-----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, Q88OxFzIzp6kWgTevQHGsBdTqnbpu17DYv8AFZTPNPX9OxZ/rSHEa8aUTV20L69I e+xgy6xqsxyrFgJR9kGsNA== 0000950144-00-006742.txt : 20000516 0000950144-00-006742.hdr.sgml : 20000516 ACCESSION NUMBER: 0000950144-00-006742 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 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: SEC FILE NUMBER: 000-15327 FILM NUMBER: 632781 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 CYTRX CORPORATION 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 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)
Registrant's telephone number, including area code: (770) 368-9500 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 May 12, 2000: 9,580,050. 2 CYTRX CORPORATION Form 10-Q Table of Contents
Page PART 1. FINANCIAL INFORMATION Item 1. Financial Statements: Condensed Consolidated Balance Sheets as of March 31, 2000 (unaudited) and December 31, 1999 3 Condensed Consolidated Statements of Operations (unaudited) for the Three Month Periods Ended March 31, 2000 and 1999 4 Condensed Consolidated Statements of Cash Flows (unaudited) for the Three Month Periods Ended March 31, 2000 and 1999 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 3. Quantitative and Qualitative Disclosures About Market Risk 10 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 11 SIGNATURES 11
2 3 Part I - FINANCIAL INFORMATION Item 1. - Financial Statements CYTRX CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31, 2000 1999 ------------ ------------ ASSETS (Unaudited) Current assets: Cash and cash equivalents $ 3,219,486 $ 3,031,893 Accounts receivable 390,951 174,292 Inventories 5,142 6,480 Other current assets 130,813 202,610 ------------ ------------ Total current assets 3,746,392 3,415,275 Property and equipment, net 2,616,358 2,641,810 Other assets 60,978 70,978 ------------ ------------ Total assets $ 6,423,728 $ 6,128,063 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 629,850 $ 629,738 Accrued liabilities 1,392,993 2,121,999 ------------ ------------ Total current liabilities 2,022,843 2,751,737 Long-term debt -- 650,000 Other long-term liabilities -- 1,693,638 Commitments Stockholders' equity: Preferred Stock, $.01 par value, 1,000 shares authorized, including 1,000 shares of Series A Junior Participating Preferred Stock; no shares issued and outstanding -- -- Common stock, $.001 par value, 18,750,000 shares authorized; 10,213,866 and 8,373,853 shares issued at March 31, 2000 and December 31, 1999, respectively 10,214 8,374 Additional paid-in capital 72,072,318 67,805,871 Treasury stock, at cost (633,816 shares held at March 31, 2000 and December 31, 1999) (2,279,238) (2,279,238) Accumulated deficit (65,402,409) (64,502,319) ------------ ------------ Total stockholders' equity 4,400,885 1,032,688 ------------ ------------ Total liabilities and stockholders' equity $ 6,423,728 $ 6,128,063 ============ ============
See accompanying notes. 3 4 CYTRX CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Month Period Ended March 31, ---------------------------------- 2000 1999 ------------ ------------ Revenues: Net sales $ 164,473 $ 202,040 Interest income 30,889 176,109 Grant income 73,211 27,461 Other 146,314 49,769 ------------ ------------ 414,887 455,379 Expenses: Cost of sales 55,493 80,677 Research and development 674,574 2,358,061 Selling, general and administrative 584,910 1,200,873 ------------ ------------ 1,314,977 3,639,611 ------------ ------------ Loss from continuing operations (900,090) (3,184,232) Loss from discontinued operations -- (95,592) Minority interest in discontinued operations -- (3,897) ------------ ------------ Net loss $ (900,090) $ (3,275,927) ============ ============ Basic and diluted loss per common share: Continuing operations $ (0.11) $ (0.42) Discontinued operations -- (0.01) ------------ ------------ Net loss $ (0.11) $ (0.43) ============ ============ Basic and diluted weighted average shares outstanding 8,070,164 7,623,394
