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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 June 30, 1997
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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
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(Exact name of Registrant as specified in its charter)
Delaware 58-1642740
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
154 Technology Parkway, Norcross, Georgia 30092
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(Address of principal executive offices) (Zip Code)
(770) 368-9500
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(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 August 11, 1997: 7,422,588.
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CYTRX CORPORATION
Form 10-Q
Table of Contents
Page
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PART I. FINANCIAL INFORMATION
Item 1 Financial Statements:
Condensed Consolidated Balance Sheets as of June 30, 1997 (unaudited)
and December 31, 1996 3
Condensed Consolidated Statements of Operations (unaudited) for the
Three Month and Six Month Periods Ended June 30, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows (unaudited) for the
Six Month Periods Ended June 30, 1997 and 1996 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 2 Changes in Securities 12
Item 4 Submission of Matters to a Vote of Security Holders 14
Item 6 Exhibits and Reports on Form 8-K 15
SIGNATURES 16
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Part I - FINANCIAL INFORMATION
Item 1. - Financial Statements
CYTRX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 1997 December 31, 1996
------------- -----------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 4,761,957 $ 1,604,003
Short-term investments 8,393,008 10,273,108
Accounts receivable, net 2,524,930 643,079
Inventories 11,045 9,508
Other current assets 167,932 532,399
------------ ------------
Total current assets 15,858,872 13,062,097
Property and equipment, net 4,949,497 5,012,809
Other assets:
Long-term investments -- 5,096,353
Notes receivable 632,786 975,000
Acquired developed technology, net 3,574,356 --
Other 59,901 153,063
------------ ------------
Total other assets 4,267,043 6,224,416
------------ ------------
Total assets $ 25,075,412 $ 24,299,322
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 941,437 $ 586,920
Accrued liabilities 1,676,443 1,123,476
Unearned revenue 46,056 251,192
------------ ------------
Total current liabilities 2,663,936 1,961,588
Minority interest in Vaxcel, Inc. 735,685 --
Commitments
Stockholders' equity:
Preferred stock, $.01 par value, 1,000 shares authorized;
no shares issued and outstanding -- --
Common stock, $.001 par value, 18,750,000 shares authorized;
7,966,274 and 7,945,203 shares issued at June 30, 1997
and December 31, 1996, respectively 7,966 7,945
Additional paid-in capital 65,103,567 62,653,015
Treasury stock, at cost (555,154 and 507,750 shares held at
June 30, 1997 and December 31, 1996, respectively) (2,198,533) (2,021,669)
Accumulated deficit (41,237,209) (38,301,557)
------------ ------------
Total stockholders' equity 21,675,791 22,337,734
------------ ------------
Total liabilities and stockholders' equity $ 25,075,412 $ 24,299,322
============ ============
See accompanying notes.
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CYTRX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Month Period Ended June 30, Six Month Period Ended June 30,
--------------------------------- --------------------------------
1997 1996 1997 1996
------------ ----------------- ------------ ----------------
Revenues:
Net sales $ 3,322,250 $ 479,894 $ 7,065,330 $ 817,419
Investment income, net 220,024 316,595 464,559 620,567
License fees -- 50,000 -- 50,000
Collaborative and grant income 13,322 -- 105,989 --
Other 27,129 15,667 52,823 33,452
------------ ------------ ------------ ------------
3,582,725 862,156 7,688,701 1,521,438
Expenses:
Cost of sales 2,433,967 367,637 4,758,612 480,352
Research and development 909,526 553,357 1,687,090 1,540,576
Selling, general and administrative 1,676,791 1,086,541 3,352,918 1,957,828
Acquired research and development 951,017 -- 951,017 --
------------ ------------ ------------ ------------
5,971,301 2,007,535 10,749,637 3,978,756
------------ ------------ ------------ ------------
Net loss before minority interest (2,388,576) (1,145,379) (3,060,936) (2,457,318)
Minority interest (125,284) -- (125,284) --
------------ ------------ ------------ ------------
Net loss $ (2,263,292) $ (1,145,379) $ (2,935,652) $ (2,457,318)
============ ============ ============ ============
Net loss per share (see Exhibit 11) $ (0.31) $ (0.15) $ (0.40) $ (0.31)
============ ============ ============ ============
See acompanying notes.
