**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 September 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
      October 25, 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




**Tableof
      Contents**







**Page****Part
                  I   FINANCIAL INFORMATION**Item
                  1.
              Financial
                  Statements (Unaudited)
              1Balance
                  Sheet – September 30, 2007
              1Statements
                  of Operations for the three and nine month periods
                  ended September 30, 2007 and 2006, and for the period  from
                  August 11, 1986 (date of inception) to September 30,
                  2007
              2Statement
                  of Changes in Stockholders' Deficiency for the period
                  from August 11, 1986 (date of inception) to September 30,
                  2007
              3Statements
                  of Cash Flows for the nine-month period ended
                  September 30, 2007 and 2006 and for the period from August 11,
                  1986 (date
                  of inception) to September 30, 2007
              13Notes
                  to Condensed Financial Statements
              15Item
                  2.
              Managements
                  Discussion and Analysis or Plan of
                  Operation
              33Item
                  3.
              Controls
                  and Procedures
              35**Part
                  II   OTHER INFORMATION**Item
                  1.
              Legal
                  Proceedings
              36Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of
                  Proceeds
              36Item
                  3.
              Defaults
                  Upon Senior
                  Securities
              36Item
                  4.
              Submission
                  of Matters to a Vote of Security
                  Holders
              36Item
                  5.
              Other
                  Information
              36Item
                  6.
              Exhibits
              37







Table
          of Contents






**CeptorCorporation****(A
                  Development Stage Company)****Condensed
                  Balance Sheet****(Unaudited)**






**September
                  30,****2007**AssetsCurrent
                  assetsCash
                  and cash equivalents
              
              $
              1,342Prepaid
                  services and other current assets (note 5)
              
              
              305Total
                  current assets
              
              
              1,647Deferred
                  financing costs (note 6)
              
              
              233,397Total
                  assets
              
              $
              235,044Liabilities
                  and Stockholders' DeficitCurrent
                  liabilitiesAccounts
                  payable
              
              $
              4,014,667Accrued
                  liabilities (note 7)
              
              
              1,500,386Unsecured Advances
              
              
              583,000Convertible
                  notes, net of discounts $652,910 (note 8)
              
              
              5,315,270Warrant
                  liability (note 4)
              
              
              485,516Conversion
                  option liability (note 4)
              
              
              163,364Total
                  current liabilities
              
              
              12,062,203Commitments
                  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 September 30, 2007 (note
                  9)
              
              
              1,555Additional
                  paid-in capital
              
              
              27,045,028Deficit
                  Accumulated during the Development Stage
              
              
              (44,283,742
              )Total
                  stockholder's deficit
              
              
              (11,827,159
              )Total
                  liabilities and stockholders' deficit
              
              $
              235,044




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




1
 Table
          of Contents




**CeptorCorporation**


**(A
                  DevelopmentStage Company)****Condensed
                  Statements of Operations****(Unaudited)**




**Cumulative
                  from****For
                  the Three**
              
              
              **For
                  the Three**
              
              
              **For
                  the Nine**
              
              
              **For
                  the Nine**
              
              
              **Inception****Months
                  Ended**
              
              
              **Months
                  Ended**
              
              
              **Months
                  Ended**
              
              
              **Months
                  Ended**
              
              
              **(August
                  11, 1986)****September
                  30,**
              
              
              **September
                  30,**
              
              
              **September
                  30,**
              
              
              **September
                  30,**
              
              
              **September
                  30,****2007**
              
              
              **2006**
              
              
              **2007**
              
              
              **2006**
              
              
              **2007**Revenue:Other
                  income
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              75,349Operating
                  expenses:Impairment
                    of fixed assets
              
              
              -
              
              
              
              -
              
              
              
              35,562
              
              
              
              -
              
              
              
              35,562Research
                  and development
              
              
              -
              
              
              
              238,947
              
              
              
              -
              
              
              
              1,282,699
              
              
              
              14,165,974In-process
                    research and development
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              5,034,309General
                  and administrative expenses
              
              
              54,061
              
              
              
              326,504
              
              
              
              398,769
              
              
              
              2,083,257
              
              
              
              12,761,939Gain
                    on extinguishment of debt
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (387,362
              )
              
              
              (698,643
              )Change
                  in fair value of derivative
                  financial   instruments
              
              
              (1,375,921
              )
              
