<PAGE>
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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, 2000
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 0-28386
CELL THERAPEUTICS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Washington 91-1533912
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
201 Elliott Avenue West, Suite 400, 98119
Seattle, Washington (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(206) 282-7100
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check [x] 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
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
CLASS OUTSTANDING AT JUNE 30, 2000
----- -----------------------------
Common Stock, no par value (including
associated Preferred Stock Purchase Rights).... 25,137,110
This report on Form 10-Q, including all exhibits, contains 15 pages.
The exhibit index is located on page 14.
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1
<PAGE>
CELL THERAPEUTICS, INC.
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2000
TABLE OF CONTENTS
PAGE
----
PART I FINANCIAL INFORMATION
ITEM 1: CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets -- June 30, 2000 (unaudited) and
December 31, 1999............................................... 3
Consolidated Statements of Operations (unaudited) -- Three and
six months ended June 30, 2000 and 1999......................... 4
Consolidated Statements of Cash Flows (unaudited) -- Six months
ended June 30, 2000 and 1999.................................... 5
Notes to 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................................ 12
SIGNATURES...................................................... 13
EXHIBIT INDEX................................................... 14
2
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PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CELL THERAPEUTICS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
----------------- -----------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 11,815,671 $ 5,674,386
Securities available-for-sale 29,902,862 18,205,630
Interest receivable 511,680 367,636
Prepaid expenses and other current assets 316,406 748,506
----------------- -----------------
Total current assets 42,546,619 24,996,158
Property and equipment 16,636,830 16,550,053
Accumulated depreciation (12,395,847) (11,514,370)
----------------- -----------------
Property and equipment, net 4,240,983 5,035,683
Acquisition related intangible assets, net 28,328,919 -
Other assets and deferred charges 2,565,941 816,050
----------------- -----------------
Total assets $ 77,682,462 $ 30,847,891
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 533,404 $ 1,224,994
Accrued expenses 5,974,644 4,940,626
Notes payable 487,500 -
Current portion of long-term obligations 1,196,410 1,125,211
----------------- -----------------
Total current liabilities 8,191,958 7,290,831
Long-term obligations, less current portion 12,237,433 2,653,111
Commitments
Shareholders' equity:
Preferred Stock, no par value:
Series A and B, 161,118.645 shares designated,
none issued or outstanding - -
Series D, designated, issued and outstanding shares - 2,425 and 10,000
at June 30, 2000 and December 31, 1999, respectively
liquidation preference - $2,425,000 2,748,764 11,384,029
Common Stock, no par value:
Authorized shares - 100,000,000
Issued and outstanding shares - 25,137,110 and 15,595,536
at June 30, 2000 and December 31, 1999, respectively 235,737,944 168,235,338
Notes receivable from officers (330,000) (330,000)
Accumulated deficit (180,874,110) (158,350,182)
Accumulated other comprehensive loss (29,527) (35,236)
----------------- -----------------
Total shareholders' equity 57,253,071 20,903,949
----------------- -----------------
Total liabilities and shareholders' equity $ 77,682,462 $ 30,847,891
================= =================
</TABLE>
See accompanying notes.
3
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CELL THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------- ---------------------------------
2000 1999 2000 1999
---------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Operating expenses:
Research and development $ 6,085,685 $ 7,304,792 $ 12,860,511 $ 13,668,987
General and administrative 3,939,846 2,958,275 6,168,884 5,103,950
Amortization of purchased intangibles 2,177,645 - 4,340,250 -
---------------- --------------- --------------- ----------------
12,203,176 10,263,067 23,369,645 18,772,937
---------------- --------------- --------------- ----------------
Loss from operations: (12,203,176) (10,263,067) (23,369,645) (18,772,937)
Other income (expense):
Investment income 733,076 475,509 1,214,804 1,058,841
Interest expense (173,248) (131,899) (369,086) (265,361)
---------------- --------------- --------------- ----------------
Net loss (11,643,348) (9,919,457) (22,523,927) (17,979,457)
---------------- --------------- --------------- ----------------
Preferred stock dividend (126,389) - (252,778) -
---------------- --------------- --------------- ----------------
Net loss applicable to common shareholders $ (11,769,737) $ (9,919,457) $ (22,776,705) $ (17,979,457)
================ =============== =============== ================
Basic and diluted net loss per common share $ (0.48) $ (0.64) $ (1.04) $ (1.16)
================ =============== =============== ================
Shares used in calculation of basic and
diluted net loss per common share 24,474,722 15,534,728 21,957,248 15,534,545
================ =============== =============== ================
</TABLE>
See accompanying notes.
