Edgar Filing: CEL SCI CORP

As filed with the Securities and Exchange Commission on February __, 2005.

Registration No 333-109070

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-1

POST-EFFECTIVE
AMENDMENT NO. 2

Registration Statement
Under
THE SECURITIES ACT OF 1933

CEL-SCI Corporation
-----------------------------------------
(Exact name of registrant as specified in charter)

Colorado
-----------------------
(State or other jurisdiction of incorporation)

8229 Boone Blvd. #802
Vienna, Virginia 22182
84-09l6344 (703) 506-9460
---------------------------- -------------------------------------------
(IRS Employer I.D. Number (Address, including zip code, and telephone
number including area of principal executive
offices)

Geert Kersten
8229 Boone Blvd. #802
Vienna, Virginia 22182
(703) 506-9460
------------------------------
(Name and address, including zip code, and telephone number,
including area code, of agent for service)

Copies of all communications, including all communications sent
to the agent for service, should be sent to:

William T. Hart, Esq.
Hart & Trinen
1624 Washington Street
Denver, Colorado 80203
(303) 839-0061

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date
of this Registration Statement

If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]

If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

CALCULATION OF REGISTRATION FEE

Title of each Proposed Proposed
Class of Maximum Maximum
Security Securities Offering Aggregate Amount of
to be to be Price Per Offering Registration
Registered Registered Share (3) Price Fee
---------- ---------- ----------- --------- ------------

Common stock (1) 14,000,000 $0.81 $11,340,000 $1,044
------------------------------------------------------------------------------
Common stock (2) 395,726 $0.81 $320,538 30

------------------------------------------------------------------------------
Total $11,660,538 $1,074
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(1) Represents shares issuable to Rubicon Group Ltd. under the equity line of
credit.
(2) Represents shares issuable upon the exercise of warrants held by Rubicon
Group Ltd.
(3) Offering price computed in accordance with Rule 457(c).

Pursuant to Rule 416, this Registration Statement includes such
indeterminate number of additional securities as may be required for issuance
upon the exercise of the warrants as a result of any adjustment in the number of
securities issuable by reason of stock splits or similar capital
reorganizations.

The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of l933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

PROSPECTUS Rule 424(b)(3)
File No. 333-109070

CEL-SCI CORPORATION

Common Stock

This prospectus may be used only in connection with sales of approximately
11,700,000 shares of the common stock of CEL-SCI Corporation by Rubicon Group
Ltd. Rubicon Group will sell shares of common stock purchased from CEL-SCI under
an equity line of credit agreement and up to 395,726 shares of common stock
which may be issued upon the exercise of warrants. The warrants were issued to
Rubicon Group upon the signing of the equity line of credit agreement. CEL-SCI
will pay for the expenses of this offering. Rubicon Group Ltd. is an
"underwriter" as that term is defined in the Securities Act of 1933.

CEL-SCI's common stock is quoted on the American Stock Exchange under the
symbol "CVM." On January __, 2005 the closing price for one share of the
CEL-SCI's common stock was $____.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.

These securities are speculative and involve a high degree of risk. For a
description of certain important factors that should be considered by
prospective investors, see "Risk Factors" beginning on page 5 of this Prospectus

The date of this prospectus is January __, 2005

PROSPECTUS SUMMARY

THIS SUMMARY IS QUALIFIED BY THE MORE DETAILED INFORMATION APPEARING ELSEWHERE
IN THIS PROSPECTUS.

CEL-SCI

CEL-SCI Corporation was formed as a Colorado corporation in 1983. CEL-SCI
is involved in the research and development of certain drugs and vaccines.
CEL-SCI manufactures MULTIKINE(R), its first, and main product, using CEL-SCI's
proprietary cell culture technologies. CEL-SCI is testing MULTIKINE to determine
if it is effective in creating an anti-cancer immune response in head and neck
cancer patients.

CEL-SCI also owns a pre-clinical technology called L.E.A.P.S. (Ligand
Epitope Antigen Presentation System). The lead product derived from this
technology is the CEL-1000 peptide which has shown protection in animals against
herpes, malaria and cancer. With the help of government grants and US Army and
US Navy collaborations, CEL-1000 is now being tested against viral encephalitis,
West Nile Virus, SARS, Vaccinia, Smallpox, herpes, malaria and other agents. If
the bio-terrorism tests are successful, CEL-SCI is likely to push CEL-1000 for
potential bio-terrorism disease indications to gain accelerated approval.

Before human testing can begin with respect to a drug or biological
product, preclinical studies are conducted in laboratory animals to evaluate the
potential efficacy and the safety of a product. Human clinical studies generally
involve a three-phase process. The initial clinical evaluation, Phase I,
consists of administering the product and testing for safe and tolerable dosage
levels. Phase II trials continue the evaluation of safety and determine the
appropriate dosage for the product, identify possible side effects and risks in
a larger group of subjects, and provide preliminary indications of efficacy.
Phase III trials consist of testing for actual clinical efficacy within an
expanded group of patients at geographically dispersed test sites.

CEL-SCI has funded the costs associated with the clinical trials relating
to CEL-SCI's technologies, research expenditures and CEL-SCI's administrative
expenses with the public and private sales of shares of CEL-SCI's common stock
and borrowings from third parties, including affiliates of CEL-SCI.

All of CEL-SCI's products are in the development stage. As of January 10,
2005, CEL-SCI was not receiving any revenues from the sale of MULTIKINE or any
other products which CEL-SCI was developing.

CEL-SCI does not expect to develop commercial products for several years,
if at all. CEL-SCI has had operating losses since its inception, had an
accumulated deficit of approximately $(90,750,000) at September 30, 2004 and
expects to incur substantial losses for the foreseeable future.

CEL-SCI's executive offices are located at 8229 Boone Blvd., #802, Vienna,
Virginia 22182, and its telephone number is (703) 506-9460.

THE OFFERING

Securities Offered:

In order to provide a possible source of funding for CEL-SCI's current
activities and for the development of its current and planned products, CEL-SCI
has entered into an equity line of credit agreement with Rubicon Group Ltd.

Under the equity line of credit agreement, Rubicon Group has agreed to
provide CEL-SCI with up to $10,000,000 of funding during the twenty four-month
period following the date of this prospectus. During this twenty four-month
period, CEL-SCI may request a drawdown under the equity line of credit by
selling shares of its common stock to Rubicon Group, and Rubicon Group will be
obligated to purchase the shares. The minimum amount CEL-SCI can draw down at
any one time is $100,000, and the maximum amount CEL-SCI can draw down at any
one time will be determined at the time of the drawdown request using a formula
contained in the equity line of credit agreement. CEL-SCI may request a drawdown
once every 24 trading days, although CEL-SCI is under no obligation to request
any drawdowns under the equity line of credit.

During the 22 trading days following a drawdown request, CEL-SCI will
calculate the amount of shares it will sell to Rubicon Group and the purchase
price per share. The purchase price per share of common stock will be based on
the daily volume weighted average price of CEL-SCI's common stock during each of
the 22 trading days immediately following the drawdown date, less a discount of
11%.

CEL-SCI is registering the shares of common stock issuable to Rubicon
Group under the equity line of credit, as well as the 395,726 shares underlying
the warrants that CEL-SCI granted to Rubicon Group. These shares may be offered
for sale from time to time by means of this prospectus by or for the account of
Rubicon Group. CEL-SCI will prepare and file amendments and supplements to this
prospectus as may be necessary in order to keep this prospectus effective as
long as the selling shareholders hold shares of CEL-SCI's common stock or until
these shares can be sold under an appropriate exemption from registration.
CEL-SCI has paid the expenses of registering the shares, including legal fees of
$10,000 payable to Rubicon Group's attorneys, but not the expenses associated
with selling the shares, such as broker discounts and commissions.

As of January 10, 2005, CEL-SCI had sold 307,082 shares of its common
stock to the Rubicon Group under the equity line of credit and had received net
proceeds of $335,910 from the sale of these shares.

As of January 10, 2004, CEL-SCI had 72,269,231 shares of common stock
issued and outstanding. The number of outstanding shares does not give effect to
shares which may be issued pursuant to the equity-line of credit or upon the
exercise and/or conversion of options, warrants or convertible notes. If all

outstanding warrants and convertible securities were exercised and converted,
CEL-SCI would have 86,219,765 outstanding shares of common stock. See
"Comparative Share Data".

CEL-SCI will not receive any proceeds from the sale of the shares by
Rubicon Group. However, CEL-SCI will receive proceeds from any sale of common
stock to Rubicon Group under the equity line of credit agreement and upon the
exercise of warrants held by Rubicon Group, when, and if, it pays the exercise
price in cash. CEL-SCI expects to use substantially all the net proceeds for
general and administrative expenses, research and clinical trials.

Risk Factors: The purchase of the securities offered by
this prospectus involves a high degree of risk. Risk
factors include the lack of revenues and history of
loss, need for additional capital and need for FDA
approval. See the "Risk Factors" section of this
prospectus for additional Risk Factors.

AMEX Symbol: CVM

Summary Financial Data

Results of Operations: Years Ended September 30,
2004 2003
---- ----

Grant Revenue and Other: $ 325,479 $ 318,304
Expenses:
Research and Development 1,941,630 1,915,501
Depreciation and Amortization 198,269 199,117
General and Administrative 2,310,279 2,287,019
Interest Income (51,817) (52,502)
Interest Expense 126,840 2,340,667
------------- -----------
Net Loss (4,199,722) (6,371,498)
Net Loss Attributable to
Common Stockholders $(4,199,722) $(6,480,319)
============ ============

Net loss per common share
(basic and diluted) $(0.06) $(0.13)
============ ============

Weighted average common shares
outstanding 67,273,133 50,961,457
=========== ===========

Balance Sheet Data:
September 30,
---------------------------
2004 2003
---- ----

Working Capital $ 4,592,331 $ 531,742
Total Assets 5,513,810 2,915,206
Convertible Debt * -- 32,882
Note Payable - Covance * -- 184,330

Note Payable - Cambrex* -- 656,076
Total Liabilities 215,981 1,690,100
Stockholders' Equity 5,297,829 1,225,106

* Included in Total Liabilities.

Forward Looking Statements

This prospectus contains various forward-looking statements that are based
on CEL-SCI's beliefs as well as assumptions made by and information currently
available to CEL-SCI. When used in this prospectus, the words "believe",
"expect", "anticipate", "estimate" and similar expressions are intended to
identify forward-looking statements. Such statements may include statements
regarding seeking business opportunities, payment of operating expenses, and the
like, and are subject to certain risks, uncertainties and assumptions which
could cause actual results to differ materially from projections or estimates.
Factors which could cause actual results to differ materially are discussed at
length under the heading "Risk Factors". Should one or more of the enumerated
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those anticipated, estimated
or projected. Investors should not place undue reliance on forward-looking
statements, all of which speak only as of the date made.

RISK FACTORS

Investors should be aware that this offering involves the risks described
below, which could adversely affect the price of CEL-SCI's common stock. In
addition to the other information contained in this prospectus, the following
factors should be considered carefully in evaluating an investment in the shares
offered by this prospectus.

RISKS RELATED TO CEL-SCI

Since CEL-SCI Has Earned Only Limited Revenues and Has a History of Losses,
CEL-SCI Will Require Additional Capital to Remain in Operation.

CEL-SCI has had only limited revenues since it was formed in 1983. Since
the date of its formation and through September 30, 2004 CEL-SCI incurred net
losses of approximately $(90,750,000). During the years ended September 30,
2002, 2003 and 2004 CEL-SCI suffered losses of $(8,342,244), $(6,371,498) and
$(4,199,722) respectively. CEL-SCI has relied principally upon the proceeds of
public and private sales of securities and convertible notes to finance its
activities to date. All of CEL-SCI's potential products are in the early stages
of development, and any commercial sale of these products will be many years
away. Accordingly, CEL-SCI expects to incur substantial losses for the
foreseeable future.

Since CEL-SCI does not intend to pay dividends on its common stock, any return
to investors will come only from potential increases in the price of CEL-SCI's
common stock.

At the present time, CEL-SCI intends to use available funds to finance
CEL-SCI's operations. Accordingly, while payment of dividends rests within the

discretion of the Board of Directors, no common stock dividends have been
declared or paid by CEL-SCI and CEL-SCI has no intention of paying any common
stock dividends.

If CEL-SCI cannot obtain additional capital, CEL-SCI may have to postpone
development and research expenditures which will delay CEL-SCI's ability to
produce a competitive product. Delays of this nature may depress the price of
CEL-SCI's common stock.

Clinical and other studies necessary to obtain approval of a new drug can
be time consuming and costly, especially in the United States, but also in
foreign countries. CEL-SCI's estimates of the costs associated with future
clinical trials and research may be substantially lower than the actual costs of
these activities. The different steps necessary to obtain regulatory approval,
especially that of the Food and Drug Administration, involve significant costs
and may require several years to complete. CEL-SCI expects that it will need
substantial additional financing over an extended period of time in order to
fund the costs of future clinical trials, related research, and general and
administrative expenses. Although CEL-SCI's equity line of credit agreement is
expected to be a source of funding, the amounts which CEL-SCI is able to draw
from the equity line during each drawdown period are limited and may not satisfy
CEL-SCI's capital needs.

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. CEL-SCI
is unable to estimate the future costs of clinical trials since CEL-SCI has not
yet met with the FDA to discuss the design of future clinical trials; and until
the scope of future clinical trials is known, CEL-SCI will not be able to price
any trials with clinical trial organizations.

Over the past three years CEL-SCI's research and development expenditures
have decreased, due in part to the capital available to CEL-SCI. 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.

To raise additional capital CEL-SCI will most likely sell shares of its
common stock or securities convertible into common stock at prices that may be
below the prevailing market price of CEL-SCI's common stock at the time of sale.
The issuance of additional shares will have a dilutive impact on other
stockholders and could have a negative effect on the market price of CEL-SCI's
common stock. Since April 2001 CEL-SCI has sold approximately 34,000,000 shares
of its common stock to private investors at prices that were between 7% and 30%
below the market price of CEL-SCI's common stock at the time of sale.

Any failure to obtain or any delay in obtaining required regulatory
approvals may adversely affect the ability of CEL-SCI or potential licensees to
successfully market any products they may develop.

MULTIKINE is made from components of human blood which involves inherent risks
that may lead to product destruction or patient injury which could materially
harm CEL-SCI's financial results, reputation and stock price.

MULTIKINE is made, in part, from components of human blood. There are
inherent risks associated with products that involve human blood such as
possible contamination with viruses, including Hepatitis or HIV. Any possible
contamination could require CEL-SCI to destroy batches of MULTIKINE or cause
injuries to patients who receive the product thereby subjecting CEL-SCI to
possible financial losses and harm to its business.

Although CEL-SCI has product liability insurance for MULTIKINE, the successful
prosecution of a product liability case against CEL-SCI could have a materially
adverse effect upon its business if the amount of any judgment exceeds CEL-SCI's
insurance coverage.

Although no claims have been brought to date, participants in CEL-SCI's
clinical trials could bring civil actions against CEL-SCI for any unanticipated
harmful effects arising from the use of MULTIKINE or any drug or product that
CEL-SCI may try to develop. Although CEL-SCI believes its insurance coverage of
$2,000,000 per claim is adequate, the defense or settlement of any product
liability claim could adversely affect CEL-SCI even if the defense and
settlement costs did not exceed CEL-SCI's insurance coverage.

CEL-SCI's directors are allowed to issue shares of preferred stock with
provisions that could be detrimental to the interests of the holders of
CEL-SCI's common stock.

The provisions in CEL-SCI's Articles of Incorporation relating to
CEL-SCI's Preferred Stock would allow CEL-SCI's directors to issue Preferred
Stock with rights to multiple votes per share and dividend rights which would
have priority over any dividends paid with respect to CEL-SCI's Common Stock.
The issuance of Preferred Stock with such rights may make more difficult the
removal of management even if such removal would be considered beneficial to
shareholders generally, and will have the effect of limiting shareholder
participation in certain transactions such as mergers or tender offers if such
transactions are not favored by incumbent management.

RISKS RELATED TO GOVERNMENT APPROVALS

CEL-SCI's product candidates must undergo rigorous preclinical and clinical
testing and regulatory approvals, which could be costly and time-consuming and
subject CEL-SCI to unanticipated delays or prevent CEL-SCI from marketing any
products.

Therapeutic agents, drugs and diagnostic products are subject to approval,
prior to general marketing, by the FDA in the United States and by comparable
agencies in most foreign countries. Before obtaining marketing approval,
CEL-SCI's 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 such approvals will be granted.

CEL-SCI cannot be certain when or under what conditions it will undertake
further clinical trials, including a Phase III program for MULTIKINE. The
clinical trials of CEL-SCI's product candidates may not be completed on
schedule, and the FDA or foreign regulatory agencies may order CEL-SCI to stop
or modify its research or these agencies may not ultimately approve any of
CEL-SCI's product candidates for commercial sale. Varying interpretations of the
data obtained from pre-clinical and clinical testing could delay, limit or
prevent regulatory approval of CEL-SCI's product candidates. The data collected
from CEL-SCI's clinical trials may not be sufficient to support regulatory
approval of its various product candidates, including MULTIKINE. For example,
MULTIKINE is now being made by a process that was different from the process
tested in many of CEL-SCI's clinical studies to date. It is possible that the
FDA will require CEL-SCI to conduct additional studies to demonstrate that the
MULTIKINE that it plans to use for its Phase III program is the same as the
product previously tested in CEL-SCI's phase II studies. Even if CEL-SCI
believes the data collected from its clinical trials are sufficient, the FDA has
substantial discretion in the approval process and may disagree with CEL-SCI's
interpretation of the data. In this regard, the FDA is aware of Phase II
clinical study results from US and Canadian studies, but not results from
foreign trials. The foreign data comprises approximately 75% of the subjects
participating in CEL-SCI's Phase II program. CEL-SCI can make no assurances that
the FDA will accept the data from its foreign studies or that the agency would
not require CEL-SCI to conduct more Phase II studies before beginning Phase III
trials. CEL-SCI's failure to adequately demonstrate the safety and efficacy of
any of its product candidates would delay or prevent regulatory approval of its
product candidates, which could prevent CEL-SCI from achieving profitability.

The requirements governing the conduct of clinical trials, manufacturing,
and marketing of CEL-SCI's product candidates, including MULTIKINE, outside the
United States vary widely from country to country. Foreign approvals may take
longer to obtain than FDA approvals and can require, among other things,
additional testing and different trial designs. Foreign regulatory approval
processes include all of the risks associated with the FDA approval processes.
Some of those agencies also must approve prices for products. Approval of a
product by the FDA does not ensure approval of the same product by the health
authorities of other countries. In addition, changes in regulatory policy in the
US or in foreign countries for product approval during the period of product
development and regulatory agency review of each submitted new application may
cause delays or rejections.

In addition to conducting further clinical studies of MULTIKINE and
CEL-SCI's other product candidates, CEL-SCI also must undertake the development
of its manufacturing process and optimize its product formulations. CEL-SCI is
continuing, for example, to develop MULTIKINE to decrease or further
characterize the amount of DNA in MULTIKINE and to develop ways of better
measuring the amount of DNA in the product. CEL-SCI can make no assurances that
it will succeed in decreasing the amount of DNA in MULTIKINE to a level that is
acceptable for product approval or that it can develop a method of measuring the
amount of DNA that the FDA accepts as suitable for approving the marketing of
the product.

CEL-SCI has only limited experience in filing and pursuing applications
necessary to gain regulatory approvals, which may impede its ability to obtain
timely approvals from the FDA or foreign regulatory agencies, if at all. CEL-SCI

will not be able to commercialize MULTIKINE and other product candidates until
it has obtained regulatory approval, and any delay in obtaining, or inability to
obtain, regulatory approval could harm its business. In addition, regulatory
authorities may also limit the types of patients to which CEL-SCI or others may
market MULTIKINE or CEL-SCI's other products.

Even if CEL-SCI obtains regulatory approval for its product candidates, CEL-SCI
will be subject to stringent, ongoing government regulation.

Even if CEL-SCI's products receive regulatory approval, either in the
United States or internationally, it will continue to be subject to extensive
regulatory requirements. These regulations are wide-ranging and govern, among
other things:

o product design, development, manufacture and testing;
o adverse drug experience and other reporting regulations;
o product advertising and promotion;
o product manufacturing, including good manufacturing practice requirements;
o record keeping requirements;
o registration of CEL-SCI's establishments with the FDA and certain state
agencies;
o product storage and shipping;
o drug sampling and distribution requirements;
o electronic record and signature requirements; and
o labeling changes or modifications.

CEL-SCI and any third-party manufacturers or suppliers must continually
adhere to federal regulations setting forth requirements, known as current Good
Manufacturing Practices, or cGMPs, and their foreign equivalents, which are
enforced by the FDA and other national regulatory bodies through their
facilities inspection programs. If CEL-SCI's facilities, or the facilities of
its manufacturers or suppliers, cannot pass a pre-approval plant inspection, the
FDA will not approve the marketing application of CEL-SCI's product candidates.
In complying with cGMP and foreign regulatory requirements, CEL-SCI and any of
its potential third-party manufacturers or suppliers will be obligated to expend
time, money and effort in production, record-keeping and quality control to
ensure that its products meet applicable specifications and other requirements.
State regulatory agencies and the regulatory agencies of other countries have
similar requirements.

CEL-SCI entered into an agreement with Cambrex Bio Science, Inc. whereby
Cambrex agreed to provide CEL-SCI with a facility for the periodic manufacturing
of MULTIKINE in accordance with the cGMPs established by FDA regulations. This
agreement expires on December 31, 2006. If the Cambrex facility were not
available for the production of MULTIKINE, CEL-SCI estimates that it would take
approximately six to ten months to find or build an alternative manufacturing
facility for MULTIKINE. CEL-SCI does not know what cost it would incur to obtain
an alternative source of MULTIKINE.

If CEL-SCI does not comply with regulatory requirements at any stage,
whether before or after marketing approval is obtained, it may be subject to

criminal prosecution, seizure, injuction, fines, or be forced to remove a
product from the market or experience other adverse consequences, including
restrictions or delays in obtaining regulatory marketing approval, which could
materially harm CEL-SCI's financial results, reputation and stock price.
Additionally, CEL-SCI may not be able to obtain the labeling claims necessary or
desirable for product promotion. CEL-SCI may also be required to undertake
post-marketing trials. In addition, if CEL-SCI or other parties identify adverse
effects after any of CEL-SCI's products are on the market, or if manufacturing
problems occur, regulatory approval may be withdrawn and CEL-SCI may be required
to reformulate its products, conduct additional clinical trials, make changes in
its product's labeling or indications of use, or submit additional marketing
applications to support these changes. If CEL-SCI encounters any of the
foregoing problems, its business and results of operations will be harmed and
the market price of our common stock may decline.

Also, the extent of adverse government regulations which might arise from
future legislative or administrative action cannot be predicted. Without
government approval, CEL-SCI will be unable to sell any of its products.

RISKS RELATED TO INTELLECTUAL PROPERTY

CEL-SCI may not be able to achieve or maintain a competitive position and other
technological developments may result in CEL-SCI's proprietary technologies
becoming uneconomical or obsolete.

The biomedical field in which CEL-SCI is involved is undergoing rapid and
significant technological change. The successful development of therapeutic
agents from CEL-SCI's compounds, compositions and processes through
CEL-SCI-financed research, or as a result of possible licensing arrangements
with pharmaceutical or other companies, will depend on its ability to be in the
technological forefront of this field.

Many pharmaceutical and biotechnology companies are developing products
for the prevention or treatment of cancer and infectious diseases including
Introgen Therapeutics, Inc. and ImClone Systems, Inc. which are currently
developing drugs for head and neck cancer. Both Introgen and ImClone, as well as
many other companies working on drugs designed to prevent, cure or treat cancer,
have substantial financial, research and development, and marketing resources
and are capable of providing significant long-term competition either by
establishing in-house research groups or by forming collaborative ventures with
other entities. In addition, smaller companies and non-profit institutions are
active in research relating to cancer and infectious diseases and are expected
to become more active in the future.

CEL-SCI's patents might not protect CEL-SCI's technology from competitors, in
which case CEL-SCI may not have any advantage over competitors in selling any
products which it may develop.

Certain aspects of CEL-SCI's technologies are covered by U.S. and foreign
patents. In addition, CEL-SCI has a number of patent applications pending. There
is no assurance that the applications still pending or which may be filed in the
future will result in the issuance of any patents. Furthermore, there is no
assurance as to the breadth and degree of protection any issued patents might

afford CEL-SCI. Disputes may arise between CEL-SCI and others as to the scope
and validity of these or other patents. Any defense of the patents could prove
costly and time consuming and there can be no assurance that CEL-SCI will be in
a position, or will deem it advisable, to carry on such a defense. Other private
and public concerns, including universities, may have filed applications for, or
may have been issued, patents and are expected to obtain additional patents and
other proprietary rights to technology potentially useful or necessary to
CEL-SCI. The scope and validity of such patents, if any, the extent to which
CEL-SCI may wish or need to acquire the rights to such patents, and the cost and
availability of such rights are presently unknown. Also, as far as CEL-SCI
relies upon unpatented proprietary technology, there is no assurance that others
may not acquire or independently develop the same or similar technology.
CEL-SCI's first MULTIKINE patent expired in 2000. Since CEL-SCI does not know if
it will ever be able to sell MULTIKINE on a commercial basis, CEL-SCI cannot
predict what effect the expiration of this patent will have on CEL-SCI.
Notwithstanding the above, CEL-SCI believes that trade secrets and later issued
patents will protect the technology associated with MULTIKINE.

RISKS RELATED TO THIS OFFERING

Since the market price for CEL-SCI's common stock is volatile, investors in this
offering may not be able to sell any of CEL-SCI's shares at a profit.

The market price of CEL-SCI's common stock, as well as the securities of
other biopharmaceutical and biotechnology companies, have historically been
highly volatile, and the market has from time to time experienced significant
price and volume fluctuations that are unrelated to the operating performance of
particular companies. During the twelve months ended December 31, 2004 CEL-SCI's
stock price has ranged from a low of $0.46 per share to a high of $1.88 per
share. Factors such as fluctuations in CEL-SCI's operating results,
announcements of technological innovations or new therapeutic products by
CEL-SCI or its competitors, governmental regulation, developments in patent or
other proprietary rights, public concern as to the safety of products developed
by CEL-SCI or other biotechnology and pharmaceutical companies, and general
market conditions may have a significant effect on the future market price of
CEL-SCI's common stock.

Shares issuable upon the exercise of options and warrants, or as a result of
sales made in connection with the equity line of credit may substantially
increase the number of shares available for sale in the public market and may
depress the price of CEL-SCI's common stock.

CEL-SCI has outstanding options and warrants which allow the holders to
acquire up to 13,950,534 additional shares of CEL-SCI's common stock. Until the
options and warrants expire, the holders will have an opportunity to profit from
any increase in the market price of CEL-SCI's common stock without assuming the
risks of ownership. Holders of the options and warrants may exercise or convert
these securities at a time when CEL-SCI could obtain additional capital on terms
more favorable than those provided by the options. The exercise of the options
and warrants will dilute the voting interest of the owners of presently
outstanding shares of CEL-SCI's common stock.

CEL-SCI has filed registration statements with the Securities and Exchange
Commission so that the 13,950,534 shares of common stock which are issuable upon
the exercise of outstanding options and warrants may be sold in the public
market. The sale of common stock issued or issuable upon the exercise of the
warrants described above, or the perception that such sales could occur, may
adversely affect the market price of CEL-SCI's common stock.

See the "Comparative Share Data" section of this prospectus for more
information concerning CEL-SCI's outstanding options and warrants.

