**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **Washington,
        DC 20549**
  
  **FORM
        10-QSB**
  
 
 (MARK
                  ONE)**x**
              **QUARTERLY REPORT UNDER
                  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                  1934****For
                  the quarterly period ended June 30,
                  2007****OR****o**
              **TRANSITION
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT****For
                  the transition period from  ______________ to
                  ______________**
  Commission
        file number: 333-105793
  **CEPTOR
        CORPORATION**
 (Name
        of
        Small Business Issuer in Its Charter)
  **Delaware**
              **11-2897392**(State
                  or other jurisdiction of
                incorporation
                  or organization)
              (IRS
                  Employer Identification No.)
  **462 Seventh
        Avenue, Suite
        1200**
 **New
        York, New York 10018**
 (Address
        of principal executive offices)  (Zip Code)
  **(212)
        629-0804**
 (Issuer’s
        telephone number)
 
 
 Check
        whether the issuer (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Exchange Act during the past 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 xNo o
  Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act).    Yes o No  x
 
 As
        of
        August 02, 2007, there were 15,550,069 shares of the issuer's common equity
        outstanding.
  Transitional
        Small Business Disclosure Format (Check one): Yes o   No x
  Table
            of Contents
  **Table
        of Contents**
 
  **Page**Part
                  I   FINANCIAL INFORMATIONItem
                  1.
              Financial
                  Statements (Unaudited)
              1Balance
                  Sheet –
                  June 30, 2007
              1Statements
                  of
                  Operations for the three and six month periods ended June 30, 2007
                  and
                  2006, and for the period
                from
                  August 11,
                  1986 (date of inception) to June 30, 2007
              2Statement
                  of
                  Changes in Stockholders' Deficiency for the period from August
                  11, 1986
                  (date of inception) to June 30, 2007
              3Statements
                  of Cash
                  Flows for the six-month period ended June 30, 2007 and 2006 and
                  for the
                  period
                from
                  August 11,
                  1986 (date of inception) to June 30, 2007
              10Notes
                  to
                  Condensed Financial Statements
              12Item
                  2.
              Managements
                  Discussion and Analysis or Plan of Operation
              30Item
                  3.
              Controls
                  and
                  Procedures
              33Part
                  II   OTHER INFORMATIONItem
                  1.
              Legal
                  Proceedings
              34Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              34Item
                  3.
              Defaults
                  Upon
                  Senior Securities
              34Item
                  4.
              Submission
                  of
                  Matters to a Vote of Security Holders
              34Item
                  5.
              Other
                  Information
              34Item
                  6.
              Exhibits
              35
  
 Table
            of Contents
 
  **PART
        I**
 **FINANCIAL
        INFORMATION**
 **Item
                  1.**
              **Financial
                  Statements**
   **CepTor
                  Corporation**********
              ******(A
                  Development Stage Company)**********
              ******Balance
                  Sheet**********
              ******(Unaudited)**********
              ********
              ****
              ****
              ********
              ****
              **June
                  30,**
              ********
              ****
              **2007**AssetsCurrent
                  assetsCash
                  and cash equivalents
              
              $
              22,249Prepaid
                  services and other current assets (note 5)
              
              
              604Total
                  current assets
              
              
              22,853Deferred
                  financing costs (note 6)
              
              
              242,098Total
                  assets
              
              $
              264,951Liabilities
                  and Stockholders' DeficitCurrent
                  liabilitiesAccounts
                  payable
              
              $
              4,001,884Accrued
                  liabilities
              
              
              1,423,682Convertible
                  notes, net of discounts $1,031,980 (note 8)
              
              
              4,936,200Unsecured advances
              
              
              563,000Warrant
                  liability (note 4)
              
              
              1,324,150Conversion
                  option liability (note 4)
              
              
              700,650Total
                  current liabilities
              
              
              12,949,565Commitments
                  and Contingencies
              
              
              -Stockholders'
                  deficitPreferred
                  stock, $0.0001 par value, authorized 20,000,000 shares,
                  issuedand
                  outstanding 216.4 shares of Series A Convertible
              
              
              5,410,000Common
                  stock, $0.0001 par value; 100,000,000 shares authorized;15,550,069
                  shares issued and outstanding at June 30, 2007 (note 9)
              
              
              1,555Additional
                  paid-in capital
              
              
              27,044,958Deficit
                  Accumulated during the Development Stage
              
              
              (45,141,127
              )Total
                  stockholder's deficit
              
              
              (12,684,614
              )Total
                  liabilities and stockholders' deficit
              
              $
              264,951
 
 The
        accompanying notes are an integral part of these unaudited consolidated
        financial statements.
 
 
 1
 Table
            of Contents
 **CepTorCorporation** **** ****
 **(A
        Development Stage Company)**
 **Statements
        of Operations**
 **(Unaudited)**
 
 **Cumulative
                  from******
              **For
                  the Three**
              ****
              ****
              **For
                  the Three**
              ****
              ****
              **For
                  the Six**
              ****
              ****
              **For
                  the Six**
              ****
              ****
              **Inception**
              ********
              ****
              **Months
                  Ended**
              ****
              ****
              **Months
                  Ended**
              ****
              ****
              **Months
                  Ended**
              ****
              ****
              **Months
                  Ended**
              ****
              ****
              **(August
                  11, 1986)**
              ********
              ****
              **June
                  30,**
              ****
              ****
              **June
                  30,**
              ****
              ****
              **June
                  30,**
              ****
              ****
              **June
                  30,**
              ****
              ****
              **to
                  June 30,**
              ********
              ****
              **2007**
              ****
              ****
              **2006**
              ****
              ****
              **2007**
              ****
              ****
              **2006**
              ****
              ****
              **2007**
              ********
              ****
              ****
              ****
              ****
              **(Restated)**
              ****
              ****
              ****
              ****
              ****
              **(Restated)**Revenue:Other
                  income
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              75,349Operating
                  (income) expenses:Impairment
                  of fixed assets
              
              
              -
              
              
              
              -
              
              
              
              35,562
              
              
              
              -
              
              
              
              71,124Research
                  and development
              
              
              -
              
              
              
              472,027
              
              
              
              -
              
              
              
              1,043,752
              
              
              
              14,165,974In-process
                  research and development
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              5,034,309General
                  and administrative expenses
              
              
              162,269
              
              
              
              497,239
              
              
              
              344,708
              
              
              
              1,756,753
              
              
              
              12,890,317Gain
                  on extinguishment of debt
              
              
              -
              
              
              
              (387,362
              )
              
              
              -
              
              
              
              (387,362
              )
              
              
              (698,643
              )Change
                  in fair value of derivative
                  financial      instruments
              
              
              (2,709,289
              )
              
              
              311,147
              
              
              
              (4,185,212
              )
              
              
              (2,326,585
              )
              
              
              (15,106,997
              )Interest
                  (income) expense, net
              
              
              1,247,099
              
              
              
              4,817,154
              
              
              
              2,867,995
              
              
              
              5,294,640
              
              
              
              20,034,336Total
                  operating (income) expenses
              
              
              (1,299,921
              )
              
              
              5,710,205
              
              
              
              (936,947
              )
              
              
              5,381,198
              
              
              
              (36,390,420
              )Net
                  income (loss)
              
              $
              1,299,921
              
              
              $
              (5,710,205
              )
              
              $
              936,947
              
              
              $
              (5,381,198
              )
              
              $
              (36,315,071
              )Preferred
                  dividends
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              (10,100,616
              )Net
                  income (loss) available to common shareholders
              
              $
              1,299,921
              
              
              $
              (5,710,205
              )
              
              $
              936,947
              
              
              $
              (5,381,198
              )
              
              $
              (46,415,687
              )Net
                  loss per share - basic
              
              $
              0.08
              
              
              $
              (0.38
              )
              
              $
              0.06
              
              
              $
              (0.39
              )Net
                  loss per share - fully diluted
              
              $
              0.05
              
              
              $
              (0.38
              )
              
              $
              0.03
              
              
              $
              (0.39
              )Weighted
                  average shares outstanding - basic
              
              
              15,500,069
              
              
              
              14,855,983
              
              
              
              15,500,069
              
              
              
              13,785,982Weighted
                  average shares outstanding - diluted
              
              
              26,855,182
              
              
              
              14,855,983
              
              
              
              29,905,206
              
              
              
              13,785,982
  Comprehensive
          income (loss) is equivalent to net income (loss) for all periods
          presented.
  The
        accompanying notes are an integral part of these unaudited consolidated
        financial statements.
   2
 Table
            of Contents
  **CepTorCorporation**
 **(A
          Development Stage Company)**
 **Statements
          of Changes in Stockholders' (Deficiency) Equity**
 **(Unaudited)**
 **Preferred
                  Stock**
              
              **Common
                  Stock**
              
              
              
              **Deferred**
              
              **Additional**
              
              **Treasury
                  Stock**
              
              
              **Accumulated**
                **Deficit**
                **During
                  the**
              
              
              **Total**
                **Stockholders'****Shares**
              
              **Amount**
              
              **Shares**
              
              **Amount**
              
              **Subscription****Receivable**
              
              **Compen-****sation**
              
              **Paid-in****Capital**
              
              **Shares**
              
              
              **Amount**
              
              
              **Development****Stage**
              
              
              **(Deficiency)****Equity****Balance,
                  August 11, 1986 and December 31,   
                  1986**
              
              -
              
              $
              -
              
              
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -Issuance
                  of common stock for cash ($0.0012)
              
              -
              
              
              -
              
              
              840,818
              
              
              84
              
              
              -
              
              
              -
              
              
              916
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,000**Balance,
                  December 31, 1987**
              
              -
              
              $
              -
              
              
              840,818
              
              $
              84
              
              $
              -
              
              $
              -
              
              $
              916
              
              
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              1,000**Balance,
                  December 31, 1988**
              
              -
              
              $
              -
              
              
              840,818
              
              $
              84
              
              $
              -
              
              $
              -
              
              $
              916
              
              
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              1,000**Balance,
                  December 31, 1989**
              
              -
              
              $
              -
              
              
              840,818
              
              $
              84
              
              $
              -
              
              $
              -
              
              $
              916
              
              
              -
              
              
              
              -
              
              
              $
              -
              
              
              $
              1,000**Balance,
                  December 31, 1990**
              
              -
              
              $
              -
              
              
              840,818
              
              $
              84
              
              $
              -
              
              $
              -
              
              $
              916
              
              
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              1,000**Balance,
                  December 31, 1991**
              
              -
              
              $
              -
              
              
              840,818
              
              $
              84
              
              $
              -
              
              $
              -
              
              $
              916
              
              
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              1,000Net
                  loss
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              -
              
              
              
              (8,006
              )
              
              
              (8,006
              )**Balance,
                  December 31, 1992**
              
              -
              
              $
              -
              
              
              840,818
              
              $
              84
              
              $
              -
              
              $
              -
              
              $
              916
              
              
              -
              
              
              $
              -
              
              
              $
              (8,006
              )
              
              $
              (7,006
              )Net
                  loss
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              -
              
              
              
              (1,169
              )
              
              
              (1,169
              )Convertible
                  notes
              
              -
              
              
              -
              
              
              176,572
              
              
              18
              
              
              -
              
              
              -
              
              
              3
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              21Issuance
                  of common stock in exchange for services rendered ($
                  0.0142)
              
              -
              
              
              -
              
              
              176,572
              
              
              18
              
              
              -
              
              
              -
              
              
              2,482
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              2,500**Balance,
                  December 31, 1993**
              
              -
              
              $
              -
              
              
              1,193,962
              
              $
              120
              
              $
              -
              
              $
              -
              
              $
              3,401
              
              
              -
              
              
              $
              -
              
              
              $
              (9,175
              )
              
              $
              (5,654
              )Net
                  income
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              -
              
              
              
              10,222
              
              
              
              10,222Distribution
                  to stockholders
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              -
              
              
              
              (4,260
              )
              
              
              (4,260
              )**Balance,
                  December 31, 1994**
              
              -
              
              $
              -
              
              
              1,193,962
              
              $
              120
              
              $
              -
              
              $
              -
              
              $
              3,401
              
              
              -
              
              
              $
              -
              
              
              $
              (3,213
              )
              
              $
              308
  3
 Table
            of Contents
    Net
                  loss
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              -
              
              
              
              (1,342
              )
              
              
              (1,342
              )**Balance,
                  December 31, 1995**
              
              -
              
              $
              -
              
              
              1,193,962
              
              $
              120
              
              $
              -
              
              $
              -
              
              $
              3,401
              
              
              -
              
              
              $
              -
              
              
              $
              (4,555
              )
              
              $
              (1,034
              )Net
                  loss
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              -
              
              
              
              (8,727
              )
              
              
              (8,727
              )**Balance,
                  December 31, 1996**
              
              -
              
              $
              -
              
              
              1,193,962
              
              $
              120
              
              $
              -
              
              $
              -
              
              $
              3,401
              
              
              -
              
              
              $
              -
              
              
              $
              (13,282
              )
              
              $
              (9,761
              )Net
                  loss
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              -
              
              
              
              (3,975
              )
              
              
              (3,975
              )Issued
                  pursuant to acquisition ($3.3501)
              
              -
              
              
              -
              
              
              59,700
              
              
              6
              
              
              -
              
              
              -
              
              
              199,994
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              200,000Issuance
                  of common stock for cash ($3.3501)
              
              -
              
              
              -
              
              
              29,850
              
              
              3
              
              
              -
              
              
              -
              
              
              99,997
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              100,000Capital
                  contribution by stockholder
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              50,000
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              50,000Expense
                  pursuant to grant of stock option
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              20,356
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              20,356**Balance,
                  December 31, 1997**
              
              -
              
              $
              -
              
              
              1,283,512
              
              $
              129
              
              $
              -
              
              $
              -
              
              $
              373,748
              
              
              -
              
              
              $
              -
              
              
              $
              (17,257
              )
              
              $
              356,620Net
                  loss
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              -
              
              
              
              (21,102
              )
              
              
              (21,102
              )**Balance,
                  December 31, 1998**
              
              -
              
              $
              -
              
              
              1,283,512
              
              $
              129
              
              $
              -
              
              $
              -
              
              $
              373,748
              
              
              -
              
              
              $
              -
              
              
              $
              (38,359
              )
              
              $
              335,518Net
                  loss
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              -
              
              
              
              (25,172
              )
              
              
              (25,172
              )**Balance,
                  December 31, 1999**
              
              -
              
              $
              -
              
              
              1,283,512
              
              $
              129
              
              $
              -
              
              $
              -
              
              $
              373,748
              
              
              -
              
              
              $
              -
              
              
              $
              (63,531
              )
              
              $
              310,346Net
                  loss
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              -
              
              
              
              (36,256
              )
              
              
              (36,256
              )Issuance
                  of common stock for cash ($3.1409)
              
              -
              
              
              -
              
              
              15,919
              
              
              2
              
              
              -
              
              
              -
              
              
              49,998
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              50,000**Balance,
                  December 31, 2000**
              
              -
              
              $
              -
              
              
              1,299,431
              
              $
              131
              
              $
              -
              
              $
              -
              
              $
              423,746
              
              
              -
              
              
              $
              -
              
              
              $
              (99,787
              )
              
              $
              324,090Net
                  loss
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              -
              
              
              
              (233,958
              )
              
              
              (233,958
              )Issued
                  pursuant to funding agreement ($0.0838)
              
              -
              
              
              -
              
              
              1,083,729
              
              
              108
              
              
              -
              
              
              -
              
              
              90,659
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              90,767**Balance,
                  December 31, 2001**
              
              -
              
              $
              -
              
              
              2,383,160
              
              $
              239
              
              $
              -
              
              $
              -
              
              $
              514,405
              
              
              -
              
              
              $
              -
              
              
              $
              (333,745
              )
              
              $
              180,899Net
                  loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (654,599
              )
              
              
              (654,599
              )Issued
                  pursuant to funding agreement ($0.0838)
              
              -
              
              
              -
              
              
              1,515,053
              
              
              151
              
              
              -
              
              
              -
              
              
              126,742
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              126,893**Balance,
                  December 31, 2002**
              
              -
              
              $
              -
              
              
              3,898,213
              
              $
              390
              
              $
              -
              
              $
              -
              
              $
              641,147
              
              
              -
              
              
              $
              -
              
              
              $
              (988,344
              )
              
              $
              (346,807
              )
 
 4
 Table
            of Contents
  Net
                  income
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              -
              
              
              
              72,498
              
              
              
              72,498**Balance,
                  December 31, 2003**
              
              -
              
              $
              -
              
              
              3,898,213
              
              $
              390
              
              $
              -
              
              $
              -
              
              $
              641,147
              
              
              -
              
              
              $
              -
              
              
              $
              (915,846
              )
              
              $
              (274,309
              )Acquisition
                  by Xechem International, Inc. and application of push-down
                  accounting
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              4,118,463
              
              
              -
              
              
              
              -
              
              
              
              915,846
              
              
              
              5,034,309Option
                  granted pursuant to spinoff agreement
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              2,082,500
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              2,082,500Common
                  stock subject to repurchase under put right
              
              -
              
              
              -
              
              
              (401,305
              )
              
              (40
              )
              
              -
              
              
              -
              
              
              (1,637,285
              )
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,637,325
              )Common
                  stock issued May 2004, in connection with bridge loans
                  ($1.22)
              
              -
              
              
              -
              
              
              451,597
              
              
              45
              
              
              -
              
              
              -
              
              
              549,955
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              550,000Common
                  stock issued May 2004, to placement agent for bridge loans
                  ($2.50)
              
