lease. On

January 24, 2008, a second amendment to the lease for the manufacturing facility

was signed. In accordance with the amendment, the Company was required to pay

the following: 1) an additional $518,790 for movable equipment, which increased

restricted cash, and 2) an additional $1,295,528 into the escrow account to

cover additional costs, which increased deferred rent. These funds were

transferred in early February 2008. In April 2008, an additional $288,474 was

paid toward the completion of the manufacturing facility. The Company took

possession of the manufacturing facility in October of 2008. An additional

$505,225 was paid for the completion of the work on the manufacturing facility

in October 2008. During the three months ended December 31, 2009, an additional

$32,059 was paid for final completion costs.



In December 2008, the Company was not in compliance with certain lease

requirements (i.e., failure to pay an installment of Base Annual Rent). However,

the landlord did not declare the Company to be in default, but instead

renegotiated the lease. In January 2009, as part of an amended lease agreement

on the manufacturing facility, the Company repriced the 3,000,000 warrants

issued to the landlord in July 2007 at $1.25 per share which were to expire on

July 12, 2013. These warrants were repriced at $0.75 per share and expire on

January 26, 2014. The cost of this repricing and extension of the warrants was

$70,515. In addition, 787,500 additional warrants were given to the landlord on

the same date. The warrants are exercisable at a price of $0.75 per share and

will expire on January 26, 2014. The cost of these warrants was $45,207. During

the three months ended June 30, 2009, the Company issued the landlord an

additional 2,296,875 warrants in accordance with an amendment to the lease.

These warrants were issued at a price of $0.75 and will expire between March 31,

2014 and June 30, 2014. These warrants were valued at $251,172 using the Black

Scholes method. The Company is currently in compliance with the lease.



During the three months ended December 31, 2010, revenue increased by $632,818

compared to the three months ended December 31, 2009. In November 2010, the

Company received a $733,437 grant under The Patient Protection and Affordable

Care Act of 2010 (PPACA). The grant was related to three of the Company's

projects, including the Phase III trial of Multikine. The PPACA provides small

and mid-sized biotech, pharmaceutical and medical device companies with up to a

50% tax credit for investments in qualified therapeutic discoveries for tax

years 2009 and 2010, or a grant for the same amount tax-free. The tax

credit/grant program covers research and development costs from 2009 and 2010

for all "qualifying therapeutic discovery projects." The Company recognizes

revenue as the expenses are incurred. The amount of the grant earned during the

three months ended December 31, 2010 was $640,385.



Three Months Ended December 31,

2010 2009

- -

MULTIKINE $3,075,120 $2,296,333

L.E.A.P.S 189,308 508,794

- -

TOTAL $3,264,428 $2,805,127

= =



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