<PAGE> 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 September 30, 1997
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)
<TABLE>
<CAPTION>
<S> <C>
Delaware 58-1642740
- --------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
</TABLE>
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 November 6, 1997: 7,431,287.
<PAGE> 2
CYTRX CORPORATION
Form 10-Q
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements:
Condensed Consolidated Balance Sheets as of September 30, 1997 (unaudited)
and December 31, 1996 3
Condensed Consolidated Statements of Operations (unaudited) for the
Three Month and Nine Month Periods Ended September 30, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows (unaudited) for the
Nine Month Periods Ended September 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 9
PART II. OTHER INFORMATION
Item 2 Changes in Securities and Use of Proceeds 12
Item 6 Exhibits and Reports on Form 8-K 13
SIGNATURES 13
</TABLE>
2
<PAGE> 3
Part I - FINANCIAL INFORMATION
Item 1. - Financial Statements
CYTRX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
------------------ -----------------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6,195,526 $ 1,604,003
Short-term investments 5,906,341 10,273,108
Accounts receivable, net 2,687,381 643,079
Inventories 10,293 9,508
Deposits on inventory pursuant to purchase commitments 498,156 -
Other current assets 166,149 532,399
------------ ------------
Total current assets 15,463,846 13,062,097
Property and equipment, net 4,799,165 5,012,809
Other assets:
Long-term investments - 5,096,353
Notes receivable 632,786 975,000
Acquired developed technology, net 3,514,356 -
Other 64,485 153,063
------------ ------------
Total other assets 4,211,627 6,224,416
------------ ------------
Total assets $ 24,474,638 $ 24,299,322
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,000,474 $ 586,920
Accrued liabilities 2,275,113 1,123,476
Unearned revenue 124,933 251,192
------------ ------------
Total current liabilities 3,400,520 1,961,588
Minority interest in Vaxcel, Inc. 668,828 -
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;
7,977,742 and 7,945,203 shares issued at September 30, 1997
and December 31, 1996, respectively 7,978 7,945
Additional paid-in capital 65,132,065 62,653,015
Treasury stock, at cost (555,154 and 507,750 shares held at
September 30, 1997 and December 31, 1996, respectively) (2,198,533) (2,021,669)
Accumulated deficit (42,536,220) (38,301,557)
------------ ------------
Total stockholders' equity 20,405,290 22,337,734
------------ ------------
Total liabilities and stockholders' equity $ 24,474,638 $ 24,299,322
============ ============
</TABLE>
See accompanying notes.
3
<PAGE> 4
CYTRX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Month Period Ended September 30, Nine Month Period Ended September 30,
-------------------------------------- -------------------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Net sales $ 4,665,551 $ 787,389 $ 13,020,411 $ 1,604,808
Investment income, net 177,064 279,585 641,623 900,152
License fees - - - 50,000
Collaborative and grant income 198,950 - 304,939 -
Other 21,416 51,420 74,239 84,872
----------- ------------ ------------ -----------
5,062,981 1,118,394 14,041,212 2,639,832
Expenses:
Cost of sales 2,343,690 699,464 7,102,302 1,179,816
Research and development 1,312,069 505,669 2,999,159 2,046,245
Selling, general and administrative 2,773,090 1,033,425 7,415,538 2,991,253
Acquired research and development - - 951,017 -
----------- ------------ ------------ -----------
6,428,849 2,238,558 18,468,016 6,217,314
----------- ------------ ------------ -----------
Net loss before minority interest (1,365,868) (1,120,164) (4,426,804) (3,577,482)
Minority interest (66,857) - (192,141) -
----------- ------------ ------------ -----------
Net loss $(1,299,011) $ (1,120,164) $ (4,234,663) $(3,577,482)
=========== ============ ============ ===========
Net loss per share (see Exhibit 11) $ (0.18) $ (0.15) $ (0.57) $ (0.46)
=========== ============ ============ ===========
</TABLE>
See accompanying notes.