              
              7,544,948
              
              
              
              (5,561,133
              )
              
              
              5,218,363
              
              
              
              (15,006,995
              )Interest
                    (income) expense, net
              
              
              464,475
              
              
              
              5,421,577
              
              
              
              3,332,470
              
              
              
              10,716,217
              
              
              
              18,877,915Total
                    operating (income) expenses
              
              
              (857,385
              )
              
              
              13,531,976
              
              
              
              (1,794,332
              )
              
              
              18,913,174
              
              
              
              35,170,061Net
                    income (loss)
              
              
              857,385
              
              
              
              (13,531,976
              )
              
              
              1,794,332
              
              
              
              (18,913,174
              )
              
              
              (35,094,712
              )Preferred
                    dividends
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (10,100,616
              )Net
                    income (loss) available to common shareholders
              
              $
              857,385
              
              
              $
              (13,531,976
              )
              
              $
              1,794,332
              
              
              $
              (18,913,174
              )
              
              $
              (45,192,328
              )Net
                    income (loss) per share - basic
              
              $
              0.06
              
              
              $
              (0.87
              )
              
              $
              0.12
              
              
              $
              (1.32
              )Net
                    income (loss) per share - fully diluted
              
              $
              0.03
              
              
              $
              (0.87
              )
              
              $
              0.07
              
              
              $
              (1.32
              )Weighted
                    average shares outstanding - basic
              
              
              15,550,096
              
              
              
              15,500,069
              
              
              
              15,550,096
              
              
              
              14,363,623Weighted
                    average shares outstanding - fully diluted
              
              
              26,905,209
              
              
              
              15,500,069
              
              
              
              26,905,209
              
              
              
              14,363,623




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






2
 Table
          of Contents




**CeptorCorporation**
 **(A
      Development Stage Company)**


**Statements of
      Changes in Stockholders' (Deficiency) Equity**


**(Unaudited)**


**Preferred
                  Stock**
              
              
              **Common
                  Stock**
              
              
              
              
              
              **Subscription**
              
              
              **Deferred-**
              
              
              **AdditionalPaid-in**
              
              
              **Treasury
                  Stock**
              
              
              
              
              
              **Accumulated
                  During the Development**
              
              
              **Total
                  Stockholders'(Deficiency)****Shares**
              
              
              **Amount**
              
              
              **Shares**
              
              
              **Amount**
              
              
              **Receivable**
              
              
              **Compensation**
              
              
              **Capital**
              
              
              **Shares**
              
              
              **Amount**
              
              
              **Stage**
              
              
              **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
              )
              
              $
              308Net
                  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
              )




3
 Table
          of Contents




**CeptorCorporation**
 **(A
          Development Stage Company)**
 **Statements of
          Changes in Stockholders' (Deficiency) Equity**
 **(Unaudited)(Continued)**




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
              )Net
                  income
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              72,498
              
              
              
              72,498**Balance,
                  December 31, 2003**
              
              -
              
              
              $
              -
              
              
              
              3,898,213
              
              
              $
              390
              
              
              $
              -
              
              
              $
              -
              
              
              $
              641,147
              
              
              
              -
              
              
              $
              -
              
              
              $
              (915,846
              )
              
              $
              (274,309
              )








4
 Table
          of Contents




**CeptorCorporation**
 **(A
          Development Stage Company)**
 **Statements of
          Changes in Stockholders' (Deficiency) Equity**
 **(Unaudited)** **(Continued)**


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
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              312,500






5
 Table
          of Contents




**CeptorCorporation**
 **(A
          Development Stage Company)**
 **Statements of
          Changes in Stockholders' (Deficiency) Equity**
 **(Unaudited)** **(Continued)**
  Warrants
                    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
                )
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                2,804,240Acquisition
                    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
              )
              
              
              -
 6
 Table
            of Contents
  **CeptorCorporation**
 **(A
            Development Stage Company)**
 **Statements of
            Changes in Stockholders' (Deficiency) Equity**
 **(Unaudited)** **(Continued)**
 
 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
              )
              
              
              -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
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
    7
 Table
            of Contents
  **CeptorCorporation**
 **(A
            Development Stage Company)**
 **Statements of
            Changes in Stockholders' (Deficiency) Equity**
 **(Unaudited)** **(Continued)**
 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
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              270,000Common
                  stock issued July 2005 upon conversion of preferred shares
                  ($2.50)
              