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CYTRX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Month Period Ended June 30,
-------------------------------------
1997 1996
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Cash flows from operating activities:
Net loss $ (2,935,652) $ (2,457,318)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 324,659 252,364
Charge for acquired research and development 951,017 --
Minority interest in net loss (125,284) --
Net change in assets and liabilities (503,450) (691,458)
------------ ------------
Total adjustments 646,942 (439,094)
------------ ------------
Net cash used by operating activities (2,288,710) (2,896,412)
Cash flows from investing activities:
(Increase) decrease in short-term investments 1,880,100 (11,181,158)
Decrease in long-term investments 5,096,353 --
Capital expenditures, net (201,332) (123,274)
Net cash paid for acquisition (1,239,355) --
------------ ------------
Net cash provided (used) by investing activities 5,535,766 (11,304,432)
Cash flows from financing activities:
Net proceeds from issuance of common stock 87,762 70,160
Purchase of treasury stock (176,864) (40,001)
------------ ------------
Net cash provided (used) by financing activities (89,102) 30,159
------------ ------------
Net increase (decrease) in cash and cash equivalents 3,157,954 (14,170,685)
Cash and cash equivalents at beginning of period 1,604,003 16,645,570
------------ ------------
Cash and cash equivalents at end of period $ 4,761,957 $ 2,474,885
============ ============
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CYTRX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
(Unaudited)
1. DESCRIPTION OF COMPANY AND BASIS OF PRESENTATION
CytRx Corporation's business strategy is to build shareholder value
through the development and commercialization of high value human therapeutic
products and the successful development and rollout of its promising subsidiary
companies. CytRx's Flocor (CRL-5861) is being developed to treat acute sickle
cell crisis and other vascular diseases. Vaxcel, Inc. is developing the
Optivax(R) vaccine delivery system to enhance the effectiveness of vaccines.
VetLife, Inc. markets and distributes products to enhance food animal growth.
Proceutics, Inc. provides high quality preclinical development services to the
pharmaceutical industry. References herein to "the Company" include CytRx and
its subsidiaries.
The accompanying condensed consolidated financial statements at June
30, 1997 and for the three month and six month periods ended June 30, 1997 and
1996 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. All significant intercompany transactions
have been eliminated. 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, 1996.
2. INVENTORIES
Inventories at June 30, 1997 and December 31, 1996 are comprised of the
following:
June 30, 1997 December 31, 1996
------------- -----------------
Finished goods $ 8,009 $ 6,144
Raw materials 3,036 3,364
------- -------
$11,045 $ 9,508
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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
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reverse stock split approved on February 5, 1996 by the Company's
stockholders, effective February 6, 1996.
4. NET LOSS PER COMMON SHARE
Net loss per common share is calculated in accordance with Accounting
Principles Board Opinion No. 15, Earnings per Share, and is based on the
weighted average number of common shares and common share equivalents
outstanding during each period. Stock options and warrants outstanding are
excluded from the computation of net loss per share since the effect is
antidilutive.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share, which is required to be adopted on
December 31, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per share,
the dilutive effect of stock options will be excluded. The adoption of Statement
No. 128 will not impact the Company's calculation of net loss per share for the
three month or six month periods ended June 30, 1997 and 1996.
5. ACQUISITION OF ZYNAXIS, INC.
In December 1996 CytRx, Vaxcel and Zynaxis, Inc. ("Zynaxis") signed an
agreement whereby Zynaxis would be merged with a wholly-owned subsidiary of
Vaxcel. At that time Zynaxis was a publicly-held biotechnology company engaged
in the development of certain vaccine technologies. The transaction was approved
by the Zynaxis stockholders at a meeting held on May 21, 1997 and was
consummated as of that date.
