##### 









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, 2004                                                 
|          
|or        
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934

Commission File No. 0-15327


CytRx Corporation


(Exact name of Registrant as specified in its charter)


|                                                                                                       |  |                                         
|------------------------------------------------------------------------------------------------------ |  | ----------------------------------------
|Delaware                                                                                               |  | 58-1642740                              
|(State or other jurisdiction of
    incorporation or organization)                                     |  | (I.R.S. Employer
    Identification No.)
|                                                                                                      
|11726 San Vicente Blvd, Suite 650,
    Los Angeles, California(Address of principal executive offices) |  | 90049(Zip Code)                         

Registrants telephone number, including area code:


(310) 826-5648





Securities registered pursuant to Section 12(b) of the
Act:


None


Securities registered pursuant to Section 12(g) of the
Act:


Common Stock, $.001 par value per share


þ o


o


o þ












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##### 












CYTRX CORPORATION


2004 FORM 10-K ANNUAL REPORT


TABLE OF CONTENTS


|         |  |                                                                                                                      |  |            |    |  |    | 
|-------- |  | -------------------------------------------------------------------------------------------------------------------- |  | ---------- | -- |  | -- | 
|         |  |                                                                                                                      |  | Page       |   
|         |  |                                                                                                                      |  |            |   
|PART I  
|Item 1.  |  | Business                                                                                                             |  |            | 1  | 
|Item 2.  |  | Properties                                                                                                           |  |            | 12 | 
|Item 3.  |  | Legal Proceedings                                                                                                    |  |            | 12 | 
|Item 4.  |  | Submission of Matters to a Vote of Security
    Holders                                                              |  |            | 13 | 
|        
|PART II 
|Item 5.  |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities |  |            | 14 | 
|Item 6.  |  | Selected Financial Data                                                                                              |  |            | 14 | 
|Item 7.  |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                            |  |            | 18 | 
|Item 7A. |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                       |  |            | 41 | 
|Item 8.  |  | Financial Statements and Supplementary
    Data                                                                      |  |            | 41 | 
|Item 9.  |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure                             |  |            | 41 | 
|Item 9A. |  | Controls and Procedures                                                                                              |  |            | 44 | 
|        
|PART III
|Item 10. |  | Directors and Executive Officers of the
    Registrant                                                               |  |            | 45 | 
|Item 11. |  | Executive Compensation                                                                                               |  |            | 47 | 
|Item 12. |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                   |  |            | 53 | 
|Item 13. |  | Certain Relationships and Related
    Transactions                                                                   |  |            | 54 | 
|Item 14. |  | Principal Accountant Fees and Services                                                                               |  |            | 54 | 
|        
|PART IV 
|Item 15. |  | Exhibits and Financial Statement
    Schedules                                                                       |  |            | 55 | 
|         |  |                                                                                                                      |  | Signatures |    |  | 62 | 



i



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SAFE HARBOR STATEMENT UNDER THE


PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995








PART I







|        |         
|------- | --------
|Item 1. | Business

General




1



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##### 

















2



---



##### 





in vitro






| |                                
| | -------------------------------
| | Molecular Chaperone Co-inducers

e.g.








in vitro


3



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##### 



in vivo










| |                
| | ---------------
| | RNAi Technology





Science in vitro in vivo


4



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##### 











Product Development




| |                                           
| | ------------------------------------------
| | University of Massachusetts Medical School





5



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##### 











| |                            
| | ---------------------------
| | Obesity and Type 2 Diabetes





6



---



##### 









| |                                    
| | -----------------------------------
| | Research and Development Subsidiary









| |    
| | ---
| | ALS







7



---



##### 











| |                       
| | ----------------------
| | Cardiovascular Disease



Pre-Global Genomics Merger Technologies




| |                              
| | -----------------------------
| | Therapeutic Copolymer Program





| |                                     
| | ------------------------------------
| | Vaccine Enhancement and Gene Therapy



8



---



##### 





| |              
| | -------------
| | Merck License





| |              
| | -------------
| | Vical License

in vitro


2002 Merger with Global Genomics








9



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##### 





Genomics Investments




Research and Development Expenditures




Manufacturing




Patents and Proprietary Technology






10



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##### 







Competition










11



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##### 





Government Regulation






Employees









|        |           
|------- | ----------
|Item 2. | Properties








|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings





12



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##### 










|        |                                                    
|------- | ---------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security Holders





| |                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------
| | 1. To elect two directors to serve until our 2007 annual
    meeting of stockholders; and                                  
|
| | 2. To ratify the selection of BDO Seidman, LLP as
    independent auditors for the fiscal year ended December 31,
    2004.







|                     |  |                |            |                    |             |  |           |             |        |  |           |  |  |  |   | 
|-------------------- |  | -------------- | ---------- | ------------------ | ----------- |  | --------- | ----------- | ------ |  | --------- |  |  |  | - | 
|                     |  |                |            | Votes Cast Against |             |  |           |             | Broker | 
|Director Nominee     |  | Votes Cast For |            |                    | or Withheld |  |           | Abstentions |        |  | Non-Votes | 
|                     |  |                |            |                    |             |  |           |             |        |  |           | 
|Dr. Louis Ignarro    |  |                | 30,401,297 |                    |             |  | 1,235,669 |             |        |  |          |  |  |  |  | 
|Dr. Joseph Rubinfeld |  |                | 31,238,051 |                    |             |  | 398,781   |             |        |  |          |  |  |  |  | 



13



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##### 



PART II







|        |                                                                                                                     
|------- | --------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity
    Securities



|                  |                |                       |   |      |      |  |   |      |      | 
|----------------- | -------------- | --------------------- | - | ---- | ---- |  | - | ---- | ---- | 
|                  |                | High                  |   |      | Low  | 
|                  |                |                       |   |      |      | 
|Fiscal Year 2005: |                |                       |   |      |      |  |   |     
|                  |                | January 1 to March 28 |   | $    | 2.07 |  |   | $    | 1.14 | 
|Fiscal Year 2004: |                |                       |   |      |      |  |   |     
|                  | Fourth Quarter |                       | $ | 1.75 |      |  | $ | 1.10 |     
|                  | Third Quarter  |                       | $ | 1.80 |      |  | $ | 0.94 |     
|                  | Second Quarter |                       | $ | 2.10 |      |  | $ | 1.06 |     
|                  | First Quarter  |                       | $ | 2.43 |      |  | $ | 1.43 |     
|Fiscal Year 2003: |                |                       |   |      |      |  |   |     
|                  | Fourth Quarter |                       | $ | 2.50 |      |  | $ | 1.75 |     
|                  | Third Quarter  |                       | $ | 2.81 |      |  | $ | 1.58 |     
|                  | Second Quarter |                       | $ | 3.74 |      |  | $ | 0.62 |     
|                  | First Quarter  |                       | $ | 0.61 |      |  | $ | 0.23 |     








|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data



14



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##### 



|                                         |                                     |      |             |         |      |   |             |        |   |   |            |           |   |      |           |           |   |   |            |           |  
|---------------------------------------- | ----------------------------------- | ---- | ----------- | ------- | ---- | - | ----------- | ------ | - | - | ---------- | --------- | - | ---- | --------- | --------- | - | - | ---------- | --------- | -
|                                         |                                     | 2004 |             |         | 2003 |   |             | 2002   |   |   | 2001       |           |   | 2000 |          
|                                         |                                     |      |             |         |      |   |             |        |   |   |            |           |   |      |          
|Statement of Operations Data:            |                                     |      |             |         |      |   |             |        |   |   |            |           |   |      |           |           |   |   |            |          
|Revenues                                 |                                     |      |             |         |      |   |             |        |   |   |            |           |   |      |           |           |   |   |            |          
|                                         | Service revenues                    |      | $           |        |      |   | $           |       |   |   | $          | 23,000    |   |      | $         | 101,000   |   |   | $          | 451,000   |  
|                                         | License fees                        |      |             | 428,000 |      |   |             | 94,000 |   |   |            | 1,051,000 |   |      |           | 3,751,000 |   |   |            | 2,000,000 |  
|                                         | Grant income                        |      |             |        |      |   |             |       |   |   |            | 46,000    |   |      |           | 157,000   |   |   |            | 349,000   |  
|                                         | Other income                        |      |             |        |      |   |             |       |   |   |            |          |   |      |           |          |   |   |            | 225,000   |  
|                                         |                                     |      |             |         |      |   |             |        |   |   |            |           |   |      |          
|Total revenues                           |                                     | $    | 428,000     |         |      | $ | 94,000      |        |   | $ | 1,120,000  |           |   | $    | 4,009,000 |           |   | $ | 3,025,000  |          
|                                         |                                     |      |             |         |      |   |             |        |   |   |            |           |   |      |          
|Loss from continuing operations          |                                     | $    | (16,392,000 | )       |      | $ | (17,845,000 | )      |   | $ | (6,176,000 | )         |   | $    | (931,000  | )         |   | $ | (1,147,000 | )        
|Income from discontinued operations      |                                     |      |            |         |      |   |            |        |   |   |           |           |   |      |          |           |   |   | 799,000    |          
|                                         |                                     |      |             |         |      |   |             |        |   |   |            |           |   |      |          
|Net loss                                 |                                     | $    | (16,392,000 | )       |      | $ | (17,845,000 | )      |   | $ | (6,176,000 | )         |   | $    | (931,000  | )         |   | $ | (348,000   | )        
|                                         |                                     |      |             |         |      |   |             |        |   |   |            |           |   |      |          
|Basic and diluted loss per common share: |                                     |      |             |         |      |   |             |        |   |   |            |           |   |      |           |           |   |   |            |          
|                                         | Loss from continuing operations     |      | $           | (0.48   | )    |   | $           | (0.65  | ) |   | $          | (0.39     | ) |      | $         | (0.09     | ) |   | $          | (0.12     | )
|                                         | Income from discontinued operations |      |             |        |      |   |             |       |   |   |            |          |   |      |           |          |   |   |            | 0.08      |  
|                                         |                                     |      |             |         |      |   |             |        |   |   |            |           |   |      |          
|                                         | Net loss                            |      | $           | (0.48   | )    |   | $           | (0.65  | ) |   | $          | (0.39     | ) |      | $         | (0.09     | ) |   | $          | (0.04     | )
|                                         |                                     |      |             |         |      |   |             |        |   |   |            |           |   |      |          
|Balance Sheet Data:                      |                                     |      |             |         |      |   |             |        |   |   |            |           |   |      |           |           |   |   |            |          
|Total assets                             |                                     | $    | 5,049,000   |         |      | $ | 12,324,000  |        |   | $ | 9,284,000  |           |   | $    | 7,611,000 |           |   | $ | 6,859,000  |          
|Total stockholders equity               |                                     | $    | 1,595,000   |         |      | $ | 10,193,000  |        |   | $ | 7,959,000  |           |   | $    | 6,583,000 |           |   | $ | 5,619,000  |          



15



---



##### 





|                                                                                                                                                                                 |                                  |                                            |              |                     |                 |   |            |                   |            |   |              |            |            | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------- | ------------------------------------------ | ------------ | ------------------- | --------------- | - | ---------- | ----------------- | ---------- | - | ------------ | ---------- | ---------- | 
|                                                                                                                                                                                 |                                  |                                            |              | Adjustments Related |                 |   |           
|                                                                                                                                                                                 |                                  | Actual as of                               |              |                     | to January 2005 |   |            | Pro Forma as of   |           
|                                                                                                                                                                                 |                                  | December 31, 2004                          |              |                     | Financing       |   |            | December 31, 2004 |           
|                                                                                                                                                                                 |                                  |                                            |              |                     |                 |   |            |                   |           
|                                                                                                                                                                                 |                                  | (Audited)                                  |              |                     | (Unaudited)     |   |            | (Unaudited)       |           
|ASSETS                                                                                                                                                                           |                                  |                                            |              |                     |                 |   |            |                   |            |   |              |           
|Current assets:                                                                                                                                                                  |                                  |                                            |              |                     |                 |   |            |                   |            |   |              |           
|                                                                                                                                                                                 | Cash and short-term investments  |                                            | $            | 2,999,000           |                 |   | $          | 19,505,000        |            |   | $            | 22,504,000 |           
|                                                                                                                                                                                 | Prepaid and other current assets |                                            |              | 956,000             |                 |   |            |                  |            |   |              | 956,000    |           
|                                                                                                                                                                                 |                                  |                                            |              |                     |                 |   |            |                   |           
|                                                                                                                                                                                 |                                  | Total current assets                       |              |                     | 3,955,000       |   |            |                   | 19,505,000 |   |              |            | 23,460,000 | 
|Non-current assets                                                                                                                                                               |                                  |                                            | 1,093,000    |                     |                 |   |           |                   |            |   | 1,093,000    |           
|                                                                                                                                                                                 |                                  |                                            |              |                     |                 |   |            |                   |           
|                                                                                                                                                                                 |                                  | Total assets                               |              | $                   | 5,048,000       |   |            | $                 | 19,505,000 |   |              | $          | 24,553,000 | 
|                                                                                                                                                                                 |                                  |                                            |              |                     |                 |   |            |                   |           
|                                                                                                                                                                                
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                            
|Total liabilities                                                                                                                                                                |                                  | $                                          | 3,283,000    |                     |                 | $ |           |                   |            | $ | 3,283,000    |           
|                                                                                                                                                                                 |                                  |                                            |              |                     |                 |   |            |                   |           
|Minority interest in subsidiary                                                                                                                                                  |                                  |                                            | 170,000      |                     |                 |   |           |                   |            |   | 170,000      |           
|                                                                                                                                                                                 |                                  |                                            |              |                     |                 |   |            |                   |           
|Commitments and contingencies                                                                                                                                                    |                                  |                                            |              |                     |                 |   |            |                   |            |   |              |           
|Stockholders equity:                                                                                                                                                            |                                  |                                            |              |                     |                 |   |            |                   |            |   |              |           
|Preferred Stock, $0.01 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, $0.001 par value, 100,000,000 shares
    authorized; 40,190,000 shares issued at December 31,
    2004                                                             |                                  |                                            | 40,000       |                     |                 |   | 17,000     |                   |            |   | 57,000       |           
|Additional paid-in-capital                                                                                                                                                       |                                  |                                            | 110,028,000  |                     |                 |   | 19,488,000 |                   |            |   | 129,516,000  |           
|Treasury stock, at cost (633,816 shares)                                                                                                                                         |                                  |                                            | (2,279,000   | )                   |                 |   |           |                   |            |   | (2,279,000   | )         
|Accumulated deficit                                                                                                                                                              |                                  |                                            | (106,194,000 | )                   |                 |   |           |                   |            |   | (106,194,000 | )         
|                                                                                                                                                                                 |                                  |                                            |              |                     |                 |   |            |                   |           
|                                                                                                                                                                                 |                                  | Total stockholders equity                 |              |                     | 1,595,000       |   |            |                   | 19,505,000 |   |              |            | 21,100,000 | 
|                                                                                                                                                                                 |                                  |                                            |              |                     |                 |   |            |                   |           
|                                                                                                                                                                                 |                                  | Total liabilities and stockholders equity |              | $                   | 5,048,000       |   |            | $                 | 19,505,000 |   |              | $          | 24,553,000 | 
|                                                                                                                                                                                 |                                  |                                            |              |                     |                 |   |            |                   |           

Factors Affecting Comparability






16



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17



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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations



Overview












18



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##### 







Research and Development












| |   |                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------
| |  | 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.                              