              
              (20
              )
              
              
              (500,000
              )
              
              
              200,000
              
              
              
              20
              
              
              
              -
              
              
              
              -
              
              
              
              499,980
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -




8
 Table
          of Contents




**CeptorCorporation**
 **(A
          Development Stage Company)**
 **Statements of
          Changes in Stockholders' (Deficiency) Equity**
 **(Unaudited)** **(Continued)**




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
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
   9
 Table
            of Contents
  **CeptorCorporation**
 **(A
            Development Stage Company)**
 **Statements of
            Changes in Stockholders' (Deficiency) Equity**
 **(Unaudited)** **(Continued)**
 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
              )


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
              )




10
 Table
          of Contents




**CeptorCorporation**
 **(A
            Development Stage Company)**
 **Statements of
            Changes in Stockholders' (Deficiency) Equity**
 **(Unaudited)** **(Continued)**


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
              )
   11
 Table
            of Contents
  **CeptorCorporation**
 **(A
            Development Stage Company)**
 **Statements of
            Changes in Stockholders' (Deficiency) Equity**
 **(Unaudited)** **(Continued)**
 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
              )
              
              $
              (12,684,614
              )Value
                  of options granted to board member
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              70
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              70Net
                  income (loss)
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              857,385
              
              
              
              857,385**Balance
                  September 30, 2007**
              
              
              216
              
              
              $
              5,410,000
              
              
              
              15,550,069
              
              
              $
              1,555
              
              
              $
              -
              
              
              $
              -
              
              
              $
              27,045,028
              
              
              $
              -
              
              
              $
              -
              
              
              $
              (44,283,742
              )
              
              $
              (11,827,159
              )


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




12
 Table
          of Contents




**CeptorCorporation****(A
                  Development Stage Company)****Statement
                  of Cash Flows****(Unaudited)**




**For
                  the Nine**
              
              
              **For
                  the Nine**
              
              
              **Cumulative****Months
                  Ended**
              
              
              **Months
                  Ended**
              
              
              **from
                  Inception****September
                  30,**
              
              
              **September
                  30,**
              
              
              **(August
                  11, 1986) to****2007**
              
              
              **2006**
              
              
              **September
                  30, 2007**Cash
                  flows from operating activities:Net
                  income (loss)
              
              $
              1,794,332
              
              
              $
              (18,913,174
              )
              
              $
              (35,094,712
              )**Adjustments
                  to reconcile net loss to net****cash
                  used in operating activities:**Depreciation
                  and amortization
              
              
              -
              
              
              
              14,302
              
              
              
              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
              
              
              -
              
              
              
              113,246
              
              
              
              267,802Stock-based
                  compensation to nonemployees
              
              
              -
              
              
              
              579,591
              
              
              
              4,802,822Stock-based
                  component of payment of legal fees
              
              
              -
              
              
              
              -
              
              
              
              70,000Stock-based
                  component of litigation settlement
              
              
              -
              
              
              
              -
              
              
              
              422,000Amortization
                  of deferred compensation
              
              
              210
              
              
              
              -
              
              
              
              210Gain
                  on extinguishment of debt
              
              
              -
              
              
              
              (387,362
              )
              
              
              (698,643
              )Impairment
                  of fixed assets
              
              
              36,362
              
              
              
              -
              
              
              
              36,362Change
                  in fair vale of derivative securities
              
              
              (5,561,133
              )
              
              
              5,218,363
              
              
              
              (15,006,995
              )Non-cash
                  interest expense
              
              
              3,039,572
              
              
              
              10,499,745
              
              
              
              18,167,980Changes
                  in operating assets and liabilities:Prepaid
                  services and other assets
              
              
              12,592
              
              
              
              112,585
              
              
              
              (305
              )Other
                  assets
              
              
              -
              
              
              
              4,243
              
              
              
              -Accounts
                  payable and accrued expenses
              
              
              430,092
              
              
              
              (758,613
              )
              
              
              4,945,819**Net
                  cash used in operating activities**
              
              
              (247,973
              )
              
              
              (3,517,074
              )
              
              
              (14,920,292
              )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
              
              
              237,000
              
              
              
              3,528,000
              
              
              
              7,777,444Debt
                  issuance costs
              
              
              -
              
              
              
              (561,195
              )
              