4
<PAGE> 5
CYTRX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Month Period Ended September 30,
1997 1996
------------ -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($ 4,234,663) ($ 3,577,482)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 522,454 378,546
Charge for acquired research and development 951,017 -
Minority interest in net loss (192,141) -
Net change in assets and liabilities (429,522) (1,075,728)
------------ ------------
Total adjustments 851,808 (697,182)
------------ ------------
Net cash used by operating activities (3,382,855) (4,274,664)
Cash flows from investing activities:
(Increase) decrease in short-term investments 4,366,767 (10,014,275)
Decrease in long-term investments 5,096,353 -
Capital expenditures, net (188,795) (310,230)
Net cash paid for acquisition (1,239,355) -
------------ ------------
Net cash provided (used) by investing activities 8,034,970 (10,324,505)
Cash flows from financing activities:
Net proceeds from issuance of common stock 116,272 108,135
Purchase of treasury stock (176,864) (1,192,207)
------------ ------------
Net cash used by financing activities (60,592) (1,084,072)
------------ ------------
Net increase (decrease) in cash and cash equivalents 4,591,523 (15,683,241)
Cash and cash equivalents at beginning of period 1,604,003 16,645,570
------------ ------------
Cash and cash equivalents at end of period $ 6,195,526 $ 962,329
============ ============
</TABLE>
See accompanying notes.
5
<PAGE> 6
CYTRX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 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(TM) (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
September 30, 1997 and for the three month and nine month periods ended
September 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 September 30, 1997 and December 31, 1996 are comprised
of the following:
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
------------------ -----------------
<S> <C> <C>
Finished goods $ 7,258 $ 6,144
Raw materials 3,035 3,364
-------- -------
$ 10,293 $ 9,508
======== =======
</TABLE>
6
<PAGE> 7
3. 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.
4. NEW ACCOUNTING STANDARDS
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 nine month periods ended September 30, 1997 and 1996.
In June 1997, the Financial Accounting Standards Board issued Statement
No. 130, Reporting Comprehensive Income, which is required to be adopted
December 31, 1997. The Statement establishes new rules for the reporting and
display of comprehensive income and its components in a full set of general
purpose financial statements. The adoption of Statement No. 130 will not impact
the Company's financial statements.
In June 1997, the Financial Accounting Standards Board issued Statement
No. 131, Disclosures about Segments of an Enterprise and Related Information,
which is required to be adopted December 31, 1997. The adoption of Statement No.
131 will not impact any disclosures made for the three month or nine month
periods ended September 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
7
<PAGE> 8
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 Developed 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 nine months ended September 30, 1997 and 1996, as if the acquisition of
Zynaxis had occurred on January 1 of each period.
<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Revenues $ 14,869,000 $ 3,648,000
Net loss before minority interest (3,798,000) (6,220,000)
Minority interest (196,000) (427,000)
Net loss $ (3,602,000) $(5,793,000)
Net loss per share $ (.49) $ (.74)
</TABLE>
6. SUBSEQUENT EVENT
On October 22, 1997, the Company privately placed (the "Note Sale")
with certain investors (the "Investors") $2,000,000 of convertible notes (the
"Debentures"). The Debentures may be converted into CytRx Common Stock on and
after December 21, 1997 at a price of the lesser of 85% of the average closing
bid price for the 10 days preceding the conversion, or $5.68 per share (the
"Conversion Price"). The debentures were sold at par and bear interest at a rate
of 6% per annum. Also in connection with the Note Sale, the Investors were
issued two year warrants to purchase 40,000 shares of CytRx Common Stock at an
exercise price of $5.68. The terms of the Debentures grant CytRx the right to
redeem the Debentures at 110% of par if the Conversion Price falls below $4.
In addition, CytRx has the option, subject to certain conditions, to
sell to the Investors an additional $2,000,000 in value of the Debentures. Also
in connection with the Note Sale, CytRx agreed to file a registration statement
in connection with the shares of CytRx Common Stock into which the Debentures
are convertible (the "Securities"), and to keep such registration statement
effective until October 22, 1999 (or such earlier date when the holders of the
Securities are able to sell all such securities immediately without restriction
pursuant to Rule 144(k) under the Securities Act of 1933 or any successor rule
thereunder or otherwise).
