<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS
AND SIMILAR PLANS PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ________ to ________
Commission file number 0-15327
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
CYTRX CORPORATION 401(K) PROFIT-SHARING PLAN
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
CYTRX CORPORATION
154 Technology Parkway
Norcross, Georgia 30092
<PAGE> 2
CytRx Corporation
401(k) Profit Sharing Plan
Audited Financial Statements
and Supplemental Schedules
Year ended December 31, 1998 and as of December 31, 1997
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors...........................................................................1
Audited Financial Statements
Statements of Net Assets Available for Benefits..........................................................3
Statement of Changes in Net Assets Available for Benefits,
with Fund Information.................................................................................4
Notes to Financial Statements............................................................................5
Signatures..............................................................................................11
Supplemental Schedules
Line 27(a) - Schedule of Assets Held for Investment Purposes............................................12
Line 27(d) - Schedule of Reportable Transactions........................................................13
Exhibit Index...........................................................................................14
Consent.................................................................................................15
</TABLE>
<PAGE> 3
Report of Independent Auditors
The Trustees of the CytRx Corporation
401(k) Profit-Sharing Plan
We have audited the accompanying statements of net assets available for benefits
of the CytRx Corporation 401(k) Profit-Sharing Plan as of December 31, 1998 and
1997, and the related statement of changes in net assets available for benefits
for the year ended December 31, 1998. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 1998 and 1997, and the changes in its net assets available for
benefits for the year ended December 31, 1998, in conformity with generally
accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules of assets
held for investment purposes as of December 31, 1998 and reportable transactions
for the year then ended are presented for purposes of additional analysis and
are not a required part of the financial statements but are supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. These supplemental schedules are the responsibility of the Plan's
management. The Fund Information in the statement of changes in net assets
available for benefits is presented for purposes of additional analysis rather
than to present the changes in net assets available for benefits of each fund.
The supplemental schedules and Fund Information have been subjected to auditing
procedures applied in our audits of the financial statements and, in our
opinion, are fairly stated in all material respects in relation to the financial
statements taken as a whole.
Atlanta, Georgia
June 23, 1999
<PAGE> 4
CytRx Corporation
401(k) Profit Sharing Plan
Statements of Net Assets Available for Benefits
<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
---------- ----------
<S> <C> <C>
ASSETS
Investments, at fair value:
Merrill Lynch Retirement Preservation Trust $ 46,059 $ 51,718
Merrill Lynch Basic Value Fund 473,846 576,685
Merrill Lynch Corporate Bond Fund 17,275 40,722
Merrill Lynch Capital Fund 322,765 390,382
Merrill Lynch Growth Fund 195,532 401,244
Merrill Lynch Global Allocation Fund 964 --
Merrill Lynch S&P 500 Index Fund 24,987 --
Massachusetts Financial Services Emerging Growth Fund 2,905 --
Massachusetts Financial Services Research Fund 7,245 --
Oppenheimer Quest Fund 1,009 --
CytRx Corporation Common Stock 151,413 378,086
Merrill Lynch CMA Money Fund 3,303 17,014
Participant loans 19,695 20,392
---------- ----------
Total investments 1,266,998 1,876,243
Contributions receivable:
Employer 7,615 24,114
Participants 5,777 11,143
---------- ----------
Total assets 1,280,390 1,911,500
LIABILITIES
Due to CytRx Corporation -- 17,037
---------- ----------
Net assets available for benefits $1,280,390 $1,894,463
========== ==========
</TABLE>
See accompanying notes.