Equity Line of Credit

An unknown number of shares of common stock, which may be sold by means of
this prospectus, are issuable under an equity line of credit arrangement to
Rubicon Group Ltd. As CEL-SCI sells shares of its common stock to Rubicon Group
under the equity line of credit, and Rubicon Group sells the common stock to
third parties, the price of CEL-SCI's common stock may decrease due to the
additional shares in the market. If CEL-SCI decides to draw down on the equity
line of credit as the price of its common stock decreases, CEL-SCI will be
required to issue more shares of its common stock for any given dollar amount
invested by Rubicon Group, subject to the minimum selling price specified by
CEL-SCI. The more shares that are issued under the equity line of credit, the
more CEL-SCI's then outstanding shares will be diluted and the more CEL-SCI's
stock price may decrease. Any decline in the price of CEL-SCI's common stock may
encourage short sales, which could place further downward pressure on the price
of CEL-SCI's common stock. Short selling is a practice of selling shares which
are not owned by a seller with the expectation that the market price of the
shares will decline in value after the sale.

As consideration for extending the equity line of credit, CEL-SCI granted
Rubicon Group warrants to purchase 395,726 shares of common stock at any time
prior to September 16, 2008 at a price of $0.83 per share. Rubicon Group is not
obligated to exercise any warrants.

See "Equity Line of Credit Agreement" for more information concerning the
equity line.

COMPARATIVE SHARE DATA

Number of Note
Shares Reference

Shares outstanding as of January 10, 2005 72,269,231

Shares to be sold in this Offering:
Shares issuable pursuant to the Equity
Line of Credit Agreement Unknown A

Shares issuable upon exercise of 395,726 A
warrants

The number of shares outstanding as of January 10, 2005 excludes shares
which may be issued in connection with CEL-SCI's line of credit or upon the
exercise of other options, warrants, or convertible securities previously issued
by CEL-SCI. See table below.

Other Shares Which May Be Issued:

The following table lists additional shares of CEL-SCI's common stock
which may be issued as the result of the exercise of other outstanding options
or warrants issued by CEL-SCI:

Number of Note
Shares Reference

Shares issuable upon exercise of warrants 3,114,761 B
held by private investors

Shares issuable upon exercise of options and 10,290,047 C
warrants granted to CEL-SCI's officers,
directors, employees, consultants, and
third parties

Shares issuable upon exercise of options 150,000 D
granted to investor relations consultants

A. An unknown number of shares of common stock are issuable under the equity
line of credit agreement between CEL-SCI and Rubicon Group Ltd. As consideration
for extending the equity line of credit, CEL-SCI granted Rubicon Group warrants
to purchase 395,726 shares of common stock at a price of $0.83 per share any
time prior to September 16, 2008. See the section of this prospectus captioned
"Equity Line of Credit Agreement" for more information regarding the equity
line.

B. In August 2003, the Company issued warrants to a private investor. The
warrants permit the holder to purchase 23,758 shares of CEL-SCI's common stock
at a price of $0.77 per share at any time prior to August 17, 2006.

In July and September 2002, CEL-SCI sold Series G convertible notes, plus
Series G warrants, to a group of private investors for $1,300,000. As of June
30, 2003 all of the Series G notes had been converted into 8,390,746 shares of
CEL-SCI's common stock. As of September 30, 2004 the Series G warrants allowed
the holders to purchase up to 450,000 shares of CEL-SCI's common stock at a
price of $0.145 per share at any time prior to July 12, 2009. Every three months
after December 9, 2004, the exercise price of the Series G warrants will be
adjusted to an amount equal to 84% of the average of the 3 lowest daily trading
prices of CEL-SCI's common stock on the American Stock Exchange during the 20
trading days immediately prior to the three month adjustment date, provided that
the adjusted price is lower than the warrant exercise price on that date.

In January and July 2003, CEL-SCI sold Series H convertible notes, plus
Series H warrants, to a group of private investors for $1,350,000. As of October
31, 2003 all of the Series H notes had been converted into 3,233,229 shares of

CEL-SCI's common stock. As of September 30, 2004 the Series H warrants allowed
the holders to purchase up to 550,000 shares of CEL-SCI's common stock at a
price of $0.25 per share at any time prior to January 7, 2010. Every three
months after September 26, 2004 the exercise price of the Series H warrants will
be adjusted to an amount equal to 84% of the average of the 3 lowest daily
trading prices of CEL-SCI's common stock on the American Stock Exchange during
the 15 trading days immediately prior to the three month adjustment date,
provided that the adjusted price is lower than the warrant exercise price on
that date.

In May 2003 CEL-SCI sold shares of its common stock plus Series I warrants
to a strategic partner, at prices equal to or above the then current price of
CEL-SCI's common stock. The Series I warrants allow the holder to purchase
1,100,000 shares of CEL-SCI's common stock at a price of $0.47 per share at any
time prior to May 30, 2008.

If CEL-SCI sells any additional shares of common stock, or any securities
convertible into common stock at a price below the then applicable exercise
price of the Series G or 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 G or 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 G or H warrants nor the
shares issuable upon the exercise of the Series G or H warrants will 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:

o in connection with a merger or acquisition or a strategic partnership;

o upon the exercise of options or the issuance of common stock to
CEL-SCI's employees, officers, directors, consultants and vendors in
accordance with CEL-SCI's equity incentive policies;

o pursuant to the conversion or exercise of securities which were
outstanding prior to July 12, 2002 in the case of the Series G
warrants and January 7, 2003 in the case of the Series H warrants;

o to key officers of CEL-SCI in lieu of their respective salaries.

C. The options are exercisable at prices ranging from $0.16 to $11.00 per
share. CEL-SCI may also grant options to purchase additional shares under its
Incentive Stock Option and Non-Qualified Stock Option Plans.

D. CEL-SCI has granted options for the purchase of 150,000 shares of common
stock to certain investor relations consultants in consideration for services
provided to CEL-SCI. The options are exercisable at $1.63 per share and expire
June 1, 2006.

The shares referred to in Notes B, C and D are being, or will be, offered
for sale by means of registration statements which have been filed with the
Securities and Exchange Commission.

MARKET FOR CEL-SCI'S COMMON STOCK

As of January __, 2005 there were approximately 2,550 record holders of
CEL-SCI's common stock. CEL-SCI's common stock is traded on the American Stock
Exchange under the symbol "CVM". Set forth below are the range of high and low
quotations for CEL-SCI's common stock for the periods indicated as reported on
the American Stock Exchange. The market quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commissions and may not necessarily
represent actual transactions.

Quarter Ending High Low

12/31/02 $0.32 $0.19
3/31/03 $0.27 $0.15
6/30/03 $1.35 $0.20
9/30/03 $1.08 $0.61

12/31/03 $1.75 $0.91
3/31/04 $1.45 $0.86
6/30/04 $1.30 $0.67
9/30/04 $0.89 $0.52

12/31/04 $0.67 $0.46

Holders of Common Stock are entitled to receive such dividends as may be
declared by the Board of Directors out of funds legally available therefore and,
in the event of liquidation, to share pro rata in any distribution of CEL-SCI's
assets after payment of liabilities. The Board of Directors is not obligated to
declare a dividend. CEL-SCI has not paid any dividends on its common stock and
CEL-SCI does not have any current plans to pay any common stock dividends.

The market price of CEL-SCI's common stock, as well as the securities of
other biopharmaceutical and biotechnology companies, have historically been
highly volatile, and the market has from time to time experienced significant
price and volume fluctuations that are unrelated to the operating performance of
particular companies. Factors such as fluctuations in CEL-SCI's operating
results, announcements of technological innovations or new therapeutic products
by CEL-SCI or its competitors, governmental regulation, developments in patent
or other proprietary rights, public concern as to the safety of products
developed by CEL-SCI or other biotechnology and pharmaceutical companies, and
general market conditions may have a significant effect on the market price of
CEL-SCI's Common Stock.

MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION

The following selected financial data should be read in conjunction with
the more detailed financial statements, related notes and other financial
information included in this prospectus. Certain amounts reported in previous
years have been reclassified to conform to the classifications being used as of
and for the year ended September 30, 2004.

For the Years Ended September 30,
------------------------------------------------
2004 2003 2002 2001 2000
---- ---- ---- ---- ----

Grant Revenue and Other: $ 325,479 $ 318,304 $ 384,939 $ 293,871 $ 40,540
Operating Expenses:
Research and Development 1,941,630 1,915,501 4,699,909 7,762,213 5,186,065
Depreciation and Amortization 198,269 199,117 226,514 209,121 220,994
General and Administrative 2,310,279 2,287,019 1,754,332 3,432,437 3,513,889
Interest Income (51,817) (52,502) (85,322) (376,221) (402,011)
Interest Expense 126,840 2,340,667 2,131,750 -- --
---------- --------- ----------- ----------- ---------
Net Loss $(4,199,722) $(6,371,498) $(8,342,244) $(10,733,679) $(8,478,397)

Net loss attributable to
common stock holders $(4,199,722) $(6,480,319) $(9,989,988) $(11,104,251) $(8,478,397)
=========== =========== =========== ============ ===========
Net loss per common share
(basic and diluted) $ (0.06) $ (0.13) $ (0.35) $ (0.51) $ (0.44)
============ =========== =========== ============ ===========
Weighted average common
shares outstanding 67,273,133 50,961,457 28,746,341 21,824,273 19,259,190
=========== =========== =========== ============ ===========

Balance Sheet Data: September 30,
-----------------------------------------------------

2004 2003 2002 2001 2000
---- ---- ---- ---- ----

Working Capital $4,592,331 $ 531,742 $ 690,804 $2,801,299 $11,725,940
Total Assets 5,513,810 2,915,206 3,771,258 4,508,920 13,808,882
Convertible Debt * -- 32,882 639,288 -- --
Note Payable - Covance * -- 184,330 -- -- --
Note Payable - Cambrex * -- 656,076 1,135,017 -- --
Total Liabilities 215,981 1,690,100 2,709,087 507,727 847,423
Stockholders' Equity 5,297,829 1,225,106 1,062,171 4,001,193 12,961,459

* Included in total liabilities

No dividends have been declared on CEL-SCI's common stock.

CEL-SCI's net losses for each fiscal quarter during the two years ended
September 30, 2004 were:
Net Loss
Quarter Net Loss per Share

12-31-02 $(1,682,865) $(0.04)
03-31-03 $(1,032,181) $(0.02)
06-30-03 $(1,762,564) $(0.03)
09-30-03 $(1,893,888) $(0.03)

12-31-03 $(1,106,093) $(0.02)
03-31-04 $(1,205,273) $(0.02)
06-30-04 $ (893,610) $(0.01)
09-30-04 $ (994,746) $(0.01)

OVERVIEW

CEL-SCI's most advanced product, Multikine(R), manufactured using the
company's proprietary cell culture technologies, is being developed for the
treatment of cancer. Multikine is designed to target the tumor micro-metastises
that are mostly responsible for treatment failure. The basic idea of Multikine
is to make current cancer treatments more successful. The lead indication is
advanced primary head & neck cancer (500,000 new cases per annum). Since
Multikine is not tumor specific, it may also be applicable in many other solid
tumors.

Since its inception, CEL-SCI has financed operations through the issuance
of equity securities, convertible notes, loans and certain research grants.
CEL-SCI's expenses will likely exceed its revenues 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.

Results of Operations

Fiscal 2004

Grant revenue and other during fiscal year 2004 remained at approximately
the same level as fiscal year 2003 as work continued on the four grants received
during the fiscal year 2003. Interest income also remained approximately at the
same level.

Research and development expense increased by approximately $26,000 as
CEL-SCI's research and development costs on L.E.A.P.S. increased during fiscal
2004.

General and administrative expenses increased by approximately $23,000
this year. CEL-SCI's cost reduction program continues. This reduction was
substantially offset by an increase in audit and audit-related fees and an
increase in filing and registration fees.

Fiscal 2003

Grant revenues and other was lower during the year ended September 30,
2003 due to the winding down of a project for which CEL-SCI received grant
money. The grant for this project generated $110,000 in revenue in fiscal year
2003 compared with $380,000 in revenue in fiscal year 2002. However, CEL-SCI has
received four additional grants, two grants in April 2003, one grant in May
2003, and one grant in September 2003 for other projects on which CEL-SCI is
working. These grants generated approximately $170,750 in revenue in fiscal year
2003. Research and development expenses declined because CEL-SCI completed its
current production of Multikine during fiscal year 2002. General and
administrative expenses were higher during the year ended September 30, 2003
since there was a reversal in 2002 of a 2001 fiscal year charge of $593,472
resulting from a decline in the intrinsic value of the options repriced to
employees. Interest income during the year ended September 30, 2003 was less
than it was during the same periods in fiscal year 2002 as a result of CEL-SCI's
smaller cash position and lower interest rates on interest bearing accounts.
During the years ended September 30, 2003 and 2002, interest expense was
$2,340,667 and $2,131,750, respectively. Interest expense for all periods
presented is primarily a non-cash item incurred to account for interest and
amortization of the discounts and deferred financing costs related to
convertible debt, the note payable to Covance AG and the convertible debt
payable to Cambrex Biosciences, Inc.

Research and Development Expenses

During the five years ended September 30, 2004 CEL-SCI's research and
development efforts involved Multikine, L.E.A.P.S. and an AIDS vaccine. The
table below shows the research and development expenses associated with each
project during this five-year period.

2004 2003 2002 2001 2000
---- ---- ---- ---- ----

MULTIKINE $1,539,454 $1,653,904 $4,405,678 $7,365,305 $4,106,752
L.E.A.P.S. 402,176 261,597 244,769 280,766 453,061
AIDS Vaccine -- -- 43,462 94,642 602,252
Other -- -- 6,000 21,500 24,000
---------- ---------- ---------- ---------- ----------
TOTAL $1,941,630 $1,915,501 $4,699,909 $7,762,213 $5,186,065
========== ========== ========== ========== ==========

CEL-SCI believes that it has compiled sufficient data and clinical
information to justify a Phase III clinical trial which would be designed to
prove the clinical benefit from Multikine as an addition to established
anti-cancer therapies. It is CEL-SCI's intention to meet with the FDA in early
2005 to discuss such a trial. CEL-SCI is unable to estimate the future costs of
research and clinical trials involving Multikine since CEL-SCI has not yet met
with the FDA to discuss the design of future clinical trials and until the scope
of these trials is known, CEL-SCI will not be able to price any future trials.

As explained in Item 1 of this report, as of November 15, 2004 CEL-SCI was
involved in a number of pre-clinical studies with respect to its L.E.A.P.S.
technology. As with Multikine, CEL-SCI does not know what obstacles it will
encounter in future pre-clinical and clinical studies involving its L.E.A.P.S.
technology. Consequently, CEL-SCI cannot predict with any certainty the funds
required for future research and clinical trials and the timing of future
research and development projects.

CEL-SCI discontinued its research efforts relating to the AIDS vaccine due
to a lack of government funding in 2000.

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.

Since all of CEL-SCI's projects are under development, CEL-SCI 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 l983. CEL-SCI has relied primarily upon proceeds realized from the
public and private sale of its common and preferred stock and convertible notes
to meet its funding requirements. Funds raised by CEL-SCI have been expended
primarily in connection with the acquisition of an exclusive worldwide license
to certain patented and unpatented proprietary technology and know-how relating
to the human immunological defense system, patent applications, the repayment of
debt, the continuation of Company-sponsored research and development,
administrative costs and construction of laboratory facilities. Inasmuch as
CEL-SCI does not anticipate realizing revenues until such time as it enters into
licensing arrangements regarding the technology and know-how licensed to it
(which could take a number of years), CEL-SCI is mostly dependent upon the
proceeds from the sale of its securities to meet all of its liquidity and
capital resource requirements.

In fiscal 2003, CEL-SCI reduced its discretionary expenditures. In fiscal
2004 expenditures remained at the 2003 levels. If necessary, CEL-SCI may reduce
discretionary expenditures in fiscal 2005; however such reductions would further
delay the development of CEL-SCI's products.

Multikine has an FDA approved shelf life of two years. Consequently,
Multikine can only be used for two years after it is manufactured. Since the
last batch of Multikine was manufactured over two years ago, CEL-SCI does not
currently have any Multikine available for future clinical studies. As a result,
CEL-SCI will be required to manufacture additional quantities of Multikine for
future research and clinical studies. CEL-SCI anticipates that the Multikine
needed for its planned Phase III clinical trial will be manufactured in several
batches over a two to three year period at a cost of between $4 to $5 million.
CEL-SCI's last batch of Multikine was used during the fall of 2002.

Equity Line of Credit

In order to provide a possible source of funding for CEL-SCI's current
activities and for the development of its current and planned products, CEL-SCI
entered into an equity line of credit agreement with Rubicon Group Ltd.

Under the equity line of credit agreement, Rubicon Group has agreed to
provide CEL-SCI with up to $10,000,000 of funding during a two year period
beginning on December 29, 2003. During this period, CEL-SCI may request a
drawdown under the equity line of credit by selling shares of its common stock
to Rubicon Group, and Rubicon Group will be obligated to purchase the shares.
The minimum amount CEL-SCI can draw down at any one time is $100,000, and the
maximum amount CEL-SCI can draw down at any one time will be determined at the
time of the drawdown request using a formula contained in the equity line of
credit agreement. CEL-SCI may request a drawdown once every 22 trading days,
although CEL-SCI is under no obligation to request any drawdowns under the
equity line of credit.

During the 22 trading days following a drawdown request, CEL-SCI will
calculate the number of shares it will sell to Rubicon Group and the purchase
price per share. The purchase price per share of common stock will be based on
the daily volume weighted average price of CEL-SCI's common stock during each of
the 22 trading days immediately following the drawdown date, less a discount of
11%.

The following summarizes the drawdowns requested by CEL-SCI under the
equity line of credit during the year ended September 30, 2004.

Date of Shares Average Sale Net Proceeds
Sale Sold Price Per Share to CEL-SCI
-------- ------ --------------- -------------

01/27/04 101,308 $1.09 $109,000
02/11/04 92,722 $1.19 $109,000
03/02/04 74,760 $1.07 $ 79,000
03/12/04 38,292 $1.04 $ 39,000

The net proceeds to CEL-SCI are net of a $1,000 fee paid to an escrow
agent.

Shelf Offering

In May 2004, CEL-SCI completed an offering of 6,402,439 shares of
registered common stock at $0.82 per share to one institutional investor. This
sale resulted in gross proceeds of $5,250,000 and associated costs of $498,452.
The stock was offered pursuant to a shelf registration statement and Wachovia
Capital Markets, LLC acted as the placement agent for the offering. CEL-SCI is
using the proceeds of the offering to advance the clinical development of
Multikine for the treatment of cancer. In connection with this financing, 76,642
warrants were issued to Wachovia at a price of $1.37. The warrants expire May 4,
2009. The warrants were valued using the Black-Scholes valuation method and an
expense of $38,127 was recorded to additional paid-in capital as a cost related
to obtaining capital during the year ended September 30, 2004.

Future Capital Requirements

CEL-SCI plans to use its existing financial resources, the proceeds from
the sale of its common stock, and proceeds from the sale of common stock under
the equity line of credit agreement to fund its capital requirements during the
year ending September 30, 2005.

Other than funding operating losses, funding its research and development
program, and paying its liabilities, CEL-SCI does not have any material capital
commitments. Material future liabilities as of September 30, 2004 are as
follows:

Contractual Obligations: Years Ending September 30,
--------------------------------
Total 2005 2006 2007
----- ---- ---- ----

Operating Leases $281,481 $139,209 $ 71,136 $71,136
Employment Contracts 891,788 552,085 339,703 --
-------- -------- ------- -------
$1,173,269 $691,294 $410,839 $71,136
========== ======== ======== =======

It should be noted that substantial additional funds will be needed for
more extensive clinical trials which will be necessary before CEL-SCI will be
able to apply to the FDA for approval to sell any products which may be
developed on a commercial basis throughout the United States. In the absence of
revenues, CEL-SCI will be required to raise additional funds through the sale of
securities, debt financing 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. It is the opinion of management
that sufficient funds will be available from external financing and additional
capital and/or expenditure reduction in order to meet CEL-SCI's liabilities and
commitments as they come due during fiscal year 2005. Ultimately, CEL-SCI must
complete the development of its products, obtain appropriate regulatory
approvals and obtain sufficient revenues to support its cost structure.

CEL-SCI's cash flow and earnings are subject to fluctuations due to
changes in interest rates on its certificates of deposit, and, to an immaterial
extent, foreign currency exchange rates.

Covance AG

On October 8, 2002, CEL-SCI signed an agreement with Covance AG (Covance), a
Swiss Corporation. Pursuant to the agreement, amounts owed to Covance totaling
$199,928 as of June 30, 2003 were converted to a note payable. The note was
payable on January 2, 2004. Interest was payable monthly at an annual rate of
8%. Until the entire amount was paid to Covance, Covance was entitled to receive
2% of any draw-down of CEL-SCI's equity credit line, 2% of any net funds
received from outside financings of less than $1 million, 3% of any net funds
received from outside financings greater than $1 million but less than $2
million and 4% of any net funds received from outside financings greater than $2
million. During the year ended September 30, 2003, CEL-SCI paid $15,598 on the
Covance note. The note was paid in full in December 2003.

Eastern Biotech

In May 2003, CEL-SCI entered into an agreement with Eastern Biotech which
provided Eastern Biotech with the following (i) the exclusive right to
distribute Multikine and CEL-1000 in Greece, Serbia and Croatia, (ii) a royalty
equal to 1% of CEL-SCI's net sales of Multikine and CEL-1000 prior to May 30,
2033, (iii) 1,100,000 shares of CEL-SCI's common stock and, (iv) warrants which
allow Eastern Biotech to purchase an additional 1,100,000 shares of CEL-SCI's
common stock at a price of $0.47 per share at any time prior to May 30, 2008. In
consideration for the above Eastern Biotech paid CEL-SCI $500,000. Because the
Company did not register these shares prior to September 30, 2003, the royalty
percentage increased to 2%. If Eastern Biotech did not meet certain clinical
development milestones within one year, it would lose the right to sell both
products in these three countries. As of June 1, 2004, Eastern Biotech lost its
exclusive right to market, distribute and sell Multikine in accordance with the
agreement.

Cambrex Bio Science Promissory Note

In November 2001, CEL-SCI gave a promissory note to Cambrex Bio Sciences,
Inc., the owner of the manufacturing facility used by CEL-SCI to produce
Multikine for CEL-SCI's clinical trials. The promissory note was in the
principal amount of $1,172,517 which represented the cost of CEL-SCI's use of
the Cambrex manufacturing facility for the three months ended January 10, 2002.
The amount due Cambrex bore interest at the prime interest rate, plus 3%, which
was adjusted monthly. As of December 1, 2003 the prime interest rate was 4% and
the interest rate on the amount due Cambrex was 7%. Pursuant to the agreement,
CEL-SCI surrendered a cash deposit and transferred title to certain equipment to
Cambrex, which reduced the amount due by $225,000. Until the note was paid in
full, CEL-SCI agreed to pay Cambrex 10% of all amounts received by CEL-SCI, net
of financing costs, from any future financings, including amounts received by
CEL-SCI from its equity line of credit. Cambrex, at its option, could convert
all or part of the amount due Cambrex into shares of CEL-SCI's common stock. The
number of shares to be issued to Cambrex upon any conversion of the note was to
be determined by dividing that portion of the note to be converted by the
Conversion Price. The "Conversion Price" was an amount equal to 90% of the
average closing prices of CEL-SCI's common stock for the three trading days
immediately prior to the conversion date. However, the Conversion Price could
not be less than $0.22.

During the quarter ended December 31, 2003, CEL-SCI paid $692,010 of
principal plus accrued interest of $59,450 to Cambrex, thereby fully repaying
the remaining balance of the note. No part of the note was converted into shares
of CEL-SCI's common stock.

Convertible Notes

In December 2001 and January 2002, CEL-SCI sold Series F convertible
notes, plus Series F warrants, to a group of private investors for $1,600,000.
As of December 1, 2002 all of the Series F notes had been converted into
6,592,461 shares of CEL-SCI's common stock.

In January and July 2003, CEL-SCI sold Series H convertible notes, plus
Series H warrants, to a group of private investors for $1,350,000. As of
December 1, 2003 all of the Series H notes had been converted into 3,233,229
shares of CEL-SCI's common stock.

Critical Accounting Policies

CEL-SCI's significant accounting policies are more fully described in Note
1 to the consolidated financial statements. However, certain accounting policies
are particularly important to the portrayal of financial position and results of
operations and require the application of significant judgments by management.
As a result, the consolidated 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. Our significant
accounting policies include:

Patents - Patent expenditures are capitalized and amortized using the
straight-line method over 17 years. In the event changes in technology or other
circumstances impair the value or life of the patent, appropriate adjustment in
the asset value and period of amortization is made. An impairment loss is
recognized when estimated future undiscounted cash flows expected to result from
the use of the asset, and from disposition, is less than the carrying value of
the asset. The amount of the impairment loss would be the difference between the
estimated fair value of the asset and its carrying value.

Stock Options and Warrants - In October 1996, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards No.
123, Accounting for Stock-Based Compensation (SFAS No. 123). This statement
encourages but does not require companies to account for employee stock
compensation awards based on their estimated fair value at the grant date with
the resulting cost charged to operations. CEL-SCI has elected to continue to
account for its employee stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees, and related Interpretations. In December 2002, the
FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation - Transaction
and Disclosure" which amends SFAS No. 123. SFAS No. 148 provided alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation and requires more prominent and
more frequent disclosures in the financial statements of the effects of
stock-based compensation. The provisions of SFAS No. 148 are effective for
periods beginning after December 15, 2002. The Company has elected to continue
to account for its employee stock-based compensation using the intrinsic value
method.

Asset Valuations and Review for Potential Impairments - CEL-SCI reviews
its fixed assets every fiscal quarter. This review requires that CEL-SCI make
assumptions regarding the value of these assets and the changes in circumstances
that would affect the carrying value of these assets. If such analysis indicates
that a possible impairment may exist, CEL-SCI is then required to estimate the
fair value of the asset and, as deemed appropriate, expense all or a portion of
the asset. The determination of fair value includes numerous uncertainties, such
as the impact of competition on future value. CEL-SCI believes that it has made
reasonable estimates and judgments in determining whether our long-lived assets
have been impaired; however, if there is a material change in the assumptions
used in our determination of fair values or if there is a material change in
economic conditions or circumstances influencing fair value, CEL-SCI could be
required to recognize certain impairment charges in the future. As a result of
the reviews, no changes in asset values are expected.

Prepaid Expenses and Laboratory Supplies--The majority of prepaid expenses
consist of bulk purchases of laboratory supplies used on a daily basis in the
lab and items that will be used for future production. The items in prepaid
expenses are expensed when used in production or daily activity as Research and
Development expenses. These items are disposables and consumables and can be
used for both the manufacturing of Multikine for clinical studies and in the

laboratory for quality control and bioassay use. They can be used in training,
testing and daily laboratory activities. Other prepaid expenses are payments for
services over a long period and are expensed over the time period for which the
service is rendered.

Convertible Notes - Convertible notes were issued during the year ended
September 30, 2002. CEL-SCI initially offset a portion of the notes with a
discount representing the relative fair value of the warrants and a beneficial
conversion feature discount. This discount is amortized to interest expense over
the period the notes are outstanding and is accelerated pro-rata as the notes
are converted. The fair value of the warrants and the beneficial conversion
discount are calculated based on available market data using appropriate
valuation models. These valuations require that CEL-SCI make assumptions and
estimates regarding the convertible notes and warrants. Management uses its
judgment, as well as outside sources, to determine these assumptions and
estimates.

Quantitative and Qualitative Disclosure About Market Risks

Market risk is the potential change in an instrument's value caused by,
for example, fluctuations in interest and currency exchange rates. CEL-SCI has
no derivative financial instruments. Further, there is no exposure to risks
associated with foreign exchange rate changes because none of the operations of
CEL-SCI are transacted in a foreign currency. The interest rate risk on
investments is considered immaterial due to the dollar value of investments as
of September 30, 2004.

Recent Accounting Pronouncements

In November 2004 the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 151, "Inventory Costs,
an amendment of ARB 43, Chapter 4". This statement amends ARB 43, Chapter 4, to
clarify accounting for abnormal amounts of idle facility expense, freight,
handling costs and wasted material. SFAS No. 151 requires that those items be
recognized as current-period charges in all circumstances. SFAS No. 151 is
effective for fiscal years beginning after June 15, 2005. CEL-SCI does not
believe that the adoption of SFAS No. 151 will have a material effect on its
financial position, results of operations or cash flows.

