10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2008

OR

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

For the transition period from                      to                     

Commission file number 0-15327

CytRx Corporation

(Exact name of Registrant as specified in its charter)

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

(310) 826-5648
(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ     No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer þ  Non-accelerated filer o
(Do not check if a smaller reporting company) Smaller reporting company o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12(b)-2 of the Exchange Act). Yes o     No þ

Number of shares of CytRx Corporation Common Stock, $.001 par value, issued and outstanding as of August 6, 2008: 90,770,453, exclusive of treasury shares.

CYTRX CORPORATION

FORM 10-Q

TABLE OF CONTENTS

		Page
PART I. — FINANCIAL INFORMATION
Item 1.	Financial Statements		3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		20
Item 4.	Controls and Procedures		21
PART II. — OTHER INFORMATION
Item 1A.	Risk Factors		21
Item 4.	Submission of Matters to a Vote of Security Holders		24
Item 6.	Exhibits		24
SIGNATURES			25
INDEX TO EXHIBITS			26
EXHIBIT 10.1
EXHIBIT 10.2
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2

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PART I — FINANCIAL INFORMATION

Item 1. — Financial Statements

CYTRX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,
	2008			2007
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	36,382,744		$	50,498,261
Short-term investments, at amortized cost		—			9,951,548
Accounts receivable		29,332			101,217
Loan receivable, net of reserve		1,600,000			—
Prepaid expense and other current assets		1,232,891			930,596
Total current assets		39,244,967			61,481,622
Equipment and furnishings, net		1,703,607			1,573,290
Molecular library, net		148,639			193,946
Investment in unconsolidated subsidiary (see Note 9)		1,344,373			—
Goodwill		183,780			183,780
Other assets		238,387			713,398
Total assets	$	42,863,753		$	64,146,036
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	520,363		$	1,946,215
Accrued expenses and other current liabilities		2,262,637			3,700,866
Income taxes payable		342,000			—
Deferred revenue, current portion		6,228,035			8,399,167
Total current liabilities		9,353,035			14,046,248
Deferred revenue, non-current portion		5,417,062			7,167,381
Total liabilities		14,770,097			21,213,629
Minority interest		—			2,708,368
Commitments and Contingencies
Stockholders’ equity:
Preferred Stock, $.01 par value, 5,000,000 shares authorized, including 15,000 shares of Series A Junior Participating Preferred Stock; no shares issued and outstanding		—			—
Common stock, $.001 par value, 150,000,000 shares authorized; 91,404,269 and 90,397,867 shares issued at June 30, 2008 and December 31, 2007, respectively		91,404			90,398
Additional paid-in capital		206,617,383			203,905,691
Treasury stock, at cost (633,816 shares held at June 30, 2008 and December 31, 2007, respectively)		(2,279,238	)		(2,279,238	)
Accumulated deficit		(176,335,893	)		(161,492,812	)
Total stockholders’ equity		28,093,656			40,224,039
Total liabilities and stockholders’ equity	$	42,863,753		$	64,146,036

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CYTRX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2008			2007			2008			2007
Revenue:
Service revenue	$	1,740,362		$	2,369,513		$	3,921,450		$	3,816,506
Grant revenue		—			—			—			116,070
		1,740,362			2,369,513			3,921,450			3,932,576
Expenses:
Research and development		2,525,659			6,884,296			5,717,372			10,892,670
General and administrative		3,192,082			4,106,597			7,665,231			6,591,681
		5,717,741			10,990,893			13,382,603			17,484,351
Loss before other income		(3,977,379	)		(8,621,380	)		(9,461,153	)		(13,551,775	)
Other income:
Interest income		284,304			659,062			808,575			1,039,676
Other income, net		1,000			1,501,000			219,229			1,501,000
Equity in loss of unconsolidated subsidiary		(2,133,956	)		—			(2,512,854	)		—
Minority interest in losses of subsidiary		—			176,136			88,374			178,136
Net loss before income taxes		(5,826,031	)		(6,285,182	)		(10,857,829	)		(10,832,963	)
Provision for income taxes		—			—			(342,000	)		—
Net loss		(5,826,031	)		(6,285,182	)		(11,199,829	)		(10,832,963	)
Deemed dividend for anti-dilution adjustment made to stock warrants		—			—			(756,954	)		—
Net loss applicable to common stockholders	$	(5,826,031	)	$	(6,285,182	)	$	(11,956,783	)	$	(10,832,963	)
Basic and diluted loss per share	$	(0.06	)	$	(0.07	)	$	(0.13	)	$	(0.14	)
Weighted average shares outstanding		90,768,145			85,379,769			90,524,297			79,242,321

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CYTRX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Six Months Ended June 30,
	2008			2007
Cash flows from operating activities:
Net loss	$	(11,199,829	)	$	(10,832,963	)
Adjustments to reconcile net loss to net used in operating activities:
Depreciation and amortization		271,960			121,067
Equity in loss of unconsolidated subsidiary		2,512,854			—
Minority interest in losses of subsidiary		(88,374	)		(178,136	)
Reserve against loan receivable		690,000			—
RXi common stock transferred for services		244,860			—
Non-cash earned on short-term investments		(48,452	)		—
Non-cash gain on transfer of RXi common stock		(226,579	)		—
Common stock issued for services		—			2,310,560
Expense related to employee and non-employee stock options		1,053,498			2,205,919
Net change in operating assets and liabilities		(4,946,228	)		(4,431,803	)
Total adjustments		(536,461	)		29,607
Net cash used in operating activities		(11,736,290	)		(10,803,356	)
Cash flows from investing activities:
Purchases of equipment and furnishings		(706,757	)		(38,303	)
Deconsolidation of subsidiary, RXi Pharmaceutical Corporation		(10,359,278	)		—
Proceeds from sale of short-term investments		10,000,000			—
Loan receivable		(2,290,000	)		—
Net cash used in investing activities		(3,356,035	)		(38,303	)
Cash flows from financing activities:
Proceeds from exercise of stock options and warrants		976,808			15,909,775
Net proceeds from issuances of common stock		—			34,248,062
Net cash provided by financing activities		976,808			50,157,837
Net increase (decrease) in cash and cash equivalents		(14,115,517	)		39,316,178
Cash and cash equivalents at beginning of period		50,498,261			30,381,393
Cash and cash equivalents at end of period	$	36,382,744		$	69,697,571
Supplemental disclosure of cash flow information:
Cash received during the period as interest income	$	808,575		$	1,039,676

Supplemental schedule of non-cash investing and financing activities:

     As the result of the March 6, 2008 distribution by CytRx Corporation (the “Company”) to its stockholders of approximately 36% of the outstanding shares of RXi Pharmaceuticals Corporation, the Company deconsolidated that previously majority-owned subsidiary. As part of the transaction, the Company deconsolidated $3.7 million of total assets and $4.6 million of total liabilities.

     In connection with applicable antidilution adjustments to the price of certain outstanding warrants in March 2008, the Company recorded a deemed dividend of approximately $757,000 in the six months ended June 30, 2008. The deemed dividend was recorded as a charge to accumulated deficit and a corresponding credit to additional paid-in capital.

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

CYTRX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2008
(Unaudited)

1. Description of Company and Basis of Presentation

     CytRx Corporation (“CytRx,” the “Company,” “we,” “us” or “our”) is a clinical-stage biopharmaceutical company engaged in developing human therapeutic products based primarily upon its small-molecule molecular chaperone amplification technology. Molecular chaperone proteins occur normally in human cells and are key components of the body’s defenses against potentially toxic mis-folded cellular proteins. Since damaged toxic proteins called aggregates are thought to play a role in many diseases, CytRx believes that amplification of molecular chaperone proteins could have therapeutic efficacy for a broad range of indications. Currently, CytRx is using its chaperone amplification technology to develop treatments for neurodegenerative disorders and diabetic complications. In addition, CytRx has been applying molecular chaperone technology to the identification of drug candidates for oncology by adapting its proprietary chaperone screening assay to identify inhibitors (rather than amplifiers) of chaperone activity.

     On June 6, 2008, the Company entered into a merger agreement to acquire Innovive Pharmaceuticals, Inc., or Innovive, a publicly traded biopharmaceutical company with four clinical stage oncology drug candidates. Under the merger agreement, CytRx will pay initial merger consideration of $3.0 million in the form of shares of CytRx common stock valued at $0.94 per share, plus future earnout merger consideration of up to approximately $18.3 million. The merger is subject to customary closing conditions, including the approval by Innovive’s stockholders of the merger agreement. For a more detailed description of the terms of the merger, see Note 11 below.

     Through February 2008, the Company owned a majority of the outstanding shares of common stock of RXi Pharmaceuticals Corporation, or RXi, which was founded in April 2006 by the Company and four researchers in the field of RNAi, including Dr. Craig Mello, recipient of the 2006 Nobel Prize for Medicine for his co-discovery of RNAi. RNAi is a naturally occurring mechanism for the regulation of gene expression that has the potential to selectively inhibit the activity of any human gene. RXi is focused solely on developing and commercializing therapeutic products based upon RNAi technologies for the treatment of human diseases, including neurodegenerative diseases, cancer, type 2 diabetes and obesity. While RXi was majority-owned, the Company’s consolidated financial statements reflected 100% of the assets and liabilities and results of operations of RXi, with the interests of the minority shareholders of RXi recorded as “minority interests.” In March 2008, the Company distributed to its stockholders approximately 36% of RXi’s outstanding shares, which reduced CytRx’s ownership to less than 50% of RXi. As a result of the reduced ownership, CytRx began to account for its investment in RXi using the equity method, under which CytRx records only its pro-rata share of the financial results of RXi against its historical basis investment in RXi. The investment in RXi is shown as “investment in unconsolidated subsidiary” on the consolidated balance sheet and the related earnings are shown as “equity in loss of unconsolidated subsidiary” on the consolidated statements of operations. Because only a portion of RXi’s financial results for March 2008 were recorded by CytRx under the equity method, the Company’s results of operations for the first six months of 2008 are not directly comparable to results of operations for the same period in 2007. The future results of operations of the Company also will not be directly comparable to corresponding periods in prior years during which our financial statements reflected the consolidation of RXi.

     To date, the Company has relied primarily upon sales of its equity securities and upon proceeds received upon the exercise of options and warrants and, to a much lesser extent, upon payments from its strategic partners and licensees, to generate funds needed to finance its business and operations. See Notes 6 and 7 below.

     In August 2006, the Company received approximately $24.3 million in proceeds from the privately-funded ALS Charitable Remainder Trust (“ALSCRT”) in exchange for the commitment to continue research and development of arimoclomol and other potential treatments for ALS and a one percent royalty in the worldwide sales of arimoclomol. Under the arrangement, the Company retains the rights to any developments funded by the arrangement and the proceeds of the transaction are non-refundable. The ALSCRT has no obligation to provide any further funding to the Company. Management has concluded that due to the research and development components of the transaction that it is properly accounted for under SFAS No. 68, Research and Development Arrangements (“SFAS No. 68”). Accordingly, the Company has recorded the value received under the arrangement as deferred revenue and will recognize service revenue using the proportional performance method of revenue recognition, meaning that service revenue is recognized on a dollar-for-dollar basis for each dollar of expense incurred for the research and development of arimoclomol and other potential ALS treatments.

6

     The accompanying condensed consolidated financial statements at June 30, 2008 and for the three-month and six-month periods ended June 30, 2008 and 2007 are unaudited, but include all adjustments, consisting of normal recurring entries, that management believes to be necessary for a fair presentation of the periods presented. Prior period figures have been reclassified, wherever necessary, to conform to current presentation. Interim results are not necessarily indicative of results for a full year. Balance sheet amounts as of December 31, 2007 have been derived from the Company’s audited financial statements as of that date.

     The consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. The financial statements should be read in conjunction with the Company’s audited consolidated financial statements in its Form 10-K for the year ended December 31, 2007. The Company’s operating results will fluctuate for the foreseeable future. Therefore, period-to-period comparisons should not be relied upon as predictive of the results in future periods.

2. Recent Accounting Pronouncements

     In September 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 does not expand the use of fair value in any new circumstances. In February 2008, the FASB issued Staff Position No. FAS 157-1, which amended SFAS No. 157 to exclude SFAS No. 13, Accounting for Leases, and other accounting pronouncements that address fair value measurements for purposes of lease classification or measurement under Statement 13. However, this scope exception does not apply to assets acquired and liabilities assumed in a business combination. Also in February 2008, the FASB issued Staff Position No. FAS 157-2, which delayed the effective date of SFAS No. 157 for non-financial assets and liabilities, except those items recognized at fair value on an annual or more frequently recurring basis to fiscal years beginning after November 15, 2008 and interim periods within those fiscal years. The Company adopted SFAS No. 157 with no material impact on the Company’s consolidated financial statements.

     In February 2007, the FASB issued SFAS No. 159, Fair Value Option for Financial Assets and Financial Liabilities (“SFAS No. 159”). SFAS No. 159 permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Company adopted SFAS No. 159 with no material impact on the Company’s consolidated financial statements.

     In June 2007, the FASB ratified the consensus on Emerging Issues Task Force (“EITF”) Issue No. 06-11, Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards (“EITF 06-11”). EITF 06-11 requires companies to recognize the income tax benefit realized from dividends or dividend equivalents that are charged to retained earnings and paid to employees for non-vested equity-classified employee share-based payment awards as an increase to additional paid-in capital. EITF 06-11 is effective for fiscal years beginning after September 15, 2007. The Company adopted EITF 06-11 with no material impact on the Company’s consolidated financial statements.

     In June 2007, the FASB ratified the consensus reached on EITF Issue No. 07-3, Accounting for Nonrefundable Advance Payments for Goods or Services Received for Use in Future Research and Development Activities (“EITF 07-3”), which requires that nonrefundable advance payments for goods or services that will be used or rendered for future research and development activities be deferred and amortized over the period that the goods are delivered or the related services are performed, subject to an assessment of recoverability. EITF 07-3 is effective for fiscal years beginning after December 15, 2007. The Company adopted EITF 07-3 with no material impact on the Company’s consolidated financial statements.