              
              (1,125,012
              )Principal
                  payments on bridge loans
              
              
              -
              
              
              
              -
              
              
              
              (350,000
              )**Net
                  cash provided by financing activities**
              
              
              237,000
              
              
              
              3,166,805
              
              
              
              15,008,555Net
                  increase (decrease) in cash and cash equivalents
              
              
              (10,973
              )
              
              
              (350,269
              )
              
              
              1,342Cash
                  and cash equivalents at beginning of period
              
              
              12,315
              
              
              
              434,277
              
              
              
              -Cash
                  and cash equivalents at end of period
              
              $
              1,342
              
              
              $
              84,008
              
              
              $
              1,342






13
 Table
          of Contents




**Ceptor
                    Corporation****(A
                    Development Stage Company)****Statement
                    of Cash Flows****(Unaudited)****(Continued)**




Supplemental
                    disclosures of cash flow information:Cash
                    paid during the period for:Interest
                
                $
                -
                
                
                $
                -
                
                
                $
                35,421Taxes
                
                $
                -
                
                
                $
                -
                
                
                $
                -Deemed
                    dividend of the beneficial conversion feature of units sold in
                    private
                    placement
                
                $
                -
                
                
                $
                -
                
                
                $
                10,100,616Issuance
                    of 2,902,500 shares of common stock upon conversion of preferred
                    shares
                
                $
                -
                
                
                $
                668,750
                
                
                $
                6,587,500Issuance
                    of 267,500 shares of common stock upon conversion 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 upon conversion of convertible
                    note
                
                $
                -
                
                
                $
                320,725
                
                
                $
                320,725Issuance
                    of 1,299,850 shares of common stock upon conversion of convertible
                    shares
                
                $
                -
                
                
                $
                300,000
                
                
                $
                300,000Issuance
                    of 100,000 shares of common stock pursuant to stock plan
                
                $
                -
                
                
                $
                -
                
                
                $
                270,000Issuance
                    of 7,500 shares of common stock as compensation for past
                    services
                
                $
                -
                
                
                $
                -
                
                
                $
                46,875Issuance
                    of 25,000 shares of common stock as compensation for financial
                    planning
                
                $
                -
                
                
                $
                -
                
                
                $
                75,000Issuance
                    of 23,000 shares of common stock in payment of accrued legal
                    fees
                
                $
                -
                
                
                $
                -
                
                
                $
                70,000Capital
                    contribution for repurchase of common stock pursuant to Stock
                    Purchase
                    Agreement
                
                $
                -
                
                
                $
                -
                
                
                $
                424,818Issued
                    36,000 shares of common stock as debt issuance costs
                
                $
                -
                
                
                $
                -
                
                
                $
                90,000Issued
                    451,597 shares of common stock to bridge loan investors and placement
                    agents
                
                $
                -
                
                
                $
                -
                
                
                $
                550,000Issuance
                    of 167,610 shares of common stock upon conversion of convertible
                    notes
                
                $
                -
                
                
                $
                -
                
                
                $
                209,512Issuance
                    of convertible notes in exchange for bridge loans and long-term
                    debt plus
                    accrued interest
                
                $
                -
                
                
                $
                -
                
                
                $
                1,111,240Obligation
                    to repurchase 401,305 shares of common stock pursuant to put
                    right
                
                $
                -
                
                
                $
                -
                
                
                $
                1,637,325




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




14
 Table
          of Contents




**CepTorCorporation**
 **(A
          Development Stage Company)**
 **Notes
          to Condensed Financial Statements**
 **September
          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 nine
          month
          periods ended September 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 that 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.
 
 The
              Company’s efforts to date in seeking to acquire an alternative technology around
              which to reorganize its affairs have been unsuccessful.  Though the
              Company is continuing to seek to identify such a company or technology
              to
              acquire, there remains substantial doubt as to whether such a transaction
              will materialize and successfully close.  Absent consummation of such
              a transaction, the Company would very likely cease all operations and
              wind down
              its affairs in their entirety.
 