              -
              
              
              -
              
              
              36,000
              
              
              4
              
              
              -
              
              
              -
              
              
              89,996
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              90,000Common
                  stock issued September 2004, net of offering expenses of $70,760
                  ($1.68)
              
              -
              
              
              -
              
              
              554,413
              
              
              55
              
              
              -
              
              
              -
              
              
              929,176
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              929,231Common
                  stock issued December 2004 to advisors for past services
                  ($2.50)
              
              -
              
              
              -
              
              
              675,690
              
              
              68
              
              
              -
              
              
              -
              
              
              1,689,157
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,689,225Reclassification
                  in December 2004 of advances from Xechem as contribution to
                  capital
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              350,310
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              350,310Minority
                  shareholders pursuant to recapitalization
              
              -
              
              
              -
              
              
              1,850,000
              
              
              185
              
              
              -
              
              
              -
              
              
              (185
              )
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Common
                  stock issued December 2004 pursuant to exercise of options granted
                  pursuant to spinoff agreement ($0.00001)
              
              -
              
              
              -
              
              
              3,031,943
              
              
              303
              
              
              (303
              )
              
              -
              
              
              -
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Intrinsic
                  value of beneficial conversion feature of replacement
                  notes
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              1,111,240
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,111,240Common
                  stock issued December 2004 in conversion of convertible note
                  ($1.25)
              
              -
              
              
              -
              
              
              167,610
              
              
              17
              
              
              -
              
              
              -
              
              
              209,495
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              209,512Common
                  stock issued December 2004  in connection with litigation
                  settlement ($2.50)
              
              -
              
              
              -
              
              
              125,000
              
              
              12
              
              
              -
              
              
              -
              
              
              312,488
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              312,500Warrants
                  issued in connection with litigation settlement
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              109,500
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              109,500Common
                  stock issued December 2004 pursuant to placement agent agreement
                  ($2.50)
              
              -
              
              
              -
              
              
              150,000
              
              
              15
              
              
              -
              
              
              -
              
              
              (15
              )
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Warrants
                  issued to nonemployees for services
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              396,000
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              396,000Preferred
                  stock and warrants issued pursuant to units sold December 2004
                  in a
                  private placement ($25,000)
              
              145
              
              
              3,626,750
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (822,510
              )
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              2,804,240
  5
 Table
            of Contents
  Acquisition
                  December 2004 of treasury stock under put right ($2.50)
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              145,070
              
              
              
              (362,675
              )
              
              
              -
              
              
              
              (362,675
              )Deemed
                  dividend of beneficial conversion feature of units sold in private
                  placement
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              936,116
              
              
              -
              
              
              
              -
              
              
              
              (936,116
              )
              
              
              -Amortization
                  of deferred compensation
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              604,350
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              604,350Net
                  loss
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              -
              
              
              
              (14,547,889
              )
              
              
              (14,547,889
              )**Balance,
                  December 31, 2004**
              
              145
              
              $
              3,626,750
              
              
              10,539,161
              
              $
              1,054
              
              $
              (303
              )
              $
              -
              
              $
              11,669,898
              
              
              145,070
              
              
              $
              (362,675
              )
              
              $
              (15,484,005
              )
              
              $
              (549,281
              )Preferred
                  stock and warrants issued pursuant to units sold on January 5,
                  2005 in a
                  private placement ($25,000)
              
              48
              
              
              1,208,750
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (159,359
              )
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,049,391Deemed
                  dividend of beneficial conversion feature of units sold January
                  5, 2005 in
                  private placement
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              1,208,750
              
              
              -
              
              
              
              -
              
              
              
              (1,208,750
              )
              
              
              -Acquisition
                  January 5, 2005 of treasury stock under put right ($2.50)
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              48,350
              
              
              
              (120,875
              )
              
              
              -
              
              
              
              (120,875
              )Preferred
                  stock and warrants issued pursuant to units sold on January 18,
                  2005 in a
                  private placement ($25,000)
              
              76
              
              
              1,906,250
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (252,624
              )
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,653,626Deemed
                  dividend of beneficial conversion feature of units sold January
                  18, 2005
                  in private placement
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              1,906,250
              
              
              -
              
              
              
              -
              
              
              
              (1,906,250
              )
              
              
              -Acquisition
                  January 18, 2005 of treasury stock under put right ($2.50)
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              76,250
              
              
              
              (190,625
              )
              
              
              -
              
              
              
              (190,625
              )Common
                  stock issued January 2005  in connection with payment of legal
                  fees ($3.04)
              
              -
              
              
              -
              
              
              23,000
              
              
              2
              
              
              -
              
              
              -
              
              
              69,998
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              70,000Common
                  stock issued January 2005 pursuant to amendment of placement agent
                  agreement ($2.50)
              
              -
              
              
              -
              
              
              150,000
              
              
              15
              
              
              -
              
              
              -
              
              
              (15
              )
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Common
                  stock issued February 2005  to advisors for past services
                  ($6.25)
              
              -
              
              
              -
              
              
              7,500
              
              
              1
              
              
              -
              
              
              -
              
              
              46,874
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              46,875Preferred
                  stock and warrants issued pursuant to units sold on February 3,
                  2005 in a
                  private placement ($25,000)
              
              224
              
              
              5,612,000
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (851,447
              )
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              4,760,553Deemed
                  dividend of beneficial conversion feature of units sold February
                  3, 2005
                  in private placement
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              5,612,000
              
              
              -
              
              
              
              -
              
              
              
              (5,612,000
              )
              
              
              -
   6
 Table
            of Contents
 
 Acquisition
                  February 3, 2005 of treasury stock under put right ($2.50)
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              224,480
              
              
              
              (561,200
              )
              
              
              -
              
              
              
              (561,200
              )Preferred
                  stock and warrants issued pursuant to units sold on February 11,
                  2005 in a
                  private placement ($25,000)
              
              18
              
              
              437,500
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (256,681
              )
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              180,819Deemed
                  dividend of beneficial conversion feature of units sold February
                  11, 2005
                  in private placement
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              437,500
              
              
              -
              
              
              
              -
              
              
              
              (437,500
              )
              
              
              -Acquisition
                  February 11, 2005 of treasury stock under put right
                  ($2.50)
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              17,500
              
              
              
              (43,750
              )
              
              
              -
              
              
              
              (43,750
              )Common
                  stock issued February 2005 pursuant to cashless exercise of option
                  ($3.05)
              
              -
              
              
              -
              
              
              100,191
              
              
              10
              
              
              -
              
              
              -
              
              
              (10
              )
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Common
                  stock issued March 2005 upon conversion of preferred shares
                  ($2.50)
              
              (44
              )
              
              (1,100,000
              )
              
              440,000
              
              
              44
              
              
              -
              
              
              -
              
              
              1,099,956
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Payment
                  for common stock issued December 2004 pursuant to exercise of options
                  granted pursuant to spinoff agreement ($0.00001)
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              303
              
              
              -
              
              
              -
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              303Common
                  stock issued March 2005 pursuant to exercise of warrants
                  ($1.25)
              
              -
              
              
              -
              
              
              5,000
              
              
              1
              
              
              -
              
              
              -
              
              
              6,249
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              6,250Common
                  stock issued April 2005 upon conversion of preferred shares
                  ($2.50)
              
              (15
              )
              
              (375,000
              )
              
              150,000
              
              
              15
              
              
              -
              
              
              -
              
              
              374,985
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Common
                  stock issued May 2005 pursuant to financing letter agreement
                  ($3.00)
              
              -
              
              
              -
              
              
              25,000
              
              
              2
              
              
              -
              
              
              -
              
              
              74,998
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              75,000Common
                  stock issued May 2005 upon conversion of preferred shares
                  ($2.50)
              
              (41
              )
              
              (1,025,000
              )
              
              410,000
              
              
              41
              
              
              -
              
              
              -
              
              
              1,024,959
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Common
                  stock issued June 2005 upon conversion of preferred shares
                  ($2.50)
              
              (29
              )
              
              (725,000
              )
              
              290,000
              
              
              29
              
              
              -
              
              
              -
              
              
              724,971
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Capital
                  contribution for repurchase of common stock pursuant to Stock Purchase
                  Agreement
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              424,818
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              424,818Common
                  stock repurchased June 2005 pursuant to Stock Repurchase Agreement
                  ($0.80)
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              2,886,563
              
              
              
              (2,734,068
              )
              
              
              -
              
              
              
              (2,734,068
              )Common
                  stock issued July 2005 pursuant to Regulatory Milestone Plan
                  ($2.70)
              
              -
              
              
              -
              
              
              100,000
              
              
              10
              
              
              -
              
              
              -
              
              
              269,990
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              270,000
  7
 Table
            of Contents
  Common
                  stock issued July 2005 upon conversion of preferred shares
                  ($2.50)
              
              (20
              )
              
              (500,000
              )
              
              200,000
              
              
              20
              
              
              -
              
              
              -
              
              
              499,980
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Common
                  stock issued August 2005 upon conversion of preferred shares
                  ($2.50)
              
              (84
              )
              
              (2,087,500
              )
              
              835,000
              
              
              84
              
              
              -
              
              
              -
              
              
              2,087,416
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Common
                  stock issued September 2005 upon conversion of preferred shares
                  ($2.50)
              
              (25
              )
              
              (625,000
              )
              
              250,000
              
              
              25
              
              
              -
              
              
              -
              
              
              624,975
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Common
                  stock issued September 2005 pursuant to Stock Purchase
                  Agreement
              
              -
              
              
              -
              
              
              25,000
              
              
              2
              
              
              -
              
              
              -
              
              
              (2
              )
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Expenses
                  incurred pursuant to entering into Stock Purchase
                  Agreement
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (89,340
              )
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (89,340
              )Net
                  proceeds from October 2005 sale of common stock issued December
                  2004
                  pursuant to exercise of options granted pursuant to spinoff agreement
                  ($0.63)
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              163,014
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              163,014Common
                  stock issued October 2005 pursuant to Stock Purchase
                  Agreement
              
              -
              
              
              -
              
              
              377,359
              
              
              38
              
              
              -
              
              
              -
              
              
              (38
              )
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Common
                  stock issued November 2005 upon conversion of preferred shares
                  ($2.50)
              
              (2
              )
              
              (50,000
              )
              
              20,000
              
              
              2
              
              
              -
              
              
              -
              
              
              49,998
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Common
                  stock issued December 2005 pursuant to Securities Purchase
                  Agreement
              
              -
              
              
              -
              
              
              268,817
              
              
              27
              
              
              -
              
              
              -
              
              
              37,343
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              37,370Warrant
                  liability established
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (3,350,697
              )
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (3,350,697
              )Common
                  stock issued December 2005 upon conversion of replacement notes
                  ($0.375)
              
              -
              
              
              -
              
              
              485,000
              
              
              48
              
              
              -
              
              
              -
              
              
              181,827
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              181,875Common
                  stock issued December 2005 upon conversion of preferred shares
                  ($2.50)
              
              (4
              )
              
              (100,000
              )
              
              40,000
              
              
              4
              
              
              -
              
              
              -
              
              
              99,996
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Discount
                  of secured convertible debenture upon fair value allocation of
                  proceeds
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              250,000
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              250,000Retirement
                  of treasury shares
              
              -
              
              
              -
              
              
              (3,398,213
              )
              
              (340
              )
              
              -
              
              
              -
              
              
              (4,012,853
              )
              
              (3,398,213
              )
              
              
              4,013,193
              
              
              
              -
              
              
              
              -Reverse
                  common stock subject to repurchase under variable shares put right
                  at
                  December 31, 2004
              
              -
              
              
              -
              
              
              401,305
              
              
              40
              
              
              -
              
              
              -
              
              
              1,637,285
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,637,325Amortization
                  of deferred compensation
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              1,035,701
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,035,701Net
                  loss
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              -
              
              
              
              (13,267,590
              )
              
              
              (13,267,590
              )**Balance,
                  December 31, 2005**
              
              248
              
              $
              6,203,750
              
              
              11,744,120
              
              $
              1,174
              
              $
              -
              
              $
              -
              
              $
              22,646,665
              
              
              -
              
              
              $
              -
              
              
              $
              (37,916,095
              )
              
              $
              (9,064,506
              )
   8
 Table
            of Contents
 
 Common
                  stock issued January 2006 upon conversion of preferred shares
                  ($2.50)
              
              (10
              )
              
              (250,000
              )
              
              100,000
              
              
              10
              
              
              
              
              
              
              
              
              249,990
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -Common
                  stock issued January 2006 upon conversion of replacement notes
                  ($0.375)
              
              -
              
              
              -
              
              
              855,267
              
              
              85
              
              
              -
              
              
              -
              
              
              320,640
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              320,725Common
                  stock issued February 2006 upon conversion of preferred shares
                  ($2.50)
              
              (7
              )
              
              (175,000
              )
              
              70,000
              
              
              7
              
              
              -
              
              
              -
              
              
              174,993
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Common
                  stock issued February 2006 upon conversion of 2005 Convertible
                  Debentures
                  ($0.5795)
              
              -
              
              
              -
              
              
              86,281
              
              
              9
              
              
              -
              
              
              -
              
              
              49,991
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              50,000Common
                  stock issued March 2006 upon conversion of preferred shares
                  ($2.50)
              
              (7
              )
              
              (168,750
              )
              
              67,500
              
              
              7
              
              
              -
              
              
              -
              
              
              168,743
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Common
                  stock issued March 2006 upon conversion of options
                  ($0.359)
              
              -
              
              
              -
              
              
              557,102
              
              
              56
              
              
              -
              
              
              -
              
              
              199,944
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              200,000Expenses
                  incurred pursuant to entering into Stock Purchase
                  Agreement
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (38,181
              )
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (38,181
              )Common
                  stock issued March 2006 upon conversion of 2005 Convertible Debentures
                  ($0.3373)
              
              -
              
              
              -
              
              
              148,236
              
              
              15
              
              
              -
              
              
              -
              
              
              49,985
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              50,000Common
                  stock issued April 2006 upon conversion of 2005 Convertible Debentures
                  ($0.1985)
              
              -
              
              
              -
              
              
              755,735
              
              
              76
              
              
              -
              
              
              -
              
              
              149,924
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              150,000Common
                  stock issued May 2006 upon conversion of preferred shares
                  ($2.50)
              
              (3
              )
              
              (75,000
              )
              
              30,000
              
              
              3
              
              
              -
              
              
              -
              
              
              74,997
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Common
                  stock issued May 2006 upon conversion of 2005 Convertible Debentures
                  ($0.1616)
              
              -
              
              
              -
              
              
              309,598
              
              
              31
              
              
              -
              
              
              -
              
              
              49,969
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              50,000Common
                  stock issued May 2006 pursuant to anti-dilution provisions
              
              -
              
              
              -
              
              
              776,230
              
              
              77
              
              
              -
              
              
              -
              
              
              155,169
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              155,246Incremental
                  fair value of additional common stock issuable upon conversion
                  of
                  preferred shares
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              1,936,377
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,936,377Amortization
                  of deferred compensation
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              730,617
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              730,617Net
                  icome (loss)
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              -
              
              
              
              (8,161,979
              )
              
              
              (8,161,979
              )**Balance,
                  December 31, 2006**
              
              221
              
              $
              5,535,000
              
              
              15,500,069
              
              $
              1,550
              
              $
              -
              
              $
              -
              
              $
              26,919,823
              
              
              -
              
              
              $
              -
              
              
              $
              (46,078,074
              )
              
              $
              (13,621,701
              )Common
                  shares issued January 2007 upon conversion of preferred shares
                  ($2.50)
              
              (5
              )
              
              (125,000
              )
              
              50,000
              
              
              5
              
              
              -
              
              
              -
              
              
              124,995
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Value
                  of options granted to board member
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              70
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              70Net
                  income (loss)
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              -
              
              
              
              (362,974
              )
              
              
              (362,974
              )**Balance
                  March 31, 2007**
              
              216
              
              
              5,410,000
              
              
              15,550,069
              
              
              1,555
              
              
              -
              
              
              -
              
              
              27,044,888
              
              
              -
              
              
              
              -
              
              
              
              (46,441,048
              )
              
              
              (13,984,605
              )Value
                  of options granted to board member
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              70
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              70Net
                  income (loss)
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              -
              
              
              
              1,299,921
              
              
              
              1,299,921**Balance
                  June 30, 2007**
              
              216
              
              $
              5,410,000
              
              
              15,550,069
              
              $
              1,555
              
              $
              -
              
              $
              -
              
              $
              27,044,958
              
              
              -
              
              
              $
              -
              
              
              $
              (45,141,127
              )
              
              $
              (12,684,615
              )
 
 The
        accompanying notes are an integral part of these
        unaudited consolidated financial statements.
 