19



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##### 





| |   |                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------
| |  | 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.
|
| |  | The effect of competing technological and market developments.                                                               



Critical Accounting Policies and Estimates








| |                    
| | -------------------
| | Revenue Recognition





| |                                  
| | ---------------------------------
| | Research and Development Expenses



20



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##### 





| |                         
| | ------------------------
| | Stock-based Compensation

Accounting for Stock Issued to
Employees




Accounting for Stock-based
Compensation






| |                                
| | -------------------------------
| | Impairment of Long-Lived Assets



Accounting for
the Impairment or Disposal of Long-Lived Assets


The Equity Method of Accounting for
Investments in Common Stock


21



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##### 







| |                                       
| | --------------------------------------
| | Estimated Facility Abandonment Accrual



Quarterly Financial Data




|                                         |          |                                       |        |       |         |   |        |              |   |   |             |       |   |   |        |       |  
|---------------------------------------- | -------- | ------------------------------------- | ------ | ----- | ------- | - | ------ | ------------ | - | - | ----------- | ----- | - | - | ------ | ----- | -
|                                         |          | Quarter Ended                         |       
|                                         |          |                                       |       
|                                         |          | March 31                              |        |       | June 30 |   |        | September 30 |   |   | December 31 |      
|                                         |          |                                       |        |       |         |   |        |              |   |   |             |      
|                                         |          | (In thousands, except per share data) |       
|2004                                     |          |                                       |        |       |         |   |        |              |   |   |             |       |   |   |        |      
|Total revenues                           |          | $                                     | 100    |       |         | $ | 228    |              |   | $ |            |       |   | $ | 100    |      
|Net loss                                 |          |                                       | (3,774 | )     |         |   | (4,061 | )            |   |   | (2,796      | )     |   |   | (5,761 | )    
|Basic and diluted loss per common share: |          |                                       |        |       |         |   |        |              |   |   |             |       |   |   |        |      
|                                         | Net loss |                                       | $      | (0.11 | )       |   | $      | (0.12        | ) |   | $           | (0.08 | ) |   | $      | (0.15 | )
|2003                                     |          |                                       |        |       |         |   |        |              |   |   |             |       |   |   |        |      
|Total revenues                           |          | $                                     |       |       |         | $ | 3      |              |   | $ | 1           |       |   | $ | 90     |      
|Net loss                                 |          |                                       | (914   | )     |         |   | (5,046 | )            |   |   | (8,777      | )     |   |   | (3,108 | )    
|Basic and diluted loss per common share: |          |                                       |        |       |         |   |        |              |   |   |             |       |   |   |        |      
|                                         | Net loss |                                       | $      | (0.04 | )       |   | $      | (0.21        | ) |   | $           | (0.30 | ) |   | $      | (0.09 | )

22



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##### 





Liquidity and Capital Resources














23



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##### 

















| |                        
| | -----------------------
| | Contractual Obligations



|                    |  |           |       |                |            |   |       |            |  |   |       |  |  |   |       | 
|------------------- |  | --------- | ----- | -------------- | ---------- | - | ----- | ---------- |  | - | ----- |  |  | - | ----- | 
|                    |  | Operating |       |                | License    |   |       | Employment |  |   |      
|                    |  | Leases    |       |                | Agreements |   |       | Agreements |  |   | Total | 
|                    |  |           |       |                |            |   |       |            |  |   |       | 
|                    |  |           |       | (In thousands) |            |   |      
|2005                |  | $         | 573   |                |            | $ | 2,363 |            |  | $ | 1,008 |  |  | $ | 3,944 | 
|2006                |  |           | 342   |                |            |   | 1,149 |            |  |   | 740   |  |  |   | 2,231 | 
|2007                |  |           | 229   |                |            |   | 226   |            |  |   | 240   |  |  |   | 695   | 
|2008                |  |           | 76    |                |            |   | 330   |            |  |   | 240   |  |  |   | 646   | 
|2009                |  |           |      |                |            |   | 330   |            |  |   |      |  |  |   | 330   | 
|2010 and thereafter |  |           |      |                |            |   | 990   |            |  |   |      |  |  |   | 990   | 
|                    |  |           |       |                |            |   |       |            |  |   |       | 
|Total               |  | $         | 1,220 |                |            | $ | 5,388 |            |  | $ | 2,228 |  |  | $ | 8,836 | 
|                    |  |           |       |                |            |   |       |            |  |   |       | 

24



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##### 







| |                                     
| | ------------------------------------
| | License and Collaboration Agreements







| |                                
| | -------------------------------
| | Net Operating Loss Carryforward



Results of Operations




25



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##### 









| |                         
| | ------------------------
| | Research and Development

|                                                     |  |                         |       |  |      |   |       |      |  |   |     | 
|---------------------------------------------------- |  | ----------------------- | ----- |  | ---- | - | ----- | ---- |  | - | --- | 
|                                                     |  | Year Ended December 31, |      
|                                                     |  |                         |      
|                                                     |  | 2004                    |       |  | 2003 |   |       | 2002 | 
|                                                     |  |                         |       |  |      |   |       |      | 
|                                                     |  | (In thousands)          |      
|Research and development expense                     |  | $                       | 4,626 |  |      | $ | 1,485 |      |  | $ | 689 | 
|Non-cash research and development expense            |  |                         | 1,387 |  |      |   | 2,903 |      |  |   |    | 
|Acquired in-process research and development expense |  |                         | 3,022 |  |      |   |      |      |  |   | 78  | 
|                                                     |  |                         |       |  |      |   |       |      | 
|                                                     |  | $                       | 9,035 |  |      | $ | 4,388 |      |  | $ | 767 | 
|                                                     |  |                         |       |  |      |   |       |      | 









26



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| |                                            
| | -------------------------------------------
| | Selling, general and administrative expense

|                                                                                                    |  |                         |       |  |      |   |       |      |  |   |       | 
|--------------------------------------------------------------------------------------------------- |  | ----------------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|                                                                                                    |  | Year Ended December 31, |      
|                                                                                                    |  |                         |      
|                                                                                                    |  | 2004                    |       |  | 2003 |   |       | 2002 | 
|                                                                                                    |  |                         |       |  |      |   |       |      | 
|                                                                                                    |  | (In thousands)          |      
|Common stock, stock options and warrants issued for selling,
    general and administrative expense |  | $                       | 1,977 |  |      | $ | 3,148 |      |  | $ | 230   | 
|Selling, general and administrative expense                                                         |  |                         | 5,924 |  |      |   | 3,841 |      |  |   | 1,703 | 
|                                                                                                    |  |                         |       |  |      |   |       |      | 
|                                                                                                    |  | $                       | 7,901 |  |      | $ | 6,989 |      |  | $ | 1,933 | 
|                                                                                                    |  |                         |       |  |      |   |       |      | 





Depreciation and amortization expense




| |                                                         
| | --------------------------------------------------------
| | Severance and other contractual payments to
    officers





27



---



##### 







Asset impairment charge


Loss on facility abandonment


Interest income




| |                                         
| | ----------------------------------------
| | Equity Losses from Minority-Owned Entity

|                                              |  |                         |   |      |  |   |       |  |  |   |     | 
|--------------------------------------------- |  | ----------------------- | - | ---- |  | - | ----- |  |  | - | --- | 
|                                              |  | Year Ended December 31, |  
|                                              |  |                         |  
|                                              |  | 2004                    |   | 2003 |  |   | 2002  | 
|                                              |  |                         |   |      |  |   |       | 
|                                              |  | (In thousands)          |  
|Equity losses from minority-owned entity      |  | $                       |  |      |  | $ | 245   |  |  | $ | 330 | 
|Asset impairment charge                       |  |                         |  |      |  |   | 5,869 |  |  |   |    | 
|Amortization of acquired developed technology |  |                         |  |      |  |   | 548   |  |  |   | 335 | 
|                                              |  |                         |   |      |  |   |       |  | 
|                                              |  | $                       |  |      |  | $ | 6,662 |  |  | $ | 665 | 
|                                              |  |                         |   |      |  |   |       |  | 



Minority interest in losses of subsidiary


28



---



##### 



Recently Issued Accounting Standards












Related Party Transactions




Off-Balance Sheet Arrangements




29



---



##### 



RISK FACTORS




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 Revenues, Which
Makes Us Dependent on Financing to Sustain Our Operations






| |   |                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We are able to complete the development of and commercialize one
    or more of the products that we are currently developing, which
    may require us to first enter into license or other arrangements
    with third parties.
|
| |  | One or more of our currently licensed products is commercialized
    by our licensees, thereby generating royalty income for us.                                                                                                 
|
| |  | We are able to acquire products from third parties that are
    already being marketed or are approved for marketing.                                                                                                            



Most of Our Revenues Have Been Generated by License Fees for
TranzFect, Which May Not be a Recurring Source of Revenue for
Us




30



---



##### 





We Have Changed Our Business Strategy, Which Will Require Us,
in Certain Cases, to Find and Rely Upon Third Parties for the
Development of Our Products and to Provide Us With Products








31



---



##### 







Our Current Financial Resources May Limit Our Ability to
Execute Certain Strategic Initiatives










32



---



##### 





If Our Products Are Not Successfully Developed and Approved
by the FDA, We May Be Forced to Reduce or Terminate 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.                    



The Approach We Are Taking to Discover and Develop Novel
Drugs Using RNAi and Other Technologies is Unproven and May
Never Lead to Marketable Products




33



---



##### 





The Drug Candidates Acquired from Biorex May Not Obtain
Regulatory Marketing Approvals










Our Obesity and Type 2 Diabetes Subsidiary May Not Be
Able to Develop Products




34



---



##### 





We Will Be Reliant Upon SynthRx to Develop and Commercialize
Flocor








We Are Unlikely to Recover Any Amounts from Global
Genomics Portfolio Companies




We May Be Involved in Legal Proceedings That Could Affect Our
Business Operations or Financial Condition




35



---



##### 



We Are Subject to Intense Competition That Could Materially
Impact Our Operating Results








| |   |                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------
| |  | Succeed in developing competitive products sooner than us or our
    strategic partners or licensees.              
|
| |  | Obtain FDA and other regulatory approvals for their products
    before 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 or
    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.                                                                







36



---



##### 



tm tm


We Do Not Have the Ability to Manufacture Any of Our Products
and Will Need to Rely upon Third Parties for the Manufacture of
Our Clinical and Commercial Product Supplies




We May Be Unable to Protect Our Intellectual Property Rights,
Which Could Adversely Affect the Value of Our Assets






37



---



##### 







We May Incur Substantial Costs from Future Clinical Testing
or Product Liability Claims




We May Be Delisted from the Nasdaq SmallCap Market if Our
Future Filings Are Not Timely




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




38



---



##### 







Our Outstanding Options and Warrants and the Registrations of
Our Shares Issued in the Global Genomics Merger and Our Recent
Private Financings May Adversely Affect the Trading Price of Our
Common Stock






39



---



##### 





We May Issue Preferred Stock in the Future, and the Terms of
the Preferred Stock May Reduce the Value of Our Common Stock




Changes in Stock Option Accounting Rules May Adversely Impact
Our Reported Operating Results, Our Stock Price and Our
Competitiveness in the Employee Marketplace




We May Experience Volatility in Our Stock Price, Which May
Adversely Affect the Trading Price of Our Common Stock






| |   |                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------
| |  | Our quarterly operating results.                                                                   
|
| |  | Announcements of regulatory developments or technological
    innovations by us or our competitors.
|
| |  | Government regulation of drug pricing.                                                             
|
| |  | Developments in patent or other technology ownership rights.                                       
|
| |  | Public concern regarding the safety of our products.                                               

40



---



##### 










|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures About Market
    Risk








|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data








|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure









41



---



##### 









| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Whether a portion of the purchase price in our July 2002 merger
    with Global Genomics (accounted for as a purchase of a group of
    assets, not a business combination) should have been allocated
    to an acquired assembled workforce, which would have reduced the
    amount of the purchase price allocated to the Blizzard and
    Psynomics investments ($7.3 million and $78,000,
    respectively) and whether the amount originally determined to be
    the fair value of the Blizzard investment was overstated.
|
| |  | Whether an other-than-temporary impairment charge should have
    been taken by us against the appropriate carrying value of the
    Blizzard investment earlier than in the fourth quarter of 2003.                                                                                                                                                                                                                                                                                                                              









42



---



##### 















| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | On April 2, 2004, our Audit Committee engaged BDO to
    perform agreed-upon procedures with respect to our financial
    statements for the year ended December 31, 2003. Due to our
    Audit Committees concerns that the concurrent involvement
    of two auditing firms might create the appearance that we were
    shopping for a particular audit opinion, the terms of our
    April 2, 2004 engagement of BDO stated that BDO was not to
    conduct a compilation, review or audit, but rather was to
    conduct only certain agreed upon procedures. We agreed with BDO
    that the procedures would be conducted solely in order to assist
    BDO in completing a potential future audit of our financial
    statements in the event the Audit Committee subsequently engaged
    BDO to opine on our financial statements. Since the agreed upon
    procedures specified in our engagement agreement were to be
    conducted in preparation for a possible future audit, they
    included a majority of the procedures that would have been
    necessary in order for BDO to opine with respect to our
    financial statements. The specific procedures were proposed by
    BDO

43



---



##### 



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | and were jointly accepted by BDO and us without modification. We
    have been advised by BDO that, as of April 14, 2004, the
    date on which we engaged BDO to become our independent auditor,
    BDO had completed approximately 64% of the hours that they
    eventually worked to complete their audit, but a significant
    portion of the manager and partner review had not yet been
    completed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | Subsequent to engaging BDO to perform these agreed-upon
    procedures, we consulted with BDO concerning the need to include
    separate audited financial statements of Blizzard in our Annual
    Report for the year ended December 31, 2003. BDO orally
    advised us that separate audited Blizzard financial statements
    were required to be included in this Annual Report. This advice
    was consistent with the advice previously received by us from
    PwC on this issue, no disagreement on this issue existed between
    PwC and us, and we subsequently filed these financial statements
    in our Annual Report for the year ended December 31, 2003,
    together with our financial statements.                                                                                                                                                                                                                    
|
| |  | During the course of BDOs performance of the above
    agreed-upon procedures, we did not solicit or receive any oral
    or written opinion from BDO with respect to the proper
    accounting treatment for the allocation of the purchase price
    paid by us in connection with our merger with Global Genomics or
    the subsequent carrying value of our investment in Blizzard.
    However, we did discuss with BDO our views on the proper
    accounting treatment for these items and provided BDO with
    certain of our accounting records, a valuation analysis prepared
    by a valuation firm in 2002 utilized by management in connection
    with its allocation of the purchase price for the Global
    Genomics merger and an analysis prepared in April 2004 by
    another valuation firm covering certain aspects of the
    allocation of that purchase price and the subsequent carrying
    value of Blizzard.






|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures





44



---



##### 



PART III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant



|                        |  |     |    |          |              |  |     |          |  |                                                                            
|----------------------- |  | --- | -- | -------- | ------------ |  | --- | -------- |  | ---------------------------------------------------------------------------
|                        |  |     |    | Class of |              |  |    
|Name                    |  | Age |    |          | Directors(1) |  |     | Position
|                        |  |     |    |          |              |  |     |         
|Max Link                |  |     | 64 |          |              |  | III |          |  | Director, Chairman of the Board(2)(3)                                      
|Steven A. Kriegsman     |  |     | 63 |          |              |  | II  |          |  | Director, Chief Executive Officer, President                               
|Marvin R. Selter        |  |     | 77 |          |              |  | II  |          |  | Director, Vice Chairman of the Board(2)(3)(4)                              
|Louis Ignarro, Ph.D.    |  |     | 63 |          |              |  | I   |          |  | Director                                                                   
|Joseph Rubinfeld, Ph.D. |  |     | 72 |          |              |  | I   |          |  | Director(2)(4)                                                             
|Richard L. Wennekamp    |  |     | 62 |          |              |  | II  |          |  | Director(2)(3)(4)                                                          
|Mark A. Tepper, Ph.D.   |  |     | 47 |          |              |  |    |          |  | Vice President; President, CytRx Laboratories, Inc.                        
|Matthew Natalizio       |  |     | 50 |          |              |  |    |          |  | Chief Financial Officer, Treasurer                                         
|Jack R. Barber, Ph.D.   |  |     | 49 |          |              |  |    |          |  | Senior Vice President  Drug Development                                   
|Benjamin S. Levin       |  |     | 29 |          |              |  |    |          |  | General Counsel, Vice President  Legal Affairs and
    Corporate Secretary






|    |                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Class I directors serve until the 2007 annual meeting of
    stockholders, Class II directors serve until the 2005
    annual meeting of stockholders and Class III directors
    serve until the 2006 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


Steven A. Kriegsman


45



---



##### 



Marvin R. Selter


Louis Ignarro, Ph.D.


