-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IQetDvB0Q3+kN1z1MvvQRhYM5S2MvGvUU1Y6R9jQlqFrelP/Ses9iQn6WnU3Qt6y sq2985wqBB+0mJ7lMZD13w== 0000799698-95-000007.txt : 19951109 0000799698-95-000007.hdr.sgml : 19951109 ACCESSION NUMBER: 0000799698-95-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951108 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CYTRX CORP CENTRAL INDEX KEY: 0000799698 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 581642740 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15327 FILM NUMBER: 95588215 BUSINESS ADDRESS: STREET 1: 154 TECHNOLOGY PKWY STREET 2: TECHNOLOGY PARK/ATLANTA CITY: NORCROSS STATE: GA ZIP: 30092 BUSINESS PHONE: 4043689500 MAIL ADDRESS: STREET 1: 154 TECHNOLOGY PARKWAY CITY: NORCROSS STATE: GA ZIP: 30092 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM lO-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number 0-15327 CYTRX CORPORATION (Exact name of Registrant as specified in its charter) Delaware 58-1642740 (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 154 Technology Parkway, Norcross, Georgia 30092 (Address of principal executive offices) (Zip Code) (770) 368-9500 (Registrant's telephone number) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Number of shares of CytRx Corporation Common Stock, $.001 par value, issued and outstanding as of September 30, 1995: 31,631,524 CYTRX CORPORATION Form 10-Q Table of Contents Page PART I. FINANCIAL INFORMATION Item 1 Financial Statements: Condensed Consolidated Balance Sheets as of September 30, 1995 (unaudited) and December 31, 1994 3 Condensed Consolidated Statements of Operations (unaudited) for the Three Month and Nine Month Periods Ended September 30, 1995 and 1994 4 Condensed Consolidated Statements of Cash Flows (unaudited) for the Nine Month Periods Ended September 30, 1995 and 1994 5 Notes to Condensed Consolidated Financial Statements 6 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. OTHER INFORMATION Item 6 Exhibits and Reports on Form 8-K 10 SIGNATURES 11 EXHIBIT 11 -- Computation of Net Loss Per Share 12 Part I - FINANCIAL INFORMATION Item 1. - Financial Statements CYTRX CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS September 30, December 31, 1995 1994 ASSETS (unaudited) Current assets: Cash and cash equivalents $24,031,771 $3,395,974 Short-term investments 3,067,120 27,453,502 Receivables 109,955 68,590 Inventories 4,753 6,651 Other current assets 259,280 447,165 Total current assets 27,472,879 31,371,882 Property and equipment, net 5,324,387 5,649,056 Other assets: Patents and patent application costs, less accumulated amortization (Note 5) - 1,395,476 Other 244,153 244,153 Total other assets 244,153 1,639,629 Total assets $33,041,419 $38,660,567 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $81,826 $284,179 Accrued liabilities 1,027,743 350,041 Total current liabilities 1,109,569 634,220 Commitments Stockholders' equity: Common stock, $.001 par value, 75,000,000 shares authorized; 31,631,524 and 31,575,847 shares issued at September 30, 1995 and December 31, 1994, respectively 31,632 31,576 Additional paid-in capital 62,427,735 62,327,244 Accumulated deficit (30,527,517) 21,857,196) Net unrealized loss on investments - (2,475,277) Total stockholders' equity 31,931,850 38,026,347 Total liabilities and stockholders' equity $33,041,419 $38,660,567 See accompanying notes CYTRX CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Month Period Ended Nine Month Period Ended September 30, September 30, 1995 1994 1995 1994 Revenues: Net sales $102,154 $114,912 $353,985 $411,277 License fees 25,000 - 25,000 - Investment income, net (Note 4) 473,528 493,351 1,424,849 1,399,608 Other 16,507 21,853 52,782 66,473 617,189 630,116 1,856,616 1,877,358 Expenses: Cost of sales 9,931 23,395 31,602 48,703 Research and development 1,648,760 1,684,774 5,223,093 4,668,716 Selling and marketing 79,491 14,470 139,159 172,842 General, administrative and business development 831,215 847,589 2,634,986 2,554,035 Realized loss on short-term investments, net (Note 4) - - 1,102,621 - Write-off of patent costs (Note 5) - - 1,395,476 - 2,569,397 2,570,228 10,526,937 7,444,296 Loss before cumulative effect of change in accounting principle (1,952,208) (1,940,112) (8,670,321) (5,566,938) Cumulative effect of change in accounting principle (Note 4) - - - 131,329 Net loss $(1,952,208) $(1,940,112) $(8,670,321) $(5,435,609) Per share amounts: Loss before cumulative effect of change in accounting principle $(0.06) $(0.06) $(0.27) $(0.17) Cumulative effect of change in accounting principle (Note 4) - - - 0.00 Net loss -- see Exhibit 11 $(0.06) $(0.06) $(0.27) $(0.17) See accompanying notes. CYTRX CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Month Period Ended September 30, 1995 1994 Cash flows from operating activities: Net loss $(8,670,321) $(5,435,609) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 441,199 399,691 Cumulative effect of change in accounting principle - (131,329) Write-off of patent costs 1,395,476 - Net change in assets and liabilities 623,767 (1,707,396) Total adjustments 2,460,442 (1,439,034) Net cash used by operating activities (6,209,879) (6,874,643) Cash flows from investing activities: Decrease in short-term investments 26,861,659 1,137,786 Capital expenditures (116,530) (2,690,122) Net cash provided (used) by investing activities 26,745,129 (1,552,336) Cash flows from financing activities: Proceeds from issuance of common stock 100,547 112,408 Short-term borrowings - 1,975,000 Net cash provided by financing activities 100,547 2,087,408 Net increase (decrease) in cash and cash equivalents 20,635,797 (6,339,571) Cash and cash equivalents at beginning of period 3,395,974 6,855,473 Cash and cash equivalents at end of period $24,031,771 $515,902 See accompanying notes. CYTRX CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 1995 (Unaudited) 1. Description of Company and Basis of Presentation CytRx Corporation is a biopharmaceutical company engaged in the research and development of critical care pharmaceutical products intended for use in the treatment of vascular and infectious diseases, and cancer. Reference herein to "the Company" includes CytRx and its wholly-owned subsidiaries -- Vaxcel, Inc., Vetlife, Inc. and Proceutics, Inc. Vaxcel is developing the Optivax vaccine delivery system. Vetlife is developing non-antibiotic solutions to enhance food animal growth. Proceutics was recently formed to provide high quality preclinical development services to the pharmaceutical industry. The accompanying condensed consolidated financial statements at September 30, 1995 and for the three and nine month periods ended September 30, 1995 and 1994 include the accounts of CytRx and its wholly-owned subsidiaries. The condensed consolidated financial statements as of September 30, 1995 and for the periods ended September 30, 1995 and 1994 are unaudited, but include all adjustments, consisting of normal, recurring entries, which the Company's management believes to be necessary for a fair presentation of the periods presented. Interim results are not necessarily indicative of results for a full year. The financial statements should be read in conjunction with the Company's audited financial statements in its Form 10-K for the year ended December 31, 1994. 2. Inventories Inventories at September 30, 1995 and December 31, 1994 are comprised of the following: September 30, 1995 December 31, 1994 Finished goods $ 1,956 $ 2,392 Raw materials 2,797 4,259 $ 4,753 $ 6,651 3. Net Loss Per Common Share Net loss per common share is computed based on the weighted average number of common shares outstanding during each period. Stock options and warrants outstanding are excluded from the computation of net loss per share since their effect is antidilutive. 4. Adoption of FASB Statement No. 115 In May 1993 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities", effective for fiscal years beginning after December 15, 1993. Under the new rules, debt securities that the Company has both the positive intent and ability to hold to maturity are carried at amortized cost. Debt securities that the Company does not have the positive intent and ability to hold to maturity and all marketable equity securities are classfied as either "available-for-sale" or "trading" and carried at fair value. Unrealized holding gains and losses on securities classified as available-for-sale are carried as a separate component of shareholders' equity. Unrealized holding gains and losses on securities classified as trading are reported in earnings. The Company adopted the new rules as of January 1, 1994 and, in accordance with the Statement, did not restate prior period financial statements. The cumulative effect of adopting Statement 115 decreased net loss by $131,329 in the first quarter of 1994. During 1995 the Company sold the majority of its short-term investments, realizing a net loss of $1,102,621 thereon, and reinvested the proceeds in cash equivalents. As of September 30, 1995, the Company has classified all of its short-term investments as "held-to-maturity". 