 
 9
 Table
            of Contents
  
 
 **CepTor
                  Corporation**
                **(A
                  Development Stage Company)**
                **Statement
                  of Cash Flows**
                **(Unaudited)******
              **For
                  the Six**
              ****
              ****
              **For
                  the Six**
              ****
              ****
              **Cumulative**
              ********
              ****
              **Months
                  Ended**
              ****
              ****
              **Months
                  Ended**
              ****
              ****
              **from
                  Inception**
              ********
              ****
              **June
                  30,**
              ****
              ****
              **June
                  30,**
              ****
              ****
              **(August
                  11, 1986) to**
              ********
              ****
              **2007**
              ****
              ****
              **2006**
              ****
              ****
              **June
                  30, 2007**
              ********
              ****
              ****
              ****
              ****
              **(Restated)**
              ****
              ****Cash
                  flows from operating activities:Net
                  income (loss)
              
              $
              936,947
              
              
              $
              (5,381,198
              )
              
              $
              (35,952,097
              )**Adjustments
                  to reconcile net loss to  net****cash
                  used in operating activities:**Depreciation
                  and amortization
              
              
              -
              
              
              
              9,535
              
              
              
              50,559Write-off
                  in-process research and development
              
              
              -
              
              
              
              -
              
              
              
              5,034,309Charge
                  for stock option issued pursuant to spin-off agreement
              
              
              -
              
              
              
              -
              
              
              
              2,082,500Stock
                  based compensation to employees and directors
              
              
              -
              
              
              
              75,466
              
              
              
              267,802Stock-based
                  compensation to non-employees
              
              
              -
              
              
              
              579,591
              
              
              
              4,802,822Stock-based
                  component of payment of legal fees
              
              
              -
              
              
              
              -
              
              
              
              70,000Stock-based
                  component of litigation settlement
              
              
              -
              
              
              
              -
              
              
              
              422,000Amortization
                  of deferred compensation
              
              
              140
              
              
              
              -
              
              
              
              140Gain
                  on extinguishment of debt
              
              
              -
              
              
              
              (387,362
              )
              
              
              (698,643
              )Impairment
                  of fixed assets
              
              
              36,362
              
              
              
              -
              
              
              
              36,362Change
                  in fair vale of derivative securities
              
              
              (4,185,212
              )
              
              
              (2,326,585
              )
              
              
              (13,631,074
              )Non-cash
                  interest expense
              
              
              2,651,801
              
              
              
              5,170,999
              
              
              
              17,780,209Changes
                  in operating assets and liabilities:Prepaid
                  services and other assets
              
              
              12,292
              
              
              
              101,240
              
              
              
              (605
              )Other
                  assets
              
              
              -
              
              
              
              -
              
              
              
              -Accounts
                  payable and accrued expenses
              
              
              340,604
              
              
              
              6,832
              
              
              
              4,856,331**Net
                  cash used in operating activities**
              
              
              (207,066
              )
              
              
              (2,151,482
              )
              
              
              (14,879,385
              )Cash
                  flows from investing activities:Acquisition
                  of property and equipment
              
              
              -
              
              
              
              -
              
              
              
              (86,921
              )**Net
                  cash used in investing activities**
              
              
              -
              
              
              
              -
              
              
              
              (86,921
              )Cash
                  flows from financing activities:Proceeds
                  from issuances of common stock
              
              
              -
              
              
              
              200,000
              
              
              
              1,499,819Net
                  proceeds from issuances of preferred stock
              
              
              -
              
              
              
              -
              
              
              
              10,448,629Acquisition
                  of treasury stock under put right
              
              
              -
              
              
              
              -
              
              
              
              (1,279,125
              )Acquisition
                  of treasury stock under purchase agreement
              
              
              -
              
              
              
              -
              
              
              
              (2,309,250
              )Distribution
                  to shareholders
              
              
              -
              
              
              
              -
              
              
              
              (4,260
              )Capital
                  contributed by Xechem International, Inc.
              
              
              -
              
              
              
              -
              
              
              
              350,310Proceeds
                  from issuance of debt
              
              
              217,000
              
              
              
              1,876,000
              
              
              
              7,757,444Debt
                  issuance costs
              
              
              -
              
              
              
              (355,949
              )
              
              
              (1,125,012
              )Principal
                  payments on bridge loans
              
              
              -
              
              
              
              -
              
              
              
              (350,000
              )**Net
                  cash provided by financing activities**
              
              
              217,000
              
              
              
              1,720,051
              
              
              
              14,988,555Net
                  increase (decrease) in cash and cash equivalents
              
              
              9,934
              
              
              
              (431,431
              )
              
              
              22,249Cash
                  and cash equivalents at beginning of period
              
              
              12,315
              
              
              
              434,277
              
              
              
              -Cash
                  and cash equivalents at end of period
              
              $
              22,249
              
              
              $
              2,846
              
              
              $
              22,249The
                  accompanying notes are an integral part of these unaudited consolidated
                  financial statements.
   10
 Table
            of Contents
 
 Supplemental
                  disclosures of cash flow information:Cash
                  paid during the period for:Interest
              
              $
              -
              
              
              $
              -
              
              
              $
              35,421Taxes
              
              $
              -
              
              
              $
              -
              
              
              $
              -Deemed
                  dividend of the beneficial conversionfeature
                  of units sold in private placement
              
              $
              -
              
              
              $
              -
              
              
              $
              10,100,616Issuance
                  of 2,902,500 shares of common stock uponconversion
                  of preferred shares
              
              $
              -
              
              
              $
              668,750
              
              
              $
              6,587,500Issuance
                  of 267,500 shares of common stock uponconversion
                  of preferred shares
              
              $
              -
              
              
              $
              -
              
              
              $
              668,750Issuance
                  of 485,000  shares of common stock upon-conversion
                  of convertible note
              
              $
              -
              
              
              $
              -
              
              
              $
              181,875Issuance
                  of 855,267 shares of common stock uponconversion
                  of convertible note
              
              $
              -
              
              
              $
              320,725
              
              
              $
              320,725Issuance
                  of 1,299,850 shares of common stock uponconversion
                  of convertible shares
              
              $
              -
              
              
              $
              300,000
              
              
              $
              300,000Issuance
                  of 100,000 shares of common stock purusant tostock
                  plan
              
              $
              -
              
              
              $
              -
              
              
              $
              270,000Issuance
                  of 7,500 shares of common stock ascompensation
                  for past services
              
              $
              -
              
              
              $
              -
              
              
              $
              46,875Issuance
                  of 25,000 shares of common stock ascompensation
                  for financial planning
              
              $
              -
              
              
              $
              -
              
              
              $
              75,000Issuance
                  of 23,000 shares of common stock inpayment
                  of accrued legal fees
              
              $
              -
              
              
              $
              -
              
              
              $
              70,000Capital
                  contribution for repurchase of common stockpursuant
                  to Stock Purchase Agreement
              
              $
              -
              
              
              $
              -
              
              
              $
              424,818Issued
                  36,000 shares of common stock as debt issuancecosts
              
              $
              -
              
              
              $
              -
              
              
              $
              90,000Issued
                  451,597 shares of common stock to bridge loaninvestors
                  and placement agents
              
              $
              -
              
              
              $
              -
              
              
              $
              550,000Issuance
                  of 167,610 shares of common stock uponconversion
                  of convertible notes
              
              $
              -
              
              
              $
              -
              
              
              $
              209,512Issuance
                  of convertible notes in exchange for bridgeloans
                  and long-term debt plus accrued interest
              
              $
              -
              
              
              $
              -
              
              
              $
              1,111,240Obligation
                  to repurchase 401,305 shares of common stockpursuant
                  to put right
              
              $
              -
              
              
              $
              -
              
              
              $
              1,637,325
  The
        accompanying notes are an integral part of these unaudited consolidated
        financial statements.
 
 11
 Table
            of Contents
  **CepTor
        Corporation**
 **(A
        Development Stage Company)**
 **Notes
        to Condensed Financial Statements**
 **June
        30, 2007**
 **(Unaudited)**
   **NOTE
        1 - BASIS OF INTERIM FINANCIAL STATEMENT PRESENTATION**
 
 The
        accompanying unaudited Condensed Financial Statements of CepTor Corporation
        have
        been prepared in accordance with accounting principles generally accepted
        in the
        United States for interim financial information and the instructions to Form
        10-QSB. Accordingly, they do not include all the information and footnotes
        required by accounting principles generally accepted in the United States
        for
        complete financial statements. In the opinion of management all adjustments
        (which include only normal recurring adjustments) necessary to present fairly
        the financial position, results of operations and cash flows for all periods
        presented have been made. The results of operations for the three and six
        month
        periods ended June 30, 2007 are not necessarily indicative of the operating
        results that may be expected for the entire year ending December 31,
        2007.
 
 **NOTE
        2 - THE COMPANY**
 
 ***Organization***
 
 The
        financial statements presented are those of CepTor Corporation ("CepTor"
        or
        the "Company"), incorporated in August 1986 in the State of
        Delaware.
 
 ***Nature
        of Business and Development Stage Operations***
  The
        Company is a biopharmaceutical company which has historically been engaged
        in
        the research and development of therapeutic products for neuromuscular,
        neurodegenerative and other diseases with a focus on orphan diseases (defined
        as
        those which affect less than 200,000 people).  Since its inception, the
        Company has devoted its efforts and resources to the development of its receptor
        mediated drug-targeting platform for neuromuscular and neurodegenerative
        diseases, and to raising the funds necessary to continue this research. Its
        two
        lead compounds are MyodurTM, for neuromuscular disease, and NeurodurTM, for
        neurodegenerative diseases. In January 2006, CepTor submitted an Investigational
        New Drug Application (IND) to the Food and Drug Administration (FDA) for
        MyodurTM
with the hope of beginning clinical trials for this compound following approval
        of the IND. Since that time, the IND has remained on “clinical hold” pending
        resolution of certain issues raised by the FDA. Most recently, in October
        2006,
        the Company was advised that, despite its efforts to resolve the concerns
        and
        issues previously raised by the FDA, the IND would remain on hold pending
        further testing and research as directed by the FDA.
 
 As
        a
        result of the clinical hold status of our lead compound, our existing investors
        have advised us that they were unwilling to continue to fund either the research
        and development costs required to fully prosecute the IND filing, or the
        general
        operating costs necessary to keep the business afloat as those research and
        development activities continued. With no other financial resources available
        to
        us, we had no choice but to cease all efforts related to the research and
        development of our compounds, terminate all of our employees, and close down
        our
        corporate offices in Maryland. At present, we are maintaining our operations
        as
        a “virtual” office operated out of New York City and have one part-time
        employee, Howard Becker, our CEO appointed in December 2006.
 
 In
          the
          period since the closure of the Company’s Maryland offices and the termination
          of all of its Maryland based employees, we have been focusing on a two-part
          strategy, in cooperation with the existing secured creditors and investors,
          whereby (i) our existing technologies would be divested from the corporation
          pursuant to a transaction that would allow CepTor to retain significant
          upside
          should the technologies ultimately fulfill their promise as marketable
          and
          commercially viable products, and (ii) a new technology would be acquired
          by the
          Company around which we could restructure our affairs.  Any such
          transaction would have to have the full support of the existing secured
          creditors, which have a priority position with respect to all of CepTor’s
          current assets.
 As
        described more fully below, the Company has, to date, been unsuccessful in
        its
        efforts to acquire an alternative technology around which to reorganize its
        affairs, and the likelihood of such a transaction materializing, at least
        in the
        near term, is remote.  The Company is continuing its discussions with
        the founding scientists responsible for the initial development of CepTor’s
        existing technologies regarding a transaction that will allow those scientists,
        Drs. Al Stracher and Leo Kesner, to continue to develop the technologies,
        whether under CepTor’s auspices or through a private company in which the
        founding scientists have a controlling interest.  However, there can
        be no assurance that such a transaction will be consummated or that, if
        consummated, it will support the continued operation of the
        Company.  Based on these circumstances, as well as the Company’s lack
        of financial resources, there is substantial doubt as to the Company’s ability
        to continue as a going a concern.
  12
 Table
            of Contents
  **CepTor
        Corporation**
 **(A
        Development Stage Company)**
 **Notes
        to Condensed Financial Statements**
 **June
        30, 2007**
 **(Unaudited)**
  
 The
        Company is a development stage company which has a limited history of operations
        and has not generated any material revenues since its inception. The Company
        has
        received a limited amount of funding through grants and collaborative research
        efforts in connection with developing its products. The Company does not
        have
        any products that are approved for commercial distribution at the present
        time.
        As a development stage company, the Company is subject to all of the risks
        and
        uncertainties that are associated with developing a new business.
 
 **NOTE
        3 - LIQUIDITY AND FINANCIAL CONDITION AND GOING CONCERN**
  The
          Company has had difficulty securing the necessary capital to execute its
          business plan and has not been able to remain current with respect to the
          payment terms of its operating obligations including its trade payables
          and
          accrued liabilities, which aggregated approximately $5,425,566 at June
          30, 2007.
          As described in Note 8, the Company is in default of substantially all
          of its convertible note obligations, which total approximately $6 million
          in aggregate principal amount. These defaults occurred principally as a
          result
          of (i) the Company's failure to make the required payments of principal
          and
          interest under certain of these obligations (which triggered cross default
          provisions under the remaining note obligations), (ii) its failure to file
          a
          registration statement pursuant to the 2006 6% Convertible Notes within
          a
          specified period, (iii) its failure to file a post-effective amendment
          to its
          registration statement on Form SB-2 covering shares issuable under the
          2005
          Convertible Debentures within a specified period, and (iv) its failure
          to have
          sufficient authorized but unissued shares available to net share settle
          its 2005
          convertible notes and all of its derivative financial instruments. The
          Company
          has pledged all of its assets to the holders of the 2006 6% Convertible
          Notes to
          secure its repayment obligations under those notes, and the holders of
          these
          notes currently have the rights to exercise remedies with respect to the
          collateral should they desire to do so.
  The
          Company has exhausted substantially all of its capital resources, terminated
          substantially all of its employees except for its part-time chief executive
          officer and is currently unable to pursue further development of its product
          candidates.  The primary reason for the Company’s current difficulties has
          been its inability to date to procure approval of its IND for
          MyodurTM.  Specifically, in October 2006, the Company was informed by
          the FDA that its IND was to remain on hold pending the resolution of two
          remaining issues. Additional time is required to fully resolve the FDA
          issues
          and complete the Company's own internal research program, which the Company
          estimates would take an additional twelve to eighteen months to complete
          and
          would require a substantial investment of capital.  The Company lacks
          the funding needed to resolve these issues and is currently unable to secure
          financing commitments for this purpose. Due to these remaining issues and
          the
          lack of adequate funding, the Company has halted development of its
          programs.
 
 Throughout
          much of the first and second quarters of this year, the Company has been
          focusing on a two-part strategy, in cooperation with the existing secured
          creditors and investors, whereby (i) its existing technologies would be
          divested
          from the corporation pursuant to a transaction that would allow CepTor
          to retain
          significant upside should the technologies ultimately fulfill their promise
          as
          marketable and commercially viable products, and (ii) a new technology
          would be
          acquired by the Company around which to restructure its affairs.  In
          anticipation of such a transaction, the Company had also initiated discussions
          with its trade creditors concerning a voluntary restructuring of those
          obligations. However, as of the date of this report, the discussions that
          had
          been previously ongoing with the owners of one such technology regarding
          a
          potential acquisition transaction have ceased entirely, and an alternative
          potential transaction has yet to be identified.  Though the Company
          will continue to seek to identify a possible transaction that will allow
          it to
          reorganize its affairs, there is a substantial doubt that any
          such  transaction will materialize.
 
 At
          present, the Company is continuing its discussions with Drs. Al Stracher
          and Leo
          Kesner, the original founding scientists behind CepTor’s existing technologies,
          regarding a transaction that would enable those individuals to continue
          to
          develop the technologies, either through CepTor or a private company they
          control.    However, even should such a transaction be
          consummated, there is no assurance that CepTor will be a viable, self-sustaining
          entity, nor is there any assurance that the Company will ever become
          operational.  Accordingly, there is a material possibility that CepTor
          may be forced to terminate all operations and wind down its affairs, and/or
          commence bankruptcy or receivership proceedings. These matters raise substantial
          doubt about the Company's ability to continue as a going concern. The financial
          statements do not include any adjustments that may result from the outcome
          of
          this uncertainty.
  13
 Table
            of Contents
  **CepTor
        Corporation**
 **(A
        Development Stage Company)**
 **Notes
        to Condensed Financial Statements**
 **June
        30, 2007**
 **(Unaudited)**
  
 Primarily
            as the result of recording during the six months ended June 30, 2007
            non-cash
            interest expense of $2,651,801 offset by a non-cash gain associated with
            the
            decrease in the liability associated with the fair values of its derivative
            financial instruments of $4,185,212, the Company recorded a net income
            for the
            three and six month periods ended June 30, 2007 of $1,299,921 and $936,947,
            respectively. Non-cash interest expense consisted of the amortization
            of the
            discount on notes payable of $1,563,907; amortization of deferred financing
            cost
            of $945,116, and accrual of liquidated damages of $142,778. The Company
            used net
            cash flows in its operating activities of $207,066 during the six month
            period
            ended June 30, 2007. The Company's working capital deficiency amounted
            to
            $12,926,712, and its development stage accumulated deficit amounted to
            $45,141,127 at June 30, 2007. The Company will require substantial additional
            funding if it is ever to support the development of its proposed products
            and
            fund the operations contemplated under its business plan.
  At
            June
            30, 2007, the Company had $6,531,180 in principal amount of notes outstanding.
            The December 2004 Convertible Note in the principal amount of $448,736,
            was due
            July 3, 2006. There has not been an agreement on amended terms and no
            assurance
            that the Company will reach agreement with the note holder on amended
            terms. The
            terms of the 2004 Convertible Note do not provide for penalties or other
            payments upon default, and accordingly, the Company has not accrued a
            penalty as
            of March 31, 2007. Of the remaining convertible debt, (i) $250,000 in
            principal
            plus accrued interest was due on December 9, 2006, (ii) $3,569,444 in
            principal
            representing 2006 6% Convertible Notes mature during the period June
            2007
            through October 2007, and (iii) the Cornell Convertible Debentures of
            $1,700,000
            mature in December 2008. In addition to its convertible notes, the Company
            has
            received $448,000 in unsecured cash advances, from an existing investor,
            of
            which $102,000 was borrowed during  the three months ended June 30,
            2007. These unsecured cash advances are repayable on demand, and bear
            interest
            at the rate of 8% per year. Currently, the Company is in default of
            substantially all of its obligations to its convertible noteholders and
            such
            noteholders currently have the right to demand immediate payment of these
            loans.
            At present, the Company does not have, and has no identifiable prospect
            of
            obtaining, the available cash to repay these obligations. The note holders
            holding $1,700,000 in principal indebtedness have a security interest
            in all the
            assets of the Company.
 Due
        to
        the defaults of its note obligations, its lack of resources to settle its
        obligations when due and the possibility that all of the Company’s indebtedness
        will be accelerated if a bankruptcy petition were filed by or against the
        Company, the Company has recorded all of its liabilities as
        current.
 