Joseph Rubinfeld, Ph.D.


Richard L. Wennekamp


Mark A. Tepper, Ph.D.


Matthew Natalizio


46



---



##### 





Jack Barber, Ph.D.


Benjamin S. Levin






Section 16(a) Beneficial Ownership Reporting
Compliance






| |   |                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------
| |  | Grants of stock options to Messrs. Ignarro, Rubinfeld,
    Link, Selter and Wennekamp, directors of the Company, in July
    2004; and
|
| |  | The acquisition by Mr. Wennekamp of shares of our common
    stock in August 2004.                                                    



Code of Ethics









|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation

Summary Compensation Table




47



---



##### 





|                            |                                                                             |      |      |      |        |   |         |              |  |   |             |         |  |              |         |           |     |   |        |     | 
|--------------------------- | --------------------------------------------------------------------------- | ---- | ---- | ---- | ------ | - | ------- | ------------ |  | - | ----------- | ------- |  | ------------ | ------- | --------- | --- | - | ------ | --- | 
|                            |                                                                             |      |      |      |        |   |         | Long-Term    |  |   |            
|                            |                                                                             |      |      |      |        |   |         | Compensation |  |   |            
|                            |                                                                             |      |      |      |        |   |         |              |  |   |            
|                            |                                                                             |      |      |      |        |   |         | Securities   |  |   |            
|                            |                                                                             |      |      |      |        |   |         | Underlying   |  |   | All Other   |        
|Name and Principal Position |                                                                             | Year |      |      | Salary |   |         | Bonus        |  |   | Options (#) |         |  | Compensation |        
|                            |                                                                             |      |      |      |        |   |         |              |  |   |             |         |  |              |        
|Steven A. Kriegsman         |                                                                             |      | 2004 |      |        | $ | 361,173 |              |  | $ | 150,000     |         |  |              |        |           |     | $ | 42,617 | (1)
|                            | President and Chief Executive Officer                                       |      |      | 2003 |        |   | $       | 313,772      |  |   | $           | 150,000 |  |              |         | 1,000,000 | (2) |   |        |    | 
|                            |                                                                             |      |      | 2002 | (3)    |   | $       | 110,000      |  |   |             |        |  |              |         |          |     |   |        |    | 
|Jack R. Barber, Ph.D.       |                                                                             |      | 2004 | (4)  |        | $ | 112,910 |              |  | $ |             |         |  |              | 100,000 |           |     |   |       |    
|                            | Vice President  Drug Development                                           |      |      |      |        |   |         |              |  |   |             |         |  |              |         |           |     |   |        |     | 
|Mark A. Tepper, Ph.D.       |                                                                             |      | 2004 |      |        | $ | 200,699 |              |  | $ | 50,000      |         |  |              |        |           |     |   |       |    
|                            | Senior Vice President and                                                   |      |      | 2003 | (6)    |   | $       | 58,333       |  |   | $           |        |  |              |         | 400,000   | (5) |   |        |    | 
|                            | President, CytRx Laboratories, Inc.                                         |      |      |      |        |   |         |              |  |   |             |         |  |              |         |           |     |   |        |     | 
|Matthew Natalizio           |                                                                             |      | 2004 | (7)  |        | $ | 82,900  |              |  | $ |             |         |  |              | 100,000 | (5)       |     |   |       |    
|                            | Chief Financial Officer and Treasurer                                       |      |      |      |        |   |         |              |  |   |             |         |  |              |         |           |     |   |        |     | 
|Benjamin S. Levin           |                                                                             |      | 2004 | (8)  |        | $ | 80,881  |              |  | $ |            |         |  |              | 160,000 | (5)       |     |   |       |    
|                            | General Counsel, Vice President  Legal Affairs and
    Corporate Secretary |      |      |      |        |   |         |              |  |   |             |         |  |              |         |           |     |   |        |     | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The amount shown includes approximately $5,000 in insurance
    premiums paid by us with respect to a life insurance policy for
    Mr. Kriegsman which has a face value of approximately
    $1.4 million as of December 31, 2004 and under which
    Mr. Kriegsmans designee is the beneficiary. The
    amount shown also includes approximately $37,617 of legal fees
    and expenses paid or reimbursed by us in accordance with the
    terms of Mr. Kriegsmans employment agreement
    described below under Employment Agreement with Steven A.
    Kriegsman.
|   
|(2) | 250,000 of the options shown vested on each of June 20,
    2003 and June 20, 2004. The remaining 500,000 of the
    options shown vest in twenty-four monthly installments of
    1/24th each on the 20th day of each month beginning on
    June 20, 2004, subject to Mr. Kriegsmans
    remaining in our continuous employ through such dates.                                                                                                                                                                                                                          
|   
|(3) | Mr. Kriegsman has been our President and Chief Executive
    Officer since July 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|(4) | Dr. Barber was hired on July 6, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|(5) | The options shown are subject to vesting in three annual
    installments of 1/3rd each on each of the first three
    anniversaries of the named executive officers date of
    hire, subject to his remaining in our continuous employ through
    such dates.                                                                                                                                                                                                                                                                                                           
|   
|(6) | Dr. Tepper was hired on September 20, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|(7) | Mr. Natalizio was hired on July 12, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|(8) | Mr. Levin was hired on July 15, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

48



---



##### 



Option Grants in Last Fiscal Year




Option Grants in Twelve Months Ended December 31,
2004


|                      |  |                   |         |  |              |  |                          |          |  |                         |      |  |  |     |         |  |  |   |         | 
|--------------------- |  | ----------------- | ------- |  | ------------ |  | ------------------------ | -------- |  | ----------------------- | ---- |  |  | --- | ------- |  |  | - | ------- | 
|                      |  | Individual Grants |         |  |              |  | Potential Realized Value |         
|                      |  |                   |         |  |              |  | at Assumed Annual Rates  |         
|                      |  | Number of         |         |  | % of Total   |  |                          |          |  | of Stock Price          |     
|                      |  | Shares            |         |  | Options      |  |                          |          |  | Appreciation for Option |     
|                      |  | Underlying        |         |  | Granted to   |  |                          |          |  | Term(1)                 |     
|                      |  | Options           |         |  | Employees In |  |                          | Exercise |  |                         |      | 
|Name                  |  | Granted           |         |  | Fiscal Year  |  |                          | Price    |  |                         | 5%   |  |  | 10% |        
|                      |  |                   |         |  |              |  |                          |          |  |                         |      |  |  |     |        
|Steven A. Kriegsman   |  |                   |        |  |              |  |                         | %        |  |                         |     |  |  | $   |        |  |  | $ |        | 
|Jack R. Barber, Ph.D. |  |                   | 100,000 |  |              |  | 16.2                     | %        |  | $                       | 1.13 |  |  | $   | 71,065  |  |  | $ | 180,093 | 
|Mark A. Tepper, Ph.D. |  |                   |        |  |              |  |                         | %        |  |                         |     |  |  | $   |        |  |  | $ |        | 
|Matthew Natalizio     |  |                   | 100,000 |  |              |  | 16.2                     | %        |  | $                       | 1.11 |  |  | $   | 69,807  |  |  | $ | 176,905 | 
|Benjamin S. Levin     |  |                   | 160,000 |  |              |  | 25.9                     | %        |  | $                       | 1.39 |  |  | $   | 139,866 |  |  | $ | 354,448 | 






|    |                                                                                                                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The potential realizable value shown in this table represents
    the hypothetical gain that might be realized based on assumed 5%
    and 10% annual compound rates of stock price appreciation over
    the full option term. These prescribed rates are not intended to
    forecast possible future appreciation of the common stock.

Fiscal Year-End Option Values




|                       |  |                        |         |  |                         |  |         |             |  |   |               |  |  |   |        | 
|---------------------- |  | ---------------------- | ------- |  | ----------------------- |  | ------- | ----------- |  | - | ------------- |  |  | - | ------ | 
|                       |  | Number of Securities   |         |  |                        
|                       |  | Underlying Unexercised |         |  | Value of Unexercised    | 
|                       |  | Options at             |         |  | In-the-Money Options at | 
|                       |  | December 31, 2004 (#)  |         |  | December 31, 2004 ($)   | 
|                       |  |                        |         |  |                         | 
|Name                   |  | Exercisable            |         |  | Unexercisable           |  |         | Exercisable |  |   | Unexercisable | 
|                       |  |                        |         |  |                         |  |         |             |  |   |               | 
|Steven A. Kriegsman(1) |  |                        | 971,852 |  |                         |  | 487,500 |             |  | $ | 638,499       |  |  | $ |       | 
|Jack R. Barber, Ph.D.  |  |                        |        |  |                         |  | 100,000 |             |  | $ |              |  |  | $ | 27,000 | 
|Mark A. Tepper, Ph.D.  |  |                        | 133,333 |  |                         |  | 266,667 |             |  | $ |              |  |  | $ |       | 
|Matthew Natalizio      |  |                        |        |  |                         |  | 100,000 |             |  | $ |              |  |  | $ | 29,000 | 
|Benjamin S. Levin      |  |                        |        |  |                         |  | 160,000 |             |  | $ |              |  |  | $ | 1,600  | 






|    |                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes warrants issued to Mr. Kriegsman by Global
    Genomics prior to our merger with that company covering
    459,352 shares of our common stock.

Compensation of Directors






49



---



##### 





Equity Compensation Plans




|                                                            |                               |                      |           |           |                      |     |                      |                             |  |  |           |           | 
|----------------------------------------------------------- | ----------------------------- | -------------------- | --------- | --------- | -------------------- | --- | -------------------- | --------------------------- |  |  | --------- | --------- | 
|                                                            |                               |                      |           |           |                      | (c) |                     
|                                                            |                               | (a)                  |           |           |                      |     | Number of Securities |                            
|                                                            |                               | Number of Securities |           |           | (b)                  |     |                      | Remaining Available         | 
|                                                            |                               | to be Issued Upon    |           |           | Weighted-Average     |     |                      | for Issuance Under Equity   | 
|                                                            |                               | Exercise of          |           |           | Exercise Price of    |     |                      | Compensation                | 
|                                                            |                               | Outstanding Options, |           |           | Outstanding Options, |     |                      | Plans (Excluding Securities | 
|                                                            |                               | Warrants and Rights  |           |           | Warrants and Rights  |     |                      | Reflected in Column (a))    | 
|                                                            |                               |                      |           |           |                      |     |                      |                             | 
|Equity compensation plans approved by our stockholders:     |                               |                      |           |           |                      |     |                      |                             |  |  |           |          
|                                                            | 1994 Stock Option Plan        |                      |           | 30,834    |                      |     | $                    | 1.00                        |  |  |           | 70,850    | 
|                                                            | 1995 Stock Option Plan        |                      |           |          |                      |     |                      |                            |  |  |           | 22,107    | 
|                                                            | 1998 Long-Term Incentive Plan |                      |           | 132,541   |                      |     |                      | 1.00                        |  |  |           | 29,517    | 
|                                                            | 2000 Long-Term Incentive Plan |                      |           | 4,577,667 |                      |     |                      | 1.16                        |  |  |           | 5,422,333 | 
|Equity compensation plans not approved by our stockholders: |                               |                      |           |           |                      |     |                      |                             |  |  |           |          
|Outstanding warrants(1)                                     |                               |                      | 5,098,240 |           |                      |     | 1.14                 |                             |  |  |          |          
|                                                            |                               |                      |           |           |                      |     |                      |                             | 
|Total:                                                      |                               |                      | 9,839,282 |           |                      | $   | 1.52                 |                             |  |  | 5,544,807 |          
|                                                            |                               |                      |           |           |                      |     |                      |                             | 






|    |                                                                                                                                                             
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Issued as compensation for various services and does not include
    warrants attached to common stock that were sold in private
    placement transactions.

Perquisites




Employment Agreements; Change in Control Agreements




| |                                              
| | ---------------------------------------------
| | Employment Agreement with Steven A. Kriegsman





50



---



##### 















| |                                                         
| | --------------------------------------------------------
| | Change in Control Agreement with Steven A.
    Kriegsman



51



---



##### 







| |                                            
| | -------------------------------------------
| | Employment Agreement with Matthew Natalizio







| |                                                    
| | ---------------------------------------------------
| | Employment Agreement with Jack R.
    Barber, Ph.D.







| |                                                    
| | ---------------------------------------------------
| | Employment Agreement with Mark A.
    Tepper, Ph.D.







| |                                            
| | -------------------------------------------
| | Employment Agreement with Benjamin S. Levin



52



---



##### 







Compensation Committee Interlocks and Insider Participation
in Compensation Decisions









|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters





|                                                                 |  |              |           |  |         |  |     |  
|---------------------------------------------------------------- |  | ------------ | --------- |  | ------- |  | --- | -
|                                                                 |  | Shares of    |          
|                                                                 |  | Common Stock |          
|                                                                 |  |              |          
|Name of Beneficial Owner                                         |  | Number       |           |  | Percent | 
|                                                                 |  |              |           |  |         | 
|Louis Ignarro, Ph.D.(1)                                          |  |              | 405,982   |  |         |  | *   |  
|Steven A. Kriegsman(2)                                           |  |              | 4,539,850 |  |         |  | 7.8 | %
|Max Link(3)                                                      |  |              | 48,749    |  |         |  | *   |  
|Joseph Rubinfeld(4)                                              |  |              | 11,999    |  |         |  | *   |  
|Marvin R. Selter(5)                                              |  |              | 360,784   |  |         |  | *   |  
|Richard Wennekamp(6)                                             |  |              | 8,333     |  |         |  | *   |  
|Mark A. Tepper(7)                                                |  |              | 133,333   |  |         |  | *   |  
|All executive officers and directors as a group (ten persons)(8) |  |              | 5,509,030 |  |         |  | 9.4 | %






|    |                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes 314,066 shares subject to options or warrants.                                                                                                                             
|   
|(2) | Includes 978,102 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 19,542 shares subject to options or warrants.                                                                                                                              
|   
|(4) | Includes 11,999 shares subject to options or warrants.                                                                                                                              