8
<PAGE> 9
Item 2. -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Financial Condition and Liquidity
At September 30, 1997 the Company had cash and investments of $12.1
million and net assets of $20.4 million, compared to $17.0 million and $22.3
million, respectively, at December 31, 1996. Working capital totaled $12.1
million at September 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 September 30, 1997.
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 the period prior
to closing of the merger. Subsequent to the merger, CytRx owns approximately
87.5% of Vaxcel, with the remaining 12.5% having been issued to the former
Zynaxis shareholders.
During 1996 and 1997 the Company received federal government funding
for certain research and development activities via several Small Business
Innovative Research (SBIR) grants. Most recently, the Company received a grant
from the U.S. Food and Drug Administration Division of Orphan Drug Development
to support CytRx's upcoming study of FLOCOR(TM). This grant will provide
approximately $400,000 over two years to help defray the overall costs of the
study. The Company intends to 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.
During October 1997, CytRx sold $2.0 million of convertible notes
through a private placement, realizing approximately $1.8 million in net
proceeds. (See Note 6 to Financial Statements.) CytRx also has the option to
sell an additional $2.0 million to the same investors under certain conditions.
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 all, or a portion, of its
ownership in a subsidiary.
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
9
<PAGE> 10
are satisfactory to the Company. There can be no assurance that the Company will
be able to obtain future financing from these sources.
At December 31, 1996 the Company had 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.
Management believes that cash and investments on hand, combined with
interest income and operating revenues, are sufficient to satisfy the Company's
current liquidity and working capital needs, but it is likely 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.
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, 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.
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
(in thousands) 1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
CytRx $(1,502) $ (515) $(2,998) $(1,475)
Proceutics 25 (142) (280) (722)
Vaxcel (535) (258) (2,197) (770)
Vetlife 449 (266) 1029 (596)
Consolidation Adjustments 264 61 211 (14)
------- ------- ------- -------
Consolidated $(1,299) $(1,120) $(4,235) $(3,577)
======= ======= ======= =======
</TABLE>
Consolidated net sales for the three month and nine month periods ended
September 30, 1997 were $4,666,000 and $13,020,000, respectively, as compared to
$787,000 and $1,605,000,
10
<PAGE> 11
respectively, in 1996. The increase in net sales was due primarily to the
initiation of sales and marketing activities by Vetlife during the fourth
quarter of 1996. The significant components of net sales are shown below.
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
(in thousands) 1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Product Sales (VetLife) $ 3,852 $ -- $10,935 $ --
Product Sales (CytRx) 129 174 363 402
Services (Proceutics) * 560 508 1,380 943
Services (CytRx) 125 105 342 260
------- ------- ------- -------
Consolidated $ 4,666 $ 787 $13,020 $ 1,605
======= ======= ======= =======
</TABLE>
* excludes affiliate sales
Cost of sales were $2,344,000 (50% of net sales) during the third
quarter of 1997 as compared to $699,000 (89% of net sales) in 1996. For the nine
month period ended September 30 cost of sales were $7,102,000 (55% of net sales)
in 1997 versus $1,180,000 (74% 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. Cost of sales as a
percentage of net sales fluctuates due to the changing mix of product sales and
service revenues.
Investment income was $177,000 and $642,000 during the three month and
nine month periods ended September 30, 1997 as compared to $280,000 and $900,000
for the same periods in 1996, corresponding to reductions in cash and investment
balances.
Research and development expenditures for the three month period ended
September 30, 1997 were $1,312,000 as compared to $506,000 in 1996. For the nine
month period research and development expenditures totalled $2,999,000 as
compared to $2,046,000 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 September 30, 1997 were $2,773,000 as compared to $1,033,000 in 1996. For
the nine month period selling, general and administrative expenses totalled
$7,416,000 as compared to $2,991,000 in 1996. This increase is primarily
attributable to the initiation of selling activities for VetLife.