4
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CELL THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-----------------------------------
2000 1999
----------------- ----------------
<S> <C> <C>
Operating activities
Net loss applicable to common shareholders $(22,776,705) $(17,979,457)
Adjustments to reconcile net loss applicable to common shareholders
to net cash used in operating activities:
Preferred stock dividend 252,778 -
Depreciation and amortization 5,221,726 941,897
Noncash rent benefit (57,456) (66,445)
Noncash compensation expense 1,965,438 211,894
Investment premium (discount) amortization (accretion) (51,092) 242,270
Loss on sale of investment securities 1,431 859
Changes in operating assets and liabilities, net of businesses acquired:
Interest receivable (144,044) 203,508
Collaboration agreement receivables - 3,254,491
Prepaid expenses and other current assets 458,759 101,464
Other assets and deferred charges (693,370) 4,121
Accounts payable (691,590) (534,446)
Accrued expenses (1,022,160) (1,024,457)
----------------- ----------------
Total adjustments 5,240,420 3,335,156
----------------- ----------------
Net cash used in operating activities (17,536,285) (14,644,301)
----------------- ----------------
Investing activities
Purchases of securities available-for-sale (22,796,700) (18,129,735)
Proceeds from sales of securities available-for-sale 1,514,837 4,754,743
Proceeds from maturities of securities available-for-sale 9,640,000 27,690,000
Purchases of property and equipment (86,777) (201,230)
PolaRx acquisition, net of cash acquired (781,438) -
----------------- ----------------
Net cash provided by (used in) investing activities (12,510,078) 14,113,778
----------------- ----------------
Financing activities
Sale of preferred stock via private placements, net of offering costs (11,885) -
Sale of common stock via private placements, net of offering costs 37,120,551 -
Proceeds from common stock options exercised 1,729,867 -
Proceeds from common stock warrants exercised 80,000 -
Proceeds from employee stock purchase plan 81,944 70,526
Repayment of notes payable (2,185,806) -
Repayment of long-term obligations (627,023) (576,086)
----------------- ----------------
Net cash provided by (used in) financing activities 36,187,648 (505,560)
----------------- ----------------
Net increase (decrease) in cash and cash equivalents 6,141,285 (1,036,083)
Cash and cash equivalents at beginning of period 5,674,386 4,362,486
----------------- ----------------
Cash and cash equivalents at end of period $ 11,815,671 $ 3,326,403
================= ================
Supplemental disclosure of cash flow information
Conversion of preferred stock into common stock $ 8,623,380 $ -
================= ================
Common Stock ($17,291,570) and debt ($10,340,000) issued in PolaRx acquisition $ 27,631,570 $ -
================= ================
Equity issued in exchange for services $ 2,176,399 $ -
================= ================
Cash paid during the period for interest obligations $ 369,086 $ 265,361
================= ================
</TABLE>
See accompanying notes.
5
<PAGE>
CELL THERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited financial information of Cell Therapeutics, Inc.
(the Company) as of June 30, 2000 and for the three and six months ended June
30, 2000 and 1999 has been prepared in accordance with the instructions to Form
10-Q. In the opinion of management, such financial information includes all
adjustments (consisting only of normal recurring adjustments) considered
necessary for a fair presentation of the financial position at such date and the
operating results and cash flows for such periods. Operating results for the
three and six month periods ended June 30, 2000 are not necessarily indicative
of the results that may be expected for the entire year. These financial
statements and the related notes should be read in conjunction with the
Company's audited annual financial statements for the year ended December 31,
1999 included in the Company's Form 10-K for the year ended December 31, 1999.