53



---



##### 





|    |                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(5) | The shares shown are owned, of record, by the Selter Family
    Trust or Selter IRA Rollover. Includes 3,333 shares subject
    to options or warrants owned by Mr. Selter.
|   
|(6) | Includes 3,333 shares subject to options or warrants.                                                                                                                      
|   
|(7) | Includes 133,333 shares subject to options or warrants.                                                                                                                    
|   
|(8) | Includes 1,463,708 shares subject to options or warrants.                                                                                                                  






|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions










|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accountant Fees and Services



Audit Fees




|      |  |     |         | 
|----- |  | --- | ------- | 
|Year: |  | BDO |        
|      |  |     |        
|2004  |  | $   | 217,000 | 
|2003  |  | $   | 160,000 | 



Audit Related Fees




54



---



##### 





Tax Fees




All Other Fees




PART IV







|         |                                           
|-------- | ------------------------------------------
|Item 15. | Exhibits and Financial Statement Schedules





| |     |                     
| | --- | --------------------
| | (1) | Financial Statements









| |                                                                                                         
| | --------------------------------------------------------------------------------------------------------
| | Consolidated Statements of Stockholders Equity for the
    Years Ended December 31, 2004, 2003 and 2002







Financial Statement Schedules












55



---



##### 



CytRx Corporation


Form 10-K Exhibit Index


|        |    |      |  |                                                                                                                                                              |  |  |      | 
|------- | -- | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------ |  |  | ---- | 
|Exhibit |    |      |  |                                                                                                                                                             
|Number  |    |      |  | Footnote                                                                                                                                                    
|        |    |      |  |                                                                                                                                                             
|        | 2  | .1   |  | Agreement and Plan of Merger dated February 11, 2002 among
    CytRx Corporation, GGC Merger Corporation and GlobalGenomics
    Capital, Inc.                |  |  | (m)  | 
|        | 2  | .2   |  | First Amendment to Agreement and Plan of Merger dated
    May 22, 2002 among CytRx Corporation, GGC Merger
    Corporation and Global Genomics Capital, Inc. |  |  | (m)  | 
|        | 3  | .1   |  | Restated Certificate of Incorporation                                                                                                                        |  |  | (a)  | 
|        | 3  | .2   |  | Restated By-Laws                                                                                                                                             |  |  | (b)  | 
|        | 3  | .3   |  | Certificate Of Amendment To Restated Certificate of Incorporation                                                                                            |  |  | (m)  | 
|        | 3  | .4   |  | Corrected Restated Certificate of Incorporation                                                                                                              |  |  | (n)  | 
|        | 3  | .5   |  | Certificate of Amendment to Restated Certificate of Incorporation                                                                                            |  |  | (n)  | 
|        | 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                                                                                                   |  |  | (k)  | 
|        | 4  | .3   |  | Stock Restriction and Registration Rights Agreement                                                                                                          |  |  | (o)  | 
|        | 4  | .4   |  | Warrant issued on July 20, 2002 to Corporate Consulting
    International Group pursuant to Consulting Engagement Letter
    dated July 20, 2002             |  |  | (p)  | 
|        | 4  | .5   |  | Warrant issued on February 21, 2003 to Corporate Capital
    Group International Ltd. Inc.                                                                   |  |  | (r)  | 
|        | 4  | .6   |  | Form of Common Stock Purchase Warrant between CytRx Corporation
    and each of the investors in the May 29, 2003 private
    placement                      |  |  | (s)  | 
|        | 4  | .7   |  | Form of Common Stock Purchase Warrant between CytRx Corporation
    and each of the investors in the September 16, 2003 private
    placement                |  |  | (v)  | 
|        | 4  | .8   |  | Warrant issued on May 10, 2004 to MBN Consulting, LLC                                                                                                        |  |  | (aa) | 
|        | 4  | .9   |  | Form of Common Stock Purchase Warrant between CytRx Corporation
    and each of the investors in the October 4, 2004 private
    placement                   |  |  | (dd) | 
|        | 4  | .10  |  | Form of Common Stock Purchase Warrant between CytRx Corporation
    and each of the investors in the January 2005 private placement                          |  |  | (ee) | 
|        | 5  | .1   |  | Opinion of Troy & Gould Professional Corporation                                                                                                             |  |  |      | 
|        | 10 | .1   |  | Agreement with Emory University, as amended                                                                                                                  |  |  | (d)  | 
|        | 10 | .2   |  | Option Agreement granting PSMA Development Company option to
    enter into a license agreement with CytRx Corporation dated
    December 23, 2002           |  |  | (q)  | 
|        | 10 | .3*  |  | Amended and Restated Employment Agreement between CytRx
    Corporation and Jack J. Luchese                                                                  |  |  | (i)  | 
|        | 10 | .4*  |  | Amended and Restated Change of Control Employment Agreement
    between CytRx Corporation and Jack J. Luchese                                                |  |  | (i)  | 
|        | 10 | .5*  |  | Amendment No. 1 to Employment Agreement with Jack J. Luchese                                                                                                 |  |  | (k)  | 
|        | 10 | .6*  |  | Amendment No. 1 to Change in Control Employment Agreement
    with Jack J. Luchese                                                                           |  |  | (k)  | 
|        | 10 | .7*  |  | 1986 Stock Option Plan, as amended and restated                                                                                                              |  |  | (f)  | 
|        | 10 | .8*  |  | 1994 Stock Option Plan, as amended and restated                                                                                                              |  |  | (e)  | 
|        | 10 | .9*  |  | 1995 Stock Option Plan                                                                                                                                       |  |  | (g)  | 
|        | 10 | .10* |  | 1998 Long-Term Incentive Plan                                                                                                                                |  |  | (h)  | 
|        | 10 | .11* |  | 2000 Long-Term Incentive Plan                                                                                                                                |  |  | (k)  | 
|        | 10 | .12* |  | Amendment No. 1 to 2000 Long-Term Incentive Plan                                                                                                             |  |  | (m)  | 

56



---



##### 



|        |    |      |  |                                                                                                                                                                                                                           |          |  |     | 
|------- | -- | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------- |  | --- | 
|Exhibit |    |      |  |                                                                                                                                                                                                                           |         
|Number  |    |      |  |                                                                                                                                                                                                                           | Footnote | 
|        |    |      |  |                                                                                                                                                                                                                           |          | 
|        | 10 | .13* |  | Amendment No. 2 to 2000 Long-Term Incentive Plan                                                                                                                                                                          |          |  | (m) | 
|        | 10 | .14* |  | Amendment No. 3 to 2000 Long-Term Incentive Plan                                                                                                                                                                          |          |  | (x) | 
|        | 10 | .15* |  | Amendment No. 4 to 2000 Long-Term Incentive Plan                                                                                                                                                                          |          |  | (x) | 
|        | 10 | .16 |  | License Agreement dated November 1, 2000 by and between
    CytRx Corporation and Merck & Co., Inc.                                                                                                                       |          |  | (j) | 
|        | 10 | .17  |  | License Agreement dated February 16, 2001 by and between
    CytRx Corporation and Ivy Animal Health, Inc.                                                                                                                |          |  | (k) | 
|        | 10 | .18 |  | License Agreement dated December 7, 2001 by and between
    CytRx Corporation and Vical Incorporated                                                                                                                      |          |  | (l) | 
|        | 10 | .19* |  | Amended and Restated Employment Agreement dated as of May 2002
    between CytRx Corporation and Steven A. Kriegsman                                                                                                      |          |  | (p) | 
|        | 10 | .20  |  | Extension of financial advisory agreement between CytRx
    Corporation and Cappello Capital Corp. dated January 1,
    2002 Agreement between Kriegsman Capital Group and CytRx
    Corporation dated                    |          |  | (p) | 
|        | 10 | .21  |  | February 11, 2002 regarding office space rental                                                                                                                                                                           |          |  | (p) | 
|        | 10 | .22  |  | Marketing Agreement with Madison & Wall Worldwide, Inc.
    dated August 14, 2002                                                                                                                                         |          |  | (p) | 
|        | 10 | .23  |  | Non-exclusive financial advisory agreement between CytRx
    Corporation and Sands Brothers & Co. Ltd. dated
    September 12, 2002                                                                                       |          |  | (p) | 
|        | 10 | .24  |  | Agreement between Kriegsman Capital Group and CytRx Corporate
    dated January 29, 2003 regarding office space rental and
    shared services                                                                            |          |  | (r) | 
|        | 10 | .25  |  | Consulting Agreement, dated February 21, 2003 between CytRx
    Corporation and Corporate Capital Group International Ltd.
    Inc.                                                                                       |          |  | (r) | 
|        | 10 | .26  |  | Securities Purchase Agreement, dated as of May 29, 2003,
    between CytRx Corporation and the Purchasers identified on the
    signatory page thereof                                                                    |          |  | (s) | 
|        | 10 | .27  |  | Registration Rights Agreement, dated as of May 29, 2003,
    between CytRx Corporation and the Purchasers identified on the
    signature page thereof                                                                    |          |  | (s) | 
|        | 10 | .28 |  | 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              |          |  | (t) | 
|        | 10 | .29 |  | 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                             |          |  | (t) | 
|        | 10 | .30 |  | Exclusive License Agreement dated as of April 15, 2003
    between University of Massachusetts Medical School and CytRx
    Corporation covering inhibitation of gene expression in
    adipocytes using interference RNA |          |  | (t) | 
|        | 10 | .31 |  | Exclusive License Agreement dated as of April 15, 2003
    between University of Massachusetts Medical School and CytRx
    Corporation covering RNAi targeting of viruses                                                |          |  | (t) | 
|        | 10 | .32 |  | Exclusive License Agreement dated as of April 15, 2003
    between University of Massachusetts Medical School and CytRx
    Corporation covering primary and polyvalent HIV-1 envelope
    glycoprotein DNA vaccines      |          |  | (t) | 
|        | 10 | .33 |  | Exclusive License Agreement dated as of April 15, 2003
    between University of Massachusetts Medical School and CytRx
    Corporation covering gene based therapeutics for solid tumor
    treatments                   |          |  | (t) | 
|        | 10 | .34 |  | 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                   |          |  | (t) | 
|        | 10 | .35  |  | Investment Banking Agreement dated April 1, 2003 between
    Rockwell Asset Management Inc. and CytRx Corporation                                                                                                         |          |  | (u) | 

57



---



##### 



|        |    |      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                      |          |  |     | 
|------- | -- | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------- |  | --- | 
|Exhibit |    |      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                      |         
|Number  |    |      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                      | Footnote | 
|        |    |      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                      |          | 
|        | 10 | .36  |  | Investment Banking Agreement dated April 3, 2003 between
    J.P. Turner & Company, LLC and CytRx Corporation                                                                                                                                                                                                                                                                                                                        |          |  | (u) | 
|        | 10 | .37  |  | First Amendment to Investment Banking Agreement dated
    June 4, 2003 between J.P. Turner & Company, LLC
    and CytRx Corporation                                                                                                                                                                                                                                                                                                  |          |  | (u) | 
|        | 10 | .38  |  | Exclusive Financial Advisor Engagement Agreement dated
    May 16, 2003 between Cappello Capital Corp. and CytRx
    Corporation                                                                                                                                                                                                                                                                                                     |          |  | (u) | 
|        | 10 | .39  |  | Modification letter dated June 6, 2003 to Engagement
    Agreement between Cappello Capital Corp. and CytRx Corporation                                                                                                                                                                                                                                                                                                              |          |  | (u) | 
|        | 10 | .40  |  | Engagement Letter dated May 27, 2003 between Cardinal
    Securities, LLC and CytRx Corporation                                                                                                                                                                                                                                                                                                                                      |          |  | (u) | 
|        | 10 | .41* |  | Second Amended and Restated Employment Agreement dated
    June 10, 2003 between Steven A. Kriegsman and CytRx
    Corporation                                                                                                                                                                                                                                                                                                       |          |  | (u) | 
|        | 10 | .42  |  | Financial Consulting Agreement dated May 10, 2003 between
    James Skalko and CytRx Corporation                                                                                                                                                                                                                                                                                                                                     |          |  | (u) | 
|        | 10 | .43  |  | Form of Securities Purchase Agreement, dated as of
    September 15, 2003, between CytRx Corporation and the
    Purchasers identified on the signatory page thereof                                                                                                                                                                                                                                                                 |          |  | (v) | 
|        | 10 | .44  |  | Form of Registration Rights Agreement, dated as of
    September 15, 2003, between CytRx Corporation and the
    Purchasers identified on the signature page thereof                                                                                                                                                                                                                                                                 |          |  | (v) | 
|        | 10 | .45 |  | 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 |          |  | (w) | 
|        | 10 | .46  |  | Second Amendment to Investment Banking Agreement dated as of
    August 13, 2003 between J.P. Turner & Company, LLC
    and CytRx Corporation                                                                                                                                                                                                                                                                                        |          |  | (w) | 
|        | 10 | .47* |  | Agreement dated as of July 17, 2003 between Dr. Louis
    J. Ignarro and CytRx Corporation                                                                                                                                                                                                                                                                                                                                           |          |  | (w) | 
|        | 10 | .48* |  | Employment Agreement dated as of August 1, 2003 between
    C. Kirk Peacock and CytRx Corporation                                                                                                                                                                                                                                                                                                                                    |          |  | (w) | 
|        | 10 | .49* |  | Employment Agreement dated as of September 17, 2003 between
    Mark A. Tepper and Araios, Inc.                                                                                                                                                                                                                                                                                                                                      |          |  | (w) | 
|        | 10 | .50  |  | Agreement of Settlement and Release dated August 8, 2003
    among Corporate Capital Group International Ltd., Inc, Peter
    Simone and CytRx Corporation                                                                                                                                                                                                                                                                           |          |  | (w) | 
|        | 10 | .51  |  | Confirming letter dated September 19, 2003 to the
    engagement agreement dated May 16, 2003 between Cappello
    Capital Corp. and CytRx Corporation                                                                                                                                                                                                                                                                               |          |  | (w) | 
|        | 10 | .52  |  | Preferred Stock Purchase Agreement dated as of
    September 16, 2003 between Araios, Inc. and CytRx
    Corporation                                                                                                                                                                                                                                                                                                                 |          |  | (w) | 
|        | 10 | .53  |  | Stockholders Agreement dated as of September 17, 2003 among
    Araios, Inc., Dr. Michael Czech and CytRx Corporation                                                                                                                                                                                                                                                                                                                |          |  | (w) | 
|        | 10 | .54  |  | Private Placement Agent Agreement dated September 15, 2003
    between Dunwoody Brokerage Services, Inc. and CytRx Corporation                                                                                                                                                                                                                                                                                                       |          |  | (w) | 
|        | 10 | .55  |  | Private Placement Agent Agreement dated September 15, 2003
    between Gilford Securities Incorporated and CytRx Corporation                                                                                                                                                                                                                                                                                                         |          |  | (w) | 
|        | 10 | .56  |  | Agreement dated as of September 16, 2003 between Maxim
    Group, LLC and CytRx Corporation                                                                                                                                                                                                                                                                                                                                          |          |  | (w) | 
|        | 10 | .57  |  | Amended and Restated Professional Services Agreement among CytRx
    Corporation, The Kriegsman Group and Kriegsman Capital Group,
    dated as of July 1, 2003                                                                                                                                                                                                                                                                      |          |  | (x) | 
|        | 10 | .58 |  | Agreement among University of Massachusetts, Advanced BioScience
    Laboratories, Inc. and CytRx Corporation, dated as of
    December 3, 2003                                                                                                                                                                                                                                                                                      |          |  | (x) | 