     In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements (“SFAS No. 160”) and a revision to SFAS No. 141, Business Combinations (“SFAS No. 141R”). SFAS No. 160 modifies the accounting for noncontrolling interest in a subsidiary and the deconsolidation of a subsidiary. SFAS No. 141R establishes the measurements in a business combination of the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree. Both of these related statements are effective for fiscal years beginning after December 15, 2008. The Company has not determined the impact that the adoption of these two statements will have on the consolidated financial statements.

7

     In December 2007, the SEC issued Staff Accounting Bulletin 110 (“SAB 110”), which expresses the views of the Staff regarding use of a “simplified” method, as discussed in SAB 107, in developing an estimate of expected term of “plain vanilla” share options in accordance with Statement of Financial Accounting Standards No. 123. SAB 110 will allow, under certain circumstances, the use of the simplified method beyond December 31, 2007 when an issuer is unable to rely on the historical exercise data. The Company adopted SAB 110 with no material impact on its financial statements.

     In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities (“SFAS No. 161”). The new standard amends Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS 133”), and seeks to enhance disclosure about how and why a company uses derivatives; how derivative instruments are accounted for under SFAS 133 (and the interpretations of that standard); and how derivatives affect a company’s financial position, financial performance and cash flows. SFAS 161 will be effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Early application of the standard is encouraged, as well as comparative disclosures for earlier periods at initial adoption. The Company does not believe adoption of this standard will have a material effect on its financial statements.

     In April 2008, the FASB issued Staff Position No. FAS 142-3, Determination of the Useful Life of Intangible Assets, which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, “Goodwill and Other Intangible Assets.” The Position will be effective for fiscal years beginning after December 15, 2008 and will only apply prospectively to intangible assets acquired after the effective date. Early adoption is not permitted. The Company is currently evaluating the impact this statement will have on our results of operations and financial position.

     In May 2008, the FASB issued Staff Position No. Accounting Principles Board 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (“FSP No. APB 14-1”). FSP No. APB 14-1 requires that the liability and equity components of convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) be separately accounted for in a manner that reflects an issuer’s nonconvertible debt borrowing rate. FSP No. APB 14-1 will be effective for us as of January 1, 2009. The Company does not believe adoption of this principle will have a material effect on its financial statements.

3. Short-term Investments

     RXi owned zero coupon U.S Treasury Bills that were purchased at a discount and matured within twelve months. They were classified as held-to-maturity and under Statement of Financial Accounting Standards No. 115, Investments in Debt Securities, were measured at amortized cost, since RXi had the intent and ability to hold these securities to maturity. The interest income was amortized at the effective interest rate.

4. Basic and Diluted Loss Per Common Share

     Basic and diluted loss per common share are computed based on the weighted-average number of common shares outstanding. Common share equivalents (which consist of options and warrants) are excluded from the computation of diluted loss per share, since the effect would be antidilutive. Common share equivalents which could potentially dilute basic earnings per share in the future, and that were excluded from the computation of diluted loss per share, totaled approximately 15.8 million and 20.4 million shares at June 30, 2008 and 2007, respectively.

     In connection with applicable antidilution adjustments to the terms of certain outstanding warrants to purchase common stock in March 2008, the Company recorded a deemed dividend of approximately $757,000. The deemed dividend is reflected as an adjustment to net loss for the first quarter of 2008, to arrive at net loss applicable to common stockholders on the Condensed Consolidated Statement of Operations and for purposes of calculating basic and diluted loss per share.

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5. Stock Based Compensation

     CytRx Corporation

     The Company has a stock option plan, the 2000 Stock Option Incentive Plan, under which, as of June 30, 2008, an aggregate of 10,000,000 shares of common stock were reserved for issuance, including approximately 6,674,756 shares subject to outstanding stock options and approximately 1,442,032 shares available for future grant. The Company also has two other plans, the 1994 Stock Option Plan and the 1998 Long Term Incentive Plan, under which 9,167 shares and 100,041 shares, respectively, are subject to outstanding stock options. The terms of these plans provide that no options may be issued after ten years, so no options are available for future grant under either of the plans. Options granted under the Company’s option plans generally vest and become exercisable as to 33% of the option grants on each anniversary of the grant date until fully vested. The options expire, unless previously exercised, not later than ten years from the grant date.

     The Company’s stock-based employee compensation plans are described in Note 12 to its financial statements contained in its Annual Report on Form 10-K filed for the year ended December 31, 2007.

     The Company has adopted the provisions of SFAS No. 123(R), Share-Based Payment (“SFAS 123(R)”), which requires the measurement and recognition of compensation expense for all stock-based awards made to employees and non-employees.

     For stock options paid in consideration of services rendered by non-employees, the Company recognizes compensation expense in accordance with the requirements of SFAS No. 123(R), Emerging Issues Task Force Issue No. 96-18 (“EITF 96-18”), Accounting for Equity Instruments that are Issued to other than Employees for Acquiring, or in Conjunction with Selling Goods or Services and EITF 00-18, Accounting Recognition for Certain Transactions involving Equity Instruments Granted to Other Than Employees, as amended.

     Non-employee option grants that do not vest immediately upon grant are recorded as an expense over the vesting period. At the end of each financial reporting period prior to performance, the value of these options, as calculated using the Black-Scholes option-pricing model, is determined, and compensation expense recognized or recovered during the period is adjusted accordingly. Since the fair market value of options granted to non-employees is subject to change in the future, the amount of the future compensation expense is subject to adjustment until the common stock options are fully vested.

     The following table sets forth the total stock-based compensation expense (recovery) resulting from stock options included in the Company’s unaudited interim consolidated statements of operations:

	Three Months Ended June 30,					Six Months Ended June 30,
	2008		2007			2008			2007
Research and development — employee	$	182,000	$	144,000		$	353,000		$	180,000
General and administrative — employee		316,000		270,000			607,000			382,000
Total employee stock-based compensation	$	498,000	$	414,000		$	960,000		$	562,000
Research and development — non-employee (recovery)	$	—	$	(393,000	)	$	(422,000	)	$	303,000
General and administrative — non-employee		—		—			—			—
Total non-employee stock-based compensation	$	—	$	(393,000	)	$	(422,000	)	$	303,000

     During the first six months of 2008, the Company issued stock options to purchase 815,000 shares of its common stock. The fair value of the stock options granted in the six-month period listed in the table below was estimated using the Black-Scholes option-pricing model, based on the following assumptions:

	Six Months Ended June 30,
	2008			2007
Risk-free interest rate		2.72%-3.84	%		4.43%-4.78	%
Expected volatility		93.8%-96.7	%		108.7	%
Expected lives (years)		6			6
Expected dividend yield		0.00	%		0.00	%

     The Company’s computation of expected volatility is based on the historical daily volatility of its publicly traded stock. For option grants issued during the six-month periods ended June 30, 2008 and 2007, the Company used a calculated volatility for each grant. The Company’s computation of expected life were estimated using the simplified method provided for under Staff Accounting Bulletin 107, Share-Based Payment (“SAB 107”), which averages the contractual term of the Company’s options of ten years with the average vesting term of three years for an average of six years. The dividend yield assumption of zero is based upon the fact the Company has never paid cash dividends and presently has no intention of paying cash dividends. The risk-free interest rate used for each grant is equal to the U.S. Treasury rates in effect at the time of the grant for instruments with a similar expected life. Based on historical experience, for the six-month periods ended June 30, 2008 and 2007, the Company has estimated an annualized forfeiture rate of 10% and 5%, respectively,

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for options granted to its employees, 1% for each period for options granted to senior management and 0% for each period for options granted to directors. Compensation costs will be adjusted for future changes in estimated forfeitures. The Company will record additional expense if the actual forfeitures are lower than estimated and will record a recovery of prior expense if the actual forfeiture rates are higher than estimated. No amounts relating to employee stock-based compensation have been capitalized.

     At June 30, 2008, there remained approximately $3.5 million of unrecognized compensation expense related to unvested stock options granted to current and former employees, directors and consultants, to be recognized as expense over a weighted-average period of 1.41 years. Presented below is the Company’s stock option activity:

	Six Months Ended June 30, 2008
	Number of Options			Number of Options		Total Number			Weighted Average
	(Employees)			(Non-Employees)		of Options			Exercise Price
Outstanding at January 1, 2008		4,594,000			1,397,000		5,991,000		$	2.29
Granted		901,000			—		901,000		$	1.26
Exercised		(55,000	)		—		(55,000	)	$	0.92
Forfeited		(162,000	)		—		(162,000	)	$	2.92
Outstanding at June 30, 2008		5,278,000			1,397,000		6,675,000		$	2.14
Options exercisable at June 30, 2008		3,145,000			1,147,000		4,292,000		$	1.93

     A summary of the activity for non-vested stock options as of June 30, 2008 is presented below:

									Weighted Average
	Number of Options			Number of Options		Total Number of			Grant Date Fair
	(Employees)			(Non-Employees)		Options			Value per Share
Non-vested at January 1, 2008		1,734,000			250,000		1,984,000		$	2.91
Granted		901,000			—		901,000		$	0.99
Forfeited		(162,000	)		—		(162,000	)	$	2.46
Vested		(340,000	)		—		(340,000	)	$	2.24
Non-vested at June 30, 2008		2,133,000			250,000		2,383,000		$	2.31

     The following table summarizes significant ranges of outstanding stock options under the Company’s plans at June 30, 2008:

			Weighted Average		Weighted				Weighted		Weighted
			Remaining		Average		Number of		Average		Average
Range of	Number of		Contractual Life		Exercise		Options		Contractual		Exercise
Exercise Prices	Options		(years)		Price		Exercisable		Life		Price
$0.65 - 1.00		800,000		6.67	$	0.80		735,000		6.67	$	0.80
$1.01 - 2.00		3,137,000		7.48	$	1.41		1,946,000		7.48	$	1.51
$2.01 - 3.00		1,130,000		5.07	$	2.46		1,112,000		5.07	$	2.46
$3.01 - 4.00		623,000		9.22	$	3.42		163,000		9.22	$	3.35
$4.01 - 4.65		985,000		8.85	$	4.42		336,000		8.85	$	4.41
		6,675,000		7.34	$	2.14		4,292,000		7.34	$	1.93

     The aggregate intrinsic value of outstanding options as of June 30, 2008 was approximately $0. The aggregate intrinsic value was calculated based on the positive difference between the closing fair market value of the Company’s common stock on June 30, 2008 of $0.65 per share and the exercise price of the underlying options. The intrinsic value of options exercised was $28,000 for the six-month period ended June 30, 2008, and the intrinsic value of options that vested was approximately $0 for the same period.

     RXi Pharmaceuticals

     RXi has its own stock option plan, the RXi Pharmaceuticals Corporation 2007 Incentive Plan. RXi accounted for stock option expense in the same manner as CytRx as described above.

     As discussed in Note 9, the Company started accounting for its investment in RXi under the equity method in March 2008, and accordingly, the following table sets forth the total stock-based compensation expense for January and February 2008 resulting from RXi stock options that is included in the Company’s unaudited condensed consolidated statements of operations:

	Six Months Ended June 30,
	2008		2007
Research and development — employee	$	28,000	$	32,000
General and administrative — employee		369,000		297,000
Total employee stock-based compensation	$	397,000	$	329,000
Research and development — non-employee	$	121,000	$	1,012,000
General and administrative — non-employee		—		—
Total non-employee stock-based compensation	$	121,000	$	1,012,000

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6. Liquidity and Capital Resources

     At June 30, 2008, the Company had cash, cash equivalents and short-term investments of approximately $36.4 million. Management believes that its current resources, without inclusion of the possible sale of shares of RXi common stock (see note 9), will be sufficient to support the Company’s currently planned level of operations into the second half of 2009. This estimate is based, in part, upon our currently projected expenditures for the remainder of 2008 and the first six months of 2009 of approximately $26.4 million, including approximately $1.8 million of direct expenditures for its planned clinical program for arimoclomol for ALS and related studies, approximately $0.3 million of direct expenditures for its planned clinical program for arimoclomol for stroke recovery and related studies, approximately $8.0 million of direct expenditures for its planned Phase II clinical trial of iroxanadine for diabetic ulcers and related studies, approximately $8.1 million for the operations of its research laboratory in San Diego, California, and approximately $8.2 million for other general and administrative expenses. The Company’s projected expenditures are based on our recently announced plan to conduct additional animal toxicology studies prior to the resumption of its Phase II clinical program for arimoclomol for ALS that currently is on clinical hold by the FDA and prior to any initiation of its Phase II clinical trial for arimoclomol for stroke recovery. Those animal toxicology studies are expected to take approximately one year. These projected expenditures are based upon numerous other assumptions and subject to many uncertainties, and the Company’s actual expenditures may be significantly different from these projections. These projected expenditures also do not consider the effects of the pending acquisition of Innovive on the Company’s operations and financial condition. Assuming that the acquisition is completed, the Company will need additional funds to advance any of Innovive’s product candidates. The Company will be required to obtain additional funding in order to execute its long-term business plans, although it does not currently have commitments from any third parties to provide it with capital. The Company cannot assure that additional funding will be available on favorable terms, or at all. If the Company fails to obtain additional funding when needed, it may not be able to execute its business plans and its business may suffer, which would have a material adverse effect on its financial position, results of operations and cash flows.

7. Equity Transactions

     On March 11, 2008, the Company paid a dividend to its stockholders of approximately 36% of the outstanding shares of RXi common stock. In connection with that dividend, the Company adjusted the price of warrants to purchase approximately 10.6 million shares that had been issued in prior equity financings in October 2004, January 2005 and March 2006. The adjustments were made as a result of anti-dilution provisions in those warrants that were triggered by the Company’s distribution of a portion of its assets to its stockholders. The Company accounted for the anti-dilution adjustments as deemed dividends analogous with the guidance in Emerging Issues Task Force Issue (“EITF”) No. 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios, and EITF 00-27, Application of 98-5 to Certain Convertible Instruments, and recorded an approximate $757,000 charge to accumulated deficit and a corresponding credit to additional paid-in capital.

