UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 1O-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, 1996
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)
(404) 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 March 31, 1996: 7,860,802.
CYTRX CORPORATION
Form 10-Q
Table of Contents
Page
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements:
Condensed Consolidated Balance Sheets as of March 31, 1996
(unaudited) and December 31, 1995 3
Condensed Consolidated Statements of Operations (unaudited)
for the Three Month Periods Ended March 31, 1996 and 1995 4
Condensed Consolidated Statements of Cash Flows (unaudited)
for the Three Month Periods Ended March 31, 1996 and 1995 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
2
Part I - FINANCIAL INFORMATION
Item 1. - Financial Statements
CYTRX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 1996 December 31, 1995
------------- -----------------
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 2,982,373 $16,645,570
Short-term investments 20,214,691 8,556,235
Receivables 247,631 91,077
Inventories 9,906 6,318
Other current assets 523,339 267,420
---------- -----------
Total current assets 23,977,940 25,566,620
Property and equipment, net 5,041,722 5,137,764
Other assets 256,686 255,599
---------- ----------
Total assets $29,276,348 $30,959,983
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 18,842 $ 266,125
Accrued liabilities 773,223 923,373
---------- ----------
Total current liabilities 792,065 1,189,498
Commitments
Stockholders' equity:
Common stock, $.001 par value, 18,750,000
shares authorized; 7,919,552 and 7,915,308
shares issued at March 31, 1996 and
December 31, 1995, respectively 7,920 7,915
Additional paid-in capital 62,540,423 62,514,691
Treasury Stock (58,750 shares) (242,343) (242,343)
Accumulated deficit (33,821,717) (32,509,778)
---------- ----------
Total stockholders' equity 28,484,283 29,770,485
---------- ----------
Total liabilities and
stockholders' equity $29,276,348 $30,959,983
========== ==========
See accompanying notes.
3
CYTRX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Month Period Ended March 31,
----------------------------------
1996 1995
----------- -----------
Revenues:
Net sales $ 337,525 $ 136,006
Investment income, net 303,972 396,892
Other income 33,768 20,464
--------- ---------
675,265 553,362
Expenses:
Cost of sales 112,715 11,141
Research and development 987,219 1,680,182
Selling and marketing 166,832 26,548
General, administrative and
business development 720,438 812,471
Write-off of patent costs 0 1,395,476
--------- ---------
1,987,204 3,925,818
--------- ---------
Net loss $(1,311,939) $(3,372,456)
========== ==========
Net loss per share -- see Exhibit 11 $ (0.17) $ (0.43)
========== ==========
See accompanying notes.
4
CYTRX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Month Period Ended March 31,
----------------------------------
1996 1995
---------- -----------
Cash flows from operating activities:
Net loss $(1,311,939) $(3,372,456)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 164,107 131,477
Write-off of patent costs 0 1,395,476
Net change in assets and liabilities (814,581) (98,632)
---------- ----------
Total adjustments (650,474) 1,428,321
---------- ----------
Net cash used by operating activities (1,962,413) (1,944,135)
Cash flows from investing activities:
Increase in short-term investments (11,658,456) (679,263)
Capital expenditures, net (68,065) (30,112)
---------- ----------
Net cash used by investing activities (11,726,521) (709,375)
Cash flows from financing activities:
Proceeds from issuance of common stock 25,737 23,371
---------- ----------
Net decrease in cash and cash equivalents (13,663,197) (2,630,139)
Cash and cash equivalents at beginning of period 16,645,570 3,395,974
---------- ----------
Cash and cash equivalents at end of period $ 2,982,373 $ 765,835
========== ==========
See accompanying notes.
5
CYTRX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
(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 provides high quality preclinical development
services to the pharmaceutical industry.
The accompanying condensed consolidated financial statements at March 31,
1996 and for the three month periods ended March 31, 1996 and 1995 include the
accounts of CytRx and its wholly-owned subsidiaries. The condensed consolidated
financial statements as of March 31, 1996 and for the periods ended March 31,
1996 and 1995 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, 1995.