58



---



##### 



|        |    |      |  |                                                                                                                                                                                                                             |          |  |      | 
|------- | -- | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------- |  | ---- | 
|Exhibit |    |      |  |                                                                                                                                                                                                                             |         
|Number  |    |      |  |                                                                                                                                                                                                                             | Footnote | 
|        |    |      |  |                                                                                                                                                                                                                             |          | 
|        | 10 | .59 |  | 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                  |          |  | (x)  | 
|        | 10 | .60 |  | Collaboration Agreement among University of Massachusetts,
    Advanced BioScience Laboratories, Inc. and CytRx Corporation,
    dated as of December 22, 2003                                                              |          |  | (x)  | 
|        | 10 | .61 |  | Sublicense Agreement between CytRx Corporation and Advanced
    BioScience Laboratories, Inc., dated as of December 22, 2003                                                                                                |          |  | (x)  | 
|        | 10 | .62 |  | Agreement between CytRx Corporation and Dr. Robert Hunter
    regarding SynthRx, Inc. dated October 20, 2003                                                                                                                |          |  | (x)  | 
|        | 10 | .63  |  | Office Lease between The Kriegsman Group and Douglas Emmett,
    dated April 13, 2000                                                                                                                                       |          |  | (x)  | 
|        | 10 | .64  |  | Assignment to CytRx Corporation effective July 1, 2003 of
    Office Lease between The Kriegsman Group and Douglas Emmett,
    dated April 13, 2000                                                                         |          |  | (x)  | 
|        | 10 | .65* |  | Amendment dated October 18, 2003 to Agreement between
    Dr. Louis J. Ignarro and CytRx Corporation dated as of
    July 17, 2003                                                                                          |          |  | (x)  | 
|        | 10 | .66  |  | Consulting Agreement dated December 1, 2003 between CytRx
    Corporation and MBN Consulting, LLC                                                                                                                           |          |  | (x)  | 
|        | 10 | .67  |  | Office Lease between Araios, Inc. and Are-One Innovation Drive,
    LLC dated 11-19-03                                                                                                                                      |          |  | (x)  | 
|        | 10 | .68  |  | Registration Rights Agreement, dated as of January 29,
    2004, by and between CytRx Corporation and Advanced BioScience
    Laboratories, Inc.                                                                            |          |  | (y)  | 
|        | 10 | .69  |  | Consulting Agreement, dated as of February 9, 2004, between
    CytRx Corporation and The Investor Relations Group, Inc.                                                                                                    |          |  | (y)  | 
|        | 10 | .70  |  | Investment Banking Agreement, dated as of
    February   , 2004, between CytRx Corporation and
    Gunn Allen Financial, Inc.                                                                                               |          |  | (y)  | 
|        | 10 | .71  |  | Scientific Advisory Board Agreement, effective as of
    March 3, 2004, by Tariq M. Rana, Ph.D., CytRx
    Corporation and Araios, Inc.                                                                                     |          |  | (y)  | 
|        | 10 | .72  |  | Scientific Advisory Board Agreement, effective as of
    March 3, 2004, by Craig Mello, Ph.D., CytRx
    Corporation and Araios, Inc.                                                                                       |          |  | (y)  | 
|        | 10 | .73 |  | Patent License Agreement, dated May, 2004, among CytRx
    Corporation, Imperial College of Science and Technology and
    Imperial College Innovations Limited                                                             |          |  | (z)  | 
|        | 10 | .74* |  | Mutual General Release and Severance Agreement, dated
    May 12, 2004, between CytRx Corporation and C. Kirk Peacock                                                                                                       |          |  | (z)  | 
|        | 10 | .75* |  | Mutual General Release and Severance Agreement, dated May12,
    2004, between CytRx Corporation and Gregory Liberman                                                                                                       |          |  | (z)  | 
|        | 10 | .76  |  | Settlement and Release Agreement dated May 10, 2004, by and
    between MBN Consulting, LLC and CytRx Corporation                                                                                                           |          |  | (aa) | 
|        | 10 | .77  |  | Registration Rights Agreement dated May 10, 2004, by and
    between MBN Consulting, LLC and CytRx Corporation                                                                                                              |          |  | (aa) | 
|        | 10 | .78 |  | Collaboration and Invention Disclosure Agreement dated
    July 8, 2004, by and between the University of
    Massachusetts, as represented solely by the Medical School at
    its Worcester campus, and CytRx Corporation |          |  | (aa) | 
|        | 10 | .79* |  | Employment Agreement dated July 6, 2004, by and between
    Jack Barber and CytRx Corporation                                                                                                                               |          |  | (aa) | 
|        | 10 | .80* |  | Employment Agreement dated July 12, 2004, by and between
    Matthew Natalizio and CytRx Corporation                                                                                                                        |          |  | (aa) | 
|        | 10 | .81* |  | Employment Agreement dated July 15, 2004, by and between
    Benjamin Levin and CytRx Corporation                                                                                                                           |          |  | (aa) | 
|        | 10 | .82  |  | Mutual and General Release of All Claims effective as of
    May 29, 2004, by and between Madison & Wall
    Worldwide, Inc. and CytRx Corporation                                                                          |          |  | (aa) | 

59



---



##### 



|        |    |     |  |                                                                                                                                                                                      |          |  |      | 
|------- | -- | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------- |  | ---- | 
|Exhibit |    |     |  |                                                                                                                                                                                      |         
|Number  |    |     |  |                                                                                                                                                                                      | Footnote | 
|        |    |     |  |                                                                                                                                                                                      |          | 
|        | 10 | .83 |  | Registration Rights Agreement dated May   , 2004,
    by and between Madison & Wall Worldwide, Inc. and CytRx
    Corporation                                                        |          |  | (aa) | 
|        | 10 | .84 |  | Investment Banking Agreement dated September 13, 2004, by
    and between CytRx Corporation and J.P. Turner &
    Company, LLC                                                       |          |  | (bb) | 
|        | 10 | .85 |  | Investment Banking Agreement dated September 30, 2004, by
    and between CytRx Corporation and Rodman & Renshaw, LLC                                                                |          |  | (cc) | 
|        | 10 | .86 |  | 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. |          |  | (dd) | 
|        | 10 | .87 |  | Securities Purchase Agreement dated as of October 4, 2004
    among CytRx Corporation and the Purchasers identified on the
    signatory page thereof                                |          |  | (dd) | 
|        | 10 | .88 |  | Registration Rights Agreement dated as of October 4, 2004
    among CytRx Corporation and the Purchasers identified on the
    signatory page thereof                                |          |  | (dd) | 
|        | 10 | .89 |  | Securities Purchase Agreement, dated as of January 20,
    2005, by and among CytRx Corporation and the Investors named
    therein                                                  |          |  | (ee) | 
|        | 10 | .90 |  | Registration Rights Agreement, dated as of January 20,
    2005, by and among CytRx Corporation and the Investors named
    therein                                                  |          |  | (ee) | 
|        | 10 | .91 |  | Investment Banking Agreement dated January 20, 2005 between
    CytRx Corporation and Rodman & Renshaw, LLC                                                                          |          |  | (ee) | 
|        | 14 | .1  |  | Code of Ethics                                                                                                                                                                       |          |  | (x)  | 
|        | 21 | .1  |  | Subsidiaries                                                                                                                                                                         |          |  | (x)  | 
|        | 23 | .1  |  | Consent of BDO Seidman, LLP                                                                                                                                                          |          |  |      | 
|        | 23 | .2  |  | Consent of Ernst & Young LLP                                                                                                                                                         |          |  |      | 
|        | 31 |     |  | Certifications Pursuant to 15 U.S.C. Section 7241, as
    Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002                                                      |          |  |      | 
|        | 32 |     |  | Certifications 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 21, 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                           
|   
|(f) | Incorporated by reference to the Registrants Annual Report
    on Form 10-K filed on March 27, 1996                                 
|   
|(g) | Incorporated by reference to the Registrants Registration
    Statement on Form S-8 (File No. 33-93818) filed on
    June 22, 1995  
|   
|(h) | Incorporated by reference to the Registrants Annual Report
    on Form 10-K filed on March 30, 1998                                 
|   
|(i) | Incorporated by reference to the Registrants Annual Report
    on Form 10-K filed on March 30, 2000                                 

60



---



##### 





|     |                                                                                                                                                                                                                                                                        
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(j)  | Incorporated by reference to the Registrants Current
    Report on Form 8-K/ A filed on March 16, 2001                                                                                                                                                                
|    
|(k)  | Incorporated by reference to the Registrants Annual Report
    on Form 10-K filed on March 27, 2001                                                                                                                                                                   
|    
|(l)  | Incorporated by reference to the Registrants Current
    Report on Form 8-K filed on December 21, 2001                                                                                                                                                                
|    
|(m)  | Incorporated by reference to the Registrants Proxy
    Statement filed June 10, 2002                                                                                                                                                                                  
|    
|(n)  | Incorporated by reference to the Registrants Form S-8
    (File No. 333-91068) filed on June 24, 2002                                                                                                                                                                 
|    
|(o)  | Incorporated by reference to the Registrants 8-K filed on
    August 1, 2002                                                                                                                                                                                          
|    
|(p)  | Incorporated by reference to the Registrants 10-Q filed on
    November 14, 2002                                                                                                                                                                                      
|    
|(q)  | Incorporated by reference to the Registrants 10-K filed on
    March 31, 2003                                                                                                                                                                                         
|    
|(r)  | Incorporated by reference to the Registrants 10-Q filed on
    May 15, 2003                                                                                                                                                                                           
|    
|(s)  | Incorporated by reference to the Registrants 8-K filed on
    May 30, 2003 Incorporated by reference to the
    Registrants S-3 Amendment No. 4 (File
    No. 333-100947) filed on                                                                                   
|    
|(t)  | August 5, 2003                                                                                                                                                                                                                                                         
|    
|(u)  | Incorporated by reference to the Registrants 10-Q filed on
    August 14, 2003                                                                                                                                                                                        
|    
|(v)  | Incorporated by reference to the Registrants 8-K filed on
    September 17, 2003                                                                                                                                                                                      
|    
|(w)  | Incorporated by reference to the Registrants 10-Q filed on
    November 12, 2003                                                                                                                                                                                      
|    
|(x)  | Incorporated by reference to the Registrants 10-K filed on
    May 14, 2004                                                                                                                                                                                           
|    
|(y)  | Incorporated by reference to the Registrants 10-Q filed on
    May 17, 2004 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 (z) 2, 2004
|    
|(aa) | Incorporated by reference to the Registrants 10-Q filed on
    August 16, 2004                                                                                                                                                                                        



|     |                                                                                  
|---- | ---------------------------------------------------------------------------------
|(bb) | Incorporated by reference to the Registrants 8-K filed on
    September 17, 2004



|     |                                                                                 
|---- | --------------------------------------------------------------------------------
|(cc) | Incorporated by reference to the Registrants 10-Q filed on
    November 3, 2004



|     |                                                                               
|---- | ------------------------------------------------------------------------------
|(dd) | Incorporated by reference to the Registrants 8-K filed on
    October 5, 2004



|     |                                                                                
|---- | -------------------------------------------------------------------------------
|(ee) | Incorporated by reference to the Registrants 8-K filed on
    January 21, 2005

61



---



##### 






SIGNATURES






| |                  
| | -----------------
| | CYTRX CORPORATION



| |     |                        
| | --- | -----------------------
| | By: | /s/ Steven A. Kriegsman

| |                                      
| | -------------------------------------
| |                                      
| | Steven A. Kriegsman                  
| | President and Chief Executive Officer





|                                                         |  |                                                                                            |  |                |  | 
|-------------------------------------------------------- |  | ------------------------------------------------------------------------------------------ |  | -------------- |  | 
|Signature                                                |  | Title                                                                                      |  | Date          
|                                                         |  |                                                                                            |  |               
|                                                        
|/s/ Steven A. KriegsmanSteven
    A. Kriegsman           |  | President and Chief Executive
    Officer and Director                                     |  | March 30, 2005
|                                                        
|/s/ Matthew NatalizioMatthew
    Natalizio               |  | Chief Financial Officer and Treasurer (principal financial
    and
    accounting officer) |  | March 30, 2005
|                                                        
|/s/ Louis J. Ignarro,
    Ph.DLouis
    J. Ignarro, Ph.D |  | Director                                                                                   |  | March 30, 2005
|                                                        
|/s/ Max LinkMax
    Link                                 |  | Director                                                                                   |  | March 30, 2005
|                                                        
|/s/ Joseph Rubinfeld,
    Ph.DJoseph
    Rubinfeld, Ph.D |  | Director                                                                                   |  | March 30, 2005
|                                                        
|/s/ Marvin R. SelterMarvin
    R. Selter                 |  | Director                                                                                   |  | March 30, 2005
|                                                        
|/s/ Richard L.
    WennekampRichard
    L. Wennekamp     |  | Director                                                                                   |  | March 30, 2005

62



---



##### 



INDEX TO FINANCIAL STATEMENTS


AND FINANCIAL STATEMENT SCHEDULE


|                                                              |                                                     |  |      |      | 
|------------------------------------------------------------- | --------------------------------------------------- |  | ---- | ---- | 
|CytRx Corporation                                             |                                                     |  |      |     
|Consolidated Balance Sheets                                   |                                                     |  | F-2  |     
|Consolidated Statements of Operations                         |                                                     |  | F-3  |     
|Consolidated Statements of
    Stockholders Equity           |                                                     |  | F-4  |     
|Consolidated Statements of Cash Flows                         |                                                     |  | F-5  |     
|Notes to Consolidated Financial
    Statements                |                                                     |  | F-6  |     
|Reports of Independent Registered Public
    Accounting Firms |                                                     |  | F-22 |     
|Financial Statement Schedule                                  |                                                     |  |      |     
|                                                              | Schedule II  Valuation and
    Qualifying Accounts |  |      | F-24 | 