     On April 19, 2007, the Company completed a $37.0 million private equity financing in which it issued approximately 8.6 million shares of its common stock at a price of $4.30 per share. Net of investment banking commissions, legal, accounting and other expenses related to the transaction, the Company received proceeds of approximately $34.2 million. On April 30, 2007, the Company contributed $15.0 million, net of reimbursed expenses estimated at $2.0 million paid by RXi to the Company, in exchange for equity in RXi, in order to satisfy the initial funding requirements under its agreements with the University of Massachusetts Medical School (“UMMS”). In September 2007, the actual reimbursed expenses paid by RXi to the Company were finally determined to be approximately $3.0 million, and on September 25, 2007, RXi issued to CytRx additional equity as reimbursement of the excess expenses. Following those transactions, CytRx owned approximately 85% of the outstanding capital stock of RXi, of which approximately 36% was paid as a dividend to CytRx stockholders on March 11, 2008.

     In connection with the April 2007 private equity financing, the Company adjusted the price and number of underlying shares of warrants to purchase approximately 1.4 million shares that had been issued in prior equity financings in May and September 2003. The adjustments were was made as a result of anti-dilution provisions in those warrants that were triggered by the Company’s issuance of common stock in the April 2007 financing at a price below the closing market price on the date of the transaction. For the reasons described above, the Company accounted for the anti-dilution adjustments as deemed dividends. Because the fair value of the outstanding warrants decreased as a result of the anti-dilution adjustment, no deemed dividend was recorded, and thus the Company did not record a charge to retained earnings or a corresponding credit to additional paid-in capital.

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     In connection with the April 2007 private equity financing, the Company entered into a registration rights agreement with the purchasers of its common stock and warrants. That agreement provided, among other things, for cash penalties, up to a maximum of 16% (approximately $5.9 million) of the purchase price paid for the securities in the event that the Company failed to initially register or maintain the effective registration of the securities until the sooner of two years or the date on which the securities could be sold pursuant to Rule 144 of the Securities Act of 1933, as amended. The Company evaluated the penalty provisions of the April 2007 registration rights agreement in light of FASB Staff Position No. EITF 00-19-2, Accounting for Registration Payment Arrangements, which specifies that the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement should be separately recognized and measured in accordance with FASB Statement No. 5, Accounting for Contingencies, pursuant to which a contingent obligation must be accrued only if it is reasonably estimable and probable. In management’s estimation, the contingent payments related to the registration payment arrangement are not probable to occur, and thus no amount was accrued.

     During the three-month and six-month periods ended June 30, 2008, the Company issued 1.0 million shares of its common stock, and received $0.9 million, upon the exercise of stock options and warrants. During the three-month and six-month periods ended June 30, 2007, the Company issued 2.6 million and 9.5 million shares, respectively, of its common stock, and received $4.8 million and $15.9 million, respectively, upon the exercise of stock options and warrants.

8. Minority Interest

     Through February 2008, the Company owned approximately 85% of the outstanding shares of common stock of RXi. While RXi was majority-owned, the Company’s consolidated financial statements reflected 100% of the assets and liabilities and results of operations of RXi, with the interests of the minority shareholders of RXi recorded as “minority interests.” In March 2008, the Company distributed to its stockholders approximately 36% of RXi’s outstanding shares, which reduced CytRx’s ownership to less than 50% of RXi. As a result, CytRx began to account for its investment in RXi using the equity method, under which CytRx records only its pro-rata share of the financial results of RXi against its historical basis investment in RXi. Because only a portion of RXi’s financial results for March 2008 were recorded by CytRx under the equity method, the Company’s results of operations for the first six months of 2008 are not directly comparable to results of operations for the same period in 2007. The future results of operations of the Company also will not be directly comparable to corresponding periods in prior years during which our financial statements reflected the consolidation of RXi.

     The Company offset $88,000 of minority interest in losses of RXi against its net loss for the months of January and February 2008, and $176,000 and $178,000 of minority interest in losses of RXi against its net loss for the three-month and six-month periods ended June 30, 2007, respectively.

9. Equity Investment in RXi

     In the first quarter of 2008, the Company distributed to its stockholders approximately 36% of RXi’s outstanding shares, which reduced CytRx’s ownership to less than 50% of RXi. Management determined that the distribution of the RXi common stock to stockholders of CytRx represented a partial spin-off of RXi and accounted for the distribution of the RXi common shares at cost. As a result of its reduced ownership in RXi, CytRx began to account for its investment in RXi using the equity method, under which CytRx records only its pro-rata share of the financial results of RXi against its historical basis investment in RXi. The following table presents summarized financial information for RXi for the three and six-month periods ended June 30, 2008:

	Three-Month			Six-Month
	Period Ended			Period Ended
Income Statement Data (unaudited, in thousands)	June 30, 2008			June 30, 2008
Sales	$	—		$	—
Gross profit		—			—
Loss from continuing operations		(4,346	)		(7,059	)
Loss		(4,318	)		(6,964	)

Balance Sheet Data (unaudited, in thousands)	June 30, 2008
Current assets	$	15,433
Noncurrent assets		409
Current liabilities		1,522
Stockholders’ equity		14,307

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     On June 30, 2008, RXi issued and sold 1,079,299 common shares to certain investors, which effectively reduced CytRx’s ownership to approximately 45%.

     At June 30, 2008, the fair value of CytRx’s ownership of 6,268,881 shares of RXi’s common stock was $50,151,000 based on the closing price of RXi’s common stock on that date.

10. Income Taxes

     On March 11, 2008, we distributed to our stockholders approximately 4.5 million shares of RXi common stock. We will recognize approximately a $32.9 million gain for income tax purposes on the distribution of shares of RXi common stock, which is the amount equal to the excess of the fair market value of the stock distributed over our basis. The gain will be included in determining whether we have current year earnings and profits subject to taxation. Based upon our anticipated loss from operations for 2008 and currently available loss carryforwards, we expect to pay no regular income taxes in connection with the distribution; however, we have recorded a tax provision of $342,000 related to the estimated Alternative Minimum Tax resulting from this gain.

11. Pending Acquisition

     On June 6, 2008, the Company entered into an agreement and plan of merger with Innovive Pharmaceuticals, Inc., or Innovive, CytRx Merger Subsidiary, Inc., a wholly owned subsidiary of CytRx, and Steven Kelly, Innovive’s President and Chief Executive Officer, as representative of Innovive stockholders. Pursuant to the terms of the merger agreement, the Company will acquire Innovive by means of the merger of Merger Subsidiary with and into Innovive, and as a result Innovive will continue as the surviving corporation and will become a wholly owned subsidiary of CytRx.

     Under the merger agreement, CytRx will pay initial merger consideration of $3.0 million, plus future earnout merger consideration of up to approximately $18.3 million. At the effective time of the merger, all of the outstanding shares of Innovive common stock (other than shares owned by Innovive, CytRx and Merger Subsidiary and by any stockholders who properly exercise their rights as dissenting stockholders under Delaware law), will be cancelled and converted into the right to receive from CytRx their allocable share of the merger consideration based on the fully diluted shares of Innovive at that time. The initial merger consideration will be payable in the form of shares of CytRx common stock valued at $0.94 per share, which equaled the average daily volume-weighted closing price of CytRx common stock as reported on The Nasdaq Capital Market over the ten trading days prior to June 6, 2008, the date the merger agreement was signed. The earnout merger consideration is subject to the future achievement of specified net sales under the existing Innovive license agreements. The earnout merger consideration, if any, will be payable in shares of CytRx common stock, subject to specified conditions, or, at the Company’s election, in cash, or by a combination of shares of CytRx common stock and cash. CytRx common stock will be valued for purposes of any earnout merger consideration based upon the trading price of CytRx common stock at the time the earnout merger consideration is paid.

     Under accounting principles generally accepted in the United States and the regulations of the Securities and Exchange Commission, since Innovive is a development stage company, it is not considered a business. Accordingly, the merger will be accounted for by CytRx in accordance with Statement of Financial Standard No. 142, Goodwill and Other Intangible Assets, for transactions other than a business combination. Management of CytRx has further determined it is not required to include in this Form 10-Q proforma financial statements giving effect to the merger.

     The initial merger consideration, together with direct costs incurred to effect the merger, will be allocated to the individual assets acquired, including identifiable intangible assets and liabilities assumed based on the relative fair value. No goodwill will be recorded. Consolidated financial statements of CytRx issued after the merger will reflect these fair values and will not be restated retroactively to reflect the historical financial position or results of operations of Innovive. It is anticipated that CytRx will record a one-time expense for in-process research and development it acquires.

     Completion of the merger is subject to customary closing conditions, including the absence of certain legal impediments to the merger, the effectiveness of certain filings with the SEC, approval by Innovive’s stockholders of the merger agreement and that the Innovive shares held by any dissenting stockholders not exceed 5% of Innovive’s outstanding shares. The Company expects to complete the merger during the third calendar quarter of 2008, with the exact timing dependent upon a number of factors.

     The merger agreement contains specified termination rights for both Innovive and the Company. Among other things and subject to certain conditions, (i) Innovive may terminate the merger agreement to accept a “superior proposal” (as defined in the merger agreement), and (ii) the Company may terminate the merger agreement if the board of directors of Innovive changes or withdraws, or fails to reaffirm, its recommendation to Innovive’s stockholders that they approve the merger agreement. In general, either Innovive or the Company may terminate the merger agreement if the merger has not occurred by September 30, 2008. The merger agreement further provides that, upon termination of the merger agreement under certain circumstances, Innovive may be obligated to pay us a termination fee of $1.5 million.

     Also on June 6, 2008, CytRx entered into a loan and security agreement with Innovive pursuant to which the Company agreed to advance funds to Innovive to be used to pay current accounts payable and accrued expenses of Innovive. As of August 6, 2008, we had advanced to Innovive under the loan and security agreement a total of approximately $2,690,000, and Innovive may request additional advances of up to approximately $2,810,000 pending the merger. Additional advances requested by Innovive are at the Company’s discretion. All advances under the loan agreement are secured by a lien on all or substantially all of Innovive’s assets, bear interest at the rate of 12.5% per annum, and generally will be due and payable, in full, together with accrued interest, on the date of termination of the merger agreement or September 30, 2008. In June 2008, we set a reserve of $690,000 against the advance based upon the estimated recoverable value of the underlying security.

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     In consideration for making the initial advance and entering into the loan agreement, Innovive granted CytRx under the loan agreement a one-year option, exercisable in certain circumstances if the merger agreement is terminated by Innovive, to purchase up to 2,000,000 shares of common stock of Innovive at an exercise price of $0.01 per share.

     As of June 30, 2008, CytRx had advanced to Innovive under the loan and security agreement a total of approximately $2.3 million.

Item 2. — Management’s Discussion and Analysis of Financial Condition And Results of Operations

     Forward Looking Statements

     From time to time, we make oral and written statements that may constitute “forward-looking statements” (rather than historical facts) as defined in the Private Securities Litigation Reform Act of 1995 or by the SEC in its rules, regulations and releases, including Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. We desire to take advantage of the “safe harbor” provisions in the Private Securities Litigation Reform Act of 1995 for forward-looking statements made from time to time, including, but not limited to, the forward-looking statements made in this Quarterly Report, as well as those made in our other filings with the SEC.

     All statements in this Quarterly Report, including statements in this section, other than statements of historical fact are forward-looking statements for purposes of these provisions, including statements of our current views with respect to the recent developments regarding our majority-owned subsidiary, RXi Pharmaceuticals Corporation, our business strategy, business plan and research and development activities, our future financial results, and other future events. These statements include forward-looking statements both with respect to us, specifically, and the biotechnology industry, in general. In some cases, forward-looking statements can be identified by the use of terminology such as “may,” “will,” “expects,” “plans,” “anticipates,” “estimates,” “potential” or “could” or the negative thereof or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, there can be no assurance that such expectations or any of the forward-looking statements will prove to be correct, and actual results could differ materially from those projected or assumed in the forward-looking statements.

     All forward-looking statements involve inherent risks and uncertainties, and there are or will be important factors that could cause actual results to differ materially from those indicated in these statements. We believe that these factors include, but are not limited to, those factors set forth in this Quarterly Report under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” all of which you should review carefully. If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what we anticipate. Please consider our forward-looking statements in light of those risks as you read this Quarterly Report. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

Overview

     CytRx Corporation (“CytRx,” the “Company,” “we,” “us” or “our”) is a clinical-stage biopharmaceutical company engaged in developing human therapeutic products based primarily upon its small-molecule molecular chaperone amplification technology. Molecular chaperone proteins occur normally in human cells and are key components of the body’s defenses against potentially toxic mis-folded cellular proteins. Since damaged toxic proteins called aggregates are thought to play a role in many diseases, CytRx believes that amplification of molecular chaperone proteins could have therapeutic efficacy for a broad range of indications. Currently, CytRx is using its chaperone amplification technology to develop treatments for neurodegenerative disorders and diabetic complications. In addition, CytRx has been applying molecular chaperone technology to the identification of drug candidates for oncology by adapting its proprietary chaperone screening assay to identify inhibitors (rather than amplifiers) of chaperone activity.

     On June 6, 2008, we entered into a merger agreement to acquire Innovive Pharmaceuticals, Inc., or Innovive, a publicly traded biopharmaceutical company with four clinical stage oncology drug candidates. Under the merger agreement, we will pay initial merger consideration totaling $3.0 million in the form of shares of our common stock valued at $0.94 per share, plus future earnout merger consideration of up to approximately $18.3 million. The merger is subject to customary closing conditions, including the approval by Innovive’s stockholders of the merger agreement.