Research and development expenses consist of costs incurred for proprietary
and collaboration research and development. These costs are expensed as
incurred.
The Company concluded during the quarter ended June 30, 2000 that it is no
longer in the development stage.
(2) REPORTING COMPREHENSIVE INCOME
For the three months ended June 30, 2000 and 1999, the Company's
comprehensive loss was as follows:
<TABLE>
<CAPTION>
Three months ended
-----------------------------
June 30, 2000 June 30, 1999
-------------- -------------
<S> <C> <C>
Net loss applicable to common shareholders $(11,769,737) $(9,919,457)
Other comprehensive loss:
Unrealized holding gains (losses) arising
during period 11,101 (77,412)
-------------- -------------
Total comprehensive loss $(11,758,636) $(9,996,869)
============== =============
</TABLE>
For the six months ended June 30, 2000 and 1999, the Company's comprehensive
loss was as follows:
<TABLE>
<CAPTION>
Six months ended
-----------------------------
June 30, 2000 June 30, 1999
-------------- -------------
<S> <C> <C>
Net loss applicable to common shareholders $(22,776,705) $(17,979,457)
Other comprehensive loss:
Unrealized holding gains (losses) arising
during period 5,709 (87,957)
-------------- -------------
Total comprehensive loss $(22,770,996) $(18,067,414)
============== =============
</TABLE>
(3) NEW ACCOUNTING PRONOUNCEMENTS
In March 2000, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 44, "Accounting for Transactions Involving Stock
Compensation." This Interpretation clarifies the application of Accounting
Principles Board Opinion No. 25 for certain issues related to stock
compensation. This Interpretation is effective July 1, 2000, but certain
conclusions in this Interpretation cover specific events that occur after either
December 15, 1998, or January 12, 2000. To the extent that this Interpretation
covers events occurring during the period after December 15, 1998, or January
12, 2000, but before the effective date of July 1, 2000, the effects of applying
the Interpretation are recognized on
6
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a prospective basis from July 1, 2000. The Company does not expect the adoption
of this consensus to have a material impact on its financial statements.
In December 1999, the SEC issued Staff Accounting Bulletin No. 101 (SAB 101),
"Revenue Recognized in Financial Statements," effective for the first quarter of
2000. Among other things, SAB 101 discusses the SEC staff's view on accounting
for non-refundable up-front fees received in connection with collaborative
agreements. In March 2000, the SEC delayed the effective date of SAB 101 until
the second quarter of 2000, and in May 2000 further delayed the effective date
to the fourth quarter of 2000 and indicated that a Frequently Asked Questions
document on SAB 101 would be issued to provide additional implementation
guidance. The Company does not expect the adoption of SAB 101 to have a
material impact on its financial statements.
(4) PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
On January 7, 2000, the Company acquired PolaRx Biopharmaceuticals, Inc.
(PolaRx), a biopharmaceutical company that owns the rights to Arsenic TriOxide
(ATO), an anti-cancer compound for which the Company has submitted a New Drug
Application (NDA) with the Food and Drug Administration (FDA). The pro forma
consolidated financial information for the six month period ended June 30, 1999,
determined as if the acquisition had occurred on January 1, 1999, would have
resulted in no revenues, a net loss applicable to common shareholders of
$23,669,485 and basic and diluted net loss per common share of $1.35. Pro forma
information for the period ended June 30, 2000 has not been included as the
transaction was consummated on January 7, 2000, which is near the beginning of
the period. This unaudited pro forma information is presented for illustrative
purposes only and is not necessarily indicative of the results that would have
been achieved had the Company and PolaRx been combined during the specified
period.
(5) PANGENEX, INC.
In June 2000, the Company founded PanGenex, Inc. (PanGenex), a majority-owned
subsidiary focused on identifying novel drug development targets using the
recently completed human genome sequence database. Significant operations had
not yet started as of June 30, 2000.