 **NOTE
        4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
 
 ***Basis
        of Presentation***
  The
        Company is a development stage enterprise. Accordingly, the Company has included
        its cumulative statements of operations and cash flows for the period of
        August
        11, 1986 (date of inception) to June 30, 2007 in accordance with Statement
        of
        Financial Accounting Standards ("SFAS") No. 7 "Accounting and Reporting by
        Development Stage Enterprises."
  The
        Company's net loss available to common shareholders as reported in its statement
        of operations for the period of August 11, 1986 (date of inception) to June
        30,
        2007 is $45,141,127.
  14
 Table
            of Contents
  **CepTor
        Corporation**
 **(A
        Development Stage Company)**
 **Notes
        to Condensed Financial Statements**
 **June
        30, 2007**
 **(Unaudited)**
 
  ***Accounting
        for Stock-Based Compensation***
 
 Prior
        to
        January 1, 2006, the Company accounted for employee stock transactions in
        accordance with Accounting Principles Board ("APB") Opinion No. 25 "Accounting
        for Stock Issued to Employees."  The Company applied the pro forma
        disclosure requirements of SFAS No. 123 "Accounting for Stock-Based
        Compensation."
  Effective
        January 1, 2006, the Company adopted SFAS No. 123R "Share Based Payment."
        This
        statement is a revision of SFAS Statement No. 123, and supersedes APB Opinion
        No. 25, and its related implementation guidance. SFAS 123R addresses all
        forms
        of share based payment ("SBP") awards including shares issued under employee
        stock purchase plans, stock options, restricted stock and stock appreciation
        rights. Under SFAS 123R, SBP awards result in a cost that will be measured
        at
        fair value on the awards' grant date, based on the estimated number of awards
        that are expected to vest and that will result in a charge to operations.
        The
        Company adopted the modified prospective method with respect to accounting
        for
        its transition to SFAS 123(R) and had unrecognized compensation cost of $2,520
        as deferred compensation at January 1, 2007. Accordingly, the Company recognized
        expense on the statement of operations of $140 for the fair value of these
        stock
        options which vested during the six month periods ended June 30, 2007. The
        fair
        value of these awards was estimated at the date of grant using the Black-Scholes
        option pricing model with the following weighted average assumptions: risk
        fee
        interest rate: 3.3% to 3.6%; expected dividend yield: 0%; expected option
        life:
        10 years; and volatility: 108% to 123%.
 
 ***Net
        Loss per Share***
 
 Net
          loss
          per shares is presented under SFAS No. 128 “Earnings Per
          Share.”  Under SFAS 128, basic net earnings or loss per share is
          computed by diving net income or loss by the weighted average number of
          common
          shares outstanding during the period.  Diluted earnings per shares is
          computed by dividing net income or loss by the weighted average number
          of shares
          outstanding, after giving effect to potentially dilutive share equivalents
          outstanding during the period.  Potentially dilutive common share
          equivalents are not included in the computation of diluted earnings per
          share if
          they are anti-dilutive.
 
 Shares
        of
        common stock issuable upon the conversion or exercise of potentially dilutive
        securities are as follows:
 
 **June
                  30,****2007**
              
              
              **2006**Series
                    A Preferred Stock
              
              
              11,355,113
              
              
              
              5,504,000Warrants
              
              
              33,912,855
              
              
              
              20,583,232Options
              
              
              1,878,834
              
              
              
              1,971,029Convertible
                    Notes
              
              
              44,987,007
              
              
              
              30,463,204Total
              
              
              92,133,809
              
              
              
              58,521,465
  15
 Table
            of Contents
  **CepTor
        Corporation**
 **(A
        Development Stage Company)**
 **Notes
        to Condensed Financial Statements**
 **June
        30, 2007**
 **(Unaudited)**
  
 **Accounting
        for Warrants and Freestanding Derivative Financial
        Instruments**
 
 The
        Company accounts for the issuance of common stock purchase warrants and other
        freestanding derivative financial instruments in accordance with the provisions
        of EITF 00-19. Based on the provisions of EITF 00-19, the Company classifies
        as
        equity any contracts that (i) require physical settlement or net-share
        settlement or (ii) gives the Company a choice of net-cash settlement or
        settlement in its own shares (physical settlement or net-share settlement).
        The
        Company classifies as assets or liabilities any contracts that (i) require
        net-cash settlement (including a requirement to net-cash settle the contract
        if
        an event occurs and if that event is outside the control of the Company)
        or (ii)
        give the counterparty a choice of net-cash settlement or settlement in shares
        (physical settlement or net-share settlement).
 
 The
        terms
        of the Company’s Cornell Convertible Debentures (see Note 8) provide for a
        conversion price in certain situations based on a floating conversion price
        which results in an indeterminable number of shares of common stock potentially
        issued upon conversion. Under accounting guidance provided by EITF 00-19,
        as of
        June 30, 2007, the Company had net liabilities of $1,324,150 representing
        the
        fair value of warrants and options to purchase approximately 35.8 million
        shares
        of common stock which had been issued as components of other financing
        instruments or granted to non-employees for services rendered. The Company
        recorded additional liabilities for the fair value of warrants granted during
        the year ended December 31, 2006 in the aggregate amount of approximately
        $5.7
        million. The fair value of these awards was estimated at the date of grant
        using
        the Black-Scholes option pricing model with the following assumptions: risk
        free
        interest rate: 4.7% to 5.1%; expected dividend yield: 0%; expected life: 3
        years to 5 years; and volatility: 106% to 353%.
  The
          accounting guidance shows that the warrants are a derivative liability and
          are marked to market for each reporting period. During the six months ended
          June
          30, 2007, the Company recognized a credit of $2,709,289 for the decrease in
          fair value of the derivative financial instruments. The fair value of these
          awards was estimated at June 30, 2007 using the Black-Scholes option pricing
          model with the following assumptions: risk fee interest rate: 4.7% to 5.0%;
          expected dividend yield: 0%; expected option life: 1.0 years to 4.8 years;
          and
          volatility: 293%.
  **Accounting
        for Conversion Options Embedded in Convertible Notes and Convertible Preferred
        Stock**
 
 The
        Company accounts for conversion options embedded in convertible notes and
        convertible preferred stock in accordance with SFAS No. 133 ‘‘Accounting for
        Derivative Instruments and Hedging Activities’’ and EITF 00-19 ‘‘Accounting for
        Derivative Financial Instruments Indexed to, and Potentially Settled in,
        a
        Company’s Own Stock.’’ SFAS 133 generally requires companies to bifurcate
        conversion options embedded in convertible notes and preferred shares from
        their
        host instruments and to account for them as free standing derivative financial
        instruments in accordance with EITF 00-19. SFAS 133 provides for an exception
        to
        this rule when convertible notes and mandatorily redeemable preferred shares,
        as
        host instruments, are deemed to be conventional as that term is described
        in the
        implementation guidance provided in paragraph 61 (k) of Appendix A to SFAS
        133
        and further clarified in EITF 05-2 ‘‘The Meaning of ‘Conventional Convertible
        Debt Instrument’ in Issue No. 00-19.’’ SFAS 133 provides for an additional
        exception to this rule when the economic characteristics and risks of the
        embedded derivative instrument are clearly and closely related to the economic
        characteristics and risks of the host instrument.
  16
 Table
            of Contents
  **CepTor
        Corporation**
 **(A
        Development Stage Company)**
 **Notes
        to Condensed Financial Statements**
 **June
        30, 2007**
 **(Unaudited)**
  
 The
        Company accounts for convertible notes (deemed conventional) in accordance
        with
        the provisions of EITF 98-5 ‘‘Accounting for Convertible Securities with
        Beneficial Conversion Features,’’ and EITF 00-27 ‘‘Application of EITF 98-5 to
        Certain Convertible Instruments.’’ Accordingly, the Company records, as a
        discount to convertible notes, the intrinsic value of such conversion options
        based upon the differences between the fair value of the underlying common
        stock
        at the commitment date of the note transaction and the effective conversion
        price embedded in the note. Debt discounts under these arrangements are
        amortized over the term of the related debt to their earliest date of
        redemption.
  The
          Company has issued $5,519,444 in principal of various convertible notes
          (see Note 8) with embedded conversion options accounted for as free standing
          derivative financial instruments in accordance with SFAS 133 and EITF 00-19
          and
          on the dates of issuance recorded liabilities for conversion options of
          $6,018,813. The fair value of these embedded conversion options were estimated
          at the date of issuance using the Black-Scholes option pricing model with
          the
          following assumptions: risk free interest rate: 3.3% to 5.2%; expected
          dividend
          yield: 0%; expected option life: one year to 3 years; and volatility: 130%
          to
          353%. The accounting guidance instructs that the conversion options are
          a
          derivative liability and are marked to market for each reporting period.
          During
          the six months ended June 30, 2007, the Company recognized a credit of
          $4,185,212 for the decrease in fair value of the derivative financial
          instruments. The fair value of these embedded conversion options were estimated
          at June 30, 2007 using the Black-Scholes option pricing model with the
          following
          assumptions: risk free interest rate: 4.8% to 5.0%; expected dividend yield:
          0%;
          expected option life: one year to 2 years; and volatility:
          293%.
  The
        Company also determined that the conversion option embedded in its Series
        A
        Preferred stock is not a free-standing derivative in accordance with the
        implementation guidance provided in paragraph 61 (l) of Appendix A to SFAS
        133.
 
 ***Recently
        Issued Accounting Pronouncements***
  In
        September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”
(“SFAS 157”). This statement defines fair value, establishes a framework
        for measuring fair value and expands disclosures about fair value measurements.
        This statement does not require any new fair value measurements. The effective
        date of this statement is for fiscal years beginning after November 15,
        2007. The Company is currently evaluating the impact, if any, of the adoption
        of
        SFAS 157.
  In
        July 2006, the FASB issued Financial Interpretation No. 48,
“Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement
        No. 109” (“FIN 48”), which is a change in accounting for income taxes. FIN
        48 specifies how tax benefits for uncertain tax positions are to be recognized,
        measured, and derecognized in financial statements; requires certain disclosures
        of uncertain tax matters; specifies how reserves for uncertain tax positions
        should be classified on the balance sheet; and provides transition and interim
        period guidance, among other provisions. FIN 48 is effective for fiscal years
        beginning after December 15, 2006. We do not anticipate that this FASB will
        have any material impact on our financial condition or results of
        operations.
 
 In
        September 2006, the SEC issued SAB No. 108, “Considering the Effects
        of Prior Year Misstatements When Quantifying Misstatements in Current Year
        Financial Statements” (“SAB 108”), which provides interpretive guidance on how
        the effects of the carryover or reversal of prior year misstatements should
        be
        considered in quantifying a current year misstatement. The guidance is
        applicable for fiscal years ending after November 15, 2006. We do not
        anticipate that this SAB will have any material impact on our financial
        condition or results of operations.
  17
 Table
            of Contents
  **CepTor
        Corporation**
 **(A
        Development Stage Company)**
 **Notes
        to Condensed Financial Statements**
 **June
        30, 2007**
 **(Unaudited)**
   In
        November 2006, the EITF reached a final consensus in EITF Issue 06-6 “Debtor’s
        Accounting for a Modification (or Exchange) of Convertible Debt Instruments”
(“EITF 06-6”).  EITF 06-6 addresses the modification of a convertible debt
        instrument that changes the fair value of an embedded conversion option and
        the
        subsequent recognition of interest expense for the associated debt instrument
        when the modification does not result in a debt extinguishment pursuant to
        EITF
        96-19, “Debtor’s Accounting for a Modification or Exchange of Debt
        Instruments.”  The consensus should be applied to modifications or
        exchanges of debt instruments occurring in interim or annual periods beginning
        after November 29, 2006.  The Company does not expect the adoption of EITF
        06-6 to have a material impact on its consolidated financial position, results
        of operations or cash flows.
 
 In
        November 2006, the FASB ratified EITF Issue No. 06-7, “Issuer’s Accounting for a
        Previously Bifurcated Conversion Option in a Convertible Debt Instrument
        When
        the Conversion Option No Longer Meets the Bifurcation Criteria in FASB Statement
        No. 133, Accounting for Derivative Instruments and Hedging Activities” (“EITF
        06-7”). At the time of issuance, an embedded conversion option in a convertible
        debt instrument may be required to be bifurcated from the debt instrument
        and
        accounted for separately by the issuer as a derivative under FAS 133, based
        on
        the application of EITF 00-19. Subsequent to the issuance of the convertible
        debt, facts may change and cause the embedded conversion option to no longer
        meet the conditions for separate accounting as a derivative instrument, such
        as
        when the bifurcated instrument meets the conditions of Issue 00-19 to be
        classified in stockholders’ equity. Under EITF 06-7, when an embedded conversion
        option previously accounted for as a derivative under FAS 133 no longer meets
        the bifurcation criteria under that standard, an issuer shall disclose a
        description of the principal changes causing the embedded conversion option
        to
        no longer require bifurcation under FAS 133 and the amount of the liability
        for
        the conversion option reclassified to stockholders’ equity. EITF 06-7 should be
        applied to all previously bifurcated conversion options in convertible debt
        instruments that no longer meet the bifurcation criteria in FAS 133 in interim
        or annual periods beginning after December 15, 2006, regardless of whether
        the
        debt instrument was entered into prior or subsequent to the effective date
        of
        EITF 06-7. Earlier application of EITF 06-7 is permitted in periods for which
        financial statements have not yet been issued.
 
 In
        December 2006, the FASB issued FSP EITF 00-19-2 “Accounting for Registration
        Payment Arrangements” (“FSP EITF 00-19-2”). FSP EITF 00-19-2 addresses an
        issuer’s accounting for registration payment arrangements. This pronouncement
        specifies that the contingent obligation to make future payments or otherwise
        transfer consideration under a registration payment arrangement, whether
        issued
        as a separate agreement or included as a provision of a financial instrument,
        should be separately recognized and accounted for as a contingency in accordance
        with SFAS 5 “Accounting for Contingencies.”  FSP EITF 00-19-2 amending
        previous standards relating to rights agreements became effective on December
        21, 2006 with respect to arrangements entered into or modified beginning
        on such
        date and for the first fiscal year beginning after December 15, 2006 with
        respect to those arrangements entered into prior to December 21, 2006.  The
        Company is in the process of evaluating the impact of the adoption of this
        statement on the Company’s results of operations and financial
        condition.
  In
        February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
        Financial Assets and Financial Liabilities—Including an amendment of FASB
        Statement No. 115” (“SFAS 159”). This statement permits all entities to
        choose, at specified election dates, to measure eligible items at fair value
        (the “fair value option”). A business entity must report unrealized gains
        and losses on items for which the fair value option has been elected in earnings
        at each subsequent reporting date. Upfront costs and fees related to items
        for which the fair value option is elected must be recognized in earnings
        as
        incurred and not deferred. This statement is effective as of the beginning
        of an
        entity’s first fiscal year that begins after November 15, 2007. The Company
        is currently evaluating the impact, if any, of the adoption of SFAS
        159.
  18
 Table
            of Contents
  **CepTor
        Corporation**
 **(A
        Development Stage Company)**
 **Notes
        to Condensed Financial Statements**
 **June
        30, 2007**
 **(Unaudited)**
  
 **NOTE
        5 - PREPAID EXPENSES**
 
 Prepaid
        expense consists primarily of unamortized premiums paid to carriers for
        insurance policies and retainers paid for professional services to be
        rendered.
 
 **NOTE
        6 - DEFERRED FINANCING COSTS**
  The
        Company capitalizes the costs and expenses incurred in entering into its
        debt
        obligations which are then amortized over the term of the debt. During the
        three
        and six months ended June 30, 2007, the Company amortized $438,931 and $945,116,
        respectively, of deferred financing costs to non-cash interest expense, 
and at June 30, 2007 the balance in deferred financing costs is
        $242,098.
  **NOTE
        7 - ACCRUED EXPENSES**
  Accrued
        expenses at June 30, 2007 are as follows:
 
 Financial
                    investor relations fees
              
              $
              188,278Interest
                    on convertible notes
              
              
              592,904Liquidated
                    damages
              
              
              642,500Total
              
              $
              1,423,682
 
 Pursuant
        to the Company's sale of Series A Preferred Stock in a private placement,
        the
        Company had agreed to spend up to 3% of the gross proceeds from its private
        placement on financial investor relations activities, all of which was accrued
        as ‘‘Financial Investor Relations Fees’’ and charged to additional paid-in
        capital upon each closing of the private placement.
 
 Pursuant
        to the registration rights agreement in connection with the 2006 6% Convertible
        Notes offering, the Company was obligated to pay liquidating damages of 2%
        of
        the principal amount for each 30-day period the registration statement was
        filed
        past August 21, 2006. As of June 30, 2007, the Company accrued 18% of the
        outstanding principal, or $642,500.
 
