14. Commitments and contingencies

Commitments

We have an agreement with KTB for the exclusive license of patent rights held by KTB for the worldwide development and commercialization of aldoxorubicin. Under the agreement, we must make payments to KTB in the aggregate of $7.5 million upon meeting clinical and regulatory milestones up to and including the product's second final marketing approval. We also have agreed to pay:

·	commercially reasonable royalties based on a percentage of net sales (as defined in the agreement);

·	a percentage of non-royalty sub-licensing income (as defined in the agreement); and

·	milestones of $1 million for each additional final marketing approval that we obtain.

In the event that we must pay a third party in order to exercise our rights to the intellectual property under the agreement, we are entitled to deduct a percentage of those payments from the royalties due KTB, up to an agreed upon cap.

Contingencies

We applied the disclosure provisions of ASC 460, Guarantees ("ASC 460") to our agreements that contain guarantees or indemnities by us. We provide (i) indemnifications of varying scope and size to certain investors and other parties for certain losses suffered or incurred by the indemnified party in connection with various types of third-party claims; and (ii) indemnifications of varying scope and size to officers and directors against third party claims arising from the services they provide to us.

We are occasionally involved in legal proceedings and other matters arising from the normal course of business. As previously reported in our Annual Report filed with the SEC on March 11, 2016, on June 13, 2014, three purported securities class action lawsuits pending against us and certain of our officers and directors in the United States District Court for the Central District of California were consolidated in the matter of In re CytRx Corporation Securities Litigation, 2:14-CV-01956-GHK (PJWx) (the "Federal Class Action"), and lead plaintiff and lead counsel were appointed. On October 1, 2014, plaintiffs filed a consolidated amended complaint on behalf of all persons who purchased or otherwise acquired its publicly traded securities between November 20, 2013 and March 13, 2014, against us, certain of our officers and directors, a freelance writer, and certain underwriters, including Jefferies LLC, Oppenheimer & Co., LLC, Aegis Corp., and H.C. Wainwright & Co., LLC. The complaint alleges that certain of the defendants violated the Securities Exchange Act of 1934 by making materially false and misleading statements in press releases, promotional articles, SEC filings and other public statements. The complaint further alleges that certain of the defendants violated the Securities Act of 1933 by making materially misleading statements and omitting material information in its shelf Registration Statement on Form S-3 filed with the SEC on December 6, 2012 and Prospectus Supplement under Rule 424(b)(2) filed with the SEC on January 31, 2014. These allegations arise out of our alleged retention of The DreamTeam Group and MissionIR, external investor and public relations firms unaffiliated with them, as well as our December 9, 2013 grant of stock options to certain board members and officers. The consolidated amended complaint seeks damages, including interest, in an unspecified amount, reasonable costs and attorneys' fees, and any equitable, injunctive, or other relief that the court may deem just and proper. On December 5, 2014, we and the individual defendants filed a motion to dismiss the complaint. The Court was scheduled to hear argument on this motion on March 2, 2015. On February 25, 2015, the Court took this motion under submission and took the hearing off calendar. On July 13, 2015, the Court issued an order granting in part and denying in part the motions to dismiss filed by them, the individual defendants and the underwriters. On August 7, 2015, the plaintiffs amended their complaint and on September 8, 2015, the defendants moved to dismiss the amended complaint, in part. On October 23, 2015, the Court took the motion to dismiss under submission and, as a result of the settlement of the case as set forth below, the motion to dismiss has not been ruled on by the Court.

On April 3, 2014, a purported class action lawsuit was filed against us and certain of our officers and each of our directors, as well as certain underwriters, in the Superior Court of California, County of Los Angeles, captioned Rajasekaran v. CytRx Corporation, et al., BC541426. The complaint purports to be brought on behalf of all shareholders who purchased or otherwise acquired its common stock pursuant or traceable to its public offering that closed on February 5, 2014. The complaint alleges that defendants violated the federal securities laws by making materially false and misleading statements in its filings with the SEC. The complaint seeks compensatory damages in an unspecified amount, rescission, and attorney's fees and costs. On October 14, 2014, the Court granted the parties' joint ex parte motion to stay this proceeding pending resolution of motions to dismiss in the related federal action, In re CytRx Corporation Securities Litigation, 2:14-CV-01956-GHK (PJWx). On December 29, 2015, as a result of the parties informing the Court that the settlement of the Federal Class Action also resolved the claims and allegations in the Rajasekaran case, the Superior Court deemed the case closed.