 In
                  connection with the Company’s efforts to divest itself of its existing
                  technologies, on March 29, 2007, CepTor executed a non-binding
                  term sheet with
                  its original founding scientists, Drs. Al Stracher and Leo Kesner,
                  which
                  contemplated the transfer of our MyodurTM and NeurodurTM technologies to a private
                  corporation controlled by these founding scientists in exchange for, among
                  other things, a substantial minority interest in that private entity,
                  as well as
                  a substantial gross royalty on any future product sales.  We are
                  continuing to negotiate with the founding scientists the final
                  terms of a
                  mutually acceptable transaction substantially along the lines of
                  those contained
                  in the March 29 term sheet.  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.
 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 is
                  expected to be the consensual restructuring of 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 terminate
                  operations or commence bankruptcy proceedings. These matters raise
                  substantial doubt as to the Company’s ability to continue as a going a
                  concern.
 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 and that current
                unsecured creditors and equity security holders will receive no value
                for their
                claims and interests.
  15
 Table
              of Contents
  **CepTor
          Corporation**
 **(A
          Development Stage Company)**
 **Notes
          to Condensed Financial Statements**
 **September
          30, 2007**
 **(Unaudited)**
  
 The
            Company is a development stage company with a limited history of operations
            which 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 $5,515,053 at September
              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, together with accrued interest as of
              September
              30, 2007 of $551,180. 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. Even if sufficient
                capital were available to the Company, which it is not, there is
                no assurance
                that the Company would be successful in obtaining the approval of
                its
                IND.  Moreover, with no current  funding available to it to
                seek to resolve these issues the Company has halted development of
                its
                programs.
 
 To
              date,
              the Company has pursued discussions with the owners of a certain potential
              acquisition targets, but has been unsuccessful in its efforts to identify
              a
              suitable transaction for the acquisition of an alternative technology
              around
              which to reorganize its affairs.   Though the Company is
              continuing to seek to identify a possible transaction that will allow
              it to
              reorganize its affairs, there remains substantial doubt as to whether such
              a transaction will materialize and successfully close.  Absent
              consummation of such a transaction, the Company would very likely cease
              all
              operations and wind down its affairs in their entirety.
 
 In
                connection with the Company’s efforts to divest itself of its existing
                technologies, we are continuing to negotiate with our original founding
                scientists, Drs. Al Stracher and Leo Kesner, over the final terms
                of a mutually
                acceptable transaction substantially along the lines of those contained
                in a
                term sheet executed by the parties on March 29, 2007.  However, there
                can be no assurance that such a transaction will be consummated or
                that, if
                consummated, CepTor will become a viable, self-sustaining
                entity.  There is also no 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.
    16
 Table
              of Contents
  **CepTor
          Corporation**
 **(A
          Development Stage Company)**
 **Notes
          to Condensed Financial Statements**
 **September
          30, 2007**
 **(Unaudited)**
  
 Primarily
                as the result of recording during the nine months ended September
                30, 2007
                non-cash interest expense of $3,332,470 offset by a non-cash gain
                associated
                with the decrease in the liability associated with the fair values
                of its
                derivative financial instruments of $5,561,133, the Company recorded
                a net
                income for the three and nine month periods ended September 30, 2007
                of $857,385
                and $1,794,332, respectively. Non-cash interest expense consisted
                of the
                amortization of the discount on notes payable of $1,942,979; amortization
                of
                deferred financing cost of $953,816, and accrual of liquidated damages
                of
                $142,778. The Company used net cash flows in its operating activities
                of
                $247,973 during the nine month period ended September 30, 2007. The
                Company's
                working capital deficiency amounted to $12,060,556, and its development
                stage
                accumulated deficit amounted to $44,283,742 at September 30, 2007.
                The Company
                will require substantial additional funding either to develop its
                existing
                technologies or to pursue development of alternate technologies it
                may
                acquire
  At
                  September 30, 2007, the Company had approximately $6,000,000 in
                  principal amount
                  of convertible notes outstanding, together with accrued interest
                  of
                  $551,180.  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 September 30, 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 are
                  now due and payable, and (iii) the Cornell Convertible Debentures
                  of $1,700,000
                  mature by their terms in December 2008. In addition to its convertible
                  notes,
                  the Company has received $ 563,000 in unsecured cash advances,
                  of which $
                  115,000 and $217,000 was borrowed during the three and nine months ended
                  September 30, 2007, respectively. 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.
 
