**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **WASHINGTON,
        D.C. 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: March
        31, 2006
 
 **OR**
 
 o
              TRANSITION
                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF
                  1934
 
 For
        the
        transistion period from ________ to ________.
 
 Commission
        File No.: 0-20726
 
 **Cortech,
        Inc.**
 (Exact
        name of small business issuer as specified in its charter)
 
 Delaware
              
              84-0894091(State
                  or other jurisdiction ofincorporation
                  or organization)
              
              (I.R.S.
                  EmployerIdentification
                  No.)
 
 376
        Main Street, PO Box 74, Bedminster, NJ 07921
 (Address
        of principal executive offices)
 
 (908)
        234-1881
 (Issuer's
        telephone number)
 
 N/A
 (Former
        name, former address and former fiscal year,
 if
        changed since last report)
 
 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 issuer was required to file such reports), and (2) has been subject
        to
        such filing requirements for the past 90 days.
 Yes x No o
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act).
 Yes x No o
 
 **APPLICABLE
        ONLY TO ISSUERS INVOLVED IN BANKRUPTCY**
 **PROCEEDINGS
        DURING THE PRECEDING FIVE YEARS**
 
 Check
        whether the registrant filed all documents and reports required to be filed
        by
        Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities
        under a plan confirmed by a court.
 Yes o  No o
 
 **APPLICABLE
        ONLY TO CORPORATE ISSUERS**
 
 State
        the
        number of shares outstanding of each of the issuer's classes of common equity
        as
        of the latest practicable date: As of April 30, 2006, the issuer had 3,570,000
        shares of its common stock, par value $.002 per share, outstanding.
 
 Transitional
        Small Business Disclosure Format (check one):
 Yes o No x
  
 
 
 **PART
                  I.**
              **FINANCIAL
                  INFORMATION**
 
 **ITEM
                  1.**
              **Financial
                  Statements**
 
 **CORTECH,
        INC.**
 **BALANCE
        SHEET**
 **MARCH
        31, 2006**
 **(in
        000’s, except share and per share amounts)**
 **(UNAUDITED)**
 
 ASSETSCurrent
                  assets:Cash
                  and cash equivalents
              
              $
              208Short-term
                  investments
              
              
              10,966Other
                  assets
              
              
              21Total
                  assets
              
              $
              11,195LIABILITIES
                  AND STOCKHOLDERS’ EQUITYCurrent
                  liabilities:Accrued
                  liabilities
              
              $
              108Commitments
                  and contingenciesStockholders’
                  equity:Preferred
                  stock, $.002 par value; 2,000,000 shares authorized; none
                  issued
              
              
              -Common
                  stock, $.002 par value; 5,000,000 shares authorized; 3,594,940
                  shares
                  issued and outstanding
              
              
              7Additional
                  paid-in capital
              
              
              99,442Accumulated
                  deficit
              
              (
              88,362
              )Total
                  stockholders’ equity
              
              
              11,087Total
                  liabilities and stockholders’ equity
              
              $
              11,195
 
 See
        accompanying notes to financial statements.
  2
  **CORTECH,
        INC.**
 **STATEMENTS
        OF OPERATIONS**
 **(in
        000’s, except per share amounts)**
 **(UNAUDITED)**
 
 
 Three
                  Months Ended
                March
                  31,2006
              
              2005Revenues:Interest
              
              $
              115
              
              $
              64Expenses:General
                  and administrative
              
              
              181
              
              
              84Loss
                  before income taxes
              
              (
              66
              )
              (
              20
              )Provision
                  for income taxes
              
              
              1
              
              
              -Net
                  loss
              
              ($
              67
              )
              ($
              20
              )Basic
                  and diluted net loss per share
              
              ($
              .02
              )
              ($
              .01
              )Basic
                  and diluted weighted average common shares outstanding
              
              
              3,595
              
              
              3,596
 
 
 See
        accompanying notes to financial statements.
  3
  **CORTECH,
        INC.**
 **STATEMENTS
        OF CASH FLOWS**
 **(in
        000’s)**
 **(UNAUDITED)**
 
 Three
                  Months Ended
                March
                  31,2006
              
              2005Cash
                  flows from operating activities:Net
                  loss
              
              ($
              67
              )
              ($
              20
              )Adjustments:Change
                  in other assets
              
              (
              14
              )
              (
              13
              )Interest
                  earned on short-term investments
              
              (
              115
              )
              
              -Change
                  in accrued liabilities
              
              (
              21
              )
              
