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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 March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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COMMISSION FILE NUMBER 0-15327
CYTRX CORPORATION
(Exact name of Registrant as specified in its charter)
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<CAPTION>
DELAWARE 58-1642740
<S> <C>
(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)
</TABLE>
Registrant's telephone number, including area code: (770) 368-9500
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
Number of shares of CytRx Corporation Common Stock, $.001 par value, issued and
outstanding as of May 12, 2000: 9,580,050.
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CYTRX CORPORATION
Form 10-Q
Table of Contents
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Page
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PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of
March 31, 2000 (unaudited) and December 31, 1999 3
Condensed Consolidated Statements of Operations (unaudited) for the
Three Month Periods Ended March 31, 2000 and 1999 4
Condensed Consolidated Statements of Cash Flows (unaudited)
for the Three Month Periods Ended March 31, 2000 and 1999 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 11
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2
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Part I - FINANCIAL INFORMATION
Item 1. - Financial Statements
CYTRX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
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March 31, December 31,
2000 1999
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ASSETS (Unaudited)
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Current assets:
Cash and cash equivalents $ 3,219,486 $ 3,031,893
Accounts receivable 390,951 174,292
Inventories 5,142 6,480
Other current assets 130,813 202,610
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Total current assets 3,746,392 3,415,275
Property and equipment, net 2,616,358 2,641,810
Other assets 60,978 70,978
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Total assets $ 6,423,728 $ 6,128,063
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 629,850 $ 629,738
Accrued liabilities 1,392,993 2,121,999
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Total current liabilities 2,022,843 2,751,737
Long-term debt -- 650,000
Other long-term liabilities -- 1,693,638
Commitments
Stockholders' equity:
Preferred Stock, $.01 par value, 1,000 shares authorized,
including 1,000 shares of Series A Junior Participating Preferred
Stock; no shares issued and outstanding -- --
Common stock, $.001 par value, 18,750,000 shares authorized;
10,213,866 and 8,373,853 shares issued at March 31, 2000
and December 31, 1999, respectively 10,214 8,374
Additional paid-in capital 72,072,318 67,805,871
Treasury stock, at cost (633,816 shares held at March 31, 2000
and December 31, 1999) (2,279,238) (2,279,238)
Accumulated deficit (65,402,409) (64,502,319)
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Total stockholders' equity 4,400,885 1,032,688
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Total liabilities and stockholders' equity $ 6,423,728 $ 6,128,063
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See accompanying notes.
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CYTRX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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<CAPTION>
Three Month Period Ended March 31,
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2000 1999
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Revenues:
Net sales $ 164,473 $ 202,040
Interest income 30,889 176,109
Grant income 73,211 27,461
Other 146,314 49,769
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414,887 455,379
Expenses:
Cost of sales 55,493 80,677
Research and development 674,574 2,358,061
Selling, general and administrative 584,910 1,200,873
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1,314,977 3,639,611
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Loss from continuing operations (900,090) (3,184,232)
Loss from discontinued operations -- (95,592)
Minority interest in discontinued operations -- (3,897)
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Net loss $ (900,090) $ (3,275,927)
============ ============
Basic and diluted loss per common share:
Continuing operations $ (0.11) $ (0.42)
Discontinued operations -- (0.01)
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Net loss $ (0.11) $ (0.43)
============ ============
Basic and diluted weighted average shares outstanding 8,070,164 7,623,394
</TABLE>
See accompanying notes.
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CYTRX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Three Month Period Ended March 31,
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2000 1999
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Cash flows from operating activities:
Net loss $ (900,090) $ (3,275,927)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 40,500 29,760
Stock option expense 156,075 726,621
Minority interest in net loss of subsidiary -- (3,897)
Net change in assets and liabilities (2,556,056) (214,498)
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Total adjustments (2,359,481) 537,986
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Net cash used by operating activities (3,259,571) (2,737,941)
Cash flows from investing activities:
Decrease in short-term investments -- 6,417,066
Capital expenditures, net (15,048) (182,761)
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Net cash (used) provided by investing activities (15,048) 6,234,305
Cash flows from financing activities:
Net proceeds from issuance of common stock 4,112,212 18,659
Retirement of debt (650,000) --
Purchase of treasury stock -- (9,000)
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Net cash provided by financing activities 3,462,212 9,659
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Net increase in cash and cash equivalents 187,593 3,506,023
Cash and cash equivalents at beginning of period 3,031,893 8,855,375
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Cash and cash equivalents at end of period $ 3,219,486 $ 12,361,398
============ ============
</TABLE>
See accompanying notes.