In December 2004 the FASB issued SFAS No. 123R, "Share-Based Payment".
SFAS No. 123R requires companies to recognize compensation expense in an amount
equal to the fair value of the share-based payment (stock options and restricted
stock) issued to employees. SFAS No. 123R applies to all transactions involving
issuance of equity by a company in exchange for goods and services, including
employees. SFAS No. 123R is effective for fiscal periods beginning after June
15, 2005. CEL-SCI has not determined the impact of adopting SFAS No. 123R.

On December 16, 2004, the FASB issued SFAS No. 153, "Exchange of
Non-monetary Assets", an amendment of Accounting Principles Board ("APB")
Opinion No. 29, which differed from the International Accounting Standards
Board's ("IASB") method of accounting for exchanges of similar productive
assets. Statement No. 153 replaces the exception from fair value measurement in
APB No. 29, with a general exception from fair value measurement for exchanges

of non-monetary assets that do not have commercial substance. The Statement is
to be applied prospectively and is effective for non-monetary asset exchanges
occurring in fiscal periods beginning after June 15, 2005. CEL-SCI does not
believe that SFAS No. 153 will have a material impact on its results of
operations or cash flows.

BUSINESS

CEL-SCI Corporation 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 web site is
www.cel-sci.com. 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 available on its website free of charge as soon as practicable after
they are filed or furnished to the SEC.

OVERVIEW

In a recently completed clinical trial involving 54 matched cancer
patients, treatment with Multikine prior to surgical intervention rendered the
residual tumor cells much more susceptible to follow-on treatment with
radiation, and possibly chemotherapy. This data was published in December 2003.
A second finding involving another 39 matched cancer patients demonstrated that
Multikine pre-treatment increased the percent and absolute number of immune
cells infiltrating into the tumor bed, causing tumor cell destruction and
necrosis. This finding was presented at The American Society of Clinical
Oncology (ASCO) in June 2004. The data pointed to a reversal of the CD4/CD8
immune cell ratios in the tumors, resulting in a 42% response rate after only 3
weeks of the non-toxic treatment with Multikine.

MULTIKINE

Multikine has been tested in 220 patients in clinical trials conducted in
the U.S., Canada, Europe and Israel. Most of these patients were head and neck
cancer patients, but some studies were also conducted in prostate cancer
patients, HIV-infected patients and HIV-infected women with Human Papilloma
Virus ("HPV")-induced cervical dysplasia, the precursor stage before the
development of cervical cancer. The safety profile was found to be very good and
CEL-SCI believes that the clinical data suggests that further studies are
warranted.

The function of the immunological system is to protect the body against
infectious agents, including viruses, bacteria, parasites and malignant (cancer)
cells. An individual's ability to respond to infectious agents and to other
substances (antigens) recognized as foreign by the body's immune system is
critical to health and survival. When the immune response is adequate, infection
is usually combated effectively and recovery follows. Severe infection can occur
when the immune response is inadequate. Such immune deficiency can be present
from birth but, in adult life, it is frequently acquired as a result of intense
sickness or as a result of the administration of chemotherapeutic drugs and/or
radiation. It is also recognized that, as people reach middle age and
thereafter, the immune system grows weaker.

Two classes of white blood cells, macrophages and lymphocytes, are
believed to be primarily responsible for immunity. Macrophages are large cells
whose principal immune activity is to digest and destroy infectious agents.
Lymphocytes are divided into two sub-classes. One sub-class of lymphocytes,
B-cells, produces antibodies in response to antigens. Antibodies have unique
combining sites (specificities) that recognize the shape of particular antigens
and bind with them. The combination of an antibody with an antigen sets in
motion a chain of events which may neutralize the effects of the foreign
substance. The other sub-class of lymphocytes, T-cells, regulates immune
responses. T-cells, for example, amplify or suppress antibody formation by
B-cells, and can also directly destroy "foreign" cells by activating "killer
cells."

It is generally recognized that the interplay among T-cells, B-cells and
the macrophages determines the strength and breadth of the body's response to
infection. It is believed that the activities of T-cells, B-cells and
macrophages are controlled, to a large extent, by a specific group of hormones
called cytokines. Cytokines regulate and modify the various functions of both
T-cells and B-cells. There are many cytokines, each of which is thought to have
distinctive chemical and functional properties. IL-2 is but one of these
cytokines and it is on IL-2 and its synergy with other cytokines that CEL-SCI
has focused its attention. Scientific and medical investigation has established
that IL-2 enhances immune responses by causing activated T-cells to proliferate.
Without such proliferation no immune response can be mounted. Other cytokines
support T-cell and B-cell proliferation. However, IL-2 is the only known
cytokine which causes the proliferation of T-cells. IL-2 is also known to
activate B-cells in the absence of B-cell growth factors.

Although IL-2 is one of the best characterized cytokines with anticancer
potential, CEL-SCI is of the opinion that to have optimum therapeutic value,
IL-2 should be administered not as a single substance but rather as a mixture of
IL-2 and certain cytokines, i.e. as a "cocktail". This approach, which was
pioneered by CEL-SCI, makes use of the synergism between these cytokines. It

should be noted, however, that neither the Food and Drug Administration (FDA)
nor any other agency has determined that CEL-SCI's Multikine product will be
effective against any form of cancer.

Research and human clinical trials sponsored by CEL-SCI have indicated a
correlation between administration of Multikine to cancer patients and
immunological responses. On the basis of these experimental results, CEL-SCI
believes that Multikine may have application for the treatment of solid tumors
in humans.

Between 1985 and 1988 Multikine was tested at St. Thomas Hospital in
London, UK in forty-eight patients with various types of cancers. Multikine was
shown to be safe when used by these patients.

In November 1990, the Florida Department of Health and Rehabilitative
Services ("DHRS") gave the physicians at a southern Florida medical institution
approval to start a clinical cancer trial in Florida using CEL-SCI's Multikine
product. The focus of the trial was unresectable head and neck cancer.

In 1991, four patients with regionally advanced squamous cell cancer of
the head and neck were treated with CEL-SCI's Multikine product. The patients
had previously received radical surgery followed by radiation therapy but
developed recurrent tumors at multiple sites in the neck and were diagnosed with
terminal cancer.

Significant tumor reduction occurred in three of the four patients as a
result of the treatment with Multikine. Negligible side effects, such as
injection site soreness and headaches, were observed and the patients were
treated as outpatients. Notwithstanding the above, it should be noted that these
trials were only preliminary and were only conducted on a small number of
patients. It remains to be seen if Multikine will be effective in treating any
form of cancer.

These results caused CEL-SCI to embark on a major manufacturing program
for Multikine with the goal of being able to produce a drug that would meet the
stringent regulatory requirements for advanced human studies. This program
included building a pilot scale manufacturing facility.

The objective of CEL-SCI scientists is to use Multikine as an adjunct
(additive) therapy to the existing treatment of previously untreated head & neck
cancer patients with the goal of reducing cancer recurrence and ultimately
increasing survival. However, pursuant to FDA regulations, CEL-SCI was required
to test the drug first for safety in locally recurrent, locally metastatic head
and neck cancer patients who had failed other cancer therapies. This dose
escalation study was started in 1995 at several centers in Canada and the US
where 16 patients were enrolled at 4 different dosage levels. The study ended in
1998 and showed Multikine to be safe and well tolerated at all dose levels.

Because CEL-SCI scientists have determined that patients with previously
untreated disease would most likely benefit more from Multikine treatment,
CEL-SCI started a safety trial in Canada in 1997 in advanced primary head & neck

cancer patients who had just recently been diagnosed with head & neck cancer.
This study ultimately enrolled 28 patients, also at 4 different dosage levels,
and ended in late 1999. Halfway through this study, CEL-SCI launched a number of
phase II studies in advanced primary head & neck cancer to determine the best
dosage, best route of administration and best frequency of administration of
Multikine. Those studies involved 19 patients in Israel (1997 - 2000), 30
patients in Poland and the Czech Republic (1999 - 2000), and 94 patients (half
treated with Multikine and the other half disease matched cancer patients served
as control) in Hungary (1999 - 2003). The Hungarian trial compared the control
group (receiving only conventional cancer therapy, surgery plus radiation
therapy) to the Multikine treated patients (receiving Multikine prior to
conventional therapy) by histopathology and immunohistochemistry. The results of
these studies were published in peer-reviewed scientific journals and/or
presented at scientific meetings. The studies that have not yet been published
were either conducted in support of Multikine's safety and clinical utility or
will be published in the future.

The above studies, which are all completed, indicate that Multikine was
safe and well tolerated at all dose levels investigated. The studies also showed
partial and complete tumor responses following Multikine treatment at the best
treatment regimen combinations as well as tumor necrosis (destruction) and
fibrosis (as determined by histopathology). Additional findings regarding
Multikine treatment of head & neck cancer are expected to be presented/published
in 2005.

While CEL-SCI scientists believe partial and complete tumor responses to
be very important, they also believe that other findings with Multikine in these
studies are equally important since they may serve to enhance existing cancer
therapies, thereby affecting the clinical outcome of the cancer patient's
treatment.

The initial results of the Hungarian study were published in December
2003. Data from a Phase I/II clinical trial in fifty-four (54) advanced primary
head and neck cancer patients (half treated, half control), the first part of
the Hungarian study, were published in The Laryngoscope, December 2003, Vol.113
(12). The title of the article is "The Effect of Leukocyte Interleukin Injection
(MULTIKINE) on the Peritumoral and Intratumoral Subpopulation of Mononuclear
Cells and on Tumor Epithelia: A Possible New Approach to Augmenting Sensitivity
to Radiation Therapy and Chemotherapy in Oral Cancer - A Multi Center Phase I/II
Clinical Trial".

The data demonstrates that treatment with Multikine rendered a high
proportion of the tumor cell population highly susceptible to radiation therapy.
This finding represents a major advance in the treatment of cancer since, under
current standard therapy, only about 5%-10% of the cancer cells are thought to
be susceptible to radiation therapy at any one point in time.

The increased sensitivity of the Multikine treated tumors to radiation was
derived from a dramatic increase in the number of proliferating (those that are
in cell cycle) cancer cells. Following Multikine treatment, the great majority
of the tumor cells were in a proliferative state, as measured by the
well-established cell proliferation marker Ki67. The control patients (not
treated with Multikine) had only low expression (near background) of the same
proliferation marker (Ki67) in this study. These findings were statistically
significant (p<0.05, ANOVA).

This is an important finding because the ability of radiation therapy (and
chemotherapy) to kill tumor cells is dependent, in large part, on the
proliferative state of the tumor cells at the time of radiation (and
chemotherapy) treatment. As seen in the control group in this study, and also in
many other tumor types, the great majority of tumor cells (about 90% or more)
are in a "resting" state (non-proliferating). It is generally accepted that
tumor cells in the "resting" state are by-and-large resistant to radiation and
chemotherapy. However, Multikine treatment induced a reversal of this
non-proliferative state of the tumor cells and caused the great majority of the
tumor cells to enter into the proliferative state, thereby rendering the tumor
highly susceptible to radiation therapy (and chemotherapy).

The results of the Israeli trial have been published in Archives of
Otolaryngology - Head & Neck Surgery, August 2003, Vol.129. This paper on 12
patients treated by Dr. Feinmesser shows positive safety, tumor response and
clinical outcome data, but no firm conclusions can be drawn from a study of only
12 patients.

Results from the Multikine Phase II clinical trials were published in June
2004 at the 40th ASCO Annual Meeting. The study involved 39 head & neck cancer
patients, 19 of whom were treated with CEL-SCI's immunotherapy drug Multikine
prior to surgery and radiation. The other 20 patients served as matched
controls, meaning that they did not receive Multikine prior to surgery and
radiation. In a comparison pathology study of the tumors, Multikine treatment
caused a significant shift in the ratio of key immune cells that infiltrate the
tumor. The cancer patients treated with Multikine were shown to have much higher
rate of tumor cell killing, resulting in a 42% overall response rate, including
12% complete responses.

The tumors of the 39 head & neck cancer patients were analyzed by three
independent pathologists, blinded to the study. Of the 19 Multikine treated
patients in this study, 2 patients (12%) had no remaining cancer cells, another
2 patients (12%) had a reduction in the cancer cell mass greater than 50% and an
additional 4 patients (21%) had a reduction in the cancer cell mass of more than
30%. The objective response rate in this trial was 21%, with an overall response
rate of 42%, as determined by pathology.

This study, which used a three-week, non-toxic treatment with Multikine,
caused a shift from a low CD4/CD8 cell ratio (less than one CD4 cell for each
CD8 cell) to a high (over 2.5 - 3) CD4/CD8 cell ratio (2.5 - 3 CD4 cells for
each CD8 cell) in the tumor. This indicates that Multikine treatment shifts the
immune response from a mainly CD8 cell anti-tumor response to a predominately
CD4 anti-tumor response. Both CD4 and CD8 are key cells of the immune system.

The change in the immune response from CD8 to CD4 cells is very important
for the cancer patient because the cancer cells seem to have learned to shut
down the CD8 anti-tumor immune response. This "shut-down" of the CD8 cells was
evident in the tumors of the control (non-Multikine treated) group. The control
group had predominately CD8 cell infiltrate which was inactive against the
tumor. The Multikine treated group, on the other hand, had a predominately CD4
cell infiltrate. The tumor was unable, or less able, to shut down the Multikine
induced CD4 cell immune response and, as a result thereof, the cancer patients
treated with Multikine were shown to have much higher rate of tumor cell
killing.

CEL-SCI scientists believe that they have compiled sufficient data and
clinical information to justify a Phase III clinical trial which would be
designed to prove the clinical benefit from Multikine as an addition to
established anti-cancer therapies. It is CEL-SCI's intention to meet with FDA in
early 2005 to discuss such a trial.

Follow-up data for the first 8 patients sequentially treated with
Multikine at one center in the Hungarian study indicated no recurrence of cancer
24 months after treatment. This contrasts with the scientific literature, which
reports that cancer will recur in up to 50% of primary head and neck cancer
patients within 18 to 24 months after surgery and/or radiation therapy. Data on
the remaining patients is not available because follow-up was outside of the
scope of the protocol which ended at surgery, and a follow-up study for the
complete trial has not yet been conducted. CEL-SCI considers this data to be
positive and plans to prove the clinical benefit of Multikine in Phase III
clinical trials.

Multikine has also been tested in a 15 HIV-infected patients (1998 - 1999)
in California. This small study found Multikine to be safe in the HIV-infected
population and showed preliminary evidence of improved delayed type
hypersensitivity response to recall antigens. The results of this study were
reported in Antiviral Therapy 5 (Supplement), 2000.

Another study at the Thomas Jefferson Medical Center (1998) used very
small amounts of Multikine to determine the feasibility of injecting Multikine
into the prostate of 5 hormonal therapy refractive prostate cancer patients
scheduled for prostatectomy. Although deemed safe by the investigators,
Multikine administration in this trial directly into the prostate (under
ultrasound guidance) resulted in occasional mild dysuria and mild increase in
urinary frequency. Two out of the five treated cases had an inflammatory
response in the prostate and a third case had fibrosis. The Company believes
that more Multikine injections will need to be given to achieve a potential
outcome as seen in head & neck cancer. None of the prostate cancer patients
received more than half of the amounts given to the head & neck cancer patients.
Also, no testing was done at the time to determine if Multikine would enhance
susceptibility to radiation therapy in the prostate. The results of this trial
were published in Seminars in Oncology Vol. 26 (4) (August) 1999.

In May 2001, CEL-SCI also started a Phase I clinical trial at the
University of Maryland Biotechnology Institute (UMBI). The focus of this study
is HIV-infected women with Human Papilloma Virus (HPV)-induced cervical
dysplasia, the precursor stage before the development of cervical cancer. The
goal of the study is to obtain safety and preliminary efficacy data on Multikine
as a treatment for pre-cancerous lesions of the cervix (dysplasia). Most
cervical dysplasia and cancer is due to infection with HPV. The rationale for
using Multikine in the treatment of cervical dysplasia/cancer is that Multikine
may safely boost the patients' immune systems to the point where their immune
systems can eliminate the virally-induced cancer. Cervical cancer is the second
leading cause of cancer death in women worldwide.

The HIV-infected women with HPV-induced cervical dysplasia were chosen as a
study group because of the high morbidity and low success rate of current
surgical therapies. Since HIV infection results in immune suppression,

HPV-induced cervical dysplasia follows a more malignant and aggressive course of
disease in such women. Co-infection with HPV is common in HIV-positive women
(about 83%) and cervical cancer is considered an AIDS-defining illness.

HPV infection is also a leading health problem in non HIV-infected
American college age women. A large concern among women who have HPV-induced
cervical dysplasia is that the repeated surgical procedures will lead to a
hysterectomy and the inability to bear children.

At the March 2002 33rd Annual Meeting of the Society of Gynecological
Oncologists in Miami, Florida, scientists from UMBI and CEL-SCI presented data
from this trial in HIV-infected women with HPV induced cervical dysplasia. The
results were as follows: 8 patients had been treated with no major toxicity. The
lower dosage group had 3 out of 5 patients resolved/improved with 2 out of 5
patients with no change in their cervical dysplasia status as compared the
patient's own baseline disease. The higher dosage group had 2 out of 3 patients
who improved and 1 out of 3 patients with no change. The changes in disease
status were determined by both Colposcopy and Histology.

Subsequent HPV testing during 2001 and 2002 of the first three patients
revealed the elimination of HPV virus types (using in situ PCR) following
treatment with Multikine and ranged from 54% to 84% (Avg = 68%) reduction in HPV
virus in the cervical tissue of Multikine treated HIV/HPV co-infected patients.
The study was closed due to the inability to enroll patients.

CEL-SCI's future studies in the HPV-induced cervical dysplasia area will
only be conducted with grant or government funds as CEL-SCI plans to devote its
resources to head and neck cancer, the area where it has the most data.

Since 1985, Multikine has been well tolerated in clinical studies
involving 220 patients. Forty-eight patients were treated in the United States
in accordance with clinical trials authorized by the FDA. The remaining patients
were treated outside of the United States in accordance with protocols
authorized by comparable health regulatory authorities in the countries where
the patients were treated. All the clinical trials were conducted in accordance
with the Declaration of Helsinki (1985), and informed consent was obtained from
each patient volunteer. This process is the standard procedure for the conduct
of human clinical trials.

In November 2000, CEL-SCI concluded a development, supply and distribution
agreement with Orient Europharma of Taiwan. The agreement gives Orient
Europharma the exclusive marketing rights to Multikine for all cancer
indications in Taiwan, Singapore, Hong Kong and Malaysia. The agreement provides
for Orient Europharma to fund the clinical trials needed to obtain marketing
approvals in the four countries for head and neck cancer, naso-pharyngeal cancer
and potentially cervical cancer, which are very prevalent in Far East Asia.
CEL-SCI may use the clinical data generated in these trials to support
applications for marketing approvals for Multikine in other parts of the world.

Under the agreement, CEL-SCI will manufacture Multikine and Orient
Europharma will purchase the product from CEL-SCI for distribution in the
territory. Both parties will share in the revenue from the sale of Multikine. As

of December 31, 2003 Orient Europharma had not started any clinical trials since
CEL-SCI's plan is for Orient Europharma to begin a Phase III clinical trial when
CEL-SCI begins its Phase III clinical trial or to do one combined Phase III
clinical trial. The above is subject to discussion with the FDA.

Proof of efficacy for anti-cancer drugs is a lengthy and complex process.
At this early stage of clinical investigation, it remains to be proven that
Multikine will be effective against any form of cancer. Even if some form of
Multikine is found to be effective in the treatment of cancer, commercial use of
Multikine may be several years away due to extensive safety and effectiveness
tests that would be necessary before required government approvals are obtained.
It should be noted that other companies and research teams are actively involved
in developing treatments and/or cures for cancer, and accordingly, there can be
no assurance that CEL-SCI's research efforts, even if successful from a medical
standpoint, can be completed before those of its competitors.

CEL-SCI uses Cambrex Biosciences, Inc. for certain aspects of the
production of Multikine for research and testing purposes. The agreement with
Cambrex Biosciences, Inc. expires in 2006.

T-CELL MODULATION PROCESS

CEL-SCI's patented T-cell Modulation Process uses "heteroconjugates" to
direct the body to choose a specific immune response. The heteroconjugate
technology, referred to as L.E.A.P.S. (Ligand Epitope Antigen Presentation
System), is intended to selectively stimulate the human immune system to more
effectively fight bacterial, viral and parasitic infections and cancer, when it
cannot do so on its own. Administered like vaccines, L.E.A.P.S. combines T-cell
binding ligands with small, disease associated, peptide antigens and may provide
a new method to treat and prevent certain diseases.

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.

Using the LEAPS technology, CEL-SCI discovered a peptide, named CEL-1000,
which is currently being tested in animals for the prevention/treatment of
herpes simplex, malaria, viral encephalitis, smallpox, vaccinia and a number of
other indications.

In the Spring of 2002, CEL-SCI, in conjunction with The Naval Medical
Research Center, announced that CEL-1000 provided 100% protection against
malaria infection in a mouse model. The same peptide also induced protective
effects in mouse models for herpes simplex virus and cancer. In the Fall of 2002
CEL-SCI announced that it had signed a Cooperative Research and Development
Agreement (CRADA) with the U.S. Navy for CEL-1000 in malaria.

CEL-SCI received two grants in April 2003, one grant in May 2003, and one
grant in September 2003 from the National Institutes of Health (NIH). The first
grant totaling $1,100,000 was awarded to Northeastern Ohio Universities College
of Medicine (NEOUCOM) with CEL-SCI as a subcontractor. The grant is for a period
of three years and is intended to support the development of CEL-SCI's new
compound, CEL-1000, as a possible treatment for viral encephalitis, a
potentially lethal inflammation of the brain. The grant was awarded following a
peer review process and will fund pre-clinical studies leading up to toxicology
studies. The second grant, totaling $134,000 and awarded to CEL-SCI with Johns
Hopkins Medical Institutions as a subcontractor, is a Phase I Small Business
Innovation Research (SBIR) grant for the further development of a potential
treatment for autoimmune myocarditis, a heart disease. The third grant,
announced on May 7, 2003 for $162,000 was awarded to CEL-SCI with NEOUCOM as a
sub-contractor, and is a Phase I SBIR grant for the further development of
CEL-1000 against Herpes Simplex. The fourth grant, totaling $104,000 was awarded
to CEL-SCI with the University of Nebraska as a sub-contractor, and is a Phase I
SBIR grant from the National Institute of Allergy and Infectious Diseases
(NIAID), NIH, for the development of CEL-1000 as a potential therapeutic and
prophylactic agent against vaccinia and smallpox infections as a single agent
and as an adjuvant for vaccinia vaccines. Vaccinia is the virus used in the
smallpox vaccine.

As of November 15, 2004 approximately $696,600 remained from these four
grants. As of November 15, 2004 CEL-SCI had received approximately $334,700 from
these grants. The remaining funds will be spent over the next two years.

In June 2003 CEL-SCI signed a Cooperative Agreement with the NIAID and the
U.S. Army Medical Research Institute of Infectious Disease (USAMRIID) to test
CEL-1000 against various bio-terrorism agents as well as other hard to treat
diseases.

RESEARCH AND DEVELOPMENT

Since 1983, and through September 30, 2004, approximately $48,564,000 has
been expended on CEL-SCI-sponsored research and development, including
approximately $1,942,000, $1,916,000 and $4,700,000 respectively during the
years ended September 30, 2004, 2003 and 2002.

The extent of CEL-SCI's clinical trials and research programs is 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. Over the past
three years CEL-SCI's research and development expenditures have decreased, due
in part to the capital available to CEL-SCI and due in part to the fact that the
costs involved in manufacturing MULTIKINE for use in clinical trials and costs
involved in validating the manufacturing process were primarily incurred in
fiscal 2001 and prior periods. Research and development expenses during fiscal
2004 remained at the fiscal 2003 level.

The costs associated with the clinical trials relating to CEL-SCI's
technologies, research expenditures and CEL-SCI's administrative expenses have
been funded with the public and private sales of CEL-SCI's securities and
borrowings from third parties, including affiliates of CEL-SCI.

GOVERNMENT REGULATION

New drug development and approval process

Regulation by governmental authorities in the United States and other
countries is a significant factor in the manufacture and marketing of biological
and other drug products and in ongoing research and product development
activities. CEL-SCI's products will require regulatory approval by governmental
agencies prior to commercialization. In particular, these products are subject
to rigorous preclinical and clinical testing and other premarket approval
requirements by the FDA and regulatory authorities in other countries. In the
United States, various statutes and regulations also govern or influence the
manufacturing, safety, labeling, storage, record keeping and marketing of
pharmaceutical and biological drug products. The lengthy process of seeking
these approvals, and the subsequent compliance with applicable statutes and
regulations, require the expenditure of substantial resources. CEL-SCI believes
that it is currently in compliance with applicable statutes and regulations that
are relevant to its operations. CEL-SCI has no control, however, over compliance
by its manufacturing and other partners.

The FDA's statutes, regulations, or policies may change and additional
statutes or government regulations may be enacted which could prevent or delay
regulatory approvals of biological or other drug products. CEL-SCI cannot
predict the likelihood, nature or extent of adverse governmental regulation that
might arise from future legislative or administrative action, either in the U.S.
or abroad.

Regulatory approval, when and if obtained, may be limited in scope. In
particular, regulatory approvals will restrict the marketing of a product to
specific uses. Further, approved biological and other drugs, as well as their
manufacturers, are subject to ongoing review. Discovery of previously unknown
problems with these products may result in restrictions on their manufacture,
sale or use or in their withdrawal from the market. Failure to comply with
regulatory requirements may result in criminal prosecution, civil penalties,
recall or seizure of products, total or partial suspension of production or
injunction, as well as other actions affecting CEL-SCI. Any failure by CEL-SCI

or its manufacturing and other partners to obtain and maintain, or any delay in
obtaining, regulatory approvals could materially adversely affect CEL-SCI's
business.

The process for new drug approval has many steps, including:

Preclinical testing

Once a biological or other drug candidate is identified for development, the
drug candidate enters the preclinical testing stage. During preclinical studies,
laboratory and animal studies are conducted to show biological activity of the
drug candidate in animals, both healthy and with the targeted disease. Also,
preclinical tests evaluate the safety of drug candidates. These tests typically
take approximately two years to complete. Preclinical tests must be conducted in
compliance with good laboratory practice regulations. In some cases, long term
preclinical studies are conducted while clinical studies are ongoing.

Investigational new drug application

When the preclinical testing is considered adequate by the sponsor to
demonstrate the safety and the scientific rationale for initial human studies,
an investigational new drug application (IND) is filed with the FDA to seek
authorization to begin human testing of the biological or other drug candidate.
The IND becomes effective if not rejected by the FDA within 30 days after
filing. The IND must provide data on previous experiments, how, where and by
whom the new studies will be conducted, the chemical structure of the compound,
the method by which it is believed to work in the human body, any toxic effects
of the compound found in the animal studies and how the compound is
manufactured. All clinical trials must be conducted under the supervision of a
qualified investigator in accordance with good clinical practice regulations.
These regulations include the requirement that all subjects provide informed
consent. In addition, an institutional review board (IRB), comprised primarily
of physicians and other qualified experts at the hospital or clinic where the
proposed studies will be conducted, must review and approve each human study.
The IRB also continues to monitor the study and must be kept aware of the
study's progress, particularly as to adverse events and changes in the research.
Progress reports detailing the results of the clinical trials must be submitted
at least annually to the FDA and more frequently if adverse events occur. In
addition, the FDA may, at any time during the 30-day period after filing an IND
or at any future time, impose a clinical hold on proposed or ongoing clinical
trials. If the FDA imposes a clinical hold, clinical trials cannot commence or
recommence without FDA authorization, and then only under terms authorized by
the FDA . In some instances, the IND process can result in substantial delay and
expense.

Some limited human clinical testing may also be done under a physician's IND
that allows a single individual to receive the drug, particularly where the
individual has not responded to other available therapies. A physician's IND
does not replace the more formal IND process, but can provide a preliminary
indication as to whether further clinical trials are warranted, and can, on
occasion, facilitate the more formal IND process.