See accompanying notes. 4 5 CYTRX CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Month Period Ended March 31, ---------------------------------- 2000 1999 ------------ ------------ Cash flows from operating activities: Net loss $ (900,090) $ (3,275,927) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 40,500 29,760 Stock option expense 156,075 726,621 Minority interest in net loss of subsidiary -- (3,897) Net change in assets and liabilities (2,556,056) (214,498) ------------ ------------ Total adjustments (2,359,481) 537,986 ------------ ------------ Net cash used by operating activities (3,259,571) (2,737,941) Cash flows from investing activities: Decrease in short-term investments -- 6,417,066 Capital expenditures, net (15,048) (182,761) ------------ ------------ Net cash (used) provided by investing activities (15,048) 6,234,305 Cash flows from financing activities: Net proceeds from issuance of common stock 4,112,212 18,659 Retirement of debt (650,000) -- Purchase of treasury stock -- (9,000) ------------ ------------ Net cash provided by financing activities 3,462,212 9,659 ------------ ------------ Net increase in cash and cash equivalents 187,593 3,506,023 Cash and cash equivalents at beginning of period 3,031,893 8,855,375 ------------ ------------ Cash and cash equivalents at end of period $ 3,219,486 $ 12,361,398 ============ ============
See accompanying notes. 5 6 CYTRX CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2000 (Unaudited) 1. DESCRIPTION OF COMPANY AND BASIS OF PRESENTATION CytRx Corporation ("CytRx" or "the Company") is a biopharmaceutical company engaged in the development and commercialization of high-value human therapeutics. The Company's current research and development focus is on vascular-occlusive disorders. CytRx also has a research pipeline with opportunities in the areas of acute respiratory disorders, infectious disease, gene and drug delivery, vaccines, and animal feed additives. The accompanying condensed consolidated financial statements at March 31, 2000 and for the three month periods ended March 31, 2000 and 1999 include the accounts of CytRx together with those of its subsidiaries and 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, 1999. 2. EXCHANGE OF COMMON STOCK FOR CANCELLATION OF ACCOUNTS PAYABLE, ACCRUED EXPENSES AND DEBT During the first quarter of 2000, the Company reached agreements with certain of its trade creditors whereby an aggregate of $1,894,000 of trade payables was cancelled in exchange for issuance of approximately 758,000 shares of CytRx Common Stock. Of this amount, $1,694,000 existed at December 31, 1999, and was accordingly classified as long-term liabilities on the Balance Sheet at that date. The Company also cancelled $650,000 of long-term debt in exchange for a cash payment of $200,000 and the issuance of 180,000 shares of CytRx Common Stock. 3. PRIVATE PLACEMENT OF COMMON STOCK In March 2000, the Company entered into a Stock Purchase Agreement with certain investors (the "Investors") whereby the Investors agreed to purchase 800,000 shares of the Company's Common Stock for an aggregate purchase price of $1.8 million and the issuance of warrants to purchase an additional 330,891 shares at $2.25 per share, expiring March 31, 2003. The Investors were granted registration rights for the shares issued to them and the shares underlying the warrants. In addition, the Investors will, upon effective registration of the shares, purchase an additional 286,000 shares at $2.25 per share and simultaneously receive an 6 7 additional three-year warrant to purchase 143,000 shares at $2.25 per share. In lieu of these additional shares and warrants, the Investors have the option to purchase 429,000 shares at a price equal to 75% of a trailing average market price of the Company's Common Stock, as defined in the Stock Purchase Agreement. 4. EQUITY LINE OF CREDIT In April 2000, the Company entered into a Private Equity Line of Credit Agreement (the ELC Agreement") with Majorlink Holdings Limited ("Majorlink"), pursuant to which the Company has the right to put shares of Common Stock to Majorlink from time to time during the "commitment period" to raise up to $5,000,000, subject to certain conditions and restrictions. The "commitment period" begins on the effective date of a registration statement filed by the Company to register the resale by Majorlink of the shares of Common Stock that Majorlink purchases under the ELC Agreement and ends on the earliest of (1) the date thirty months from such date, (2) the date on which Majorlink shall have purchased $5,000,000 of Common Stock under the ELC Agreement and (3) the date either party terminates the ELC Agreement in accordance with its terms. Each time the Company desires to raise a specific amount of cash under the ELC Agreement, the Company shall issue to Majorlink a number of shares of Common Stock determined by (1) dividing the amount of cash desired to be raised by the Company by (2) 90% of a trailing market average price of the Company's Common Stock, as defined in the ELC Agreement. In connection with the ELC Agreement, the Company issued Majorlink a warrant to purchase up to 200,000 shares of Common Stock at a per share exercise price of $3.438. The warrant is exercisable for a period of three years. 5. SEGMENT REPORTING
