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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2006
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 0-15327
 CytRx Corporation
  Delaware
    
    58-1642740(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 11726 San Vicente Blvd, Suite 650,Los Angeles, California
    
    90049(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code: (310) 826-5648
 Securities registered pursuant to Section 12(b) of the Act:
 Title of each class
    
    Name of exchange on which registeredCommon Stock, $0.001 par value per share
    
    The NASDAQ Stock Market LLCSeries A Junior Participating Preferred Stock Purchase Rights
 Securities Registered Pursuant to Section 12(g) of the Act:
None
 o þ
 o þ
 þ o
 þ
  o þ o
 o þ




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##### 



CYTRX CORPORATION
2006 ANNUAL REPORT ON FORM 10-K
 TABLE OF CONTENTS
 SAFE HARBOR STATEMENT
    
    iiPART I
    
    
    1Item 1. BUSINESS
    
    
    1Item 1A. RISK FACTORS
    
    
    16Item 2. PROPERTIES
    
    
    26Item 3. LEGAL PROCEEDINGS
    
    
    26PART II
    
    
    27Item 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
    
    
    27Item 6. SELECTED FINANCIAL DATA
    
    
    30Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
    
    
    32Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    46Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    47Item 9A. CONTROLS AND PROCEDURES
    
    
    47PART III
    
    
    50Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
    
    
    50Item 11. EXECUTIVE COMPENSATION
    
    
    55Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
    
    
    70Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    
    
    71Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    71PART IV
    
    
    72Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
    
    
    72SIGNATURES
    
    
    79EX-4.3EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2




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SAFE HARBOR STATEMENT




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PART I
 
 Item 1. BUSINESS
  CYTRX CORPORATION
    Molecular Chaperone Co-Induction Platform
   1




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2




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Product Development
 ALS Clinical Trials
    Obesity and Type 2 Diabetes
   3




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Stroke Recovery
  Cardiovascular Disease
  HIV
  Other Technologies and Strategic Arrangements
 in vitro
 4




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Therapeutic Copolymer Program
  Vaccine Enhancement and Gene Therapy
  Merck License
  Vical License
 in vitro
 RXI PHARMACEUTICALS CORPORATION
  5




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Recent Developments
  Contribution Agreement
  Voting Agreement
   Stockholder and Preemptive Rights Agreement
   6




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Reimbursement Agreement
  RNAi Therapeutic Platform
 Science
      7




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Material Licenses and Other Agreements
 License Agreements
    8




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New Invention Disclosure Agreement
  Manufacturing
 CytRx Corporation
   RXi Pharmaceuticals Corporation
  9




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Patents and Proprietary Technology
 CytRx Corporation
    RXi Pharmaceuticals Corporation
  Intellectual Property Rights to Key Therapeutic Targets
  in vivo
  10




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Intellectual Property Rights to Chemistry and Configurations of Therapeutically Useful RNAi
  
    
    Dr. Tariq Ranas inventions regarding the fundamental rules of designing
chemically-modified RNAi sequences that are suitable for in vivogene silencing;
    
    Dr. Tuschls invention regarding RNAi therapeutics using double-stranded RNAs of 19
to 23 nucleotides; and
    
    Drs. Mello and Zamores invention regarding in vivoproduction of siRNA.
 Intellectual Property Rights to Delivery of RNAi to Cells
 in vitro in vivo
 
    
    methods and compositions, including use of nanotransporters, for efficient RNAi
delivery for therapeutic gene silencing in cells and animals; and
    
    inhibition of gene expression in adipocytes using RNAi.
 Competition
 CytRx Corporation
   11




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RXi Pharmaceuticals Corporation
     12




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Government Regulation
       13




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Beneficial Ownership of RXis Securities
   14




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Employees
  Available Information
  15




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Item 1A. RISK FACTORS
  Risks Associated With Our Business
 We Have Operated at a Loss and Will Likely Continue to Operate at a Loss For the Foreseeable
Future
  We Have No Source of Significant Recurring Revenue, Which Makes Us Dependent on Financing to
Sustain Our Operations
  
    
    We are able to commercialize one or more of our products in development, which may
require us to first enter into license or other arrangements with third parties.
    
    One or more of our licensed products is commercialized by our licensees, thereby
generating royalty revenue for us.
    
    We are able to acquire products from third parties that are already being marketed
or are approved for marketing.
  16




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Our Current Financial Resources May Be Diminished If We Elect To Provide RXi with Initial
Financing
  We Will Be Reliant Upon Third Parties for the Development and Eventual Marketing of Our
Products
    We Will Incur Substantial Expenses and May Be Required to Pay Substantial Milestone Payments
Relating to Our Product Development Efforts
  17




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If Our Products Are Not Successfully Developed and Approved by the FDA, We May Be Forced to
Reduce or Curtail Our Operations
   
    
    Difficulty in securing centers to conduct trials.
    
    Difficulty in enrolling patients in conformity with required protocols or projected timelines.
    
    Unexpected adverse reactions by patients in trials.
    
    Difficulty in obtaining clinical supplies of the product.
    
    Changes in the FDAs requirements for our testing during the course of that testing.
    
    Inability to generate statistically significant data confirming the efficacy of the
product being tested.
    
    Modification of the drug during testing.
    
    Reallocation of our limited financial and other resources to other clinical programs.
  18




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Our Molecular Chaperone Co-Induction Drug Candidates May Not Receive Regulatory Marketing
Approvals
      We Have Identified Material Weaknesses in our Internal Control over Financial Reporting
  19




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We Are Subject to Intense Competition, and There is No Assurance that We Can Compete
Successfully
   
    
    Succeed in developing competitive products sooner than us or our strategic partners
or licensees.
    
    Obtain FDA and other regulatory approvals for their products before we can obtain
approval of any of our products.
    
    Obtain patents that block or otherwise inhibit the development and commercialization
of our product candidates.
    
    Develop products that are safer or more effective than our products.
    
    Devote greater resources to marketing or selling their products.
    
    Introduce or adapt more quickly to new technologies and other scientific advances.
    
    Introduce products that render our products obsolete.
    
    Withstand price competition more successfully than us or our strategic partners or licensees.
    
    Negotiate third-party strategic alliances or licensing arrangements more effectively.
    
    Take advantage of other opportunities more readily.
   20




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We Will Rely upon Third Parties for the Manufacture of Our Clinical Product Supplies
  We May Be Unable to Protect Our Intellectual Property Rights, Which Could Adversely Affect the
Value of Our Assets
   We Are Subject to Potential Liabilities From Clinical Testing and Future Product Liability
Claims
  21




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We May Be Unable to Acquire Products Approved For Marketing
  Risks Associated With Our Ownership of RXi
  RXi Will Be Subject to Risks of a New Business
  The Approach RXi is Taking to Discover and Develop Novel Therapeutics Using RNAi is Unproven
and May Never Lead to Marketable Products
  RXi May Be Unable to Protect Its Intellectual Property Rights Licensed From UMMS or May Need
to License Additional Intellectual Property from Others.
  22




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RXi May Not Be Able to Obtain Sufficient Financing
    We Will Be Required To Dispose of Some of Our RXi Shares, and May Not Be Able To Do So On
Attractive Terms
  23




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RXi Will Retain Discretion Over Its Use of Any Funds That We Provide To It
  We Will Not Control RXi, And The Officers, Directors and Other RXi Stockholders May Have
Interests That Are Different From Ours
  Products Developed by RXi Could Eventually Compete With Our Products For ALS, Type 2 Diabetes
and Obesity and Other Disease Indications
  RXi Will Be Subject to Competition, and It May Not Be Able To Compete Successfully
  24




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Risks Associated with Our Common Stock
 Our Anti-Takeover Provisions May Make It More Difficult to Change Our Management or May
Discourage Others From Acquiring Us and Thereby Adversely Affect Stockholder Value
    Our Outstanding Options and Warrants and the Registrations of Our Shares Issued in and Our
Private Financings May Adversely Affect the Trading Price of Our Common Stock
  25




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We May Issue Preferred Stock in the Future, and the Terms of the Preferred Stock May Reduce
the Value of Our Common Stock
  We May Experience Volatility in Our Stock Price, Which May Adversely Affect the Trading Price
of Our Common Stock
  
    
    announcements of regulatory developments or technological innovations by us or our
competitors;
    
    changes in our relationship with our licensors and other strategic partners;
    
    changes in our ownership or other relationships with RXi;
    
    our quarterly operating results;
    
    developments in patent or other technology ownership rights;
    
    public concern regarding the safety of our products;
    
    government regulation of drug pricing; and
    
    other factors which may affect our stock price are general changes in the economy,
the financial markets or the pharmaceutical or biotechnology industries.
 
 Item 2. PROPERTIES
   
 Item 3. LEGAL PROCEEDINGS
  26




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PART II
 
 Item 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
 Market Information
  High
    
    
    LowFiscal Year 2007:First Quarter through March 23
    
    
    $5.49
    
    
    
    $1.74Fiscal Year 2006:Fourth Quarter
    
    
    $2.04
    
    
    
    $1.21Third Quarter
    
    
    $1.94
    
    
    
    $0.87Second Quarter
    
    
    $2.30
    
    
    
    $1.06First Quarter
    
    
    $1.92
    
    
    
    $1.01Fiscal Year 2005:Fourth Quarter
    
    
    $1.13
    
    
    
    $0.85Third Quarter
    
    
    $1.22
    
    
    
    $0.76Second Quarter
    
    
    $1.44
    
    
    
    $0.75First Quarter
    
    
    $2.07
    
    
    
    $1.14
 Holders
  Dividends
  Recent Sales of Unregistered Securities
  27




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Comparison of Cumulative Total Returns
  Comparison of Cumulative Total Returns
 
 December 31,2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2006CytRx Corporation
    
    
    
    38
    
    
    
    
    286
    
    
    
    
    216
    
    
    
    
    158
    
    
    
    
    294Nasdaq Stock Market Index
    
    
    
    69
    
    
    
    
    104
    
    
    
    
    113
    
    
    
    
    116
    
    
    
    
    128Nasdaq Pharmaceutical Index
    
    
    
    65
    
    
    
    
    95
    
    
    
    
    101
    
    
    
    
    111
    
    
    
    
    109
 28




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Equity Compensation Plans
  (c)Number of SecuritiesRemaining Available(a)
    
    
    
    
    
    
    for Issuance UnderNumber of Securities
    
    
    (b)
    
    
    Equityto be Issued Upon
    
    
    Weighted-Average
    
    
    CompensationExercise of
    
    
    Exercise Price of
    
    
    Plans (ExcludingOutstanding Options,
    
    
    Outstanding Options,
    
    
    SecuritiesPlan Category
    
    Warrants and Rights
    
    
    Warrants and Rights
    
    
    Reflected in Column (a))Equity compensation
plans approved by our
stockholders:1994 Stock Option Plan
    