Under the terms of the agreement all of the outstanding shares of
Zynaxis were converted into shares of Vaxcel based upon certain exchange ratios
defined in the agreement, resulting in the issuance of an aggregate of 12.5% of
the outstanding (post-merger) shares of Vaxcel common stock at the date of
closing. The merger was treated as a purchase by Vaxcel and constitutes a
tax-free reorganization for Zynaxis stockholders.
Pursuant to the agreement, CytRx was to provide up to $2 million to
Zynaxis under a secured credit facility during the period prior to closing of
the merger, at which time the outstanding principal and interest was to be
contributed to the capital of Vaxcel, together with additional equity in the
amount of $4 million less the outstanding principal and interest of the secured
note. At the time of closing the outstanding principal and interest of the
secured note to Zynaxis was approximately $1.7 million, resulting in a net cash
infusion to Vaxcel of approximately $2.3 million.
Of the $4,551,000 excess purchase price over the estimated fair value
of the net assets acquired from Zynaxis, $3,600,000 has been recorded as an
intangible asset (Acquired
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Technology) and is being amortized over 15 years. The remaining $951,000 has
been recorded as a charge for acquired research and development in the
accompanying statement of operations.
The following table presents unaudited pro forma operating results for
the six months ended June 30, 1997 and 1996, as if the acquisition of Zynaxis
had occurred on January 1 of each period.
1997 1996
---- ----
Revenues $ 8,467,000 $ 2,341,000
Net loss before minority interest (2,432,000) (4,969,000)
Minority interest (129,000) (378,000)
Net loss $(2,303,000) $(4,591,000)
Net loss per share $ (.31) $ (.58)
6. ADOPTION OF SHAREHOLDER PROTECTION RIGHTS PLAN
Effective April 16, 1997, the Company's Board of Directors declared a
distribution of one Right for each outstanding share of the Company's Common
Stock to stockholders of record at the close of business on May 15, 1997 and for
each share of Common Stock issued by the Company thereafter and prior to a
Flip-in Date (as defined below). Each Right entitles the registered holder to
purchase from the Company one ten-thousandth (1/10,000th) of a share of Series A
Junior Participating Preferred Stock, at an exercise price of $30. The Rights
are generally not exercisable until 10 business days after an announcement by
the Company that a person or group of affiliated persons (an "Acquiring Person")
has acquired beneficial ownership of 15% or more of the Company's then
outstanding shares of Common Stock (a "Flip-in Date").
In the event the Rights become exercisable as a result of the
acquisition of shares, each Right will enable the owner, other than the
Acquiring Person, to purchase at the Right's then current exercise price a
number of shares of Common Stock with a market value equal to twice the exercise
price. In addition, unless the Acquiring Person owns more than 50% of the
outstanding shares of Common Stock, the Board of Directors may elect to exchange
all outstanding Rights (other than those owned by such Acquiring Person) at an
exchange ratio of one share of Common Stock per Right. All Rights that are owned
by any person on or after the date such person becomes an Acquiring Person will
be null and void.
The Rights have been distributed to protect the Company's stockholders
from coercive or abusive takeover tactics and to give the Board of Directors
more negotiating leverage in dealing with prospective acquirors.
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Item 2. -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Financial Condition and Liquidity
At June 30, 1997 the Company had cash and investments of $13.2 million
and net assets of $21.7 million, compared to $17 million and $22.3 million,
respectively, at December 31, 1996. Working capital totaled $13.2 million at
June 30, 1997, compared to $11.1 million at December 31, 1996. Working capital
at December 31, 1996 excludes $5.1 million of investments classified as
non-current assets which mature in early 1998 that are included in working
capital at June 30, 1997.