14

     Through February 2008, we owned a majority of the outstanding shares of common stock of RXi Pharmaceuticals Corporation, or RXi, which was founded in April 2006 by the Company and four researchers in the field of RNAi, including Dr. Craig Mello, recipient of the 2006 Nobel Prize for Medicine for his co-discovery of RNAi. RNAi is a naturally occurring mechanism for the regulation of gene expression that has the potential to selectively inhibit the activity of any human gene. RXi is focused solely on developing and commercializing therapeutic products based upon RNAi technologies for the treatment of human diseases, including neurodegenerative diseases, cancer, type 2 diabetes and obesity. While RXi was majority-owned, our consolidated financial statements reflected 100% of the assets and liabilities and results of operations of RXi, with the interests of the minority shareholders of RXi recorded as “minority interests.” In March 2008, we distributed to our stockholders approximately 36% of RXi’s outstanding shares, which reduced our ownership to less than 50% of RXi. As a result of the reduced ownership, we began to account for its investment in RXi using the equity method, under which we record only our pro-rata share of the financial results of RXi against our historical basis investment in RXi. The investment in RXi is shown as “investment in unconsolidated subsidiary” on the consolidated balance sheet and the related earnings are shown as “equity in loss of unconsolidated subsidiary” on the consolidated statements of operations. Because only a portion of RXi’s financial results for March 2008 were recorded by us under the equity method, our results of operations for the first six months of 2008 are not directly comparable to results of operations for the same period in 2007. The future results of operations of the Company also will not be directly comparable to corresponding periods in prior years during which our financial statements reflected the consolidation of RXi.

     We have relied primarily upon proceeds from sales of our equity securities and the exercise of options and warrants, and to a much lesser extent upon payments from our strategic partners and licensees, to generate funds needed to finance our business and operations. At June 30, 2008, we had cash, cash equivalents and short-term investments of approximately $36.4 million. We believe that our current resources, without inclusion of the possible liquidation of shares of RXi common stock (see note 9), will be sufficient to support our currently planned level of operations into the second half of 2009. This estimate is based, in part, upon our currently projected expenditures for the remainder of 2008 and the first six months of 2009 of approximately $26.4 million, including approximately $1.8 million of direct expenditures for our planned clinical program for arimoclomol for ALS and related studies, approximately $0.3 million of direct expenditures for our planned clinical program for arimoclomol for stroke recovery and related studies, approximately $8.0 million of direct expenditures for our planned Phase II clinical trial of iroxanadine for diabetic ulcers and related studies, approximately $8.1 million for the operations of our research laboratory in San Diego, California, and approximately $8.2 million for other general and administrative expenses. Our projected expenditures are based on our recently announced plan to conduct additional animal toxicology studies prior to the resumption of our Phase II clinical program for arimoclomol for ALS that currently is on clinical hold by the FDA and prior to any initiation of our Phase II clinical trial for arimoclomol for stroke recovery. Those animal toxicology studies are expected to take approximately one year. These projected expenditures are based upon numerous other assumptions and subject to many uncertainties, and our actual expenditures may be significantly different from these projections. These projected expenditures also do not consider the effects of the pending acquisition of Innovive on our operations and financial condition. Assuming that the acquisition is completed, we will need additional funds to advance any of Innovive’s product candidates.

     We will be required to obtain additional funding in order to execute our long-term business plans. We do not have commitments from any third parties to provide us with capital and we cannot assure that additional funding will be available on favorable terms, or at all. If we fail to obtain additional funding when needed, we may not be able to execute our business plans and our business may suffer, which would have a material adverse effect on our financial position, results of operations and cash flows.

     Critical Accounting Policies and Estimates

     Management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, impairment of long-lived assets, including finite lived intangible assets, research and development expenses and clinical trial expenses and stock-based compensation expense.

     We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.

     Our significant accounting policies are summarized in Note 2 to our financial statements contained in our Annual Report on Form 10-K filed for the year ended December 31, 2007. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:

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     Revenue Recognition

     Revenue consists of license fees from strategic alliances with pharmaceutical companies as well as service and grant revenues. Service revenue consists of contract research and laboratory consulting. Grant revenues consist of government and private grants.

     Monies received for license fees are deferred and recognized ratably over the performance period in accordance with Staff Accounting Bulletin (“SAB”) No. 104, Revenue Recognition. Milestone payments will be recognized upon achievement of the milestone as long as the milestone is deemed substantive and we have no other performance obligations related to the milestone and collectability is reasonably assured, which is generally upon receipt, or recognized upon termination of the agreement and all related obligations. Deferred revenue represents amounts received prior to revenue recognition.

     Revenues from contract research, government grants, and consulting fees are recognized over the respective contract periods as the services are performed, provided there is persuasive evidence or an arrangement, the fee is fixed or determinable and collection of the related receivable is reasonably assured. Once all conditions of the grant are met and no contingencies remain outstanding, the revenue is recognized as grant fee revenue and an earned but unbilled revenue receivable is recorded.

     In August 2006, we received approximately $24.3 million in proceeds from the privately-funded ALS Charitable Remainder Trust (“ALSCRT”) in exchange for the commitment to continue research and development of arimoclomol and other potential treatments for ALS and a one percent royalty in the worldwide sales of arimoclomol. Under the arrangement, we retain the rights to any products or intellectual property funded by the arrangement and the proceeds of the transaction are non-refundable. The ALSCRT has no obligation to provide any further funding to us. We have concluded that due to the research and development components of the transaction that it is properly accounted for under Statement of Financial Accounting Standards No. 68, Research and Development Arrangements. Accordingly, we have recorded the value received under the arrangement as deferred service revenue and will recognize service revenue using the proportional performance method of revenue recognition, meaning that service revenue is recognized on a dollar-for-dollar basis for each dollar of expense incurred for the research and development of arimoclomol and other potential ALS treatments. We believe that this method best approximates the efforts expended related to the services provided. We adjust our estimates of expense incurred for this research and development on a quarterly basis. For the three-month and six-month periods ended June 30, 2008 and 2007, we recognized approximately $1.7 million, $3.9 million, $2.4 million and $3.8 million, respectively, of service revenue related to this transaction. Any significant change in ALS related research and development expense in any particular quarterly or annual period will result in a change in the recognition of revenue for that period and consequently affect the comparability or revenue from period to period.

     The amount of “deferred revenue, current portion” is the amount of deferred revenue that is expected to be recognized in the next twelve months and is subject to fluctuation based upon management’s estimates. Management’s estimates include an evaluation of what pre-clinical and clinical trials are necessary, the timing of when trials will be performed and the estimated clinical trial expenses. These estimates are subject to changes and could have a significant effect on the amount and timing of when the deferred revenues are recognized.

     Research and Development Expenses

     Research and development expenses consist of costs incurred for direct and overhead-related research expenses and are expensed as incurred. Costs to acquire technologies, including licenses, that are utilized in research and development and that have no alternative future use are expensed when incurred. Technology developed for use in its products is expensed as incurred until technological feasibility has been established.

     Clinical Trial Expenses

     Clinical trial expenses, which are included in research and development expenses, include obligations resulting from our contracts with various clinical research organizations in connection with conducting clinical trials for our product candidates. We recognize expenses for these activities based on a variety of factors, including actual and estimated labor hours, clinical site initiation activities, patient enrollment rates, estimates of external costs and other activity-based factors. We believe that this method best approximates the efforts expended on a clinical trial with the expenses we record. We adjust our rate of clinical expense recognition if actual results differ from our estimates. If our estimates are incorrect, clinical trial expenses recorded in any particular period could vary.

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     Stock-Based Compensation

     Our share-based employee compensation plans are described in Note 5 to our interim financial statements. SFAS 123(R), Share-Based Payment, requires the recognition of compensation expense associated with stock option grants and other equity instruments to employees in the financial statements. We adopted SFAS 123(R) using the modified-prospective method and use the Black-Scholes valuation model for valuing share-based payments. We account for transactions in which services are received in exchange for equity instruments based on the fair value of such services received from non-employees, in accordance with SFAS 123(R), Emerging Issues Task Force Issue No. 96-18 (“EITF 96-18”), Accounting for Equity Instruments that are Issued to other than Employees for Acquiring, or in Conjunction with Selling Goods or Services and EITF 00-18, Accounting Recognition for Certain Transactions involving Equity Instruments Granted to Other Than Employees, as amended.

     Non-employee share-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances, option grants to non-employees are immediately vested and have no future performance requirements by the non-employee and the total share-based compensation charge is recorded in the period of the measurement date.

     The fair value of each CytRx and RXi common stock option grant is estimated using the Black-Scholes option-pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the common stock options and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes option-pricing model, based on an expected forfeiture rate that is adjusted for actual experience. If our Black-Scholes option-pricing model assumptions or our actual or estimated forfeiture rate are different in the future, that could materially affect compensation expense recorded in future periods.

     Impairment of Long-Lived Assets

     We review long-lived assets, including finite lived intangible assets, for impairment on an annual basis, as of December 31, or on an interim basis if an event occurs that might reduce the fair value of such assets below their carrying values. An impairment loss would be recognized based on the difference between the carrying value of the asset and its estimated fair value, which would be determined based on either discounted future cash flows or other appropriate fair value methods. If our estimates used in the determination of either discounted future cash flows or other appropriate fair value methods are not accurate as compared to actual future results we may be required to record an impairment charge.

     Earnings Per Share

     Basic and diluted loss per common share are computed based on the weighted-average number of common shares outstanding. Common share equivalents (which consist of options and warrants) are excluded from the computation of diluted loss per share, since the effect would be anti-dilutive. Common share equivalents that could potentially dilute basic earnings per share in the future, but were excluded from the computation of diluted loss per share, totaled approximately 15.8 million shares and 20.4 million shares at June 30, 2008 and 2007, respectively. In connection with the dividend of 36% of the outstanding shares of RXi paid to our stockholders on March 11, 2008, we recorded a deemed dividend of $757,000. The deemed dividend was reflected as an adjustment to net loss for the first quarter of 2008, to arrive at net loss applicable to common stockholders on the consolidated statement of operations and for purposes of calculating basic and diluted loss per shares.

     Liquidity and Capital Resources

     We have relied primarily upon proceeds from sales of our equity securities and the exercise of options and warrants, and to a much lesser extent upon payments from our strategic partners and licensees, to generate funds needed to finance our business and operations. At June 30, 2008, we had cash, cash equivalents and short-term investments of approximately $36.4 million. We believe that our current resources, without inclusion of the possible sale of shares of RXi common stock (see note 9), will be sufficient to support our currently planned level of operations into the second half of 2009. This estimate is based, in part, upon our currently projected expenditures for the remainder of 2008 and the first six months of 2009 of approximately $26.4 million, including approximately $1.8 million of direct expenditures for our planned clinical program for arimoclomol for ALS and related studies, approximately $0.3 million of direct expenditures for our planned clinical program for arimoclomol for stroke recovery and related studies, approximately $8.0 million of direct expenditures for our planned Phase II clinical trial of iroxanadine for diabetic ulcers and related studies, approximately $8.1 million for the operations of our research laboratory in San Diego, California, and approximately $8.2 million for other general and administrative expenses. Our projected expenditures are based on our recently announced plan to conduct additional animal toxicology studies prior to the resumption of our Phase II clinical program for arimoclomol for ALS that currently is on clinical hold by the FDA and prior to any initiation of our Phase II clinical trial for arimoclomol for stroke recovery. Those animal toxicology studies are expected to take approximately one year. These projected expenditures are based upon numerous other assumptions and subject to many uncertainties, and our actual expenditures may be significantly different from these projections. These projected expenditures also do not consider the effects of the pending acquisition of Innovive on our operations and financial condition. Assuming that the acquisition is consummated, we will need additional funds to advance any of Innovive’s product candidates.

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     We have no significant revenue, and we expect to have no significant revenue and to continue to incur significant losses over the next several years. Our net losses may increase from current levels primarily due to expenses related to our ongoing and planned clinical trials, research and development programs, possible technology acquisitions, and other general corporate activities. In the event that actual costs of our ongoing and planned activities are significantly higher than our current estimates, we may be required to significantly modify our planned level of operations.

     In the future, we will be dependent on obtaining financing from third parties in order to maintain our operations. We cannot assure that additional funding will be available to us on favorable terms, or at all. If we fail to obtain additional funding when needed in the future, we would be forced to scale back, or terminate, our operations, or to seek to merge with or to be acquired by another company.

     Our net loss, which includes non-cash charges relating to common stock, stock option and warrants issued for services and expenses related to employee and non-employee stock options, decreased by approximately $0.5 million during the quarter ended June 30, 2008 compared to the quarter ended June 30, 2007. This decrease was primarily as a result of the deconsolidation of RXi in the first quarter, resulting in no RXi expenses being included in the results for the quarter ended June 30, 2008. Our professional fees, included in general and administrative expenses, were approximately $470,000 higher than in the comparative 2007 period, largely relating to fees incurred in effecting the partial spinoff of RXi.

     In the six-month period ended June 30, 2008, we used $3.4 million of cash in investing activities, compared to $38,000 used in the comparable 2007 period. The 2008 period included $10.0 million of funds provided by RXi converting short-term investments to cash equivalents. However, RXi’s cash of $10.4 million (inclusive of this $10.0 million) is no longer available due to the deconsolidation. We advanced $2.3 million to Innovive and the remainder of the investing activity for both the 2008 and 2007 periods primarily related to cash used for the purchase of equipment. We manage our cash, cash equivalents and short-term investments interchangeably and at the present time do not anticipate any significant changes to our current holdings in cash equivalents. We expect capital spending to continue due to additional laboratory equipment necessary for our new San Diego, California, laboratory.

     Cash provided by financing activities in the six months ended June 30, 2008 and 2007 was $1.0 million and $50.2 million, respectively, which consisted exclusively of funds received from the exercise of stock options and warrants in the 2008 period. In the six months ended June 30, 2007, $16 million resulted from the proceeds from the exercise of stock options and warrants and $34.2 from the net proceeds from the issuance of common stock.