    
    9,167
    
    
    $
    1.00
    
    
    
    1995 Stock Option Plan
    
    
    
    
    
    
    
    
    
    
    1998 Long-Term Incentive Plan
    
    
    100,041
    
    
    
    1.02
    
    
    
    29,5172000 Long-Term Incentive Plan
    
    
    6,749,000
    
    
    
    1.66
    
    
    
    2,822,750Equity compensation plans not
approved by our stockholders:Outstanding warrants(1)
    
    
    3,783,315
    
    
    
    1.56
    
    
    
    Total:
    
    
    10,641,523
    
    
    $
    1.64
    
    
    
    2,852,267
 
 (1)
    
    The warrants shown were issued as compensation for various services and do not include
warrants sold in private placement transactions. The material terms of such warrants were
determined based upon arms-length negotiations with the recipients of the warrants. The
warrant exercise prices approximated the market price of our common stock at or about the date
of grant, and the warrant terms range from 5 to 10 years from the grant date. The warrants
contain customary anti-dilution adjustments in the event of a stock split, reverse stock
split, reclassification or combination of our outstanding common stock and similar events. 29




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Item 6. SELECTED FINANCIAL DATA
 General
  2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(restated)Statement of
Operations Data:RevenuesRecruiting revenues
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    23,000License fees
    
    
    101,000
    
    
    
    101,000
    
    
    
    428,000
    
    
    
    94,000
    
    
    
    1,051,000Grant income
    
    
    106,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,000Service revenues
    
    
    1,859,000
    
    
    
    83,000
    
    
    
    
    
    
    
    
    
    
    
    Total revenues
    
    $
    2,066,000
    
    
    $
    184,000
    
    
    $
    428,000
    
    
    $
    94,000
    
    
    $
    1,120,000Deemed dividend for
anti-dilution adjustments
made to outstanding
common stock warrants
    
    
    (488,000
    )
    
    
    (1,076,000
    )
    
    
    
    
    
    
    
    
    
    
    Net loss applicable to
common stockholders
    
    $
    (17,240,000
    )
    
    $
    (16,169,000
    )
    
    $
    (16,392,000
    )
    
    $
    (17,845,000
    )
    
    $
    (6,176,000
    )Basic and diluted loss
per share applicable to
common stock
    
    $
    (0.25
    )
    
    $
    (0.28
    )
    
    $
    (0.48
    )
    
    $
    (0.65
    )
    
    $
    (0.39
    )Balance Sheet Data:Cash and cash equivalents
    
    $
    30,381,000
    
    
    $
    8,299,000
    
    
    $
    1,988,000
    
    
    $
    11,644,000
    
    
    $
    387,000Total assets
    
    $
    31,636,000
    
    
    $
    9,939,000
    
    
    $
    5,049,000
    
    
    $
    12,324,000
    
    
    $
    9,284,000Total stockholders equity
    
    $
    5,150,000
    
    
    $
    7,208,000
    
    
    $
    1,595,000
    
    
    $
    10,193,000
    
    
    $
    7,959,000
 Factors Affecting Comparability
   30




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31




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Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Overview
 CytRx Corporation
    32




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RXi Pharmaceuticals Corporation
     Research and Development
   33




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
    
    our ability to advance product candidates into pre-clinical and clinical
trials;
    
    the scope, rate and progress of our pre-clinical trials and other research
and development activities;
    
    the scope, rate of progress and cost of any clinical trials we commence;
    
    the cost of filing, prosecuting, defending and enforcing any patent claims
and other intellectual property rights;
    
    future clinical trial results;
    
    the terms and timing of any collaborative, licensing and other arrangements
that we may establish;
    
    the cost and timing of regulatory approvals;
    
    the cost and timing of establishing sales, marketing and distribution capabilities;
    
    the cost of establishing clinical and commercial supplies of our product
candidates and any products that we may develop; and
    
    the effect of competing technological and market developments.
  Critical Accounting Policies and Estimates
   34




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Revenue Recognition
  Research and Development Arrangements
  Research and Development Expenses
  Clinical Trial Expenses
  Share-based Compensation
  35




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Accounting for
Registration Payment Arrangements
 36




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Accounting for
Contingencies
 Impairment of Long-Lived Assets
  Earnings Per Share
  Quarterly Financial Data
  Quarter EndedMarch 31
    
    
    June 30
    
    
    September 30
    
    
    December 31(In thousands, except per share data)(restated)2006Total revenues
    
    $
    61
    
    
    $
    
    
    
    $
    776
    
    
    $
    1,229Net loss
    
    
    (4,166
    )
    
    
    (5,465
    )
    
    
    (2,972
    )
    
    
    (4,148
    )Deemed dividend for anti-dilution
adjustments made to outstanding common
stock warrants
    
    
    (488
    )
    
    
    
    
    
    
    
    
    
    
    Net loss applicable to common stockholders
    
    $
    (4,654
    )
    
    $
    (5,465
    )
    
    $
    (2,972
    )
    
    $
    (4,148
    )Basic and diluted loss per share
applicable to common stock
    
    $
    (0.07
    )
    
    $
    (0.08
    )
    
    $
    (0.04
    )
    
    $
    (0.06
    )(restated)2005Total revenues
    
    $
    1
    
    
    $
    
    
    
    $
    10
    
    
    $
    173Net loss
    
    
    (3,527
    )
    
    
    (4,509
    )
    
    
    (3,492
    )
    
    
    (3,565
    )Deemed dividend for anti-dilution
adjustments made to outstanding common
stock warrants
    
    
    (1,076
    )
    
    
    
    
    
    
    
    
    
    
    Net loss applicable to common stockholders
    
    $
    (4,603
    )
    
    $
    (4,509
    )
    
    $
    (3,492
    )
    
    $
    (3,565
    )Basic and diluted loss per share
applicable to common stock
    
    $
    (0.09
    )
    
    $
    (0.08
    )
    
    $
    (0.06
    )
    
    $
    (0.06
    )
 37




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Liquidity and Capital Resources
 General
   RXi Initial Funding Requirements
  38




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Discussion of 2006 Activities and Future Capital Requirements
      39




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Off-Balance Sheet Arrangements
  Contractual Obligations
  40




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Non-Cancelable
    
    
    CancelableOperating
    
    
    Employment
    
    
    
    
    
    
    
    Research and
    
    
    LicenseLeases
    
    
    Agreements
    
    
    
    Subtotal
    
    
    Development
    
    
    Agreements
    
    
    
    Subtotal(In thousands)(1)
    
    
    (2)
    
    
    
    
    
    
    
    (3)
    
    
    (4)
    
    
    
    
    
    
    
    Total2007
    
    $
    534
    
    
    $
    1,735
    
    
    
    $
    2,269
    
    
    $
    5,583
    
    
    $
    1,267
    
    
    
    $
    6,850
    
    
    $
    9,1192008
    
    
    138
    
    
    
    876
    
    
    
    
    1,014
    
    
    
    7,424
    
    
    
    332
    
    
    
    
    7,756
    
    
    
    8,7702009
    
    
    26
    
    
    
    490
    
    
    
    
    516
    
    
    
    914
    
    
    
    332
    
    
    
    
    1,246
    
    
    
    1,7622010
    
    
    10
    
    
    
    240
    
    
    
    
    250
    
    
    
    
    
    
    
    282
    
    
    
    
    282
    
    
    
    5322011 and thereafter
    
    
    5
    
    
    
    120
    
    
    
    
    125
    
    
    
    
    
    
    
    7,455
    
    
    
    
    7,455
    
    
    
    7,580Total
    
    $
    713
    
    
    $
    3,461
    
    
    
    $
    4,174
    
    
    $
    13,921
    
    
    $
    9,668
    
    
    
    $
    23,589
    
    
    $
    27,763
 
 (1)
    
    Operating leases are primarily facility lease related obligations, as well as equipment and
software lease obligations with third party vendors.(2)
    
    Employment agreement obligations include management contracts, as well as scientific advisory
board member compensation agreements.(3)
    
    Research and development obligations relate primarily to our Phase IIb clinical trial for
arimoclomol for ALS. Most of these purchase obligations are cancelable.(4)
    
    License agreements generally relate to our obligations for licenses with UMMS associated with
RNAi, which we are developing through our majority-owned RXi subsidiary. Included in the 2007
license obligations is an $800,000 payment that may be made in cash or common stock of RXi to
UMMS. We anticipate making that payment in common stock of RXi following RXis initial
funding. License and Collaboration Agreements
   41




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Net Operating Loss Carryforward
  Results of Operations
   Research and Development
 Years Ended December 31,2006
    
    
    2005
    
    
    2004(In thousands)Research and development expense
    
    $
    8,858
    
    
    $
    8,867
    
    
    $
    4,624Non-cash research and development expense
    
    
    674
    
    
    
    220
    
    
    
    1,388Employee stock option expense
    
    
    249
    
    
    
    
    
    
    
    Acquired in-process research and development expense
    
    
    
    
    
    
    
    
    
    
    3,022$
    9,781
    
    
    $
    9,087
    
    
    $
    9,034
   43




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General and administrative expenses
 Years Ended December 31,2006
    
    
    2005
    
    
    2004(In thousands)General and administrative expenses
    
    $
    8,622
    
    
    $
    6,057
    
    
    $
    5,924Stock, stock option and warrant expenses
to non-employees and consultants
    
    
    60
    
    
    
    367
    
    
    
    1,977Employee stock option expense
    
    
    975
    
    
    
    
    
    
    
    $
    9,657
    
    
    $
    6,424
    
    
    $
    7,901
  44




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Depreciation and amortization
  Severance and other contractual payments to officers
  Interest income
  Minority interest in losses of subsidiary
   45




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Recently Issued Accounting Standards
 Accounting for Uncertainty in Income Taxes
 Fair Value Measurements
  Accounting for Registration Payment Arrangements Accounting for Contingencies
  Off-Balance Sheet Arrangements
  
 Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  46




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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 Item 9A. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
    Managements Report on Internal Control Over Financial Reporting
   Internal Control-Integrated
Framework
 47




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Earnings Per Share
   48




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PART III
 
 Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
  Class ofName
    
    Age
    
    Director(1)
    
    PositionMax Link, Ph.D.
    
    
    66
    
    
    III
    
    Director, Chairman of the Board(2)(3)Steven A. Kriegsman
    
    
    65
    
    
    II
    
    Director, Chief Executive Officer, PresidentMarvin R. Selter
    
    
    79
    
    
    II
    
    Director, Vice Chairman of the Board(2)(3)(4)Louis Ignarro, Ph.D.
    