On December 10, 2015, we announced that we had reached an agreement to settle the Federal Class Action and filed a Stipulation of Settlement with the Court. A hearing on plaintiffs' motion for preliminary approval of the settlement was held on January 11, 2016. The agreement contains no admission of liability or wrongdoing and includes a full release of us and our current and former directors and officers in connection with the allegations. The settlement is subject to definitive documentation, shareholder notice, and Court approval. The terms of the agreement provide for a settlement payment to the class of $4,000,000, of which at least $3,500,000 will be paid by its insurance carriers. We will also issue the equivalent number of shares of its common stock to the class of $4,500,000 worth of shares at the prevailing stock price at the time of the Court's final approval of the settlement agreement, but not less than a minimum of 1,200,000 shares and not more than a maximum of 1,800,000 shares. On January 9, 2016, the Court preliminarily approved the settlement, and set a settlement fairness hearing for final approval of the settlement for May 9, 2016. On May 9, 2016, the Court held the hearing for final approval, requested certain information from plaintiff's counsel, and took the matter under submission.

On September 10, 2014, the Delaware Court of Chancery consolidated Schwartz v. Ignarro, et al., Case No. 9864, Johnson v. Ignarro, et al., Case No. 9884, and Silverberg v. Kriegsman, et al., Case No. 9919, three shareholder derivative lawsuits described in its Quarterly Report filed with the SEC on August 6, 2014. The allegations in the Schwartz and Johnson complaints relate to our December 9, 2013 grant of stock options to certain board members and officers. The allegations in the Silverberg complaint relate to our December 9, 2013 grant of stock options to certain board members and officers, as well as our alleged retention of DreamTeamGroup and MissionIR. A consolidated complaint concentrated on the stock-option grant claims was filed on October 9, 2014. The consolidated lawsuit is captioned In re CytRx Corp. Stockholder Derivative Litigation, C.A. No. 9864-VCL. On November 10, 2014, we and the individual defendants filed a motion to dismiss the consolidated complaint or, in the alternative, to stay the action. The Court heard argument on the motions on January 8, 2015. The Court denied the motion to dismiss and granted in part and denied in part the motion to stay the Delaware case pending the Federal Class Action. On June 2, 2015, we announced that we had reached an agreement to settle the Delaware stockholder derivative action. Under the settlement, we have agreed to re-price outstanding stock options to purchase a total of 2,095,000 shares of our common stock that were granted on December 10, 2013 to certain of our directors and officers from the original exercise price of $2.39 to an exercise price of $4.66 (the share price at market closing on December 20, 2013). The settlement also provides that we will implement certain corporate governance changes and modify our governance practices regarding the granting of stock options. The parties reached an agreement on an award of $1.1 million of fees and expenses to plaintiffs' attorneys. On November 20, 2015, the Delaware Court approved the settlement and award of attorneys' fees and expenses, and entered a final order and judgment. This amount was paid by our insurance carriers in December 2015.

On August 14, 2014, a shareholder derivative lawsuit, captioned Pankratz v. Kriegsman, et al., 2:14-cv-06414-PA-JPR, was filed in the United States District Court for the Central District of California purportedly on our behalf against certain of our officers and each of our directors. On August 15, 2014, a virtually identical complaint was filed, captioned Taylor v. Kriegsman, et al., 2:14-cv-06451. Each of the complaints alleges breach of fiduciary duties, unjust enrichment, gross mismanagement, abuse of control, insider selling and misappropriation of information in connection with our alleged retention of DreamTeamGroup and MissionIR, as well as our December 9, 2013 grant of stock options to certain board members and officers. The complaint seeks unspecified damages, corporate governance and internal procedures reforms, restitution, disgorgement of all profits, benefits, and other compensation obtained by the individual defendants, and the costs and disbursements of the action. On October 8, 2014, the Court in Pankratz and Taylor consolidated the cases and appointed lead plaintiffs and co-lead counsel. On October 20, 2014, we and the individual defendants filed motions to dismiss the consolidated Pankratz and Taylor cases or, in the alternative, to stay the cases. On January 9, 2015, the Court stayed the action pending the resolution of the consolidated Delaware derivative action. On February 27, 2015, the Pankratz and Taylor plaintiffs filed a motion to vacate the stay. On June 24, 2015, the Court granted the motion to lift the stay in light of the pending settlement of the Delaware derivative litigation discussed above. The Court further denied the motion to dismiss without prejudice and invited us to move to dismiss the case within 30 days pursuant to the doctrine of forum non conveniens based on its forum-selection bylaw, which mandates that derivative actions be filed in the Delaware Court of Chancery unless we consent to an alternative jurisdiction. The Court advised that it would consider any forum non conveniens motion before considering a subsequent motion to dismiss under Rule 12. On November 2, 2015, the Court granted the defendants' motion on grounds of forum non conveniens, and the case was dismissed without prejudice to plaintiffs refiling the action in the Delaware Court of Chancery. Plaintiffs then filed an appeal with the Ninth Circuit Court of Appeals.