     We are evaluating other potential future sources of capital, as we do not currently have commitments from any third parties to provide us with capital. The results of our technology licensing efforts and the actual proceeds of any fund-raising activities will determine our ongoing ability to operate as a going concern. Our ability to obtain future financings through joint ventures, product licensing arrangements, royalty sales, equity financings, sales of stock of RXi, gifts, and grants or otherwise is subject to market conditions and our ability to identify parties that are willing and able to enter into such arrangements on terms that are satisfactory to us. Depending upon the outcome of our fundraising efforts, the accompanying consolidated financial information may not necessarily be indicative of future operating results or future financial condition.

     We expect to incur significant losses for the foreseeable future and there can be no assurance that we will become profitable. Even if we become profitable, we may not be able to sustain that profitability.

     Results of Operations

     We recorded a net loss applicable to common stockholders of approximately $5.8 million and $12.1 million for the three-month and six-month periods ended June 30, 2008, respectively, as compared to $6.3 million and $10.8 million for the same periods in 2007.

     We recognized $1.7 million and $3.9 million of revenue for the three-month and six-month periods ended June 30, 2008, respectively, and $2.4 million and $3.9 million for the same periods in 2007. These revenues relate to our $24.3 million sale to the ALSCRT of a one percent royalty interest in worldwide sales of arimoclomol in August 2006. All future licensing fees under our current licensing agreements are dependent upon successful development milestones being achieved by the licensor. During 2008, we do not anticipate receiving any significant licensing fees. We will continue to recognize the balance of the deferred revenue recorded from the royalty transaction with the ALSCRT over the development period of our arimoclomol research.

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Research and Development

	Three-Month Period				Six-Month Period
	Ended June 30,				Ended June 30,
	2008		2007		2008			2007
	(In thousands)				(In thousands)
Research and development expenses	$	2,225	$	3,622	$	5,349		$	7,246
Non-cash research and development expenses (recovery)		—		3,042		(243	)		3,323
Employee stock option expense		182		175		381			212
Depreciation and amortization		119		45		230			112
	$	2,526	$	6,884	$	5,717		$	10,893

     Research expenses are expenses incurred by us in the discovery of new information that will assist us in the creation and the development of new drugs or treatments. Development expenses are expenses incurred by us in our efforts to commercialize the findings generated through our research efforts.

     Research and development expenses incurred during the three-month and six-month periods ended June 30, 2008 and June 30, 2007 related primarily to (i) our Phase II clinical program for arimoclomol in ALS, (ii) our ongoing research and development related to other molecular chaperone amplification drug candidates, (iii) RXi’s acquisition of technologies covered by the UMMS license agreements, and (iv) the small molecule drug discovery and development operations at our former Massachusetts and new California laboratory. All research and development costs related to the activities of RXi and our former laboratory were expensed. The three-month period ended June 30, 2008 excludes any RXi-related research and development expenses and in the six-month period ended June 30, 2008, RXi’s research and development expenses are only included for the months of January and February 2008. Our drug development efforts are subject to uncertainties inherent in any new drug development. Due to the uncertainties involved in progressing through clinical trials, and the time and cost involved in obtaining regulatory approval and in establishing collaborative arrangements, among other factors, we cannot reasonably estimate the timing, completion dates, and costs, or range of costs, of each phase of our drug development program.

     As compensation to members of RXi’s scientific advisory board and our consultants, and in connection with the acquisition of technology, we and RXi sometimes issue shares of common stock, stock options and warrants to purchase shares of common stock. For financial statement purposes, we value these shares of common stock, stock options, and warrants at the fair value of the common stock, stock options or warrants granted, or the services received, whichever is more reliably measurable. The value of the non-employee option grants are marked to market using the Black-Scholes option-pricing model and most of the compensation expense recognized or recovered during the period is adjusted accordingly. This resulted in a recovery of expenses in the three-month and six-month periods ended June 30, 2008 totaling approximately $0 and $(243,000), respectively, and an expense of approximately $3,042,000 and $3,323,000 for the same periods of 2007. The significant decrease in the non-cash research and development expenses for the comparative six-month periods relates to the inclusion of RXi’s expenses in the 2007 period. We recorded $182,000 and $381,000 of employee stock option expense during the three-month and six-month periods ended June 30, 2008, as compared with $175,000 and $212,000 for the same periods in 2007.

     Over the coming twelve months, we expect our research and development expenses to increase primarily as a result of our ongoing clinical programs for iroxanadine and arimoclomol and our drug discovery efforts at our San Diego, California, laboratory. Those expenses will increase further if the Innovive acquisition is completed.

General and Administrative Expenses

	Three-Month Period				Six-Month Period
	Ended June 30,				Ended June 30,
	2008		2007		2008		2007
	(In thousands)				(In thousands)
General and administrative expenses	$	2,166	$	3,534	$	5,769	$	5,904
Non-cash general and administrative expenses		690		—		879		—
Employee stock option expense		316		568		975		679
Depreciation and amortization		20		5		42		9
	$	3,192	$	4,107	$	7,665	$	6,592

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     General and administrative expenses include all administrative salaries and general corporate expenses, including legal expenses associated with the prosecution of our intellectual property. Our general and administrative expenses, excluding stock option expense and depreciation expense, were $2,166,000 and $5,769,000 for the three-month and six-month periods ended June 30, 2008, respectively, compared to $3,534,000 and $5,904,000 for the same periods in 2007. General and administrative expenses decreased by $1,368,000 in the second quarter of 2008 as compared to 2007, primarily due to the 2007 period including approximately $700,000 of RXi expenses. Additionally, there was a reduction in professional fees of approximately $470,000, which largely related to fees incurred in effecting the partial spinoff of RXi in the first quarter of 2008.

     Employee stock option expense relates to options granted to recruit and retain directors, officers and other employees. We recorded approximately $316,000 and $975,000 of employee stock option expense during the three-month and six-month periods ended June 30, 2008 as compared to approximately $568,000 and $679,000 during the same periods in 2007. The decrease relates primarily to the exclusion of RXi’s expenses in the three-months ended June 30, 2008. In June 2008, we set a reserve of $690,000 against the loan receivable based upon the estimated recoverable value of the underlying security and in March 2008, we awarded RXi common stock to our directors and certain employees and recorded the $189,000 fair value as non-cash compensation expense for a total of $879,000 for the six-months ended June 30, 2008. There were no comparable awards in the 2007 period.

     Depreciation and Amortization

     The depreciation expense reflects the depreciation of our equipment and furnishings and the amortization expenses related to our molecular library, which was placed in service in March 2005. These expenses are classified as research and development or general and administrative expenses depending upon the associated business activity.

     Interest Income

     Interest income was $0.3 million and $0.8 million for the three-month and six-month periods ended June 30, 2008, respectively, compared to $0.7 million and $1.0 million for the same periods in 2007. The difference between periods is attributable primarily to the cash available for investment each year.

     Minority Interest in Losses of Subsidiary

     We offset $88,000 of minority interest in losses of RXi against our net loss for the months of January and February 2008. For March 2008 and for the second quarter of 2008, we did not record a minority interest in the losses of RXi, as RXi’s gain and losses were accounted for under the equity method, because following our March 11, 2008 distribution to our stockholders of RXi shares, we owned less than 50% of RXi. We offset $176,000 and $178,000 of minority interest in losses of RXi against our net loss for the three-month and six-month periods ended June 30, 2007, respectively.

     Income Taxes

     On March 11, 2008, we distributed to our stockholders approximately 4.5 million shares of RXi common stock. We will recognize approximately a $32.9 million gain for income tax purposes on the distribution of shares of RXi common stock, which is the amount equal to the excess of the fair market value of the stock distributed over our basis. The gain will be included in determining whether we have current year earnings and profits subject to taxation. Based upon our anticipated loss from operations for 2008 and currently available loss carryforwards, we expect to pay no regular income taxes in connection with the distribution; however, we have recorded a tax provision of $342,000 related to the estimated Alternative Minimum Tax resulting from this gain.

Item 3. — Quantitative and Qualitative Disclosures About Market Risk

     Our exposure to market risk is limited primarily to interest income sensitivity, which is affected by changes in the general level of United States interest rates, particularly because a significant portion of our investments are in short-term debt securities issued by the U.S. government and institutional money market funds. The primary objective of our investment activities is to preserve principal. Due to the nature of our short-term investments, we believe that we are not subject to any material market risk exposure. We do not have any derivative financial instruments or foreign currency instruments. If interest rates had varied by 10% in the three-month period ended June 30, 2008, it would not have had a material effect on our results of operations or cash flows for that period.

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Item 4. — Controls and Procedures

     Evaluation of Disclosure Controls and Procedures

     Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Securities Exchange Act Rule 13a-15(e)) as of the end of the quarterly period covered by this Quarterly Report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.

     Changes in Controls over Financial Reporting

     During the quarterly period covered by this Quarterly Report, we continued to make changes to our internal controls designed to strengthen our financial reporting and disclosure controls and procedures in light of material weaknesses in those regards reported in our Annual Report on Form 10-K for the year ended December 31, 2007 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2008. During the quarterly period covered by this Quarterly Report, we strengthened our managerial controls over our compliance with the established financial closing policies and procedures. Additionally, we continued to enhance the communications among our scientific, legal and accounting departments including the timing of and control over the flow of documents into our legal database.

     We are continuing our efforts in these regards in order to fully remedy previously reported material weaknesses and to ensure that all of our controls and procedures are adequate and effective. Any failure to implement and maintain improvements in the controls over our financial reporting could cause us to fail to meet our reporting obligations under the SEC’s rules and regulations. Any failure to improve our internal controls to address the weaknesses we have identified could also cause investors to lose confidence in our reported financial information, which could have a negative impact on the trading price of our common stock.

PART II — OTHER INFORMATION

Item 1A — Risk Factors

     We are subject to a number of risks and uncertainties, including the risks and uncertainties discussed below, as well as those described in our Annual Report on Form 10-K for the year ended December 31, 2007 or reflected in any subsequent filings we make with the SEC. If any of these risks or uncertainties actually occur, our business, results of operations, financial condition and prospects could be materially and adversely affected. In that case, the trading price of our common stock could decline. These risks and uncertainties are not the only ones facing us. Additional risks and uncertainties not presently known to us, or that we currently perceive as immaterial, also may adversely affect us.

     Our common stock may be delisted from The Nasdaq Capital Market if the stock price does not increase.

     We received notice from The Nasdaq Stock Market on May 28, 2008, that our common stock had closed below $1.00 per share for 30 consecutive business days, and we were therefore not in compliance with the minimum bid price required by Nasdaq Marketplace Rule 4310(c)(4). In accordance with Marketplace Rule 4310(c)(8)(D), we may regain compliance if at any time by November 24, 2008, our common stock closes at or above $1.00 for 10 consecutive business days and we otherwise meet the Nasdaq’s continuing listing requirements. Nasdaq also informed us that if we do not regain compliance by November 24, 2008, we will be granted up to an additional 180 calendar days to regain full compliance while continuing to trade during this time on The Nasdaq Capital Market if at that time we meet the Nasdaq’s initial listing requirements other than the minimum bid price rule. If we eventually fail to comply with this condition for continued listing and our common stock is delisted from The Nasdaq Small Capital Market, there is no assurance that our common stock will be listed for trading or quoted elsewhere and an active trading market for our common stock may cease to exist, which would materially and adversely impact the market value of our common stock.

     Because we have no source of significant recurring revenue, we must depend on financing to sustain our operations.

     Developing products and conducting clinical trials require substantial amounts of capital. To date, we have relied primarily upon proceeds from sales of our equity securities and the exercise of options and warrants, and to a much lesser extent, upon payments from our strategic partners and licensees, to generate funds needed to finance our business and operations. We will need to raise additional capital to, among other things:

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• fund our clinical trials and pursue regulatory approval of our existing and possible future product candidates;

• expand our research and development activities;

• finance our general and administrative expenses;

• acquire or license other technologies;

• prepare, file, prosecute, maintain, enforce and defend our patent and other proprietary rights; and

• develop and implement sales, marketing and distribution capabilities to successfully commercialize any product for which we obtain marketing approval and which we choose to market itself.

     Our revenues were approximately $7.5 million, $2.1 million and $0.2 million, respectively, for years ended December 31, 2007, 2006 and 2005, and approximately $1.7 million and $3.9 million for the three and six months ended June 30, 2008, respectively. Our revenues for the years ended December 31, 2007 and 2006 and the three and six months ended June 30, 2007 included approximately $7.2 million, $1.9 million, $2.4 million and $3.8 million, respectively, of deferred revenue recognized from our sale in August 2006 of a one percent royalty interest in worldwide sales of arimoclomol for the treatment of ALS. We will have no significant recurring revenue unless we are able to commercialize one or more of our product candidates in development, which may require us to first enter into license or other strategic arrangements with third parties.

     At June 30, 2008, we had cash, cash equivalents and short-term investments of approximately $36.4 million. We believe that our current resources will be sufficient to support our currently planned level of operations into the second half of 2009. This estimate is based, in part, upon our currently projected expenditures for the remainder of 2008 and the first six months of 2009 of approximately $26.4 million, including approximately $1.8 million of direct expenditures for our planned clinical program for arimoclomol for ALS and related studies, approximately $0.3 million of direct expenditures for our planned clinical program for arimoclomol for stroke recovery and related studies, approximately $8.0 million of direct expenditures for our planned Phase II clinical trial of iroxanadine for diabetic ulcers and related studies, approximately $8.1 million for the operations of our research laboratory in San Diego, California, and approximately $8.2 million for other general and administrative expenses. Our projected expenditures are based on our recently announced plan to conduct additional animal toxicology studies prior to the resumption of our Phase II clinical program for arimoclomol for ALS that currently is on clinical hold by the FDA and prior to any initiation of our Phase II clinical trial for arimoclomol for stroke recovery. Those animal toxicology studies are expected to take approximately one year. These projected expenditures are based upon numerous other assumptions and subject to many uncertainties, and our actual expenditures may be significantly different from these projections. These projected expenditures also do not consider the effects of the pending acquisition of Innovive on our operations and financial condition. Assuming that the acquisition is completed, we will need additional funds to advance any of Innovive’s product candidates.