(6) CELL THERAPEUTICS (UK) LIMITED
In June 2000, the Company founded Cell Therapeutics (UK) Limited, a wholly-
owned and London-based subsidiary, to provide the necessary legal, regulatory
and administrative support for the filing of an ATO Marketing Authorization
Application in Europe, and to oversee the business interests of the Company in
that region. Significant operations had not yet started as of June 30, 2000.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS, IN ADDITION TO HISTORICAL
INFORMATION, FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES.
WHEN USED IN THIS FORM 10-Q, THE WORDS "BELIEVES," "ANTICIPATES," "INTENDS,"
"EXPECTS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING
STATEMENTS. OUR ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS
DISCUSSED IN SUCH FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR
CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED
BELOW AS WELL AS THOSE DISCUSSED IN OUR ANNUAL REPORTS ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 1999 WHICH IS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-
LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE HEREOF. WE UNDERTAKE NO
OBLIGATION TO PUBLICLY RELEASE THE RESULTS OF ANY REVISIONS TO THESE FORWARD-
LOOKING STATEMENTS WHICH MAY BE MADE TO REFLECT EVENTS OR CIRCUMSTANCES AFTER
THE DATE OF THIS FORM 10-Q OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
OVERVIEW
We focus on developing, acquiring and commercializing novel treatments for
cancer. Our goal is to build a leading, vertically-integrated pharmaceutical
company with a diversified portfolio of oncology drugs and drug candidates.
Since commencement of operations in 1992, we have been engaged in research and
development activities, including conducting preclinical studies and clinical
trials. We have not received any revenue from product sales to date. As of June
30, 2000, we had incurred aggregate net losses of approximately $180.9 million
since inception. We expect to continue to incur significant additional
operating losses over the next several years from our research and development
efforts. Operating losses may fluctuate from quarter to quarter as a result of
differences in the timing of expenses incurred and revenues recognized.
In the fourth quarter of 1995, we began to receive revenue under a collaboration
agreement with BioChem Pharma, Inc. (BioChem Pharma) and in the fourth quarter
of 1996, we began to receive revenue under a collaboration agreement (the
Collaboration Agreement) with subsidiaries of Johnson & Johnson. Under the
terms of the Collaboration Agreement, Johnson & Johnson paid 60% of the U.S.
development costs of lisofylline (LSF), a product we are no longer developing.
In November 1998, after reviewing the results of our phase III clinical trial
for LSF, we and Johnson & Johnson formally amended the Collaboration Agreement.
Under the terms of the amended Collaboration Agreement, Johnson & Johnson agreed
to pay us $13.1 million for development cost reimbursements for the year ended
December 31, 1998. On April 18, 2000, we and Johnson & Johnson terminated the
Collaboration Agreement.
On June 30, 1998, we entered into an agreement with PG-TXL Company, L.P. and
scientists at the M.D. Anderson Cancer Center, granting us an exclusive
worldwide license to the rights to PG-TXL, and to all potential uses of its
polymer technology. Under the terms of the agreement, we will fund the
research, development, manufacture, marketing and sale of drugs developed using
PG-TXL's polymer technology. On May 5, 2000, we amended the agreement to pay an
increased amount upon the earlier of the acceptance by the FDA of the first
Investigational New Drug (IND) for a licensed product in the U.S., or November
13, 2000.
On January 7, 2000, we acquired ATO upon our acquisition of PolaRx, a single
product company that owned the rights to ATO. In connection with the
acquisition, we issued 2,000,000 shares of our common stock at signing and will
issue an additional 3,000,000 shares to PolaRx shareholders upon the earlier of
approval of an NDA by the FDA for ATO or January 7, 2005. The acquisition
agreement requires shareholder approval for 2,000,000 of the 3,000,000
additional shares. If our shareholders do not approve the issuance of these
additional shares, we will pay the PolaRx shareholders in cash. Two additional
payouts tied to sales thresholds of $10 million and $20 million in any four
consecutive quarters, may be payable in tranches of $4 million and $5 million
at the then fair market value of our stock, at the time such thresholds are
achieved. For annual sales of ATO in excess of $40 million, PolaRx
shareholders will receive a 2% royalty on net sales payable at the then fair
market value of our common stock or, in certain circumstances, cash. We assumed
$5 million of PolaRx's outstanding liabilities and commitments and expect to
incur substantial pre-commercialization expenses associated with the launch of
ATO, should we receive NDA approval from the FDA.