2. INVENTORIES
Inventories at March 31, 1996 and December 31, 1995 are comprised of the
following:
March 31, 1996 December 31, 1995
-------------- -----------------
Finished goods $ 7,656 $ 4,068
Raw materials 2,250 2,250
------ ------
$ 9,906 $ 6,318
====== ======
3. REVERSE STOCK SPLIT
All share and per share information in the accompanying condensed
consolidated financial statements and notes thereto has been retroactively
adjusted to reflect a one-for-four reverse stock split effective February 6,
1996.
6
4. 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.
5. Marketing and Distribution Agreement
In January 1996, Vetlife signed an agreement with Ivy Laboratories, Inc. to
market and distribute Ivy's line of FDA approved cattle growth products and
devices in North America. The newly created Vetlife Cattle Marketing Group
will begin marketing products by January 1997. In connection with the
agreement, Vetlife arranged for a letter of credit in the amount of $5 million
in favor of Ivy Laboratories. The letter of credit is collateralized by
approximately $6 million of short-term investments.
7
Item 2. -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Financial Condition and Liquidity
At March 31, 1996 the Company had cash and short-term investments of $23.2
million and net assets of $28.5 million, compared to $25.2 million and $29.8
million, respectively, at December 31, 1995. Working capital totalled $23.2
million at March 31, 1996, compared to $24.4 million at December 31, 1995. The
Company has no material capital commitments.
During 1995 the Company formed a new subsidiary, Proceutics, Inc., to provide
preclinical development services to the pharmaceutical industry. CytRx
contributed existing property and staff resources to the venture which commenced
formal operations in January 1996. Management believes that while Proceutics
will continue to provide services to its affiliates, revenue derived from third
party resources will contribute to the Company's consolidated liquidity and
capital resources.
In January 1996 Vetlife signed an agreement with Ivy Laboratories, Inc. to
market and distribute Ivy's line of FDA approved cattle growth products and
devices in North America. Unless Ivy receives FDA approval in 1996 to market
certain products currently pending agency review, marketing and selling
activities are not expected to begin until January 1997. Management expects
that revenue generated from this arrangement will support Vetlife's other
product development programs.
Given its current operating plans, management believes that cash and short-term
investments on hand, combined with investment income, revenues generated by
Proceutics and Vetlife, and sales of Titermax, will be sufficient to satisfy the
Company's working capital needs for the next several years. The Company's
future cash requirements are dependent upon a number of factors, including the
progress of the Company's product development activities, the expense of
obtaining regulatory approvals, the determination of the commercial potential of
the Company's products under development and the status of competitive products.
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 periods ended March 31, 1996 and 1995.
Although the subsequent discussion addresses the consolidated results of
operations for CytRx and its subsidiaries, management believes this presentation
of net results by operating unit is important to an understanding of the
consolidated financial statements taken as a whole.
8
Three Month Period Ended March 31,
----------------------------------
(in thousands) 1996 1995
------ ------
CytRx $ (361) $(2,716)
Proceutics (409) -
Vaxcel (296) (374)
Vetlife (246) (282)
------ ------
Consolidated $(1,312) $(3,372)
Net sales were $338,000 during the three months ending March 31, 1996 compared
to $136,000 for the same period in 1995. Cost of sales were $113,000 (33% of
net sales) in the 1996 period as compared to $11,000 (8% of net sales) in 1995.
Selling and marketing expenses in the first quarter of 1996 were $167,000 as
compared to $27,000 during 1995. Each of these increases from 1995 is
attributable to the activities of Proceutics, which commenced formal operations
in January 1996, as well as other service revenues. Net sales for the first
quarter of 1995 consist solely of Titermax sales.
Investment income was $304,000 during the first quarter of 1996 as compared to
$397,000 for the same period in 1995, corresponding to reductions in cash and
investment balances.
Research and development expenditures in 1996 decreased by $693,000, or 41%,
over 1995 for the three months ended March 31. This decrease is due to a
reduction in the scope of the Company's preclinical development activities
combined with a shift of certain personnel and capital resources to Proceutics.
General, administrative and business development expenses in 1996 decreased by
$92,000, or 11%, from 1995 for the three months ended March 31. This decrease
is primarily due to the Company's cost reduction program.
9
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: None.
10
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 10, 1996 By:/s/ Mark W. Reynolds
Mark W. Reynolds
Controller
(Chief Accounting Officer)
11