    
    65
    
    
    I
    
    DirectorJoseph Rubinfeld, Ph.D.
    
    
    74
    
    
    I
    
    Director(2)(4)Richard L. Wennekamp
    
    
    64
    
    
    II
    
    Director(2)(3)(4)Mark A. Tepper, Ph.D.
    
    
    49
    
    
    
    
    Senior Vice President  Drug DiscoveryMatthew Natalizio
    
    
    52
    
    
    
    
    Chief Financial Officer, TreasurerJack R. Barber, Ph.D.
    
    
    51
    
    
    
    
    Chief Scientific OfficerBenjamin S. Levin
    
    
    31
    
    
    
    
    General Counsel, Vice President
 Legal Affairs and Corporate SecretaryTod Woolf, Ph.D.
    
    
    42
    
    
    
    
    President and Chief Executive
Officer of RXi Pharmaceuticals Corporation
 
 (1)
    
    Our Class I directors serve until the 2007 annual meeting of stockholders, our Class II
directors serve until the 2008 annual meeting of stockholders and our Class III director
serves until the 2009 annual meeting of stockholders.(2)
    
    These directors constitute the members of our Audit Committee. Mr. Selter is the Chairman of
the Committee.(3)
    
    These directors constitute the members of our Nominating and Corporate Governance Committee.
Mr. Wennekamp is Chairman of the Committee.(4)
    
    These directors constitute the members of our Compensation Committee. Dr. Rubinfeld is
Chairman of the committee. Max Link, Ph.D
 Steven A. Kriegsman
 50




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##### Table of Contents



Marvin R. Selter
 Louis Ignarro, Ph.D.
 Joseph Rubinfeld, Ph.D.
 Richard L. Wennekamp
 Mark A. Tepper, Ph.D.
 51




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##### Table of Contents



Matthew Natalizio
 Jack Barber, Ph.D.
 Benjamin S. Levin
 Tod Woolf, Ph.D.,
 Director Independence
   52




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Transactions with Related Persons
 General
    
    
    that all related person transactions, all material terms of the transactions, and
all the material facts as to the related persons direct or indirect interest in, or
relationship to, the related person transaction must be communicated to the Audit
Committee; and
 
    
    that all related person transactions, and any material amendment or modification to
any related person transaction, be reviewed and approved or ratified by the Audit
Committee, as required by Nasdaq Marketplace Rules.
  
    
    information provided by members of our board of directors in connection with the
required annual evaluation of director independence;
    
    pertinent responses to the Directors and Officers Questionnaires submitted
periodically by our officers and directors and provided to the Audit Committee by our
management;
    
    background information on nominees for director provided by the Nominating and
Corporate Governance Committee of our board of directors; and
    
    any other relevant information provided by any of our directors or officers.
  53




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Exemption Clause
  Applicable Definitions
  
    
    related person has the meaning given to such term in Item 404(a) of Securities and
Exchange Commission Regulation S-K (Item 404(a)); and
    
    related person transaction means any transaction for which disclosure is required
under the terms of Item 404(a) involving the Company and any related persons.
 Section 16(a) Beneficial Ownership Reporting Compliance
  Code of Ethics
  54




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Item 11. EXECUTIVE COMPENSATION
 Compensation Discussion and Analysis
 Overview of Executive Compensation Program
   Compensation Philosophy and Objectives
    Role of Executive Officers in Compensation Decisions
   55




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Setting Executive Compensation
  2006 Executive Compensation Components
  
    
    base salary;
    
    performance-based cash compensation; and
    
    long-term equity incentive compensation.
 Base Salary
   
    
    the negotiated terms of each executive employment agreement;
    
    internal review of the executives compensation, both individually and relative to
other executive officers; and
    
    individual performance of the executive.
  56




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Performance-Based Compensation
  Long-Term Equity Incentive Compensation
  Retirement Plans, Perquisites And Other Personal Benefits
   Ownership Guidelines
  57




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
    
    establish the link between the creation of stockholder value and long-term executive
incentive compensation;
    
    provide an opportunity for increased equity ownership by executives;
    
    function as a retention tool because of the vesting features included in all options
granted by the Compensation Committee; and
    
    maintain competitive levels of total compensation.
     58




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Tax and Accounting Implications
 Deductibility of Executive Compensation
  Accounting for Share-Based Compensation
  Compensation Committee Interlocks and Insider Participation in Compensation Decisions
  Compensation Committee Report
  Joseph Rubinfeld, Ph.D., Chairman
    
    Marvin R. Selter
    
    Richard L. Wennekamp
 59




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##### Table of Contents



Summary Compensation Table
  Summary Compensation Table
 OptionBonus
    
    Awards
    
    TotalName and Position
    
    Year
    
    Salary ($)
    
    ($) (1)
    
    ($) (2)
    
    ($)Steven A. Kriegsman
President and Chief Executive Officer
    
    
    2006
    
    
    
    417,175
    
    
    
    400,000
    
    
    
    340,426
    
    
    
    1,157,601Matthew Natalizio
Chief Financial Officer and Treasurer
    
    
    2006
    
    
    
    204,115
    
    
    
    43,000
    
    
    
    78,472
    
    
    
    325,587Jack R. Barber, Ph.D.
Chief Scientific Officer
    
    
    2006
    
    
    
    261,750
    
    
    
    68,750
    
    
    
    90,544
    
    
    
    421,044Benjamin S. Levin
General Counsel, Vice President  Legal Affairs and Secretary
    
    
    2006
    
    
    
    208,170
    
    
    
    68,750
    
    
    
    120,550
    
    
    
    397,470Mark A. Tepper, Ph.D.
Senior Vice President  Drug Discovery
    
    
    2006
    
    
    
    249,093
    
    
    
    
    
    
    
    205,777
    
    
    
    454,870
 
 (1)
    
    Bonuses to the named executive officers reported above were paid in June 2006, which
corresponded to the end of the contractual employment year for those officers. For future
years, we plan to determine and award bonuses at the fiscal year end, and we will report any
bonuses awarded for the latter half of 2006 when made in a Current Report on Form 8-K.(2)
    
    The values shown in this column represent the dollar amount recognized for financial
statement reporting purposes with respect to the 2006 fiscal year for the fair value of stock
options granted in 2006 and prior fiscal years in accordance with SFAS 123(R). Pursuant to SEC
rules, the amounts shown exclude the impact of estimated forfeitures related to service-based
vesting conditions. The amount recognized for these awards was calculated using the Black
Scholes option-pricing model, and reflect grants from our 2000 Long-Term Incentive Plan, which
is described in Note 13 of the Notes to Consolidated Financial Statements. 
 60




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2006 Grants of Plan-Based Awards
  2006 Grants of Plan-Based Awards
 All Other
    
    
    
    
    
    Grant DateOption Awards
    
    Exercise Price of
    
    Fair Value of(# of CytRx
    
    Option Awards
    
    Option AwardsName
    
    Grant Date
    
    Shares)
    
    ($/Sh)
    
    ($)Steven A. Kriegsman
    
    
    6/16/2006
    
    
    
    200,000
    
    
    $
    1.38
    
    
    $
    236,000President and Chief Executive OfficerMatthew Natalizio
    
    
    6/16/2006
    
    
    
    50,000
    
    
    $
    1.38
    
    
    $
    59,000Chief Financial Officer and TreasurerJack R. Barber, Ph.D.
    
    
    6/16/2006
    
    
    
    100,000
    
    
    $
    1.38
    
    
    $
    118,000Chief Scientific OfficerBenjamin S. Levin
    
    
    6/16/2006
    
    
    
    90,000
    
    
    $
    1.38
    
    
    $
    106,200General Counsel, Vice President 
Legal Affairs and SecretaryMark A. Tepper, Ph.D.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Senior Vice President  Drug Discovery
 2000 Long-Term Incentive Plan
   
    
    options to purchase shares of common stock, which may be incentive stock options or
non-qualified stock options;
    
    stock appreciation rights;
    
    restricted stock;
    
    performance units;
    
    dividend equivalents; and
    
    other stock-based awards.
  61




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Administration
  
    
    designate participants;
    
    determine the types of awards to grant to each participant and the number, terms and
conditions of any award;
    
    establish, adopt or revise any rules and regulations as it may deem necessary or
advisable to administer the Plan; and
    
    make all other decisions and determinations that may be required under, or as the
Compensation Committee deems necessary or advisable to administer, the Plan.
 Awards
  Stock Options
 Stock Appreciation Rights
 Restricted Stock
 Performance Units
 Dividend Equivalents
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##### Table of Contents



Other Stock-Based Awards
 Performance Goals.
 
    
    the achievement by CytRx or a parent or subsidiary of a specific financial target;
    
    CytRxs stock price;
    
    the achievement by an individual or a business unit of CytRx or a subsidiary of a
specific financial target;
    
    the achievement of specific goals with respect to (i) product development
milestones, (ii) corporate financings, (iii) merger and acquisition activities, (iv)
licensing transactions, (v) development of strategic partnerships or alliances, or (vi)
acquisition or development of new technologies; and
    
    any combination of the goals set forth above.
  Limitations on Transfer; Beneficiaries
 Acceleration Upon Certain Events
 63




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Termination and Amendment
  Holdings of Previously Awarded Equity
  2006 Outstanding Equity Awards at Year-End
 Option AwardsNumber ofSecuritiesUnderlyingUnexercised
    
    OptionOptions
    
    Exercise
    
    Option(#)
    
    Price
    
    ExpirationName
    
    Exercisable
    
    Unexercisable
    
    ($)
    
    DateSteven A. Kriegsman
    
    
    33,380
    
    
    
    (1
    )
    
    
    166,620
    
    
    
    1.38
    
    
    
    6/16/16President and Chief Executive
    
    
    158,317
    
    
    
    (1
    )
    
    
    141,683
    
    
    
    .79
    
    
    
    5/17/15Officer
    
    
    250,000
    
    
    
    (2
    )
    
    
    
    
    
    
    2.47
    
    
    
    6/20/13750,000
    
    
    
    (2
    )
    
    
    
    
    
    
    2.47
    
    
    
    6/20/13Matthew Natalizio
    
    
    8,345
    
    
    
    (1
    )
    
    
    41,655
    
    
    
    1.38
    
    
    
    6/16/16Chief Financial Officer and
    
    
    79,159
    
    
    
    (1
    )
    
    
    70,841
    
    
    
    .79
    
    
    
    5/17/15Treasurer
    
    
    66,667
    
    
    
    (2
    )
    
    
    33,333
    
    
    
    1.11
    
    
    
    7/12/14Jack R. Barber, Ph.D.
    