 **NOTE
        8 - UNSECURED ADVANCES AND CONVERTIBLE NOTES**
  During
        the three and six months ended June 30, 2007, the Company received unsecured
        advances, from an existing invetor,  in the amount of $115,000 and
        $217,000, respectively. These advances bear interest at the rate of 8% per
        annum.
  ***Note
        Obligations in Default***
 
 The
        Company is in default of substantially all of its convertible note obligations,
        which amount to approximately $6,000,000 in aggregate principal amount. These
        defaults occurred as a result of (i) the Company's failure to make the required
        payments of principal and interest under certain of these obligations (which
        triggered cross default provisions under the remaining loans), (ii) not filing
        a
        registration statement covering shares issuable under the 2006 6% Convertible
        Notes within the specified period, (iii) not filing a post-effective amendment
        to its registration statement on Form SB-2 covering shares issuable under
        the
        Cornell Convertible Debentures within the specified period, and (iv) its
        failure
        to have sufficient authorized but unissued shares available to net share
        settle
        its Cornell Convertible Debentures and all of its derivative financial
        instruments. As of June 30, 2007, the Company, on a fully diluted basis,
        had
        107,633,878 shares issued and potentially issuable in connection with all
        of its
        outstanding common stock convertible instruments, stock options and derivative
        financial instruments.
  19
 Table
            of Contents
 
 **CepTor
        Corporation**
 **(A
        Development Stage Company)**
 **Notes
        to Condensed Financial Statements**
 **June
        30, 2007**
 **(Unaudited)**
  
 ***Convertible
        Promissory Notes***
 
 Pursuant
        to an offer dated October 22, 2004 as amended November 15, 2004, made to
        the
        holders of certain convertible notes, the Company issued $901,728 of convertible
        notes due December 8, 2005 in exchange for convertible notes in the principal
        amount of $825,000 plus accrued interest of $76,728 (the ‘‘December 2004
        Convertible Notes’’).
 
 The
        December 2004 Convertible Notes were convertible into shares of the Company's
        common stock at $1.25 per share in amounts equal to the outstanding principal
        cancelled, plus accrued interest at 10% through the date of conversion. In
        April
        2005, the Company renegotiated certain terms of the December 2004 Convertible
        Notes to extend the maturity date until July 3, 2006 and in exchange the
        Company
        (1) increased the contractual interest rate effective December 8, 2005 to
        12%,
        (2) reduced the conversion rate from $1.25 to $0.75 per share and (3) eliminated
        the Company's right to call the December 2004 Convertible Notes (the ‘‘Amended
        December 2004 Convertible Notes’’).
 
 On
        December 9, 2005, the Company amended a portion of the Amended December 2004
        Convertible Notes that was payable to Harbor Trust dated December 9, 2004,
        in
        the principal amount of $452,991 by reducing the conversion price to $0.375
        from
        $0.75 per share (the ‘‘Amended December 2005 Harbor Note’’). The effect of this
        modification was insignificant since approximately 50% of the note was converted
        in December 2005 and the remainder was converted in January 2006. The Amended
        December 2005 Harbor Note bears interest at the rate of 10% per year through
        December 8, 2005 and 12% per year thereafter. The Amended December 2005 Harbor
        Note was fully converted on January 27, 2006.
  The
        remaining Amended December 2004 Convertible Note in the principal amount
        of
        $448,736 was due July 3, 2006. There has not been an agreement on amended
        terms
        and there is no assurance the Company will reach agreement with the note
        holder.
        The terms of the December 2004 Convertible Note do not provide for penalties
        or
        other payments upon default, and accordingly, the Company has not accrued
        any as
        of December 31, 2006. The conversion price was adjusted to $0.15 from $0.75
        pursuant to the 2006 6% Convertible Note offering which commenced June 1,
        2006
        (see below).
 
 As
        of
        June 30, 2007, the principal amount of $448,736 remains outstanding under
        the
        December 2004 Convertible Note.
  20
 Table
            of Contents
  **CepTor
        Corporation**
 **(A
        Development Stage Company)**
 **Notes
        to Condensed Financial Statements**
 **June
        30, 2007**
 **(Unaudited)**
  
 ***2005
        Harbor Note***
 
 On
        December 9, 2005, the Company issued a convertible promissory note (the ‘‘2005
        Harbor Note’’) in the principal amount of $250,000 which bears interest at the
        rate of 6% per annum. All unpaid principal and interest under the 2005 Harbor
        Note was due and payable on December 9, 2006. The 2005 Harbor Note is
        convertible, in whole or in part, at any time, into common stock at an adjusted
        conversion price of $0.15 per share (adjusted pursuant to the 2006 6%
        Convertible Note offering commenced on June 1, 2006, see below), subject
        to
        certain limitations on conversion as set forth in the 2005 Harbor Note,
        including where the resulting number of shares converted on a cumulative
        basis,
        would exceed 19.99% of the total number of shares of common stock outstanding
        and, subject to a conversion price adjustment in the event the Company offers
        or
        sells an option not pursuant to an approved stock plan to acquire common
        stock
        at a price per share less than the conversion price. The conversion option
        featured in this note is being accounted for as a free standing derivative
        financial instrument in accordance with SFAS 133 and EITF 00-19.
 
 The
          fair
          value of the conversion option was $42,710 at June 30, 2007.
  There
          has
          not been an agreement on amended terms and no assurance the Company will
          reach
          agreement with the note holder. The terms of the 2005 Harbor Note do not
          provide
          for penalties or other payments upon default, and accordingly, the Company
          has
          not accrued any as of June 30, 2007.
 As
        of
        June 30, 2007, the principal amount of $250,000 remains outstanding under
        the
        2005 Harbor Note. The amount of discount of this note, based on the original
        allocation of proceeds to the carrying amount of the note and the free standing
        conversion option, has been fully amortized to non-cash interest expense
        at June
        30, 2007.
 
 ***CORNELL
        CONVERTIBLE DEBENTURES***
 
 On
        December 9, 2005, the Company entered into a securities purchase agreement
        (the
‘‘Securities Purchase Agreement’’) with Cornell Capital Partners, LP (‘‘Cornell
        Capital’’) pursuant to which Cornell Capital has purchased, in a private
        placement, secured convertible debentures in the aggregate principal amount
        of
        $2,000,000 (the ‘‘Cornell Convertible Debentures’’), which bear interest at the
        rate of 8% per annum. Pursuant to the Securities Purchase Agreement, the
        Company
        issued a Cornell Convertible Debenture in the principal amount of $1,000,000
        on
        each of December 9, 2005 and December 28, 2005. Each Cornell Convertible
        Debenture has a three-year maturity from the date of issuance and was subject
        to
        earlier conversion or redemption pursuant to its terms.
 
 Cornell
        Capital has the right to convert a portion or all of the outstanding principal
        and interest under the Cornell Convertible Debentures into shares of common
        stock at a conversion price per share equal to the lesser of $0.9765 (105%
        of
        the closing bid price of the common stock on December 8, 2005) (the ‘‘Fixed
        Price’’) or (ii) 95% of the lowest closing bid price of the common stock for the
        twenty trading days immediately preceding the conversion date (the ‘‘Floating
        Price’’ and together with the Fixed Price, the ‘‘Conversion Price’’), subject to
        adjustment as provided in the Cornell Convertible Debentures; provided, that
        any
        such conversion based on the Floating Price will generally be limited to
        $150,000 of principal outstanding under the Cornell Convertible Debentures
        in
        any thirty day period; and further provided, that Cornell Capital may not
        convert the Cornell Convertible Debentures into shares of common stock if
        such
        conversion would result in Cornell Capital, together with its affiliates,
        beneficially owning in excess of 4.9% of the then issued and outstanding
        shares
        of common stock. The Conversion Price and number of shares of common stock
        issuable upon conversion of the Cornell Convertible Debentures is subject
        to
        certain exceptions and adjustment for stock splits and combinations and other
        dilutive events.
  21
 Table
            of Contents
  **CepTor
        Corporation**
 **(A
        Development Stage Company)**
 **Notes
        to Condensed Financial Statements**
 **June
        30, 2007**
 **(Unaudited)**
 
 
 Subject
        to the terms and condition of the Cornell Convertible Debentures, the Company
        had the right at any time upon three business days notice to redeem the Cornell
        Convertible Debentures, in whole or in part. If the closing bid price of
        the
        common stock, is less than the Fixed Price at the time of the redemption,
        the
        Company is obligated to pay, in addition to the principal and accrued interest
        being redeemed, a redemption premium of 8% of the principal amount being
        redeemed (the ‘‘Redemption Amount’’). If the closing bid price is greater than
        the Fixed Price, the Company may redeem up to 50% of the principal amount
        at the
        Redemption Amount and the remaining 50% at the greater of the (x) Redemption
        Amount or (y) the market value of the common stock. In addition, Cornell
        Capital
        will receive a three-year warrant to purchase 25,000 shares of common stock
        for
        every $100,000 redeemed by the Company, on a pro rata basis, at an exercise
        price per share of $0.9765 (the ‘‘Redemption Warrant’’).
 
 If
        an
        Event of Default (as such term is defined in the Cornell Convertible Debentures)
        occurs, any principal and accrued interest outstanding will become immediately
        due and payable, in cash or common stock, at Cornell Capital’s election. 
Pursuant to the Securities Purchase Agreement, on December 9, 2005, the Company
        issued to Cornell Capital a warrant to purchase 1,000,000 shares of common
        stock
        at an exercise price per share of $1.023 (110% of the closing bid price of
        the
        common stock on December 8, 2005) and (ii) 268,817 shares of common stock,
        and
        (iii) on each of December 9, 2005 and December 28, 2005, the Company made
        a cash
        payment to an affiliate of Cornell Capital of $80,000 for expenses incurred
        in
        connection with the transaction.
 
 On
        June
        29, 2006, the Company entered into an assignment agreement (‘‘Assignment
        Agreement’’) by and between Cornell Capital, The Longview Fund, LP
        (‘‘Longview’’), Alpha Capital Aktiengesellschaft (‘‘Alpha’’), Ellis
        International Ltd. (‘‘Ellis’’) and Momona Capital Corp. (‘‘Momona’’) (each an
‘‘Assignee’’) which provides for, among other things, the assignment of the
        unpaid and unconverted amounts outstanding under each of the Cornell Convertible
        Debentures to the Assignees in the amounts listed in the Assignment Agreement.
        The aggregate unpaid and unconverted principal amount of $1,700,000 under
        the
        Cornell Convertible Debentures was assigned. The aggregate purchase price
        paid
        by the Assignees was $1,914,180, of which $1,836,000 is being paid for principal
        (which includes the Redemption Amount) and $78,180 represents accrued interest.
        The Company now owes the principal amounts of $700,000 and $400,000 to Longview
        and $300,000, $200,000 and $100,000 to Alpha, Ellis and Momona, respectively,
        in
        proportion to their assignment from Cornell Capital. All of the terms and
        conditions remain unchanged in the Cornell Convertible Debentures except
        that
        the Assignment Agreement provides that the Company may not redeem the Cornell
        Convertible Debentures, in whole or in part.
 
 Pursuant
        to the Assignment Agreement, the Company was obligated to file an amended
        registration statement to reflect the change in selling shareholders by July
        10,
        2006. As of June 30, 2007, the Company had not met this obligation causing
        it to
        be in default under the terms of the Assignment Agreement. There has not
        been an
        agreement on amended terms and no assurance the Company will reach agreement
        with the note holders. The terms of the Cornell Convertible Debentures do
        not
        provide for penalties or other payments upon default, and accordingly, the
        Company has not accrued any as of June 30, 2007.
  Pursuant
        to the Securities Purchase Agreement, the Company granted a security interest
        in
        all of its assets to Cornell Capital to secure its obligations under the
        Cornell
        Convertible Debentures, which security interest will be transferred to the
        Assignees pursuant to the Assignment Agreement.
  22
 Table
            of Contents
  **CepTor
        Corporation**
 **(A
        Development Stage Company)**
 **Notes
        to Condensed Financial Statements**
 **June
        30, 2007**
 **(Unaudited)**
    As
        of
        June 30, 2007, $1,700,000 of principal of the Debentures remains outstanding.
        The conversion option featured in these Debentures is being accounted for
        as a
        free standing derivative financial instrument in accordance with SFAS 133
        and
        EITF 00-19. The fair value of the conversion option amounted to $418,391
        at June
        30, 2007. The amount of the unamortized discount of these Debentures, based
        on
        the original allocation of proceeds to the carrying amount of the note and
        the
        free standing conversion option, amounts to $698,587, at June 30,
        2007.
  **2006
        6% CONVERTIBLE NOTES**
 
 On
        May
        26, 2006, the Company entered into a placement agency agreement and term
        sheet
        for a private offering of one-year 6% convertible notes in an aggregate
        principal amount of up to $6,000,000 (the ‘‘2006 6% Convertible
        Notes’’).
 
 The
        Company offered the 2006 6% Convertible Notes on a ‘‘best efforts’’ basis only
        to ‘‘accredited investors’’ (as defined in Rule 501 (a) of Regulation D under
        Section 4(2) of the Securities Act of 1933, as amended) by offer letter dated
        May 25, 2006 (the ‘‘Offer Letter’’), which sets forth the terms and conditions
        of the offering.
 
 The
        2006
        6% Convertible Notes are payable one year after the date of funding, or earlier
        upon acceleration following the occurrence of an ‘‘Event of Default’’, as
        defined in the 2006 6% Convertible Notes. Interest on the 2006 6% Convertible
        Notes will accrue from the date of issue at 6% per annum, or 12 % per annum
        upon
        the occurrence of an Event of Default.
 
 The
        principal of, and accrued interest on, the 2006 6% Convertible Notes is
        convertible into shares of common stock, at the option of the holders of
        the
        2006 6% Convertible Notes, at an initial conversion price per share of $0.15,
        subject to adjustment for certain issuances or events that will result in
        dilution (the ‘‘Fixed Conversion Price’’). Since the 2006 6% Convertible Notes
        had not been fully converted or repurchased for 200% of their principal amount
        by September 30, 2006, on October 1, 2006, the conversion price became the
        lesser of (i) the Fixed Conversion Price and (ii) 90% of the lowest closing
        price (or, if no closing price is available, the average of closing bid and
        asked prices) of the Company’s common stock for the 20 trading days immediately
        preceding the date on which a notice of conversion is delivered (the ‘‘Floating
        Conversion Price’’).
 
 Purchasers
        of 2006 6% Convertible Notes who have not previously purchased shares of
        the
        Company’s Series A Convertible Preferred Stock, par value $0.0001 per share (the
        ‘‘Preferred Stock’’) are to receive, without additional consideration, five-year
        warrants to purchase a number of additional shares of common stock equal
        to 100%
        of the number of shares that the purchaser may initially acquire upon conversion
        of the 2006 6% Convertible Notes, at an initial exercise price of $0.30 per
        share, subject to adjustment for certain issuances and events that will result
        in dilution.
  23
 Table
            of Contents
  **CepTor
        Corporation**
 **(A
        Development Stage Company)**
 **Notes
        to Condensed Financial Statements**
 **June
        30, 2007**
 **(Unaudited)**
  
 Purchasers
        of 2006 6% Convertible Notes who purchased shares of Preferred Stock, will
        be
        issued a number of additional shares of common stock upon conversion of the
        Preferred Stock, based upon the principal amount of 2006 6% Convertible Notes
        purchased relative to the total purchase price of the shares of Preferred
        Stock
        purchased, which will effectively reduce the per share conversion price of
        the
        Preferred Stock so that it is the same as the conversion price per share
        of the
        2006 6% Convertible Notes, or to the extent purchasers have converted shares
        of
        Preferred Stock, but not sold the common stock received upon conversion,
        the
        Company will issue a number of additional shares of common stock that will
        provide equivalent value, in each case without additional consideration.
        The
        Company will issue warrants to purchase a number of additional shares of
        common
        stock at $0.15 that will provide equivalent value, to those purchasers of
        2006
        6% Convertible Notes who have sold or otherwise disposed of shares of common
        stock received upon conversion of Preferred Stock. The Company also will
        reduce
        to $0.30 the per share exercise price of warrants purchasers of the 2006
        6%
        Convertible Notes received with their purchase of Preferred Stock, to the
        extent
        of the principal amount of 2006 6% Convertible Notes purchased relative to
        the
        total purchase price for the shares of Preferred Stock, subject to the Company’s
        right, after the registration statement referred to below has become effective,
        to force the exercise of those warrants on 20 days’ notice by offering to
        purchase those warrants for a nominal price if the closing price per share
        of
        the common stock exceeds $0.45 for ten consecutive trading days.
 
 The
        Company was obligated to file a registration statement by August 21, 2006
        to
        register for resale the shares of common stock that purchasers of 2006 6%
        Convertible Notes may acquire upon conversion of the 2006 6% Convertible
        Notes
        or exercise of the warrants, as well as any additional shares of common stock
        which may be issued as part of the offering. Since the Company failed to
        file a
        registration statement for the resale of these shares by August 21, 2006,
        the
        Company is obligated to pay purchasers of the 2006 6% Convertible Notes
        liquidated damages in an amount equal to 2% of the principal amount of the
        2006
        6% Convertible Notes for each month, or portion of a month, for which the
        Company fails to timely file the registration statement or until the
        registration statement becomes effective, but in no event may the liquidated
        damages exceed 18% of the principal amount of the 2006 6% Convertible Notes.
        At
        March 31, 2007, the Company has accrued $642,500 as estimated liquidated
        damages, which represent the damages which would be due with a potential
        delay
        of ten months in the filing of its registration statement.
 
 As
        a
        condition to their purchase of the 2006 6% Convertible Notes, purchasers
        agreed
        not to sell, transfer or otherwise dispose of any securities of the Company
        prior to the 150th day after June 1, 2006, except that the restrictive period
        applicable to shares of common stock that were acquired, or may be acquired,
        upon conversion of shares of Preferred Stock held by the purchaser, expired
        on
        August 20, 2006 to the extent of the total purchase price paid by the purchaser
        for 2006 6% Convertible Notes bears in relation to the total purchase price
        paid
        for the Preferred Stock.
 