F-1



---



##### 



CYTRX CORPORATION





CONSOLIDATED BALANCE SHEETS


|                                     |                                                                                                                                                                                 |                                            |         |              |           |  |         |             |            | 
|------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ------------ | --------- |  | ------- | ----------- | ---------- | 
|                                     |                                                                                                                                                                                 | December 31,                               |        
|                                     |                                                                                                                                                                                 |                                            |        
|                                     |                                                                                                                                                                                 | 2004                                       |         |              | 2003      | 
|                                     |                                                                                                                                                                                 |                                            |         |              |           | 
|ASSETS                              
|Current assets:                      |                                                                                                                                                                                 |                                            |         |              |           |  |         |            
|                                     | Cash and cash equivalents                                                                                                                                                       |                                            | $       | 1,987,595    |           |  | $       | 11,644,446  |           
|                                     | Short-term investments                                                                                                                                                          |                                            |         | 1,011,814    |           |  |         |            |           
|                                     | Prepaid compensation, current portion                                                                                                                                           |                                            |         | 604,750      |           |  |         |            |           
|                                     | Prepaid and other current assets                                                                                                                                                |                                            |         | 351,396      |           |  |         | 236,349     |           
|                                     |                                                                                                                                                                                 |                                            |         |              |           | 
|                                     |                                                                                                                                                                                 | Total current assets                       |         |              | 3,955,555 |  |         |             | 11,880,795 | 
|                                     |                                                                                                                                                                                 |                                            |         |              |           | 
|Equipment and furnishings, net       |                                                                                                                                                                                 |                                            | 447,579 |              |           |  | 227,413 |            
|                                     |                                                                                                                                                                                 |                                            |         |              |           | 
|Molecular library                    |                                                                                                                                                                                 |                                            | 447,567 |              |           |  |        |            
|                                     |                                                                                                                                                                                 |                                            |         |              |           | 
|Other assets                        |                                                                                                                                                                                 |                                            |         |              |           |  |         |            
|                                     | Prepaid and other assets                                                                                                                                                        |                                            |         | 198,055      |           |  |         | 216,076     |           
|                                     |                                                                                                                                                                                 |                                            |         |              |           | 
|                                     |                                                                                                                                                                                 | Total assets                               |         | $            | 5,048,756 |  |         | $           | 12,324,284 | 
|                                     |                                                                                                                                                                                 |                                            |         |              |           | 
|                                    
|LIABILITIES AND STOCKHOLDERS EQUITY
|Current liabilities:                 |                                                                                                                                                                                 |                                            |         |              |           |  |         |            
|                                     | Accounts payable                                                                                                                                                                |                                            | $       | 1,661,104    |           |  | $       | 738,135     |           
|                                     | Accrued expenses and other current liabilities                                                                                                                                  |                                            |         | 1,074,146    |           |  |         | 381,977     |           
|                                     |                                                                                                                                                                                 |                                            |         |              |           | 
|                                     |                                                                                                                                                                                 | Total current liabilities                  |         |              | 2,735,250 |  |         |             | 1,120,112  | 
|Accrued loss on facility abandonment |                                                                                                                                                                                 |                                            | 206,833 |              |           |  | 312,433 |            
|Deferred gain on sale of building    |                                                                                                                                                                                 |                                            | 65,910  |              |           |  | 93,836  |            
|Deferred revenue                     |                                                                                                                                                                                 |                                            | 275,000 |              |           |  | 275,000 |            
|                                     |                                                                                                                                                                                 |                                            |         |              |           | 
|                                     |                                                                                                                                                                                 | Total liabilities                          |         |              | 3,282,993 |  |         |             | 1,801,381  | 
|                                     |                                                                                                                                                                                 |                                            |         |              |           | 
|Minority interest                    |                                                                                                                                                                                 |                                            | 170,671 |              |           |  | 330,287 |            
|                                     |                                                                                                                                                                                 |                                            |         |              |           | 
|Commitments and contingencies        |                                                                                                                                                                                 |                                            |        |              |           |  |        |            
|Stockholders 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, 100,000,000 shares
    authorized; 40,190,000 and 34,392,000 shares issued at
    December 31, 2004 and 2003, respectively                       |                                            |         | 40,190       |           |  |         | 34,392      |           
|                                     | Additional paid-in capital                                                                                                                                                      |                                            |         | 110,028,327  |           |  |         | 102,239,460 |           
|                                     | Treasury stock, at cost (633,816 shares held, at cost, at
    December 31, 2004 and 2003)                                                                                       |                                            |         | (2,279,238   | )         |  |         | (2,279,238  | )         
|                                     | Accumulated deficit                                                                                                                                                             |                                            |         | (106,194,187 | )         |  |         | (89,801,998 | )         
|                                     |                                                                                                                                                                                 |                                            |         |              |           | 
|                                     |                                                                                                                                                                                 | Total stockholders equity                 |         |              | 1,595,092 |  |         |             | 10,192,616 | 
|                                     |                                                                                                                                                                                 |                                            |         |              |           | 
|                                     |                                                                                                                                                                                 | Total liabilities and stockholders equity |         | $            | 5,048,756 |  |         | $           | 12,324,284 | 
|                                     |                                                                                                                                                                                 |                                            |         |              |           | 



F-2



---



##### 



CYTRX CORPORATION





CONSOLIDATED STATEMENTS OF OPERATIONS


|                                                      |                                                                                                                                 |                         |             |           |      |   |             |           |  |   |            |           | 
|----------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------- | ----------------------- | ----------- | --------- | ---- | - | ----------- | --------- |  | - | ---------- | --------- | 
|                                                      |                                                                                                                                 | Year Ended December 31, |            
|                                                      |                                                                                                                                 |                         |            
|                                                      |                                                                                                                                 | 2004                    |             |           | 2003 |   |             | 2002      | 
|                                                      |                                                                                                                                 |                         |             |           |      |   |             |           | 
|Income:                                               |                                                                                                                                 |                         |             |           |      |   |             |           |  |   |            |          
|                                                      | Service revenues                                                                                                                |                         | $           |          |      |   | $           |          |  |   | $          | 22,453    | 
|                                                      | License fees                                                                                                                    |                         |             | 428,164   |      |   |             | 94,000    |  |   |            | 1,051,000 | 
|                                                      | Grant revenue                                                                                                                   |                         |             |          |      |   |             |          |  |   |            | 46,144    | 
|                                                      |                                                                                                                                 |                         |             |           |      |   |             |           | 
|                                                      |                                                                                                                                 |                         | 428,164     |           |      |   | 94,000      |           |  |   | 1,119,597  |          
|                                                      |                                                                                                                                 |                         |             |           |      |   |             |           | 
|Expenses:                                             |                                                                                                                                 |                         |             |           |      |   |             |           |  |   |            |          
|                                                      | Cost of service revenues                                                                                                        |                         |             |          |      |   |             |          |  |   |            | 11,287    | 
|                                                      | Research and development (includes non-cash stock compensation
    of $1,387,645 and $2,902,484 in 2004 and 2003, respectively) |                         |             | 6,012,903 |      |   |             | 4,387,599 |  |   |            | 767,102   | 
|                                                      | In-process research and development                                                                                             |                         |             | 3,021,952 |      |   |             |          |  |   |            |          | 
|                                                      | Common stock, stock options and warrants issued for selling,
    general and administrative                                     |                         |             | 1,977,330 |      |   |             | 3,148,047 |  |   |            | 229,550   | 
|                                                      | Selling, general and administrative                                                                                             |                         |             | 5,923,910 |      |   |             | 3,840,620 |  |   |            | 1,703,402 | 
|                                                      | Depreciation and amortization                                                                                                   |                         |             | 103,851   |      |   |             | 2,130     |  |   |            | 793,563   | 
|                                                      | Severance and other contractual payments to officers                                                                            |                         |             |          |      |   |             |          |  |   |            | 1,822,454 | 
|                                                      | Asset impairment charge                                                                                                         |                         |             |          |      |   |             |          |  |   |            | 920,939   | 
|                                                      | Loss on facility abandonment                                                                                                    |                         |             |          |      |   |             |          |  |   |            | 477,686   | 
|                                                      |                                                                                                                                 |                         |             |           |      |   |             |           | 
|                                                      |                                                                                                                                 |                         | 17,039,946  |           |      |   | 11,378,396  |           |  |   | 6,725,983  |          
|                                                      |                                                                                                                                 |                         |             |           |      |   |             |           | 
|Loss before other income                              |                                                                                                                                 |                         | (16,611,782 | )         |      |   | (11,284,396 | )         |  |   | (5,606,386 | )        
|Other income                                         |                                                                                                                                 |                         |             |           |      |   |             |           |  |   |            |          
|                                                      | Interest income                                                                                                                 |                         |             | 59,977    |      |   |             | 82,064    |  |   |            | 95,508    | 
|                                                      |                                                                                                                                 |                         |             |           |      |   |             |           | 
|                                                      |                                                                                                                                 |                         | (16,551,805 | )         |      |   | (11,202,332 | )         |  |   | (5,510,878 | )        
|Equity in losses from minority-owned entity           |                                                                                                                                 |                         |            |           |      |   | (6,662,031  | )         |  |   | (664,758   | )        
|Minority interest in losses of subsidiary             |                                                                                                                                 |                         | 159,616     |           |      |   | 19,763      |           |  |   |           |          
|                                                      |                                                                                                                                 |                         |             |           |      |   |             |           | 
|Net loss                                              |                                                                                                                                 | $                       | (16,392,189 | )         |      | $ | (17,844,600 | )         |  | $ | (6,175,636 | )        
|                                                      |                                                                                                                                 |                         |             |           |      |   |             |           | 
|Basic and diluted loss per common share               |                                                                                                                                 | $                       | (0.48       | )         |      | $ | (0.65       | )         |  | $ | (0.39      | )        
|                                                      |                                                                                                                                 |                         |             |           |      |   |             |           | 
|Basic and diluted weighted average shares outstanding |                                                                                                                                 |                         | 34,325,636  |           |      |   | 27,324,794  |           |  |   | 16,004,155 |          
|                                                      |                                                                                                                                 |                         |             |           |      |   |             |           | 



F-3



---



##### 



CYTRX CORPORATION





CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY


|                             |                                                                                         |               |            |           |            |   |        |             |  |   |             |            |  |       |              |             |       |   |            |   |  |   |            |             |  
|---------------------------- | --------------------------------------------------------------------------------------- | ------------- | ---------- | --------- | ---------- | - | ------ | ----------- |  | - | ----------- | ---------- |  | ----- | ------------ | ----------- | ----- | - | ---------- | - |  | - | ---------- | ----------- | -
|                             |                                                                                         | Common Stock  |            |           | Additional |   |        |             |  |   |             |           
|                             |                                                                                         |               |            |           | Paid-In    |   |        | Accumulated |  |   | Treasury    |            |  |      
|                             |                                                                                         | Shares Issued |            |           | Amount     |   |        | Capital     |  |   | Deficit     |            |  | Stock |              |             | Total |  
|                             |                                                                                         |               |            |           |            |   |        |             |  |   |             |            |  |       |              |             |       |  
|Balance at December 31, 2001 |                                                                                         |               | 11,459,012 |           |            | $ | 11,459 |             |  | $ | 74,632,292  |            |  | $     | (65,781,762  | )           |       | $ | (2,279,238 | ) |  | $ | 6,582,751  |            
|                             | Issuance of common stock                                                                |               |            | 324,999   |            |   |        | 326         |  |   |             | 109,408    |  |       |              |            |       |   |            |  |  |   |            | 109,734     |  
|                             | Common stock issued for Acquisition of Global Genomics                                  |               |            | 8,948,204 |            |   |        | 8,948       |  |   |             | 5,785,014  |  |       |              |            |       |   |            |  |  |   |            | 5,793,962   |  
|                             | Common stock and warrants issued in conjunction with acquisition
    of Global Genomics |               |            | 548,330   |            |   |        | 548         |  |   |             | 899,693    |  |       |              |            |       |   |            |  |  |   |            | 900,241     |  
|                             | Common stock issued in lieu of cash for officers severance and
    bonuses              |               |            | 863,382   |            |   |        | 863         |  |   |             | 517,882    |  |       |              |            |       |   |            |  |  |   |            | 518,745     |  
|                             | Issuance of stock options/warrants                                                      |               |            |          |            |   |        |            |  |   |             | 229,550    |  |       |              |            |       |   |            |  |  |   |            | 229,550     |  
|                             | Net loss                                                                                |               |            |          |            |   |        |            |  |   |             |           |  |       |              | (6,175,636  | )     |   |            |  |  |   |            | (6,175,636  | )
|                             |                                                                                         |               |            |           |            |   |        |             |  |   |             |            |  |       |              |             |       |  
|Balance at December 31, 2002 |                                                                                         |               | 22,143,927 |           |            |   | 22,144 |             |  |   | 82,173,839  |            |  |       | (71,957,398  | )           |       |   | (2,279,238 | ) |  |   | 7,959,347  |            
|                             | Issuance of common stock for research and development                                   |               |            | 1,828,359 |            |   |        | 1,828       |  |   |             | 2,550,606  |  |       |              |            |       |   |            |  |  |   |            | 2,552,434   |  
|                             | Common stock and warrants issued in connection with private
    placements              |               |            | 7,081,025 |            |   |        | 7,081       |  |   |             | 12,485,543 |  |       |              |            |       |   |            |  |  |   |            | 12,492,624  |  
|                             | Issuance of common stock for services                                                   |               |            | 700,000   |            |   |        | 700         |  |   |             | 1,534,050  |  |       |              |            |       |   |            |  |  |   |            | 1,534,750   |  
|                             | Issuance of stock options/warrants                                                      |               |            |          |            |   |        |            |  |   |             | 1,613,297  |  |       |              |            |       |   |            |  |  |   |            | 1,613,297   |  
|                             | Options and warrants exercised                                                          |               |            | 2,638,689 |            |   |        | 2,639       |  |   |             | 1,882,125  |  |       |              |            |       |   |            |  |  |   |            | 1,884,764   |  
|                             | Net loss                                                                                |               |            |          |            |   |        |            |  |   |             |           |  |       |              | (17,844,600 | )     |   |            |  |  |   |            | (17,844,600 | )
|                             |                                                                                         |               |            |           |            |   |        |             |  |   |             |            |  |       |              |             |       |  
|Balance at December 31, 2003 |                                                                                         |               | 34,392,000 |           |            |   | 34,392 |             |  |   | 102,239,460 |            |  |       | (89,801,998  | )           |       |   | (2,279,238 | ) |  |   | 10,192,616 |            
|                             | Common stock and warrants issued in connection with private
    placements              |               |            | 4,100,000 |            |   |        | 4,100       |  |   |             | 3,899,900  |  |       |              |            |       |   |            |  |  |   |            | 3,904,000   |  
|                             | Issuance of common stock for services                                                   |               |            | 800,000   |            |   |        | 800         |  |   |             | 1,252,950  |  |       |              |            |       |   |            |  |  |   |            | 1,253,750   |  
|                             | Issuance of stock options/warrants                                                      |               |            |          |            |   |        |            |  |   |             | 2,111,225  |  |       |              |            |       |   |            |  |  |   |            | 2,111,225   |  
|                             | Options and warrants exercised                                                          |               |            | 897,688   |            |   |        | 898         |  |   |             | 524,792    |  |       |              |            |       |   |            |  |  |   |            | 525,690     |  
|                             | Net 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 | ) |  | $ | 1,595,092  |            
|                             |                                                                                         |               |            |           |            |   |        |             |  |   |             |            |  |       |              |             |       |  