8
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RESULTS OF OPERATIONS
Three months ended June 30, 2000 and 1999.
Research and development expenses. Research and development expenses
decreased to approximately $6.1 million for the three months ended June 30,
2000, from approximately $7.3 million for the three months ended June 30, 1999.
This decrease was due primarily to the winding down of manufacturing and
clinical activities for LSF, decreased business development and preclinical
activities for PG-TXL, decreased manufacturing and preclinical development
activities for Apra, and a reduction in research and development staff personnel
($3.1 million). This decrease was offset in part by development activities for
ATO ($1.9 million). We have almost eliminated research and development
expenses for LSF and anticipate increased research and development expenses in
connection with our other products.
General and administrative expenses. General and administrative expenses
increased to approximately $3.9 million for the three months ended June 30,
2000, from approximately $3.0 million for the three months ended June 30, 1999.
This increase was due primarily to premarketing expenses for ATO ($1.3 million),
offset in part by a reduction in operating expenses required to support research
and development activities ($400,000). General and administrative expenses are
expected to increase to support our expected increase in research, development
and commercialization efforts.
Amortization of goodwill and other purchased intangibles. In January, 2000,
we acquired PolaRx Biopharmaceuticals, Inc. and used the purchase method of
accounting for the acquisition. We recorded acquired intangible assets for
marketing, patents and excess of purchase price over assets acquired aggregating
$32.6 million. These intangible assets are amortized over their remaining lives,
estimated to be three to five years. The amortization for the three months ended
June 30, 2000 was approximately $2.2 million.
Investment income. Investment income increased to approximately $733,000 for
the three months ended June 30, 2000 from approximately $476,000 for the three
months ended June 30, 1999. This increase was associated primarily with higher
average cash balances on hand during the three months ended June 30, 2000
compared to the three months ended June 30, 1999.
Interest expense. Interest expense increased to approximately $173,000 for
the three months ended June 30, 2000 from approximately $132,000 for the three
months ended June 30, 1999. This increase was due primarily to higher average
balances of outstanding long-term obligations resulting from the assumption of
approximately $2.7 million in notes payable associated with the acquisition of
PolaRx.
Preferred stock dividend. We issued preferred stock in November, 1999. The
preferred stock has a 5% dividend, payable annually for four years in cash or in
shares of our common stock, commencing September 30, 2000. We accrued
approximately $126,000 for the preferred stock dividend for the three months
ended June 30, 2000.
Six months ended June 30, 2000 and 1999.
Research and development expenses. Research and development expenses
decreased to approximately $12.9 million for the six months ended June 30, 2000,
from approximately $13.7 million for the six months ended June 30, 1999. This
decrease was due primarily to the winding down of manufacturing and preclinical
development activities for LSF, decreased manufacturing and preclinical
development activities for Apra, and a reduction in research and development
staff personnel ($4.2 million). This decrease was offset in part by development
activities for ATO ($3.4 million). We have almost eliminated research and
development expenses for LSF and anticipate increased research and development
expenses in connection with our other products.
General and administrative expenses. General and administrative expenses
increased to approximately $6.2 million for the six months ended June 30, 2000,
from approximately $5.1 million for the six months ended June 30, 1999. This
increase was due primarily to premarketing expenses for ATO ($1.3 million),
offset in part by a reduction in operating expenses required to support research
and development activities ($200,000). General and administrative expenses are
expected to increase to support our expected increase in research, development
and commercialization efforts.
Amortization of goodwill and other purchased intangibles. We amortized
approximately $4.3 million of goodwill and other purchased intangibles for the
six months ended June 30, 2000 in connection with the acquisition of PolaRx.
Investment income. Investment income increased to approximately $1.2 million
for the six months ended June 30, 2000 from approximately $1.1 million for the
six months ended June 30,
9
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1999. This increase was associated primarily with higher average cash balances
on hand during the six months ended June 30, 2000 compared to the six months
ended June 30, 1999.
