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 September 30, 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)
(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, 1996: 7,587,201.
<PAGE>
CYTRX CORPORATION
Form 10-Q
Contents
Page
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements:
Condensed Consolidated Balance Sheets as of September 30, 1996
(unaudited) and December 31, 1995 3
Condensed Consolidated Statements of Operations (unaudited)
for the Three Month and Nine Month Periods
Ended September 30, 1996 and 1995 4
Condensed Consolidated Statements of Cash Flows (unaudited)
for the Nine Month Periods Ended September 30, 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
<PAGE>
Part I - FINANCIAL INFORMATION
Item 1. - Financial Statements
CYTRX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 1996 December 31, 1995
------------- -----------------
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 962,329 $16,645,570
Short-term investments 18,570,510 8,556,235
Receivables 679,100 91,077
Inventories (Note 2) 6,450 6,318
Other current assets 447,898 267,420
---------- -----------
Total current assets 20,666,287 25,566,620
Property and equipment, net 5,069,448 5,137,764
Other assets 259,405 255,599
---------- ----------
Total assets $25,995,140 $30,959,983
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 222,371 $ 266,125
Accrued liabilities 663,838 923,373
---------- ----------
Total current liabilities 886,209 1,189,498
Commitments
Stockholders' equity:
Common stock, $.001 par value, 18,750,000
shares authorized; 7,938,051 and 7,915,308
shares issued at September 30, 1996 and
December 31, 1995, respectively 7,938 7,915
Additional paid-in capital 62,622,803 62,514,691
Treasury Stock (350,850 and 58,750 shares
at September 30, 1996 and December 31, 1995,
respectively) (1,434,550) (242,343)
Accumulated deficit (36,087,260) (32,509,778)
---------- ----------
Total stockholders' equity 25,108,931 29,770,485
---------- ----------
Total liabilities and
stockholders' equity $25,995,140 $30,959,983
========== ==========
See accompanying notes.
3
<PAGE>
<TABLE>
CYTRX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Month Period Ended Nine Month Period Ended
September 30, September 30,
-------------------------- --------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Net sales $ 787,389 $ 102,154 $ 1,604,808 $ 353,985
License fees - 25,000 50,000 25,000
Investment income, net (Note 4) 279,585 473,528 900,152 1,424,849
Collaborative, grant and
other revenue 51,420 16,507 84,872 52,782
--------- --------- --------- ---------
1,118,394 617,189 2,639,832 1,856,616
Expenses:
Cost of sales 699,464 9,931 1,179,816 31,602
Research and development 505,669 1,648,760 2,046,245 5,223,093
Selling, general and administrative 1,033,425 910,706 2,991,253 2,774,145
Realized loss on short-term
investments, net - - - 1,102,621
Write-off of patent costs - - - 1,395,476
--------- --------- --------- ---------
2,238,558 2,569,397 6,217,314 10,526,937
--------- --------- --------- ---------
Net loss $(1,120,164) $(1,952,208) $(3,577,482) $(8,670,321)
========= ========= ========= =========
Net loss per share $ (0.15) $ (0.25) $ (0.46) $ (1.10)
(see Exhibit 11) ========= ========= ========= =========
</TABLE>
See accompanying notes.
4
<PAGE>
CYTRX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Month Period Ended September 30,
---------------------------------
1996 1995
---------- -----------
Cash flows from operating activities:
Net loss $(3,577,482) $(8,670,321)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 378,546 441,199
Write-off of patent costs - 1,395,476
Net change in assets and liabilities (1,075,728) 623,767
---------- ----------
Total adjustments (697,182) 2,460,442
---------- ----------
Net cash used by operating activities (4,274,664) (6,209,879)
Cash flows from investing activities:
(Increase) decrease in
short-term investments (10,014,275) 26,861,659
Capital expenditures, net (310,230) (116,530)
---------- ----------
Net cash provided (used) by
investing activities (10,324,505) 26,745,129
Cash flows from financing activities:
Net proceeds from issuance of common stock 108,135 100,547
Purchase of treasury stock (1,192,207) -
---------- ----------
Net cash provided by financing activities (1,084,072) 100,547
---------- ----------
Net increase (decrease) in cash and
cash equivalents (15,683,241) 20,635,797
Cash and cash equivalents at beginning of period 16,645,570 3,395,974
---------- ----------
Cash and cash equivalents at end of period $ 962,329 $24,031,771
========== ==========
See accompanying notes.
5
<PAGE>
CYTRX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996
(Unaudited)
1. Description of Company and Basis of Presentation
CytRx Corporation and its subsidiaries are primarily engaged in the development
of pharmaceutical products. 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 products to enhance food animal growth. Proceutics provides high
quality preclinical development services to the pharmaceutical industry.
The accompanying condensed consolidated financial statements at September 30,
1996 and for the three and nine month periods ended September 30, 1996 and 1995
include the accounts of CytRx and its wholly-owned 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, 1995.
2. Inventories
Inventories at September 30, 1996 and December 31, 1995 are comprised of
the following:
September 30, 1996 December 31, 1995
------------------ -----------------
Finished goods $ 4,744 $ 4,068
Raw materials 1,706 2,250
------ ------
$ 6,450 $ 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
<PAGE>
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 Agreements
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 the United States. 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.
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.