F-4



---



##### 



CYTRX CORPORATION





CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                       |                                                                                               |                                             |                          |             |             |          |   |             |            |          |   |            |            |          |  
|-------------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------- | ------------------------ | ----------- | ----------- | -------- | - | ----------- | ---------- | -------- | - | ---------- | ---------- | -------- | -
|                                       |                                                                                               | Years Ended December 31,                    |                         
|                                       |                                                                                               |                                             |                         
|                                       |                                                                                               | 2004                                        |                          |             | 2003        |          |   | 2002        |           
|                                       |                                                                                               |                                             |                          |             |             |          |   |             |           
|Cash flows from operating activities:  |                                                                                               |                                             |                          |             |             |          |   |             |            |          |   |           
|                                       | Net loss                                                                                      |                                             | $                        | (16,392,189 | )           |          | $ | (17,844,600 | )          |          | $ | (6,175,636 | )         
|                                       | Adjustments to reconcile net loss to net cash (used in) provided
    by operating activities: |                                             |                          |             |             |          |   |             |            |          |   |            |           
|                                       |                                                                                               | Depreciation and amortization               |                          |             | 103,851     |          |   |             | 2,130      |          |   |            | 793,563    |         
|                                       |                                                                                               | Equity in losses from minority-owned entity |                          |             |            |          |   |             | 6,662,031  |          |   |            | 664,758    |         
|                                       |                                                                                               | Minority interest in losses of subsidiary   |                          |             | (159,616    | )        |   |             | (19,763    | )        |   |            |           |         
|                                       |                                                                                               | Stock option and warrant expense            |                          |             | 1,104,730   |          |   |             | 1,613,297  |          |   |            | 229,550    |         
|                                       |                                                                                               | Common stock issued for services            |                          |             | 872,600     |          |   |             | 1,534,750  |          |   |            |           |         
|                                       |                                                                                               | Non-cash research and development           |                          |             | 1,387,645   |          |   |             | 2,902,484  |          |   |            |           |         
|                                       |                                                                                               | Asset impairment charge                     |                          |             |            |          |   |             |           |          |   |            | 920,939    |         
|                                       |                                                                                               | Changes in assets and liabilities:          |                          |             |             |          |   |             |            |          |   |            |            |         
|                                       |                                                                                               |                                             | Note receivable          |             |             | 16,608   |   |             |            | 365,249  |   |            |            | 122,467  |  
|                                       |                                                                                               |                                             | Prepaid and other assets |             |             | (768,433 | ) |             |            | 14,123   |   |            |            | (379,849 | )
|                                       |                                                                                               |                                             | Accounts payable         |             |             | 922,969  |   |             |            | 658,188  |   |            |            | (98,830  | )
|                                       |                                                                                               |                                             | Other liabilities        |             |             | 558,643  |   |             |            | (181,044 | ) |            |            | 395,222  |  
|                                       |                                                                                               |                                             |                          |             |             |          |   |             |           
|                                       | Total adjustments                                                                             |                                             |                          | 4,038,997   |             |          |   | 13,551,445  |            |          |   | 2,647,820  |           
|                                       |                                                                                               |                                             |                          |             |             |          |   |             |           
|                                       |                                                                                               | Net cash used in operating activities       |                          |             | (12,353,192 | )        |   |             | (4,293,155 | )        |   |            | (3,527,816 | )       
|                                       |                                                                                               |                                             |                          |             |             |          |   |             |           
|Cash flows from investing activities:  |                                                                                               |                                             |                          |             |             |          |   |             |            |          |   |           
|                                       | Purchases of short-term investments                                                           |                                             |                          | (961,765    | )           |          |   |            |            |          |   | (1,401,358 | )         
|                                       | Redemption of short-term investments                                                          |                                             |                          |            |             |          |   | 1,401,358   |            |          |   |           |           
|                                       | Net cash paid related to acquisition                                                          |                                             |                          |            |             |          |   |            |            |          |   | (615,064   | )         
|                                       | Purchases of property and equipment                                                           |                                             |                          | (771,584    | )           |          |   | (228,459    | )          |          |   |           |           
|                                       | Disposals of property and equipment, net                                                      |                                             |                          |            |             |          |   |            |            |          |   | 30,142     |           
|                                       |                                                                                               |                                             |                          |             |             |          |   |             |           
|                                       | Net cash (used in) provided by investing activities                                           |                                             |                          | (1,733,349  | )           |          |   | 1,172,899   |            |          |   | (1,986,280 | )         
|                                       |                                                                                               |                                             |                          |             |             |          |   |             |           
|Cash flows from financing activities  |                                                                                               |                                             |                          |             |             |          |   |             |            |          |   |           
|                                       | Net proceeds from issuance of common stock                                                    |                                             |                          | 4,429,690   |             |          |   | 14,377,388  |            |          |   | 628,496    |           
|                                       |                                                                                               |                                             |                          |             |             |          |   |             |           
|                                       | Net increase (decrease) in cash and cash equivalents                                          |                                             |                          | (9,656,851  | )           |          |   | 11,257,132  |            |          |   | (4,885,600 | )         
|                                       | Cash and cash equivalents at beginning of year                                                |                                             |                          | 11,644,446  |             |          |   | 387,314     |            |          |   | 5,272,914  |           
|                                       |                                                                                               |                                             |                          |             |             |          |   |             |           
|                                       | Cash and cash equivalents at end of year                                                      |                                             | $                        | 1,987,595   |             |          | $ | 11,644,446  |            |          | $ | 387,314    |           
|                                       |                                                                                               |                                             |                          |             |             |          |   |             |           



F-5



---



##### 



CYTRX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







|   |                   
|-- | ------------------
|1. | Nature of Business









|   |                                           
|-- | ------------------------------------------
|2. | Summary of Significant Accounting Policies

Basis of Presentation and Principles of
Consolidation


Revenue Recognition


Cash Equivalents


F-6



---



##### 



CYTRX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Investments


Fair Value of Financial Instruments


Property and Equipment


Patents and Patent Application Costs


Basic and Diluted Loss per Common Share


Shares Reserved for Future Issuance


Stock-based Compensation


F-7



---



##### 



CYTRX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                                                                                            |  |      |         |   |      |   |         |      |  |   |        |  
|----------------------------------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------ | -
|                                                                                                            |  | 2004 |         |   | 2003 |   |         | 2002 | 
|                                                                                                            |  |      |         |   |      |   |         |      | 
|Net loss, as reported                                                                                       |  | $    | (16,392 | ) |      | $ | (17,845 | )    |  | $ | (6,176 | )
|Total stock-based employee compensation expense determined under
    fair value-based method for all awards |  |      | (1,376  | ) |      |   | (928    | )    |  |   | (1,229 | )
|                                                                                                            |  |      |         |   |      |   |         |      | 
|Pro forma net loss                                                                                          |  | $    | (17,768 | ) |      | $ | (18,773 | )    |  | $ | (7,405 | )
|                                                                                                            |  |      |         |   |      |   |         |      | 
|Loss per share, as reported (basic and diluted)                                                             |  | $    | (0.48   | ) |      | $ | (0.65   | )    |  | $ | (0.39  | )
|Loss per share, pro forma (basic and diluted)                                                               |  | $    | (0.52   | ) |      | $ | (0.69   | )    |  | $ | (0.46  | )



|                                                                                  |  |      |      |   |      |  |      |      |  |  |      |  
|--------------------------------------------------------------------------------- |  | ---- | ---- | - | ---- |  | ---- | ---- |  |  | ---- | -
|                                                                                  |  | 2004 |      |   | 2003 |  |      | 2002 | 
|                                                                                  |  |      |      |   |      |  |      |      | 
|Weighted average risk free interest rate                                          |  |      | 4.25 | % |      |  | 2.82 | %    |  |  | 2.74 | %
|Dividend yields                                                                   |  |      | 0    | % |      |  | 0    | %    |  |  | 0    | %
|Volatility factors of the expected market price of the
    Companys common stock |  |      | 1.09 |   |      |  | 0.99 |      |  |  | 0.99 |  
|Weighted average years outstanding                                                |  |      | 5.8  |   |      |  | 5.1  |      |  |  | 3.6  |  



Research and Development Expenses


Income Taxes


Concentrations of Credit Risk


F-8



---



##### 



CYTRX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Use of Estimates


Segment Information




|   |                                 
|-- | --------------------------------
|3. | Recent Accounting Pronouncements

Recently Issued Accounting Standards




|   |            
|-- | -----------
|4. | Investments





|   |                  
|-- | -----------------
|5. | Restricted Assets



F-9



---



##### 



CYTRX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                       
|-- | ----------------------
|6. | Property and Equipment



|                                |                             |      |      |     |      |   |     |     | 
|------------------------------- | --------------------------- | ---- | ---- | --- | ---- | - | --- | --- | 
|                                |                             | 2004 |      |     | 2003 |  
|                                |                             |      |      |     |      |  
|Equipment and furnishings       |                             | $    | 554  |     |      | $ | 229 |    
|Less  accumulated depreciation |                             |      | (106 | )   |      |   | (2  | )  
|                                |                             |      |      |     |      |  
|Equipment and furnishings, net  |                             |      | 448  |     |      |   | 227 |    
|Molecular library               |                             |      | 447  |     |      |   |    |    
|                                |                             |      |      |     |      |  
|                                | Property and equipment, net |      | $    | 895 |      |   | $   | 227 | 
|                                |                             |      |      |     |      |  



Asset Impairment Loss




|   |                 
|-- | ----------------
|7. | Accrued Expenses

Accrued Expenses


|                                                       |       |      |     |       |      |   |     |     | 
|------------------------------------------------------ | ----- | ---- | --- | ----- | ---- | - | --- | --- | 
|                                                       |       | 2004 |     |       | 2003 |  
|                                                       |       |      |     |       |      |  
|Deferred gain on sale of building (current portion)    |       | $    | 28  |       |      | $ | 28  |    
|Accrued loss on facility abandonment (current portion) |       |      | 106 |       |      |   | 106 |    
|Professional fees                                      |       |      | 359 |       |      |   | 171 |    
|Research and development costs                         |       |      | 140 |       |      |   |    |    
|Accrued bonuses                                        |       |      | 181 |       |      |   |    |    
|Accrued settlement fee                                 |       |      | 200 |       |      |   |    |    
|Other miscellaneous                                    |       |      | 60  |       |      |   | 77  |    
|                                                       |       |      |     |       |      |  
|                                                       | Total |      | $   | 1,074 |      |   | $   | 382 | 
|                                                       |       |      |     |       |      |  



|   |                     
|-- | --------------------
|8. | Facility Abandonment



F-10



---



##### 



CYTRX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|   |                              
|-- | -----------------------------
|9. | Commitments and Contingencies



|                    |  |                |       |  |            |   |       |            |  |   |       |  |  |   |       | 
|------------------- |  | -------------- | ----- |  | ---------- | - | ----- | ---------- |  | - | ----- |  |  | - | ----- | 
|                    |  | Operating      |       |  | License    |   |       | Employment |  |   |      
|                    |  | Leases         |       |  | Agreements |   |       | Agreements |  |   | Total | 
|                    |  |                |       |  |            |   |       |            |  |   |       | 
|                    |  | (In thousands) |      
|2005                |  | $              | 573   |  |            | $ | 2,363 |            |  | $ | 1,008 |  |  | $ | 3,944 | 
|2006                |  |                | 342   |  |            |   | 1,149 |            |  |   | 740   |  |  |   | 2,231 | 
|2007                |  |                | 229   |  |            |   | 226   |            |  |   | 240   |  |  |   | 695   | 
|2008                |  |                | 76    |  |            |   | 330   |            |  |   | 240   |  |  |   | 646   | 
|2009                |  |                |      |  |            |   | 330   |            |  |   |      |  |  |   | 330   | 
|2010 and thereafter |  |                |      |  |            |   | 990   |            |  |   |      |  |  |   | 990   | 
|                    |  |                |       |  |            |   |       |            |  |   |       | 
|Total               |  | $              | 1,220 |  |            | $ | 5,388 |            |  | $ | 2,228 |  |  | $ | 8,836 | 
|                    |  |                |       |  |            |   |       |            |  |   |       | 









|    |                                   
|--- | ----------------------------------
|10. | Private Placements of Common Stock



F-11



---



##### 



CYTRX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










|    |                         
|--- | ------------------------
|11. | Investment in Subsidiary







|    |                            
|--- | ---------------------------
|12. | Merger with Global Genomics



F-12



---



##### 



CYTRX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|                                                                                  |  |   |           | 
|--------------------------------------------------------------------------------- |  | - | --------- | 
|Issuance of 8,948,204 shares of CytRx common stock at
    $0.6475 per share       |  | $ | 5,793,962 | 
|Fair value of 1,014,677 vested warrants issued to purchase CytRx
    common stock |  |   | 598,659   | 
|Transaction costs                                                                 |  |   | 971,869   | 
|                                                                                  |  |   |          
|Total purchase price                                                              |  | $ | 7,364,490 | 
|                                                                                  |  |   |          



F-13



---



##### 



CYTRX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                        |  |   |           |  
|----------------------------------------------------------------------- |  | - | --------- | -
|Current assets                                                          |  | $ | 33,129    |  
|Investment in minority-owned entity  acquired
    developed technology |  |   | 7,309,250 |  
|In-process research and development (recognized as an expense)          |  |   | 78,394    |  
|Less: Liabilities assumed                                               |  |   | (56,283   | )
|                                                                        |  |   |          
|Total purchase price                                                    |  | $ | 7,364,490 |  
|                                                                        |  |   |          



Equity in Losses of Blizzard.


Impairment Test of Intangible Assets.






|                                                                        |  |   |            |  
|----------------------------------------------------------------------- |  | - | ---------- | -
|Investment in minority owned entity  acquired
    developed technology |  | $ | 7,309,250  |  
|Receivable from Blizzard                                                |  |   | 16,640     |  
|Less: Accumulated amortization                                          |  |   | (883,311   | )
|Less: Equity-method losses to date                                      |  |   | (574,381   | )
|Less: Impairment charge                                                 |  |   | (5,868,198 | )
|                                                                        |  |   |           
|                                                                        |  | $ |           |  
|                                                                        |  |   |           

F-14



---



##### 



CYTRX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|    |                               
|--- | ------------------------------
|13. | Severance Payments to Officers









|    |                           
|--- | --------------------------
|14. | Stock Options and Warrants





F-15



---



##### 



CYTRX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










|                                                                                       |  |                            |            |                  |                |   |            |      |  |   |           |   |  |      |      |  |      |   |      |  |  |   |      | 
|-------------------------------------------------------------------------------------- |  | -------------------------- | ---------- | ---------------- | -------------- | - | ---------- | ---- |  | - | --------- | - |  | ---- | ---- |  | ---- | - | ---- |  |  | - | ---- | 
|                                                                                       |  |                            |            | Weighted Average |               
|                                                                                       |  | Stock Options and Warrants |            |                  | Exercise Price |  
|                                                                                       |  |                            |            |                  |                |  
|                                                                                       |  | 2004                       |            |                  | 2003           |   |            | 2002 |  |   | 2004      |   |  | 2003 |      |  | 2002 |  
|                                                                                       |  |                            |            |                  |                |   |            |      |  |   |           |   |  |      |      |  |      |  
|Outstanding  beginning of year                                                        |  |                            | 10,130,119 |                  |                |   | 6,626,826  |      |  |   | 5,532,478 |   |  | $    | 1.58 |  |      | $ | 1.00 |  |  | $ | 1.22 | 
|Granted                                                                                |  |                            | 6,202,778  |                  |                |   | 8,074,917  |      |  |   | 1,752,178 |   |  |      | 1.61 |  |      |   | 1.95 |  |  |   | 0.32 | 
|Exercised                                                                              |  |                            | (1,031,439 | )                |                |   | (2,900,881 | )    |  |   | (200,000  | ) |  |      | 0.75 |  |      |   | 0.78 |  |  |   | 0.01 | 
|Forfeited                                                                              |  |                            | (785,000   | )                |                |   | (875,000   | )    |  |   | (275,000  | ) |  |      | 2.13 |  |      |   | 0.35 |  |  |   | 0.80 | 
|Expired                                                                                |  |                            | (40,000    | )                |                |   | (795,743   | )    |  |   | (182,830  | ) |  |      | 1.69 |  |      |   | 2.30 |  |  |   | 1.28 | 
|                                                                                       |  |                            |            |                  |                |   |            |      |  |   |           |   |  |      |      |  |      |  
|Outstanding  end of year                                                              |  |                            | 14,476,458 |                  |                |   | 10,130,119 |      |  |   | 6,626,826 |   |  |      | 1.73 |  |      |   | 1.74 |  |  |   | 1.00 | 
|                                                                                       |  |                            |            |                  |                |   |            |      |  |   |           |   |  |      |      |  |      |  
|Exercisable at end of year                                                             |  |                            | 11,872,314 |                  |                |   | 7,402,886  |      |  |   | 6,559,326 |   |  | $    | 1.69 |  |      | $ | 1.58 |  |  | $ | 1.00 | 
|Weighted average fair value of stock options and warrants
    granted during the year: |  | $                          | 1.36       |                  |                | $ | 0.78       |      |  | $ | 0.52      |   |  |      |      |  |      |   |      |  |  |   |      | 