5
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CYTRX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
(Unaudited)
1. DESCRIPTION OF COMPANY AND BASIS OF PRESENTATION
CytRx Corporation ("CytRx" or "the Company") is a biopharmaceutical
company engaged in the development and commercialization of high-value human
therapeutics. The Company's current research and development focus is on
vascular-occlusive disorders. CytRx also has a research pipeline with
opportunities in the areas of acute respiratory disorders, infectious disease,
gene and drug delivery, vaccines, and animal feed additives.
The accompanying condensed consolidated financial statements at March
31, 2000 and for the three month periods ended March 31, 2000 and 1999 include
the accounts of CytRx together with those of its subsidiaries and are
unaudited, but include all adjustments, consisting of normal recurring entries,
which the Company's management believes to be necessary for a fair presentation
of the periods presented. Interim results are not necessarily indicative of
results for a full year. The financial statements should be read in conjunction
with the Company's audited financial statements in its Form 10-K for the year
ended December 31, 1999.
2. EXCHANGE OF COMMON STOCK FOR CANCELLATION OF ACCOUNTS PAYABLE, ACCRUED
EXPENSES AND DEBT
During the first quarter of 2000, the Company reached agreements with
certain of its trade creditors whereby an aggregate of $1,894,000 of trade
payables was cancelled in exchange for issuance of approximately 758,000 shares
of CytRx Common Stock. Of this amount, $1,694,000 existed at December 31, 1999,
and was accordingly classified as long-term liabilities on the Balance Sheet at
that date. The Company also cancelled $650,000 of long-term debt in exchange
for a cash payment of $200,000 and the issuance of 180,000 shares of CytRx
Common Stock.
3. PRIVATE PLACEMENT OF COMMON STOCK
In March 2000, the Company entered into a Stock Purchase Agreement
with certain investors (the "Investors") whereby the Investors agreed to
purchase 800,000 shares of the Company's Common Stock for an aggregate purchase
price of $1.8 million and the issuance of warrants to purchase an additional
330,891 shares at $2.25 per share, expiring March 31, 2003. The Investors were
granted registration rights for the shares issued to them and the shares
underlying the warrants. In addition, the Investors will, upon effective
registration of the shares, purchase an additional 286,000 shares at $2.25 per
share and simultaneously receive an
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additional three-year warrant to purchase 143,000 shares at $2.25 per share. In
lieu of these additional shares and warrants, the Investors have the option to
purchase 429,000 shares at a price equal to 75% of a trailing average market
price of the Company's Common Stock, as defined in the Stock Purchase
Agreement.
4. EQUITY LINE OF CREDIT
In April 2000, the Company entered into a Private Equity Line of
Credit Agreement (the ELC Agreement") with Majorlink Holdings Limited
("Majorlink"), pursuant to which the Company has the right to put shares of
Common Stock to Majorlink from time to time during the "commitment period" to
raise up to $5,000,000, subject to certain conditions and restrictions. The
"commitment period" begins on the effective date of a registration statement
filed by the Company to register the resale by Majorlink of the shares of
Common Stock that Majorlink purchases under the ELC Agreement and ends on the
earliest of (1) the date thirty months from such date, (2) the date on which
Majorlink shall have purchased $5,000,000 of Common Stock under the ELC
Agreement and (3) the date either party terminates the ELC Agreement in
accordance with its terms.
Each time the Company desires to raise a specific amount of cash under
the ELC Agreement, the Company shall issue to Majorlink a number of shares of
Common Stock determined by (1) dividing the amount of cash desired to be raised
by the Company by (2) 90% of a trailing market average price of the Company's
Common Stock, as defined in the ELC Agreement.