11
<PAGE> 12
PART II -- OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
On October 22, 1997, the registrant placed two million dollars
($2,000,000) of convertible debentures (the "Initial Debentures") that are
convertible into shares of common stock of the registrant, $.001 par value
("Common Stock") and Common Stock purchase warrants to purchase up to 40,000
shares of Common Stock (the "Initial Warrants") with private investors (the
"Investors"). The aggregate offering price for the Initial Debentures and the
Initial Warrants was two million dollars ($2,000,000), and the net proceeds to
the registrant were approximately $1.8 million.
The Initial Debentures were sold at par and will bear interest at the
rate of 6% per annum. The maturity date of the Initial Debentures is October 22,
2001. The Initial Debentures are not convertible into shares of Common Stock
until December 20, 1997. Thereafter, the Investors have the option of converting
the Initial Debentures at the lesser of eighty-five percent of the average
closing price of the Common Stock for the ten trading days preceding such
conversion or $5.68 per share of Common Stock. If the conversion price is below
four dollars, the registrant has the right to redeem the Initial Debentures at
one hundred ten percent (110%) of par.
The Initial Warrants allow the Investors to purchase 40,000 shares of
Common Stock at a price of $5.68 per share. The expiration date of the Initial
Warrants is October 22, 1999.
Subject to certain conditions, the registrant has the option of selling
the Investors an additional two million dollars ($2,000,000) of similar
debentures (the "Additional Debentures") and similar warrants (the "Additional
Warrants") at any time between ninety (90) and two hundred seventy (270) days
after the effective date of a registrant statement to be filed by the registrant
under the Securities Act of 1933, as amended (the "Act") to register for resale
the shares of Common Stock that could be acquired by the Investors upon
conversion of the Initial Debentures or the Additional Debentures or upon
exercise of the Initial Warrants or the Additional Warrants (as well as the
shares of Common Stock received by Shipley Raidy Capital Partners as described
below). The conversion price and maturity date of the Additional Debentures and
the exercise price and expiration date of the Additional Warrants may differ
from the corresponding terms of the Initial Debentures and the Initial Warrants.
The registrant was advised by Shipley Raidy Capital Partners, L.P.
("Shipley") in the transaction, and Shipley received 3,000 shares of Common
Stock as compensation for its services plus a placement fee of 6.5%.
The private placement was exempt from registration under the Act,
pursuant to Rule 506 of Regulation D promulgated under the Act.
12
<PAGE> 13
The proceeds from the sale of the Initial Debentures and the Initial
Warrants will be used for general corporate purposes, including the funding of a
Phase III clinical trial for FLOCOR(TM) (CRL-5861).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
-------- ------------
<S> <C>
10 Amendment No. 2 to 1995 Employment Agreement between
CytRx Corporation and Jack J. Luchese*
11 Statement re: computation of net loss per share
27 Financial Data Schedule (for SEC use only)
</TABLE>
* Indicates a management contract or compensatory plan or arrangement.
(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: November 6, 1997 By: /s/ Mark W. Reynolds
---------------- --------------------------
Mark W. Reynolds
Chief Financial Officer
Chief Accounting Officer
and a duly authorized officer)
13
<PAGE> 1
EXHIBIT 10
AMENDMENT NO. 2
TO
1995 EMPLOYMENT AGREEMENT
BETWEEN
CYTRX CORPORATION
AND
JACK J. LUCHESE
This Amendment No. 2 ("Amendment") to Employment Agreement is made and
executed this 1st day of August, 1997, by and between CYTRX CORPORATION ("CytRx"
or the "Company"), a Delaware corporation having its principal place of business
at 154 Technology Parkway, Technology Park/Atlanta, Norcross, Georgia 30092, and
JACK J. LUCHESE ("Mr. Luchese") who currently resides at 3030 Castle Pines
Drive, Duluth, Georgia 30136.