Clinical trials are typically conducted in three sequential phases, but the
phases may overlap.

Phase I clinical trials

Phase I human clinical trials usually involve between 20 and 80 healthy
volunteers or patients and typically take one to two years to complete. The
tests study a biological or other drug's safety profile, and may seek to
establish the safe dosage range. The Phase I clinical trials also determine how
a drug candidate is absorbed, distributed, metabolized and excreted by the body,
and the duration of its action.

Phase II clinical trials

In Phase II clinical trials, controlled studies are conducted on an expanded
population of patients with the targeted disease. The primary purpose of these
tests is to evaluate the effectiveness of the drug candidate on the volunteer
patients as well as to determine if there are any side effects or other risks
associated with the drug. These studies generally take several years and may be
conducted concurrently with Phase I clinical trials. In addition, Phase I/II
clinical trials may be conducted to evaluate not only the efficacy of the drug
candidate on the patient population, but also its safety.

Phase III clinical trials

This phase typically lasts two to three years and involves an even larger
patient population, often with several hundred or even several thousand patients
depending on the use for which the drug is being studied. Phase III trials are
intended to establish the overall risk-benefit ratio of the drug and provide, if
appropriate, an adequate basis for product labeling. During the Phase III
clinical trials, physicians monitor the patients to determine efficacy and to
observe and report any reactions or other safety risks that may result from use
of the drug candidate.

Chemical and formulation development

Concurrent with clinical trials and preclinical studies, companies also must
develop information about the chemistry and physical characteristics of the drug
and finalize a process for manufacturing the product in accordance with current
good manufacturing practice requirements (cGMPs). The manufacturing process must
be capable of consistently producing quality batches of the product and the
manufacturer must develop methods for testing the quality, purity, and potency
of the final drugs. Additionally, appropriate packaging must be selected and
tested and chemistry stability studies must be conducted to demonstrate that the
product does not undergo unacceptable deterioration over its shelf-life.

New drug application or biological license application

After the completion of the clinical trial phases of development, if the
sponsor concludes that there is substantial evidence that the biological or
other drug candidate is effective and that the drug is safe for its intended

use, a new drug application (NDA) or biologics license application (BLA) may be
submitted to the FDA. The application must contain all of the information on the
biological or other drug candidate gathered to that date, including data from
the clinical trials. Under the Pediatric Research Equity Act of 2003, a company
is also required to include an assessment, generally based on clinical study
data, on the safety and efficacy of the drug candidate for all relevant
pediatric populations before submitting an application. The statute provides for
waivers or deferrals in certain situations but no assurance can be made that
such situations will apply to a particular product.

The FDA reviews all NDAs and BLAs submitted before it accepts them for
filing. It may request additional information rather than accepting an
application for filing. In this event, the application must be resubmitted with
the additional information. The resubmitted application is also subject to
review before the FDA accepts it for filing. Once the submission is accepted for
filing, the FDA begins an in-depth review of the application. The FDA may refer
the application to an appropriate advisory committee, typically a panel of
clinicians, for review, evaluation and a recommendation. The FDA is not bound by
the recommendation of an advisory committee. If FDA evaluations of the NDA or
BLA and the manufacturing facilities are favorable, the FDA may issue an
approval letter authorizing commercial marketing of the drug or biological
candidate for specified indications. The FDA could also issue an approvable
letter, which usually contains a number of conditions that must be met in order
to secure final approval of the NDA or BLA. When and if those conditions have
been met to the FDA's satisfaction, the FDA will issue an approval letter. On
the other hand, if the FDA's evaluation of the NDA or BLA or manufacturing
facilities is not favorable, the FDA may refuse to approve the application or
issue a non-approvable letter.

Among the conditions for NDA or BLA approval is the requirement that each
prospective manufacturer's quality control and manufacturing procedures conform
to current good manufacturing practice standards and requirements (cGMPs).
Manufacturing establishments are subject to periodic inspections by the FDA and
by other federal, state or local agencies.

COMPETITION AND MARKETING

Many companies, nonprofit organizations and governmental institutions are
conducting research on cytokines. Competition in the development of therapeutic
agents incorporating cytokines is intense. Large, well-established
pharmaceutical companies are engaged in cytokine research and development and
have considerably greater resources than CEL-SCI has to develop products. The
establishment by these large companies of in-house research groups and of joint
research ventures with other entities is already occurring in these areas and
will probably become even more prevalent. In addition, licensing and other
collaborative arrangements between governmental and other nonprofit institutions
and commercial enterprises, as well as the seeking of patent protection of
inventions by nonprofit institutions and researchers, could result in strong
competition for CEL-SCI. Any new developments made by such organizations may
render CEL-SCI's licensed technology and know-how obsolete.

Several biotechnology companies are producing IL-2-like compounds. CEL-SCI
believes, however, that it is the only producer of a patented IL-2 product using
a patented cell-culture technology with normal human cells. CEL-SCI foresees
that its principle competition will come from producers of

genetically-engineered IL-2-like products. However, it is CEL-SCI's belief,
based upon growing scientific evidence, that its natural IL-2 products have
advantages over the genetically engineered, IL-2-like products. Evidence
indicates that genetically engineered, IL-2-like products, which lack sugar
molecules and typically are not water soluble, may be recognized by the
immunological system as a foreign agent, leading to a measurable antibody
build-up and thereby possibly voiding their therapeutic value. Furthermore,
CEL-SCI's research has established that to have optimum therapeutic value IL-2
should be administered not as a single substance but rather as an IL-2-rich
mixture of certain cytokines and other proteins, i.e. as a "cocktail". If these
differences prove to be of importance, and if the therapeutic value of its
Multikine product is conclusively established, CEL-SCI believes it will be able
to establish a strong competitive position in a future market.

CEL-SCI has not established a definitive plan for marketing nor has it
established a price structure for CEL-SCI's saleable products. However, CEL-SCI
intends, if CEL-SCI is in a position to begin commercialization of its products,
to enter into written marketing agreements with various major pharmaceutical
firms with established sales forces. The sales forces in turn would probably
target CEL-SCI's products to cancer centers, physicians and clinics involved in
immunotherapy.

CEL-SCI may encounter problems, delays and additional expenses in
developing marketing plans with outside firms. In addition, CEL-SCI may
experience other limitations involving the proposed sale of its products, such
as uncertainty of third-party reimbursement. There is no assurance that CEL-SCI
can successfully market any products which they may develop or market them at
competitive prices.

Some of the clinical trials funded to date by CEL-SCI have not been
approved by the FDA, but rather have been conducted pursuant to approvals
obtained from certain states and foreign countries. Conducting clinical studies
in foreign countries is normal industry practice since these studies can often
be completed in less time and are less expensive than studies conducted in the
U.S. Conducting clinical studies in foreign countries is also beneficial since
CEL-SCI will need the approval from a foreign country prior to the time CEL-SCI
can market any of its drugs in the foreign country. However, since the results
of these clinical trials may not be accepted by the FDA, competitors conducting
clinical trials approved by the FDA may have an advantage in that the products
of such competitors are further advanced in the regulatory process than those of
CEL-SCI. CEL-SCI is conducting its trials in compliance with internationally
recognized standards. By following these standards, CEL-SCI anticipates
obtaining acceptance from world regulatory bodies, including the FDA.

EMPLOYEES

As of November 15, 2004 CEL-SCI had nineteen (19) employees. Six (6)
employees are involved in administration, eleven (11) employees are involved in
manufacturing research and two (2) employees are involved in general research
and development with respect to CEL-SCI's products.

PROPERTIES

CEL-SCI leases office space at 8229 Boone Blvd., Suite 802, Vienna,
Virginia at a monthly rental of approximately $7,050. The lease on the office
space expires in June 2005. CEL-SCI believes this arrangement is adequate for
the conduct of its present business.

CEL-SCI has a 17,900 square foot laboratory located at 4820 A-E Seton
Drive, Baltimore, Maryland. The laboratory is leased by CEL-SCI at a cost of
approximately $10,556 per month. The laboratory lease expires in 2009, with an
extension available until 2014.

MANAGEMENT

Officers and Directors

Name Age Position
-------- ---- -------------

Maximilian de Clara 75 Director and President
Geert R. Kersten, Esq. 45 Director, Chief Executive Officer and Treasurer
Patricia B. Prichep 52 Senior Vice President of Operations and
Secretary
Dr. Eyal Talor 48 Senior Vice President of Research and Manufac-
turing
Dr. Daniel H. Zimmerman 63 Senior Vice President of Research, Cellular
Immunology
John Cipriano 62 Senior Vice President of Regulatory Affairs
Alexander G. Esterhazy 59 Director
Dr. C. Richard Kinsolving 69 Director
Dr. Peter R. Young 59 Director

The directors of CEL-SCI serve in such capacity until the next annual
meeting of CEL-SCI's shareholders and until their successors have been duly
elected and qualified. The officers of CEL-SCI serve at the discretion of
CEL-SCI's directors.

Mr. Maximilian de Clara, by virtue of his position as an officer and
director of CEL-SCI, may be deemed to be the "parent" and "founder" of CEL-SCI
as those terms are defined under applicable rules and regulations of the SEC.

The principal occupations of CEL-SCI's officers and directors, during the
past several years, are as follows:

Maximilian de Clara. Mr. de Clara has been a Director of CEL-SCI since its
inception in March l983, and has been President of CEL-SCI since July l983.
Prior to his affiliation with CEL-SCI, and since at least l978, Mr. de Clara was
involved in the management of his personal investments and personally funding
research in the fields of biotechnology and biomedicine. Mr. de Clara attended
the medical school of the University of Munich from l949 to l955, but left
before he received a medical degree. During the summers of l954 and l955, he
worked as a research assistant at the University of Istanbul in the field of

cancer research. For his efforts and dedication to research and development in
the fight against cancer and AIDS, Mr. de Clara was awarded the "Pour le Merit"
honorary medal of the Austrian Military Order "Merito Navale" as well as the
honor cross of the Austrian Albert Schweitzer Society.

Geert R. Kersten, Esq. Mr. Kersten was Director of Corporate and Investment
Relations for CEL-SCI between February 1987 and October 1987. In October of
1987, he was appointed Vice President of Operations. In December 1988, Mr.
Kersten was appointed Director of the Company. Mr. Kersten also became CEL-SCI's
Treasurer in 1989. In May 1992, Mr. Kersten was appointed Chief Operating
Officer and in February 1995, Mr. Kersten became CEL-SCI's Chief Executive
Officer. In previous years, Mr. Kersten worked as a financial analyst with
Source Capital, Ltd., an investment advising firm in McLean, Virginia. Mr.
Kersten is a stepson of Maximilian de Clara, who is the President and a Director
of CEL-SCI. Mr. Kersten attended George Washington University in Washington,
D.C. where he earned a B.A. in Accounting and an M.B.A. with emphasis on
International Finance. He also attended law school at American University in
Washington, D.C. where he received a Juris Doctor degree.

Patricia B. Prichep has been the Company's Senior Vice President of
Operations since March 1994. Between December 1992 and March 1994, Ms. Prichep
was the Company's Director of Operations. Ms. Prichep became CEL-SCI's Corporate
Secretary in May 2000. From June 1990 to December 1992, Ms. Prichep was the
Manager of Quality and Productivity for the NASD's Management, Systems and
Support Department. Between 1982 and 1990, Ms. Prichep was Vice President and
Operations Manager for Source Capital, Ltd.

Eyal Talor, Ph.D. has been CEL-SCI's Senior Vice President of Research and
Manufacturing since March 1994. From October 1993 until March 1994, Dr. Talor
was Director of Research, Manufacturing and Quality Control, as well as the
Director of the Clinical Laboratory, for Chesapeake Biological Laboratories,
Inc. From 1991 to 1993, Dr. Talor was a scientist with SRA Technologies, Inc.,
as well as the director of SRA's Flow Cytometry Laboratory (1991-1993) and
Clinical Laboratory (1992-1993). During 1992 and 1993, Dr. Talor was also the
Regulatory Affairs and Safety Officer For SRA. Since 1987, Dr. Talor has held
various positions with the Johns Hopkins University, including course
coordinator for the School of Continuing Studies (1989-Present), research
associate and lecturer in the Department of Immunology and Infectious Diseases
(1987-1991), and associate professor (1991-Present).

Daniel H. Zimmerman, Ph.D. has been CEL-SCI's Senior Vice President of
Cellular Immunology since January 1996. Dr. Zimmerman founded CELL-MED, Inc. and
was its president from 1987-1995. From 1973 to 1987 Dr. Zimmerman served in
various positions at Electronucleonics, Inc. including Scientist, Senior
Scientist, Technical Director and Program Manager. From 1969-1973 Dr. Zimmerman
was a Senior Staff Fellow at NIH.

John Cipriano, has been CEL-SCI's Senior Vice President of Regulatory
Affairs since March 2004. Mr. Cipriano brings to CEL-SCI over 30 years of
experience in both biotech and pharmaceutical companies. In addition, he held
positions at the United States Food and Drug Administration (FDA) as Deputy
Director, Division of Biologics Investigational New Drugs, Office of Biologics
Research and Review and was the Deputy Director, IND Branch, Division of
Biologics Evaluation, Office of Biologics. Mr. Cipriano completed his B.S. in

Pharmacy from the Massachusetts College of Pharmacy in Boston, Massachusetts and
his M.S. in Pharmaceutical Chemistry from Purdue University in West Lafayette,
Indiana.

Alexander G. Esterhazy has been an independent financial advisor since
November 1997. Between July 1991 and October 1997 Mr. Esterhazy was a senior
partner of Corpofina S.A. Geneva, a firm engaged in mergers, acquisitions and
portfolio management. Between January 1988 and July 1991 Mr. Esterhazy was a
managing director of DG Bank in Switzerland. During this period Mr. Esterhazy
was in charge of the Geneva, Switzerland branch of the DG Bank, founded and
served as vice president of DG Finance (Paris) and was the President and Chief
Executive officer of DG-Bourse, a securities brokerage firm.

C. Richard Kinsolving, Ph.D. has been a Director of CEL-SCI since April
2001. Since February 1999 Dr. Kinsolving has been the Chief Executive Officer of
BioPharmacon, a pharmaceutical development company. Between December 1992 and
February 1999 Dr. Kinsolving was the President of Immuno-Rx, Inc., a company
engaged in immuno-pharmaceutical development. Between December 1991 and
September 1995 Dr. Kinsolving was President of Bestechnology, Inc. a nonmedical
research and development company producing bacterial preparations for industrial
use. Dr. Kinsolving received his Ph.D. in Pharmacology from Emory University
(1970), his Masters degree in Physiology/Chemistry from Vanderbilt University
(1962), and his Bachelor's degree in Chemistry from Tennessee Tech. University
(1957).

Peter R. Young, Ph.D. has been a Director of CEL-SCI since August 2002.
Dr. Young has been a senior executive within the pharmaceutical industry in the
United States and Canada for most of his career. Over the last 20 years he has
primarily held positions of Chief Executive Officer or Chief Financial Officer
and has extensive experience with acquisitions and equity financings. Since
November 2001 Dr. Young has been the President of Agnus Dei, LLC, which acts as
a partner in an organization managing immune system clinics which treat patients
with diseases such as cancer, multiple sclerosis and hepatitis. Since January
2003 Dr. Young has been the President and Chief Executive Officer of SRL
Technology, Inc., a company involved in the development of pharmaceutical (drug)
delivery systems. Between 1998 and 2001 Dr. Young was the Chief Financial
Officer of Adams Laboratories, Inc. Dr. Young received his Ph.D. in Organic
Chemistry from the University of Bristol, England (1969), and his Bachelor's
degree in Honors Chemistry, Mathematics and Economics also from the University
of Bristol, England (1966).

All of CEL-SCI's officers devote substantially all of their time to
CEL-SCI's business.

CEL-SCI has an audit committee and compensation committee. The members of
the audit committee are Alexander G. Esterhazy, C. Richard Kinsolving and Dr.
Peter Young. Dr. Peter Young serves as the audit committee's financial expert.
In this capacity, Dr. Young is independent, as that term is defined in the
listing standards of the American Stock Exchange. The members of the
compensation committee are Maximilian de Clara, Alexander Esterhazy and C.
Richard Kinsolving.

CEL-SCI has adopted a Code of Ethics which is applicable to CEL-SCI'S
principal executive, financial, and accounting officers and persons performing
similar functions. The Code of Ethics is available on CEL-SCI's website, located
at www.cel-sci.com.

If a violation of this code of ethics act is discovered or suspected, the
Senior Officer must (anonymously, if desired) send a detailed note, with
relevant documents, to CEL-SCI's Audit Committee, c/o Dr. Peter Young, 1904
Canterbury Drive, Westover Hills, TX 76107.

Executive Compensation

The following table sets forth in summary form the compensation received
by (i) the Chief Executive Officer of CEL-SCI and (ii) by each other executive
officer of CEL-SCI who received in excess of $100,000 during the fiscal year
ended September 30, 2004.

All
Other Other
Annual Restric- Com-
Compen- ted Stock Options pensa-
Name and Princi- Fiscal Salary Bonus sation Awards Granted tion
pal Position Year (1) (2) (3) (4) (5) (6)
--------------- ------ -------- ------ ------- --------- ------- -------

Maximilian de Clara, 2004 $363,000 -- $60,165 -- 50,000 --
President 2003 $363,000 -- $65,121 -- 574,999 $72,600
2002 $363,000 -- $46,079 $89,334 75,000 --

Geert R. Kersten, 2004 $366,673 $18,690 $11,296 50,000 --
Chief Executive 2003 $354,087 -- $12,558$ 9,244 1,890,000 $71,068
Officer and 2002 $346,324 -- $15,044 $10,929 105,000 --
Treasurer

Patricia B. Prichep 2004 $148,942 $ 3,000$ 7,110 50,000 --
Senior Vice President 2003 $147,904 -- $ 3,000$ 4,902 580,000 --
of Operations and 2002 $140,464 -- $ 3,000 $ 5,597 90,500 --
Secretary

Eyal Talor, Ph.D. 2004 $192,373 $ 3,000 $ 4,797 50,000 --
Senior Vice President 2003 $191,574 -- $ 3,000 $ 4,950 374,166 --
of Research and 2002 $187,075 -- $ 3,000 $ 5,702 85,000 --
Manufacturing

Daniel Zimmerman,
Ph.D, 2004 $147,613 $ 3,000 $ 7,176 50,000 --
Senior Vice President 2003 $147,000 -- $ 3,000 $ 5,005 392,000 --
of Cellular Immuno-
logy 2002 $143,583 -- $ 3,000 $ 5,763 91,000 --

(1) The dollar value of base salary (cash and non-cash) received. During the
year ended September 30, 2004, $134,398 of the total salaries paid to the
persons shown in the table were paid in restricted shares of CEL-SCI's
common stock.

Information concerning the issuance of these restricted shares is shown in
the following table:

Date Shares Number of Price
Were Issued Shares Issued Per Share
----------- ------------- ---------
10/07/03 133,390 $1.00
09/15/04 19,511 $0.62

On each date the amount of compensation satisfied through the issuance of
shares was determined by multiplying the number of shares issued by the Price
Per Share. The price per share was equal to the closing price of CEL-SCI's
common stock on the date prior to the date the shares were issued.

(2) The dollar value of bonus (cash and non-cash) received.

(3) Any other annual compensation not properly categorized as salary or bonus,
including perquisites and other personal benefits, securities or property.
Amounts in the table represent automobile, parking and other transportation
expenses, plus, in the case of Maximilian de Clara and Geert Kersten,
director's fees of $8,000 each. During the year ended September 30, 2004,
$6,250 of the total Other Annual compensation paid to the persons shown in
the table were paid in restricted shares of CEL-SCI's common stock.

(4) During the periods covered by the table, the value of the shares of
restricted stock issued as compensation for services to the persons listed
in the table. In the case of Mr. de Clara the shares were issued in
consideration for past services to the Company. In the case of all other
persons listed in the table, the shares were issued as CEL-SCI's
contribution on behalf of the named officer to CEL-SCI's 401(k) retirement
plan.

As of September 30, 2004, the number of shares of CEL-SCI's common stock,
owned by the officers included in the table above, and the value of such shares
at such date, based upon the market price of CEL-SCI's common stock were:

Name Shares Value

Maximilian de Clara 1,180,351 $ 672,800
Geert R. Kersten 2,537,408 $1,446,323
Patricia B. Prichep 502,164 $ 286,233
Eyal Talor, Ph.D. 408,124 $ 232,631
Daniel Zimmerman, Ph.D. 428,935 $ 244,493

Dividends may be paid on shares of restricted stock owned by CEL-SCI's
officers and directors, although CEL-SCI has no plans to pay dividends.

(5) The shares of Common Stock to be received upon the exercise of all stock
options granted during the periods covered by the table. Includes certain

options issued in connection with CEL-SCI's Salary Reduction Plans as well
as certain options purchased from CEL-SCI. See "Options Granted During
Fiscal Year Ended September 30, 2004" below.

(6) All other compensation received that CEL-SCI could not properly report in
any other column of the table including annual Company contributions or
other allocations to vested and unvested defined contribution plans, and
the dollar value of any insurance premiums paid by, or on behalf of,
CEL-SCI with respect to term life insurance for the benefit of the named
executive officer, and the full dollar value of the remainder of the
premiums paid by, or on behalf of, CEL-SCI. Amounts in the table for fiscal
2001 represent life insurance premiums. Amounts in the table for fiscal
2003 represent the value of CEL-SCI's common stock issued at below market
prices and discussed in (1) above.

Long Term Incentive Plans - Awards in Last Fiscal Year

None.

Employee Pension, Profit Sharing or Other Retirement Plans

During 1993 CEL-SCI implemented a defined contribution retirement plan,
qualifying under Section 401(k) of the Internal Revenue Code and covering
substantially all the Company's employees. Prior to January 1, 1998 CEL-SCI's
contribution was equal to the lesser of 3% of each employee's salary, or 50% of
the employee's contribution. Effective January 1, 1998 the plan was amended such
that the Company's contribution is now made in shares of CEL-SCI's common stock
as opposed to cash. Each participant's contribution is matched by CEL-SCI with
shares of common stock which have a value equal to 100% of the participant's
contribution, not to exceed the lesser of $1,000 or 6% of the participant's
total compensation. CEL-SCI's contribution of common stock is valued each
quarter based upon the closing price of the Company's common stock. The fiscal
2004 expenses for this plan were $56,158. Other than the 401(k) Plan, CEL-SCI
does not have a defined benefit, pension plan, profit sharing or other
retirement plan.

Compensation of Directors

Standard Arrangements. CEL-SCI currently pays its directors $2,000 each
per quarter, plus expenses. CEL-SCI has no standard arrangement pursuant to
which directors of CEL-SCI are compensated for any services provided as a
director or for committee participation or special assignments.

Other Arrangements. CEL-SCI has from time to time granted options to its
outside directors. See Stock Options below for additional information concerning
options granted to CEL-SCI's directors.

Employment Contracts.

In March 2002 the Company entered into a three-year employment agreement
with Mr. de Clara which expires March 31, 2005. The employment agreement
provides that CEL-SCI will pay Mr. de Clara an annual salary of $363,000 during

the term of the agreement. In the event that there is a material reduction in
Mr. de Clara's authority, duties or activities, or in the event there is a
change in the control of the Company, then the agreement allows Mr. de Clara to
resign from his position at the Company and receive a lump-sum payment from
CEL-SCI equal to 18 months salary. For purposes of the employment agreement, a
change in the control of CEL-SCI means the sale of more than 50% of the
outstanding shares of CEL-SCI's Common Stock, or a change in a majority of
CEL-SCI's directors.

The Employment Agreement will also terminate upon the death of Mr. de
Clara, Mr. de Clara's physical or mental disability, the conviction of Mr. de
Clara for any crime involving fraud, moral turpitude, or CEL-SCI's property, or
a breach of the Employment Agreement by Mr. de Clara. If the Employment
Agreement is terminated for any of these reasons, Mr. de Clara, or his legal
representatives, as the case may be, will be paid the salary provided by the
Employment Agreement through the date of termination.

Effective September 1, 2003, CEL-SCI entered into a three-year employment
agreement with Mr. Kersten. The employment agreement provides that during the
term of the employment agreement CEL-SCI will pay Mr. Kersten an annual salary
of $370,585. In the event there is a change in the control of CEL-SCI, the
agreement allows Mr. Kersten to resign from his position at CEL-SCI and receive
a lump-sum payment from CEL-SCI equal to 24 months salary. For purposes of the
employment agreement a change in the control of CEL-SCI means: (1) the merger of
CEL-SCI with another entity if after such merger the shareholders of CEL-SCI do
not own at least 50% of voting capital stock of the surviving corporation; (2)
the sale of substantially all of the assets of CEL-SCI; (3) the acquisition by
any person of more than 50% of CEL-SCI's common stock; or (4) a change in a
majority of CEL-SCI's directors which has not been approved by the incumbent
directors.

The Employment Agreement will also terminate upon the death of Mr.
Kersten, Mr. Kersten's physical or mental disability, willful misconduct, an act
of fraud against CEL-SCI, or a breach of the Employment Agreement by Mr.
Kersten. If the Employment Agreement is terminated for any of these reasons Mr.
Kersten, or his legal representatives, as the case may be, will be paid the
salary provided by the Employment Agreement through the date of termination.

Compensation Committee Interlocks and Insider Participation

CEL-SCI has a compensation committee comprised of all of CEL-SCI's
directors, with the exception of Mr. Kersten. During the year ended September
30, 2004, Mr. de Clara was the only officer participating in deliberations of
CEL-SCI's compensation committee concerning executive officer compensation.

During the year ended September 30, 2004, no director of CEL-SCI was also
an executive officer of another entity, which had an executive officer of
CEL-SCI serving as a director of such entity or as a member of the compensation
committee of such entity.

Stock Options

The following tables set forth information concerning the options granted
during the fiscal year ended September 30, 2004, to the persons named below, and
the fiscal year-end value of all unexercised options (regardless of when
granted) held by these persons.

Options Granted During Fiscal Year Ended September 30, 2004

Potential Realizable
% of Total Value at Assumed
Options Annual Rates of Stock
Granted to Exercise Price Appreciation
Options Employees in Price Per Expiration for Option Term (1)
Name Granted (#) Fiscal Year Share Date 5% 10%
------ ---------- ----------- -------- ----------- ----- -----

Maximilian de Clara 50,000 6.49% $0.61 9/02/14 $15,258 $30,516

Geert R. Kersten 50,000 6.49% $0.61 9/02/14 $15,258 $30,516

Patricia B. Prichep 50,000 6.49% $0.61 9/02/14 $15,258 $30,516

Eyal Talor, Ph.D. 50,000 6.49% $0.61 9/02/14 $15,258 $30,516

Daniel Zimmerman, Ph.D. 50,000 6.49% $0.61 9/02/14 $15,258 $30,516

John Cipriano 100,000 12.99% $1.13 3/12/14 $56,530 $113,061
20,000 2.60% $0.61 9/02/14 $6,103 $12,206
-------
120,000

(1) The potential realizable value of the options shown in the table assuming
the market price of CEL-SCI's Common Stock appreciates in value from the
date of the grant to the end of the option term at 5% or 10%.

Option Exercises and Year-End Option Values
Value (in $)
of Unexercised
Number of In-the-Money
Unexercised Options at Fiscal
Shares Options (3 Year-End (4)
Acquired On Value Exercisable/ Exercisable/
Name Exercise(1) Realized(2) Unexercisable Unexercisable

Maximilian de Clara -- -- 741,666/ 458,332 $ 68,583/$134,916
Geert R. Kersten -- - 2,485,000/1,345,000 $222,600/$442,050
Patricia Prichep -- -- 743,168/ 466,832 $ 75,877/$139,438
Eyal Talor -- -- 470,556/ 327,776 $ 51,653/$ 91,305
Daniel Zimmerman -- -- 492,335/ 341,665 $ 54,554/$ 95,876
John Cipriano -- -- --/ 120,000 --/ --

(1) The number of shares received upon exercise of options during the fiscal
year ended September 30, 2004.

(2) With respect to options exercised during CEL-SCI's fiscal year ended
September 30, 2004, the dollar value of the difference between the option
exercise price and the market value of the option shares purchased on the
date of the exercise of the options.