2
<PAGE> 5
CytRx Corporation
401(k) Profit Sharing Plan
Statement of Net Assets Available for Benefits, with Fund Information
Year ended December 31, 1998
<TABLE>
<CAPTION>
PARTICIPANT DIRECTED
--------------------------------------------------------------------------------------------------------
RETIREMENT BASIC CORPORATE GLOBAL S&P 500
PRESERVATION VALUE BOND CAPITAL GROWTH ALLOCATION INDEX
TRUST FUND FUND FUND FUND FUND FUND
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Additions to net assets
attributed to:
Participant
contributions $ 37,557 $ 52,754 $ 13,746 $ 21,438 $ 53,917 $ 1,000 $ 1,957
Employer contributions -- -- -- -- -- -- --
Investment income 3,295 38,060 3,036 17,912 1,865 95 1,143
Net appreciation
(depreciation) in fair
value of investments -- 23,408 (3,043) 3,238 (71,914) (131) 2,137
Deductions from net assets
attributed to:
Distribution to
participants (19,828) (247,543) (36,872) (105,610) (157,545) -- --
------------------------------------------------------------------------------------------------------
Interfund transfers (26,546) 27,432 (832) (5,476) (34,849) -- 19,848
------------------------------------------------------------------------------------------------------
Net increase (decrease) (5,522) (105,889) (23,965) (68,498) (208,526) 964 25,085
Net assets available for
benefits:
Beginning of year 72,087 580,920 41,347 392,433 405,097 -- --
------------------------------------------------------------------------------------------------------
End of year $ 66,565 $ 475,031 $ 17,382 $ 323,935 $ 196,571 $ 964 $25,085
======================================================================================================
<CAPTION>
PARTICIPANT DIRECTED
-------------------------------------------------------------------------
CYTRX
EMERGING OPPENHEIMER CORPORATION
GROWTH RESEARCH QUEST COMMON
FUND FUND FUND STOCK TOTAL
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Additions to net assets
attributed to:
Participant
contributions $ 2,943 $ 7,059 $ 1,000 $ 14,603 $ 207,974
Employer contributions -- -- -- 96,190 96,190
Investment income 26 239 42 -- 65,713
Net appreciation
(depreciation) in fair
value of investments 275 552 (33) (284,975) (330,486)
Deductions from net assets
attributed to:
Distribution to
participants -- (890) -- (85,176) (653,464)
-------------------------------------------------------------------------
Interfund transfers (265) 1,419 -- 19,269 --
-------------------------------------------------------------------------
Net increase (decrease) 2,979 8,379 1,009 (240,089) (614,073)
Net assets available for
benefits:
Beginning of year -- -- -- 402,579 1,894,463
-------------------------------------------------------------------------
End of year $ 2,979 $ 8,379 $ 1,009 $ 162,490 $ 1,280,390
=========================================================================
</TABLE>
3
<PAGE> 6
CytRx Corporation
401(k) Profit-Sharing Plan
Notes to Financial Statements
December 31, 1998
1. DESCRIPTION OF PLAN
GENERAL
The CytRx Corporation 401(k) Profit-Sharing Plan (the "Plan") is a defined
contribution plan that covers substantially all employees of CytRx Corporation
and its wholly-owned subsidiaries (Proceutics, Inc., Vaxcel, Inc. and VetLife,
Inc., collectively referred to herein as "the Company"). The Plan is subject to
the provisions of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"). Participants should refer to the Summary Plan Description for
a more complete description of the Plan's provisions.
CONTRIBUTIONS
Eligible employees may elect to contribute up to 15% of their total compensation
on a pre-tax basis. Participants may also elect to contribute additional amounts
on an after-tax basis, subject to statutory restrictions. Company matching
contributions are made equal to 50% of the participants' pre-tax contribution.
The Company matching contribution is made in the form of CytRx Corporation
common stock. The number of shares of stock contributed to the Plan is
determined at the end of each calendar quarter by dividing the total value of
the authorized Company matching contribution by the average stock price during
the quarter.
VESTING
Participants are immediately vested in their contributions and earnings thereon.
Participants are fully vested in Company contribution after three years of
service.
4
<PAGE> 7
CytRx Corporation
401(k) Profit-Sharing Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF PLAN (CONTINUED)
VESTING (CONTINUED)
During 1998 the Company divested certain business operations of Proceutics, Inc.
("Proceutics") and CytRx Animal Health, Inc. ("CytRx Animal Health") (formerly
VetLife, Inc.) Such divestitures resulted in a partial termination of the Plan.
Accordingly, all plan participants previously employed by Proceutics and VetLife
fully vested in their participant accounts which totaled approximately $645,000
at December 31, 1997.
DISTRIBUTIONS
Upon the attainment of age 59 1/2, death, disability or termination of
employment a participant and his or her beneficiary, generally may elect to
receive distributions of their vested account balance. Withdrawals are also
permitted for financial hardship.
FORFEITURES
Forfeitures of nonvested account balances by terminating participants are used
to reduce future Company matching contributions.
PARTICIPANT LOANS
Participants may borrow the lesser of $50,000 or 50% of the vested amount of
their account balances. Such loans bear interest at a rate determined by the
Plan Administrator. The loan is collateralized by the remainder of the
participant's account, and must be repaid within 5 years through equal payments
made at least quarterly. The term of the loan may be for a term in excess of 5
years, if the loan is used to acquire a principal residence of the Participant.