     If we obtain marketing approval as currently planned and successfully commercialize our current product candidates, we anticipate it will take a minimum of three years, and possibly longer, for us to generate significant recurring revenue, and we will be dependent on future financing until such time, if ever, as we can generate significant recurring revenue. We have no commitments from third parties to provide us with any additional financing, and we may not be able to obtain future financing on favorable terms, or at all. If we raise additional funds by issuing equity securities, dilution to our then-existing stockholders may result and new investors could have rights superior to holders of our common stock. In addition, debt financing, if available, may include restrictive covenants. If adequate funds are not available to us, we may have to liquidate some or all of our assets or delay or reduce the scope of or eliminate some portion or all of our development programs or clinical trials. We also may have to license to other companies its product candidates or technologies that we would prefer to develop and commercialize ourselves.

     The FDA has placed a clinical hold on CytRx’s Phase IIb efficacy trial of arimoclomol, which will delay the trial and could lead to a requirement that CytRx conduct additional toxicology studies or alter the trial design.

     In January 2008, the FDA placed a clinical hold on our Phase IIb clinical efficacy trial of arimoclomol for the treatment of ALS due to concerns relating to previous toxicology studies of arimoclomol in rats. We received a formal determination letter from the FDA in July 2008. In light of the ongoing clinical hold, we recently announced plans to conduct additional preclinical toxicology studies of arimoclomol, which are expected to take up to one year to complete, before any possible resumption or initiation of clinical trials of arimoclomol. We cannot predict the outcome of those additional animal toxicology studies. Depending on the outcome, we may be:

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• required to conduct additional toxicology or human studies prior to or in parallel with the resumption of our clinical trial, which would result in substantial additional expenses and possible significant delays in completing the clinical trial;

• required to alter the design including reducing the dosage of arimoclomol, of the clinical trial, which could significantly delay the completion of the trial, increase the cost of the trial, adversely affect our ability to demonstrate the efficacy of arimoclomol in the trial or cause us to cancel the trial altogether due to one or more of these considerations; or

• prohibited by the FDA from resuming our current planned clinical trial or initiating any other clinical trial of arimoclomol for the treatment of ALS or any other indication due to safety concerns.

     Our development of arimoclomol for stroke recovery is subject to similar risks.

Risks Associated with the Innovive Merger

     There is no guarantee that the merger will be completed.

     The merger with Innovive is subject to a number of conditions, including approval by Innovive stockholders. There is no assurance that the merger will be approved or that the other conditions to the completion of the merger will be satisfied. If the merger is not completed, we will need to reconsider and revise the recent changes to our business strategy or to undertake another strategic transaction in furtherance of our current strategy.

     We will incur increased losses as a result of the merger, which may adversely affect our stock price.

     We will incur significant transaction costs in connection with the merger. In addition, we expect to incur additional costs, which cannot be precisely estimated at this time, of integrating Innovive’s business and operations into ours. These costs will result in increased losses to us in the immediate future, which could have an adverse effect on the market price of our common stock.

     We may not achieve the benefits we expect from the merger, which may have a material adverse effect on us.

     We entered into the merger agreement with the expectation that the merger will result in benefits to us. Among other benefits, we believe that our development of Innovive’s existing product candidates may accelerate the time to market of our first product candidate. If we are not successful in achieving this or other expected benefits of the merger, our future prospects may be adversely affected.

     If the merger is not completed, we may not be repaid for our advances to Innovive under the loan and security agreement.

     As of August 6, 2008, we had advanced to Innovive under the loan and security agreement a total of approximately $2.7 million, and Innovive may request additional advances of up to approximately $2.8 million pending the merger. If the merger is not completed, our advances under the loan and security agreement, plus accrued interest, will become immediately due and payable by Innovive. Innovive, however, has no commitments or arrangements for any financing to repay such advances, so we expect that it would be unable to repay such advances if the merger agreement is not completed. In this event, we would be entitled to pursue all of our remedies under the loan and security agreement, including the possible foreclosure sale of all or substantially all of Innovive’s assets, but there is no assurance that these remedies would be effective to repay all of the amounts that will be owing to us by Innovive.

     If the merger is not consummated by September 30, 2008, either we or Innovive may choose not to proceed with the merger.

     Either we or Innovive may terminate the merger agreement if the merger has not been completed by September 30, 2008, unless the failure of the merger to be completed by such date has resulted from the failure of the party seeking to terminate the merger agreement to perform its obligations or the failure of the condition regarding effectiveness of the registration statement filed by us with the Securities and Exchange Commission relating to the merger.

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

     On July 1, 2008, we held our Annual Meeting of Stockholders. The following are the results of voting on the proposals:

     a) Election of directors:

Nominee	For		Withheld
Steven A. Kriegsman		71,624,371		3,298,229
Marvin R. Selter		70,887,580		4,035,020
Richard L. Wennekamp		70,868,209		4,054,391

     b) Approval of an amendment to our Restated Certificate of Incorporate to increase the authorized number of shares of common stock from 150,000,000 to 175,000,000:

For	68,557,152
Against	6,059,517
Abstain	305,929

     c) Ratification of the selection of BDO Seidman, LLP as our independent auditors:

For	74,100,790
Against	462,917
Abstain	358,892

Item 6. — Exhibits

     The exhibits listed in the accompanying Index to Exhibits are filed as part of this Quarterly Report on Form 10-Q and incorporated herein by reference.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CYTRX CORPORATION (Registrant)
Date: August 11, 2008	By:	/s/ MITCHELL K. FOGELMAN
		Mitchell K. Fogelman
		Chief Financial Officer (Principal Financial Officer)

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INDEX TO EXHIBITS

Exhibit
Number	Description
10.1	Amendment to Stockholders Agreement, dated July 28, 2008, among CytRx Corporation, RXi Pharmaceuticals Corporation, and Michael P. Czech, PhD., Gregory J. Hannon, Ph.D., Craig C. Mello, PhD., and Tariq M. Rana, Ph.D.
10.2	Amendment to Contribution Agreement, dated July 28, 2008, between CytRx Corporation and RXi Pharmaceuticals Corporation
31.1	Certification of Chief Executive Officer Pursuant to 17 CFR 240.13a-14(a)
31.2	Certification of Chief Financial Officer Pursuant to 17 CFR 240.13a-14(a)
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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EX-10.1

EXHIBIT 10.1

July 28, 2008

RXi Pharmaceuticals Corporation
One Innovation Drive
Worcester, Massachusetts 01605

     Re:     Amendment to Stockholders Agreement

Gentlemen:

     This letter will serve to amend in certain respects set forth below the Stockholders Agreement, dated February 15, 2007, among RXi Pharmaceuticals Corporation (“RXi”), CytRx Corporation (“CytRx”), and Michael P. Czech, Ph.D., Gregory J. Hannon, Ph.D., Craig C. Mello, Ph.D., and Tariq M. Rana, Ph.D. (the “Stockholders Agreement”). Unless otherwise defined herein, capitalized terms used in this letter, including Annex 1 hereto, shall have the meanings ascribed to them in the Stockholders Agreement.

     In accordance with Section 7 of the Stockholders Agreement, the Stockholders Agreement is hereby amended as follows:

     1. Preemptive Rights. Annex 1 to the Stockholders Agreement is hereby amended and restated in its entirety to read as set forth in Annex 1 to this letter.

     2. No Other Effect. Except as set forth in this letter, including Annex 1 hereto, the Stockholders Agreement shall remain in full force and effect.

[Remainder of page intentionally left blank]

RXi Corporation
July 28, 2008
Page 2

     If the foregoing correctly states the parties’ agreement, please acknowledge the same by signing and returning a copy of this letter.

Very truly yours,
 

/s/ Steven A. Kriegsman  

Steven A. Kriegsman 

President and Chief Executive Officer
CytRx Corporation 

AGREED AND ACCEPTED:
/s/ Tod Woolf	Dated: July 28, 2008
Tod Woolf, Ph.D.
President
RXi Pharmaceuticals Corporation
/s/ Craig C. Mello	Dated: July 28, 2008
Craig C. Mello, Ph.D.
/s/ Tariq M. Rana	Dated: July 28, 2008
Tariq M. Rana, Ph.D.
	Dated: July 28, 2008
Michael P. Czech, Ph.D.
/s/ Gregory J. Hannon	Dated: July 28, 2008
Gregory J. Hannon, Ph.D.

ANNEX 1

Preemptive Rights

SECTION 1. General

A. CytRx shall have the right, on the terms and provisions of this Annex 1, to purchase New Securities (as defined below in Paragraph B) that RXi may, from time to time, sell, issue or exchange.

B. “New Securities” shall mean, subject to Section 4.B, any shares of common stock of RXi (“RXi Common Stock”) and other equity securities of RXi, whether now authorized or not, any rights, options, and warrants to purchase RXi Common Stock or other equity securities, and securities of any type whatsoever that are, or may become, convertible into, or exercisable or exchangeable for, shares of RXi Common Stock or other equity securities.

SECTION 2. Sales and Issuances of New Securities for Cash

A. RXi shall not at any time issue or sell for cash any New Securities (each, a “Cash Sale”), unless and until RXi shall have first delivered to CytRx notice of the proposed Cash Sale (the “Cash Offer Notice”) and otherwise complied with the provisions of this paragraph A, as follows:

(i) The Cash Offer Notice shall (1) describe in reasonable detail the proposed Cash Sale, (2) set forth the maximum number of New Securities proposed to be offered in the Cash Sale (the “Offered Securities”), (3) describe the sale price, or where the price has not been established the method for determining the same, of the Offered Securities and other proposed terms of the proposed Cash Sale to the extent known, (4) identify the persons or entities, if known, or the class of persons or entities, to which the Offered Securities are proposed to be offered, issued or sold, and (5) include an express offer to issue and sell to CytRx a portion of such Offered Securities determined by multiplying the total dollar amount of Offered Securities by CytRx’s Proportionate Percentage (as hereinafter defined) as determined as of the date of the Cash Offer Notice. CytRx’s “Proportionate Percentage” for purposes of this Annex shall mean, as of any determination date, a fraction, expressed as a percentage, the numerator of which is the sum of (w) the number of issued and outstanding shares of RXi Common Stock then owned beneficially (as hereinafter defined) by CytRx plus (x) the number of shares of RXi Common Stock that may be acquired by CytRx upon the exercise, conversion or exchange of rights, options, warrants and other securities of RXi owned beneficially by CytRx that are exercisable or exchangeable for, or convertible into, shares of RXi Common Stock within 60 days of the date of determination of such beneficial ownership, and the denominator of which is the sum of (y) the total number of shares of RXi Common Stock then issued and outstanding plus (z) the number of shares referred to in clause (x) above. CytRx shall be deemed to “beneficially own” shares of RXi Common Stock and other securities that are held of record by CytRx or held in the name of a broker or other custodian for CytRx’s account.

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(ii)	CytRx shall have the right during the 10-business day period following delivery of the Cash Offer Notice to elect to purchase, at the price and upon the other terms specified therein, its Proportionate Percentage of the Offered Securities; provided, however, that RXi may postpone or terminate the transaction described in the Cash Offer Notice, which shall have the effect of postponing or terminating CytRx’s rights under this paragraph A. To exercise its rights under this paragraph A, CytRx must notify RXi on or prior to the expiration of the foregoing 10-business day period of the amount, if any, of the Offered Securities (not to exceed its CytRx’s Proportionate Percentage thereof) that CytRx elects to purchase (the “Notice of Acceptance”).
(iii)	RXi shall have 90 days from the date of the Cash Offer Notice to consummate the Cash Sale in accordance with the Cash Offer Notice, which may include the issuance or sale of all or any part of the Offered Securities which CytRx has not elected to purchase as reflected in the Notice of Acceptance. Any of the Offered Securities not so issued or sold by RXi within such 90-day period shall not be issued or sold by RXi, unless and until RXi again complies with the procedures specified in this Annex.
(iv)	In the event RXi determines in good faith to issue or sell less than all the Offered Securities pursuant to the Cash Sale, then the amount of the Offered Securities that CytRx shall be entitled to purchase shall automatically be reduced to an amount equal to the amount of the Offered Securities, if any, that CytRx elected to purchase as set forth in its Notice of Acceptance multiplied by a fraction, (1) the numerator of which shall be the amount of Offered Securities that RXi issues or sell (including the Offered Securities to be issued or sold to CytRx pursuant to subparagraph A(ii) above prior to such reduction) and (2) the denominator of which shall be the amount of the Offered Securities that RXi initially proposed to issue or sell as specified in the Cash Offer Notice.
(v)	On the date of the closing of the issuance or sale of all or less than all the Offered Securities, CytRx shall purchase from RXi, and RXi shall sell and issue to CytRx, the amount of Offered Securities specified in the Notice of Acceptance (as reduced pursuant to subparagraph A(iv) above, if applicable) upon the terms and conditions specified in the Cash Offer Notice. The purchase by CytRx of any of the Offered Securities is subject in all cases to the preparation, execution and delivery by RXi and CytRx of a customary purchase agreement relating to such Offered Securities and other documents consistent with the terms of the Cash Offer Notice and reasonably satisfactory in form and substance to CytRx, RXi and their respective counsel.