    
    16,690
    
    
    
    (1
    )
    
    
    83,310
    
    
    
    1.38
    
    
    
    6/16/16Chief Scientific Officer
    
    
    79,159
    
    
    
    (1
    )
    
    
    70,841
    
    
    
    .79
    
    
    
    5/17/1566,667
    
    
    
    (2
    )
    
    
    33,333
    
    
    
    1.13
    
    
    
    7/06/14Benjamin S. Levin
    
    
    15,021
    
    
    
    (1
    )
    
    
    74,979
    
    
    
    1.38
    
    
    
    6/16/16General Counsel, Vice
    
    
    79,159
    
    
    
    (1
    )
    
    
    70,841
    
    
    
    .79
    
    
    
    5/17/15President  Legal Affairs and
    
    
    106,667
    
    
    
    (2
    )
    
    
    53,333
    
    
    
    1.39
    
    
    
    7/15/14SecretaryMark A. Tepper, Ph.D.
    
    
    280,000
    
    
    
    (2
    )
    
    
    
    
    
    
    2.41
    
    
    
    9/16/13Senior Vice President  Drug
    
    
    120,000
    
    
    
    (2
    )
    
    
    
    
    
    
    2.41
    
    
    
    10/09/13Discovery
 
 (1)
    
    These options vest in 36 equal monthly installments, subject to the option holders
remaining in our continuous employ through such dates.(2)
    
    These options vest in three annual installments, subject to the option holders
remaining in our continuous employ through such dates. 
 64




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Employment Agreements and Potential Payment upon Termination or Change in Control
 Employment Agreement with Steven A. Kriegsman
       65




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Potential Paymenta upon Termination or Change in Control for Steven A. Kriegsman
  Employment Agreement with Matthew Natalizio
   Employment Agreement with Jack R. Barber, Ph.D.
   Employment Agreement with Mark A. Tepper, Ph.D.
  66




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Employment Agreement with Benjamin S. Levin
   RXi Employment Agreements
     Quantification of Termination Payments and Benefits
  67




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Termination Payments and Benefits
 Termination w/o Cause or forGood ReasonBefore Change in
    
    After Change in
    
    
    
    
    
    Disability
    
    Change inName
    
    Benefit
    
    Control ($)
    
    Control ($)
    
    Death ($)
    
    $
    
    Control ($)Steven A. Kriegsman
    
    Severance Payment
    
    
    870,000
    
    
    
    870,000
    
    
    
    870,000
    
    
    
    870,000
    
    
    
    President and Chief Executive
    
    Stock Options (1)
    
    
    246,993
    
    
    
    
    
    
    
    246,993
    
    
    
    246,993
    
    
    
    246,993Officer
    
    Health Insurance (2)
    
    
    45,704
    
    
    
    45,704
    
    
    
    45,704
    
    
    
    45,704
    
    
    
    Life Insurance
    
    
    11,350
    
    
    
    11,350
    
    
    
    
    
    
    
    11,350
    
    
    
    Bonus
    
    
    300,000
    
    
    
    300,000
    
    
    
    300,000
    
    
    
    300,000
    
    
    
    Tax Gross Up (3)
    
    
    
    
    
    
    0
    
    
    
    
    
    
    
    
    
    
    
    Matthew Natalizio
    
    Severance Payment
    
    
    53,750
    
    
    
    53,750
    
    
    
    
    
    
    
    
    
    
    
    Chief
Financial Officer and Treasurer
    
    Stock Options  (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    128,086Jack R. Barber, Ph.D.
    
    Severance Payment
    
    
    68,750
    
    
    
    68,750
    
    
    
    
    
    
    
    
    
    
    
    Chief Scientific Officer
    
    Stock Options  (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    149,496Benjamin S. Levin
    
    Severance Payment
    
    
    110,000
    
    
    
    110,000
    
    
    
    
    
    
    
    
    
    
    
    General Counsel, Vice
President 
    
    Stock Options  (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    146,814Legal Affairs and SecretaryMark A. Tepper, Ph.D.
    
    Severance Payment
    
    
    125,000
    
    
    
    125,000
    
    
    
    
    
    
    
    
    
    
    
    Senior Vice President  Drug
    
    Health Insurance (2)
    
    
    7,338
    
    
    
    7,338
    
    
    
    
    
    
    
    
    
    
    
    Discovery
    
    Stock Options  (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    Represents the aggregate value of stock options that vest and become exercisable
immediately upon each of the triggering events listed as if such events took place on December
31, 2006, determined by the aggregate difference between the stock price as of December 31,
2006 and the exercise prices of the underlying options.(2)
    
    Represents the cost as of December 31, 2006 for the family health benefits provided to
Messrs. Kriegsman and Tepper for periods of two years and six months, respectively.(3)
    
    Mr. Kriegsmans employment agreement provides that if a change in control (as defined in our
2000 Long-Term Incentive Plan) occurs during the term of the employment agreement, and if,
during the term and within two years after the date on which the change in control occurs, Mr.
Kriegsmans employment is terminated by us without cause or by him for good reason (each as
defined in his employment agreement), then, to the extent that any payment or distribution of
any type by us to or for the benefit of Mr. Kriegsman resulting from the termination of his
employment is or will be subject to the excise tax imposed under Section 4999 of the Internal
Revenue Code of 1986, as amended, we will pay Mr. Kriegsman, prior to the time the excise tax
is payable with respect to any such payment (through withholding or otherwise), an additional
amount that, after the imposition of all income, employment, excise and other taxes, penalties
and interest thereon, is equal to the sum of (i) the excise tax on such payments plus (ii) any
penalty and interest assessments associated with such excise tax. Based on Mr. Kriegsmans
past compensation and the estimated payment that would result from a termination of his
employment following a change in control, we have estimated that a gross-up payment would not
be required. 
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Compensation of Directors
  Director Compensation Table
 Fees Earned or
    
    OptionPaid in Cash
    
    Awards
    
    TotalName (1)
    
    ($) (2)
    
    ($) (3)
    
    ($)Max Link, Ph.D.
    
    
    48,250
    
    
    
    37,772
    
    
    
    86,022ChairmanMarvin R. Selter
    
    
    63,250
    
    
    
    37,772
    
    
    
    101,022Vice ChairmanLouis Ignarro, Ph.D.
    
    
    8,000
    
    
    
    37,772
    
    
    
    45,772DirectorJoseph Rubinfeld, Ph.D.
    
    
    45,500
    
    
    
    37,772
    
    
    
    83,272DirectorRichard Wennekamp
    
    
    48,250
    
    
    
    37,772
    
    
    
    86,022Director
 
 (1)
    
    Steven A. Kriegsman does not receive additional compensation for his role as a
Director. For information relating to Mr. Kriegsmans compensation as President and Chief
Executive Officer, see the Summary Compensation Table above.(2)
    
    The amounts in this column represent cash payments made to Non-Employee Directors
for attendance at meetings during the year.(3)
    
    In July 2006, we granted stock options to purchase 25,000 shares of our common stock at an
exercise price equal to the current market value of our common stock to each non-employee
director. The values shown in this column represent the dollar amount recognized for financial
statement reporting purposes with respect to the 2006 fiscal year for the fair value of stock
options granted in 2006 and prior fiscal years in accordance with SFAS 123(R). Pursuant to SEC
rules, the amounts shown exclude the impact of estimated forfeitures related to service-based
vesting conditions. The amount recognized for these awards was calculated using the Black
Scholes option-pricing model, and reflect grants from our 2000 Long-Term Incentive Plan, which
is described in Note 13 of the Notes to Consolidated Financial Statements.   69




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Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
  Shares ofCommon StockName of Beneficial Owner
    
    Number
    
    PercentLouis Ignarro, Ph.D.(1)
    
    
    503,916
    
    
    
    *Steven A. Kriegsman(2)
    
    
    5,282,230
    
    
    
    6.8
    %Max Link(3)
    
    
    97,083
    
    
    
    *Joseph Rubinfeld(4)
    
    
    62,000
    
    
    
    *Marvin R. Selter(5)
    
    
    407,451
    
    
    
    *Richard Wennekamp(6)
    
    
    55,000
    
    
    
    *Matthew Natalizio(7)
    
    
    181,945
    
    
    
    *Jack R. Barber(8)
    
    
    197,232
    
    
    
    *Mark A. Tepper(9)
    
    
    400,000
    
    
    
    *Benjamin S. Levin(10)
    
    
    234,175
    
    
    
    *All executive officers and directors as a group (eleven persons)(11)
    
    
    7,421,032
    
    
    
    9.3
    %
 
 (1)
    
    Includes 412,000 shares subject to options or warrants.(2)
    
    Includes 1,261,130 shares subject to options or warrants. Mr. Kriegsmans address is c/o
CytRx Corporation, 11726 San Vicente Boulevard, Suite 650, Los Angeles, CA 90049.(3)
    
    Includes 67,876 shares subject to options or warrants.(4)
    
    Includes 62,000 shares subject to options or warrants.(5)
    
    The shares shown are owned, of record, by the Selter Family Trust or Selter IRA Rollover.
Includes 50,000 shares subject to options or warrants owned by Mr. Selter.(6)
    
    Includes 50,000 shares subject to options or warrants.(7)
    
    Includes 181,945 shares subject to options or warrants.(8)
    
    Includes 197,232 shares subject to options or warrants. 70




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##### Table of Contents



(9)
    
    Includes 400,000 shares subject to options or warrants.(10)
    
    Includes 234,175 shares subject to options or warrants.(11)
    
    Includes 2,916,358 shares subject to options or warrants. 
 Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  Contribution Agreement
  Reimbursement Agreement
    
 Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  Audit Fees
  71




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Audit Related Fees
  Tax Fees
  All Other Fees
  Pre-Approval Policies and Procedures
  
 PART IV
 
 Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a)
    
    The following documents are filed as part of this 10-K:
 Financial Statements
        Financial Statement Schedules
   72




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CytRx Corporation
Form 10-K Exhibit Index
 ExhibitNumber
    
    Description
    
    Footnote3.1
    
    Corrected Restated Certificate of Incorporation
    
    (l)3.2
    
    Restated By-Laws
    
    (b)3.4
    
    Certificate of Amendment to Restated Certificate of Incorporation
    
    (l)3.5
    
    Certificate of Amendment to Restated Certificate of Incorporation
    
    (gg)3.6
    
    Certificate of Amendment to Restated Certificate of Incorporation
    
    (cc)4.1
    
    Shareholder Protection Rights Agreement dated April 16, 1997 between CytRx Corporation and American Stock Transfer &Trust Company as Rights Agent
    