Management believes that cash and investments on hand, combined with
interest income and operating revenues, will be sufficient to satisfy the
Company's liquidity and working capital needs for the next several years, but it
is possible that additional funding may be required to accomplish the necessary
testing and data collection procedures prescribed by the U.S. Food and Drug
Administration for the commercialization of any products for human use.
Definitive statements as to the time required and costs involved in reaching
certain objectives for the Company's products are difficult to project due to
the uncertainties of the medical research field. Requirements could vary
depending upon the results of research, competitive and technological
developments, and the time and expense required for governmental approval of
products, some of which factors are beyond management's control.
During 1996 and 1997 the Company received federal government funding
for certain research and development activities via several Small Business
Innovative Research (SBIR) grants. The Company will continue to seek government
assistance for its product development efforts as appropriate and available.
Additional funding for research and development expenditures is expected to be
obtained through joint ventures and product licensing arrangements with other
companies. CytRx also anticipates that it may raise funds through equity
financings of one or more of its subsidiaries, either directly by the subsidiary
through issuance of the subsidiary's stock, or through sale by CytRx of a
portion of its ownership in a subsidiary. These statements regarding the
Company's plans 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 obtain future financing from these
sources.
Effective May 21, 1997 CytRx's then wholly-owned subsidiary, Vaxcel,
merged with Zynaxis, a publicly-held biotechnology company (see Note 5 to
Financial Statements). Pursuant to the merger agreement, CytRx provided $4
million in equity funding to Vaxcel, less the outstanding principal and interest
drawn on a $2 million secured credit facility by Zynaxis during
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the period prior to closing of the merger. Subsequent to the merger, CytRx
owns approximately 87.5% of Vaxcel, with the remaining 12.5% held by the former
Zynaxis shareholders.
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. Although Proceutics continues to
provide services to its affiliates, revenues derived from third party sources
are contributing 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 beginning January 1, 1997. In September 1996 VetLife
signed an agreement with Elanco Animal Health, a division of Eli Lilly and
Company, whereby VetLife became the exclusive U.S. supplier of Elanco's
Compudose cattle growth promotant products, effective October 1, 1996. Revenue
generated from these arrangements are offsetting VetLife's product development
efforts and contributing to the Company's consolidated liquidity and capital
resources.
At December 31, 1996 the Company has net operating loss carryforwards
for income tax purposes of approximately $37 million, which will expire at
various dates through 2011 if not utilized. The Company also has research and
development credits available to reduce income taxes, if any, of approximately
$1.1 million. Based on an assessment of all available evidence including, but
not limited to, the Company's limited operating history and lack of
profitability, uncertainties of the commercial viability of the Company's
technology, the impact of government regulation and healthcare reform
initiatives, and other risks normally associated with biotechnology companies,
the Company has concluded that it is more likely than not that these net
operating loss carryforwards and credits will not be realized and, as a result,
a 100% deferred tax valuation allowance has been recorded against these assets.
Such valuation allowance had no impact on reported net losses.
Results of Operations
The following table presents the breakdown of consolidated results of
operations by operating unit for the three month and six month periods ended
June 30, 1997 and 1996. Although the subsequent discussion addresses the
consolidated results of operations for CytRx together with 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.
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Three Months Ended June 30, Six Months Ended June 30,
---------------------------- --------------------------
(in thousands) 1997 1996 1997 1996
---- ---- ---- ----
CytRx $ (876) $ (581) $(1,497) $ (960)
Proceutics (219) (176) (305) (580)
Vaxcel (1,319) (220) (1,662) (513)
Vetlife 207 (149) 581 (330)
Consolidation Adjustments (56) (19) (53) (74)
------- ------- ------- -------
Consolidated $(2,263) $(1,145) $(2,936) $(2,457)
======= ======= ======= =======
Consolidated net sales for the three month and six month periods ended
June 30, 1997 were $3,322,000 and $7,065,000, respectively, as compared to
$480,000 and $817,000, respectively, in 1996. The significant components of net
sales are shown below.