(3) The total number of unexercised options held as of September 30, 2004,
separated between those options that were exercisable and those options
that were not exercisable.

(4) For all unexercised options held as of September 30, 2004, the market value
of the stock underlying those options as of September 30, 2004.

Stock Option and Bonus Plans

CEL-SCI has Incentive Stock Option Plans, Non-Qualified Stock Option Plans
and Stock Bonus Plans. All Stock Option and Bonus Plans have been approved by
the stockholders. A summary description of these Plans follows. In some cases
these Plans are collectively referred to as the "Plans".

Incentive Stock Option Plan. The Incentive Stock Option Plans collectively
authorize the issuance of up to 5,100,000 shares of CEL-SCI's Common Stock to
persons who exercise options granted pursuant to the Plan. Only Company
employees may be granted options pursuant to the Incentive Stock Option Plan.

To be classified as incentive stock options under the Internal Revenue
Code, options granted pursuant to the Plans must be exercised prior to the
following dates:

(a) The expiration of three months after the date on which an option
holder's employment by CEL-SCI is terminated (except if such
termination is due to death or permanent and total disability);

(b) The expiration of 12 months after the date on which an option
holder's employment by CEL-SCI is terminated, if such termination is
due to the Employee's permanent and total disability;

(c) In the event of an option holder's death while in the employ of
CEL-SCI, his executors or administrators may exercise, within three
months following the date of his death, the option as to any of the
shares not previously exercised;

The total fair market value of the shares of Common Stock (determined at
the time of the grant of the option) for which any employee may be granted
options which are first exercisable in any calendar year may not exceed
$100,000.

Options may not be exercised until one year following the date of grant.
Options granted to an employee then owning more than 10% of the Common Stock of

CEL-SCI may not be exercisable by its terms after five years from the date of
grant. Any other option granted pursuant to the Plan may not be exercisable by
its terms after ten years from the date of grant.

The purchase price per share of Common Stock purchasable under an option
is determined by the Committee but cannot be less than the fair market value of
the Common Stock on the date of the grant of the option (or 110% of the fair
market value in the case of a person owning more than 10% of CEL-SCI's
outstanding shares).

Non-Qualified Stock Option Plans. The Non-Qualified Stock Option Plans
collectively authorize the issuance of up to 8,760,000 shares of CEL-SCI's
Common Stock to persons that exercise options granted pursuant to the Plans.
CEL-SCI's employees, directors, officers, consultants and advisors are eligible
to be granted options pursuant to the Plans, provided however that bona fide
services must be rendered by such consultants or advisors and such services must
not be in connection with the offer or sale of securities in a capital-raising
transaction. The option exercise price is determined by the Committee but cannot
be less than the market price of CEL-SCI's Common Stock on the date the option
is granted.

Stock Bonus Plan. Up to 2,940,000 shares of Common Stock may be granted
under the Stock Bonus Plan. Such shares may consist, in whole or in part, of
authorized but unissued shares, or treasury shares. Under the Stock Bonus Plan,
CEL-SCI's employees, directors, officers, consultants and advisors are eligible
to receive a grant of CEL-SCI's shares, provided however that bona fide services
must be rendered by consultants or advisors and such services must not be in
connection with the offer or sale of securities in a capital-raising
transaction.

Other Information Regarding the Plans. The Plans are administered by
CEL-SCI's Compensation Committee ("the Committee"), each member of which is a
director of the Company. The members of the Committee were selected by CEL-SCI's
Board of Directors and serve for a one-year tenure and until their successors
are elected. A member of the Committee may be removed at any time by action of
the Board of Directors. Any vacancies which may occur on the Committee will be
filled by the Board of Directors. The Committee is vested with the authority to
interpret the provisions of the Plans and supervise the administration of the
Plans. In addition, the Committee is empowered to select those persons to whom
shares or options are to be granted, to determine the number of shares subject
to each grant of a stock bonus or an option and to determine when, and upon what
conditions, shares or options granted under the Plans will vest or otherwise be
subject to forfeiture and cancellation.

In the discretion of the Committee, any option granted pursuant to the
Plans may include installment exercise terms such that the option becomes fully
exercisable in a series of cumulating portions. The Committee may also
accelerate the date upon which any option (or any part of any options) is first
exercisable. Any shares issued pursuant to the Stock Bonus Plan and any options
granted pursuant to the Incentive Stock Option Plan or the Non-Qualified Stock
Option Plan will be forfeited if the "vesting" schedule established by the
Committee administering the Plan at the time of the grant is not met. For this
purpose, vesting means the period during which the employee must remain an
employee of CEL-SCI or the period of time a non-employee must provide services
to CEL-SCI. At the time an employee ceases working for CEL-SCI (or at the time a
non-employee ceases to perform services for CEL-SCI), any shares or options not

fully vested will be forfeited and cancelled. At the discretion of the Committee
payment for the shares of Common Stock underlying options may be paid through
the delivery of shares of CEL-SCI's Common Stock having an aggregate fair market
value equal to the option price, provided such shares have been owned by the
option holder for at least one year prior to such exercise. A combination of
cash and shares of Common Stock may also be permitted at the discretion of the
Committee.

Options are generally non-transferable except upon death of the option
holder. Shares issued pursuant to the Stock Bonus Plan will generally not be
transferable until the person receiving the shares satisfies the vesting
requirements imposed by the Committee when the shares were issued.

The Board of Directors of CEL-SCI may at any time, and from time to time,
amend, terminate, or suspend one or more of the Plans in any manner they deem
appropriate, provided that such amendment, termination or suspension will not
adversely affect rights or obligations with respect to shares or options
previously granted. The Board of Directors may not, without shareholder
approval: make any amendment which would materially modify the eligibility
requirements for the Plans; increase or decrease the total number of shares of
Common Stock which may be issued pursuant to the Plans except in the case of a
reclassification of CEL-SCI's capital stock or a consolidation or merger of
CEL-SCI; reduce the minimum option price per share; extend the period for
granting options; or materially increase in any other way the benefits accruing
to employees who are eligible to participate in the Plans.

Summary. The following sets forth certain information, as of January 10,
2005, concerning the stock options and stock bonuses granted by CEL-SCI. Each
option represents the right to purchase one share of CEL-SCI's common stock.

Total Shares
Shares Reserved for Shares Remaining
Reserved Outstanding Issued as Options/Shares
Name of Plan Under Plans Options Stock Bonus Under Plans
------------ ----------- ----------- ----------- ------------

Incentive Stock Option Plans 5,100,000 3,833,100 N/A 1,165,315
Non-Qualified Stock Option
Plans 8,760,000 6,078,197 N/A 1,262,505
Stock Bonus Plans 2,940,000 N/A 1,330,060 1,609,940

Of the shares issued pursuant to CEL-SCI's Stock Bonus Plans 592,944
shares were issued as part of CEL-SCI's contribution to its 401(k) plan.

The following table shows the weighted average exercise price of the
outstanding options granted pursuant to the Company's Incentive and
Non-Qualified Stock Option Plans as of January 10, 2005, CEL-SCI's most recent
fiscal year end. CEL-SCI's Incentive and Non-Qualified Stock Option Plans have
been approved by CEL-SCI's shareholders.

Number of Securities
Number Remaining Available
of Securities For Future Issuance
to be Issued Weighted-Average Under Equity
Upon Exercise Exercise Price Compensation Plans,
of Outstanding of Outstanding Excluding Securities
Plan category Options Options Reflected in Column (a)
-------------------------------------------------------------------------------
(a)
Incentive Stock Option
Plans 3,833,100 $0.68 1,165,315
Non-Qualified Stock
Option Plans 6,078,197 $0.67 1,262,505

PRINCIPAL SHAREHOLDERS

The following table sets forth, as of January 10, 2005, information with
respect to the only persons owning beneficially 5% or more of the outstanding
Common Stock and the number and percentage of outstanding shares owned by each
director and officer and by the officers and directors as a group. Unless
otherwise indicated, each owner has sole voting and investment powers over his
shares of Common Stock.

Name and Address Number of Shares (1) Percent of Class (3)
---------------- -------------------- --------------------

Maximilian de Clara 1,592,493 2.2%
Bergstrasse 79
6078 Lungern,
Obwalden, Switzerland

Geert R. Kersten 4,700,824 (2) 6.3%
8229 Boone Blvd., Suite 802
Vienna, VA 22182

Patricia B. Prichep 1,165,737 1.6%
8229 Boone Blvd., Suite 802
Vienna, VA 22182

Eyal Talor, Ph.D. 865,346 1.2%
8229 Boone Blvd., Suite 802
Vienna, VA 22182

Daniel H. Zimmerman, Ph.D. 879,702 1.2%
8229 Boone Blvd., Suite 802
Vienna, VA 22182

John Cipriano 44,804 0.1
8229 Boone Blvd., Suite 802
Vienna, VA 22182

Name and Address Number of Shares (1) Percent of Class (3)
---------------- ------------------- --------------------

Alexander G. Esterhazy 80,000 0.1
20 Chemin du Pre-Poiset
CH- 1253 Vandoeuvres
Geneve, Switzerland

C. Richard Kinsolving 242,424 0.3
P.O. Box 20193
Bradenton, FL 34204-0193

Peter R. Young, Ph.D. 21,268 *
1904 Canterbury Drive
Westover Hills, TX 76107

All Officers and Directors 9,592,598 12.5%
as a Group (9 persons)
* Less than 1%

(1) Includes shares issuable prior to March 31, 2005 upon the exercise of
options or warrants granted to the following persons:

Options or Warrants Exercisable
Name Prior to March 31, 2005
--------------- -------------------------------

Maximilian de Clara 731,666
Geert R. Kersten 2,158,000
Patricia B. Prichep 659,668
Eyal Talor, Ph.D. 455,222
Daniel H. Zimmerman, Ph.D. 447,001
John Cipriano 33,334
Alexander G. Esterhazy 80,000
C. Richard Kinsolving, Ph.D. 173,334
Peter R. Young, Ph.D. 6,667

(2) Amount includes shares held in trust for the benefit of Mr. Kersten's minor
children. Geert R. Kersten is the stepson of Maximilian de Clara.

(3) Amount includes shares referred to in (1) above but excludes shares which
may be issued upon the exercise or conversion of other options, warrants
and other convertible securities previously issued by CEL-SCI.

EQUITY LINE OF CREDIT AGREEMENT

Overview

On September 16, 2003, CEL-SCI entered into an equity line of credit
agreement with Rubicon Group Ltd. in order to establish a possible source of
funding for the development of CEL-SCI's technologies. The equity line of credit
agreement establishes what is sometimes also referred to as an equity drawdown
facility.

Under the equity line of credit agreement, Rubicon Group has agreed to
provide CEL-SCI with up to $10,000,000 of funding during the twenty-four month
period following the date of this prospectus. During this twenty-four month
period, CEL-SCI may request a drawdown under the equity line of credit by
selling shares of its common stock to Rubicon Group and Rubicon Group will be
obligated to purchase the shares. CEL-SCI may request a drawdown once every 22
trading days, although CEL-SCI is under no obligation to request any drawdowns
under the equity line of credit.

During the 22 trading days following a drawdown request, CEL-SCI will
calculate the amount of shares it will sell to Rubicon Group and the purchase
price per share. The purchase price per share of common stock will based on the
daily volume weighted average price of CEL-SCI's common stock during each of the
22 trading days immediately following the drawdown date, less a discount of 11%.

CEL-SCI may request a drawdown by faxing a drawdown notice to Rubicon
Group, stating the amount of the drawdown and the lowest daily volume weighted
average price, if any, at which CEL-SCI is willing to sell the shares. The
lowest volume/weighted average price will be set by CEL-SCI's Chief Executive
Officer in his sole and absolute discretion.

Calculation of Drawdown Amount, Purchase Price and Number of Shares Sold

The minimum amount CEL-SCI can draw down at any one time is $100,000. The
maximum amount CEL-SCI can draw down at any one time is the lesser of $2,000,000
or the amount equal to:

o 4.5% of the weighted average price of CEL-SCI's common stock for the ninety
calendar day period prior to the date of the drawdown request
o multiplied by the total trading volume of CEL-SCI's common stock for the
ninety calendar day period prior to the date of the drawdown request.

On the day following the delivery of the drawdown notice, a valuation
period of 22 trading days will start:

o On each trading day during the valuation period where the daily volume
weighted average price of CEL-SCI's common stock on the American Stock
Exchange exceeds the minimum price, if any, specified by CEL-SCI in the
drawdown notice, the purchase price will equal 89% of the volume weighted
average price on that day.

o On each of the 22 trading days during the valuation period, the number of
shares to be sold to Rubicon Group will be determined by dividing 1/22 of
the drawdown amount by the purchase price on each trading day.

o If the volume weighted average price for CEL-SCI's common stock on any
trading day during the 22 trading day calculation period is below the
minimum price, then Rubicon Group will not purchase any shares on that day,
and the drawdown amount will be reduced by 1/22.

If CEL-SCI sets a minimum price which is too high and CEL-SCI's stock
price does not consistently meet that level during the 22 trading days after its
drawdown request, the amount CEL-SCI can draw and the number of shares CEL-SCI
will sell to Rubicon Group will be reduced. On the other hand, if CEL-SCI sets a
minimum price which is too low and its stock price falls significantly but stays
above the minimum price, CEL-SCI will have to issue a greater number of shares
to Rubicon Group based on the reduced market price.

Payment for Shares Issued

The shares purchased on the first 11 trading days will be issued and paid
for on the 13th trading day following the drawdown request. The shares purchased
on the 12th through the 22nd trading days will be issued and paid for on the
24th trading day following the drawdown request.

Upon closing of the equity line of credit Agreement, CEL-SCI paid $10,000
to Feldman Weinstein LLP, legal counsel to Rubicon Group, for Rubicon Group's
legal expenses relating to the equity line of credit.

Grant of Warrants

CEL-SCI has determined that the fair value of these warrants using
customary pricing models is approximately $244,000. The fair value of these
warrants will be reflected in CEL-SCI's financial statements and recorded as
both a charge and an addition to additional paid-in capital for the year ended
September 30, 2003.

Restrictions on Future Financings

During the term of the equity line of credit agreement, CEL-SCI may not
raise capital through any other equity line of credit arrangement.

Termination of the Equity Line of Credit Agreement

The Equity Line of Credit Agreement will be terminated if:

o any event, which has not been corrected within 30 days, has taken place
which has any material adverse effect on the business or financial
condition of CEL-SCI or which prohibits or interferes with the ability of
CEL-SCI to perform any of its material obligations under the equity line of
credit agreement,

o CEL-SCI's common stock is de-listed from the American Stock Exchange unless
the de-listing is in connection with CEL-SCI's subsequent listing of its
common stock on the NASDAQ National Market, the NASDAQ SmallCap Market, the
New York Stock Exchange, the OTC Bulletin Board, or

o CEL-SCI files for protection from its creditors under the Federal
Bankruptcy laws.

CEL-SCI may terminate the equity line of credit if Rubicon Group fails to
honor more than one drawdown notice.

Indemnification

Rubicon Group is entitled to customary indemnification from CEL-SCI for
any losses or liabilities it suffers based upon material misstatements or
omissions from the registration statement and this prospectus, except as they
relate to information Rubicon Group supplied to CEL-SCI for inclusion in the
registration statement and prospectus.

SELLING SHAREHOLDER

This prospectus relates to sales of CEL-SCI's common stock by Rubicon Group
Ltd. Rubicon Group will receive shares of CEL-SCI's common stock under an equity
line of credit agreement and up to 395,726 shares of common stock upon the
exercise of warrants. Rubicon Group is sometimes referred to in this prospectus
as the selling shareholder.

CEL-SCI will not receive any proceeds from the sale of the shares by
Rubicon Group. Rubicon Group may resell the shares it acquires by means of this
prospectus from time to time in the public market. The costs of registering the
shares offered by Rubicon Group is being paid by CEL-SCI. Rubicon Group will pay
all other costs of the sale of the shares offered by it. During the past three
years neither the Rubicon Group nor its controlling persons had any relationship
with CEL-SCI, or CEL-SCI's officers or directors.

The following table shows the shares which are being offered for sale by
Rubicon Group.

Share
Shares Shares to Be Ownership
Presently Sold in this After
Name Owned Offering Offering
----------- -------- ------------ ----------

Rubicon Group Ltd. 395,726 (2) --

(1) Represents shares issuable upon the exercise of the warrants held by the
Rubicon Group, but excludes any shares which may be acquired by the Rubicon
Group under the Equity Line of Credit Agreement.

(2) The number of shares to be sold by the Rubicon Group in this offering will
vary from time-to-time and will depend upon the number of shares purchased from
CEL-SCI pursuant to the terms of the Equity Line Agreement and upon the exercise
of warrants. As of January 10, 2005, CEL-SCI had sold 307,082 shares of its
common stock to the Rubicon Group under the equity line of credit and had
received net proceeds of $335,910 from the sale of these shares.

Rubicon Group is a private investment fund. David Bree, Karim Shariff and
Raahim Don have voting and investment power over the securities held by the
Rubicon Group. The sole shareholder of Rubicon Group is SDS Capital
International, Ltd. The sole director of SDS Capital International, Ltd. has the
same members and managing member as the general partner of SDS Merchant Fund,
L.P. Since December 2001 SDS Merchant Fund has entered into three separate
transactions (sometimes known as PIPE transactions) involving the purchase of
convertible notes and warrants from CEL-SCI. The total amount paid by SDS
Merchant Fund for these convertible notes and warrants was $2,050,000. SDS
Merchant Fund has sold the securities it has acquired from CEL-SCI by means of
three separate registration statements. As of the date of this prospectus SDS
Merchant Fund has not agreed to make any further investments in CEL-SCI.

Manner of Sale.

The shares of common stock owned, or which may be acquired, by Rubicon
Group may be offered and sold by means of this prospectus from time to time as
market conditions permit in the over-the-counter market, or otherwise, at prices
and terms then prevailing or at prices related to the then-current market price,
or in negotiated transactions. These shares may be sold by one or more of the
following methods, without limitation:

o a block trade in which a broker or dealer so engaged will attempt to sell
the shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
o purchases by a broker or dealer as principal and resale by such broker or
dealer for its account pursuant to this prospectus;
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and
o face-to-face transactions between sellers and purchasers without a
broker/dealer.

In effecting sales, brokers or dealers engaged by Rubicon Group may
arrange for other brokers or dealers to participate. Such brokers or dealers may
receive commissions or discounts from Rubicon Group in amounts to be negotiated.

Rubicon Group is an "underwriter" and any broker/dealers who act in
connection with the sale of the shares by means of this prospectus may be deemed
to be "underwriters" within the meaning of ss.2(11) of the Securities Acts of
1933, and any commissions received by them and profit on any resale of the
shares as principal might be deemed to be underwriting discounts and commissions
under the Securities Act. CEL-SCI has agreed to indemnify Rubicon Group and any
securities broker/dealers who may be deemed to be underwriters against certain
liabilities, including liabilities under the Securities Act as underwriters or
otherwise.

CEL-SCI has advised Rubicon Group that it and any securities
broker/dealers or others who may be deemed to be statutory underwriters will be
subject to the prospectus delivery requirements under the Securities Act of
1933. CEL-SCI has also advised Rubicon Group that in the event of a
"distribution" of its shares Rubicon Group, any "affiliated purchasers", and any
broker/dealer or other person who participates in such distribution may be
subject to Rule 102 under the Securities Exchange Act of 1934 ("1934 Act") until
their participation in that distribution is completed. Rule 102 makes it
unlawful for any person who is participating in a distribution to bid for or
purchase stock of the same class as is the subject of the distribution. A
"distribution" is defined in Rule 102 as an offering of securities "that is
distinguished from ordinary trading transactions by the magnitude of the
offering and the presence of special selling efforts and selling methods".
CEL-SCI has also advised Rubicon Group that Rule 101 under the 1934 Act
prohibits any "stabilizing bid" or "stabilizing purchase" for the purpose of
pegging, fixing or stabilizing the price of the common stock in connection with
this offering.

Grant of Registration Rights

CEL-SCI granted registration rights to Rubicon Group to enable it to sell
the common stock it may acquire under the equity line of credit agreement or
upon the exercise of the warrants. Notwithstanding these registration rights,
CEL-SCI has no obligation:

o to assist or cooperate with Rubicon Group in the offering or disposition of
their shares;

o to obtain a commitment from an underwriter relative to the sale of any the
shares; or

o to include the shares within any underwritten offering.

The registration rights agreement with Rubicon Group permits CEL-SCI to
restrict the resale of the shares Rubicon Group has purchased under the equity
line of credit agreement for a period of time sufficient to permit CEL-SCI to
amend or supplement this prospectus to include material information. If CEL-SCI
restricts the ability of Rubicon Group to resell shares at any time during the
thirty-two trading days following the delivery of a drawdown notice, and
CEL-SCI's stock price declines during the restriction period, then, in order to
compensate Rubicon Group for its inability to sell shares during the restriction
period, CEL-SCI will be required to pay Rubicon Group an amount determined by
multiplying:

o the number of shares Rubicon Group is committed to purchase following the
delivery of the drawdown notice, and

o the difference between the highest daily weighted average price of
CEL-SCI's common stock during the restriction period and the weighted
average price of CEL-SCI's common stock on the day after the restriction
period ends.

DESCRIPTION OF SECURITIES

Common Stock

CEL-SCI is authorized to issue 200,000,000 shares of common stock, (the
"common stock"). Holders of common stock are each entitled to cast one vote for
each share held of record on all matters presented to shareholders. Cumulative
voting is not allowed; hence, the holders of a majority of the outstanding
common stock can elect all directors.

Holders of common stock are entitled to receive such dividends as may be
declared by the Board of Directors out of funds legally available therefor and,
in the event of liquidation, to share pro rata in any distribution of CEL-SCI's
assets after payment of liabilities. The board is not obligated to declare a
dividend. It is not anticipated that dividends will be paid in the foreseeable
future.

Holders of common stock do not have preemptive rights to subscribe to
additional shares if issued by CEL-SCI. There are no conversion, redemption,
sinking fund or similar provisions regarding the common stock . All of the
outstanding shares of Common stock are fully paid and non-assessable.

Preferred Stock

CEL-SCI is authorized to issue up to 200,000 shares of preferred stock.
CEL-SCI's Articles of Incorporation provide that the Board of Directors has the
authority to divide the preferred stock into series and, within the limitations
provided by Colorado statute, to fix by resolution the voting power,
designations, preferences, and relative participation, special rights, and the
qualifications, limitations or restrictions of the shares of any series so
established. As the Board of Directors has authority to establish the terms of,
and to issue, the preferred stock without shareholder approval, the preferred
stock could be issued to defend against any attempted takeover of CEL-SCI.

Warrants Held by Private Investors

See "Comparative Share Data" for information concerning the terms of
warrants held by private investors.

Transfer Agent

Computershare Trust Company, Inc., of Denver, Colorado, is the transfer
agent for CEL-SCI's common stock.

EXPERTS

The financial statements included in this prospectus have been audited by
Deloitte & Touche LLP, an independent registered public accounting firm, as
stated in their reports appearing herein and elsewhere in the registration
statement, and are included in reliance upon the reports of such firm given upon
their authority as experts in accounting and auditing.

INDEMNIFICATION

CEL-SCI's bylaws authorize indemnification of a director, officer,
employee or agent of CEL-SCI against expenses incurred by him in connection with
any action, suit, or proceeding to which he is named a party by reason of his
having acted or served in such capacity, except for liabilities arising from his
own misconduct or negligence in performance of his duty. In addition, even a
director, officer, employee, or agent of CEL-SCI who was found liable for
misconduct or negligence in the performance of his duty may obtain such
indemnification if, in view of all the circumstances in the case, a court of
competent jurisdiction determines such person is fairly and reasonably entitled
to indemnification. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, or persons
controlling CEL-SCI pursuant to the foregoing provisions, CEL-SCI has been
informed that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.

ADDITIONAL INFORMATION

CEL-SCI is subject to the requirements of the Securities Exchange Act of
l934 and is required to file reports, proxy statements and other information
with the Securities and Exchange Commission. Copies of any such reports, proxy
statements and other information filed by CEL-SCI can be read and copied at the
Commission's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.,
20549. The public may obtain information on the operation of the Public
Reference Room by calling the Commission at 1-800-SEC-0330. The Commission
maintains an Internet site that contains reports, proxy and information
statements, and other information regarding CEL-SCI. The address of that site is
http://www.sec.gov.

CEL-SCI will provide, without charge, to each person to whom a copy of
this prospectus is delivered, including any beneficial owner, upon the written
or oral request of such person, a copy of any or all of the documents
incorporated by reference below (other than exhibits to these documents, unless
the exhibits are specifically incorporated by reference into this prospectus).
Requests should be directed to:

CEL-SCI Corporation
8229 Boone Blvd., #802
Vienna, Virginia 22182
(703) 506-9460

CEL-SCI has filed with the Securities and Exchange Commission a
Registration Statement under the Securities Act of l933, as amended, with
respect to the securities offered by this prospectus. This prospectus does not
contain all of the information set forth in the Registration Statement. For
further information with respect to CEL-SCI and such securities, reference is
made to the Registration Statement and to the exhibits filed with the
Registration Statement. Statements contained in this prospectus as to the
contents of any contract or other documents are summaries which are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference. The
Registration Statement and related exhibits may also be examined at the
Commission's internet site.

CEL-SCI CORPORATION

Consolidated Financial Statements for the Years Ended
September 30, 2004, 2003, and 2002, and Report of
Independent Registered Public Accounting Firm

CEL-SCI CORPORATION

TABLE OF CONTENTS

Page

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM F-3

CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
SEPTEMBER 30, 2004, 2003, AND 2002:

Consolidated Balance Sheets F-4

Consolidated Statements of Operations F-5

Consolidated Statements of Comprehensive Loss F-6

Consolidated Statements of Stockholders' Equity F-7 - F-9

Consolidated Statements of Cash Flows F-10 - F-13

Notes to Consolidated Financial Statements F-14 - F-37

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
CEL-SCI Corporation
Vienna, Virginia

We have audited the accompanying consolidated balance sheets of CEL-SCI
Corporation and subsidiary (the "Company") as of September 30, 2004 and 2003,
and the related consolidated statements of operations, comprehensive loss,
stockholders' equity, and cash flows for each of the three years in the period
ended September 30, 2004. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at September 30, 2004
and 2003, and the results of its operations and its cash flows for each of the
three years in the period ended September 30, 2004, in conformity with
accounting principles generally accepted in the United States of America.

Deloitte & Touche LLP

McLean, Virginia
January 6, 2005

F-3

CEL-SCI CORPORATION
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2004 AND 2003
------------------------------------------------------------------------------
ASSETS 2004 2003

CURRENT ASSETS:
Cash and cash equivalents $ 4,263,631 $ 1,753,307
Interest and other receivables 21,256 47,051
Prepaid expenses 508,597 357,531
Deposits 14,828 14,828
Deferred financing costs - 16,243
----------- ----------
Total current assets 4,808,312 2,188,960

RESEARCH AND OFFICE EQUIPMENT--Less accumulated
depreciation of $1,651,759 and $2,002,232 233,612 278,706

PATENT COSTS--Less accumulated amortization
of $745,321 and $704,522 471,886 447,540
----------- ----------
$ 5,513,810 $2,915,206
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Accounts payable $ 143,300 $ 481,985
Accrued expenses 64,361 99,172
Due to officer/shareholder and employees 5,320 227,115
Deposits held 3,000 3,000
Deferred rent - 5,540
Note payable - Cambrex, net of discount - 656,076
Note payable - Covance - 184,330
----------- ----------
Total current liabilities 215,981 1,657,218

CONVERTIBLE DEBT, NET - 32,882
----------- ----------
Total liabilities 215,981 1,690,100
----------- ----------

STOCKHOLDERS' EQUITY:
Common stock, $.01 par value--authorized,
100,000,000 shares; issued and outstanding,
72,147,367 and 61,166,345 shares at September
30, 2004 and 2003, respectively 721,474 611,663
Unearned compensation (14,237) -
Additional paid-in capital 95,343,962 87,167,091
Accumulated deficit (90,753,370) (86,553,648)
----------- ---------
Total stockholders' equity 5,297,829 1,225,106
----------- ---------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,513,810 $ 2,915,206
=========== ===========

See notes to consolidated financial statements.