    (c)4.2
    
    Amendment No. 1 to Shareholder Protection Rights Agreement
    
    (i)4.3
    
    Amendment No. 2 to Shareholder Protection Rights Agreement4.4
    
    Warrant issued on July 20, 2002 to Corporate Consulting International Group pursuant to Consulting Engagement Letter dated July 20, 2002
    
    (m)4.5
    
    Warrant issued on February 21, 2003 to Corporate Capital Group International Ltd. Inc
    
    (o)4.6
    
    Form of Common Stock Purchase Warrant between CytRx Corporation and each of the investors in the May 29, 2003 private placement
    
    (p)4.7
    
    Form of Common Stock Purchase Warrant between CytRx Corporation and each of the investors in the September 16, 2003 private placement
    
    (t)4.8
    
    Warrant issued on May 10, 2004 to MBN Consulting, LLC
    
    (v)4.9
    
    Form of Common Stock Purchase Warrant between CytRx Corporation and each of the investors in the October 4, 2004 private placement
    
    (w)4.10
    
    Form of Common Stock Purchase Warrant between CytRx Corporation and each of the investors in the January 2005 private placement
    
    (x)4.11
    
    Form of Common Stock Purchase Warrant between CytRx Corporation and each of the investors in the March 2006 private placement
    
    (bb)10.1
    
    Agreement with Emory University, as amended
    
    (d)10.2*
    
    1994 Stock Option Plan, as amended and restated
    
    (e)10.3*
    
    1995 Stock Option Plan
    
    (f)10.4*
    
    1998 Long-Term Incentive Plan
    
    (g)10.5*
    
    2000 Long-Term Incentive Plan
    
    (i)10.6*
    
    Amendment No. 1 to 2000 Long-Term Incentive Plan
    
    (k)10.7*
    
    Amendment No. 2 to 2000 Long-Term Incentive Plan
    
    (k)10.8*
    
    Amendment No. 3 to 2000 Long-Term Incentive Plan
    
    (t)10.9*
    
    Amendment No. 4 to 2000 Long-Term Incentive Plan
    
    (t)10.10
    
    License Agreement dated November 1, 2000 by and between CytRx Corporation and Merck & Co., Inc
    
    (h)10.11
    
    License Agreement dated December 7, 2001 by and between CytRx Corporation and Vical Incorporated
    
    (j)10.12
    
    Registration Rights Agreement, dated as of May 29, 2003, between CytRx Corporation and the Purchasers identified on the signature page thereof
    
    (p)
 74




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##### Table of Contents



ExhibitNumber
    
    Description
    
    Footnote10.13
    
    Non-Exclusive License Agreement dated as of April 15, 2003 between University of Massachusetts Medical School and CytRx Corporation covering RNA sequence specific mediators of RNA interference
    
    (q)10.14
    
    Exclusive License Agreement dated as of April 15, 2003 between University of Massachusetts Medical School and CytRx Corporation covering in vivo production of small interfering RNAs
    
    (q)10.15
    
    Exclusive License Agreement dated as of April 15, 2003 between University of Massachusetts Medical School and CytRx Corporation covering selective silencing of a dominant ALS gene by RNAi
    
    (q)10.16
    
    Form of Registration Rights Agreement, dated as of September 15, 2003, between CytRx Corporation and the Purchasers identified on the signature page thereof
    
    (r)10.17
    
    Amended and Restated License Agreement dated as of September 15, 2003 between University of Massachusetts Medical School and CytRx Corporation covering inhibition of gene expression in adipocytes using interference RNA, certain data bases, the use of endoplasmic reticulum stress response pathway of adipose cells to enhance whole body insulin sensitivity, and receptor-activated reporter systems
    
    (s)10.18
    
    Agreement among University of Massachusetts, Advanced BioScience Laboratories, Inc and CytRx Corporation, dated as of December 3, 2003
    
    (t)10.19
    
    Amended and Restated Exclusive License Agreement among University of Massachusetts Medical School, CytRx Corporation and Advanced BioScience Laboratories, Inc., dated as of December 22, 2003
    
    (t)10.20
    
    Collaboration Agreement among University of Massachusetts, Advanced BioScience Laboratories, Inc. and CytRx Corporation, dated as of December 22, 2003
    
    (t)10.21
    
    Sublicense Agreement between CytRx Corporation and Advanced BioScience Laboratories, Inc., dated as of December 22, 2003
    
    (t)10.22
    
    Agreement between CytRx Corporation and Dr. Robert Hunter regarding SynthRx, Inc dated October 20, 2003
    
    (t)10.23
    
    Office Lease between The Kriegsman Group and Douglas Emmett, dated April 13, 2000
    
    (t)10.24
    
    Assignment to CytRx Corporation effective July 1, 2003 of Office Lease between The Kriegsman Group and Douglas Emmett, dated April 13, 2000
    
    (t)10.25
    
    Office Lease between Araios, Inc. and Are-One Innovation Drive, LLC dated 11-19-03
    
    (t)10.26
    
    Patent License Agreement, dated May, 2004, among CytRx Corporation, Imperial College of Science and Technology and Imperial College Innovations Limited
    
    (u)10.27
    
    Asset Sale and Purchase Agreement dated October 4, 2004, by and among CytRx Corporation, Biorex Research & Development, RT and BRX Research and Development Company Ltd
    
    (w)10.28
    
    Registration Rights Agreement dated as of October 4, 2004 among CytRx Corporation and the Purchasers identified on the signatory page thereof
    
    (w)10.29
    
    Securities Purchase Agreement, dated as of January 20, 2005, by and among CytRx Corporation and the Investors named therein
    
    (x)10.30
    
    Registration Rights Agreement, dated as of January 20, 2005, by and among CytRx Corporation and the Investors named therein
    
    (x)10.31*
    
    Employment Agreement dated October 6, 2005 between CytRx Corporation and Dr. Mark A. Tepper
    
    (y)
 75




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##### Table of Contents



ExhibitNumber
    
    Description
    
    Footnote10.32*
    
    Amended and Restated Employment Agreement dated May 17, 2005 between CytRx Corporation and Steven A. Kriegsman
    
    (z)10.33
    
    First Amendment to Office Lease dated October 14, 2005, by and between CytRx Corporation and Douglas Emmett 1993, LLC
    
    (aa)10.34
    
    Registration Rights Agreement, dated as of March 2, 2006, by and among CytRx Corporation and the purchasers named therein.
    
    (bb)10.35
    
    First Amendment to Lease Agreement dated March 24, 2006, by and between CytRx Corporation and ARE-One Innovation Drive, LLC
    
    (dd)10.36*
    
    Second Amended and Restated Employment Agreement dated June 16, 2006 between CytRx Corporation and Dr. Jack Barber
    
    (ee)10.37*
    
    Second Amended and Restated Employment Agreement dated June 16, 2006 between CytRx Corporation and Matthew Natalizio
    
    (ee)10.38*
    
    Second Amended and Restated Employment Agreement dated June 16, 2006 between CytRx Corporation and Benjamin S. Levin
    
    (ee)10.39*
    
    Schedule of Non-Employee Director Compensation adopted on June 20, 2006
    
    (ee)10.40
    
    Royalty Agreement dated August 28, 2006 between CytRx Corporation and Kenneth Council, as Trustee of the ALS Charitable Remainder Trust
    
    (ff)21.1
    
    Subsidiaries23.1
    
    Consent of BDO Seidman, LLP31.1
    
    Certification of Chief Executive Officer Pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer Pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 *
    
    Indicates a management contract or compensatory plan or arrangement.
    
    Confidential treatment has been requested or granted for certain portions which have been
blanked out in the copy of the exhibit filed with the Securities and Exchange Commission. The
omitted information has been filed separately with the Securities and Exchange Commission.(a)
    
    Incorporated by reference to the Registrants Registration Statement on Form S-3 (File No.
333-39607) filed on November 5, 1997(b)
    
    Incorporated by reference to the Registrants Registration Statement on Form S-8 (File No.
333-37171) filed on July 21, 1997(c)
    
    Incorporated by reference to the Registrants Current Report on Form 8-K filed on April 17,
1997(d)
    
    Incorporated by reference to the Registrants Registration Statement on Form S-l (File No.
33-8390) filed on November 5, 1986(e)
    
    Incorporated by reference to the Registrants Quarterly Report on Form 10-Q filed on November
13, 1997 76




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##### Table of Contents



(f)
    
    Incorporated by reference to the Registrants Registration Statement on Form S-8 (File No.
33-93818) filed on June 22, 1995(g)
    
    Incorporated by reference to the Registrants Annual Report on Form 10-K filed on March 30,
1998(h)
    
    Incorporated by reference to the Registrants Current Report on Form 8-K/A filed on March 16,
2001(i)
    
    Incorporated by reference to the Registrants Annual Report on Form 10-K filed on March 27,
2001(j)
    
    Incorporated by reference to the Registrants Current Report on Form 8-K filed on December
21, 2001(k)
    
    Incorporated by reference to the Registrants Proxy Statement filed June 10, 2002(l)
    
    Incorporated by reference to the Registrants Form S-8 (File No. 333-91068) filed on June 24,
2002(m)
    
    Incorporated by reference to the Registrants 10-Q filed on November 14, 2002(n)
    
    Incorporated by reference to the Registrants 10-K filed on March 31, 2003(o)
    
    Incorporated by reference to the Registrants 10-Q filed on May 15, 2003(p)
    
    Incorporated by reference to the Registrants 8-K filed on May 30, 2003(q)
    
    Incorporated by reference to the Registrants S-3 Amendment No. 4 (File No. 333-100947) filed
on August 5, 2003(r)
    
    Incorporated by reference to the Registrants 8-K filed on September 17, 2003(s)
    
    Incorporated by reference to the Registrants 10-Q filed on November 12, 2003(t)
    
    Incorporated by reference to the Registrants 10-K filed on May 14, 2004(u)
    
    Incorporated by reference to the Registrants Post-Effective Amendment No. 1 to Registration
Statement on Form S-1 to Form S-3 (Reg. No. 333-109708) filed on June 2, 2004(v)
    
    Incorporated by reference to the Registrants 10-Q filed on August 16, 2004(w)
    
    Incorporated by reference to the Registrants 8-K filed on October 5, 2004(x)
    
    Incorporated by reference to the Registrants 8-K filed on January 21, 2005(y)
    
    Incorporated by reference to the Registrants 8-K filed on October 7, 2005(z)
    
    Incorporated by reference to the Registrants 10-Q filed on August 15, 2005(aa)
    