Interest expense. Interest expense increased to approximately $369,000 for
the six months ended June 30, 2000 from approximately $265,000 for the six
months ended June 30, 1999. This increase was due primarily to higher average
balances of outstanding long-term obligations resulting from the assumption of
approximately $2.7 million in notes payable associated with the acquisition of
PolaRx.
Preferred stock dividend. We accrued approximately $253,000 for a preferred
stock dividend at June 30, 2000, in connection with preferred stock issued in
November, 1999.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations since inception primarily through the sale of
equity securities and our collaboration with Johnson & Johnson. As of June 30,
2000, we had raised aggregate net proceeds of approximately $215.7 million
through the sale of equity securities, including $37.1 million in net proceeds
from a private placement of common stock completed in February, 2000. We have
received approximately $40.8 million from Johnson & Johnson including $10
million from the sale of equity securities. In addition, we financed the
purchase of $16.2 million of property and equipment through financing agreements
and capital lease obligations of which approximately $2.8 million remained
outstanding as of June 30, 2000.
At June 30, 2000, we had $41.7 million in cash, cash equivalents, and
securities available-for-sale.
We expect to generate losses from operations for several years due to
substantial additional research and development costs, including costs related
to clinical trials, and increased sales and marketing expenditures. We expect
that our existing capital resources will enable us to maintain our current and
planned operations through at least mid-2001. Our future capital requirements
will depend on many factors, including:
* success of our sales and marketing efforts
* progress in and scope of our research and development activities
* competitive market developments
* success in acquiring complementary products, technologies or businesses
Future capital requirements will also depend on the extent to which we
acquire or invest in businesses, products and technologies. If we should require
additional financing due to unanticipated developments, additional financing may
not be available when needed or, if available, we may not be able to obtain this
financing on terms favorable to us or to our shareholders. Insufficient funds
may require us to delay, scale back or eliminate some or all of our research and
development programs, or may adversely affect our ability to operate as a going
concern. If additional funds are raised by issuing equity securities,
substantial dilution to existing shareholders may result.
INCOME TAXES
As of June 30, 2000, we had available for Federal income tax purposes net
operating loss carryforwards of approximately $175.4 million and research and
development credit carryforwards of approximately $6.1 million. These
carryforwards begin to expire in 2007. Our ability to utilize these net
operating loss and research and development credit carryforwards is subject to
annual limitations of $5.6 million for losses incurred prior to March 26, 1997
and may be subject to additional limitations thereafter pursuant to the "change
in ownership" rules under Section 382 of the Internal Revenue Code of 1986.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
10
<PAGE>
We are exposed to market risk related to changes in interest rates that could
adversely affect the value of our investments. We do not use derivative
financial instruments for speculative or trading purposes. We maintain a short-
term investment portfolio consisting of interest bearing securities with an
average maturity of less than one year. These securities are classified as
"available-for-sale" securities. These securities are interest bearing and thus
subject to interest rate risk and will fall in value if market interest rates
increase. Because we have the ability to hold our fixed income investments until
maturity, we do not expect our operating results or cash flows to be affected to
any significant degree by a sudden change in market interest rates on our
securities portfolio. We have operated primarily in the United States and all
revenues to date have been in U.S. dollars. Accordingly, we do not have
material exposure to foreign currency rate fluctuations. We have not entered
into any foreign exchange contracts to hedge any exposure to foreign currency
rate fluctuations because such exposure is immaterial.
11
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PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None.
12
<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:
CELL THERAPEUTICS, INC.
(Registrant)
Dated: August 14, 2000 By: /s/ James A. Bianco, M.D.
-----------------------------------
James A. Bianco, M.D.
President and Chief Executive
Officer
Dated: August 14, 2000 By: /s/ Louis A. Bianco
-----------------------------------
Louis A. Bianco
Executive Vice President,
Finance and Administration
(Principal Financial Officer,
Chief Accounting Officer)
13
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
EXHIBIT 27.1 Financial Data Schedule
14