 As
                  a
                  result of the Company’s failure to remain current in its obligations to American
                  Stock Transfer, Inc., its stock transfer agent, all business services
                  customarily performed for the Company by its transfer agent, including
                  issuing
                  stock, processing conversion requests, removing restrictive legends,
                  recording
                  stock transfers, issuing shareholder lists, etc., have been suspended
                  temporarily.  We are working to resolve this matter with the stock
                  transfer agent so that normal and customary stock transfer services
                  for the
                  Company can resume.  However, unless and until this situation is
                  resolved, our inability to ensure the timely processing of conversion
                  requests,
                  removal of restrictive legends, process transfers, etc. may trigger
                  further
                  liabilities and defaults under our existing debt and equity
                  securities.
 
 **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 September 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
            September
            30, 2007 is $44,283,742.
   17
 Table
              of Contents
  **CepTor
          Corporation**
 **(A
          Development Stage Company)**
 **Notes
          to Condensed Financial Statements**
 **September
          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 $210 for the fair value of
            these stock
            options which vested during the nine month period ended September 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 set forth below.  These figures are based on the
            fixed conversion prices contained in these instruments rather than the
            floating
            prices, which could result in an undetermined number of shares issuable
            upon
            conversion o the affected securities.
 
 **September
                    30,****2007**
                
                
                **2006**Series
                      A Preferred Stock
                
                
                11,355,113
                
                
                
                8,794,000Warrants
                
                
                33,912,855
                
                
                
                32,509,897Options
                
                
                1,878,834
                
                
                
                1,971,029Convertible
                    Notes
                
                
                45,102,700
                
                
                
                41,027,483Total
                
                
                92,249,502
                
                
                
                84,302,409
   18
 Table
              of Contents
  **CepTor
          Corporation**
 **(A
          Development Stage Company)**
 **Notes
          to Condensed Financial Statements**
 **September
          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
          September 30, 2007, the Company had net liabilities of $485,517 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 three and nine
          months
          ended September 30, 2007, the Company recognized a credits of $1,375,921
          and $
          5,561,133, respectively,  for the decrease in fair value of the derivative
          financial instruments. The fair value of these awards was estimated at
          September
          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: 0.5 years to 4.3 years; and volatility: 321%.
  **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.
   19
 Table
              of Contents
  **CepTor
          Corporation**
 **(A
          Development Stage Company)**
 **Notes
          to Condensed Financial Statements**
 **September
          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 three and nine months ended September 30, 2007, the Company recognized
              a
              gain of $1,375,921 and $5,561,133, respectively,  for the decrease in
              fair value of the derivative financial instruments. The fair values
              of these
              embedded conversion options were estimated at September 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: 321%.
 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.
   20
 Table
              of Contents
  **CepTor
          Corporation**
 **(A
          Development Stage Company)**
 **Notes
          to Condensed Financial Statements**
 **September
          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.
   21
 Table
              of Contents
  **CepTor
          Corporation**
 **(A
          Development Stage Company)**
 **Notes
          to Condensed Financial Statements**
 **September
          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 nine months ended September 30, 2007, the Company amortized $8,701
          and
          $953,817, respectively, of deferred financing costs to non-cash interest
          expense,  and at September 30, 2007 the balance in deferred financing costs
          is $233,397.
  **NOTE
          7 - ACCRUED LIABILITIES**
  Accrued  liabilities
          at September 30, 2007 are as follows:
 
 Financial
                      investor relations fees
                
                $
                188,329Interest
                    on convertible notes
                
                
                669,607Liquidated
                      damages
                
                
                642,450Total
                
                $
                1,500,386
 
 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 September 30, 2007, the Company accrued 18% of
          the outstanding principal, or $642,450.
 
 **NOTE
          8 - UNSECURED ADVANCES AND CONVERTIBLE NOTES**
  During
                the three and nine months ended September 30, 2007, the Company received
                unsecured advances from Margie Chassman  in the amount of $20,000 and
                $237,000, respectively. These advances bear interest at the rate
                of 8% per
                annum.
  ***Note
                Obligations in Default***
 