7
<PAGE>
Item 2. -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Financial Condition and Liquidity
At September 30, 1996 the Company had cash and short-term investments of $19.5
million and net assets of $25.1 million, compared to $25.2 million and $29.8
million, respectively, at December 31, 1995. Working capital totaled $19.8
million at September 30, 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. Although Proceutics continues to provide
services to its affiliates, revenues derived from third parties 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. Marketing and selling activities are not expected to
begin until January 1997, unless Ivy receives FDA approval in 1996 to market
certain additional products currently pending agency review. 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.
Management expects that revenue generated from these arrangements will support
Vetlife's other 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, the Company's research adjuvant,
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 and nine month periods ended September 30,
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
<PAGE>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
(in thousands) 1996 1995 1996 1995
---- ---- ---- ----
CytRx $(420) $(1,566) $(1,475) $(6,955)
Proceutics (166) - (725) -
Vaxcel (264) (246) (777) (1,138)
Vetlife (270) (140) (600) (577)
----- ----- ----- -----
Consolidated Net Loss $(1,120) $(1,952) $(3,577) $(8,670)
===== ===== ===== =====
Net sales were $787,000 during the three months ended September 30, 1996
compared to $102,000 in 1995 and $1,605,000 during the nine months ended
September 30, 1996 compared to $354,000 in 1995. Cost of sales during the nine
month period ended September 30, 1996 were $1,180,000 (74% of net sales) as
compared to $32,000 (9% of net sales) in 1995. These increases from 1995 are
primarily attributable to the activities of Proceutics, which commenced formal
operations in January. Net sales during 1995 consist solely of sales of
Titermax.
Investment income was $280,000 and $900,000 during the three months and nine
months ended September 30, 1996, as compared to $474,000 and $1,425,000 for the
same periods in 1995. The decrease from 1995 is primarily due to lower cash
and invesment balances. 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 of
1995, CytRx reduced its unrealized losses by $1.4 million, recording a non-cash
charge of $1.1 million during the nine months ended September 30, 1995 which is
shown as a separate line item on the Condensed Consolidated Statements of
Operations.
Research and development expenditures in 1996 decreased by $1,143,000, or 69%,
from 1995 for the three months ended September 30, and by $3,177,000, or 61%,
for the nine months ended September 30. 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.
Selling, general and administrative expenses in 1996 increased by $123,000, or
13%, from 1995 for the three months ended September 30, and by $217,000 or 8%,
for the nine months ended September 30. This increase is due to higher
administrative expenses associated with Proceutics and Vetlife's Cattle
Marketing Group, partially offset by cost reduction measures taken by CytRx.
9
<PAGE>
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
<PAGE>
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 4, 1996 By:/s/ Mark W. Reynolds
Mark W. Reynolds
Controller
(Chief Financial Officer)
11
Exhibit 11
<TABLE>
CYTRX CORPORATION
COMPUTATION OF NET LOSS PER SHARE
COMPUTATION OF LOSS PER SHARE - PRIMARY
<CAPTION>
Three Month Period Ended Nine Month Period Ended
September 30, September 30,
------------------------- ------------------------
1996 1995 1996 1995
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net loss $(1,120,164) $(1,952,208) $(3,577,482) $(8,670,321)
--------- --------- --------- ---------
Average number of common shares outstanding 7,705,829 7,907,624 7,809,622 7,898,439
Common shares issuable assuming exercise of
stock options and warrants (1) - - - -
--------- --------- --------- ---------
Total 7,705,829 7,907,624 7,809,622 7,898,439
--------- --------- --------- ---------
Net loss per share $ (0.15) $ (0.25) $ (0.46) $ (1.10)
========= ========= ========= =========
COMPUTATION OF LOSS PER SHARE - FULLY DILUTED
Net loss $(1,120,164) $(1,952,208) $(3,577,482) $(8,670,321)
--------- --------- --------- ---------
Average number of common shares outstanding 7,705,829 7,907,624 7,809,622 7,898,439
Common shares issuable assuming exercise of
stock options and warrants (1) - - - -
--------- --------- --------- ---------
Total 7,705,829 7,907,624 7,809,622 7,898,439
--------- --------- --------- ---------
Net loss per share $ (0.15) $ (0.25) $ (0.46) $ (1.10)
========= ========= ========= =========
</TABLE>
(1) Stock options and warrants outstanding are excluded from the computation of
net loss per share since their effect would be anti-dilutive.
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Form 10-Q
for the period ended 9/30/96 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 962329
<SECURITIES> 18570510
<RECEIVABLES> 679100
<ALLOWANCES> 0
<INVENTORY> 6450
<CURRENT-ASSETS> 20666287
<PP&E> 6839281
<DEPRECIATION> 1769833
<TOTAL-ASSETS> 25995140
<CURRENT-LIABILITIES> 886209
<BONDS> 0
0
0
<COMMON> 7938
<OTHER-SE> 25100993
<TOTAL-LIABILITY-AND-EQUITY> 25995140
<SALES> 1604808
<TOTAL-REVENUES> 2639832
<CGS> 1179816
<TOTAL-COSTS> 1179816
<OTHER-EXPENSES> 5037498
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3577482)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3577482)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3577482)
<EPS-PRIMARY> (.46)
<EPS-DILUTED> (.46)
</TABLE>