Three Months Ended June 30, Six Months Ended June 30,
---------------------------- -------------------------
(in thousands) 1997 1996 1997 1996
---- ---- ---- ----
Product Sales (VetLife) $ 2,714 $ -- $ 5,794 $ --
Product Sales (CytRx) 106 105 234 228
Services (Proceutics) * 385 280 821 435
Services (CytRx) 117 95 216 154
------- ------- ------- -------
Consolidated $ 3,322 $ 480 $ 7,065 $ 817
======= ======= ======= =======
* excludes affiliate sales
Cost of sales were $2,434,000 (73% of net sales) during the second
quarter of 1997 as compared to $368,000 (77% of net sales) in 1996. For the six
month period ended June 30 cost of sales were $4,759,000 (67% of net sales) in
1997 versus $480,000 (59% of net sales) in 1996. This increase in cost of sales
is directly attributable to the sales activities of VetLife, which initiated
sales and marketing activities during the fourth quarter of 1996, as well as
increasing third party sales for Proceutics.
Investment income was $220,000 and $465,000 during the three month and
six month periods ended June 30, 1997 as compared to $317,000 and $621,000 for
the same periods in 1996, corresponding to reductions in cash and investment
balances.
Research and development expenditures for the three month period ended
June 30, 1997 were $910,000 as compared to $553,000 in 1996. For the six month
period research and development expenditures totalled $1,687,000 as compared to
$1,541,000 in 1996. Contributing to the increase for 1997 was the initiation in
April 1997 of a human clinical trial to evaluate Flocor (CRL-5861) in sickle
cell patients suffering acute vaso-occlusive crises. In connection with Vaxcel's
acquisition of Zynaxis, the Company recorded a non-recurring charge of $951,000
for acquired research and development. This charge is reported as a separate
line item on the accompanying Statement of Operations.
Selling, general and administrative expenses for the three month period
ended June 30, 1997 were $1,677,000 as compared to $1,087,000 in 1996. For the
six month period selling, general and administrative expenses totalled
$3,353,000 as compared to $1,958,000 in 1996.
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This increase is primarily attributable to the initiation of selling activities
for VetLife. Management believes that inflation had no material impact on the
Company's operations during the three year period ended December 31, 1996.
PART II -- OTHER INFORMATION
ITEM 2 CHANGES IN SECURITIES
As reported on the Company's report on Form 8-K filed April 17, 1997,
on April 16, 1997, the Board of Directors of the Company declared a dividend of
one preferred stock purchase right (a "Right") for each outstanding share of
common stock, par value $.001 per share (the "Common Shares"), of the Company.
The dividend was payable on May 15, 1997, (the "Record Date") to the
stockholders of record on that date. Each Right entitles the registered holder
to purchase from the Company one ten-thousandth (1/10,000th) of a share of
Junior Participating Preferred Stock, par value $.01 per share (the "Preferred
Shares"), of the Company, at a price of $30 per one ten-thousandth of a
Preferred Share (the "Exercise Price"), subject to adjustment. The description
and terms of the Rights are set forth in the Shareholder Protection Rights
Agreement, as the same may be amended from time to time (the "Rights
Agreement"), dated as of April 16, 1997 between the Company and American Stock
Transfer & Trust Company, as Rights Agent (the "Rights Agent").
Until the date on which certain events take place (the "Separation
Time"), the Rights will be evidenced by, with respect to any Common Share
certificate outstanding on the Record Date, such Common Share and a Summary of
Rights mailed to each holder of record on the Record Date. The term "Separation
Time" means the close of business on the earlier of (a) the tenth business day
(or such earlier or later date as may be determined by the Board of Directors of
the Company) following a public announcement by the Company that a person or
group of affliated or associated persons has acquired beneficial ownership of
15% or more of the outstanding Common Shares (collectively, an "Acquiring
Person") (the "Flip-in Date") or (b) the tenth business day (or such later date
as may be determined by the Board of Directors of the Company) after the date on
which any person or group of affiliated or associated persons commences a tender
or exchange offer the consummation of which would result in the beneficial
ownership by such Person of 15% or more of such outstanding Common Shares.