Participant distributions from the Plan are reduced by any outstanding loan
balance at the time of distribution.
5
<PAGE> 8
CytRx Corporation
401(k) Profit-Sharing Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF PLAN (CONTINUED)
AMENDMENT OR TERMINATION
The Company intends to continue the Plan indefinitely but reserves the right to
terminate it at any time or amend it in any manner it deems advisable. No
amendment or termination may reduce any participant's vested interest accrued to
the date for such amendment or termination.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
METHOD OF ACCOUNTING
The financial statements of the Plan have been prepared using the accrual basis
of accounting.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates that affect the
amounts reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
INVESTMENTS
Investments are stated at fair value based on quoted market prices on national
exchanges. Participant loans are valued at cost, which approximates fair value.
6
<PAGE> 9
CytRx Corporation
401(k) Profit-Sharing Plan
Notes to Financial Statements (continued)
3. ADMINISTRATIVE EXPENSES
All custodial, record-keeping and trust administration fees and expenses
incurred for the benefit of the Plan are paid by the Company.
4. INCOME TAX STATUS
The Plan has received a determination letter from the Internal Revenue Service
dated August 17, 1995, stating that the Plan is qualified under Section 401(a)
of the Internal Revenue Code, (the "Code") and, therefore, the related trust is
exempt from taxation. Once qualified, the Plan is required to operate in
conformity with the Code to maintain its qualification. The Plan Administrator
believes the Plan is being operated in compliance with the applicable
requirements of the Code and, therefore, believes that the Plan is qualified and
the related trust is tax exempt.
5. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for benefits per the
financial statements to the Form 5500:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997
---- ----
<S> <C> <C>
Net assets available for benefits per the financial
statements $1,280,390 $1,894,463
Contributions receivable (13,392) (35,257)
Other (3,276) 145
---------- ----------
Net assets available for benefits per the Form
5500 $1,263,722 $1,859,351
========== ==========
</TABLE>
7
<PAGE> 10
CytRx Corporation
401(k) Profit-Sharing Plan
Notes to Financial Statements (continued)
5. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500 (CONTINUED)
The following is a reconciliation of net decrease per the financial statements
to the Form 5500:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1998
------------
<S> <C>
Net decrease in net assets available for benefits
per the financial statements $ 614,073
Add:
Contributions receivable at December 31, 1998
13,392
Less:
Contributions receivable at December 31, 1997
(35,257)
Other 3,421
---------
Net decrease in net assets available for benefits
per the Form 5500 $ 595,629
=========
</TABLE>
6. YEAR 2000 ISSUE (UNAUDITED)
The Company has determined that it will be necessary to take certain steps in
order to ensure that the Plan's information systems are prepared to handle year
2000 dates. The Company is taking a two phase approach. The first phase
addresses internal systems that must be modified or replaced to function
properly. Both internal and external resources are being utilized to replace or
modify existing software applications, and test the software and equipment for
the year 2000 modifications. The Company anticipates substantially completing
this phase of the project by late 1999. Costs associated with modifying software
and equipment are not estimated to be significant and will be paid by the
Company.
8
<PAGE> 11
CytRx Corporation
401(k) Profit-Sharing Plan
Notes to Financial Statements (continued)
6. YEAR 2000 ISSUE (UNAUDITED) (CONTINUED)
For the second phase of the project, Plan management established formal
communications with its third party providers to determine that they have
developed plans to address their own year 2000 problems as they relate to the
Plan's operations. All third party service providers have indicated that they
have become or will become year 2000 compliant during 1999. If modification of
data processing systems of either the Plan, the Company, or its service
providers are not completed timely, the year 2000 problem could have a material
impact on the operations of the Plan. Plan management has not developed a
contingency plan, because they are confident that all systems will be year 2000
ready.
9
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees have duly caused this annual report to be signed by the undersigned
hereunto duly authorized.