 The
        Company is obligated to pay a cash fee equal to 10% of the gross proceeds
        from
        the sale of the 2006 6% Convertible Notes for purchasers obtained through
        the
        assistance of the placement agent, a portion of which may be reallocated
        to
        other registered broker-dealers participating in the offering, and reimburse
        the
        placement agent for $15,000 of its legal expenses. The Company is obligated
        to issue to the placement agent, or its designee(s), at each closing, a
        five-year warrant to purchase such number of shares of common stock at an
        exercise price of $0.15 per share equal to 10% of such number of shares of
        common stock into which the 2006 6% Convertible Notes sold through the placement
        agent at such closing are convertible. In addition, the Company has agreed
        to
        reduce to $0.30 the per share exercise price of warrants to purchase shares
        of
        common stock issued to the placement agent previously, as placement agent
        for
        our Preferred Stock.
  24
 Table
            of Contents
  **CepTor
        Corporation**
 **(A
        Development Stage Company)**
 **Notes
        to Condensed Financial Statements**
 **June
        30, 2007**
 **(Unaudited)**
  
 The
        Harbor Trust has agreed to a pledge of its 2005 Harbor Note dated December
        9,
        2005 issued in the name of The Harbor Trust in the principal amount of $250,000
        to secure a non-recourse obligation to increase the return to purchasers
        of
        Preferred Stock to the extent required to protect investors from a loss on
        their
        investment to the extent of such collateral, measured on the earlier of May
        20,
        2007 or the date on which all the 2006 6% Convertible Notes offered have
        been
        sold or otherwise disposed of, including by conversion. In consideration
        for the
        agreements made by The Harbor Trust, at each closing the Company is obligated
        to (i) pay The Harbor Trust a yield enhancement incentive fee equal to 10%
        of the aggregate gross proceeds of the 2006 6% Convertible Notes receiving
        the
        benefit of such protection (the ‘‘Yield Protected Notes’’), plus (ii) issue to
        The Harbor Trust, for nominal consideration, five-year warrants to purchase,
        for
        the principal amount thereof, (A) 2006 6% Convertible Notes having a principal
        amount equal to 10% of the principal amount of the Yield Protected Notes
        sold in
        the Offering, and (B) five-year warrants to purchase a number of shares of
        common stock equal to 10% of the shares of common stock that purchasers of
        the
        Yield Protected Notes sold in the offering may acquire upon exercise of the
        warrants they received with the purchase of the Yield Protected Notes, at
        an
        exercise price of $0.30 per share. In no event will the total yield enhancement
        incentive fee, plus the placement agent fee, paid by the Company exceed 10%
        of
        the gross proceeds of the offering.
 
 From
        June
        1, 2006 through October 19, 2006 (date of last closing under the offering),
        the
        Company sold an aggregate principal amount of $3,569,444 of 2006 6% Convertible
        Notes. The Company issued five-year warrants to purchase an aggregate of
        14,018,513 shares of common stock, at an initial exercise price of $0.30
        per
        share to purchasers of $2,102,777 of 2006 6% Convertible Notes who had not
        previously purchased its Preferred Stock. The Company is obligated
        to issue to those purchasers of $1,466,667 of 2006 6% Convertible Notes who
        had previously purchased Preferred Stock, upon the conversion of their Preferred
        Stock, 9,191,113 additional shares of common stock and adjust the exercise
        price
        to $0.30 on warrants to purchase an aggregate of 293,333 shares of common
        stock
        received upon the purchase of the Preferred Stock. Pursuant to the terms
        of the
        6% Notes Offering, the Company issued (i) warrants to purchase $356,944 of
        2006
        6% Convertible Notes at an exercise price of $356,944 and attached warrants
        to
        purchase 2,379,629 shares of common stock, and (ii) a warrant to purchase
        1,401,851 shares of common stock at an exercise price of $0.30, as yield
        enhancement fees.
  Of
        the
        $2,102,777 in principal purchased by those investors who had not previously
        purchased the Company’s Preferred Stock, the Company recognized a debt discount
        of $1,545,208 at date of issuance based on an allocation of the proceeds
        based
        on relative fair values of the 2006 6% Convertible Notes, the warrants and
        the
        conversion option, as determined by the Black-Scholes option pricing model.
        Since the Company is required to account for its derivative financial
        instruments as liabilities (see Note 3), the Company recorded the full fair
        values of the warrants and the conversion options at date of issuance of
        the
        2006 6% Convertible Notes of $3,161,789 and $3,019,573, respectively, as
        liabilities and charged non-cash interest expense. The fair value of the
        warrants and conversion option was estimated at the date of issuance using
        the
        Black-Scholes option pricing model with the following assumptions: risk fee
        interest rate: 4.7% to 5.1%; expected dividend yield: 0%; expected option
        life:
        3 years to 5 years; and volatility: 173% to 223%. The Company marks to market
        these derivative financial instruments at each reporting date. At June 30,
        2007,
        the Company valued the warrants and conversion options at $1,324,150 and
        $700,651, respectively.
  25
 Table
            of Contents
  **CepTor
        Corporation**
 **(A
        Development Stage Company)**
 **Notes
        to Condensed Financial Statements**
 **June
        30, 2007**
 **(Unaudited)**
  
 Of
        the
        $1,466,667 in principal purchased by those investors who had previously
        purchased the Company’s Preferred Stock, the Company recognized a debt discount
        of $1,466,667 at date of issuance based on the (i) fair values of the conversion
        option, (ii) the incremental increase in fair value of the additional shares
        of
        common stock to be issued upon conversion of the Preferred Stock and (iii)
        the
        change in fair value of the underlying warrants associated with the Preferred
        Stock due to the change in exercise price, as determined by the Black-Scholes
        option pricing model. Since the Company is required to account for its
        derivative financial instruments as liabilities (see Note 3), the Company
        recorded the incremental fair value of the Preferred Stock warrants and the
        full
        fair value of the conversion options at date of issuance of the 2006 6%
        Convertible Notes of $18,148 and $2,026,398, respectively, as liabilities
        and
        charged the excess to non-cash interest expense. The fair value of these
        derivatives was estimated at the date of grant using the Black-Scholes option
        pricing model with the following assumptions: risk fee interest rate: 4.7%
        to
        5.1%; expected dividend yield: 0%; expected option life: 3 years to 5 years;
        and
        volatility: 173% to 223%. The Company marks to market these derivative financial
        instruments at each reporting date. In addition, the Company charged non-cash
        interest expense and credited equity for the incremental increase in fair
        value
        of the additional shares of common stock issuable upon conversion of the
        Preferred Stock. At June 30, 2007, the Company's authorized common stock
        was not
        sufficient to accommodate the exercise of warrants or conversion privileges
        of
        outstanding convertible debts and exercisable warrants.
  **ADJUSTMENTS
        TO OUTSTANDING CONVERTIBLE SECURITIES AND OTHER RIGHTS TO PURCHASE COMMON
        STOCK
        RESULTING FROM 2006 6% CONVERTIBLE NOTES OFFERING**
 
 Pursuant
        to the terms of the 2006 6% Convertible Note offering, the conversion prices
        on
        certain convertible securities were adjusted to the conversion price of the
        2006
        6% Convertible Notes.
 
 The
        Amended December 2004 Convertible Note and the 2005 Harbor Note in the principal
        amount of $448,736 and $250,000, respectively and with adjusted conversion
        prices of $0.75 per share and $0.375 per share, respectively, had their
        conversion prices adjusted to $0.15 per share. As a result of this adjustment,
        the Company anticipates that it will issue an additional 2,937,220 and 1,063,616
        shares, respectively, calculated as of June 30, 2007.
  The
        Company evaluated the revision in the remaining Amended December 2004
        Convertible Note to determine whether the reduction in the conversion price
        resulted in the issuance of a substantially different debt instrument. The
        Company determined that after giving effect to the substantial increase in
        the
        fair value of the beneficial conversion feature that resulted from reducing
        the
        conversion price, it had issued a substantially different debt instrument
        which
        resulted in a constructive extinguishment of the original debt instrument.
        Accordingly, the Company recorded a gain on the extinguishment of debt in
        the
        amounts of $387,362 for the Amended December 2005 Convertible Note that was
        included in the statement of operations for the year ended December 31,
        2006.
 
 Since
        the
        incremental fair value of the Company's common stock which would be issued
        upon
        conversion, as determined by the Black-Scholes option pricing model, was
        in the
        aggregate greater than the principal balance of individual notes, the Company
        recorded an original issuance discount equal to the fair value of this
        beneficial conversion feature, limited to the principal balance of the notes.
        This debt discount is being amortized as non-cash interest expense over the
        remaining term of the Amended December 2004 Convertible Note. During the
        year
        ended December 31, 2006, the Company amortized an aggregate of $448,736 of
        the
        debt discount which is included in interest expense in the accompanying
        statement of operations. Assumptions relating to the estimated fair value
        of the
        beneficial conversion features are as follows: risk-free interest rate of
        5.1%;
        expected dividend yield zero percent; expected life of 1.5 years; and current
        volatility of 165.4%.
  26
 Table
            of Contents
  **CepTor
        Corporation**
 **(A
        Development Stage Company)**
 **Notes
        to Condensed Financial Statements**
 **June
        30, 2007**
 **(Unaudited)**
 
 
 The
        Cornell Convertible Debentures in the principal of $1,700,000 plus accrued
        interest, with a Fixed Conversion Price (as that term is defined in the Cornell
        Convertible Debentures) of $0.9765, adjusted to a Fixed Conversion Price
        of
        $0.15. In addition, the exercise price of the warrants issued to Cornell
        Capital, for the purchase of 1,000,000 shares of common stock at $1.023 per
        share has been reduced to $0.15 per share. As the terms of Cornell Convertible
        Debentures provide for a lower of Fixed Conversion Price or Floating Conversion
        Price (as both terms are defined in the Cornell Convertible Debentures) at
        conversion, the number of shares of common stock issuable upon conversion
        is
        indeterminate.
 
 Certain
        options granted pursuant to our 2004 Incentive Stock Plan and certain shares
        of
        common stock issued upon exercise of those options, contain anti-dilution
        provisions which provide for a reduction of the exercise price if the Company
        sells common stock or issues convertible securities at a per share price
        less
        than their exercise price of $0.359 (fair market value on the date of grant).
        As
        a result of the anti-dilution provision, the Company issued an additional
        776,231 shares of common stock and increased the remaining unexercised option
        by
        an additional 776,230 shares of common stock issuable upon exercise to the
        option holders.
 
 **NOTE
        9 - EQUITY TRANSACTIONS**
  During
        the six month period ended June 30, 2007, the Company issued the following
        equity securities.
  ***Common
        Stock Issued Upon Conversion of Series A Preferred
        Stock***
  During
        the six-month period ended June 30, 2007, the Company issued 50,000 shares
        of
        common stock upon conversion of five shares of its Preferred
        Stock.
  ***Insufficient
        Authorized but Unissued Shares of Common Stock***
  On
        May 9,
        2006, the Board of Directors authorized an amendment to the Company's Amended
        and Restated Certificate of Incorporation to increase the number of authorized
        shares of capital stock from 120,000,000 shares to 270,000,000 shares, of
        which
        250,000,000 shares would be designated as common stock and 20,000,000 shares
        would be designated as Preferred Stock. The proposed amendment has yet to
        be
        considered or approved by the stockholders. Accordingly, the Company has
        not
        satisfied its obligations in the agreements relating to those securities,
        and is
        in default of its obligations under those agreements (see note 8). As a result,
        the holders of those securities may accelerate payment of the Company's
        obligations, obtain liquidated damages under certain of those agreements
        and
        pursue other legal remedies against the Company that would have a material
        adverse affect on the Company's ability to remain in existence.
  **NOTE
        10- STOCK BASED COMPENSATION**
 
 The
        Company, since its inception, has granted non-qualified stock options to
        various
        employees and non-employees at the discretion of the Board of Directors under
        its 2004 Incentive Stock Plan and its 2006 Incentive Stock Plan (the "Plans").
        Both Plans have substantially the same terms. Substantially all options granted
        to date have exercise prices equal to the fair value of the underlying common
        stock at the date of grant and terms ranging from three to ten years. Vesting
        periods range from fully vested at the date of grant to four years.
  27
 Table
            of Contents
  **CepTor
        Corporation**
 **(A
        Development Stage Company)**
 **Notes
        to Condensed Financial Statements**
 **June
        30, 2007**
 **(Unaudited)**
   The
          fair
          value of all awards is estimated at the date of grant using the Black-Scholes
          option pricing model. Assumptions relating to the estimated fair value
          of stock
          options that the Company granted prior to January 1, 2006 that were previously
          accounted for and recorded under the intrinsic value method prescribed
          under APB
          25 are described in Note 3. Pursuant to SFAS 123R, the Company recognized
          expense on the statement of operations of $70 and $140 for the fair value
          of those stock options granted prior to January 1, 2006 and which vested
          during
          the three and six month periods ended June 30, 2007.
 
 During
        March 2006, the Company granted stock options to acquire an aggregate of
        1,514,206 shares of common stock to three consultants. The option agreements
        for
        two of the consultants contained anti-dilution protection of the exercise
        price
        and the number of shares issuable upon conversion in the event the Company
        issued common stock at a price less then the exercise price contained in
        their
        option. Each option was exercisable at a price of $0.359 per share for a
        period
        of up to five years from issuance. All of these options were fully vested
        and
        non forfeitable on their date of issuance. The Company charged the estimated
        fair value of $579,591 to compensation expense during the nine-month period
        ended September 30, 2006 with respect to these options. Assumptions relating
        to
        the estimated fair value of these stock options (as determined by the
        Black-Scholes option pricing model), which the Company accounted for in
        accordance with SFAS 123I and EITF 96-18, are as follows: risk-free interest
        rate of 4.7%; expected dividend yield zero percent; expected option life
        of 5
        years; and current volatility of 129.6%.
 
 Pursuant
        to the 2006 6% Convertible Note offering commencing in May 2006, the options
        for
        the two consultants who had the anti-dilution protection were adjusted for
        the
        dilutive effect of the offering. The two consultants were issued an aggregate
        of
        776,230 additional shares of common stock of which the fair value of $155,246
        was charged to non-cash interest expense as a component of the 2006 6%
        Convertible Note Offering. In addition, they were granted an additional option,
        pursuant to the 2006 Incentive Stock Plan, to acquire an aggregate of 776,230
        shares of common stock at an exercise price of $0.15 per share, of which
        the
        fair value (as determined by the Black-Scholes option pricing model) of $158,144
        was charged to non-cash interest expense as a component of the 2006 6%
        Convertible Note offering. Assumptions related to the estimated fair value
        of
        the stock options at the date of adjustment, which the Company accounted
        for in
        accordance with SFAS 123R and EITF-96-18 were: risk fee interest rate: 5.1%;
        expected dividend yield: 0%; expected option life: 5 years; and volatility:
        173%. The exercise price on their remaining unexercised options was adjusted
        to
        $0.15 per share.
 
 During
        June 2006, the Company granted stock options to acquire an aggregate of 16,000
        shares of common stock to three directors of the Company. Each option was
        exercisable at a price of $0.21 per share for a period of up to ten years
        from
        issuance. All of these options vest over three years and were non forfeitable
        on
        their date of issuance. The fair value of these options (as determined by
        the
        Black-Scholes option pricing model) was $3,360 and the Company amortized
        $188 to
        compensation expense during the nine-month period ended September 30, 2006
        with
        respect to these options. Assumptions relating to the estimated fair value
        of
        these stock options, which the Company accounted for in accordance with SFAS
        123(R) and EITF 96-18 are as follows: risk-free interest rate of 5.1%; expected
        dividend yield zero percent; expected option life of 10 years; and current
        volatility of 220.3%.
 
 During
        the three months ended March 31, 2007, options previously granted to certain
        former members of the Company’s Board of Directors were forfeited. A total of
        16,000 options previously granted to now terminated Board members was forfeited
        during the 1st quarter 2007.
 
 No
        options were granted to officers or directors of the Company during the three
        months ended June 30, 2007.
  28
 Table
            of Contents
  **CepTor
        Corporation**
 **(A
        Development Stage Company)**
 **Notes
        to Condensed Financial Statements**
 **June
        30, 2007**
 **(Unaudited)**
  
 The
        risk-free rate is based on the U.S. Treasury yield curve in effect at the
        time
        of grant. The Company has not paid dividends to date and does not expect
        to pay
        dividends in the foreseeable future due to its substantial accumulated deficit
        and limited capital resources. Accordingly, expected dividends yields are
        zero.
        Historical cancellations and forfeitures of stock options are insignificant.
        The
        Company will adjust its assumptions relating to its expectations of future
        vesting and terms of options at such times that additional data indicates
        that
        changes in these assumptions are necessary. Expected volatility is
        principally based on the historical volatility of the Company's
        stock.
 