    Incorporated by reference to the Registrants 8-K filed on October 20, 2005(bb)
    
    Incorporated by reference to the Registrants 8-K filed on March 3, 2006(cc)
    
    Incorporated by reference to the Registrants Proxy Statement filed June 7, 2005(dd)
    
    Incorporated by reference to the Registrants Current Report on Form 8-K filed on March 24, 2006(ee)
    
    Incorporated by reference to the Registrants 10-Q filed on August 3, 2006 77




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##### Table of Contents



(ff)
    
    Incorporated by reference to the Registrants 10-Q filed on November 13, 2006(gg)
    
    Incorporated by reference to the Registrants Proxy Statement filed September 17, 2003 78




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##### Table of Contents



SIGNATURES
  Date: March 31, 2007
    CYTRX CORPORATIONBy:
    /s/ STEVEN A. KRIEGSMANSteven A. KriegsmanPresident and Chief Executive Officer 79




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##### Table of Contents



INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
 CytRx Corporation
    
    
    F-2Consolidated Balance Sheets
    
    
    F-2Consolidated Statements of Operations (restated)
    
    
    F-3Consolidated Statements of Stockholders Equity
    
    
    F-4Consolidated Statements of Cash Flows
    
    
    F-5Notes to Consolidated Financial Statements
    
    
    F-6Reports of Independent Registered Public Accounting Firm
    
    
    F-22Financial Statement Schedule Schedule II  Valuation and Qualifying Accounts
    
    
    F-23
 F-1




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##### Table of Contents



CYTRX CORPORATION
 
 CONSOLIDATED BALANCE SHEETS
 December 31,2006
    
    
    2005(restated)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    30,381,393
    
    
    $
    8,299,390Accounts Receivable
    
    
    105,930
    
    
    
    172,860Prepaid insurance, current portion
    
    
    189,193
    
    
    
    192,797Prepaid expenses and other current assets
    
    
    44,130
    
    
    
    122,809Total current assets
    
    
    30,720,646
    
    
    
    8,787,856Equipment and furnishings, net
    
    
    252,719
    
    
    
    352,641Molecular library, net
    
    
    283,460
    
    
    
    372,973Goodwill
    
    
    183,780
    
    
    
    183,780Other assets:Deposits and prepaid insurance expense
    
    
    195,835
    
    
    
    241,660Total assets
    
    $
    31,636,440
    
    
    $
    9,938,910LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    955,156
    
    
    $
    815,626Accrued expenses and other current liabilities
    
    
    2,722,478
    
    
    
    1,639,922Deferred revenue, current portion
    
    
    6,733,350
    
    
    
    Total current liabilities
    
    
    10,410,984
    
    
    
    2,455,548Deferred revenue, non-current portion
    
    
    16,075,117
    
    
    
    275,000Total liabilities
    
    
    26,486,101
    
    
    
    2,730,548Commitment and contingenciesStockholders equity:Preferred Stock, $.01 par value, 5,000,000
shares authorized, including 5,000 shares of
Series A Junior Participating Preferred
Stock; no shares issued and outstanding
    
    
    
    
    
    
    Common stock, $.001 par value, 125,000,000
shares authorized; 70,788,586 and 59,283,960
shares issued and outstanding at December 31,
2006 and 2005, respectively
    
    
    70,789
    
    
    
    59,284Additional paid-in capital
    
    
    146,961,657
    
    
    
    131,790,932Treasury stock, at cost (633,816 shares held,
at December 31, 2006 and 2005, respectively)
    
    
    (2,279,238
    )
    
    
    (2,279,238
    )Accumulated deficit
    
    
    (139,602,869
    )
    
    
    (122,362,616
    )Total stockholders equity
    
    
    5,150,339
    
    
    
    7,208,362Total liabilities and stockholders equity
    
    $
    31,636,440
    
    
    $
    9,938,910
  F-2




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##### Table of Contents



CYTRX CORPORATION
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Years Ended December 31,2006
    
    
    2005
    
    
    2004(restated)Income:License fees
    
    $
    101,000
    
    
    $
    101,500
    
    
    $
    428,164Grant revenue
    
    
    105,930
    
    
    
    
    
    
    
    Service revenue
    
    
    1,858,772
    
    
    
    82,860
    
    
    
    2,065,702
    
    
    
    184,360
    
    
    
    428,164Expenses:Research and development (includes non-cash stock
compensation to consultants of $674,030, $219,718
and $1,387,645 in 2006, 2005, and 2004,
respectively; employee stock option expense of
$248,908 in 2006)
    
    
    9,781,007
    
    
    
    9,087,270
    
    
    
    6,012,903In-process research and development
    
    
    
    
    
    
    
    
    
    
    3,021,952General and administrative (includes non-cash
stock compensation to consultants of $59,578,
$366,753 and $1,977,330 in 2006, 2005 and 2004,
respectively; employee stock option expense of
$975,546 in 2006)
    
    
    9,657,257
    
    
    
    6,424,106
    
    
    
    7,901,240Depreciation
and amortization
    
    
    227,704
    
    
    
    217,095
    
    
    
    103,85119,665,968
    
    
    
    15,728,471
    
    
    
    17,039,946Loss before other income
    
    
    (17,600,266
    )
    
    
    (15,544,111
    )
    
    
    (16,611,782
    )Other income:Interest income
    
    
    996,647
    
    
    
    206,195
    
    
    
    59,977Gain on lease termination
    
    
    
    
    
    
    163,604
    
    
    
    Other expense
    
    
    (3,205
    )
    
    
    
    
    
    
    (16,606,824
    )
    
    
    (15,174,312
    )
    
    
    (16,551,805
    )Minority interest in losses of subsidiary
    
    
    
    
    
    
    81,452
    
    
    
    159,616Net loss before provision for income taxes
    
    
    (16,606,824
    )
    
    
    (15,092,860
    )
    
    
    (16,392,189
    )Provision for income taxes
    
    
    (145,000
    )
    
    
    
    
    
    
    Net loss
    
    
    (16,751,824
    )
    
    
    (15,092,860
    )
    
    
    (16,392,189
    )Deemed dividend for anti-dilution adjustments made to
outstanding common stock warrants
    
    
    (488,429
    )
    
    
    (1,075,568
    )
    
    
    Net loss applicable to common stockholders
    
    $
    (17,240,253
    )
    
    $
    (16,168,428
    )
    
    $
    (16,392,189
    )Basic and diluted loss per share, as originally stated
    
    $
    (0.25
    )
    
    $
    (0.27
    )
    
    $
    (0.48
    )Basic and diluted loss per share, as restated
    
    $
    (0.25
    )
    
    $
    (0.28
    )
    
    $
    (0.48
    )Basic and diluted weighted average shares outstanding
    
    
    68,105,626
    
    
    
    56,852,402
    
    
    
    34,325,636
  F-3




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##### Table of Contents



CYTRX CORPORATION
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 AdditionalCommon Stock
    
    
    Paid-In
    
    
    Accumulated
    
    
    TreasuryShares Issued
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Stock
    
    
    TotalBalance at December 31, 2003
    
    
    34,392,000
    
    
    $
    34,392
    
    
    $
    102,239,460
    
    
    $
    (89,801,998
    )
    
    $
    (2,279,238
    )
    
    $
    10,192,616Common stock and warrants issued in connection
with private placements
    
    
    4,100,000
    
    
    
    4,100
    
    
    
    3,899,900
    
    
    
    
    
    
    
    
    
    
    
    3,904,000Issuance of common stock for services
    
    
    800,000
    
    
    
    800
    
    
    
    1,252,950
    
    
    
    
    
    
    
    
    
    
    
    1,253,750Issuance of stock options/warrants for services and licenses
    
    
    
    
    
    
    
    
    
    
    2,111,225
    
    
    
    
    
    
    
    
    
    
    
    2,111,225Options and warrants exercised
    
    
    897,688
    
    
    
    898
    
    
    
    524,792
    
    
    
    
    
    
    
    
    
    
    
    525,690Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,392,189
    )
    
    
    
    
    
    
    (16,392,189
    )Balance at December 31, 2004
    
    
    40,189,688
    
    
    
    40,190
    
    
    
    110,028,327
    
    
    
    (106,194,187
    )
    
    
    (2,279,238
    )
    
    
    1,595,092Common stock and warrants issued in connection
with private placements
    
    
    18,084,494
    
    
    
    18,084
    
    
    
    19,572,362
    
    
    
    
    
    
    
    
    
    
    
    19,590,446Issuance of stock options/warrants
For services and licenses
    
    
    
    
    
    
    
    
    
    
    586,471
    
    
    
    
    
    
    
    
    
    
    
    586,471For minority interest
    
    
    
    
    
    
    
    
    
    
    273,000
    
    
    
    
    
    
    
    
    
    
    
    273,000Options and warrants exercised
    
    
    1,009,778
    
    
    
    1,010
    
    
    
    255,203
    
    
    
    
    
    
    
    
    
    
    
    256,213Deemed dividend
    
    
    
    
    
    
    
    
    
    
    1,075,569
    
    
    
    (1,075,569
    )
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,092,860
    )
    
    
    
    
    
    
    (15,092,860
    )Balance at December 31, 2005
    
    
    59,283,960
    
    
    
    59,284
    
    
    
    131,790,932
    
    
    
    (122,362,616
    )
    
    
    (2,279,238
    )
    
    
    7,208,362Common stock and warrants issued in connection
with private placements
    
    
    10,650,795
    
    
    
    10,651
    
    
    
    12,393,709
    
    
    
    
    
    
    
    
    
    
    
    12,404,360Issuance of stock options/warrants
for services and licenses
    
    
    149,928
    
    
    
    150
    
    
    
    1,930,098
    
    
    
    
    
    
    
    
    
    
    
    1,930,248Options and warrants exercised
    
    
    703,903
    
    
    
    704
    
    
    
    358,489
    
    
    
    
    
    
    
    
    
    
    
    359,193Deemed dividend
    
    
    
    
    
    
    
    
    
    
    488,429
    
    
    
    (488,429
    )
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,751,824
    )
    
    
    
    
    
    
    (16,751,824
    )Balance at December 31, 2006
    
    
    70,788,586
    
    
    $
    70,789
    
    
    $
    146,961,657
    
    
    $
    (139,602,869
    )
    
    $
    (2,279,238
    )
    
    $
    5,150,339
  F-4




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##### Table of Contents



CYTRX CORPORATION
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Years Ended December 31,2006
    
    
    2005
    
    
    2004Cash flows from operating activities:Net loss
    
    $
    (16,751,824
    )
    
    $
    (15,092,860
    )
    