On January 5, 2016, we announced that we had reached an agreement to settle the consolidated stockholder derivative lawsuits, In Re CytRx Corporation Stockholder Derivative Litigation, then pending in the U.S. Court of Appeals for the Ninth Circuit Court, on appeal from the United States District Court for the Central District of California. The settlement includes no financial or equity compensation but, rather provides for the implementation of certain corporate governance changes and the modification of certain governance practices. The settlement agreement contains no admission of liability or wrongdoing and includes a full release of the current and former directors and officers in connection with the allegations. In light of the settlement, on February 19, 2016, the Ninth Circuit dismissed plaintiffs' appeal without prejudice to reinstatement in the event the District Court does not enter a final order approving the settlement in accordance with the agreement reached between the parties or such final order is not affirmed on appeal, and it remanded the action to the District Court for further proceedings. On February 25, 2016, the parties filed a Notice of Settlement in the District Court and requested a stay of the proceedings so that the necessary documentation could be prepared and submitted to the Court, which request the District Court granted. On April 4, 2016, the plaintiffs filed a Motion for Preliminary Approval of the Shareholder Derivative Settlement. Pursuant to the Stipulation of Settlement executed by the parties and filed with the Motion for Preliminary Approval, the parties reached an agreement on the amount of a proposed award of attorneys' fees and costs to the plaintiffs' counsel whereby we shall issue to plaintiffs' counsel the equivalent number of shares of its common stock of $700,000 worth of shares at the prevailing stock price at the time of the Court's final approval of the settlement agreement, but not less than a minimum of 186,666 shares and not more than a maximum of 280,000 shares. The settlement and award of attorneys' fees and expenses are subject to definitive documentation, notice to stockholders, and District Court approval. A hearing on the Motion for Preliminary Approval is scheduled for May 9, 2016. On May 5, 2016, the Court took the scheduled May 9 hearing off the calendar and indicated that it will issue such further order as appropriate. On May 6, 2016, the plaintiffs in the Niedermayer action in the Delaware Court of Chancery filed in the California derivative action a motion to intervene and stay consideration of preliminary approval or deny preliminary approval of the settlement and dismiss the action in favor of the Delaware proceedings, setting a hearing date for such motion of June 6, 2016.

On December 14, 2015, a shareholder derivative complaint, captioned Niedermeyer et al. v. Kriegsman et al., C.A. No. 11800, was filed in the Delaware Court of Chancery purportedly on our behalf against certain of our officers and directors. The complaint alleges breach of fiduciary duty, unjust enrichment, and gross mismanagement in connection with our alleged retention of DreamTeamGroup and MissionIR, as well as our December 2013 grant of stock options to certain board members and officers. The complaint seeks unspecified damages, corporate governance and internal procedures reforms, restitution, disgorgement of all profits, benefits, and other compensation obtained by the individual defendants, and the costs and disbursements of the action. On February 26, 2016, we and the defendants filed two motions with the Court of Chancery. First, we moved to dismiss because the Niedermayer complaint fails to state a claim upon which relief can be granted and because the allegations and claims in the Niedermayer complaint are effectively resolved by the settlement of the consolidated stockholder derivative lawsuits, In Re CytRx Corporation Stockholder Derivative Litigation, pending in the United States District Court for the Central District of California, and the settlement of the derivative lawsuits already approved by the Delaware Court of Chancery, In re CytRx Corp. Stockholder Derivative Litigation, C.A. No. 9864-VCL. Second, we moved to stay the Niedermayer case until the Central District of California completes the approval process for the settlement of the consolidated derivative actions pending in that court, In Re CytRx Corporation Stockholder Derivative Litigation. At the request of the Niedermayer plaintiffs, the Court agreed to resolve the motion to stay before the parties presented the motion to dismiss to the Court and, on March 15, 2016, the Court ordered a proposed briefing schedule on the motion to stay pursuant to which we submitted our opening brief in support of the motion on March 21, 2016, the plaintiffs filed their opposition brief on April 1, 2016, we filed our reply brief on April 11, 2016, and a hearing was held on April 18, 2016. On March 18, 2016, the Niedermayer plaintiffs amended their complaint to add certain former and present officers and directors as defendants and to add a purported cause of action for breach of fiduciary duty for consenting under our forum-selection bylaw to the United States District Court for the Central District of California as a judicial forum to consider approval of the settlement reached in In Re CytRx Corporation Stockholder Derivative Litigation, discussed above. On May 2, 2016, the Delaware Court of Chancery granted our motion to stay the Niedermayer action.

We evaluate developments in legal proceedings and other matters on a quarterly basis. We record accruals for loss contingencies to the extent that we conclude that it is probable that a liability has been incurred and the amount of the related loss can be reasonably estimated. We have accrued $2.0 million of litigation cash settlement, of which $0.9 million will be paid by our insurance carriers and is recorded on the balance sheet as an accounts receivable, and a non-cash amount of $5.2 million which will be settled by the issuance of our common stock.