Cel-Sci investor files suit, alleges breach of contract over convertibles

By Devika Patel

Knoxville, Tenn., Oct. 27 - Cel-Sci Corp. investor Iroquois Master Fund, Ltd. filed a suit against the company in the United States District Court for the Southern District of New York on Oct. 21, according to an 8-K filed Tuesday with the Securities and Exchange Commission.

According to the filing, the suit alleges that the conversion price of the company's series K convertible notes, and the related warrants, should have been reduced to $0.20 as a result of Cel-Sci's March 6 financing, which had a share price of $0.20.

The notes and warrants originally were convertible at $0.95 per share.

The company reduced the conversion price to $0.40 in June, but the investor is arguing that the notes should be convertible at the same price as the financing share price.

In its complaint, alleging breach of contract, breach of fiduciary duty, conversion and negligence, Iroquois seeks $30 million in actual damages, $90 million in punitive damages, an additional 4,264,681 common shares, warrants for an additional 6,460,757 shares and a ruling by the court that the conversion price of the notes and the exercise price of the warrants are both $0.20.

The $8 million in notes and warrants were sold in 2006 and were subsequently repaid, the filing said. The company said it believes Iroquois's claims are without merit and it plans to defend the lawsuit, denying all of Iroquois' claims.

Based in Vienna, Va., Cel-Sci develops treatments for cancer and infectious diseases.

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