 The
                  Company is in default of all of its convertible note obligations,
                  which amount
                  to approximately $6,000,000 in aggregate principal amount, plus
                  accrued interest
                  as of September 30, 2007 of $551,180. 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 September 30,
                  2007, the Company, on a fully diluted basis, had 107,799,571 shares issued
                  and potentially issuable in connection with all of its outstanding
                  common stock
                  convertible instruments, stock options and derivative financial
                  instruments
                  based on the fixed conversion and exercise  prices in these
                  instruments.   The number of shares potentially issuable under
                  the floating price calculations contained in the Cornell Convertible
                  Debentures
                  (i.e., 95% of the lowest closing price for the Company’s common stock during the
                  20 days preceding the conversion), and the 2006 6% Convertible
                  Notes ( 90% of
                  the lowest closing price for the Company’s common stock during the 20 days
                  preceding the conversion) would result in an indeterminate number
                  of shares
                  being issued.
 22
 Table
              of Contents
 
 **CepTor
          Corporation**
 **(A
          Development Stage Company)**
 **Notes
          to Condensed Financial Statements**
 **September
          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
          September 30, 2007, the principal amount of $448,736 remains outstanding
          under
          the December 2004 Convertible Note.
    23
 Table
              of Contents
  **CepTor
          Corporation**
 **(A
          Development Stage Company)**
 **Notes
          to Condensed Financial Statements**
 **September
          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 $9,877 at September 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 September 30, 2007.
  As
          of
          September 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
          September 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.
   24
 Table
              of Contents
  **CepTor
          Corporation**
 **(A
          Development Stage Company)**
 **Notes
          to Condensed Financial Statements**
 **September
          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 September 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 September 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.
   25
 Table
              of Contents
  **CepTor
          Corporation**
 **(A
          Development Stage Company)**
 **Notes
          to Condensed Financial Statements**
 **September
          30, 2007**
 **(Unaudited)**
    As
          of
          September 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 $153,487 at September 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
          $576,630,
          at September 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.
   26
 Table
              of Contents
  **CepTor
          Corporation**
 **(A
          Development Stage Company)**
 **Notes
          to Condensed Financial Statements**
 **September
          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.
   27
 Table
              of Contents
  **CepTor
          Corporation**
 **(A
          Development Stage Company)**
 **Notes
          to Condensed Financial Statements**
 **September
          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 September
          30,
          2007, the Company valued the warrants and conversion options at
          $485,516  and $163,363 , respectively.
   28
 Table
              of Contents
  **CepTor
          Corporation**
 **(A
          Development Stage Company)**
 **Notes
          to Condensed Financial Statements**
 **September
          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 September 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 3,190,233 and 1,570,364
            shares,
            respectively, calculated as of September 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%.
   29
 Table
              of Contents
  **CepTor
          Corporation**
 **(A
          Development Stage Company)**
 **Notes
          to Condensed Financial Statements**
 **September
          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 nine month period ended September 30, 2007, the Company issued the
          following
          equity securities.
  ***Common
          Stock Issued Upon Conversion of Series A Preferred
          Stock***
  During
          the nine month period ended September 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 effect 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.
   30
 Table
              of Contents
  **CepTor
          Corporation**
 **(A
          Development Stage Company)**
 **Notes
          to Condensed Financial Statements**
 **September
          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 $210 for the fair value
          of those stock options granted prior to January 1, 2006 and which vested
          during
          the three and nine month periods ended September 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 September 30, 2007.
   31
 Table
              of Contents
  **CepTor
          Corporation**
 **(A
          Development Stage Company)**
 **Notes
          to Condensed Financial Statements**
 **September
          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 nine-month period ended September 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
                
                
                
                3.17
                
                
                $
                -Granted
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Exercised
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Forfeited
                    or expired
                
                
                16,000
                
                
                
                4.84
                
                
                
                7.62
                
                
                
                -Outstanding
                      at September 30, 2007
                
                
                1,862,834
                
                
                $
                0.53
                
                
                
                3.26
                
                
                $
                -Exercisable
                    at September 30, 2007
                
                
                1,841,834
                
                
                $
                0.52
                
                
                
                3.18
                
                
                $
                -
  As
          of
          September 30, 2007, the Company has $2,100 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 2.00 years.


32
 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 since winding
        down our Maryland-based operations 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.
 
 To
            date,
            the Company has pursued discussions with the owners of a certain potential
            acquisition targets, but has been unsuccessful in its efforts to identify
            a
            suitable transaction for the acquisition of an alternative technology
            around
            which to reorganize its affairs.   Though the Company is
            continuing to seek to identify a possible transaction that will allow
            it to
            reorganize its affairs, there remains substantial doubt as to whether
            such a
            suitable transaction will materialize and successfully close.  Absent
            consummation of such a transaction, the Company would very likely cease
            all
            operations and wind down its affairs in their entirety.
 