Continuing Operations -------------------------------------------------------- Total Research Recruiting Product Continuing Discontinued (in thousands) Products Services Development Operations Operations - -------------- -------- ---------- ----------- ---------- ------------ Three Months Ended March 31, 2000: Sales to external customers $ 64 $ 100 $ -- $ 164 $ -- Intersegment sales -- -- -- -- -- Segment profit (loss) 40 43 (983) (900) -- Total assets -- -- 6,424 6,424 -- Three Months Ended March 31, 1999: Sales to external customers 136 66 -- 202 -- Intersegment sales -- -- -- -- -- Segment profit (loss) 83 (1) (3,266) (3,184) (92) Total assets -- -- 13,164 13,164 805
7 8 Item 2. -- Management's Discussion and Analysis of Financial Condition And Results of Operations Liquidity and Capital Resources At March 31, 2000 the Company had cash and cash equivalents of $3.2 million and net assets of $4.4 million, compared to $3.0 million and $1.0 million, respectively, at December 31, 1999. Working capital totaled $1.7 million at March 31, 2000, compared to $0.7 million at December 31, 1999. During the first quarter of 2000, the Company took steps to improve its financial condition, including (i) agreements with certain trade creditors whereby an aggregate of $2.3 million of indebtedness was cancelled in exchange for issuance of approximately 938,000 shares of CytRx Common Stock (see Note 2 to Financial Statements), and (ii) a Stock Purchase Agreement with certain investors (the "Investors") whereby the Investors agreed to purchase 800,000 shares of the Company's Common Stock for an aggregate purchase price of $1.8 million and the issuance of certain warrants (see Note 3 to Financial Statements). The Company also terminated the services of twelve of its employees as part of its efforts to conserve its cash resources and has further reduced its operations by suspending its clinical development program for FLOCOR. In April 2000, the Company entered into a Private Equity Line of Credit Agreement (the "ELC Agreement") pursuant to which the Company has the right to put shares of its Common Stock to the ELC Investor from time to time to raise up to $5,000,000, subject to certain conditions and restrictions (see Note 4 to Financial Statements). The Company believes that the proceeds of the transactions completed during the first quarter will allow the Company to operate throughout the remainder of 2000, but that additional funds will be needed to significantly advance any of the Company's technologies under development, some of which may be provided by the ELC Agreement. The ongoing ability of the Company to operate as a going concern with the current portfolio of technologies under development will be determined by the results of technology licensing efforts and/or the actual proceeds of any fund-raising activities, which are subject to market conditions and the Company's ability to identify parties that are willing and able to enter into such arrangements on terms that are satisfactory to the Company. There is no assurance that such funding will be available for the Company to finance its operations on acceptable terms, if at all. Insufficient funding may require the Company to delay, reduce or eliminate some or all of its research and development activities, planned clinical trials and administrative programs. The above statements regarding the Company's plans and expectations for future financing are forward-looking statements that are subject to a number of risks and uncertainties. The Company's ability to obtain future financings through joint ventures, product licensing arrangements, equity financings or otherwise is subject to market conditions and the Company's ability to identify parties that are willing and able to enter into such arrangements on terms that are satisfactory to the Company. There can be no assurance that the Company will be able to 8 9 obtain future financing from these sources. Additionally, depending