 A
        summary
        of option activity for the six-month period ended June 30, 2007 is as
        follows:
 
 **Weighted-****Weighted-**
              
              
              **Average****Average**
              
              
              **Remaining**
              
              
              **Aggregate****Exercise**
              
              
              **Contractual**
              
              
              **Intrinsic****Options**
              
              **Shares**
              
              
              **Price**
              
              
              **Term**
              
              
              **Value**Outstanding
                    at January 1, 2007
              
              
              1,878,834
              
              
              $
              1.06
              
              
              
              3.42
              
              
              $
              -Granted
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Exercised
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Forfeited
                    or expired
              
              
              16,000
              
              
              
              4.84
              
              
              
              7.87
              
              
              
              -Outstanding
                    at June 30, 2007
              
              
              1,862,834
              
              
              $
              0.53
              
              
              
              3.52
              
              
              $
              -Exercisable
                    at June 30, 2007
              
              
              1,841,834
              
              
              $
              0.52
              
              
              
              3.43
              
              
              $
              -
  As
        of
        June 30, 2007, the Company has $2,170 of unrecognized compensation cost related
        to non-vested share-based compensation arrangements, which represents the
        fair
        value of stock options that the Company accounted for under APB 25 through
        December 31, 2005. These costs are expected to be recognized over a
        weighted-average period of 2.25 years.
  29
 Table
            of Contents
  **Item
                  2.**
              **Management's
                  Discussion and Analysis or Plan of
                  Operation**
  ***Overview***
 
 CepTor
        Corporation (hereinafter “CepTor” or the “Company”) has been historically
        engaged in the research and development of therapeutic products for
        neuromuscular, neurodegenerative and other diseases with a focus on orphan
        diseases (defined as those which affect less than 200,000 people.  Its
        two lead compounds are MyodurTM, for neuromuscular disease, and NeurodurTM, for
        neurodegenerative diseases. In January 2006, CepTor submitted an Investigational
        New Drug Application (IND) to the Food and Drug Administration (FDA) for
        MyodurTM
with the hope of beginning clinical trials for this compound following approval
        of the IND. Since that time, the IND has remained on “clinical hold” pending
        resolution of certain issues raised by the FDA. Most recently, in October
        2006,
        the Company was advised that, despite its efforts to resolve the concerns
        and
        issues previously raised by the FDA, the IND would remain on hold pending
        further testing and research as directed by the FDA.
 
 Our
          existing investors have advised us that they were unwilling to continue
          to fund
          either the research and development costs required to fully prosecute the
          IND
          filing, or the general operating costs necessary to keep the business afloat
          as
          those research and development activities continued.  Additionally, we have
          no assurances that with lapses of time which have now occurred whether
          the
          issues raised by the FDA in connection with our IND for MyodurTM could be
          successfully resolved or that an IND would ultimately win FDA approval.
           With no other financial resources available to us, we had no choice but
          to
          cease all efforts related to the research and development of our compounds,
          terminate all of our employees, and close down our corporate offices in
          Maryland. At present, we are maintaining our operations as a “virtual” office
          operated out of New York City and have one part-time employee, Howard Becker,
          our CEO.
 
 The
        MyodurTM and NeurodurTM technologies have historically represented substantially
        all of the focus of the Company, and those technologies have been pledged
        to
        certain secured creditors under a credit facility entered into by the Company
        in
        late 2005. Based on the estimated realizable value of our early stage
        technologies, we do not believe that the liquidation of those assets would
        generate more than the amount of the debt which is secured by these
        technologies.  However, rather than merely sell off the assets and
        terminate all operations, file a bankruptcy petition or consent to the
        foreclosure of the assets by the secured creditors, our efforts throughout
        the
        first and second quarters of this year were instead focused primarily on
        a
        two-part strategy whereby (i) our existing technologies would  be
        divested from the corporation pursuant to a transaction that would allow
        CepTor
        to retain significant upside should the technologies ultimately fulfill their
        promise as marketable and commercially viable products, and (ii) a new
        technology would be acquired by the Company around which we could restructure
        our affairs. Any such transaction would have to have the full support of
        the
        existing secured creditors, as they have a priority position with respect
        to all
        of CepTor’s current assets.
 
 Unfortunately,
        the Company has been unsuccessful to date in its efforts to identify a suitable
        transaction for the acquisition of an alternative technology around which
        to
        reorganize its affairs.  Previously reported discussions with the
        owners of one potential acquisition target have now ceased in their entirety,
        and an alternative potential transaction has yet to be
        identified.  Though the Company will continue to seek to identify a
        possible transaction that will allow it to reorganize its affairs, there
        is a
        strong possibility that no suitable transaction will materialize.
 
 Prior
        to
        the collapse of negotiations for the new technology CepTor had been pursuing,
        and in furtherance of the above-described two-part strategy of divesting
        CepTor
        of its existing technologies to facilitate any acquisition transaction, on
        March
        29, 2007, CepTor executed a non-binding term sheet with its original founding
        scientists, Drs. Al Stracher and Leo Kesner.  Had that transaction
        been consummated, our MyodurTM and NeurodurTM technologies would have been
        assigned to a private corporation controlled by them (“Newco”) and the founding
        scientists would have dedicated their efforts to the continued research and
        development activities for these products, with the initial goal of getting
        the
        FDA process back on track. CepTor was to retain a substantial minority interest
        in Newco, as well as a substantial gross royalty on any product sales had
        their
        efforts proven successful.
 
 In
        view
        of CepTor’s failure to date to identify a viable acquisition candidate to
        facilitate its reorganization, and the low likelihood of such a transaction
        materializing, at least in the near term, the primary justification for
        proceeding with the existing term sheet with the founding scientists has
        disappeared.  As a result, that transaction remains on hold and, in
        the meantime, the Company is continuing its discussions with the founding
        scientists regarding an alternative transaction that would allow those
        scientists to continue to develop the technologies, whether under CepTor’s
        auspices or through a private company in which the founding scientists have
        a
        controlling interest.  However, there can be no assurance that such a
        transaction will be consummated or that, if consummated, it will support
        the
        continued operation of the Company.  These matters raise substantial
        doubt as to the Company’s ability to continue as a going a concern.
  30
 Table
            of Contents
 Even
          if
          CepTor is successful either in identifying a new technology to acquire
          or in
          consummating an alternative transaction with the founding scientists related
          solely to the existing technologies, a pre-condition to any such transaction
          will be to consensually restructure our approximately $4 million in trade
          debt.
          Without such a consensual restructuring of the trade debt, we do not believe
          that we will be able to successfully close any transaction, whether it
          is for
          the acquisition of a new technology or for the continued development of
          our
          existing technologies.  In that case, we would likely be left with no
          choice but to terminate operations or commence bankruptcy
          proceedings.
 
 Given
          our
          present financial circumstances, as well as the absence of a presently
          identifiable acquisition transaction, there is a substantial risk that
          CepTor
          will be forced to cease operations in their entirety.
  ***Capital
        Resources and Cash Requirements***
  The
        Company has had difficulty securing the necessary capital to execute its
        business plan and has not been able to remain current with respect to the
        payment terms of its operating obligations including its trade payables which
        aggregated approximately $4 million at June 30, 2007. As described in note
        8 to
        the financial statements, included in the Form 10-QSB, as Part One, Item
        1, the
        Company is in default of substantially all of its convertible note obligations,
        which amount to approximately $6 million in aggregate principal. These defaults
        occurred principally as a result of (i) the Company's failure to make the
        required payments of principal and interest under certain of these obligations
        (which triggered cross default provisions under the remaining note obligations),
        (ii)its failure to file a registration statement pursuant to the 2006 6%
        Convertible Notes within a specified period, (iii) its failure to file a
        post-effective amendment to its registration statement on Form SB-2 covering
        shares issuable under the Cornell Convertible Debentures within a specified
        period, and (iv) the failure of the Company to have sufficient authorized
        but
        unissued shares available to net share settle its Cornell Convertible Debentures
        and all of its derivative financial instruments.
  The
        Company has exhausted substantially all of its capital resources, terminated
        substantially all of its employees and is currently unable to pursue further
        development of its product candidates.  The primary reason for the
        Company’s current difficulties has been its inability to date to procure
        approval of its IND for MyodurTM.  Specifically, in October 2006, the
        Company was informed by the FDA that its IND was to remain on hold pending
        the
        resolution of two remaining issues. Additional time is required to fully
        resolve
        the FDA issues and complete the Company's own internal research program,
        which
        the Company estimates would take an additional twelve to eighteen months
        to
        complete, and would require a substantial investment of capital.  The
        Company lacks the funding that is necessary to resolve these issues and is
        currently unable to secure financing commitments for this purpose.  With no
        other financial resources available to it, the Company had no choice but
        to
        cease all efforts related to the research and development of its compounds,
        terminate all of its employees, and close down its corporate offices in
        Maryland. At present, CepTor is maintaining its operations as a “virtual” office
        operated out of New York City and has one part-time employee, Howard Becker,
        the
        Company’s CEO. The
        continuation of existence of the Company is no indicator of its ability to
        raise
        funds for its operations.
 
 During
        the six months ended June 30, 2007, we funded our operations through unsecured
        advances of $217,000.
  Primarily
        as the result of recording interest expense of $2,867,995 (including non-cash
        interest expense of $2,651,801), offset by the non-cash gain associated with
        the
        decrease in the fair values of its derivative financial instruments of
        $4,185,212, we recorded a net income for the three and six month periods
        ended
        June 30, 2007 of $1,299,921 and $936,947, respectively. Non-cash interest
        expense consisted primarily of the excess fair values of its derivative
        securities included in its financing transactions and amortization of deferred
        financing costs of those financing transactions. We used net cash flows in
        its
        operating activities of $207,066 during the six-month period ended June 30,
        2007. Our working capital deficiency amounted to $12,926,712 and our development
        stage accumulated deficit amounted to $45,141,127 at June 30, 2007. The Company
        will require substantial additional funding to develop any newly acquired
        technology and fund ongoing costs of its operations.
  At
        June
        30, 2007, the Company had $6,531,180 in principal amount of notes outstanding,
        of which approximately $6 million were convertible notes and the balance
        represent unsecured demand notes. The December 2004 Convertible Note in the
        principal amount of $448,736, was due July 3, 2006. There has not been an
        agreement on amended terms and no assurance that the Company will reach
        agreement with the note holder on amended terms. The terms of the December
        2004
        Convertible Note do not provide for penalties or other payments upon default,
        and accordingly, the Company has not accrued a penalty as of June 30, 2007.
        Of
        the remaining debt, (i) $250,000 in principal plus accrued interest was due
        on
        December 9, 2006, (ii) $3,569,444 in principal representing 2006 6% Convertible
        Notes mature during the period June 2007 through October 2007, (iii) the
        Cornell
        Convertible Debentures of $1,700,000 mature in December 2008, and (iv) $563,000
        represent unsecured advances, from an existing investor, that accrue at an
        annual interest rate of between 6% and 8%. Currently, the Company is in default
        of substantially all of its obligations to its convertible noteholders and
        such
        noteholders currently have the right to demand immediate payment of these
        loans.
        At present, the Company does not have, and has no immediate prospect of
        obtaining, the available cash to repay these obligations. The note holders
        holding $1,700,000 in principal have a security interest in all the assets
        of
        the Company.
 
 If
        we are
        able to secure suitable financing we may continue the development of our
        technologies, explore the development of other technologies or we may acquire
        or
        merge into other businesses. If we decide to pursue any of these options,
        we
        will require substantial additional financing which we may or may not be
        able to
        obtain.
  31
 Table
            of Contents
  ***Default
        of Various Obligations***
 
 The
        Company has been unsuccessful in its efforts to raise the necessary capital
        to
        fully execute its business plan and has not been able to remain current with
        respect to the payment terms of any of its operating obligations including
        its
        trade payables which aggregated approximately $4 million at June 30, 2007.
        In
        addition, as described in Note 8, the Company is in default of substantially
        all
        of its convertible note obligations, which amount to approximately $6,000,000
        in
        aggregate principal amount. These defaults occurred principally as a result
        of
        (i) the Company's failure to make the required payments of principal and
        interest under certain of these obligations (which triggered cross default
        provisions under the remaining note obligations), (ii) its failure to file
        a registration statement pursuant to the 2006 6% Convertible Notes within
        a
        specified period, (iii) its failure to file a post-effective amendment to
        its
        registration statement on Form SB-2 covering shares issuable under the Cornell
        Convertible Debentures within a specified period, and (iv) its failure to
        have
        sufficient authorized but unissued shares available to settle
        its Convertible Debentures and all of its derivative and other financial
        instruments.
 
 Due
        to
        the defaults and arrears with its noteholders and trade creditors, and the
        lack
        of resources to settle its obligations, creditors may seek to aggressively
        pursue remedies available to them, which could force the Company to commence
        bankruptcy proceedings or wind down its affairs. Such creditors may also
        seek to
        file an involuntary bankruptcy petition against the Company. Based on the
        status
        of its obligations, the Company has recorded all of its liabilities as currently
        due.
 
 ***Research,
        Development and Manufacturing***
 
 Historically,
        our efforts and resources were directed to raising capital and moving our
        lead
        product into phase I clinical trials for Duchenne muscular dystrophy. Based
        on
        the decision by management to terminate all efforts with respect to the
        Company’s existing products, there has been no development or manufacturing
        activity during the three and six months ended June 30, 2007.
 
 ***Off
        Balance Sheet Arrangements***
 
 Currently,
        we do not have any off balance sheet arrangements which would require disclosure
        in our financial statements.
 
 ***Employees***
 
 As
        of
        June 30, 2007, we had one part-time employee.
  ***Properties***
 
 We
        lease
        our executive offices in New York, NY consisting of a single small office
        of
        approximately 180 square feet for approximately $2,100 per month. This lease
        is
        a month-to-month lease and we believe should provide sufficient space for
        our
        administrative functions at this time.
  32
 Table
            of Contents
  **Item
                  3.**
              **Controls
                  and Procedures**
 
 ***Evaluation
        of Our Disclosure Controls and Internal
        Controls***
 
 As
        of the
        end of the period covered by this Report, we carried out an evaluation of
        the
        effectiveness of the design and operation of our disclosure controls and
        procedures (as defined in Securities Exchange Act of 1934 Rule 13-d-15(e)
        and
        15d-15(e)). Based upon that evaluation and management's assessment of the
        potential effects of the material weakness described below, our Chief Executive
        Officer concluded that as of the end of the period covered by this Report,
        our
        disclosure controls and procedures were effective to enable us to record,
        process, summarize and report information required to be included in our
        periodic SEC filings within the required time period.
 
 ***Disclosure
        Controls and Internal Controls***
 
 Disclosure
        controls are procedures that are designed with the objective of ensuring
        that
        information required to be disclosed in our reports filed under the Securities
        Exchange Act of 1934, as amended, such as this Report, is recorded, processed,
        summarized, and reported within the time periods specified in the SEC's rules
        and forms. Disclosure controls are also designed with the objective of ensuring
        that such information is accumulated to allow timely decisions regarding
        required disclosure. Internal controls are procedures which are designed
        with
        the objective of providing reasonable assurance that our transactions are
        properly authorized, recorded, and reported and our assets are safeguarded
        against unauthorized or improper use, and to permit the preparation of our
        financial statements in conformity with generally accepted accounting
        principles.
  Our
        company is not an "accelerated filer" (as defined in the Exchange Act) and
        is
        not currently required to deliver management's report on control over our
        financial reporting until our fiscal year ended December 31, 2008. Nevertheless,
        we consider the effectiveness of our internal controls over financial reporting
        as part of the quarterly evaluations of our procedures. In connection therewith,
        we reported, for the years ended December 31, 2005 and 2006, that we identified
        certain matters that we believed constituted material weaknesses (as such
        term
        is defined under the Public Company Accounting Oversight Board Auditing Standard
        No. 2) in our internal controls over financial reporting. The first such
        material weakness related to our ability to ensure that the accounting for
        our
        equity-based transactions is accurate and complete and the second related
        to our
        limited segregation of duties.
  With
        respect to the first material weakness, we previously adopted a policy of
        having
        our Chief Financial Officer review all of our agreements to ensure that we
        identify the applicable accounting treatments to evaluate any areas that
        may
        involve the application of highly specialized accounting principles including,
        but not necessarily limited to, complex equity transactions. At the present
        time, given our current status as a “virtual” company, we are not considering
        any complex equity transactions that implicate our ability to ensure proper
        accounting of equity transactions. If the Company succeeds in restructuring
        its
        affairs and involves itself in potentially complicated equity or other
        transactions that implicate accounting treatment of such transactions, we
        intend
        to put in place appropriate policies to ensure any such transactions are
        properly accounted for in a timely manner.
  With
        respect to the second material weakness, which relates to our segregation
        of
        duties, we believe that, as a “virtual” company with one part-time employee, our
        risks of either material misstatement or misappropriation of assets is minimal.
        In addition, prior to the suspension of our research programs and the wind-down
        of our Baltimore office, substantially all of our general and
        administrative expenses and scientific research expenditures were reviewed
        and
        approved by employees who were knowledgeable of those matters. To date our
        procedures have also enabled us to comply with our financial reporting
        obligations within the time frames required by the SEC. Although we believe
        our
        risks with respect to this matter are minimal, we acknowledge that it would
        be
        beneficial for the Company to segregate certain procedures to a greater number
        of employees, once such additional employees are hired pending development
        and
        execution of a new business plan. We believe that our limited segregation
        of
        duties still constitutes a material deficiency in our system. However, we
        currently have very limited financial resources and do not believe that at
        this
        time, it would be prudent for us to further constrain our liquidity by
        allocating resources to hiring additional employees as a corrective measure.
        We
        believe that the costs we would incur to increase our staff (solely for this
        purpose) exceed the potential reduction in risk, especially given our current
        circumstances. Our CEO is monitoring this situation to determine if these
        circumstances change. If the situation changes and sufficient capital is
        secured, it is our intention to increase staffing within our general accounting
        and financial functions.
 