F-4

CEL-SCI CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 2004, 2003, AND 2002
------------------------------------------------------------------------------
2004 2003 2002

GRANT REVENUE AND OTHER $ 325,479 $ 318,304 $ 384,939

OPERATING EXPENSES:
Research and development 1,941,630 1,915,501 4,699,909
Depreciation and amortization 198,269 199,117 226,514
General and administrative 2,310,279 2,287,019 1,754,332
--------- ----------- ---------
Total operating expenses 4,450,178 4,401,637 6,680,755
--------- ----------- ---------
NET OPERATING LOSS (4,124,699) (4,083,333) (6,295,816)

INTEREST INCOME 51,817 52,502 85,322
INTEREST EXPENSE (126,840) (2,340,667) (2,131,750)
--------- ---------- ----------

NET LOSS
(4,199,722) (6,371,498) (8,342,244)
ACCRUED DIVIDENDS ON
PREFERRED STOCK - (32,101) (202,987)

ACCRETION OF BENEFICIAL CONVERSION
FEATURE ON PREFERRED STOCK - (76,720) (1,444,757)
--------- ---------- ----------

NET LOSS ATTRIBUTABLE TO COMMON
STOCKHOLDERS $(4,199,722) $(6,480,319) $(9,989,988)
=========== =========== ===========

NET LOSS PER COMMON SHARE (BASIC) $ (0.06) $ (0.13) $ (0.35)
=========== =========== ===========

NET LOSS PER COMMON SHARE (DILUTED)$ (0.06) $ (0.13) $ (0.35)
=========== =========== ===========

WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 67,273,133 50,961,457 28,746,341
=========== =========== ===========

See notes to consolidated financial statements.

F-5

CEL-SCI CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
YEARS ENDED SEPTEMBER 30, 2004, 2003,
AND 2002
--------------------------------------------------------------------------------
2004 2003 2002

NET LOSS $(4,199,722) $(6,371,498) $(8,342,244)

OTHER COMPREHENSIVE LOSS--Unrealized
gain on investments - - 210
----------- ---------- -----------

COMPREHENSIVE LOSS $(4,199,722) $(6,371,498) $(8,342,034)
=========== =========== ===========

See notes to consolidated financial statements.

F-6

CEL-SCI CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 2004, 2003, AND 2002

-----------------------------------------------------------------------------------------------------------------------------------
Accumulated
Preferred Additional Other
Series E Stock Common Stock Paid-In Unearned Comprehensive Accumulated
Shares Amount Shares Amount Capital Compensation Income Deficit Total
-----------------------------------------------------------------------------------------------------------------------------------
BALANCE, OCTOBER 1, 2001 5,863 $ 59 21,952,082 $219,521 $75,641,365 $(19,636) $(210) $(71,839,906) $4,001,193
Exercise of warrants 104,500 1,045 21,668 22,713
Stock issued to employees
for service 1,885,600 18,856 502,038 520,894
Repriced options (613,108) 19,636 (593,472)
Stock options issued to non-
employees for service (2,262) (2,262)
Stock issued to nonemployees
for service 45,596 456 45,140 45,596
Conversion of Preferred Series
E to common stock (4,671) ( 47) 4,282,150 42,822 (42,775) -
Dividends on Preferred Series
E paid in common stock 122,760 1,227 131,875 133,102
Dividends accrued on Preferred
Series E stock (202,987) (202,987)
Issuance of Series F convertible
debt with warrants and
beneficial conversion feature 1,600,000 1,600,000
Conversion of Series F convertible
debt 5,611,344 56,113 1,403,885 1,459,998
Interest on Series F convertible
debt paid in common stock 1,269 13 752 765
Issuance of Series G convertible
debt with warrants and beneficial
conversion feature 690,709 690,709
Conversion of Series G convertible debt 277,778 2,777 47,225 50,002
Issuance--common stock 150,000 1,500 148,500 150,000
401(k) contributions 193,818 1,938 69,885 71,823
Stock bonus to officer 75,071 751 88,583 89,334
Issuance of common stock for
equity line 2,553,174 25,532 1,341,265 1,366,797
Change in unrealized gain (loss)
of investment securities available
for sale 210 210
Net loss (8,342,244) (8,342,244)
-------- ------ --------- ------ ---------- ------- ----- ---------- ----------
BALANCE, SEPTEMBER 30, 2002 1,192 $ 12 37,255,142 $372,551 $80,871,758 $ - $ - $(80,182,150) $1,062,171

See notes to consolidated financial statements.
(Continued)

F-7

CEL-SCI CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 2004, 2003, AND 2002

-----------------------------------------------------------------------------------------------------------------------------------
Accumulated
Preferred Additional Other
Series E Stock Common Stock Paid-In Unearned Comprehensive Accumulated
Shares Amount Shares Amount Capital Compensation Income Deficit Total
-----------------------------------------------------------------------------------------------------------------------------------
Exercise of warrants 1,435,500 $14,355 $ 255,027 $ 269,382
Stock issued to employees for
service 4,409,932 44,099 920,117 964,216
Stock options issued to non-
employees for service 6,727 6,727
Stock issued to nonemployees
for service 559,089 5,591 123,100 128,691
Conversion of Preferred Series
E to common stock (1,192) (12) 1,018,439 10,184 (10,172) -
Dividends on Preferred Series E
paid in common stock 97,389 974 98,650 99,624
Dividends accrued on Preferred
Series E stock (21,189) (21,189)
Conversion of Series F
convertible debt 979,670 9,797 130,203 140,000
Interest on Series F
convertible debt paid in common
stock 22,608 226 4,040 4,266
Conversion of Series G
convertible debt 8,076,420 80,764 1,169,236 1,250,000
Interest on Series G convertible
debt paid in common stock 109,428 1,094 20,378 21,472
Issuance of Series H convertible
debt with warrants and
beneficial conversion feature 1,054,647 1,054,647
Conversion of Series H convertible debt 3,003,929 30,039 1,219,961 1,250,000
Interest on Series H convertible
debt paid in common stock 80,010 800 25,430 -- -- -- 26,230
Issuance of Cambrex note payable
with beneficial conversion
feature 106,716 106,716
Costs for equity related
transactions (40,600) (40,600)
Sale of common stock to Eastern
Biotech 1,100,000 11,000 489,000 500,000
Exercise of options 6,667 67 2,133 2,200
401(k) contributions 134,336 1,344 45,707 47,051
Issuance of common stock for
equity line 2,877,786 28,778 696,222 725,000
Net loss (6,371,498)(6,371,498)
------ ----- ---------- ------- ---------- ----- ---- ---------- ---------
BALANCE, SEPTEMBER 30, 2003 - $ - 61,166,345 $611,663 $87,167,091 $ - $ - $(86,553,648)$1,225,106

See notes to consolidated financial statements.
(Continued)

F-8

CEL-SCI CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 2004, 2003, AND 2002

See notes to consolidated financial statements.

F-9

CEL-SCI CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2004, 2003, AND 2002
------------------------------------------------------------------------------
2004 2003 2002

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss (4,199,722) (6,371,498) (8,342,244)
Adjustments to reconcile net loss to net
cash used for operating activities:
Depreciation and amortization 198,269 199,117 226,514
Issuance of stock options for services - 6,727 (2,262)
Repriced options - - (593,472)
Common stock bonus granted to officer - - 89,334
Issuance of common stock for services 165,136 1,092,907 566,490
Common stock contributed to 401(k) plan 52,476 47,051 71,823
Net realized (gain) loss on sale of
securities - - (2,758)
Impairment loss on abandonment of
patents 43,351 9,828 39,960
Gain on retired equipment - (5,913) -
Gain on sale of equipment - (26,463) -
R&D expenses paid with note payable - - 872,517
Amortization of deferred financing costs 16,243 385,170 276,785
Amortization of discount on note payable 30,916 113,300 262,500
Amortization of discount on
convertible debt 67,118 1,738,241 1,539,994
Changes in assets and liabilities:
Decrease (increase) in interest and
other receivables 25,795 (15,574) 8,899
(Increase) decrease in prepaid
expenses (151,066) 87,752 413,935
(Decrease) increase in accounts
payable and accrued expenses (418,974) 15,216 321,297
(Decrease) increase in due to
officer/shareholder and employees (221,795) 197,523 29,131
Increase in deposits held - 3,000 -
Decrease in deferred rent (5,540) (15,192) (10,486)
------- -------- --------
Net cash used for operating
activities (4,397,793) (2,538,808) (4,232,043)
---------- ---------- ----------

CASH FLOWS (USED FOR) PROVIDED BY
INVESTING ACTIVITIES:
Sales and maturities of investments - - 596,352
Proceeds from disposal of equipment - 7,812 -
Purchases of equipment (52,175) (6,905) (15,313)
Expenditures for patent costs (121,430) (93,509) (39,439)
--------- --------- --------

Net cash (used for) provided by
investing activities (173,605) (92,602) 541,600
--------- ------- --------

See notes to consolidated financial statements.

(Continued)
F-10

CEL-SCI CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2004, 2003, AND
2002
---------------------------------------------------------------------------
2004 2003 2002
CASH FLOWS PROVIDED BY
FINANCING ACTIVITIES:
Proceeds from issuance of common stock 7,799,970 500,000 150,000
Proceeds from exercise of warrants 291,222 269,382 22,713
Draw-downs on equity line (net) 340,000 725,000 1,366,797
Exercise and modification of stock
options 113,463 2,200 -
Proceeds from short-term loan - 25,000 -
Payment on short-term loan - (25,000) -
Payments on notes payable (871,322) (276,122) -
Proceeds from convertible debt - 1,350,000 2,900,000
Costs for convertible debt transactions - (224,419) (453,781)
Costs for equity related transactions (591,611) (40,600) -
--------- -------- --------
Net cash provided by
financing activities 7,081,722 2,305,441 3,985,729
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH 2,510,324 (325,969) 295,286
--------- --------- ---------
CASH, BEGINNING OF YEAR 1,753,307 2,079,276 1,783,990
--------- --------- ---------
CASH, END OF YEAR $4,263,631 $1,753,307 $2,079,276
========== ========== ==========

See notes to consolidated financial statements.

F-11

CEL-SCI CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2004, 2003, AND 2002
------------------------------------------------------------------------------

SUPPLEMENTAL INFORMATION ON NONCASH TRANSACTIONS 2004 2003 2002

CONVERSION OF PREFERRED STOCK INTO COMMON STOCK:

Decrease in preferred stock $ - $ (12) $ (47)
Increase in common stock - 10,184 42,822
Decrease in additional paid-in capital - (10,172) (42,775)
-------- ---------- ---------
$ - $ - $ -
======== ========== =========
COMMON STOCK IN LIEU OF CASH DIVIDENDS AND INTEREST
ON PREFERRED STOCK:
Decrease in accrued liabilities - (99,625) (133,102)
Increase in common stock - 974 1,227
Increase in additional paid-in capital - 98,651 131,875
-------- ---------- ---------
$ - $ - $ -
======== ========== =========
ACCRUAL OF DIVIDENDS ON PREFERRED STOCK:
Increase in accrued liabilities $ - $ 21,189 $ 202,987
Decrease in additional paid-in capital
- (21,189) (202,987)
-------- ---------- ---------
$ - $ - $ -
======== ========== =========
ISSUANCE OF CONVERTIBLE DEBT WITH WARRANTS
AND BENEFICIAL CONVERSION:
Decrease in convertible debt $ - $(1,054,647) (2,290,709)
Increase in additional paid-in capital - 1,054,647 2,290,709
-------- ---------- ---------
$ - $ - $ -
======== ========== =========

CONVERSION OF CONVERTIBLE DEBT INTO COMMON STOCK:
Decrease in convertible debt $(100,000) $(2,640,000) $(1,510,000)
Increase in common stock 1,794 120,600 58,890
Increase in additional paid-in capital 98,206 2,519,400 1,451,110
-------- ---------- ---------
$ - $ - $ -
======== ========== =========
CONVERSION OF INTEREST ON CONVERTIBLE DEBT
INTO COMMON STOCK:
Decrease in accrued liabilities $ (1,789) $ (51,968) $ (765)
Increase in common stock 32 2,120 13
Increase in additional paid-in capital 1,757 49,848 752
-------- ---------- ---------
$ - $ - $ -
======== ========== =========
CHANGES IN UNEARNED COMPENSATION
FOR VARIABLE OPTIONS:
Decrease in additional paid-in capital $ - $ - $ (19,636)
Decrease in unearned compensation - - 19,636
-------- ---------- ---------
$ - $ - $ -
======== ========== =========

ACCRETION TO THE BENEFICIAL CONVERSION
ON PREFERRED STOCK:
Increase in additional paid-in capital $ - $ 76,720 $1,444,757
Decrease in additional paid-in capital - (76,720) (1,444,757)
-------- ---------- ---------
$ - $ - $ -
======== ========== =========

See notes to consolidated financial statements.
(continued)

F-12

CEL-SCI CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2004, 2003, AND 2002
-------------------------------------------------------------------------------

SUPPLEMENTAL INFORMATION ON NONCASH TRANSACTIONS 2004 2003 2002

EQUIPMENT COSTS INCLUDED IN ACCOUNTS PAYABLE:
Increase in equipment costs $ (31,728) $ (157) $ (677)
Increase in accounts payable 31,728 157 677
---------- --------- --------
$ - $ - $ -
========== ========= ========

PATENT COSTS INCLUDED IN ACCOUNTS PAYABLE:
Increase in patent costs $ (15,539) $ (11,659) $ (17,321)
Increase in accounts payable 15,539 11,659 17,321
---------- --------- --------
$ - $ - $ -
========== ========= ========

BENEFICIAL CONVERSION FEATURE OF NOTE PAYABLE:
Increase in additional paid-in capital $ - $ 106,716 $ -
Decrease in notes payable - (106,716) -
---------- --------- --------
$ - $ - $ -
========== ========= ========

SURRENDER OF DEPOSIT AND SALE OF EQUIPMENT TO
REDUCE NOTE PAYABLE:
Decrease in deposits $ - $ 125,000 $ -
Decrease in equipment, net - 100,000 -
Decrease in notes payable - (225,000) -
---------- --------- --------
$ - $ - $ -
========== ========= ========

CONVERSION OF ACCOUNTS PAYABLE INTO NOTES PAYABLE:
Decrease in accounts payable $ - $(199,928) $ -
Increase in notes payable - 199,928 -
---------- --------- --------
$ - $ - $ -
========== ========= ========

RECLASS OF INVENTORY TO EQUIPMENT:
Decrease in inventory $ - $ 6,839 $ -
Increase in equipment - (6,839) -
---------- --------- --------
$ - $ - $ -
========== ========= ========

CASHLESS EXERCISE OF WARRANTS:
Increase in common stock $ 3,698 $ - $ -
Decrease in additional paid-in capital (3,698) - -
---------- --------- --------
$ - $ - $ -
========== ========= ========

See notes to consolidated financial statements.

F-13

CEL-SCI CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2004, 2003 AND 2002

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CEL-SCI Corporation (the "Company") was incorporated on March 22, 1983, in
the State of Colorado, to finance research and development in biomedical
science and ultimately to engage in marketing and selling products.

Significant accounting policies are as follows:

a. Principles of Consolidation--The consolidated financial statements include
the accounts of the Company and its wholly owned subsidiary, Viral
Technologies, Inc. All significant intercompany transactions have been
eliminated upon consolidation.

b. Investments--Investments that may be sold as part of the liquidity
management of the Company or for other factors are classified as
available-for-sale and are carried at fair market value. Unrealized gains
and losses on such securities are reported as a separate component of
stockholders' equity. Realized gains and losses on sales of securities are
reported in earnings and computed using the specific identified cost
basis.

c. Research and Office Equipment--Research and office equipment is recorded
at cost and depreciated using the straight-line method over estimated
useful lives of five to seven years. Leasehold improvements are
depreciated over the shorter of the estimated useful life of the asset or
the terms of the lease. Repairs and maintenance are expensed when
incurred.

d. Research and Development Costs--Research and development expenditures are
expensed as incurred. The Company has an agreement with an unrelated
corporation for the production of MULTIKINE, which is the Company's only
product source.

e. Research and Development Grant Revenues--The Company's grant arrangements
are handled on a reimbursement basis. Grant revenues under the
arrangements are recognized as grant revenue when costs are incurred.

f. Patents--Patent expenditures are capitalized and amortized using the
straight-line method over 17 years. In the event changes in technology or
other circumstances impair the value or life of the patent, appropriate
adjustment in the asset value and period of amortization is made. An
impairment loss is recognized when estimated future undiscounted cash flows
expected to result from the use of the asset, and from disposition, is less
than the carrying value of the asset. The amount of the impairment loss
would be the difference between the estimated fair value of the asset and
its carrying value. During the years ended September 30, 2004, 2003 and
2002, the Company recorded patent impairment charges of $43,351, $9,828 and
$39,960, respectively, for the net book value of patents abandoned during
the year.These amounts are included in general and administrative expenses.

F-14

g. Net Loss Per Common Share--Net loss per common share is computed by
dividing the net loss, after increasing the loss for the effect of any
accrued dividends on the preferred stock and the accretion of the
beneficial conversion feature related to the preferred stock, by the
weighted average number of common shares outstanding during the period.
Common stock equivalents, including convertible preferred stock and
options to purchase common stock, were excluded from the calculation for
all periods presented as they were antidilutive.

h. Prepaid Expenses--The majority of prepaid expenses consist of
manufacturing production advances and bulk purchases of laboratory
supplies to be consumed in the manufacturing of the Company's product for
clinical studies. During the year ended September 30, 2004, $43,184 in
expired (but still useable) inventory was returned to the vendor and
replaced by the vendor at no cost.

i. Deferred Financing Costs--Deferred financing costs are capitalized and
expensed over the shorter of the period the notes are outstanding or on a
pro-rata basis as the notes are converted.

j. Income Taxes--Income taxes are accounted for using the asset and
liability method under which deferred tax liabilities or assets are
determined based on the difference between the financial statement and tax
basis of assets and liabilities (i.e., temporary differences) and are
measured at the enacted tax rates. Deferred tax expense is determined by
the change in the liability or asset for deferred taxes. The difference in
the Company's U.S. Federal statutory income tax rate and the Company's
effective rate is primarily attributed to the recording of a valuation
allowance due to the uncertainty of the amount of future tax benefits that
will be realized because it is more likely than not that future taxable
income will not be sufficient to realize such tax benefits.

k. Cash and Cash Equivalents--For purposes of the statements of cash flows,
cash and cash equivalents consists principally of unrestricted cash on
deposit and short-term money market funds. The Company considers all
highly liquid investments with a maturity when purchased of less than
three months, and those investments that are readily convertible to known
amounts of cash and are so close to maturity that they bear no interest
rate risk, as cash and cash equivalents.

l. Convertible Debt--Convertible debt issued by the Company is initially
offset by a discount representing the relative fair value of the warrants
and beneficial conversion feature. This discount is amortized to interest
expense over the period the debt is outstanding and accelerated pro-rata as
the notes are converted. The fair value of the warrants and beneficial
conversion discount are calculated based on available market data using
appropriate valuation models. Notes 6 and 12 provide additional information
on the valuation of the warrants and beneficial conversion discount.

m. Use of Estimates--The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

F-15

n. New Pronouncements--In November 2004 the Financial Accounting Standards
Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS")
No. 151, "Inventory Costs, an amendment of ARB 43, Chapter 4". This
statement amends ARB 43, Chapter 4, to clarify accounting for abnormal
amounts of idle facility expense, freight, handling costs and wasted
material. SFAS No. 151 requires that those items be recognized as
current-period charges in all circumstances. SFAS No. 151 is effective for
fiscal years beginning after June 15, 2005. The Company does not believe
that the adoption of SFAS No. 151 will have a material effect on its
financial position, results of operations or cash flows.

In December 2004 the FASB issued SFAS No. 123R, "Share-Based Payment". SFAS
No. 123R requires companies to recognize compensation expense in an amount
equal to the fair value of the share-based payment (stock options and
restricted stock) issued to employees. SFAS No. 123R applies to all
transactions involving issuance of equity by a Company in exchange for
goods and services, including employees. SFAS No. 123R is effective for
fiscal periods beginning after June 15, 2005. The Company has not
determined the impact of adopting SFAS No. 123R.

On December 16, 2004, the FASB issued SFAS No. 153, "Exchange of
Nonmonetary Assets", an amendment of Accounting Principles Board ("APB")
Opinion No. 29, which differed from the International Accounting Standards
Board's ("IASB") method of accounting for exchanges of similar productive
assets. Statement No. 153 replaces the exception from fair value
measurement in APB No. 29, with a general exception from fair value
measurement for exchanges of nonmonetary assets that do not have commercial
substance. The Statement is to be applied prospectively and is effective
for nonmonetary asset exchanges occurring in fiscal periods beginning after
June 15, 2005. The Company does not believe that SFAS No. 153 will have a
material impact on its results of operations or cash flows.

o. Stock-Based Compensation-- In October 1996, the FASB issued SFAS No. 123,
"Accounting for Stock-Based Compensation". This statement encourages but
does not require companies to account for employee stock compensation
awards based on their estimated fair value at the grant date with the
resulting cost charged to operations. The Company has elected to continue
to account for its employee stock-based compensation using the intrinsic
value method prescribed in APB No. 25, "Accounting for Stock Issued to
Employees, and related Interpretations". In December 2002, the FASB issued
SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and
Disclosure" which amends SFAS No. 123. SFAS 148 provides alternative
methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation and requires
more prominent and more frequent disclosures in the financial statements
of the effects of stock-based compensation. The provisions of SFAS 148 are
effective for fiscal years ending after December 15, 2002. The Company has
elected to continue to account for its employee stock-based compensation
using the intrinsic value method. If the Company had elected to recognize
compensation expense based on the fair value of the awards granted,
consistent with the provisions of SFAS No. 123, the Company's net loss and
net loss per common share would have been increased to the pro forma
amounts indicated below:

Year Ended September 30,
----------------------------------------
2004 2003 2002
---- ----- ----
Net loss:
As reported $(4,199,722) $(6,371,498) $ (8,342,244)

F-16

Add/(subtract): Recording of
and reversal of compensation
expense for stock-based per-
formance awards included in
reported net loss, net of
related tax effects 7,597 - (593,472)
Add: Total stock-based
employee compensation expense
determined under fair-value
based method for all awards,
net of related tax effects (1,050,113) (971,076) (990,949)
---------- -------- ---------
Pro forma net loss $(5,242,238) $(7,342,574) $(9,926,665)

Net loss per common share:
As reported $ (0.06) $ (0.13) $ (0.35)
Pro forma $ (0.08) $ (0.15) $ (0.40)

The weighted average fair value at the date of grant for options granted
during fiscal years 2004, 2003 and 2002 was $0.48, $0.22, and $0.49, per
option, respectively.

The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following
assumptions:
2004 2003 2002
---- ---- ----
Expected stock risk volatility 88% 77% 90 to 93%
Risk-free interest rate 3.13-4.25 3.12% 4.10 to 4.12%
Expected life options 5 Years 5 Years 5 Years
Expected dividend yield - - -

The effects of applying SFAS No. 123 in this pro forma disclosure are not
necessarily indicative of the effect on future amounts.

The Company's stock options are not transferable, and the actual value of
the stock options that an employee may realize, if any, will depend on the
excess of the market price on the date of exercise over the exercise
price. The Company has based its assumption for stock price volatility on
the variance of monthly closing prices of the Company's stock. The
risk-free rate of return used for fiscal years 2004 and 2003 equals the
yield on five-year zero-coupon U.S. Treasury issues on the grant date. The
risk-free rate of return used for fiscal years 2002 and 2001 equals the
yield on one to six year zero-coupon U.S. Treasury issues on the date of
grant. No discount was applied to the value of the grants for
nontransferability or risk of forfeiture.

2. OPERATIONS AND FINANCING

The Company has incurred significant costs since its inception in connection
with the acquisition of certain patented and unpatented proprietary
technology and know-how relating to the human immunological defense system,
patent applications, research and development, administrative costs,
construction of laboratory facilities, and clinical trials. The Company has

F-17

funded such costs with proceeds realized from the public and private sale
of its common and preferred stock. The Company will be required to raise
additional capital or find additional long-term financing in order to
continue with its research efforts. The Company expects to receive
additional funding from private investors subsequent to September 30, 2004;
however, there can be no assurances that the Company will be able to raise
additional capital or obtain additional financing. To date, the Company has
not generated any revenue from product sales. The ability of the Company to
complete the necessary clinical trials and obtain FDA approval for the sale
of products to be developed on a commercial basis is uncertain.

The Company plans to seek continued funding of the Company's development by
raising additional capital. In fiscal year 2003 and fiscal year 2002, the
Company reduced its discretionary expenditures. Fiscal year 2004
expenditures remained in line with fiscal year 2003 expenditures. If
necessary, the Company plans to further reduce discretionary expenditures
in fiscal year 2005; however such reductions would further delay the
development of the Company's products. It is the opinion of management that
sufficient funds will be available from external financing and additional
capital and/or expenditure reductions in order to meet the Company's
liabilities and commitments as they come due during fiscal year 2005.
Ultimately, the Company must complete the development of its products,
obtain the appropriate regulatory approvals and obtain sufficient revenues
to support its cost structure.

3. INVESTMENTS

The Company has invested in highly liquid notes during fiscal year 2004 with
maturity dates of less than three months. These investments are classified as
cash and cash equivalents. There were no investments or associated unrealized
gains or losses as of September 30, 2004 or 2003. The gross realized gains
and losses of sales of investments available-for-sale for the years ended
September 30, 2004, 2003, and 2002, are as follows:

2004 2003 2002
---- ---- ----
Realized gains $ - $ - $ 2,758
======= ======= =======

4. RESEARCH AND OFFICE EQUIPMENT

Research and office equipment at September 30, 2004 and 2003, consists of the
following:
2004 2003
---- ----
Research equipment $ 1,619,780 $1,999,475
Furniture and equipment 222,549 238,422
Leasehold improvements 43,041 43,041
----------- ----------
1,885,370 2,280,938

Less: Accumulated depreciation and
amortization (1,651,758) (2,002,232)
---------- -----------
Net research and office equipment $ 233,612 278,706
=========== ==========

F-18

5. INCOME TAXES

At September 30, 2004 the Company had a federal net operating loss carry-
forward of approximately $79.2 million expiring from 2005 through 2024. The
Company has deferred tax assets of approximately $30.8 million and $32.5
million at September 30, 2004 and 2003, respectively. The deferred tax
assets are principally a result of the net operating loss carryforwards.

At both September 30, 2004 and 2003, the Company has recognized a valuation
allowance to the full extent of its deferred tax assets. In assessing the
realization of the deferred tax assets, management considered whether it
was more likely than not that some portion or all of the deferred tax asset
will be realized. The ultimate realization of the deferred tax assets are
dependent upon the generation of future income. Management has considered
the history of the Company's operating losses and believes that the
realization of the benefit of the deferred tax assets cannot be determined.
In addition, under the Internal Revenue Code Section 382 the Company's
ability to utilize these net operating loss carryforwards may be limited or
eliminated in the event of a change in ownership. Internal Revenue Code
Section 382 generally defines a change in ownership as the situation where
there has been a more than 50 percent change in ownership of the value of
the Company within the last three years.

For fiscal years 2004, 2003 and 2002, the Company's federal statutory tax
rate was 35% and the state tax rate was 6%. The effective tax rate was 0%.
The difference between the rates was primarily attributable to the effect
of non-deductible interest expense related to convertible notes (1%, 11%
and 7% for the fiscal years 2004, 2003 and 2002, respectively) and the
non-recognition of deferred taxes due to the valuation allowance.

6. STOCK OPTIONS, BONUS PLAN AND WARRANTS

Non-Qualified Stock Option Plan--At September 30, 2004, the Company has
collectively authorized the issuance of 8,760,000 shares of common stock
under the Non-Qualified Plan. Options typically vest over a three-year period
and expire no later than ten years after the grant date. Terms of the options
are to be determined by the Company's Compensation Committee, which
administers all of the plans. The Company's employees, directors, officers,
and consultants or advisors are eligible to be granted options under the
Non-Qualified Plan.