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SECTION 3. Sales and Issuances of New Securities Other than for Cash

A. If at any time or from time to time RXi shall issue or sell for consideration other than cash any New Securities (each, a “Non-Cash Sale”), it shall comply with the provisions of this Section 3, as follows:

(i)

RXi shall deliver to CytRx notice of the Non-Cash Sale (the “Non-Cash Offer Notice”). Except as provided below, the Non-Cash Offer Notice shall be delivered within 10 days following the issuance or sale of such New Securities and (1) describe in reasonable detail the Non-Cash Sale, (2) set forth the maximum number of New Securities, (3) describe the proposed price or value attributable to the New Securities, or where the same has not been determined the method for determining the price or value, and other proposed terms of the Non-Cash Sale to the extent known, (4) identify the persons or entities, if known, or the class of persons or entities, to which such New Securities are proposed to be offered, issued or sold, and (5) include an express offer to issue and sell to CytRx from RXi’s authorized but unissued shares of RXi Common Stock, or from treasury shares, such number of shares of RXi Common Stock as are necessary and sufficient to restore CytRx, after giving effect to such award, issuance, sale or exchange, to its Proportionate Percentage as of the time immediately preceding such Non-Cash Sale. Notwithstanding the foregoing, if the amount of the New Securities issued or sold in a Non-Cash Sale, when added to all other New Securities issued and sold in Non-Cash Sales of which CytRx shall not have been notified by RXi in accordance with this subparagraph A(i), represents 5% or less of the shares of RXi Common Stock outstanding immediately prior to such Non-Cash Sale, then RXi may postpone the Non-Cash Offer Notice hereunder until the date 10 days following the earlier of (1) the end of the calendar quarter during which such Non-Cash Sale occurred and (2) the date of the next subsequent issuance or sale of New Securities in a Non-Cash Sale which, when added to all other New Securities issued and sold by RXi in Non-Cash Sales as to which no Non-Cash Offer Notice shall have been given to CytRx, exceeds 1% of the shares of RXi Common Stock outstanding immediately prior to the earliest of all such unreported Non-Cash Sales; provided, however, that in the event the Board of Directors of RXi shall determine to authorize or approve of a merger of RXi with or into any other person or entity, or a sale or other disposition of all or substantially all of RXi shares of capital stock, business or assets, RXi shall immediately deliver to CytRx all previously postponed Non-Cash Offer Notices.

(ii)

CytRx shall have the right during the 30-day period following delivery of the Non-Cash Offer Notice to elect in its discretion to purchase all or any portion of the number of shares of RXi Common Stock determined as provided in subparagraph A(i) above. To exercise its rights under this paragraph A, CytRx must notify RXi on or prior to the expiration of the foregoing 30-day period of the number, if any, of such shares of RXi Common Stock, up to the whole number thereof, that CytRx elects to purchase (the “Notice of Acceptance”). The purchase price to CytRx of such shares of RXi Common Stock shall be the Fair Value (as defined below) of such shares.

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(iii)

At a closing to be held on a date that is mutually agreeable to RXi and CytRx that is not more than 20 days after the Notice of Acceptance, CytRx shall acquire from RXi, and RXi shall sell and issue to CytRx, the number of shares of RXi Common Stock specified in the Notice of Acceptance. The purchase by CytRx of such shares of RXi Common Stock is subject in all cases to the preparation, execution and delivery by RXi and CytRx of a customary purchase agreement relating to such shares of RXi Common Stock and other documents consistent with the terms hereof and reasonably satisfactory in form and substance to CytRx, RXi and their respective counsel.

(iv)

The “Fair Value” per share of RXi’s Common Stock shall be equal to the average closing price of RXi Common Stock as reported on Nasdaq (or other principal exchange on which such shares are then traded) over the 10 trading days ending on the earlier of (1) the date of any press release or other announcement by RXi of the transaction involving such New Securities and (2) the date that CytRx delivers its Notice of Acceptance under subparagraph B(ii) above. If RXi Common Stock is not publicly traded at that time, the Fair Value of a share of RXi Common Stock shall be the fair market value per share of RXi Common Stock as determined in good faith by the Board of Directors of RXi acting by not less than a majority of the disinterested directors of RXi.

SECTION 4. Excluded Securities and New Option Securities

A. Notwithstanding any other provision of this Annex, this Annex shall not apply to (i) any New Securities issued as a dividend or other distribution on or with respect to RXi Common Stock, or (ii) any stock split, recapitalization or reclassification of RXi Common Stock.

B. Notwithstanding any other provision of this Annex, the provisions of this Annex shall not apply to the grant, award or issuance for consideration other than cash of any New Securities consisting solely of options, warrants or other rights to subscribe for or purchase shares of RXi Common Stock or other equity securities (“New Option Securities”). With respect to any New Option Securities granted, awarded or issued by RXi for consideration other than cash, the provisions of Section 3 shall apply in all respects to the issuance or sale of any New Securities upon the exercise or conversion of such New Option Securities. Without limiting the generality of the preceding sentence, the purchase price to CytRx of any shares of RXi Common Stock that it elects to purchase upon any such exercise or conversion shall be the Fair Value of such shares as of the date of CytRx’s Notice of Acceptance delivered in accordance with Section 3.

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SECTION 5. Miscellaneous

A.	All notices and other communications provided for or permitted to be given under this Annex shall be in writing and shall be given by depositing the notice in the United States mail, addressed to the party to be notified, postage paid, and registered or certified with return receipt requested, or by such notice being delivered in person or by facsimile communication to such party. Notices or other communications given or served pursuant hereto shall be effective upon receipt by the party to be notified. All notices or other communications to be sent to RXi shall be sent to One Innovation Drive, Worcester, Massachusetts 01605, or such other address as RXi may specify by notice hereunder to CytRx. All notices or other communications to be sent to CytRx shall be sent or made at the address of CytRx as set forth in RXi’s books and records or such other address as CytRx may specify by notice hereunder to RXi.
B.	No delay or failure on the part of any party in exercising any rights hereunder, and no partial or single exercise thereof, shall constitute a waiver of such rights or of any other rights hereunder.
C.	In the event that any provision of this Annex, or the application of such provision to any person or circumstance, is determined by a court, arbitrator or other adjudicator to be invalid or unenforceable to any extent, the remainder of this Annex, and the application of such provision to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and such provision and each other provision of this Annex shall be valid and enforceable to the greatest extent permitted by law.
D.	In the event of any arbitration, litigation or other legal proceeding involving the interpretation of this Annex or enforcement of the rights or obligations of the parties hereto, the prevailing party or parties shall be entitled to recover reasonable attorneys’ fees and expenses as determined by the court, arbitrator or other adjudicator. In the event that the arbitration, litigation or other legal proceeding is successful only in party, the court, arbitrator or other adjudicator shall be entitled to prorate and allocate said fees and expenses between the parties.

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EX-10.2

EXHIBIT 10.2

July 28, 2008

RXi Pharmaceuticals Corporation
One Innovation Drive
Worcester, Massachusetts 01605

     Re: Amendment to Contribution Agreement

Gentlemen:

     This letter will serve to amend in certain respects set forth below the Contribution Agreement, dated April 30, 2007 (the “Contribution Agreement”), between RXi Pharmaceuticals Corporation (“RXi”) and CytRx Corporation (“CytRx”). Unless otherwise defined herein, capitalized terms used in this letter, including Exhibit A hereto, shall have the meanings ascribed to them in the Contribution Agreement.

     In accordance with Section 7 of the Contribution Agreement, the Contribution Agreement is hereby amended as follows:

     1. Preemptive Rights. Exhibit A to the Contribution Agreement is hereby amended and restated in its entirety to read as set forth in Exhibit A to this letter.

     2. No Other Effect. Except as set forth in this letter, including Exhibit A hereto, the Contribution Agreement shall remain in full force and effect.

[Remainder of page intentionally left blank]

RXi Corporation
July 28, 2008
Page 2

If the foregoing correctly states the parties’ agreement, please acknowledge the same by signing and returning a copy of this letter.

Very truly yours,
 

/s/ Steven A. Kriegsman  

Steven A. Kriegsman 

President and Chief Executive Officer
CytRx Corporation 

AGREED AND ACCEPTED: Dated July 28, 2008

/s/ Tod Woolf  

Tod Woolf, Ph.D.  

President
RXi Pharmaceuticals Corporation 

Exhibit A

Form of Registration Rights Terms

REGISTRATION RIGHTS TERMS

SECTION 1. Definitions. As used in this Exhibit, the following terms shall have the following meanings:

          (a) The term “1934 Act” means the Securities Exchange Act of 1934, as amended.

          (b) The term “Common Stock” means the RXi’s Common Stock, $.0001 par value per share.

          (c) The term “CytRx” means CytRx Corporation and its permitted successors and assigns under Section 12.

          (d) The terms “register,” “registered,” and “registration” refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act and the declaration or ordering of effectiveness of such registration statement.

          (e) The term “Registrable Shares” means the Common Stock issued to CytRx pursuant to the Contribution Agreement between RXi and CytRx dated as of January 8, 2007 and the Contribution Agreement between RXi and CytRx dated as of April 30, 2007 (including the shares issued to CytRx in September 2007 as reimbursement for expenses pursuant to such agreement) and any Common Stock issued as a dividend or other distribution with respect to, or in exchange or in replacement of, such Common Stock.

          (f) The term “Rule 144” means Rule 144 promulgated under the Securities Act.

          (g) The term “SEC” means the Securities and Exchange Commission.

          (h) The term “Securities Act” means the Securities Act of 1933, as amended.

SECTION 2. Request for Registration. If at any time after the Common Stock is registered under the 1934 Act, RXi shall receive a written request (specifying that it is being made pursuant to this Section 2 from CytRx that RXi file a registration statement under the Securities Act, or a similar document pursuant to any other statute then in effect corresponding to the Securities Act, covering the registration of Registrable Shares the expected price to the public of which equals or exceeds $1,000,000 (based on the market price or fair value on the date of such request), then RXi shall promptly use its best efforts to cause all Registrable Shares that CytRx has requested be registered to be registered under the Securities Act on Form S-1 or any other available form.

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     Notwithstanding the foregoing, (i) RXi shall not be obligated to effect a registration pursuant to this Section 2 during the period starting with the date sixty (60) days prior to RXi’s estimated date of filing of, and ending on a date six (6) months following the effective date of, a registration statement pertaining to an underwritten public offering of securities for the account of RXi, provided that RXi is actively employing in good faith its best efforts to cause such registration statement to become effective and that RXi’s estimate of the date of filing such registration statement is made in good faith; (ii) RXi shall not be obligated to effect a registration pursuant to this Section 2 within six (6) months after the effective date of a prior registration under this Section 2 (or three (3) months where, due to the requirements of the SEC or other factors beyond CytRx’s control, such prior registration included less than all of the Registrable Shares that CytRx requested to be included therein); and (iii) if RXi shall furnish to CytRx a certificate signed by the President of RXi stating that in the good faith judgment of the Board of Directors it would be seriously detrimental to RXi or its shareholders for a registration statement to be filed in the near future, then RXi’s obligation to use its best efforts to file a registration statement shall be deferred for a period not to exceed ninety (90) days; provided, however, that RXi shall not be permitted to so defer its obligation more than once in any 12-month period.

     RXi shall not be obligated to effect more than three registrations on behalf of CytRx pursuant to this Section 2. In order to count as a registration under this Section 2, the registration statement relating to such registration must have included Registrable Shares and must have been ordered or declared effective by the SEC.

SECTION 3. RXi Registration. If at any time RXi proposes to register any of its Common Stock under the Securities Act in connection with the public offering of such securities for its own account or for the accounts of shareholders other than CytRx, solely for cash on a form that would also permit the registration of the Registrable Shares, RXi shall, each such time, promptly give CytRx written notice of such determination. Upon the written request of CytRx given within thirty (30) days after giving of any such notice by RXi, RXi shall, subject to the limitations set forth in Section 8, use its best efforts to cause to be registered under the Securities Act all of the Registrable Shares that CytRx has requested be registered; provided, that RXi shall have the right to postpone or withdraw any registration statement relating to an offering in which CytRx is eligible to participate under this Section 3 without any liability or obligation to CytRx under this Section 3.

SECTION 4. Obligations of RXi. Whenever required under Section 2, Section 3 or Section 11 to use its best efforts to effect the registration of any Registrable Shares, RXi shall, as expeditiously as reasonably possible:

          (a) Prepare and file with the SEC a registration statement with respect to such Registrable Shares and use its best efforts to cause such registration statement to become effective, and, upon the request of CytRx, keep such registration statement effective for a period of up to one (1) year or, if earlier, until the distribution contemplated in the registration statement has been completed; provided, however, that (i) such one (1) year period shall be extended for a period of time equal to the period CytRx refrains from selling any securities included in such registration at the request of an underwriter of Common Stock (or other securities) of RXi; and (ii) in the case of any registration of Registrable Shares on Form S-3 which are intended to be offered on a continuous or delayed basis, subject to compliance with applicable SEC rules, such one (1) year period shall be extended for up to ninety (90) days, if necessary, to keep the registration statement effective until all such Registrable Shares are sold.

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          (b) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement.

          (c) Furnish to CytRx such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of such Registrable Shares owned by it.

          (d) Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably appropriate for the distribution of the securities covered by the registration statement, provided that RXi shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, and further provided that (anything in this Exhibit to the contrary notwithstanding with respect to the bearing of expenses) if any jurisdiction in which the securities shall be qualified shall require that expenses incurred in connection with the qualification of the securities in that jurisdiction be borne by shareholders, then such expenses shall be payable by CytRx to the extent required by such jurisdiction.

          (e) Provide a transfer agent for the Common Stock no later than the effective date of the first registration of any Registrable Shares.

          (f) Otherwise use its best efforts to comply with all applicable rules and regulations of the SEC.

          (g) Use its best efforts either (i) to cause all such Registrable Shares to be listed on a national securities exchange (if such securities are not already so listed) and on each additional national securities exchange on which similar securities issued by RXi are then listed, if the listing of such securities is then permitted under the rules of such exchange, or (ii) to secure designation of all such Registrable Shares as a Nasdaq “national market system security” within the meaning of Rule 11Aa2-1 of the SEC or, failing that, to secure listing on Nasdaq for such Registrable Shares and, without limiting the generality of the foregoing, to arrange for at least two (2) market makers to register as such with respect to Registrable Shares with the National Association of Securities Dealers.