The Rights Agreement provides that, until the Separation Time, the
Rights will be transferred with and only with the Common Shares. Until the
Separation Time (or the earlier temination or expiration of the Rights), new
Common Share certificates issued after the Record Date upon transfer or new
issuance of Common Shares will contain a notation incorporating the Rights
Agreement by reference. Until the Separation Time (or the earlier termination or
expiration of the Rights), the surrender for transfer of any certificates for
Common Shares outstanding as of the Record Date, even without such notation,
will also constitute the transfer of the Rights associated with the Common
Shares represented by such certificate. As soon as practicable following the
Separation Time, separate certificates evidencing the Rights (the "Right
Certificates") will be mailed to holders of record of the Common Shares as of
the close
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of business on the Separation Time, and such separate Right Certificates alone
will evidence the Rights.
The Rights are not exercisable until the Separation Time. After the
Separation Time and prior to the Expiration Time, each Right (unless previously
terminated) will entitle the holder to purchase, for the Exercise Price, one
ten-thousandth of a share of the Preferred Shares having the rights described
below. The Rights will expire on the Expiration Time, unless the Expiration Time
is extended, or the Rights are earlier terminated by the Company. The term
"Expiration Time" is defined in the Rights Agreement and generally means April
16, 2007, unless the Rights are sooner exchanged or terminated.
The Exercise Price payable, and the number of outstanding Rights and
the number of one ten-thousandth interests in Preferred Shares issuable upon
exercise of each Right, are subject to adjustment in the event of a stock split
of the Common Shares or a stock dividend on the Common Shares payable in Common
Shares or subdivisions, consolidations or combinations of the Common Shares
occurring, in any such case, prior to the Separation Time.
If prior to the Separation Time, the Company distributes securities or
assets in exchange for Common Shares (other than regular cash dividends or a
dividend payable solely in Common Shares) whether by dividend, reclassification
or otherwise, the Company shall make such adjustments, if any, in the Exercise
Price, the number of Rights and otherwise as the Board of Directors deems
appropriate.
At a Flip-in Date, Rights owned by the Acquiring Person or any
affiliate or associate thereof or any transferee thereof will automatically
become void and, subject to the Exchange Option summarized below, each Right
will automatically become a right to buy, for the Exercise Price, that number of
Common Shares or, at the option of the Board of Directors, Preferred Shares
designed to have economic and voting terms similar to the Common Shares, in
either case, having a market value of twice the Exercise Price. If any person or
group acquires beneficial ownership of 15% or more of the outstanding Common
Shares without any intent to acquire or affect control of the Company, that
acquisition will not result in a Flip-in Date if such acquiror immediately
enters into an irrevocable commitment to promptly divest, and thereafter
promptly divests, sufficient Common Shares such that 15% or greater beneficial
ownership ceases. After a Flip-in Date occurs, the Company may not consolidate
or merge with, or sell 50% or more of its assets or earning power to, any
person, if the Company's Board of Directors is controlled by the Acquiring
Person, unless proper provision is made so that each Right would thereafter
become a right to buy, for the Exercise Price, that number of shares of common
stock of such other person having a market value of twice the Exercise Price.
At any time after a Flip-in Date occurs and prior to the time a person
or group of persons become the beneficial owner of more than 50% of the
oustanding Common Shares, the Board of Directors of the Company may elect to
exchange all of the outstanding Rights (other than Rights owned by such person
or group which have become void), for Common Shares at an exhange ratio (subject
to adjustment) of one Common Share per Right (the "Exchange Option").
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At any time prior to a Flip-in Date, the Board of Directors of the
Company may terminate the Rights. Immediately upon any termination of the
Rights, the right to exercise the Rights will terminate.
