<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1996
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
For the transition period from to
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Commission file number 0-26918
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CYTOCLONAL PHARMACEUTICS INC.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 75-2402409
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(State or Other jurisdication (I.R.S. Employer
of incorporation or Organization) Identification Number)
9000 Harry Hines Boulevard, Suite 330, Dallas, Texas 75235
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(Address of Principal Executive Offices)
(214)-353-2922
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(Issuer's Telephone Number, Including Area Code)
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(Former Name, Former Address and Former Fiscal Year,
if changed since last report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
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APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed al documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court.
Yes No
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APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 7,617,632 shares of common
stock, $.01 par value, outstanding as of May 8, 1996.
Transitional Small Business Disclosure Format (check one):
Yes No X
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CYTOCLONAL PHARMACEUTICS INC
TABLE OF CONTENTS
Page(s)
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PART I. FINANCIAL INFORMATION
Item 1 -- Financial Statements:
Condensed Balance Sheets as of March 31, 1996
(unaudited) and December 31, 1995 3
Condensed Statements of Operations for the
Three Months Ended March 31, 1995 and 1996
(unaudited) and the Period From September
11, 1991 (Inception) Through March 31,
1996 4
Condensed Statements of Cash Flows for the
Three Months Ended March 31, 1995 and 1996
(unaudited) and the Period From September
11, 1991 (Inception) Through March 31,
1996 5
Item 2 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations 6-8
PART II. OTHER INFORMATION
Item 6 -- Exhibits and Reports on Form 8-K 8
Signatures 9
Exhibit 11 10
<PAGE>
Item 1. Financial Statements
CYTOCLONAL PHARMACEUTICS INC.
(a development stage company)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1995 1996
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ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash $5,442,000 $4,905,000
Prepaid expenses and other current assets 31,000 16,000
---------- ----------
Total current assets 5,473,000 4,921,000
Equipment, net 60,000 68,000
Patent rights, less accumulated amortization of
$312,000 and $331,000 938,000 919,000
Investment in joint venture - at equity 39,000 33,000
Other assets 5,000 5,000
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T O T A L $6,515,000 $5,946,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses 235,000 323,000
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Total current liabilities 235,000 323,000
Royalties payable 1,250,000 1,250,000
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Total liabilities 1,485,000 1,573,000
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Stockholders' equity:
Preferred stock - $.01 par value, 10,000,000 shares
authorized; 1,268,787 and 1,370,908 shares of
Series A convertible preferred issued and outstanding
at December 31, 1995 and March 31, 1996, respectively
(liquidation value $3,172,000 and $3,427,000 at
December 31, 1995 and March 31, 1996, respectively) 13,000 14,000
Common Stock - $.01 par value, 30,000,000 shares
authorized: 7,563,500 and 7,588,267 shares issued
and outstanding at December 31, 1995 and
March 31, 1996, respectively 76,000 76,000
Additional paid-in capital 13,903,000 13,902,000
Deficit accumulated during the development stage (8,962,000) (9,619,000)
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Total Stockholders' Equity 5,030,000 4,373,000
T O T A L $6,515,000 $5,946,000
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</TABLE>
3
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CYTOCLONAL PHARMACEUTICS INC.
(a development stage company)
STATEMENT OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
September 11, 1991
Three Months Ended (inception)
March 31, through
---------------------------------- March 31,
1995 1996 1996
---- ---- ----
<S> <C> <C> <C>
Operating Expenses:
Research and development $ 313,000 $ 339,000 $ 5,070,000
General and administrative 353,000 380,000 4,176,000
----------- ----------- -----------
666,000 719,000 9,246,000
----------- ----------- -----------
Other (Income) expenses:
Interest (income) (1,000) (62,000) (265,000)
Interest expense 100,000 559,000
----------- ----------- -----------
99,000 (62,000) 294,000
----------- ----------- -----------
NET (LOSS) ($ 765,000) ($ 657,000) $ 9,540,000
----------- ----------- -----------
Net loss per common share ($ 0.16) ($ 0.13)
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Weighted average number of
shares outstanding 5,367,415 7,569,918
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</TABLE>
4
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CYTOCLONAL PHARMACEUTICS INC.