    $
    (16,392,189
    )Adjustments to reconcile net loss to net cash provided by (used in) operating activities:Depreciation and amortization
    
    
    227,704
    
    
    
    217,095
    
    
    
    103,851Loss on retirement of equipment
    
    
    2,864
    
    
    
    
    
    
    
    Minority interest in losses of subsidiary
    
    
    
    
    
    
    (81,452
    )
    
    
    (159,616
    )Gain on lease termination
    
    
    
    
    
    
    (163,604
    )
    
    
    Stock option and warrant expense
    
    
    1,284,032
    
    
    
    366,753
    
    
    
    1,104,730Common stock issued for services
    
    
    262,500
    
    
    
    
    
    
    
    872,600Non-cash stock compensation related to research and development
    
    
    411,530
    
    
    
    219,718
    
    
    
    1,387,645Changes in assets and liabilities:Accounts receivable
    
    
    66,930
    
    
    
    (172,860
    )
    
    
    Note receivable
    
    
    
    
    
    
    
    
    
    
    16,608Prepaid expenses and other assets
    
    
    100,295
    
    
    
    596,935
    
    
    
    (768,433
    )Accounts payable
    
    
    139,530
    
    
    
    (845,477
    )
    
    
    922,969Deferred revenue
    
    
    22,533,467
    
    
    
    
    
    
    
    Accrued expenses and other current liabilities
    
    
    1,082,557
    
    
    
    456,637
    
    
    
    558,643Total adjustments
    
    
    26,111,409
    
    
    
    593,745
    
    
    
    4,038,997Net cash provided by (used in) operating activities
    
    
    9,359,585
    
    
    
    (14,499,115
    )
    
    
    (12,353,192
    )Cash flows from investing activities:Purchases of short-term investments
    
    
    
    
    
    
    
    
    
    
    (961,765
    )Redemption of short-term investments
    
    
    
    
    
    
    1,011,814
    
    
    
    Net cash paid related to acquisition/purchases of property and equipment
    
    
    (41,133
    )
    
    
    (47,563
    )
    
    
    (771,584
    )Net cash (used in) provided by investing activities
    
    
    (41,133
    )
    
    
    964,251
    
    
    
    (1,733,349
    )Cash flows from financing activities:Net proceeds from exercise of stock options and warrants
    
    
    359,191
    
    
    
    256,213
    
    
    
    525,690Net proceeds from issuance of common stock
    
    
    12,404,360
    
    
    
    19,590,446
    
    
    
    3,904,000Net cash provided by financing activities
    
    
    12,763,551
    
    
    
    19,846,659
    
    
    
    4,429,690Net increase (decrease) in cash and cash equivalents
    
    
    22,082,003
    
    
    
    6,311,795
    
    
    
    (9,656,851
    )Cash and cash equivalents at beginning of year
    
    
    8,299,390
    
    
    
    1,987,595
    
    
    
    11,644,446Cash and cash equivalents at end of year
    
    $
    30,381,393
    
    
    $
    8,299,390
    
    
    $
    1,987,595Supplemental disclosure of cash flow information:Cash received during the year for interest received
    
    $
    996,647
    
    
    $
    206,195
    
    
    $
    59,977Supplemental disclosures of non-cash investing activities:Fair market value of options and warrants provided for goods and services
    
    $
    705,794
    
    
    $
    586,471
    
    
    $
    1,104,730Fair market value of common stock exchanged for minority interest in subsidiary
    
    $
    
    
    
    $
    273,000
    
    
    $
    
 Non-cash financing activities:
   F-5




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##### Table of Contents



CYTRX CORPORATION
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. Nature of Business
    F-6




---



##### Table of Contents



2. Summary of Significant Accounting Policies
 Basis of Presentation and Principles of Consolidation
 Revenue Recognition
   Research and Development Arrangements
 Cash Equivalents
 Fair Value of Financial Instruments
 Property and Equipment
 F-7




---



##### Table of Contents



Molecular Library
 Impairment of Long-Lived Assets
 Patents and Patent Application Costs
 Basic and Diluted Loss per Common Share
  Shares Reserved for Future Issuance
 Share-based Compensation
  F-8




---



##### Table of Contents



Research and Development Expenses
 Income Taxes
 Concentrations of Credit Risk
 Use of Estimates
 F-9




---



##### Table of Contents



Reclassifications
 Other comprehensive income/(loss)
 3. Recent Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes
 Fair Value Measurements
  Accounting for Registration Payment Arrangements Accounting for
Contingencies
 F-10




---



##### Table of Contents



4. Accounts Receivable
  5. Other Assets
  6. Equipment, Furnishings and Molecular Library, net
  2006
    
    
    2005Equipment and furnishings
    
    $
    502
    
    
    $
    601Less  accumulated depreciation
    
    
    (249
    )
    
    
    (248
    )Property and equipment, net
    
    
    253
    
    
    
    353Molecular library
    
    $
    447
    
    
    $
    447Less  accumulated amortization
    
    
    (164
    )
    
    
    (75
    )Molecular library, net
    
    $
    283
    
    
    $
    372
   7. Accrued Expenses
  2006
    
    
    2005Professional fees
    
    $
    900
    
    
    $
    205Research and development costs
    
    
    1,013
    
    
    
    911Bonuses
    
    
    276
    
    
    
    163Settlement fees
    
    
    253
    
    
    
    253Income taxes
    
    
    145
    
    
    
    Other
    
    
    135
    
    
    
    108Total
    
    $
    2,722
    
    
    $
    1,640
 8. Termination of the Atlanta Facility Lease
  F-11




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##### Table of Contents



9. Commitments and Contingencies
   Non-Cancelable
    
    
    CancelableOperating
    
    
    Employment
    
    
    
    
    
    
    
    Research and
    
    
    LicenseLeases
    
    
    Agreements
    
    
    
    Subtotal
    
    
    Development
    
    
    Agreements
    
    
    
    Subtotal(In thousands)(1)
    
    
    (2)
    
    
    
    
    
    
    
    (3)
    
    
    (4)
    
    
    
    
    
    
    
    Total2007
    
    $
    534
    
    
    $
    1,735
    
    
    
    $
    2,269
    
    
    $
    5,583
    
    
    $
    1,267
    
    
    
    $
    6,850
    
    
    $
    9,1192008
    
    
    138
    
    
    
    876
    
    
    
    
    1,014
    
    
    
    7,424
    
    
    
    332
    
    
    
    
    7,756
    
    
    
    8,7702009
    
    
    26
    
    
    
    490
    
    
    
    
    516
    
    
    
    914
    
    
    
    332
    
    
    
    
    1,246
    
    
    
    1,7622010
    
    
    10
    
    
    
    240
    
    
    
    
    250
    
    
    
    
    
    
    
    282
    
    
    
    
    282
    
    
    
    5322011 and thereafter
    
    
    5
    
    
    
    120
    
    
    
    
    125
    
    
    
    
    
    
    
    7,455
    
    
    
    
    7,455
    
    
    
    7,580Total
    
    $
    713
    
    
    $
    3,461
    
    
    
    $
    4,174
    
    
    $
    13,921
    
    
    $
    9,668
    
    
    
    $
    23,589
    
    
    $
    27,763
 
 (1)
    
    Operating leases are primarily facility lease related obligations, as well as equipment and
software lease obligations with third party vendors. Facility lease expenses during 2006, 2005
and 2004 were approximately $472,000, $380,000 and $364,000, respectively.(2)
    
    Employment agreement obligations include management contracts, as well as scientific advisory
board member compensation agreements. Certain agreements, which have been revised from time to
time, provide for minimum salary levels, adjusted annually at the discretion of the Companys
Compensation Committee, as well as for minimum bonuses that are payable.(3)
    
    Research and development obligations relate primarily to CytRxs Phase IIb clinical trial for
arimoclomol for ALS. Most of these purchase obligations are cancelable.(4)
    
    License agreements generally relate to CytRxs obligations for licenses with UMMS associated
with RNAi, which CytRx is developing through its majority-owned RXi subsidiary. Included in
the 2007 license obligations is an $800,000 payment that may be made in cash or common stock
of RXi to UMMS. CytRx anticipates making that payment in common stock of RXi following RXis
initial funding. F-12




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##### Table of Contents



10. Private Placements of Common Stock
  Accounting for Convertible Securities with
Beneficial Conversion Features or Contingently Adjustable Conversion Ratios, ,
Application of 98-5 to Certain Convertible Instruments,
  Accounting for Derivative
Financial Instruments Indexed To, and Potentially Settled In a Companys Own Stock, ,
Accounting for Registration Payment Arrangements Accounting
for Contingencies
   F-13




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##### Table of Contents



11. Investment in CytRx Laboratories
  12. Severance Payments to Officers
  13. Stock Options and Warrants
 Options
   F-14




---



##### Table of Contents



Years Ended December 31,2005
    
    
    2004(restated)Net loss applicable to common stockholders
    
    $
    (16,168
    )
    
    $
    (16,392
    )Total stock-based employee compensation
expense determined under fair-value based
method for all awards
    
    
    (1,388
    )
    
    
    (1,415
    )Pro forma net loss
    
    $
    (17,556
    )
    
    $
    (17,807
    )Loss per share, as originally reported (basic and diluted)
    
    $
    (0.27
    )
    
    $
    (0.48
    )Loss per share, as restated (basic and diluted)
    
    $
    (0.28
    )
    
    $
    (0.48
    )Loss per share, pro forma (basic and diluted)
    
    $
    (0.31
    )
    
    $
    (0.52
    )
   2006
    
    2005
    
    2004Weighted average risk free interest rate
    
    
    4.91
    %
    
    
    4.10
    %
    
    
    3.65
    %Dividend yields
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Weighted average volatility
    
    
    112
    %
    
    
    109
    %
    
    
    117
    %Expected lives (years)
    
    
    6
    
    
    
    8
    
    
    
    8Weighted average years outstanding
    
    
    7.5
    
    
    
    4.8
    
    
    
    5.8
  F-15




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##### Table of Contents



Weighted AverageStock Options
    
    Exercise Price2006
    
    2005
    
    2004
    
    2006
    
    2005
    
    2004Outstanding  beginning of year
    
    
    6,205,542
    
    
    
    4,741,042
    
    
    
    2,778,042
    
    
    $
    1.71
    
    
    $
    1.93
    
    
    $
    2.08Granted
    
    
    1,033,500
    
    
    
    1,519,500
    
    
    
    2,318,000
    
    
    
    1.30
    
    
    
    0.95
    
    
    
    1.73Exercised
    
    
    (82,500
    )
    
    
    (17,000
    )
    
    
    (55,000
    )
    
    
    0.97
    
    
    