In connection with the ELC Agreement, the Company issued Majorlink a
warrant to purchase up to 200,000 shares of Common Stock at a per share
exercise price of $3.438. The warrant is exercisable for a period of three
years.
5. SEGMENT REPORTING
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Continuing Operations
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Total
Research Recruiting Product Continuing Discontinued
(in thousands) Products Services Development Operations Operations
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Three Months Ended March 31, 2000:
Sales to external customers $ 64 $ 100 $ -- $ 164 $ --
Intersegment sales -- -- -- -- --
Segment profit (loss) 40 43 (983) (900) --
Total assets -- -- 6,424 6,424 --
Three Months Ended March 31, 1999:
Sales to external customers 136 66 -- 202 --
Intersegment sales -- -- -- -- --
Segment profit (loss) 83 (1) (3,266) (3,184) (92)
Total assets -- -- 13,164 13,164 805
</TABLE>
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Item 2. -- Management's Discussion and Analysis of Financial Condition
And Results of Operations
Liquidity and Capital Resources
At March 31, 2000 the Company had cash and cash equivalents of $3.2
million and net assets of $4.4 million, compared to $3.0 million and $1.0
million, respectively, at December 31, 1999. Working capital totaled $1.7
million at March 31, 2000, compared to $0.7 million at December 31, 1999.
During the first quarter of 2000, the Company took steps to improve
its financial condition, including (i) agreements with certain trade creditors
whereby an aggregate of $2.3 million of indebtedness was cancelled in exchange
for issuance of approximately 938,000 shares of CytRx Common Stock (see Note 2
to Financial Statements), and (ii) a Stock Purchase Agreement with certain
investors (the "Investors") whereby the Investors agreed to purchase 800,000
shares of the Company's Common Stock for an aggregate purchase price of $1.8
million and the issuance of certain warrants (see Note 3 to Financial
Statements). The Company also terminated the services of twelve of its
employees as part of its efforts to conserve its cash resources and has further
reduced its operations by suspending its clinical development program for
FLOCOR.
In April 2000, the Company entered into a Private Equity Line of
Credit Agreement (the "ELC Agreement") pursuant to which the Company has the
right to put shares of its Common Stock to the ELC Investor from time to time
to raise up to $5,000,000, subject to certain conditions and restrictions (see
Note 4 to Financial Statements).
The Company believes that the proceeds of the transactions completed
during the first quarter will allow the Company to operate throughout the
remainder of 2000, but that additional funds will be needed to significantly
advance any of the Company's technologies under development, some of which may
be provided by the ELC Agreement. The ongoing ability of the Company to operate
as a going concern with the current portfolio of technologies under development
will be determined by the results of technology licensing efforts and/or the
actual proceeds of any fund-raising activities, which are subject to market
conditions and the Company's ability to identify parties that are willing and
able to enter into such arrangements on terms that are satisfactory to the
Company. There is no assurance that such funding will be available for the
Company to finance its operations on acceptable terms, if at all. Insufficient
funding may require the Company to delay, reduce or eliminate some or all of
its research and development activities, planned clinical trials and
administrative programs.
The above statements regarding the Company's plans and expectations
for future financing are forward-looking statements that are subject to a
number of risks and uncertainties. The Company's ability to obtain future
financings through joint ventures, product licensing arrangements, equity
financings or otherwise is subject to market conditions and the Company's
ability to identify parties that are willing and able to enter into such
arrangements on terms that are satisfactory to the Company. There can be no
assurance that the Company will be able to
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obtain future financing from these sources. Additionally, depending upon the
outcome of the Company's fund raising efforts via its subsidiaries discussed
above, the accompanying financial information may not necessarily be indicative
of future operating results or future financial condition.
Results of Operations
The Company recorded a net loss of $900,000 for the three month period
ended March 31, 2000 as compared to $3,276,000 for 1999. Loss from continuing
operations was $900,000 in 2000 as compared to $3,184,000 in 1999. The overall
reduction in net loss is due primarily to changes in the Company's research and
development expenditures, discussed below.