(a development stage company)
STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
September 11,
1991
Three Months Ended (Inception)
March 31, through
------------------------------------ March 31,
1995 1996 1996
----------------- ----------------- -----------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) ($765,000) ($657,000) ($9,540,000)
Adjustments to reconcile net (loss) to net
cash (used in) operating activities:
Depreciation and amortization 29,000 28,000 482,000
Amortization of debt discount 50,000 269,000
Amortization of debt costs 97,000 554,000
Value assigned to warrants and
options 16,000
Equity in loss of joint venture 6,000 6,000 199,000
Changes in operating assets and
liabilities:
(Increase) decrease in other assets (1,000) 15,000 (25,000)
Increase in accounts payable
and accrued expenses 84,000 88,000 323,000
------------ ------------ ------------
Net cash (used in) operating
activities (500,000) (520,000) (7,722,000)
------------ ------------ ------------
Cash flows from investing activities:
Purchase of equipment (17,000) (138,000)
Investment in joint venture (233,000)
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Net cash (used in) investing
activities (17,000) (371,000)
============ ============
Cash flows from financing activities:
Net proceeds from sales of preferred and
common stock 13,750,000
Proceeds from bridge loans, net of expenses 404,000 2,684,000
Repayment of bridge loans (3,238,000)
Principal payments of equipment notes (76,000)
Dividends paid (122,000)
------------
Net cash provided by
financing activities 404,000 12,998,000
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NET (DECREASE) IN CASH (96,000) (537,000) 4,905,000
Cash at beginning of period 395,000 5,442,000
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CASH AT END OF PERIOD $299,000 $4,905,000 4,905,000
============ ============ ============
</TABLE>
5
<PAGE>
Item 2. Plan of Operation
Cytoclonal Pharmaceutics Inc. (the "Company") was organized and
commenced operations in September 1991. The Company is in the development stage,
and its efforts have been principally devoted to research and development
activities and organizational efforts, including the development of products for
the treatment of cancer and infectious diseases, recruiting its scientific and
management personnel and advisors and raising capital.
The Company's plan of operation for the next 12 months will consist of
research and development and related activities aimed at:
* further increasing the Taxol yield from the Fungal Taxol
Production System using alternative fermentation technologies,
inducers and media strain improvements.
* further development of a diagnostic test using the LCG gene and
related MAb to test in vitro serum, tissue or respiratory aspirant
material for the presence of cells which may indicate a
predisposition to, or early sign of, lung or other cancers.
* developing a humanized antibody specific for the protein
associated with the LCG gene and, if successful, submission of an
IND for clinical trials.
* testing the TNF-PEG technology as an anti-cancer agent in animal
studies.
* further development of proprietary vectors which have been
constructed for the expression of specific proteins that may be
utilizable for vaccines for different diseases.
* initiating animal studies of IL-T and IL-P and, if successful,
submission of an IND for clinical trials.
* continuing the funding of the research on anti-sense technology
currently being conducted at the University of Texas at Dallas and
testing of an idealized anti-sense algorithm under development.
6
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* development of technology licensed from the University of
California, Los Angeles for taxol treatment of polycystic kidney
disease.
* making modest improvements to the Company's laboratory facilities.
* hiring approximately three additional research technicians and a
financial vice president.
* seeking to establish strategic partnerships for the development,
marketing, sales and manufacturing of the Company's proposed
products.