upon the outcome of the Company's fund raising efforts via its subsidiaries discussed above, the accompanying financial information may not necessarily be indicative of future operating results or future financial condition. Results of Operations The Company recorded a net loss of $900,000 for the three month period ended March 31, 2000 as compared to $3,276,000 for 1999. Loss from continuing operations was $900,000 in 2000 as compared to $3,184,000 in 1999. The overall reduction in net loss is due primarily to changes in the Company's research and development expenditures, discussed below. Net sales, which consist primarily of sales of TiterMax research adjuvant and service revenues from Spectrum Recruitment Research, were $164,000 and $202,000 during the three months ended March 31, 2000 and 1999, respectively. Cost of product sales and service revenues was $55,000 in 2000 versus $81,000 in 1999. Interest income was $31,000 and $176,000 during the three months ended March 31, 2000 and 1999, respectively. The variance between years generally corresponds to fluctuating cash and investment balances. Grant income was $73,000 in 2000 versus $27,000 in 1999. The increase relates to a new SBIR grant issued to CytRx in September 1999. Costs related to grant income are included in research and development expense and generally approximate the amount of revenue recognized. Other income was $146,000 for the three month period ended March 31, 2000 and includes $125,000 in fees paid by a third party pursuant to an Evaluation Agreement for the Company's gene delivery technology. Other income for 2000 also includes $21,000 in sublease revenues. Other income for the three month period of 1999 was $50,000, consisting of $28,000 in sublease revenues and $22,000 in administrative service fees charged to a former subsidiary. Research and development expenditures were $675,000 and $2,358,000 during the three months ended March 31, 2000 and 1999, respectively. Research and development expenditures are higher in prior periods due to the Company's clinical development activities for FLOCOR. A Phase III clinical trial of FLOCOR for treatment of acute sickle cell crisis was initiated in March of 1998 and completed in December 1999. Subsequent to the completion of the Phase III trial in December 1999, the Company has suspended all clinical development activities for FLOCOR pending further analysis of the Phase III results. The Company's development activities during the first quarter of 2000 consisted primarily of analysis of the Phase III results and consultation with the Company's scientific and regulatory advisors. Selling, general and administrative expenditures were $585,000 and $1,201,000 during the three months ended March 31, 2000 and 1999, respectively. During each of the periods, certain vesting criteria of employee options and warrants were achieved, resulting in aggregate non-cash charges to compensation expense and consulting expense of $156,000 and $727,000, 9 10 during 2000 and 1999, respectively. Excluding these charges, selling, general and administrative expenditures during the first quarter of 2000 decreased by $45,000 from the same period in 1999. Net loss from discontinued operations, net of minority interest, was $-0- and $(92,000) during the three months ended March 31, 2000 and 1999, respectively, and relates to the operations of Vaxcel, Inc. CytRx's equity interest in Vaxcel was sold in September 1999. Item 3. -- Quantitative and Qualitative Disclosures About Market Risk There have been no changes in the Company's assessment of its market risk from that disclosed in its Form 10-K for the year ended December 31, 1999. 10 11 PART II -- OTHER INFORMATION Item 6. -- Exhibits and Reports on Form 8-K (a) Exhibits
Exhibit Number Description ------ ----------- 27.1 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K None. 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: May 15, 2000 By: /s/ Mark W. Reynolds -------------------------------- Mark W. Reynolds Vice President, Finance (Chief Accounting Officer and a duly authorized officer) 11 EX-27.1 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 3,219,486 0 390,951 0 5,142 3,746,392 3,184,380 568,022 6,423,728 2,022,843 0 0 0 10,214 4,390,671 6,423,728 164,473 414,887 55,493 55,493 1,259,484 0 0 (900,090) 0 (900,090) 0 0 0 (900,090) (0.11) (0.11)
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