    0.92
    
    
    
    0.89Forfeited
    
    
    (1,667
    )
    
    
    (38,000
    )
    
    
    (285,000
    )
    
    
    1.00
    
    
    
    1.52
    
    
    
    2.00Expired
    
    
    (296,667
    )
    
    
    
    
    
    
    (15,000
    )
    
    
    1.59
    
    
    
    
    
    
    
    3.16Outstanding  end of year
    
    
    6,858,208
    
    
    
    6,205,542
    
    
    
    4,741,042
    
    
    
    1.66
    
    
    
    1.69
    
    
    
    1.93Exercisable at end of year
    
    
    4,758,330
    
    
    
    3,438,157
    
    
    
    2,136,898
    
    
    $
    1.80
    
    
    $
    1.89
    
    
    $
    1.94Weighted average fair value of stock options granted during the year:
    
    $
    1.11
    
    
    $
    0.95
    
    
    $
    1.73
  Weighted AverageGrant Date FairStock Options
    
    Value per Share2006
    
    2005
    
    2004
    
    2006
    
    2005
    
    2004Nonvested at January 1,
    
    
    2,767,384
    
    
    
    2,604,161
    
    
    
    2,304,388
    
    
    $
    1.30
    
    
    $
    1.72
    
    
    $
    1.99Granted
    
    
    1,033,500
    
    
    
    1,519,500
    
    
    
    2,318,000
    
    
    
    1.11
    
    
    
    0.82
    
    
    
    1.52Vested
    
    
    (1,497,674
    )
    
    
    (1,356,277
    )
    
    
    (1,753,227
    )
    
    
    1.34
    
    
    
    1.54
    
    
    
    1.81Pre-vested forfeitures
    
    
    (203,333
    )
    
    
    
    
    
    
    (265,000
    )
    
    
    1.16
    
    
    
    
    
    
    
    1.73Nonvested at December 31,
    
    
    2,099,877
    
    
    
    2,767,384
    
    
    
    2,604,161
    
    
    
    1.19
    
    
    
    1.30
    
    
    
    1.72
  Weighted AverageRemaining
    
    
    
    
    
    Number ofRange of
    
    
    
    
    
    Contractual Life
    
    Weighted Average
    
    Options
    
    Weighted Average
    
    Weighted AverageExercise Prices
    
    Number of Options
    
    (years)
    
    Exercise Price
    
    Exercisable
    
    Contractual Life
    
    Exercise Price$0.25  1.00
    
    
    1,147,709
    
    
    
    7.50
    
    
    $
    0.81
    
    
    
    667,890
    
    
    
    7.50
    
    
    $
    0.81$1.01  1.50
    
    
    1,763,000
    
    
    
    8.70
    
    
    
    1.25
    
    
    
    905,771
    
    
    
    8.70
    
    
    
    1.25$1.51  2.00
    
    
    2,284,500
    
    
    
    7.14
    
    
    
    1.86
    
    
    
    1,534,170
    
    
    
    7.14
    
    
    
    1.86$2.01  3.00
    
    
    1,662,999
    
    
    
    6.61
    
    
    
    2.43
    
    
    
    1,650,499
    
    
    
    6.61
    
    
    
    2.446,858,208
    
    
    
    7.47
    
    
    $
    1.66
    
    
    
    4,758,330
    
    
    
    7.47
    
    
    $
    1.80
  F-16




---



##### Table of Contents



Warrants
  Weighted AverageWarrants
    
    Exercise Price2006
    
    2005
    
    2004
    
    2006
    
    2005
    
    2004Outstanding  beginning of year
    
    
    18,508,949
    
    
    
    9,735,416
    
    
    
    7,352,077
    
    
    $
    1.94
    
    
    $
    1.64
    
    
    $
    1.61Granted
    
    
    6,112,870
    
    
    
    10,267,887
    
    
    
    3,884,778
    
    
    
    1.54
    
    
    
    1.96
    
    
    
    1.58Exercised
    
    
    (1,261,654
    )
    
    
    (1,294,354
    )
    
    
    (976,439
    )
    
    
    1.16
    
    
    
    0.55
    
    
    
    0.74Forfeited
    
    
    
    
    
    
    
    
    
    
    (500,000
    )
    
    
    
    
    
    
    
    
    
    
    2.25Expired
    
    
    
    
    
    
    (200,000
    )
    
    
    (25,000
    )
    
    
    
    
    
    
    1.00
    
    
    
    0.80Outstanding  end of year
    
    
    23,360,165
    
    
    
    18,508,949
    
    
    
    9,735,416
    
    
    
    1.83
    
    
    
    1.94
    
    
    
    1.64Exercisable at end of year
    
    
    23,360,165
    
    
    
    18,508,949
    
    
    
    9,735,416
    
    
    $
    1.83
    
    
    $
    1.94
    
    
    $
    1.58Weighted average fair value of
warrants granted during the year:
    
    $
    1.54
    
    
    $
    2.00
    
    
    $
    1.36
  Warrants OutstandingWeightedAverage
    
    
    
    
    
    WarrantsRemaining
    
    Weighted
    
    Number of
    
    ExercisableNumber of
    
    Contractual Life
    
    Average
    
    Shares
    
    Weighted AverageRange of Exercise Prices
    
    Shares
    
    (years)
    
    Exercise Price
    
    Exercisable
    
    Exercise Price$0.20 - 1.05
    
    
    506,362
    
    
    
    .05
    
    
    $
    .21
    
    
    
    506,362
    
    
    $
    .21$1.06 - 1.79
    
    
    10,079,726
    
    
    
    3.92
    
    
    
    1.56
    
    
    
    10,079,726
    
    
    
    1.56$1.80 - 2.67
    
    
    10,632,966
    
    
    
    3.16
    
    
    
    2.00
    
    
    
    10,632,966
    
    
    
    2.00$2.68 - 2.70
    
    
    2,141,111
    
    
    
    1.66
    
    
    
    2.70
    
    
    
    2,141,111
    
    
    
    2.7023,360,165
    
    
    
    3.28
    
    
    $
    1.83
    
    
    
    23,360,165
    
    
    $
    1.83
 14. Stockholder Protection Rights Plan
    F-17




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##### Table of Contents



15. Income Taxes
   December 31,2006
    
    
    2005Deferred tax assets:Net operating loss carryforward
    
    $
    30,892
    
    
    $
    35,607Tax credit carryforward
    
    
    2,391
    
    
    
    6,443Equipment, furnishings and other
    
    
    1,547
    
    
    
    4,476Deferred revenue
    
    
    9,085
    
    
    
    Total deferred tax assets
    
    
    43,915
    
    
    
    46,526Deferred tax liabilities  Prepaid insurance
    
    
    (85
    )
    
    
    (2,730
    )Net deferred tax assets
    
    
    43,830
    
    
    
    43,796Valuation allowance
    
    
    (43,830
    )
    
    
    (43,796
    )$
    
    
    
    $
    
   Years ended December 31,2006
    
    
    2005
    
    
    2004Federal benefit at statutory rate
    
    $
    (5,646
    )
    
    $
    (5,128
    )
    
    $
    (5,570
    )State income taxes, net of Federal taxes
    
    
    (968
    )
    
    
    (603
    )
    
    
    (655
    )Permanent differences
    
    
    143
    
    
    
    736
    
    
    
    1,103Provision related to change in valuation allowance
    
    
    34
    
    
    
    5,308
    
    
    
    5,122Net write-off of research and development tax credits
    
    
    5,059
    
    
    
    
    
    
    
    Change in state tax rates
    
    
    2,160Other, net
    
    
    (637
    )
    
    
    (313
    )
    
    
    $
    145
    
    
    $
    
    
    
    $
    
 F-18




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##### Table of Contents



16. License Agreements
    17. Quarterly Financial Data (unaudited)
  Quarter EndedMarch 31
    
    
    June 30
    
    
    September 30
    
    
    December 31(In thousands, except per share data)(restated)2006Total revenues
    
    $
    61
    
    
    $
    
    
    
    $
    776
    
    
    $
    1,229Net loss
    
    
    (4,166
    )
    
    
    (5,465
    )
    
    
    (2,972
    )
    
    
    (4,148
    )Deemed dividend for anti-dilution adjustments made to outstanding common stock warrants
    
    
    (488
    )
    
    
    
    
    
    
    
    
    
    
    Net loss applicable to common stockholders
    
    $
    (4,654
    )
    
    $
    (5,465
    )
    
    $
    (2,972
    )
    
    $
    (4,148
    )Basic and diluted loss per share applicable to common stock
    
    $
    (0.07
    )
    
    $
    (0.08
    )
    
    $
    (0.04
    )
    
    $
    (0.06
    )(restated)2005Total revenues
    
    $
    1
    
    
    $
    
    
    
    $
    10
    
    
    $
    173Net loss
    
    
    (3,527
    )
    
    
    (4,509
    )
    
    
    (3,492
    )
    
    
    (3,565
    )Deemed dividend for anti-dilution adjustments made to outstanding common stock warrants
    
    
    (1,076
    )
    
    
    
    
    
    
    
    
    
    
    Net loss applicable to common stockholders
    
    $
    (4,603
    )
    
    $
    (4,509
    )
    
    $
    (3,492
    )
    
    $
    (3,565
    )Basic and diluted loss per share applicable to common stock
    
    $
    (0.09
    )
    
    $
    (0.08
    )
    
    $
    (0.06
    )
    
    $
    (0.06
    )
    F-19




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##### Table of Contents



18. Related Party Transactions
      19. Subsequent Events
   F-20




---



##### Table of Contents



F-21




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
        
 F-22




---



##### Table of Contents



REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      F-23




---



##### Table of Contents



F-24




---



##### Table of Contents



CYTRX CORPORATION
 
 SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 2006, 2005 and 2004
 AdditionsBalance at
    
    Charged to
    
    Charged toBeginning of
    
    Costs and
    
    Other
    
    
    
    
    
    Balance atDescription
    
    Year
    
    Expenses
    
    Accounts
    
    Deductions
    
    End of YearReserve Deducted in the
Balance Sheet from the Asset to
Which it Applies:Allowance for Deferred Tax AssetsYear ended December 31, 2006
    
    $
    43,796,000
    
    
    $
    
    
    
    $
    34,000
    
    
    $
    
    
    
    $
    43,830,000Year ended December 31, 2005
    
    
    38,488,000
    
    
    
    
    
    
    
    5,308,000
    
    
    
    
    
    
    
    43,796,000Year ended December 31, 2004
    
    
    36,478,000
    
    
    
    
    
    
    
    2,008,000
    
    
    
    
    
    
    
    38,488,000
 F-25