|                         |             |                                        |            |                            |                  |  |     |                  |           |   |             |      |  |                  |            |           |  |   |      |      | 
|------------------------ | ----------- | -------------------------------------- | ---------- | -------------------------- | ---------------- |  | --- | ---------------- | --------- | - | ----------- | ---- |  | ---------------- | ---------- | --------- |  | - | ---- | ---- | 
|                         |             |                                        |            | Stock Options and Warrants |                 
|                         |             | Stock Options and Warrants Outstanding |            |                            | Exercisable      | 
|                         |             |                                        |            |                            |                  | 
|                         |             |                                        |            | Weighted Average           |                  |  |     |                  |          
|                         |             |                                        |            | Remaining                  |                  |  |     |                  | Number of |   |             |     
|                         |             | Number of                              |            |                            | Contractual Life |  |     | Weighted Average |           |   | Shares      |      |  | Weighted Average |           
|Range of Exercise Prices |             | Shares                                 |            |                            | (years)          |  |     | Exercise Price   |           |   | Exercisable |      |  | Exercise Price   |           
|                         |             |                                        |            |                            |                  |  |     |                  |           |   |             |      |  |                  |           
|$0.01                    |             |                                        | 459,352    |                            |                  |  | 2.1 |                  |           | $ | 0.01        |      |  |                  | 459,352    |           |  | $ | 0.01 |     
|                         | 0.20 - 1.05 |                                        |            | 2,636,912                  |                  |  |     | 4.7              |           |   |             | 0.78 |  |                  |            | 2,606,910 |  |   |      | 0.78 | 
|                         | 1.06 - 1.79 |                                        |            | 4,748,171                  |                  |  |     | 5.5              |           |   |             | 1.59 |  |                  |            | 4,285,171 |  |   |      | 1.63 | 
|                         | 1.80 - 2.67 |                                        |            | 4,668,246                  |                  |  |     | 8.2              |           |   |             | 2.08 |  |                  |            | 2,557,104 |  |   |      | 2.08 | 
|                         | 2.68 - 2.94 |                                        |            | 1,963,777                  |                  |  |     | 3.7              |           |   |             | 2.94 |  |                  |            | 1,963,777 |  |   |      | 2.94 | 
|                         |             |                                        |            |                            |                  |  |     |                  |           |   |             |      |  |                  |           
|                         |             |                                        | 14,476,458 |                            |                  |  | 5.8 |                  |           | $ | 1.73        |      |  |                  | 11,872,314 |           |  | $ | 1.69 |     
|                         |             |                                        |            |                            |                  |  |     |                  |           |   |             |      |  |                  |           

F-16



---



##### 



CYTRX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                                   
|--- | ----------------------------------
|15. | Stockholder Protection Rights Plan









|    |             
|--- | ------------
|16. | Income Taxes





|                                                  |                                           |              |         |        |      |   |         |        | 
|------------------------------------------------- | ----------------------------------------- | ------------ | ------- | ------ | ---- | - | ------- | ------ | 
|                                                  |                                           | December 31, |        
|                                                  |                                           |              |        
|                                                  |                                           | 2004         |         |        | 2003 |  
|                                                  |                                           |              |         |        |      |  
|Deferred tax assets:                              |                                           |              |         |        |      |   |         |       
|                                                  | Net operating loss carryforward           |              | $       | 30,231 |      |   | $       | 27,047 | 
|                                                  | Tax credit carryforward                   |              |         | 6,363  |      |   |         | 6,628  | 
|                                                  | Property and equipment and capital losses |              |         | 4,559  |      |   |         | 5,488  | 
|                                                  |                                           |              |         |        |      |  
|Total deferred tax assets                         |                                           |              | 41,153  |        |      |   | 39,163  |       
|Deferred tax liabilities  Depreciation and other |                                           |              | (2,665  | )      |      |   | (2,683  | )     
|                                                  |                                           |              |         |        |      |  
|Net deferred tax assets                           |                                           |              | 38,488  |        |      |   | 36,480  |       
|Valuation allowance                               |                                           |              | (38,488 | )      |      |   | (36,480 | )     
|                                                  |                                           |              |         |        |      |  
|                                                  |                                           | $            |        |        |      | $ |        |       
|                                                  |                                           |              |         |        |      |  

F-17



---



##### 



CYTRX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|                                                             |  |              |        |   |      |   |        |      |  |   |        |  
|------------------------------------------------------------ |  | ------------ | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                             |  | December 31, |       
|                                                             |  |              |       
|                                                             |  | 2004         |        |   | 2003 |   |        | 2002 | 
|                                                             |  |              |        |   |      |   |        |      | 
|Federal benefit at statutory rate                            |  | $            | (5,570 | ) |      | $ | (6,066 | )    |  | $ | (2,100 | )
|State income taxes, net of Federal taxes                     |  |              | (655   | ) |      |   | (1,070 | )    |  |   | (371   | )
|Permanent differences                                        |  |              | 1,103  |   |      |   | 1,200  |      |  |   | 319    |  
|Provision (benefit) related to change in valuation allowance |  |              | 5,122  |   |      |   | 7,414  |      |  |   | 1,976  |  
|Other                                                        |  |              |       |   |      |   | (1,478 | )    |  |   | 176    |  
|                                                             |  |              |        |   |      |   |        |      | 
|                                                             |  | $            |       |   |      | $ |       |      |  | $ |       |  
|                                                             |  |              |        |   |      |   |        |      | 



|    |                   
|--- | ------------------
|17. | License Agreements

University of Massachusetts Medical School




F-18



---



##### 



CYTRX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|    |                                     
|--- | ------------------------------------
|18. | Quarterly Financial Data (unaudited)



|                                         |          |                                       |        |       |         |   |        |              |   |   |             |       |   |   |        |       |  
|---------------------------------------- | -------- | ------------------------------------- | ------ | ----- | ------- | - | ------ | ------------ | - | - | ----------- | ----- | - | - | ------ | ----- | -
|                                         |          | Quarter Ended                         |       
|                                         |          |                                       |       
|                                         |          | March 31                              |        |       | June 30 |   |        | September 30 |   |   | December 31 |      
|                                         |          |                                       |        |       |         |   |        |              |   |   |             |      
|                                         |          | (In thousands, except per share data) |       
|2004                                     |          |                                       |        |       |         |   |        |              |   |   |             |       |   |   |        |      
|Total revenues                           |          | $                                     | 100    |       |         | $ | 228    |              |   | $ |            |       |   | $ | 100    |      
|Net loss                                 |          |                                       | (3,774 | )     |         |   | (4,061 | )            |   |   | (2,796      | )     |   |   | (5,761 | )    
|Basic and diluted loss per common share: |          |                                       |        |       |         |   |        |              |   |   |             |       |   |   |        |      
|                                         | Net loss |                                       | $      | (0.11 | )       |   | $      | (0.12        | ) |   | $           | (0.08 | ) |   | $      | (0.15 | )
|2003                                     |          |                                       |        |       |         |   |        |              |   |   |             |       |   |   |        |      
|Total revenues                           |          | $                                     |       |       |         | $ | 3      |              |   | $ | 1           |       |   | $ | 90     |      
|Net loss                                 |          |                                       | (914   | )     |         |   | (5,046 | )            |   |   | (8,777      | )     |   |   | (3,108 | )    
|Basic and diluted loss per common share: |          |                                       |        |       |         |   |        |              |   |   |             |       |   |   |        |      
|                                         | Net loss |                                       | $      | (0.04 | )       |   | $      | (0.21        | ) |   | $           | (0.30 | ) |   | $      | (0.09 | )





|    |                           
|--- | --------------------------
|19. | Related Party Transactions





F-19



---



##### 



CYTRX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|    |                 
|--- | ----------------
|20. | Subsequent Event



F-20



---



##### 



CYTRX CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                                                                                                                                 |                                            |                      |              |                     |                 |   |            |                   |            |   |              |            |            | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | -------------------- | ------------ | ------------------- | --------------- | - | ---------- | ----------------- | ---------- | - | ------------ | ---------- | ---------- | 
|                                                                                                                                                                                 |                                            |                      |              | Adjustments Related |                 |   |           
|                                                                                                                                                                                 |                                            | Actual as of         |              |                     | to January 2005 |   |            | Pro Forma as of   |           
|                                                                                                                                                                                 |                                            | December 31, 2004    |              |                     | Financing       |   |            | December 31, 2004 |           
|                                                                                                                                                                                 |                                            |                      |              |                     |                 |   |            |                   |           
|                                                                                                                                                                                 |                                            | (Audited)            |              |                     | (Unaudited)     |   |            | (Unaudited)       |           
|ASSETS                                                                                                                                                                          
|Current assets:                                                                                                                                                                  |                                            |                      |              |                     |                 |   |            |                   |            |   |              |           
|                                                                                                                                                                                 | Cash and short-term investments            |                      | $            | 2,999,000           |                 |   | $          | 19,505,000        |            |   | $            | 22,504,000 |           
|                                                                                                                                                                                 | Prepaid and other current assets           |                      |              | 956,000             |                 |   |            |                  |            |   |              | 956,000    |           
|                                                                                                                                                                                 |                                            |                      |              |                     |                 |   |            |                   |           
|                                                                                                                                                                                 |                                            | Total current assets |              |                     | 3,955,000       |   |            |                   | 19,505,000 |   |              |            | 23,460,000 | 
|Non-current assets                                                                                                                                                               |                                            |                      | 1,093,000    |                     |                 |   |           |                   |            |   | 1,093,000    |           
|                                                                                                                                                                                 |                                            |                      |              |                     |                 |   |            |                   |           
|                                                                                                                                                                                 |                                            | Total assets         |              | $                   | 5,048,000       |   |            | $                 | 19,505,000 |   |              | $          | 24,553,000 | 
|                                                                                                                                                                                 |                                            |                      |              |                     |                 |   |            |                   |           
|                                                                                                                                                                                
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                            
|Total liabilities                                                                                                                                                                |                                            | $                    | 3,283,000    |                     |                 | $ |           |                   |            | $ | 3,283,000    |           
|                                                                                                                                                                                 |                                            |                      |              |                     |                 |   |            |                   |           
|Minority interest in subsidiary                                                                                                                                                  |                                            |                      | 170,000      |                     |                 |   |           |                   |            |   | 170,000      |           
|                                                                                                                                                                                 |                                            |                      |              |                     |                 |   |            |                   |           
|Commitments and contingencies                                                                                                                                                    |                                            |                      |              |                     |                 |   |            |                   |            |   |              |           
|Stockholders equity:                                                                                                                                                            |                                            |                      |              |                     |                 |   |            |                   |            |   |              |           
|Preferred Stock, $0.01 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, $0.001 par value, 100,000,000 shares
    authorized; 40,190,000 shares issued at December 31,
    2004                                                             |                                            |                      | 40,000       |                     |                 |   | 17,000     |                   |            |   | 57,000       |           
|Additional paid-in-capital                                                                                                                                                       |                                            |                      | 110,028,000  |                     |                 |   | 19,488,000 |                   |            |   | 129,516,000  |           
|Treasury stock, at cost (633,816 shares)                                                                                                                                         |                                            |                      | (2,279,000   | )                   |                 |   |           |                   |            |   | (2,279,000   | )         
|Accumulated deficit                                                                                                                                                              |                                            |                      | (106,194,000 | )                   |                 |   |           |                   |            |   | (106,194,000 | )         
|                                                                                                                                                                                 |                                            |                      |              |                     |                 |   |            |                   |           
|                                                                                                                                                                                 | Total stockholders equity                 |                      |              | 1,595,000           |                 |   |            | 19,505,000        |            |   |              | 21,100,000 |           
|                                                                                                                                                                                 |                                            |                      |              |                     |                 |   |            |                   |           
|                                                                                                                                                                                 | Total liabilities and stockholders equity |                      | $            | 5,048,000           |                 |   | $          | 19,505,000        |            |   | $            | 24,553,000 |           
|                                                                                                                                                                                 |                                            |                      |              |                     |                 |   |            |                   |           

F-21



---



##### 






REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
















| |                        
| | -----------------------
| | /s/ BDO Seidman, LLP   
| |                        
| | BDO Seidman, LLP       
| | Los Angeles, California



F-22



---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM














| |                      
| | ---------------------
| | /s/ ERNST & YOUNG LLP
| |                      
| | Atlanta, Georgia     



F-23



---



##### 



CYTRX CORPORATION





SCHEDULE II  VALUATION AND QUALIFYING
ACCOUNTS


For the Years Ended December 31, 2004, 2003 and 2002


|                                                                              |                                   |                              |  |           |            |  |  |            |       |  |            |   |            |               |  |   |        |  |  |   |            | 
|----------------------------------------------------------------------------- | --------------------------------- | ---------------------------- |  | --------- | ---------- |  |  | ---------- | ----- |  | ---------- | - | ---------- | ------------- |  | - | ------ |  |  | - | ---------- | 
|                                                                              |                                   |                              |  | Additions |            |  |  |            |      
|                                                                              |                                   |                              |  |           |            |  |  |            |      
|                                                                              |                                   | Balance at                   |  |           | Charged to |  |  | Charged to |       |  |            |   |           
|                                                                              |                                   | Beginning of                 |  |           | Costs and  |  |  | Other      |       |  |            |   | Balance at |              
|Description                                                                   |                                   | Period                       |  |           | Expenses   |  |  | Accounts   |       |  | Deductions |   |            | End of Period | 
|                                                                              |                                   |                              |  |           |            |  |  |            |       |  |            |   |            |               | 
|Reserve Deducted in the Balance Sheet from the Asset to Which it
    Applies: |                                   |                              |  |           |            |  |  |            |       |  |            |   |            |               |  |   |        |  |  |  
|                                                                              | Allowance for Bad Debts           |                              |  |           |            |  |  |            |       |  |            |   |            |               |  |   |        |  |  |   |           
|                                                                              |                                   | Year ended December 31, 2004 |  | $         |           |  |  | $          |      |  |            | $ |           |               |  | $ |       |  |  | $ |           | 
|                                                                              |                                   | Year ended December 31, 2003 |  |           |           |  |  |            | 4,939 |  |            |   | 16,640     |               |  |   | 21,579 |  |  |   |           | 
|                                                                              |                                   | Year ended December 31, 2002 |  | $         | 39,050     |  |  | $          |      |  |            | $ |           |               |  | $ | 39,050 |  |  | $ |           | 
|                                                                              | Allowance for Deferred Tax Assets |                              |  |           |            |  |  |            |       |  |            |   |            |               |  |   |        |  |  |   |           
|                                                                              |                                   | Year ended December 31, 2004 |  | $         | 36,478,000 |  |  | $          |      |  |            | $ | 2,008,000  |               |  | $ |       |  |  | $ | 38,488,000 | 
|                                                                              |                                   | Year ended December 31, 2003 |  |           | 29,064,000 |  |  |            |      |  |            |   | 7,414,000  |               |  | $ |       |  |  |   | 36,478,000 | 
|                                                                              |                                   | Year ended December 31, 2002 |  | $         | 27,088,000 |  |  | $          |      |  |            | $ | 1,976,000  |               |  |   |       |  |  | $ | 29,064,000 | 

F-24