Information regarding the Company's Non-Qualified Stock Option Plan is
summarized as follows:
Outstanding Exercisable
------------------- -----------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------------------- -----------------
Options outstanding,
October 1, 2001 3,360,066 $1.29 1,640,047 $ 1.38

Options granted 860,000 0.44
Options exercised - -
Options forfeited (146,632) 1.50
----------

F-19

Options outstanding,
September 30, 2002 4,073,434 1.10 3,159,938 1.25

Options granted 2,582,165 0.22
Options exercised (6,667) 0.33
Options forfeited (194,959) 1.44
----------

Options outstanding,
September 30, 2003 6,453,973 0.74 3,319,317 1.18

Options granted 670,000 0.61

Options exercised (198,503) 0.43

Options forfeited (26,332) 0.28
---------
Options outstanding,
September 30, 2004 6,899,138 0.74 4,288,847 0.98
=========

At September 30, 2004, options outstanding and exercisable were as follows:

Weighted Weighted Weighted
Average Average Average
Range of Exercise Remaining Exercise
Exercise Number Price Contractual Number Price
Prices Outstanding Outstanding Life Exercisable Exercisable

$0.16 - $0.24 2,430,000 $ 0.22 8.49 years 748,030 $ 0.22
$0.33 - $0.50 408,333 $ 0.34 7.63 years 255,006 $ 0.33
$0.54 - $0.81 961,500 $ 0.59 9.19 years 194,334 $ 0.54
$1.05 - $1.58 2,395,266 $ 1.07 1.67 years 2,387,768 $ 1.07
$1.67 - $2.51 677,109 $ 1.79 0.96 years 677,109 $ 1.79
$3.25 - $4.88 25,800 $ 3.34 2.57 years 25,800 $ 3.34
$6.25 - $9.38 800 $ 6.25 4.00 years 800 $ 6.25

During March 2000, the Company agreed to restore and vest 40,000 options at
prices ranging from $5.25 to $5.62, to one former Director and one Director
as part of a settlement agreement. The options will expire on September 25,
2006. As of September 30, 2003, 20,000 options had been exercised. In
October 2000 and April 2001, the Company extended the expiration dates on
approximately 1,056,000 options from the Nonqualified Stock Option Plan
with exercise prices ranging from $2.38 to $5.25. The options originally

F-20

expired from October 2000 to January 2001 but were extended to expiration
dates ranging from October 2001 to January 2002. Each of these two dates
was considered a new measurement date with respect to all of the modified
options; however, on each date the exercise price of the options exceeded
the fair market value of the Company's common stock, and therefore, no
compensation expense was recorded.

In July 2001, the Company repriced 1,298,098 outstanding employee and
director stock options under the Nonqualified Plans that were priced over
$2.00 down to $1.05. In accordance with Financial Interpretation No. 44 (FIN
44), such repriced options are considered to be variable options. During the
year ended September 30, 2001, compensation charges of $364,532 were recorded
in the consolidated statement of operations and unearned compensation of
$11,916 was recorded on the consolidated balance sheet as of September 30,
2001. The compensation expense was originally determined based upon the
difference between the fair market value of the Company's common stock at the
date of modification and the exercise price of each stock option. On
September 30, 2001, the incremental compensation expense was determined based
on the difference between the fair market value of the stock on September 30,
2001, and the exercise price, less the previously recorded expense. During
the year ended September 30, 2002, the change in the market value of the
Company's common stock resulted in the reversal of $364,532 of compensation
expense. Changes in the fair market value of the Company's stock may result
in future changes to compensation expense. There was no expense recorded
during the years ended September 30, 2004 and 2003. As of September 30, 2004,
1,194,266 options remain outstanding.

In November 2001, the Company extended the expiration date on 242,000 options
at $1.05 from the Nonqualified Plans. The options were to expire between June
2002 and October 2002 and were extended by one year to June 2003 through
October 2003. The options had originally been granted between October 1989 to
December 1995. These dates were considered a new measurement date with
respect to all of the modified options. In addition, in February, April, and
July of 2002, the Company modified options outstanding to employees who had
been terminated in conjunction with their change in employee status so that
all options vested on the date of termination. These dates were considered a
new measurement date with respect to all of the newly vested options. At each
of the dates of modification, the exercise price of the options exceeded the
fair market value of the Company's common stock and no compensation expense
was recorded.

In November 2002 and March 2003, the Company extended the expiration date on
897,000 options from the Nonqualified Stock Option Plan with exercise prices
ranging from $1.05 to $1.94. The options originally expired from January 2003
to October 2003, but were extended to expiration dates ranging from January
2005 to October 2005. Each of these two dates was considered a new
measurement date. At each of the dates of modification, the exercise price of
the options exceeded the fair market value of the Company's common stock and
no compensation expense was recorded. As of September 30, 2004, all options
remain outstanding.

In June 2004, the vesting of 10,700 nonqualified stock options was
accelerated for an employee leaving the Company. Compensation expense of
$7,597 was recorded for the modification.

Incentive Stock Option Plan--At September 30, 2004, the Company has
collectively authorized the issuance of 4,100,000 shares of common stock

F-21

under the Incentive Stock Option Plan. Options vest after a one-year to
three-year period and expire no later than ten years after the grant date.
Terms of the options are to be determined by the Company's Compensation
Committee, which administers all of the plans. Only the Company's employees
and directors are eligible to be granted options under the Incentive Plan.

Information regarding the Company's Incentive Stock Option Plan is summarized
as follows:
Outstanding Exercisable
------------------ ----------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
--------- --------- ------- --------
Options outstanding, October 1, 2001 1,170,100 $1.65 862,103 $2.33

Options granted 81,000 1.08
Options exercised - -
Options forfeited - -
---------

Options outstanding, September 30, 2002 1,251,100 1.62 1,062,769 1.69

Options granted 2,550,000 0.22
Options exercised - -
Options forfeited - -
---------

Options outstanding, September 30, 2003 3,801,100 0.68 1,162,768 1.65

Options granted 100,000 1.13
Options exercised (15,000) 1.05
Options forfeited (53,000) 1.15
---------
Options outstanding, September 30, 2004 3,833,100 0.68 2,006,435 1.05
=========

At September 30, 2004, options outstanding and exercisable were as follows:

Weighted Weighted Weighted
Average Average Average
Range of Exercise Remaining Exercise
Exercise Number Price Contractual Number Price
Prices Outstanding Outstanding Life Exercisable Exercisable
--------- ----------- ----------- ----------- ----------- ------------

$0.22 - $0.33 2,550,000 $ 0.22 8.50 years 850,001 $ 0.22
$1.00 - $1.50 1,041,066 $ 1.08 4.54 years 914,400 1.08
$1.85 - $2.78 81,167 2.00 2.87 years 81,167 2.00
$2.87 - $4.31 30,167 3.40 0.84 years 30,167 3.40
$4.50 - $6.75 129,600 5.06 3.69 years 129,600 5.06
$9.00 -$13.50 1,100 $10.09 1.73 years 1,100 10.09

F-22

During fiscal year 2001, the Company extended the expiration date on 50,000
options at $2.87 from the Incentive Stock Option Plan. The options were to
expire November 1, 2001, and were extended to November 1, 2002. The options
had originally been granted in November 1991. November 1, 2001 was considered
a new measurement date; however, the exercise price on all the options
modified exceeded the fair market value of the Company's common stock, and
therefore, no compensation expense was recorded. The options were further
extended to November 1, 2005. There was no compensation expense recorded
because the exercise price on the options exceeded the fair market value of
the Company's common stock.

In July 2001, the Company repriced 816,066 outstanding employee and director
stock options under the Incentive Stock Option Plan that were priced over
$2.00 down to $1.05. In accordance with FIN 44, such repriced options are
considered to be variable options. During the year ended September 30, 2001,
compensation charges of $228,940 were recorded in the consolidated statement
of operations and unearned compensation of $7,720 was recorded on the
consolidated balance sheet as of September 30, 2001. The compensation expense
was originally determined based upon the difference between the fair market
value of the Company's common stock at the date of modification and the
exercise price of each stock option. On September 30, 2001, the incremental
compensation expense was determined based on the difference between the fair
market value of the stock on September 30, 2001, and the exercise price, less
the previously recorded expense. During the year ended September 30, 2002,
this charge was completely reversed as the stock price declined. No expense
was recorded during the year ended September 30, 2003 related to these
options. As of September 30, 2004, 751,066 options remain outstanding.
Changes in the fair market value of the Company's common stock may result in
future changes in compensation expenses.

In November 2001, the Company extended the expiration date on 56,000 options
at $1.05 from the Incentive Stock Option Plan. The options were to expire
between November 2002 and December 2002, and were extended by one year to
November 2003 to December 2003. The options had originally been granted
between November 1999 and December 1992. This date was considered a new
measurement date with respect to the modified options. In addition, in
February, April, and July of 2002, the Company modified options outstanding
to employees who had been terminated in conjunction with their change in
employee status so that all options vested on the date of termination. At
each of the dates of modification, the exercise price of the options exceeded
the fair market value of the Company's common stock and no compensation
expense was recorded.

In March 2003, the Company extended the expiration date on 105,500 options
from the Incentive Stock Option Plan with exercise prices ranging from $1.05
to $1.94. The options originally expired from August 2003 to March 2004 but
were extended to expiration dates ranging from August 2005 to March 2006.
This was considered a new measurement date with respect to all of the
modified options. At each of the dates of modification, the exercise price of
the options exceeded the fair market value of the Company's common stock and
no compensation expense was recorded. As of September 30, 2004, all options
remain outstanding.

Other Options and Warrants - In connection with the 1992 public offering,
5,175,000 common stock purchase warrants were issued and outstanding at
September 30, 1997. Every ten warrants entitled the holder to purchase one

F-23

share of common stock at a price of $15.00 per share. Subsequently, the
expiration date of the warrants was extended to February 1998. Effective
June 1, 1997, the exercise price of warrants was lowered from $15 to $6 and
only five warrants, rather than 10 warrants, were required to purchase one
share of common stock. Subsequent to September 30, 1997, warrant holders
who tendered five warrants and $6.00 between January 9, 1998, and February
7, 1998, would receive one share of the Company's common stock and one new
warrant. The new warrants would permit the holder to purchase one share of
the Company's common stock at a price of $10.00 per share prior to February
7, 2000. During fiscal year 1998, the expiration date of the original
warrants was extended to July 31, 1998, and 582,025 original warrants were
tendered for 116,405 common shares. As of September 30, 1999, the 4,592,975
original warrants had expired. In January 2001, the Company extended the
expiration date on the remaining 116,405 warrants to August 2001 and
repriced them from $10.00 to $3.00 per share. In July 2001, the Company
extended the expiration date further to February 2002. The incremental
value at the date of these modifications collectively of $43,842 is
recorded as an addition to additional paid-in capital and also a charge to
additional paid-in capital since the Company is in an accumulated deficit
position. In January 2002, the Company extended the expiration date further
to February 6, 2003. The additional incremental value at the date of the
modification of $5,997 is recorded as an addition to additional paid-in
capital and also a charge to additional paid-in capital since the Company
is in an accumulated deficit position. The fair value was valued using the
Black-Scholes pricing methodology. All warrants expired on February 6,
2003.

During fiscal year 1999, the Company granted a consultant options to purchase
a total of 50,000 shares of the Company's common stock. The fair value of the
options is expensed over the life of the consultant's contract. All 50,000
options became exercisable during fiscal year 1999 at $2.50 per share. All
options expired February 4, 2004.

During fiscal year 2001, the Company granted options to consultants to
purchase a total of 180,000 shares of the Company's common stock at exercise
prices ranging from $1.05 to $1.63 expiring from June to July of 2006. As of
September 30, 2004, all options were outstanding. Total compensation of
$77,206 was expensed for these options. The compensation expense was
determined using the Black-Scholes pricing methodology with the following
assumptions:

Expected stock risk volatility 98% to 104%
Risk-free interest rate 3.12% to 4.12%
Expected life of option 3 Years
Expected dividend yield -0-

In connection with the April 2001 common stock purchase agreement discussed
in Note 13, the Company issued 200,800 common stock purchase warrants. Each
warrant entitled the holder to purchase one share of common stock at $1.64
per share. The warrants expired in April 2004. The warrants had a relative
fair value of $200,000 calculated using the Black-Scholes pricing methodology
with the following assumptions:

Expected stock risk volatility 98%
Risk-free interest rate 3.12%
Expected life of warrant 3 Years
Expected dividend yield -0-

F-24

The fair value of the warrants has been recorded as an addition to additional
paid-in capital and also a charge to additional paid-in capital since the
Company is in an accumulated deficit position.

In August 2001, the Company issued 272,108 common stock purchase warrants in
connection with a private offering of common stock as discussed in Note 13.
Each warrant entitled the holder to purchase one share of common stock at
$1.75 per share. The warrants were due to expired in July 2004, but were
extended to July 2007. The extension of the warrants had a relative fair
value of $80,035 calculated using the Black-Scholes pricing methodology with
the following assumptions:

Expected stock risk volatility 87%
Risk-free interest rate 2.25%
Expected life of warrant 3 Years
Expected dividend yield -0-

The fair value of the warrant extension has been recorded as an addition to
additional paid-in capital and also a charge to additional paid-in capital
since the Company is in an accumulated deficit position.

Series E warrants were issued in connection with the issuance of preferred
stock in August 2001. The Series E warrants allowed the holders to purchase
up to 815,351 shares of the Company's common stock at a price of $1.19 per
share at any time prior to August 16, 2004. In August 2003, in accordance
with the Series E agreement discussed in Note 13, the Company issued 23,758
warrants to purchase shares of common stock at a price of $0.77 per share.
The warrants are exercisable at any time prior to August 17, 2006. These
warrants were valued using the Black Scholes pricing methodology with the
following assumptions:

Expected stock risk volatility 94%
Risk-free interest rate 2.00%
Expected life of warrant 3 Years
Expected dividend yield -0-

The fair value of the warrants has been recorded as an addition to additional
paid-in capital and also a charge to additional paid-in capital since the
Company is in an accumulated deficit position. These warrants are considered
a deemed dividend and the fair value, as determined using Black-Scholes, of
$10,912 is included in the accrued dividends on preferred stock in the
statements of operations for the year ended September 30, 2003.

During the year ended September 30, 2004, 244,724 warrants were exercised for
proceeds of $291,222. As of September 30, 2004, 23,758 Series E warrants
remained outstanding.

Warrants were issued in connection with the issuance of the convertible
debt in December 2001 and January 2002. The Series F warrants allowed the
holders to purchase up to 960,000 shares of the Company's common stock at a
price equal to 110% of the closing price per share at any time prior to the
date which is seven years after the closing of the transaction. The warrant
price was adjustable if the Company sold any additional shares of its
common stock or convertible securities for less than fair market value or
at an amount lower than the exercise price of the Series F warrants. The
warrant price was adjusted every three months to an amount equal to 110% of
the conversion price on such date, provided that the adjusted price was
lower than the warrant exercise price on that date. If the warrant exercise
price was adjusted, the number of shares of common stock issuable upon
exercise of the warrant was also adjusted accordingly. On the date that the

F-25

registration statement was declared effective by the Securities and
Exchange Commission (SEC), and every three months following the effective
date, the warrant exercise price was adjusted to an amount equal to 110% of
the conversion price of the convertible debt on such date, provided that
the adjusted price was lower than the warrant exercise price on that date.
In accordance with the terms of the warrants, the exercise price was
adjusted to $0.65 per share on January 17, 2002. On April 17, 2002, the
price was adjusted to $0.24, on July 17, the price was adjusted to $0.19,
and on October 17, 2002 the price was adjusted to $0.153. There were no
further adjustments in accordance with the terms of the warrants since the
adjusted price would have been higher. As of September 30, 2002, $1,460,000
of the notes had been converted into 5,611,344 shares of common stock. As
of November 30, 2002, all convertible debt had been converted into a total
of 6,592,461 shares of the Company's common stock. In addition, 104,500
warrants were exercised during the year ended September 30, 2002, for
proceeds of $22,713. During the year ended September 30, 2003, 435,500
warrants were exercised for proceeds of $66,632. During the year ended
September 30, 2004, 420,000 warrants were exercised in a cashless exercise
as allowed by the contract. As of September 30, 2004 there are no remaining
Series F warrants.

Warrants were also issued in connection with the issuance of the convertible
debt in July and September 2002. The Series G warrants allowed the holders to
purchase up to 900,000 shares of the Company's common stock at a price equal
to $0.25 per share at any time prior to July 12, 2009. If the Company sells
any additional shares of common stock, or any securities convertible into
common stock at a price below the then applicable warrant exercise price, the
warrant exercise price will be lowered to the price at which the shares were
sold or the lowest price at which the securities were convertible, as the
case may be. The warrant exercise price is adjusted every three months 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. If the
warrant exercise price is adjusted, the number of shares of common stock
issuable upon the exercise of the warrant would 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 was reduced. In accordance with the terms of the
warrants, the exercise price was adjusted to $0.18 on December 9, 2002. The
exercise price was adjusted to $0.145 on March 9, 2003. In accordance with
the terms of the warrants, there were no further adjustments since the price
would have been higher. As of September 30, 2002, $50,000 of the notes had
been converted into 277,778 shares of common stock. During the year ended
September 30, 2003, all of the remaining convertible debt were converted into
8,076,420 shares of common stock for a total conversion of 8,354,198 shares
of common stock for Series G convertible debt. In addition, interest totaling
$21,472 was converted into 109,428 shares of common stock during the year
ended September 30, 2003. During the year ended September 30, 2003, 450,000
warrants were exercised for proceeds of $65,250. As of September 30, 2004,
450,000 Series G warrants remain outstanding.

Warrants were also issued in connection with the issuance of the convertible
debt in January and July 2003. The Series H warrants allowed the holders to
purchase up to 1,100,000 shares of the Company's common stock at a price
equal to $0.25 per share at any time prior to January 7, 2010. If the Company

F-26

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 exercise price of the Series H warrants will be
lowered to the price at which the shares were sold or the lowest price at
which the securities are convertible. If the exercise price of the Series H
warrants is adjusted, the number of shares of common stock issuable upon the
exercise of the Series H warrants 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. However, neither the exercise price nor
the shares issuable upon the exercise of the Series H warrants will be
adjusted as the result of shares issued in connection with a permitted
financing. Every three months after June 26, 2003, 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. During the year ended September 30,
2003, $1,250,000 of the total Series H convertible debt were converted into
3,003,929 shares of common stock. Additionally, interest of $26,230 was
converted into 80,010 shares of common stock. As of October 2, 2003, all of
the Series H notes had been converted into a total of 3,183,358 shares of
common stock and total interest of $32,914 had been converted into 83,227
shares of common stock. During the year ended September 30, 2003, 550,000
warrants were exercised at $0.25 for proceeds of $137,500. As of September
30, 2004, 550,000 Series H warrants remain outstanding.

Warrants were issued in connection with obtaining an equity line of credit in
September 2003, discussed in Note 13. There were 395,726 warrants issued at
an exercise price of $0.83, which expire in September 2008. The fair value of
these warrants of $244,867 was determined using the Black-Scholes pricing
methodology with the following assumptions:

Expected stock risk volatility 98%
Risk-free interest rate 3.12%
Expected life of warrant 5 Years
Expected dividend yield -0-

The fair value of the warrants has been recorded as an addition to additional
paid-in capital and also a charge to additional paid-in capital since the
Company is in an accumulated deficit position.

In addition, 30,000 options were issued to a consultant in May 2003 at a
price of $0.41. The options vest over a three year period and expire in May
2013. The compensation expense for these options was determined using the
Black Scholes pricing methodology with the following assumptions:

Expected stock risk volatility 84%
Risk-free interest rate 2.0%
Expected life of warrant 3 Years
Expected dividend yield -0-

The fair value of the options was recorded as general and administrative
expense. Compensation expense of $6,727 was recorded for the year ended
September 30, 2003.

In connection with an agreement with a private investor in May 2003, which is
discussed in Note 14, 1,100,000 warrants were issued with an exercise price
of $0.47. The warrants initially expired May 30, 2006. In accordance with the

F-27

terms of the agreement, the expiration was extended to May 30, 2008 on
September 30, 2003. The fair value of these warrants of $710,919 was
determined using the Black-Scholes pricing methodology with the following
assumptions:

Expected stock risk volatility 93%
Risk-free interest rate 2.00%
Expected life of options 5 Years
Expected dividend yield -0-

The fair value of the warrants has been recorded as an addition to additional
paid-in capital and also as a charge to additional paid-in capital since the
Company is in an accumulated deficit position.

On December 1, 2003, CEL-SCI sold 2,999,964 shares of its common stock, to a
group of private institutional investors for approximately $2,550,000, or
$0.85 per share. As part of this transaction, the investors in the private
offering received Series J warrants which allow the investors to purchase
991,003 shares of CEL-SCI's common stock at a price of $1.32 per share at any
time prior to December 1, 2006. An investment broker received warrants
totaling 5% of the investment of its clients in the common stock of the
Company. The investment broker received 91,750 warrants with a fair value of
$64,999. This fair value was determined using the Black-Scholes pricing
methodology with the following assumptions:

Expected stock risk volatility 97%
Risk-free interest rate 2.00%
Expected life of options 3 Years
Expected dividend yield -0-

On May 4, 2004, the CEL-SCI sold 6,402,439 shares of its common stock to a
group of private institutional investors for $5,250,000 and associated costs
of $498,452. As part of this transaction, the investors in the private
offering received warrants which allow the investors to purchase 76,642
shares of CEL-SCI's common stock at a price of $1.37 per share at any time
prior to May 4, 2009. These warrants were valued at $38,127. This fair value
was determined using the Black-Scholes pricing methodology with the following
assumptions:

Expected stock risk volatility 87%
Risk-free interest rate 2.00%
Expected life of options 3 Years
Expected dividend yield -0-

Stock Bonus Plan-- At September 30, 2004, the Company had been authorized to
issue up to 2,940,000 shares of common stock under the Stock Bonus Plan. All

F-28

employees, directors, officers, consultants, and advisors are eligible to be
granted shares. During the year ended September 30, 2002, 327,530 shares with
related expenses of $186,594 were issued under the Plan and recorded in the
consolidated statement of operations. During the year ended September 30,
2003, 134,336 shares with related expenses of $47,051 were issued under the
Plan and recorded in the consolidated statement of operations. During the
year ended September 30, 2004, 72,495 shares were issued to the Company's
401(k) plan for a cost of $52,476.

Stock Compensation Plan-- During the year ended September 30, 2004, 1,000,000
shares were authorized for use in the Company's stock compensation plan. Of
these shares, 25,050 shares were issued during the year ended September 30,
2004 as compensation for salary increases extending through August 31, 2005.
The shares were issued at $0.62 per share for a total cost of $15,531. Of
this, $14,237 is recorded as unearned compensation in the consolidated
balance sheet.

7. EMPLOYEE BENEFIT PLAN

The Company maintains a defined contribution retirement plan, qualifying
under Section 401(k) of the Internal Revenue Code, subject to the Employee
Retirement Income Security Act of 1974, as amended, and covering
substantially all Company employees. Each participant's contribution is
matched by the Company with shares of common stock that have a value equal to
100% of the participant's contribution, not to exceed the lesser of $10,000
or 6% of the participant's total compensation. The Company's contribution of
common stock is valued each quarter based upon the closing bid price of the
Company's common stock. The expense for the years ended September 30, 2004,
2003, and 2002, in connection with this Plan was $56,158, $48,437, and
$71,823, respectively.

8. OPTIONAL SALARY ADJUSTMENT PLAN

In July 2001, the Company issued an "Optional Salary Adjustment Plan" (the
"Plan"). The terms of the Plan allow certain employees the option to forgo
salary increments of $6,000 in exchange for stock options for the period
beginning from July 16, 2001, through October 15, 2001. In accordance with
the Plan, employees will receive 40,000 stock options for each salary
increment of $6,000. The total amount of options to be granted under the Plan
is limited to 1,200,000. For the year ended September 30, 2002, 180,000
options were issued in lieu of compensation of $27,000. No compensation
expense was recorded for the options since such options were issued with
exercise prices equal to the fair market value of the Company's common stock
on the date of grant. During the years ended September 30, 2004 and 2003,
there were no options issued in lieu of compensation.

9. COMMITMENTS AND CONTINGENCIES

Operating Leases-The future minimum annual rental payments due under
noncancelable operating leases for office and laboratory space are as
follows:

F-29

Year Ending
September 30,
2005 $139,209
2006 71,136
2007 71,136
2008 71,136
2009 29,640
--------

Total minimum lease payments $382,257
========

Rent expense for the years ended September 30, 2004, 2003, and 2002, was
$282,138, $276,564 and $229,428, respectively. Minimum payments have not been
reduced by minimum sublease rental receivable under future noncancelable
subleases.

Employment Contracts--In March 2002 the Company entered into a three-year
employment agreement with its President and Director which expires March 31,
2005. The employment agreement provides that Company will pay him an annual
salary of $363,000 during the term of the agreement. In the event that there
is a material reduction in his authority, duties or activities, or in the
event there is a change in the control of the Company, then the agreement
allows him to resign from his position at the Company and receive a lump-sum
payment from the Company equal to 18 months salary. For purposes of the
employment agreement, a change in the control of the Company means the sale
of more than 50% of the outstanding shares of the Company's Common Stock, or
a change in a majority of the Company's directors.

Effective September 1, 2003, the Company entered into a three-year employment
agreement with its Chief Executive and Financial Officer. The employment
agreement provides that during the term of the employment agreement the
Company will pay him an annual salary of $370,585. In the event there is a
change in the control of the Company, the agreement allows him to resign from
his position at the Company and receive a lump-sum payment from the Company
equal to 24 months salary. For purposes of the employment agreement a change
in the control of the Company means: (1) the merger of the Company with
another entity if after such merger the shareholders of the Company do not
own at least 50% of voting capital stock of the surviving corporation; (2)
the sale of substantially all of the assets of the Company; (3) the
acquisition by any person of more than 50% of the Company's common stock; or
(4) a change in a majority of the Company's directors which has not been
approved by the incumbent directors.

10.CAMBREX NOTE PAYABLE

On November 15, 2001, the Company signed an agreement with Cambrex Bio
Science, Inc., (Cambrex) in which Cambrex provided manufacturing space and
support to the Company during November and December 2001 and January 2002. In
exchange, the Company signed a note with Cambrex to pay a total of
$1,172,517, to Cambrex. In December 2001, the note was amended to extend the
due date to January 2, 2003. Unpaid principal began accruing interest on
November 16, 2002, at the Prime Rate plus 3%. The note was collateralized by
certain equipment. The imputed interest on this note was capitalized and was
expensed over the life of the loan. As shown in the consolidated balance
sheet, this liability was recorded at September 30, 2002, along with an
unamortized discount of $37,500 representing imputed interest. Interest

F-30

expense of $262,500 was recorded on the note for the year ended September 30,
2002. In December 2002, the Company negotiated an extension of the note with
Cambrex. Per the agreement, the Company gave Cambrex certain equipment and
surrendered a security deposit, which reduced the amount owed by $225,000.
The remaining balance was payable pursuant to a note due January 2, 2004. In
addition, the agreement required the Company to pay $150,000 on the note from
the Series H convertible debt and 10% of all other future financing
transactions, including draws on the equity line-of-credit. During the year
ended September 30, 2003, the Company paid down the note by $485,524. The
Company also recorded interest expense of $49,486 and amortized the remaining
discount of $37,500 from the year ended September 30, 2002. There were also
conversion features allowing Cambrex to convert either all or part of the
note into shares of the Company's common stock. The principal balance of the
note and any accrued interest were convertible into common stock at 90% of
the average of the closing prices of the common stock for the three trading
days immediately prior to the conversion date subject to a floor of $0.22
per share. A beneficial conversion cost of $106,716 was recorded during the
year ended September 30, 2003 for the difference between the conversion
price of the stock and the market price of the stock. Of this amount,
$75,800 was amortized during the year ended September 30, 2003, leaving
$30,916 as a discount to the note recorded in the balance sheet at
September 30, 2003. The note was repaid in December, 2003 and the remaining
discount of $30,916 was amortized.