5. Patent Costs Prior to 1995, the Company capitalized the costs associated with obtaining patents on its technologies. During the first quarter of 1995 the Company changed from deferring and amortizing such costs to recording them as expenses when incurred because, even though the Company believes the patents and underlying technology have continuing value, the amount of future benefits to be derived therefrom are uncertain. Accordingly, the new accounting method has been adopted in recognition of a possible change in estimated future benefits. Since the effect of this change in accounting principle is inseparable from the effect of the change in accounting estimate, such change has been accounted for as a change in estimate in accordance with Opinion No. 20 of the Accounting Principles Board. As a result, the Company recorded a non-cash write-off of $1,395,476 ($.04 per share) during the first quarter of 1995. Future patent costs are expected to be expensed since the benefits to be derived therefrom are likely to be uncertain. 6. Termination of RheothRx License Agreement In October 1995 Glaxo Wellcome PLC ("GW") informed the Company of its decision to cease development of the Company's RheothRx copolymer and its intention to terminate its license. Pursuant to the CytRx's 1990 license agreement with GW (then Burroughs Wellcome Co.), the Company has received a cumulative total of $9 million to date under the agreement. In 1993 GW completed its obligation to pay initial license fees and milestone payments under the agreement. Subsequent to the termination of its license, GW has no further financial obligations to CytRx. This event had no impact on the accompanying financial statements. Item 2. -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Financial Condition and Liquidity At September 30, 1995 the Company had cash and short-term investments of $27.1 million and net assets of $31.9 million, compared to $30.8 million and $38.0 million, respectively, at December 31, 1994. Working capital totalled $26.4 million at September 30, 1995, compared to $30.7 million at December 31, 1994. On October 23, 1995 Glaxo Wellcome PLC ("GW") informed the Company of its decision to cease development of the Company's RheothRx copolymer and its intention to terminate its license. Since May 1994, RheothRx was under evaluation in the CORE (Collaborative Organization for RheothRx Evaluation) trial, a multi-national Phase II/III study of RheothRx in patients with acute myocardial infarction. The CORE trial was planned to eventually enroll more than 9,000 patients. In July, GW completed patient enrollment in Stage 1 of the CORE trial, involving 2,948 patients. An analysis of Stage 1 by GW indicated that RheothRx showed benefit only in certain clinical evaluations and were limited to high dose levels associated with unacceptable toxicity. Lower dosages of the drug were not associated with any clinical benefit. Pursuant to CytRx's 1990 license agreement with GW (then Burroughs Wellcome Co.), the Company received a cumulative total of $9 million under the agreement. Subsequent to the termination of its license, GW has no further financial obligations to CytRx. On October 30, 1995 CytRx announced that its Board of Directors had authorized the repurchase of up to 5 million shares of its common stock. Purchases may be made from time to time on the open market or in unsolicited block transactions. Although GW's termination of the RheothRx license agreement has negatively impacted CytRx's long-term cash flow potential, management believes that cash and short-term investments, combined with income to be generated therefrom, will be sufficient to satisfy the Company's working capital needs for the next several years. The Company will consider additional sources of funding as appropriate and available. Results of Operations The following table presents the breakdown of consolidated results of operations by operating unit for the three month and nine month periods ended September 30, 1995 and 1994. Although the subsequent discussion addresses the onsolidated results of operations for CytRx and its subsidiaries, management believes this presentation by operating unit is important to an understanding of the consolidated financial statements taken as a whole. No results are shown for Proceutics, Inc. as this subsidiary will not commence formal operations until 1996. Three Months Ended Nine Months Ended September 30, September 30, (in thousands) 1995 1994 1995 1994 CytRx $(1,566) $(1,541) $(6,955) $(4,277) Vaxcel (246) (154) (1,138) (864) Vetlife (140) (245) (577) (295) Consolidated Net Loss $(1,952) $(1,940) $(8,670) $(5,436) Net sales of TiterMax were $102,000 during the three months ended September 30, 1995 compared to $115,000 in 1994 and $354,000 during the nine months ended September 30, 1995 compared to $411,000 in 1994. Selling and marketing expenses in 1995 increased by $65,000, or 449%, from 1994 for the three months ended September 30, and decreased by $34,000, or 