Net sales, which consist primarily of sales of TiterMax research
adjuvant and service revenues from Spectrum Recruitment Research, were $164,000
and $202,000 during the three months ended March 31, 2000 and 1999,
respectively. Cost of product sales and service revenues was $55,000 in 2000
versus $81,000 in 1999.
Interest income was $31,000 and $176,000 during the three months ended
March 31, 2000 and 1999, respectively. The variance between years generally
corresponds to fluctuating cash and investment balances.
Grant income was $73,000 in 2000 versus $27,000 in 1999. The increase
relates to a new SBIR grant issued to CytRx in September 1999. Costs related to
grant income are included in research and development expense and generally
approximate the amount of revenue recognized.
Other income was $146,000 for the three month period ended March 31,
2000 and includes $125,000 in fees paid by a third party pursuant to an
Evaluation Agreement for the Company's gene delivery technology. Other income
for 2000 also includes $21,000 in sublease revenues. Other income for the three
month period of 1999 was $50,000, consisting of $28,000 in sublease revenues
and $22,000 in administrative service fees charged to a former subsidiary.
Research and development expenditures were $675,000 and $2,358,000
during the three months ended March 31, 2000 and 1999, respectively. Research
and development expenditures are higher in prior periods due to the Company's
clinical development activities for FLOCOR. A Phase III clinical trial of
FLOCOR for treatment of acute sickle cell crisis was initiated in March of 1998
and completed in December 1999. Subsequent to the completion of the Phase III
trial in December 1999, the Company has suspended all clinical development
activities for FLOCOR pending further analysis of the Phase III results. The
Company's development activities during the first quarter of 2000 consisted
primarily of analysis of the Phase III results and consultation with the
Company's scientific and regulatory advisors.
Selling, general and administrative expenditures were $585,000 and
$1,201,000 during the three months ended March 31, 2000 and 1999, respectively.
During each of the periods, certain vesting criteria of employee options and
warrants were achieved, resulting in aggregate non-cash charges to compensation
expense and consulting expense of $156,000 and $727,000,
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during 2000 and 1999, respectively. Excluding these charges, selling, general
and administrative expenditures during the first quarter of 2000 decreased by
$45,000 from the same period in 1999.
Net loss from discontinued operations, net of minority interest, was
$-0- and $(92,000) during the three months ended March 31, 2000 and 1999,
respectively, and relates to the operations of Vaxcel, Inc. CytRx's equity
interest in Vaxcel was sold in September 1999.
Item 3. -- Quantitative and Qualitative Disclosures About Market Risk
There have been no changes in the Company's assessment of its market
risk from that disclosed in its Form 10-K for the year ended December 31, 1999.
10
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PART II -- OTHER INFORMATION
Item 6. -- Exhibits and Reports on Form 8-K
(a) Exhibits
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Exhibit
Number Description
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27.1 Financial Data Schedule (for SEC use only)
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(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CYTRX CORPORATION
(Registrant)
Date: May 15, 2000 By: /s/ Mark W. Reynolds
--------------------------------
Mark W. Reynolds
Vice President, Finance
(Chief Accounting Officer
and a duly authorized officer)
11
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 3,219,486
<SECURITIES> 0
<RECEIVABLES> 390,951
<ALLOWANCES> 0
<INVENTORY> 5,142
<CURRENT-ASSETS> 3,746,392
<PP&E> 3,184,380
<DEPRECIATION> 568,022
<TOTAL-ASSETS> 6,423,728
<CURRENT-LIABILITIES> 2,022,843
<BONDS> 0
0
0
<COMMON> 10,214
<OTHER-SE> 4,390,671
<TOTAL-LIABILITY-AND-EQUITY> 6,423,728
<SALES> 164,473
<TOTAL-REVENUES> 414,887
<CGS> 55,493
<TOTAL-COSTS> 55,493
<OTHER-EXPENSES> 1,259,484
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (900,090)
<INCOME-TAX> 0
<INCOME-CONTINUING> (900,090)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (900,090)
<EPS-BASIC> (0.11)
<EPS-DILUTED> (0.11)
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