 As
        a
        result of our currently having only one employee who is responsible for all
        financial reporting, there has been a change in our internal controls over
        financial reporting that reflect that fact, and
        in
        fact, due to the lack of any segregation of duties due to the existence of
        only
        one employee, there is no effective internal control in the
        Company
  33
 Table
            of Contents
  **PART
        II**
 **OTHER
        INFORMATION**
  **Item
                  1.**
              **Legal
                  Proceedings**
 
 In
          June
          2007, a lawsuit was commenced against the Company and certain of its officers,
          directors and others in the District Court for the City and County of
          Denver, Colorado (*Jack**J.**Grynberg and Grynberg Petroleum
          Company**v. Ceptor, Inc.,* *et. al.,*07-CV___). 
The complaint alleges fraud and breach of contract in connection with
          its
          investment of $250,000 as part of the Company's 2005 sale of $6 million
          of
          Series A Preferred Stock.  The plaintiffs are seeking actual damages
          of $244,000, together with punitive, treble and other damages.  Such
          amount significantly exceeds 10% of the Company's current
          assets.  As a result, an adverse decision would have a material adverse
          effect on the ability of the Company to continue it business and
          affairs.
 
 **Item
                  2.**
              **Unregistered
                  Sales of Equity Securities and Use of
                  Proceeds**
  None.
 
 **Item
                  3.**
              **Defaults
                  Upon Senior Securities**
  As
        of the
        date hereof, the Company is in default of substantially all of its
        convertible note obligations, which amount to approximately $6 million in
        aggregate principal amount. These defaults occurred principally as a result
        of
        (i) the Company's failure to make the required payments of principal and
        interest under certain of these obligations (which triggered cross default
        provisions under the remaining note obligations), (ii) its failure to file
        a
        registration statement pursuant to the 2006 6% Convertible Notes within a
        specified period, (iii) its failure to file a post-effective amendment to
        its
        registration statement on Form SB-2 covering shares issuable under the 2005
        Convertible Debentures within a specified period, and (iv) the failure of
        the
        Company to have sufficient authorized but unissued shares available to net
        share
        settle its 2005 convertible notes and all of its derivative financial
        instruments.
 
 The
        Company has pledged all of its assets to the holders of the 2006 6% Convertible
        Notes to secure its repayment obligations under those notes.
   **Item
                  4.**
              **Submission
                  of Matters to a Vote of Security
                  Holders**
  None.
 
 **Item
                  5.**
              **Other
                  Information**
 
 None.
 
 34
 Table
            of Contents
  **FORWARD-LOOKING
        STATEMENTS**
 
 This
        Quarterly Report on Form 10-QSB contains forward-looking statements (as defined
        in Section 27A of the Securities Act and Section 21E of the Securities Exchange
        Act of 1934 (the ``Exchange Act''). To the extent that any statements made
        in
        this Report contain information that is not historical, these statements
        are
        essentially forward-looking. Forward-looking statements can be identified
        by the
        use of words such as "expects," "plans" "will," "may," "anticipates," believes,"
        "should," "intends," "estimates," and other words of similar meaning. These
        statements are subject to risks and uncertainties that cannot be predicted
        or
        quantified and consequently, actual results may differ materially from those
        expressed or implied by such forward-looking statements. Such risks and
        uncertainties include, without limitation, our ability to finalize and close
        on
        a transaction for a new technology, our ability to raise capital to finance
        the
        development of any newly acquired technologies, the effectiveness, profitability
        and the marketability of those technologies, our ability to protect our
        proprietary information, general economic and business conditions, the impact
        of
        technological developments and competition, including our expectations and
        estimates concerning future financial performance and financing plans, adverse
        results of any legal proceedings, the impact of current, pending or future
        legislation and regulation on the healthcare industry, our ability to satisfy
        government and commercial customers using our technology, our ability to
        develop
        manufacturing capabilities or the inability to enter into acceptable
        relationships with one or more contract manufacturers for our products and
        key
        components and the ability of such contract manufacturers to manufacture
        products or components of an acceptable quality on a cost-effective basis,
        the
        volatility of our operating results and financial condition, our ability
        to
        attract or retain qualified senior management personnel, including sales
        and
        marketing and scientific personnel and other risks detailed from time to
        time in
        our filings with the SEC, and the risk that creditors, including convertible
        debt holders and secured creditors, may take aggressive collection action
        in
        respect of their past due obligations. We do not undertake any obligation
        to
        publicly update any forward-looking statements. As a result, you should not
        place undue reliance on these forward-looking statements.
 
 We
        also
        use market data and industry forecasts and projections throughout this Report,
        which we have obtained from market research, publicly available information
        and
        industry publications. These sources generally state that the information
        they
        provide has been obtained from sources believed to be reliable, but that
        the
        accuracy and completeness of the information are not guaranteed. The forecasts
        and projections are based on industry surveys and the preparers' experience
        in
        the industry, and the projected amounts may not be achieved. Similarly, although
        we believe that the surveys and market research others have performed are
        reliable, we have not independently verified this information. Forecasts
        and
        other forward-looking information obtained from these sources are subject
        to the
        same qualifications and the additional uncertainties accompanying any estimates
        of future market size, revenue and market acceptance
 
 **Item
                  6.**
              **Exhibits**
  **Exhibit
                    Number**
                **Description**2
                .1
                Certificate
                    of Ownership and Merger of CepTor Corporation into CepTor Research
                    and
                    Development Company (incorporated by reference herein to Exhibit
                    2.1 to
                    the Company's Current Report on Form 8-K dated January 31, 2005
                    (the
                    "January 2005 8-K"))3
                .1
                Amended
                    and Restated Certificate of Incorporation, dated January 27,
                    2005
                    (incorporated herein by reference to Exhibit 3.1 to the January
                    2005
                    8-K)3
                .2
                Certificate
                    of Correction to Amended and Restated Certificate of Incorporation
                    (incorporated herein by reference to Exhibit 3.1 to the Company's
                    Current
                    Report on Form 8-K, dated February 10, 2005)3
                .3
                Amended
                    and Restated By-laws (incorporated herein by reference to Exhibit
                    3.2 to
                    the January 2005 8-K)4
                .1
                Form
                    of Common Stock Certificate (incorporated herein by reference
                    to Exhibit
                    4.1 to the Company's Annual Report on Form 10-KSB for the fiscal
                    year
                    ended December 31, 2004 (the "2004 10-KSB"))4
                .2
                CepTor
                    Agreement, dated March 31, 2004 (the ``CepTor Agreement"), by
                    and among
                    William Pursley, Xechem and the Company (incorporated herein
                    by reference
                    to Exhibit 4.1 to the Company's Current Report on Form 8-K, dated
                    December
                    9, 2004 (the "2004 Form 8-K"))4
                .3
                First
                    Amendment to CepTor Agreement effective April 23, 2004, by and
                    among
                    William Pursley, the Company and Xechem (incorporated herein
                    by reference
                    to Exhibit 4.2 to the 2004 8-K)4
                .4
                Second
                    Amendment to CepTor Agreement, dated December 9, 2004, by and
                    among
                    William Pursley, the Company and Xechem (incorporated by reference
                    to
                    Exhibit 4.3 to the 2004 8-K)4
                .5
                Form
                    of Unit Warrant (incorporated by reference to Exhibit 4.4 to
                    the Company's
                    Registration Statement on Form SB-2 as filed with the SEC on
                    February 11,
                    2005 (the "Form SB-2"))4
                .6
                Form
                    of Amended and Restated Convertible Promissory Note (incorporated
                    herein
                    by reference to Exhibit 4.7 to the 2004 10-KSB)4
                .7
                Form
                    of Subscription Agreement (incorporated herein by reference to
                    Exhibit 4.6
                    to the Form SB-2)4
                .8
                Securities
                    Purchase Agreement, dated June 17, 2005 by and between the Company,
                    Xechem
                    and William Pursley (incorporated herein by reference to Exhibit
                    99.01 to
                    the Company's Current Report on Form 8-K filed on June 20,
                    2005)4
                .9
                Common
                    Stock Purchase Agreement, dated October 7, 2005, between the
                    Company and
                    Fusion Capital Fund II, LLC ("Fusion") (incorporated herein by
                    reference
                    to Exhibit 10.1 to the Company's Current Report on Form 8-K,
                    filed October
                    11, 2005 (the "October 2005 8-K"))4
                .10
                Registration
                    Rights Agreement, dated October 7, 2005, between the Company
                    and Fusion
                    (incorporated herein by reference to Exhibit 4.2 to the October
                    2005
                    8-K)4
                .11
                Common
                    Stock Warrant with Fusion, dated October 7, 2005 (incorporated
                    by
                    reference herein to Exhibit 4.1 to the October 2005
                    8-K)
  35
 Table
              of Contents
  **Exhibit
                    Number**
                **Description**4
                .12
                Agreement
                    between the Company and Brown Advisory Securities, LLC, dated
                    May 20, 2005
                    (incorporated herein by reference to Exhibit 4.1 to the Company's
                    Registration Statement on Form SB-2 as filed with the SEC on
                    October 17,
                    2005 (the "October 2005 SB-2"))4
                .13
                Secured
                    Convertible Debenture, dated December 9, 2005, issued by the
                    Company to
                    Cornell Capital (incorporated herein by reference to Exhibit
                    4.1 to our
                    Current Report on Form 8-K, filed December 15, 2005 ("December
                    2005
                    8-K"))4
                .14
                Warrant
                    issued to Cornell Capital, dated December 9, 2005 (incorporated
                    herein by
                    reference to Exhibit 4.2 to the December 2005 8-K)4
                .15
                Form
                    of Redemption Warrant to Cornell Capital (incorporated herein
                    by reference
                    to Exhibit 4.3 to the December 2005 8-K)4
                .16
                $250,000
                    Convertible Promissory Note, dated December 9, 2005, to Harbor
                    Trust
                    (incorporated herein by reference to Exhibit 4.4 to the December
                    2005
                    8-K)4
                .17
                $452,991.10
                    Amended Promissory Note, dated December 9, 2005, to Harbor Trust
                    (incorporated herein by reference to Exhibit 4.5 to the December
                    2005
                    8-K)4
                .18
                Secured
                    Convertible Debenture, dated December 28, 2005, issued by the
                    Company to
                    Cornell Capital (incorporated herein by reference to Exhibit
                    4.10 to the
                    Company's Registration Statement on Form SB-2, dated December
                    29, 2005
                    ("December 2005 SB-2"))4
                .19
                Non-Qualified
                    Option Certificate and Addendum thereto, dated March 3, 2006,
                    to Little
                    Gem Life Sciences Fund, LLC (incorporated herein by reference
                    to Exhibit
                    4.18 to the Company's Annual Report on Form 10-KSB for the year
                    ended
                    December 31, 2005 ("2005 10-KSB"))4
                .20
                Non-Qualified
                    Option Certificate and Addendum thereto, dated March 3, 2006,
                    to Peter
                    Chung (incorporated herein by reference to Exhibit 4.19 to the
                    2005
                    10-KSB)4
                .21
                Placement
                    Agency Agreement (incorporated herein by reference to Exhibit
                    1.1 to the
                    Company's Current Report on Form 8-K filed with the SEC on June
                    2,
                    2006)4
                .22
                Form
                    of Subscription Agreement (incorporated herein by reference to
                    Exhibit 4.1
                    to the Company's Current Report on Form 8-K filed with the SEC
                    on June 2,
                    2006)4
                .23
                Form
                    of 6% Convertible Note (incorporated herein by reference to Exhibit
                    4.2 to
                    the Company's Current Report on Form 8-K filed with the SEC on
                    June 2,
                    2006)4
                .24
                Form
                    of Common Stock Purchase Warrant (incorporated herein by reference
                    to
                    Exhibit 4.3 to the Company's Current Report on Form 8-K filed
                    with the SEC
                    on June 2, 2006)4
                .25
                Assignment
                    Agreement, dated June 29, 2006 (incorporated herein by reference
                    to
                    Exhibit 4.3 to the Company's Current Report on Form 8-K filed
                    with the SEC
                    on July 6, 2006)4
                .26
                Secured
                    Convertible Debenture with Longview Fund, LP, dated June 29,
                    2006
                    (incorporated herein by reference to Exhibit 4.3 to the Company's
                    Current
                    Report on Form 8-K filed with the SEC on July 6, 2006)4
                .27
                Secured
                    Convertible Debenture with Longview Fund, LP, dated June 29,
                    2006
                    (incorporated herein by reference to Exhibit 4.3 to the Company's
                    Current
                    Report on Form 8-K filed with the SEC on July 6,
                    2006)
   36
 Table
              of Contents
  **Exhibit
                    Number**
                **Description**4
                .28
                Secured
                    Convertible Debenture with Alpha Capital, Aktiengesellschaft,
                    dated June
                    29, 2006 (incorporated herein by reference to Exhibit 4.3 to
                    the Company's
                    Current Report on Form 8-K filed with the SEC on July 6,
                    2006)4
                .29
                Secured
                    Convertible Debenture with Ellis International Ltd., dated June
                    29, 2006
                    (incorporated herein by reference to Exhibit 4.3 to the Company's
                    Current
                    Report on Form 8-K filed with the SEC on July 6, 2006)4
                .30
                Secured
                    Convertible Debenture with Momona Capital, dated June 29, 2006
                    (incorporated herein by reference to Exhibit 4.3 to the Company's
                    Current
                    Report on Form 8-K filed with the SEC on July 6, 2006)4
                .31
                Warrant,
                    dated June 29, 2006 (incorporated herein by reference to Exhibit
                    4.3 to
                    the Company's Current Report on Form 8-K filed with the SEC on
                    July 6,
                    2006)4
                .32
                Securities
                    Purchase Agreement, dated August 14, 2006, by and between the
                    Company and
                    the signatories thereto (incorporated herein by reference to
                    Exhibit 4.32
                    to the Company's Quarterly Report on Form 10-QSB for the quarterly
                    period
                    ended June 30, 2006 ("June 30, 2006 10-QSB"))10
                .1
                Employment
                    Agreement, dated March 31, 2004, by and between William H. Pursley
                    and the
                    Company (incorporated herein by reference to Exhibit 10.1 to
                    the Form
                    SB-2)10
                .2
                Founders'
                    Plan (incorporated herein by reference to Exhibit 10.5 to the
                    Form
                    SB-2)10
                .3
                2004
                    Incentive Stock Plan (incorporated herein by reference to Exhibit
                    10.6 to
                    the Form SB-2)10
                .4
                Deferred
                    Stock Plan for Non-Employee Directors under the 2004 Incentive
                    Stock Plan
                    (incorporated herein by reference to Exhibit 10.7 to the 2004
                    10-KSB)10
                .5
                2006
                    Incentive Stock Plan (incorporated herein by reference to Exhibit
                    10.7 to
                    the 2005 10-KSB)10
                .6
                Sublease
                    Agreement, dated March 4, 2004, by and between the Company and
                    Millennium
                    Inorganic Chemicals, Inc. (incorporated herein by reference to
                    Exhibit
                    10.7 to the Form SB-2)10
                .7
                Exclusive
                    License Agreement, dated September 15, 2004, between the Company
                    and JCR
                    Pharmaceuticals Company, Ltd. (incorporated herein by reference
                    to Exhibit
                    10.8 to the Form SB-2)10
                .8
                Indemnification
                    Agreement, dated October 6, 2005, by and between William H. Pursley
                    and
                    the Company (incorporated herein by reference to Exhibit 10.9
                    to the
                    October 2005 SB-2)10
                .9
                Securities
                    Purchase Agreement, dated December 9, 2005, between the Company
                    and
                    Cornell Capital (incorporated herein by reference to Exhibit
                    10.1 to the
                    December 2005 8-K)10
                .10
                Side
                    Letter, dated December 9, 2005, between the Company and Cornell
                    Capital
                    (incorporated herein by reference to Exhibit 10.2 to the December
                    2005
                    8-K)10
                .11
                Investor
                    Registration Rights Agreement, dated December 9, 2005, between
                    the Company
                    and Cornell Capital (incorporated herein by reference to Exhibit
                    10.3 to
                    the December 2005 8-K)10
                .12
                Security
                    Agreement, dated December 9, 2005, between the Company and Cornell
                    Capital
                    (incorporated herein by reference to Exhibit 10.4 to the December
                    2005
                    8-K)
 10
                .13
                Rights
                    Agreement, dated March 7, 2006, between the Company and American
                    Stock
                    Transfer & Trust Company (incorporated herein by reference to Exhibit
                    1 to the Company's Registration Statement on Form 8-A, dated
                    March 8,
                    2006)10
                .14
                Manufacture
                    and Supply Agreement entered into as of April 18, 2005 by and
                    among
                    Peninsula Laboratories Inc., Bachem AG, Bachem Americas and the
                    Company
                    (incorporated by reference herein to Exhibit 10.14 to the Company's
                    Quarterly Report on Form 10-QSB for the quarter ended March 31,
                    2005)10
                .15
                Term
                    Sheet, dated May 3, 2006, by and between the Company and Margie
                    Chassman
                    (incorporated herein by reference to Exhibit 10.1 to the Company's
                    Current
                    Report on Form 8-K, filed May 9, 2006)31
                .1*
                Section
                    302 Certification of Principal Executive Officer and Principal
                    Financial
                    Officer32
                .1*
                Section
                    906 Certification of Principal Executive Officer and Principal
                    Financial
                    Officer
  *           Filed
          herewith.
  37
 Table
            of Contents
 
   **SIGNATURES**
 
 In
        accordance with the requirements of the Exchange Act, the registrant caused
        this
        report to be signed on its behalf by the undersigned, thereunto duly
        authorized.
  **CEPTOR
                    CORPORATION**Date: August
                    14, 2007
              By:
              /s/
                    Howard BeckerHoward
                    BeckerChief
                    Executive Officer and Director
                (Principal
                    Executive Officer and
                Principal
                    Financial Officer)
 
    38