WHEREAS, the Company and Mr. Luchese have heretofore entered into an
amended and restated Employment Agreement, dated as of March 7, 1995, as amended
on April 16, 1997 (as amended, the "1995 Agreement");
WHEREAS, the Compensation Committee of the Board of Directors of the
Company approved an extension of the 1995 Agreement to December 31, 1999;
WHEREAS, the Company and Mr. Luchese desire to modify the 1995
Agreement to extend the term thereof;
NOW, THEREFORE, in consideration of the mutual covenants and promises
made in this Amendment, the parties do hereby agree as follows:
1. Paragraph 2 of the 1995 Agreement be and hereby is deleted in its
entirety and the following is substituted therefor:
"2. Term and Renewal. The term of Mr. Luchese's employment
hereunder will be for a period commencing on January 1, 1995,
and continuing until December 31, 1998 (the "Expiration
Date"), unless Mr. Luchese's employment is terminated by
either party pursuant to Paragraph 7 of this Agreement."
2. Effect of Amendment. All provisions of the 1995 Agreement not modified
by the provisions of this Amendment shall remain in full force and effect.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
under seal on the day and year first above written.
/s/ Jack J. Luchese
---------------------
Jack J. Luchese
Attest: CYTRX CORPORATION:
/s/ William B. Fleck
- -------------------- -----------------------
Corporate Secretary By: William B. Fleck
(CORPORATE SEAL) Title: Vice President - Human Resources
- 2 -
<PAGE> 1
Exhibit 11
CYTRX CORPORATION
COMPUTATION OF NET LOSS PER SHARE
<TABLE>
<CAPTION>
COMPUTATION OF LOSS PER SHARE - PRIMARY
Three Month Period Ended September 30, Nine Month Period Ended September 30,
---------------------------------- -------------------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net loss $(1,299,011) $(1,120,164) $(4,234,663) $(3,577,482)
----------- ----------- ----------- -----------
Average number of common shares outstanding 7,416,979 7,705,829 7,422,488 7,809,622
Common shares issuable assuming exercise of
stock options and warrants(1) - - - -
----------- ----------- ----------- -----------
Total 7,416,979 7,705,829 7,422,488 7,809,622
----------- ----------- ----------- -----------
Net loss per share $ (0.18) $ (0.15) $ (0.57) $ (0.46)
=========== =========== =========== ===========
COMPUTATION OF LOSS PER SHARE - FULLY DILUTED
Net loss $(1,299,011) $(1,120,164) $(4,234,663) $(3,577,482)
----------- ----------- ----------- -----------
Average number of common shares outstanding 7,416,979 7,705,829 7,422,488 7,809,622
Common shares issuable assuming exercise of
stock options and warrants(1) - - - -
----------- ----------- ----------- -----------
Total 7,416,979 7,705,829 7,422,488 7,809,622
----------- ----------- ----------- -----------
Net loss per share $ (0.18) $ (0.15) $ (0.57) $ (0.46)
=========== =========== =========== ===========
</TABLE>
(1) Stock options and warrants outstanding are excluded from the
computation of net loss per share since their effect would be
antidilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CYTRX CORPORATION FOR THE NINE MONTHS ENDED AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-13-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 6,195,526
<SECURITIES> 5,906,341
<RECEIVABLES> 2,738,094
<ALLOWANCES> 50,713
<INVENTORY> 10,293
<CURRENT-ASSETS> 664,305
<PP&E> 7,282,267
<DEPRECIATION> 2,483,102
<TOTAL-ASSETS> 24,474,638
<CURRENT-LIABILITIES> 3,400,520
<BONDS> 0
0
0
<COMMON> 7,978
<OTHER-SE> 20,397,312
<TOTAL-LIABILITY-AND-EQUITY> 24,474,638
<SALES> 13,020,411
<TOTAL-REVENUES> 14,041,212
<CGS> 7,102,302
<TOTAL-COSTS> 7,102,302
<OTHER-EXPENSES> 11,365,714
<LOSS-PROVISION> 77,416
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4,234,663)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,234,663)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,234,663)
<EPS-PRIMARY> (0.57)
<EPS-DILUTED> 0
</TABLE>