          (h) Enter into such customary agreements (including an underwriting agreement in customary form) and take such other actions as CytRx shall reasonably request in order to expedite or facilitate the disposition of such Registrable Shares.

          (i) Make available for inspection by CytRx, by any underwriter participating in any disposition to be effected pursuant to such registration statement and by any attorney, accountant or other agent retained by CytRx or any such underwriter, all pertinent financial and other records and pertinent corporate documents and properties of RXi, and cause all of RXi’s officers, directors and employees to supply all information reasonably requested by CytRx, underwriter, attorney, accountant or agent in connection with such registration statement.

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          (j) Use every reasonable effort to prevent the issuance of any stop order suspending the effectiveness of such registration statement or of any order preventing or suspending the use of any preliminary prospectus and, if any such order is issued, to obtain the lifting thereof at the earliest reasonable time.

          (k) Make such representations and warranties to CytRx and the underwriters as are customarily made by issuers to selling stockholders and underwriters, as the case may be, in primary underwritten public offerings.

SECTION 5. Furnish Information. It shall be a condition precedent to the obligations of RXi to take any action pursuant to this Exhibit with respect to the registration of any CytRx’s Registrable Shares that CytRx shall take such actions and furnish to RXi such information regarding itself, the Registrable Shares held by it, and the intended method of disposition of such securities, as RXi shall reasonably request and as shall be required in connection with any registration, qualification or compliance referred to in this agreement, including, without limitation (i) in connection with an underwritten offering, enter into an appropriate underwriting agreement containing terms and provisions then customary in agreements of that nature, (ii) enter into such custody agreements, powers of attorney and related documents at such time and on such terms and conditions as may then be customarily required in connection with such offering and (iii) distribute the Registrable Shares only in accordance with and in the manner of the distribution contemplated by the applicable registration statement and prospectus. In addition, CytRx shall promptly notify RXi of any request by the Commission or any state securities commission or agency for additional information or for such registration statement or prospectus to be amended or supplemented.

SECTION 6. Expenses of Demand Registration. All expenses incurred in connection with any registration pursuant to Section 2 or Section 11 (excluding underwriters’ discounts and commissions), including, without limitation, all registration and qualification fees, printers’ and accounting fees, fees and disbursements of counsel for RXi, and the reasonable fees and disbursements of one special counsel for CytRx, shall be borne by RXi whether or not the registration statement to which such registration expenses relate becomes effective; provided, however, that RXi shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 2 if the registration request is subsequently withdrawn at the request of CytRx (in which case CytRx shall bear such expenses), unless CytRx agrees to forfeit its right to demand registrations pursuant to Section 2.

SECTION 7. RXi Registration Expenses. All expenses (excluding underwriters’ discounts and commissions) incurred in connection with any registration pursuant to Section 3, including, without limitation, any additional registration and qualification fees and any additional fees and disbursements of counsel to RXi that result from the inclusion of securities held by CytRx in such registration and the reasonable fees and disbursements of one special counsel for CytRx, shall be borne by RXi whether or not the registration statement to which such registration expenses relate becomes effective.

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SECTION 8. Underwriting Requirements.

          (a)

(i)

In connection with any offering under Section 3 involving an underwriting of shares being issued by RXi, RXi shall not be required to include any Registrable Shares in such underwriting unless CytRx accepts the terms of the underwriting as agreed upon between RXi and the underwriters selected by it, and then only in such quantity (subject to the minimum Registrable Shares to be included as provided in subsection (ii) below) as will not, in the reasonable opinion of the underwriters, jeopardize the success of the offering by RXi.

(ii)

If the total amount of securities (which for the purposes of this subsection (ii) refers only to securities owned directly by CytRx Corporation and none of its transferees, successors or assigns) that CytRx requests to be included in an underwritten offering under Section 3 exceeds the amount of securities that the underwriters reasonably believe compatible with the success of the offering, RXi may exclude from such registration and underwriting such Registrable Shares, provided that RXi shall only be permitted to exclude such Registrable Shares that exceed fifteen (15) percent of the total shares included in such registration and underwriting.

          (b) With respect to any underwriting of shares to be registered under Section 2 or Section 11, CytRx shall have the right to designate the managing underwriter or underwriters, subject to the consent of RXi. In connection with any underwritings of shares to be registered under Section 3, RXi shall have the right to designate the managing underwriter or underwriters. In any such case, such consent of RXi or CytRx shall not be unreasonably withheld or delayed.

SECTION 9. Delay of Registration. CytRx shall not have any right to take any action to restrain, enjoin, or otherwise delay any registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Exhibit.

SECTION 10. Indemnification. In the event any Registrable Shares are included in a registration statement under this Exhibit:

          (a) To the extent permitted by law, in connection with any Registration in which Registrable Shares are included, RXi will indemnify and hold harmless CytRx and its officers, directors and stockholders, legal counsel and accountants for CytRx, any underwriter (as defined in the Securities Act) for CytRx and each person, if any, who controls CytRx or underwriter within the meaning of the Securities Act or the 1934 Act, against any losses, claims, damages or liabilities, joint or several, to which they may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based on (i) any untrue or alleged untrue statement of any material fact contained in such registration statement, including, without limitation, any prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading or (iii) any violation by RXi of any rule or regulation promulgated under the Securities Act applicable to RXi and relating to action or inaction required of RXi in connection with any such registration; and will promptly reimburse CytRx, and any underwriter, controlling person or other aforementioned person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such

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loss, claim, damage, liability, or action, provided, however, that the indemnity agreement contained in this Section 10(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of RXi (which consent shall not be unreasonably withheld or delayed) nor shall RXi be liable to CytRx, or any underwriter, controlling person or other aforementioned person in any such case for any such loss, claim, damage, liability or action to the extent that it (i) arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in connection with such registration statement, preliminary prospectus, final prospectus, or amendments or supplements thereto, in reliance upon and in conformity with written information furnished to RXi expressly for use in connection with such registration by or on behalf of CytRx, or any underwriter, controlling person or other aforementioned person, (ii) is caused by the failure of CytRx to deliver a copy of the final prospectus relating to such Registrable Shares, as then amended or supplemented, in connection with a purchase, if RXi had previously furnished copies thereof to CytRx or (iii) is caused by CytRx’s disposition of Registrable Shares during any period during which CytRx is obligated to discontinue any disposition of Registrable Shares under Section 13.

          (b) To the extent permitted by law, CytRx will indemnify and hold harmless RXi, each of its directors, each of its officers who has signed the registration statement, each person, if any, who controls RXi within the meaning of the Securities Act, and any underwriter (within the meaning of the Securities Act) for RXi against any losses, claims, damages or liabilities to which RXi or any such director, officer, controlling person or underwriter may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in such registration statement, including any prospectus or final prospectus contained therein or any amendments or supplements thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information relating to and furnished to RXi by CytRx expressly for use in connection with such registration; and will promptly reimburse RXi or any such director, officer, controlling person or underwriter for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this Section 10(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of CytRx (which consent shall not be unreasonably withheld or delayed) and provided further that CytRx shall not have any liability under this Section 10(b) in excess of the net proceeds actually received by CytRx in the relevant public offering.

          (c) Promptly after receipt by an indemnified party under this Section 10 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 10, notify the indemnifying party in writing of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel

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mutually satisfactory to the parties. The failure to notify an indemnifying party promptly of the commencement of any such action, if prejudicial to his ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 10, but the omission so to notify the indemnifying party will not relieve him of any liability that he may have to any indemnified party otherwise than under this Section 10.

          (d) If the indemnification provided for in this Section 10 is required by its terms but is for any reason held to be unavailable to or otherwise insufficient to hold harmless an indemnified party under Section 10(a) or Section 10(b) in respect of any losses, claims, damages, liabilities or expenses referred to herein, then each applicable indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of any losses, claims, damages, liabilities or expenses referred to herein in such proportion as is appropriate to reflect the relative fault of RXi and CytRx in connection with the statements or omissions described in such Section 10(a) or Section 10(b) which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of RXi and CytRx shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by RXi or CytRx and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in this Section 10, any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The provisions set forth in Section 10(c) with respect to notice of commencement of any action shall apply if a claim for contribution is to be made under this Section 10(d); provided, however, that no additional notice shall be required with respect to any action for which notice has been given under subsection Section 10(c) for purposes of indemnification. RXi and CytRx agree that it would not be just and equitable if contribution pursuant to this Section 10 were determined solely by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in this paragraph. Notwithstanding the provisions of this Section 10(d), CytRx shall not be required to contribute an amount in excess of the net proceeds actually received by CytRx in the relevant public offering. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

SECTION 11. Registrations on Form S-3.

          (a) If (i) RXi shall receive a written request (specifying that it is being made pursuant to this Section 11) from CytRx that RXi file a registration statement on Form S-3 (or any successor form to Form S-3 regardless of its designation) for a public offering of Registrable Shares the reasonably anticipated aggregate price to the public of which would equal or exceed $1,000,000, and (ii) RXi is a registrant entitled to use Form S-3 (or any successor form to Form S-3) to register such shares, then RXi shall use its best efforts to cause all Registrable Shares that CytRx has requested be registered to be registered on Form S-3 (or any successor form to Form S-3).

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          (b) Notwithstanding the foregoing, (i) RXi shall not be obligated to effect a registration pursuant to this Section 11 during the period starting with the date sixty (60) days prior to RXi’s estimated date of filing of, and ending on a date six (6) months following the effective date of, a registration statement pertaining to an underwritten public offering of securities for the account of RXi, provided that RXi is actively employing in good faith its best efforts to cause such registration statement to become effective and that RXi’s estimate of the date of filing such registration statement is made in good faith; (ii) RXi shall not be obligated to effect a registration pursuant to this Section 11 within six (6) months after the effective date of a prior registration under this Section 11 (or three (3) months where, due to the requirements of the SEC or other factors beyond CytRx’s control, such prior registration included less than all of the Registrable Shares that CytRx requested to be included therein); and (iii) if RXi shall furnish to CytRx a certificate signed by the President of RXi stating that in the good faith judgment of the Board of Directors it would be seriously detrimental to RXi or its shareholders for a registration statement to be filed in the near future, then RXi’s obligation to use its best efforts to file a registration statement shall be deferred for a period not to exceed ninety (90) days; provided, however, that RXi shall not be permitted to so defer its obligation more than once in any 12-month period.

          (c) CytRx’s rights to registration under this Section 11 are in addition to, and not in lieu of, their rights to registration under Section 2 and Section 3 of this Exhibit.

SECTION 12. Transfer of Registration Rights.

          (a) The registration rights and obligations of CytRx under this Exhibit with respect to any Registrable Shares may be transferred or assigned to any acquirer of all or substantially all of the assets or outstanding shares of stock of CytRx or any entity that merges with or into CytRx.

          (b) The registration rights and obligations under Sections 2 and 11 hereof may be transferred or assigned to one or more transferees of Registrable Shares (while also being retained by CytRx); provided that RXi shall not be obligated to effect more than three registrations under Section 2 on behalf of CytRx and those transferees.

          (c) The registration rights and obligations under Section 3 hereof may be transferred or assigned to any transferee of 0.5% or more of the Registrable Shares at any time.

SECTION 13. Future Events. If CytRx is, at the time participating in a Registration, RXi will notify CytRx of the occurrence of any of the following events of which RXi is actually aware, and when so notified, CytRx will immediately discontinue any disposition of Registrable Shares until notified by RXi that such event is no longer applicable:

          (a) the issuance by the Commission or any state securities commission or agency of any stop order suspending the effectiveness of the registration statement or the initiation of any proceedings for that purpose (in which case RXi will make reasonable efforts to obtain the withdrawal of any such order or the cessation of any such proceedings); or

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          (b) the existence of any fact which makes untrue any material statement made in the registration statement or prospectus or any document incorporated therein by reference or which requires the making of any changes in the registration statement or prospectus or any document incorporated therein by reference in order to make the statements therein not misleading (in which case RXi will make reasonable efforts to amend the applicable document to correct the deficiency).

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EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Steven A. Kriegsman, Chief Executive Officer of CytRx Corporation, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of CytRx Corporation;

     2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this quarterly report;

     3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

     (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

     (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the periods covered by this report based on such evaluation; and

     (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 11, 2008	/s/ STEVEN A. KRIEGSMAN
	Steven A. Kriegsman
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Mitchell K. Fogelman, Chief Financial Officer of CytRx Corporation, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of CytRx Corporation;

     2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this quarterly report;

     3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

     (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

     (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the periods covered by this report based on such evaluation; and

     (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 11, 2008	/s/ MITCHELL K. FOGELMAN
	Mitchell K. Fogelman
	Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification of Chief Executive Officer

Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of CytRx Corporation (the “Company”) hereby certifies based on his knowledge that:

(i) the accompanying Quarterly Report on Form 10-Q of the Company for the period ended June 30, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods covered in the Report.

Date: August 11, 2008	/s/ STEVEN A. KRIEGSMAN
	Steven A. Kriegsman
	Chief Executive Officer

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 (Section 906), or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to CytRx Corporation and will be retained by CytRx Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

The foregoing certification is being furnished to the Securities and Exchange Commission as an Exhibit to the Form 10-Q and shall not be considered filed as part of the Form 10-Q.

EX-32.2

Exhibit 32.2

Certification of Chief Financial Officer

Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of CytRx Corporation (the “Company”) hereby certifies based on his knowledge that:

(i) the accompanying Quarterly Report on Form 10-Q of the Company for the period ended June 30, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods covered in the Report.

Date: August 11, 2008	/s/ MITCHELL K. FOGELMAN
	Mitchell K. Fogelman
	Chief Financial Officer

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 (Section 906), or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to CytRx Corporation and will be retained by CytRx Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

The foregoing certification is being furnished to the Securities and Exchange Commission as an Exhibit to the Form 10-Q and shall not be considered filed as part of the Form 10-Q.