19%, for the nine months ended September 30, due to variances in promotional expenditures as well as personnel resources devoted to the Titermax marketing effort. Investment income was $474,000 and $1,425,000 during the three months and nine months ended September 30, 1995, as compared to $493,000 and $1,400,000 for the same periods in 1994. In 1995 CytRx chose to convert the majority of its short-term investments into cash equivalents. At December 31, 1994 the Company had $2.5 million in unrealized losses as a result of 1994's dramatic increase in interest rates. By taking advantage of strength in the bond market during the second quarter, CytRx reduced its unrealized losses by $1.4 million, recording non-cash charges of $1.1 million during the nine months ended September 30, 1995. These charges are shown as a separate line item on the Condensed Consolidated Statements of Operations. The Company believes that during the period in which these losses were incurred and then recognized (February 1994 to June 1995), total investment income, net of realized losses, exceeded the amount of potential investment income had the Company invested in shorter-term securities. During the first quarter of 1994 the Company adopted Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" (see Note 4 to Condensed Consolidated Financial Statements). Research and development expenditures in 1995 decreased by $36,000, or 2%, from 1994 for the three months ended September 30, and increased by $554,000 or 12%, for the nine months ended September 30. These fluctuations are due to the nature of work being performed and are difficult to compare from period to period. However, the increase for the nine month period ended September 30 is primarily due to costs associated with clinical trials conducted on the Company's CRL-1336 compound in early 1995 as well as costs related to the hiring of a Vice-President of Research and Development for each of Vaxcel and Vetlife. General, administrative and business development expenses in 1995 decreased by $16,000, or 2%, from 1994 for the three months ended September 30, and increased by $81,000 or 3%, for the nine months ended September 30. Contributing to the increase for the nine month period ended September 30 were higher expenses for Vetlife, reflecting the hiring of the subsidiary's president in July 1994. Additionally, patent costs in 1995 were expensed, versus being capitalized in prior years (See Note 5 to Condensed Consolidated Financial Statements). Part II -- OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibit 11 -- Statement re: computation of net loss per share (attached hereto). (b) Reports on Form 8-K On October 30, 1995 the Company filed a Current Report on Form 8-K reporting that its Board of Directors had approved a stock repurchase program. On November 7, 1995 the Company filed a Current Report on Form 8-K reporting the termination by Glaxo Wellcome PLC of its license agreement for the Company's RheothRx copolymer. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CYTRX CORPORATION (Registrant) Date: November 8, 1995 By: /s/ Mark W. Reynolds Mark W. Reynolds Controller (Chief Accounting Officer) EX-11 2 Exhibit 11 CYTRX CORPORATION COMPUTATION OF NET LOSS PER SHARE COMPUTATION OF LOSS PER SHARE - PRIMARY Three Month Period Nine Month Period Ended September 30, Ended September 30, 1995 1994 1995 1994 Net loss ($1,952,208) ($1,940,112) ($8,670,321) ($5,435,609) Average number of common shares outstanding 31,630,496 31,566,470 31,593,755 31,558,045 Common shares issuable assuming exercise of stock options and warrants(1) 0 0 0 0 Total shares 31,630,496 31,566,470 31,593,755 31,558,045 Net loss per share ($0.06) ($0.06) ($0.27) ($0.17) COMPUTATION OF LOSS PER SHARE - FULLY DILUTED Net loss ($1,952,208) ($1,940,112) ($8,670,321) ($5,435,609) Average number of common shares outstanding 31,630,496 31,566,470 31,593,755 31,558,045 Common shares issuable assuming exercise of stock options and warrants(1) 0 0 0 0 Total shares 31,630,496 31,566,470 31,593,755 31,558,045 Net loss per share ($0.06) ($0.06) ($0.27) ($0.17) (1) Stock options and warrants outstanding are excluded from the computation of net loss per share since their effect would be anti-dilutive. EX-27 3
5 This schedule contains summary financial information extracted from Form 10-Q for the period ended 9/30/95 and is qualified in its entirety by reference to such financial statements. 9-MOS DEC-31-1995 SEP-30-1995 24031771 30067120 109955 0 4753 27472879 6708873 1384486 33041419 1109569 0 31632 0 0 31931850 33041419 353985 1856616 31602 31602 10495335 0 0 (8670321) 0 (8670321) 0 0 0 (8670321) (.27) (.27)
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