 In
            connection with the Company’s efforts to divest itself of its existing
            technologies, on March 29, 2007, CepTor executed a non-binding term sheet
            with
            its original founding scientists, Drs. Al Stracher and Leo Kesner which
            contemplated the transfer of our MyodurTM and NeurodurTM technologies to a private
            corporation controlled by the founding scientists in exchange for, among
            other things, a substantial minority interest in that private entity,
            as well as
            a substantial gross royalty on any product sales had their efforts proven
            successful.   We are continuing to negotiate with the founding
            scientists the final terms of a mutually acceptable transaction substantially
            along the lines of those contained in the March 29 term
            sheet.   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.
  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
            is
            expected to 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. These matters raise substantial doubt as to the Company’s
            ability to continue as a going a concern.
 
 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 and that current
            creditors and equity security holders will receive no value for their
            claims and
            interests.
  ***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
            and
            accrued liabilities, which aggregated approximately $5.5 million at September
            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 all of
            its
            convertible note obligations, which amount to approximately $6 million
            in
            aggregate principal, plus accrued interest as of September 30, 2007 of
            $551,180.
            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.
 33
 Table
            of Contents
  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 seek
            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 three and nine months ended September 30, 2007, we funded our operations
          through unsecured advances from Margie Chassman of $20,000 and $237,000,
          respectively.
  Primarily
          as the result of recording interest expense of $3,332,470 (including non-cash
          interest expense of $3,039,573), offset by the non-cash gain associated
          with the
          decrease in the fair values of its derivative financial instruments of
          $5,561,133, we recorded a net income for the three and nine month periods
          ended
          September 30, 2007 of $857,385 and $1,794,332, 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
          from
          our operating activities of $247,973 during the nine-month period ended
          September 30, 2007. Our working capital deficiency amounted to $12,060,556
          and
          our development stage accumulated deficit amounted to $44,283,742 at September
          30, 2007. The Company will require substantial additional funding to develop
          any
          newly acquired technology and fund ongoing costs of its operations.
  At
          September 30, 2007, the Company had $6,583,000 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 September
          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 September 2007 through October
          2007,
          (iii) the Cornell Convertible Debentures of $1,700,000 mature in December
          2008,
          and (iv) $583,000 represent unsecured advances from Margie Chassman 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 noteholders 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.
  ***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 and accrued liabilities which aggregated approximately $5,515,053
          million at September 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, together
          with
          accrued interest as of September 30, 2007 of $551,180. 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.
 
 As
          a
          result of the Company’s failure to remain current in its obligations to American
          Stock Transfer, Inc., its stock transfer agent, all business services
          customarily performed for the Company by its transfer agent, including
          issuing
          stock, processing conversion requests, removing restrictive legends, recording
          stock transfers, issuing shareholder lists, etc., have been suspended for
          the
          time being.  We are working to resolve this matter with the stock
          transfer agent so that normal and customary stock transfer services for
          the
          Company can resume.  However, unless and until this situation is
          resolved, our inability to ensure the timely processing of conversion requests,
          removal of restrictive legends, process transfers, etc. may trigger further
          liabilities and defaults under our existing debt and equity
          securities.
  ***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 nine months ended September 30, 2007.
   34
 Table
            of Contents
  ***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
        September 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.
   **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, considering our status as a virtual company with
            limited
            business activities, 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, 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. As a result of our
              currently having only one individual who is responsible for all financial
              reporting, there has been a change in our internal controls over financial
              reporting that reflects that fact.  Also, since we have only one
              employee, there is no segregation of duties and no effective internal
              control in
              the Company.  If the current situation changes and sufficient capital is
              secured, it is our intention to increase staffing within our general
              accounting
              and financial functions.
  35
 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,
            and
            would likely precipitate a bankruptcy filing by the Company or cause
            it to wind
            down its 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, together with interest as of September 30,
            2007 of
            $551,180. 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.
  
 36
 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)
 
 
 37
 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)
 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.
  
  38
 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: November 14, 2007
              By:
              /s/
                  Howard
                  BeckerHoward
                  BeckerChief
                  Executive Officer and Director
                (Principal
                  Executive Officer and
                Principal
                  Financial Officer)
 
   39
 Table
            of Contents