June 29, 1999 CYTRX CORPORATION
401(K) PROFIT-SHARING PLAN
/s/ Mark W. Reynolds
------------------------------------
Mark W. Reynolds
Chief Financial Officer
CytRx Corporation
10
<PAGE> 13
Cytrx Corporation
401(k) Profit-Sharing Plan
EIN: 58-1642740
Plan No.: 001
Line 27(a) - Schedule of Assets Held for Investment Purposes
December 31, 1998
<TABLE>
<CAPTION>
IDENTITY OF ISSUE,
BORROWER, LESSOR OR CURRENT
SIMILAR PARTY DESCRIPTION OF INVESTMENT COST VALUE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
* Merrill Lynch, Pierce Fenner 46,059 shares Retirement Preservation
& Smith Trust $ 46,059 $ 46,059
* Merrill Lynch, Pierce Fenner 12,653 shares Basic Value Fund
& Smith 399,809 473,846
* Merrill Lynch, Pierce Fenner 2,482 shares Corporate Bond Fund
& Smith 20,858 17,275
* Merrill Lynch, Pierce Fenner 9,572 shares Capital Fund
& Smith 296,142 322,765
* Merrill Lynch, Pierce Fenner 9,850 shares Growth Fund
& Smith 42,844 195,532
* Merrill Lynch, Pierce Fenner 78 shares Global Allocation Fund
& Smith 1,095 964
* Merrill Lynch, Pierce Fenner 1,635 shares S&P 500 Index Fund
& Smith 22,850 24,987
Massachusetts Financial 67 shares Emerging Growth Fund
Services 2,602 2,905
Massachusetts Financial
Services 296 shares Research Fund 6,689 7,245
Oppenheimer 48 shares Quest Fund 1,042 1,009
*CytRx Corporation 156,418 shares Common Stock 577,107 151,413
* Merrill Lynch, Pierce Fenner 3,303 shares CMA Money Fund
& Smith 3,303 3,303
Participant loans Interest rates ranging from 8%to 8.5%,
due no later than June, 2002 - 19,695
---------- ----------
$1,617,097 $1,266,998
========== ==========
</TABLE>
* Indicates a party-in-interest to the Plan.
11
<PAGE> 14
Cytrx Corporation
401(k) Profit-Sharing Plan
EIN: 58-1642740
Plan No.: 001
Line 27(d) - Schedule of Reportable Transactions
Year ended December 31, 1998
<TABLE>
<CAPTION>
CURRENT VALUE
OF ASSETS ON
PURCHASE SELLING COST OF TRANSACTION NET GAIN
IDENTITY OF PARTY INVOLVED DESCRIPTION OF ASSET PRICE PRICE ASSET DATE (LOSS)
- ------------------------------------------------------------------------------------------------------------------------------------
CATEGORY (III) - SERIES OF TRANSACTIONS IN EXCESS OF 5% OF PLAN ASSETS.
<S> <C> <C> <C> <C> <C> <C>
CytRx Corporation Common Stock $161,001 $ -- $161,001 $161,001 $ --
-- 102,699 214,071 102,699 (111,372)
Merrill Lynch Pierce Fenner & Smith Capital Fund 44,248 -- 44,248 44,248 --
-- 115,103 100,100 115,103 15,003
Merrill Lynch Pierce Fenner & Smith Basic Value Fund 123,731 -- 123,731 123,731 --
-- 249,978 196,276 249,978 53,702
Merrill Lynch Pierce Fenner & Smith Growth Fund 61,224 -- 61,224 61,224 --
-- 195,023 196,243 195,023 (1,220)
Merrill Lynch Pierce Fenner & Smith CMA Money Fund 826,375 -- 826,375 826,375 --
-- 840,086 840,086 840,086 --
Merrill Lynch Pierce Fenner & Smith Retirement Preservation Trust 45,733 -- 45,733 45,733 --
-- 51,390 51,390 51,390 --
</TABLE>
Note: Commissions and fees related to purchases and sales of investments are
included in the cost of investments or the proceeds from the sale and are not
separately identified by the trustee. There was no lease rental.
THERE WERE NO CATEGORY (I), (II) OR (IV) REPORTABLE TRANSACTIONS DURING THE YEAR
ENDED DECEMBER 31, 1998.
12
<PAGE> 15
CYTRX CORPORATION
401(K) PROFIT-SHARING PLAN
FORM 11-K EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description Page
- -------------- ----------- ----
<S> <C> <C>
23.1 Consent of Ernst & Young LLP 14
</TABLE>
13
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements on
Form S-8 (No. 33-48706 and 333-31717) pertaining to the CytRx Corporation
401(k) Profit-Sharing Plan of our report dated June 23, 1999 with respect to
the financial statements and supplemental schedules of the CytRx Corporation
401(k) Profit-Sharing Plan included in this Annual Report (Form 11-K) for the
year ended December 31, 1998.
/s/ Ernst & Young LLP
Atlanta, Georgia
June 23, 1999
14