The actual research and development and related activities of the
Company may vary significantly from current plans depending on numerous factors,
including changes in the cost of such activities from current estimates, the
results of the Company's research and development programs, the results of
clinical studies, the timing of regulatory submissions, technological advances,
determinations as to commercial potential and the status of competitive
products. The focus and direction of the Company's operations will also be
dependent upon the establishment of collaborative arrangements with other
companies, the availability of financing and other factors.
For the period from January 1, 1996 to March 31, 1996, the Company
incurred a net loss of $657,000. The Company expects to incur additional losses
in the foreseeable future.
The Company incurred a net loss of $765,000 for the three months ended
March 31, 1995. The decrease from the previous year was attributable to a
decrease in interest expense and financing costs associated with two bridge
financings in 1994 and 1995. In connection with the two bridge financings, the
Company issued an aggregate of $3,037,500 in principal amount of 9% subordinated
notes, which notes and interest thereof were repaid out of the proceeds of the
Company's public offering which was consummated in November 1995.
7
<PAGE>
The Company incurred general and administrative expenses of $353,000
and $380,000 for the three months ended March 1995 and March 1996, respectively.
The increase was attributable to increased public relations costs and to the
acquisition of Directors and Officers liability insurance. The increase was
partially offset by a decrease in financing costs mentioned above.
The Company incurred research and development expenses of $313,000 and
$339,000 for the three months ended March 1995 and March 1996, respectively. The
increase was attributable to an increase in the purchase of laboratory supplies
and to the acquisition of an exclusive license to technology for taxol treatment
of polycystic kidney disease ("PKD"). PKD is a condition characterized by a
large number of cysts resulting in enlarged kidneys, impairment of kidney
function and, eventually, kidney failure and death. The worldwide rights,
acquired from the University of California, Los Angeles (UCLA), include a
pending patent and provide for royalties to UCLA upon commercial sales.
The Company believes that the net proceeds from its initial public
offering of November 1995 will be sufficient to finance the Company's plan of
operation for approximately 24 months. There can be no assurance that the
Company will generate sufficient revenues to fund its operations after such
period or that any required financings will be available, through bank
borrowings, debt or equity offerings, or otherwise, on acceptable terms or at
all.
PART II -- OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 11 Computation of per share earnings
(b) Reports on Form 8-K - None
8
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
CYTOCLONAL PHARMACEUTICS INC.
Date: May 13, 1996 /s/ Daniel M. Shusterman
-------------------------
Daniel M. Shusterman
Vice President of Operations,
Treasurer and Chief Financial
Officer
9
<PAGE>
Exhibit 11
CYTOCLONAL PHARMACEUTICS INC.
COMPUTATION OF NET (LOSS) PER COMMON SHARE (2)
(unaudited)
Primary
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
1995 1996
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<S> <C> <C>
Net (loss) ($ 765,000) ($ 657,000)
Add cumulative preferred dividend (79,000) (345,000)
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NET (LOSS) USED FOR COMPUTATION ($ 844,000) ($1,002,000)
=========== ===========
Weighted average number of common shares outstanding 5,220,000 7,569,918
----------- -----------
Shares issuable upon exercise of stock options and
warrants, net of shares assumed to be repurchased (1) 147,415 0
----------- -----------
Shares used for computation 5,367,415 7,569,918
=========== ===========
Net (loss) per common share ($ 0.16) ($ 0.13)
=========== ===========
</TABLE>
Notes and Assumptions:
(1) The Company issued common stock and common stock equivalents for
consideration below the initial public offering price of $5.00.
Consequently, in accordance with Staff Accounting Bulletin 83 (during
the periods covered by statements of operation included in the
registration statement) the following methodology was used in
determining weighted average shares outstanding:
Stock issued in a one year period immediately prior to the
offering was treated as outstanding for the entire period and
repurchase of shares using the treasury stock method at an
offering price of $5.00.
(2) Adjusted to reflect retroactively, a 1 for 2.5 reverse stock split
effected on August 2, 1995.
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10-QSB
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<NAME> CYTOCLONAL PHARMACEUTICS INC.
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