11.COVANCE NOTE PAYABLE

On October 8, 2002, the Company signed an agreement with Covance AG
(Covance), a Swiss Corporation. Pursuant to the agreement, amounts owed to
Covance totaling $199,928 as of June 30, 2003 were converted to note payable.
The note was payable on January 2, 2004. Interest was payable at an annual
rate of 8%. Until the entire amount was paid to Covance, Covance was entitled
to receive 2% of any draw-down of the Company's equity credit line, 2% of any
net funds received from outside financings of less than $1 million, 3% of any
net funds received from outside financings greater than $1 million but less
than $2 million and 4% of any net funds received from outside financings
greater than $2 million. During the year ended September 30, 2003, the
Company paid $15,598 on the note payable to Covance in accordance with the
agreement. In December, 2003, the note was repaid along with accrued interest
of $2,581.

12.CONVERTIBLE DEBT

As of September 30, 2004, there is no outstanding convertible debt. The
remaining Series H convertible debt at September 30, 2003 was converted to
179,436 shares of common stock on October 2, 2003. Series G debt had all been
converted as of June 2, 2003.

In December 2001, the Company agreed to sell redeemable convertible debt and
Series F warrants, to a group of private investors for proceeds of
$1,600,000, less transaction costs of $276,410 of which $15,116 was included
in deferred financing costs in the accompanying balance sheet as of September
30, 2002. The notes bore interest at 7% per year and would have been due and
payable December 31, 2003. Interest was payable quarterly beginning July 1,
2002. The notes were secured by substantially all of the Company's assets and
contain certain restrictions, including limitations on such items as
indebtedness, sales of common stock and payment of dividends.

The notes were convertible into shares of the Company's common stock at the
holder's option determinable by dividing each $1,000 of note principal by 76%
of the average of the three lowest daily trading prices of the Company's

F-31

common stock on the American Stock Exchange during the twenty trading days
immediately prior to the closing date. The conversion price may not be less
than a floor of $0.57; however the floor could have been lowered if the
Company sold any shares of common stock or securities convertible to common
stock at a price below the market price of the Company's common stock.
Additionally, the notes were required to be redeemed by the Company at 130%
upon certain occurrences; such as failure to file a Registration Statement to
register the notes with the Securities and Exchange Commission (SEC) or the
effectiveness of such statement lapses, delisting of the Company's common
stock, completion of certain mergers or business combinations, filing
bankruptcy, and exceeding its drawdown limits under the Company's equity line
of credit.

So long as the notes remained outstanding, the note-holders had a first right
of refusal to participate in any subsequent financings involving the Company.
If the Company had entered into any subsequent financing on terms more
favorable than the terms governing the notes and warrants, then the
note-holders could have exchanged notes and warrants for the securities sold
in the subsequent financing.

The entire balance of the convertible debt was initially offset by a discount
of $1,600,000 which represented the relative fair value of the Series F
warrants of $763,000 and a beneficial conversion discount of $837,000. The
discount on outstanding convertible debt was amortized to interest expense as
the notes were converted. As of September 30, 2002, $1,460,000 of the notes
had been converted into 5,611,344 shares of common stock. In addition,
$1,512,500 of the discount had been amortized to interest expense as of
September 30, 2002. As of November 30, 2002, all convertible debt had been
converted into a total of 6,592,461 shares of the Company's common stock and
all of the discount had been amortized to interest expense. All deferred
financing costs had also been amortized to interest expense as of November
30, 2002.

In July and September 2002, the Company sold convertible debt, plus Series G
warrants, to a group of private investors for $1,300,000 less transaction
costs of $177,370, of which $161,879 was included in deferred financing costs
in the accompanying balance sheet as of September 30, 2002. The notes bore
interest at 7% per year and were due and payable September 9, 2004. Interest
was payable quarterly beginning October 1, 2002. The notes were secured by
substantially all of the Company's assets and contained certain restrictions,
including limitations on such items as indebtedness, sales of common stock
and payment of dividends. At the holder's option the notes were convertible
into shares of the Company'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 the Company's common stock on the American
Stock Exchange during the 15 trading days immediately prior to the conversion
date. The Conversion Price could not be less than $0.18. However, if the
Company's common stock traded for less than $0.24 per share for a period of
20 consecutive trading days, the $0.18 minimum price would no longer have
been applicable. The Conversion Price would have declined from 76% to 60% if
(i) on any trading day after September 9, 2002 the closing daily price of the
Company's common stock multiplied by the total number of shares of common
stock traded on that day is less than $29,977, (ii) the Company defaulted in
the performance of any material covenant, condition or agreement with the
holders of the notes or, (iii) the Company's common stock was delisted from
the American Stock Exchange.

If the Company sold 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 would have been lowered to the price at which the

F-32

shares were sold or the lowest price at which the securities were
convertible, as the case may be. If the Company had sold any additional
shares of common stock, or any securities convertible into common stock at a
price below the market price of the Company's common stock, the Conversion
Price would have been lowered by a percentage equal to the price at which the
shares were sold or the lowest price at which the securities were
convertible, as the case may be, divided by the then prevailing market price
of the Company's common stock.

So long as the notes remained outstanding, the note holders had a first right
of refusal to participate in any subsequent financings involving the Company.
If the Company had entered into any subsequent financing on terms more
favorable than the terms governing the notes and warrants, then the note
holders could have exchanged notes and warrants for the securities sold in
the subsequent financing. A portion of the proceeds was initially offset by a
discount of $690,706, which represents the relative fair value of the Series
G warrants of $83,340 and a beneficial conversion discount of $677,140. As of
September 30, 2002, $50,000 of the notes had been converted into 277,778
shares of common stock. In addition, $27,496 of the discount on the debt had
been amortized to interest expense. During the year ended September 30, 2003,
the balance of the notes were converted into an additional 8,076,420 shares
of common stock. In addition, interest totaling $21,472 was converted into
109,428 shares of common stock during the year ended September 30, 2003. All
of the remaining discount and deferred financing costs were amortized to
interest expense during the year ended September 30, 2003.

In January and July 2003, the Company sold convertible debt, plus Series H
warrants to purchase up to 1,100,000 shares of common stock, to a group of
private investors for $1,350,000 less transaction costs of approximately
$220,419, of which $16,243 is included in deferred financing costs in the
accompanying balance sheet as of September 30, 2003. The first funds,
totaling $600,000, were received in January 2003 and the balance of $750,000
was received on July 2, 2003. The notes bore interest at 7% per year. The
first notes were due and payable January 7, 2005 and the second notes were
due and payable July 7, 2005. Interest was payable quarterly. The notes were
secured by substantially all of the Company's assets and contained certain
restrictions, including limitations on such items as indebtedness, sales of
common stock and payment of dividends. At the holders' option the notes were
convertible into shares of the Company'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 defaulted to 60% of the average
of the three lowest daily trading prices of the Company's common stock on the
American Stock Exchange during the 15 trading days immediately prior to the
conversion date in the event of default. On May 8, 2003, the Company signed
an amendment to the agreement that prevented the conversion price from
defaulting to 60%. In the agreement, the conversion price declined to 70% of
the average of the three lowest daily trading prices of the Company's common
stock if the price of the stock climbs over $0.50. If the Company sold 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 would have been lowered to the price at which the shares were sold or
the lowest price at which the securities were convertible. On May 30, 2003,
the price of the Company's stock rose above $0.50. In accordance with the
agreement, the discount percentage changed from 76% to 70%. This change
increased the discount on the debt that the Company recorded for the Series H
convertible debt by $67,669 and was included in the $1,054,647 total
discount.

During the year ended September 30, 2003, $1,250,000 of the notes had been
converted into 3,003,929 shares of common stock. Additionally, $1,023,731 of

F-33

the total discount of $1,054,647 had been amortized to interest expense.
Interest of $26,230 was converted into 80,010 shares of common stock during
the year ended September 30, 2003. As of October 2, 2003, all of the Series H
notes had been converted into a total of 3,183,358 shares of common stock and
total interest of $32,914 had been converted into 83,227 shares of common
stock.

13. STOCKHOLDERS' EQUITY

During December 1997, the Company issued 10,000 shares of Series D Preferred
Stock for $10,000,000. The issuance included 550,000 Series A Warrants and
550,000 Series B Warrants. The number of common shares issuable upon
conversion of the Preferred Shares is determinable by dividing $1,000 by
$8.28 prior to September 19, 1998, or at any time at which the Company's
common stock is $3.45 or less for five consecutive days. On or after
September 19, 1998, the number of common shares to be issued upon conversion
is determined by dividing $1,000 by the lesser of (1) $8.28 or (2) the
average price of the stock for any two trading days during the ten trading
days preceding the conversion date. The Series A Warrants are exercisable at
any time for $8.62 prior to December 22, 2001, and the Series B Warrants are
exercisable at any time for $9.31 prior to December 22, 2001. Each warrant
entitles the holder to purchase one share of common stock. At September 30,
1998, 998 shares of Series D Preferred Stock had been converted into 441,333
shares of common stock. At September 30, 1999, 9,002 shares of Series D
Preferred Stock had been converted into 4,760,127 shares of common stock.
There are no remaining shares of Series D Preferred Stock. All Series A and
Series B Warrants issued expired December 22, 2001. In connection with the
Company's December 1997 $10,000,000 Series D Preferred Stock offering, the
Series A and Series B warrants were assigned a relative fair value of
$1,980,000 in accordance with APB No. 14, Accounting for Convertible Debt and
Debt Issued with Stock Purchase Warrants, (APB 14) and were recorded as
additional paid-in capital. The $1,980,000 allocated to the warrants was
accreted immediately.

In April 2001, the Company signed a common stock purchase agreement that
allowed the Company at its discretion to draw up to $10 million of Common
stock in increments of a minimum of $100,000 and the maximum of $2 million
for general operating requirements. The Company was restricted from entering
into any other equity line of credit arrangement and the agreement expired in
June 2003. As discussed in Note 6, the Company issued 200,800 warrants to the
issuer pursuant to this agreement. During the year ended September 30, 2002,
the Company sold 2,553,174 shares of its common stock pursuant to this
agreement for net proceeds of $1,366,797. During the year ended September 30,
2003, the Company sold 2,877,786 shares of its common stock pursuant to this
agreement for net proceeds of $725,000.

During fiscal year 2001, the Company issued 522,108 shares of common stock in
two private offerings of common stock. Pursuant to the private offerings, one
of the investors also received warrants to purchase 272,108 shares of common
stock as discussed in Note 6.

During August 2001, three private investors exchanged shares of the Company's
common stock and remaining Series D Warrants, which they owned, for 6,288
shares of the Company's Series E Preferred Stock. These investors also
exchanged their Series A and Series C Warrants for new Series E Warrants as
discussed in Note 6. The Preferred shares are entitled to receive cumulative

F-34

annual dividends in an amount equal to $60 per share and have liquidation
preferences equal to $1,000 per share. Each Series E Preferred share is
convertible into shares of the Company's common stock on the basis of one
Series E Preferred share for shares of common stock equal in number to the
amount determined by dividing $1,000 by the lesser of $5 or 93% of the
average closing bid prices (Conversion Price) of the Company's common stock
for the five days prior to the date of each conversion notice. The Series E
Preferred stock has no voting rights and is redeemable at the Company's
option at a price of 120% plus accrued dividends until August 2003 when the
redemption price will be fixed at 100%. During the year ended September 30,
2002, the Company incurred $202,987 in dividends. Dividends paid in common
stock totaled $133,103, interest expense on unpaid dividends was $9,404 and
accrued dividends and interest payable was $78,436 at September 30, 2002. For
the year ended September 30, 2003, the Company incurred $32,101 in
dividends. During the year ended September 30, 2003, $99,624 in accrued
dividends and interest were converted into 97,389 shares of common stock.

All outstanding shares of the Company's Series E Preferred Stock, 39 shares,
were automatically converted on August 17, 2003, (the Automatic Conversion
Date) into 47,531 common shares (the Automatic Conversion Shares). The number
of common shares for the conversion is 200% times the quotient obtained by
dividing $1,000 by the Conversion Price.

In addition, the Company issued 23,758 common stock purchase warrants, which
was one warrant for each share of the Series E Preferred stock outstanding as
of August 17, 2003, to acquire shares equal to 33% of the Automatic
Conversion Shares at an exercise price of 110% of the volume weighted average
price for the five trading days preceding the date of issuance. Since the
terms of these warrants were contingent, no accounting has been given to such
warrants in the accompanying consolidated financial statements as of
September 30, 2002. As of September 30, 2003, the warrants were valued using
Black Scholes methodology as discussed in Note 6 and the resulting costs of
$10,912 were recorded as a deemed dividend as a debit and an offsetting
credit to additional paid-in capital as the Company is in a deficit position.
See Note 6 for further discussion of the warrants issued at the time the
Preferred stock converted to common stock.

The common stock, preferred stock and warrants exchanged had different
rights, preferences and terms. However, since the equity securities were
exchanged for equity securities, the exchange had no effect on the Company's
total stockholders' equity. In connection with the exchange, the total
implied value of the equity securities received was $8,957,000 of which
$848,000 represented the relative fair value of the warrants which was
recorded to additional paid-in capital and the remaining value of $8,109,000
was allocated to preferred stock. The Series E Warrants were valued using the
Black-Scholes pricing methodology with the following assumptions:

Expected stock risk volatility 105%
Risk-free interest rate 3.12%
Expected life of option 3 Years
Expected dividend yield -0-

Pursuant to the exchange, the holders received a beneficial conversion
discount in the amount of $5,365,381, which was accreted to additional
paid-in capital over a two-year period. During the years ended September 30,
2003, September 30, 2002 and September 30, 2001, $76,720, $1,444,757 and

F-35

$317,419, respectively, of the beneficial conversion discount was accreted.
During the year ended September 30, 2002, 4,671 shares of the Series E
Preferred Stock were converted into 4,282,150 shares of common stock. During
the year ended September 30, 2003, 1,192 shares of the Series E Preferred
stock were converted into 1,018,439 shares of common stock. As of September
30, 2003, there were no shares of Series E Preferred stock remaining.

In October 2001, the Company issued 150,000 shares of common stock in a
private offering for proceeds of $150,000. The investor also received
warrants which entitled the holder to purchase 75,000 shares of common stock
at $1.50 per share. These warrants expire October 5, 2004.

In May 2003, the Company sold 1,100,000 shares of common stock and an
additional 1,100,000 warrants to purchase common stock in conjunction with
a marketing agreement as discussed in Note 14. The Company received
proceeds of $500,000 for the stock and warrants. The warrants are
exercisable at a price of $0.47 per share. The warrants initially expired
May 30, 2006. In accordance with the terms of the agreement, the expiration
was extended to May 30, 2008.

In September 2003, the Company signed a common stock purchase agreement that
allowed the Company at its discretion to draw up to $10 million of common
stock in increments of a minimum of $100,000 and a maximum amount that can be
drawn down at any one time that will be determined at the time of the
drawdown request, using a formula contained in the agreement. The Company is
restricted from entering into any other equity line of credit arrangement
until the earlier of the expiration of the agreement or two years from the
date of registration. As discussed in Note 6, the Company issued 395,726
warrants to the issuer at a price of $0.83 and the warrants expire September
16, 2008 pursuant to the agreement. Expenses of $40,600 were recorded to
additional paid-in capital as a cost of equity related - transaction during
the year ended September 30, 2003. During the year ended September 30, 2004,
the company sold 307,082 shares of its common stock pursuant to this
agreement for gross proceeds of $340,000, net of related costs of $4,090.

On December 1, 2003, CEL-SCI sold 2,999,964 shares of its common stock, to
a group of private institutional investors for approximately $2,550,000, or
$0.85 per share. There were associated costs of $93,159. As part of this
transaction, the investors in the private offering received Series J
warrants which allow the investors to purchase 991,003 shares of CEL-SCI's
common stock at a price of $1.32 per share at any time prior to December 1,
2006. See discussion of valuation of warrants in Note 6.

On May 4, 2004, the CEL-SCI sold 6,402,439 shares of its common stock to a
group of private institutional investors at $0.82 per share for $5,250,000
and associated costs of $498,452. As part of this transaction, the
investors in the private offering received warrants which allow the
investors to purchase 76,642 shares of CEL-SCI's common stock at a price of
$1.37 per share at any time prior to May 4, 2009. See discussion of
valuation of warrants in Note 6.

14. MARKETING AGREEMENT

On May 30, 2003, the Company and Eastern Biotech signed an agreement to
develop both Multikine and CEL-1000, and their derivatives and improvements,
in three Eastern European countries: Greece, Serbia and Croatia. Eastern
Biotech also has the exclusive right to sales in these three countries. As
part of the agreement, Eastern Biotech gained the right to receive a 1%
royalty on the future net sales of these two products and their derivatives

F-36

and improvements worldwide. Eastern Biotech also purchased 1,100,000 shares
of common stock and warrants, which allow the holder to purchase up to
1,100,000 shares of the Company's common stock at a price equal to $0.47. The
Company received proceeds of $500,000 for these shares and warrants. Because
the Company did not register these shares prior to September 30, 2003, the
royalty percentage increased to 2%. Eastern Biotech did not meet certain
clinical development milestones within one year, and therefore, it lost the
right to sell both products in these three countries.

15. NET LOSS PER COMMON SHARE

Basic earnings per share (EPS) excludes dilution and is computed by dividing
net income or loss attributable to common stockholders by the weighted
average of common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to issue
common stock (convertible preferred stock, warrants to purchase common stock
and common stock options using the treasury stock method) were exercised or
converted into common stock. The Company had 4,104,529, 4,906,527 and
11,118,168 potentially dilutive securities outstanding at September 30, 2004,
2003 and 2002, respectively, that were not included in the computation of
diluted loss per share because to do so would have been antidilutive for all
periods presented. The loss attributable to common stockholders includes the
impact of the accretion of the beneficial conversion feature of Series E
Preferred Stock and the accrual of cumulative preferred stock dividends.

2004 2003 2002
Net loss per common share
(basic and diluted) $(0.06) $(0.13) $(0.35)
====== ====== ======

16. SEGMENT REPORTING

SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information" establishes standards for reporting information regarding
operating segments in annual financial statements and requires selected
information for those segments to be presented in interim financial reports
issued to stockholders. SFAS No. 131 also establishes standards for related
disclosures about products and services and geographic areas. Operating
segments are identified as components of an enterprise about which separate
discrete financial information is available for evaluation by the chief
operating decision maker, or decision-making group, in making decisions how
to allocate resources and assess performance. The Company's chief decision
maker, as defined under SFAS No. 131, is the Chief Executive Officer. To
date, the Company has viewed its operations as principally one segment, the
research and development of certain drugs and vaccines. As a result, the
financial information disclosed herein, materially represents all of the
financial information related to the Company's principal operating segment.

******

F-37

No dealer salesman or other person has been authorized to give any
information or to make any representations, other than those contained in this
prospectus. Any information or representation not contained in this prospectus
must not be relied upon as having been authorized by CEL-SCI. This prospectus
does not constitute an offer to sell, or a solicitation of an offer to buy, the
securities offered hereby in any state or other jurisdiction to any person to
whom it is unlawful to make such offer or solicitation. Neither the delivery of
this prospectus nor any sale made hereunder shall, under any circumstances,
create an implication that there has been no change in the affairs of CEL-SCI
since the date of this prospectus.

TABLE OF CONTENTS

Page
Prospectus Summary ...................................................
Risk Factors ..........................................................
Comparative Share Data ................................................
Market for CEL-SCI's Common Stock......................................
Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................
Business...............................................................
Management.............................................................
Principal Shareholders ................................................
Equity Line of Credit Agreement........................................
Selling Shareholder ...................................................
Description of Securities .............................................
Experts ...............................................................
Indemnification .......................................................
Additional Information ................................................

Common stock

CEL-SCI CORPORATION

PROSPECTUS

PART II
Information Not Required in Prospectus

Item 13. Other Expenses of Issuance and Distribution

SEC Filing Fee $ 463
Blue Sky Fees and Expenses 100
Printing and Engraving Expenses 2,000
Legal Fees and Expenses 20,000
Accounting Fees and Expenses 10,000
Miscellaneous Expenses 2,437
---------
TOTAL $35,000
=======

All expenses other than the SEC filing fees are estimated.

Item 14. Indemnification of Officers and Directors.

Section 7-109-102 of the Colorado Revised Statutes and CEL-SCI's Bylaws
provides that CEL-SCI may indemnify any and all of its officers, directors,
employees or agents or former officers, directors, employees or agents, against
expenses actually and necessarily incurred by them, in connection with the
defense of any legal proceeding or threatened legal proceeding, except as to
matters in which such persons shall be determined to not have acted in good
faith and in the best interest of CEL-SCI.

Item 15. Recent Sales of Unregistered Securities.

In May 2003, the Company entered into an agreement with Eastern Biotech
which provided Eastern Biotech with the following (i) the exclusive right to
distribute MULTIKINE and CEL-1000 in Greece, Serbia and Croatia, (ii) a royalty
equal to 1% of the Company's net sales of MULTIKINE and CEL-1000 prior to May
30, 2033, (iii) 1,100,000 shares of the Company's common stock and, (iv)
warrants which allow Eastern Biotech to purchase an additional 1,100,000 shares
of the Company's common stock at a price of $0.47 per share at any time prior to
May 30, 2006.

In July 2003, the Company issued 120,608 shares of its common stock to
certain employees and directors in lieu of salary and fees.

In August 2003, the Company issued 47,831 shares of its common stock in
payment of approximately $26,000 in accrued and unpaid dividends which were owed
to a holder of the Company's Series E preferred stock.

The foregoing securities were not issued under the Securities Act of 1933
but were issued or sold in reliance upon the exemption provided by Section 4(2)
of the Act. The persons who acquired these securities were either accredited or

sophisticated investors. The securities were acquired for investment purposes
only and without a view to distribution. The persons who acquired these
securities were informed and advised about matters concerning the Company,
including the Company's business, financial affairs and other matters. The
investors acquired these shares for their own accounts. The certificates
representing the securities bear legends stating that they may not be offered,
sold or transferred other than pursuant to an applicable exemption from
registration. The preferred shares and warrants are "restricted" securities as
that term is defined in Rule 144 of the Securities and Exchange Commission.

Item 16. Exhibits

3(a)Articles of Incorporation Incorporated by reference to Exhibit 3(a) of
CEL-SCI's combined Registration
Statement on Form S-1 and Post-Effective
Amendment ("Registration Statement"),
Registration Nos. 2-85547-D and 33-7531.

(b)Amended Articles Incorporated by reference to Exhibit 3(a) of
CEL-SCI's Registration Statement on Form S-1,
Registration Nos. 2-85547-D and 33-7531.

(c)Amended Articles
(Name change only) Filed as Exhibit 3(c) to CEL-SCI's
Registration Statement on Form S-1
Registration Statement (No. 33-34878).

(d) Bylaws Incorporated by reference to
Exhibit 3(b) of CEL-SCI's Registration
Statement on Form S-1, Registration Nos.
2-85547-D and 33-7531.

(a) Specimen copy of Incorporated by reference to Exhibit 4(a)
Stock Certificate of CEL-SCI's Registration Statement on Form
S-1 Registration Nos. 2-85547-D and 33-7531.

(b) Designation of Series E Incorporated by reference to Exhibit 4 to
Preferred Stock report on Form 8-K dated August 21, 2001.

5. Opinion of Counsel (1)
-----------------------------------

10(d) Employment Agreement with Incorporated by reference to Exhibit 10(d) to
Maximilian de Clara CEL-SCI's Registration Statement on Form
S-1 (Commission File #333-102639).

10(e) Employment Agreement with Incorporated by reference to Exhibit 10(e) of
Geert Kersten CEL-SCI's Registration Statement on Form S-3
(Commission File #106879).

10(q) Common Stock Purchase Agreement (1)
------------------------------------
with Rubicon Group Ltd.

10(r) Stock Purchase Warrant issued to (1)
Rubicon Group Ltd. -----------------------------------

10(s) Securities Exchange Agreement Incorporated by reference to Exhibit 10.1
(together with Schedule required to report on Form 8-K dated August 21,
by Instruction 2 to Item 601 2001.
Regulation S-K)

10(t) Form of Series E Warrant Incorporated by reference to Exhibit 10.2
to report on Form 8-K dated August 21,
2001.

10(u) Form of Secondary Warrant Incorporated by reference to Exhibit 10.3
to report on Form 8-K dated August 21,
2001.

10(v) Note and Warrant Purchase Incorporated by reference to Exhibit 10(v)
Agreement(together with to CEL-SCI's Registration Statement on
Schedule required by Instruction Form S-3 (Commission File Number
2 to Item 601 Regulation S-K) 333-76396)
pertaining to notes sold in
December 2001 and January 2002

10(vi) Note and Warrant Purchase Incorporated by reference to Exhibit (vi)
Agreement (together with to CEL-SCI's Registration statement on
Schedule required by Form S-3 (Commission File No.333-97171)
Instruction 2 to Item 601
Regulation S-K) pertaining
to Series G notes and warrants

10(vii) Note and Warrant Purchase Incorporated by reference to Exhibit 10
Agreement(together with to CEL-SCI's report on Form 8-K dated
Schedule required by January 14, 2003
Instruction 2 to Item 601
Regulation S-K) pertaining
to Series H notes and warrants

10(x) Distribution and Royalty Incorporated by reference to Exhibit 10(x)
Agreement with Eastern to Amendment No. 2 to CEL-SCI's
Biotech Registration statement on Form S-3
(Commission File No. 333-106879).

10(y) Common Stock and Warrant Incorporated by reference to Exhibit 10
Purchase Agreement (together to CEL-SCI's report on Form 8-K dated
with Schedule required by December 1, 2003.
Instruction 2 to Item 601
Regulation S-K).

23(a) Consent of Hart & Trinen (1)
------------------------------

(b) Consent of Deloitte & Touche LLP ------------------------------

(1) Filed with original registration statement.

Item 17. Undertakings.

The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement.

(i) To include any prospectus required by Section l0(a)(3) of the
Securities Act of l933;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement;

(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement, including
(but not limited to) any addition or deletion of a managing underwriter.

(2) That, for the purpose of determining any liability under the
Securities Act of l933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.

Insofar as indemnification for liabilities arising under the Securities
Act of l933 may be permitted to directors, officers and controlling persons of
the Registrant, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

POWER OF ATTORNEY

The registrant and each person whose signature appears below hereby
authorizes the agent for service named in this Registration Statement, with full
power to act alone, to file one or more amendments (including post-effective
amendments) to this Registration Statement, which amendments may make such
changes in this Registration Statement as such agent for service deems
appropriate, and the Registrant and each such person hereby appoints such agent
for service as attorney-in-fact, with full power to act alone, to execute in the
name and in behalf of the Registrant and any such person, individually and in
each capacity stated below, any such amendments to this Registration Statement.

SIGNATURES

Pursuant to the requirements of the Securities Act of l933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-1 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Vienna, Commonwealth of Virginia, on the 10th day of
February 2005.

CEL-SCI CORPORATION

By: /s/ Maximilian de Clara
-----------------------------------
Maximilian de Clara, President

Pursuant to the requirements of the Securities Act of l933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

Signature Title Date

/s/ Maximilian de Clara
------------------------ Director and Principal February 10, 2005
Maximilian de Clara Executive Officer

/s/ Geert R. Kersten
------------------------ Director, Principal February 10, 2005
Geert R. Kersten Financial Officer, Principal
Accounting Officer and Chief
Executive Officer

/s/ Alexander G. Esterhazy
-------------------------- Director February 10, 2005
Alexander G. Esterhazy

/s/ C. Richard Kinsolving Director February 10, 2005
--------------------------
C. Richard Kinsolving, Ph.D.

/s/ Peter R. Young Director February 10, 2005
------------------------
Peter R. Young, Ph.D.

CEL-SCI CORPORATION
REGISTRATION STATEMENT ON

FORM S-1

POST-EFFECTIVE AMENDMENT NO. 1

EXHIBITS