The Company and the Rights Agent may amend the Rights Agreement in any
respect prior to the occurrence of a Flip-in Date. Therafter, the Company and
the Rights Agent may amend the Rights Agreement in any respect which shall not
materially adversely affect the interests of holders of Rights generally or to
cure an ambiguity or to correct or supplement any provision which may be
inconsistent with any other provision or otherwise defective.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Stockholders held on June 26, 1997,
the following members were elected to the Board of Directors:
Votes For Votes Withheld
--------- --------------
Jack L. Bowman 6,617,285 399,177
Raymond C. Carnahan Jr. 6,621,450 395,012
Max Link 6,623,175 393,287
Jack J. Luchese 6,619,300 397,162
Herbert H. McDade 6,622,450 394,012
The following proposals were submitted to the Company's Stockholders for
approval:
Votes Abstained/
Votes For Votes Against Not Voted
--------- ------------- ---------------
Amendment of the Company's ByLaws
to classify the Board of Directors into
three classes, each of which shall contain
an equal number of directors to the extent
possible, with directors in each class to be
elected to three-year terms. 2,141,439 1,268,897 3,606,126
Amendment of the Company's Certificate
of Incorporation to provide that stockholder
action by written consent without a meeting
must be taken by the holders of at least 80%
of the Company's outstanding shares of
Common Stock. 2,092,456 1,313,915 3,610,091
Amendment of the Company's Certificate
of Incorporation to increase the Company's
authorized capital stock to 25,000,000 shares
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of Common Stock, par value $.001 per share,
and 1,000,000 shares of Preferred Stock, par
value $.01 per share. 2,109,067 1,309,916 3,597,479
Ratification of appointment of Ernst & Young
LLP as independent auditors for the fiscal year
ending December 31, 1997. 6,372,788 588,388 55,286
The nominees for election as directors were all elected. The proposals to amend
the Company's Bylaws to classify the Board of Directors and to ratify the
selection of the Company's auditors received more than the number of votes
required for their approval, and were adopted. The proposals to amend the
Company's Certificate of Incorporation to provide for a higher vote for
stockholder action taken without a meeting and to increase the Company's
authorized capital stock received fewer than the number of votes required for
their approval, and were not adopted.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description
------- -----------
3 Registrant's Bylaws, as amended (included as Exhibit
4.2 to the Registrant's registration statement on Form S-8
filed July 21, 1997 (registration no. 31717) and
incorporated herein by reference).
10.1* Amendment No. 1 to 1995 Employment Agreement by and between
CytRx Corporation and Jack J. Luchese
10.2* Change in Control Employment Agreement dated April 16, 1997
by and between CytRx Corporation and Jack J. Luchese
10.3* CytRx Corporation 1994 Stock Option Plan Amended and
Restated as of April 16, 1997
11 Statement re: computation of net loss per share
27 Financial Data Schedule (for SEC use only)
* Indicates a management contract or compensating plan or arrangement.
(b) Reports on Form 8-K
On April 17, 1997, the Registrant filed a Current Report on Form 8-K
reporting the adoption of a Shareholder Protection Rights Plan by its
Board of Directors, effective April 16, 1997.
On June 3,1997, the Registrant filed a Current Report on Form 8-K
reporting the merger of its wholly-owned subsidiary, Vaxcel, Inc.,
with Zynaxis, Inc. on May 21, 1997. On July 21, 1997 the Registrant
file Amendment No. 1 to the Form 8-K filed on June 3, 1997 in order to
provide the historical financial statements of Zynaxis, Inc. required
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under Rule 3-05 of Regulation S-X and the pro forma financial
information required under Article 11 of Regulation S-X.
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: August 14, 1997 By: /s/ Mark W. Reynolds
--------------- ------------------------------
Mark W. Reynolds
Chief Financial Officer
(Chief Accounting Officer
and a duly authorized officer)
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