Commitments and Contingencies

12 Months Ended

Dec. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

12. Commitments and Contingencies

Commitments

CytRx acquires assets still in development and CytRx enters into research and development arrangements with third parties that often require milestone and royalty payments to the third-party contingent upon the occurrence of certain future events linked to the success of the asset in development. Milestone payments may be required, up to an aggregate of $7.5 million, contingent upon the successful achievement of an important point in the development life-cycle of the pharmaceutical product (e.g., approval of the product for marketing by a regulatory agency). If required, CytRx may also have to make royalty payments, based upon a percentage of the sales of the pharmaceutical product. In respect of aldoxorubicin, it agreed to pay up to a maximum amount of approximately $18.3 million, payable in shares of its common stock, in the event that regulatory approval for marketing is obtained.

These arrangements may be material individually, and in the unlikely event that milestones for multiple products covered by these arrangements were reached in the same period, the aggregate charge to expense could be material to the results of operations in any one period. In addition, these arrangements often give CytRx the discretion to unilaterally terminate development of the product, which would allow CytRx to avoid making the contingent payments; however, CytRx is unlikely to cease development if the compound successfully achieves clinical testing objectives.

CytRx’s current contractual obligations that will require future cash payments are as follows (in thousands):

	Operating Leases (1)		Employment Agreements (2)		Total
2019	$	416	$	1,457	$	1,873
2020		163		1,057		1,220
2021		—		1,057		1,057
2022		—		—		—
2023		—		—		—
Thereafter		—		—		—
Total	$	579	$	3,571	$	4,150

(1)

Operating leases are primarily facility lease related obligations, as well as equipment lease obligations with third party vendors. The Company recognized rent expenses of $276,450 and $271,332 in 2018 and 2017, respectively in the continuing operations. The Company recognized rent expenses of $136,684 and $148,774 in 2018 and 2017, respectively in the discontinued operations.

(2)

Employment agreements include management contracts which have been revised from time to time. The employment agreement for the Company’s executive officers provide for minimum salaries, which are adjusted annually at the discretion of the Company’s Compensation Committee, and in some cases provide for minimum annual bonuses and employee benefits, as well. New employment agreements for the Company’s other executive officers are usually entered into annually or biennially.

Contingencies

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

During 2018, the Company resolved various shareholder derivative actions and a class action lawsuit that were pending against them (Note 5). The Company intends to vigorously defend against any complaints. CytRx has directors’ and officers’ liability insurance, which would be utilized in the defense of any such matters.

The Company evaluates developments in legal proceedings and other matters on a quarterly basis. The Company records accruals for loss contingencies to the extent that the Company concludes that it is probable that a liability has been incurred and the amount of the related loss can be reasonably estimated.