              5Net
                  cash used in operating activities
              
              (
              217
              )
              (
              28
              )Net
                  decrease in cash and cash equivalents
              
              (
              217
              )
              (
              28
              )Cash
                  and cash equivalents at beginning of period
              
              
              425
              
              
              11,382Cash
                  and cash equivalents at end of period
              
              $
              208
              
              $
              11,354Supplemental
                  disclosure cash flow information:Cash
                  paid for income taxes
              
              $
              1
              
              $
              -
 
 See
        accompanying notes to financial statements.
  4
  **CORTECH,
        INC.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 
 
 1.
              General
 
 The
        accompanying unaudited financial statements of Cortech, Inc. (“Cortech” or the
“Company”) as of March 31, 2006 and for the three months ended March 31, 2006
        and 2005 reflect all material adjustments consisting of only normal recurring
        adjustments, which, in the opinion of management, are necessary for a fair
        presentation of results for the interim periods. Certain information and
        footnote disclosures required under accounting principles generally accepted
        in
        the United States of America have been condensed or omitted pursuant to the
        rules and regulations of the Securities and Exchange Commission, although
        the
        Company believes that the disclosures are adequate to make the information
        presented not misleading. These financial statements should be read in
        conjunction with the financial statements and notes thereto included in the
        Company’s Annual Report on Form 10-KSB for the year ended December 31, 2005 as
        filed with the Securities and Exchange Commission.
 
 The
        preparation of financial statements in conformity with accounting principles
        generally accepted in the United States of America requires management to
        make
        estimates and assumptions that affect the reported amounts of assets and
        liabilities and disclosure of contingent assets and liabilities at the date
        of
        the financial statements and the reported amounts of revenues and expenses
        during the reporting period. Actual results could differ from those estimates.
 
 The
        results of operations for the three months ended March 31, 2006 and 2005
        are not
        necessarily indicative of the results to be expected for the entire year
        or for
        any other period.
 
 2.
              Related
                  Party Transactions
 
 A
        monthly
        management fee of $21,000 (increased from $15,000 in September 2005) is paid
        to
        Asset Value Fund Limited Partnership (“AVF”) for management services. These
        services include, among other things, periodic and other filings with the
        Securities and Exchange Commission, evaluating merger and acquisition proposals,
        internal accounting and shareholder relations. The Company believes that
        the
        management fee is less than the cost for the Company to perform these services.
        This arrangement may be terminated at will by either party. AVF is the
        beneficial owner of approximately 51.77% of the Company’s outstanding Common
        Stock at March 31, 2006 and 53.22% at April 30, 2006. The sole general
        partner of AVF is Asset Value Management, Inc. (“AVM”), a Delaware Corporation
        and wholly-owned subsidiary of Kent Financial Services, Inc. (“KENT”), a
        Delaware Corporation. Paul O. Koether, Chairman of the Company is also the
        Chairman of Kent and the beneficial owner of approximately 54.93% of Kent’s
        outstanding common stock. Qun Yi Zheng, President of the Company is also
        the
        President of Kent and Sue Ann Merrill, Chief Financial Officer of the Company
        is
        also the Chief Financial Officer of Kent.
  5
 
 3.
              Common
                  Stock
 
 In
        October 2000, the Board of Directors approved a stock repurchase program
        authorizing the Company to repurchase up to 320,000 shares of its Common
        Stock
        at prices deemed favorable from time to time in the open market or in privately
        negotiated transactions subject to market conditions, the Company’s financial
        position and other considerations. This program has no expiration date. As
        of
        March 31, 2006, 159,480 shares of Common Stock were repurchased for
        approximately $559,000. All shares repurchased were returned to the status
        of
        authorized but unissued shares.
 
 4.
              Basic
                  and Diluted Net Loss Per Share
 
 Basic
        loss per common share is computed by dividing the net loss by the
        weighted-average number of common shares outstanding. Diluted net loss per
        common share is computed by dividing the net loss by the sum of the
        weighted-average number of common shares outstanding plus the dilutive effect
        of
        shares issuable through the exercise of stock options.
 
 The
        shares used for basic loss per common share and diluted loss per common share
        are reconciled below (in 000’s).
 
 Three
                  Months Ended
                March
                  31,2006
              
              2005Average
                  shares outstanding for basic loss per share
              
              
              3,595
              
              
              3,596Dilutive
                  effect of stock options
              
              
              -
              
              
              -Average
                  shares outstanding for dilutive loss per share
              
              
              3,595
              
              
              3,596
 
 The
        Company had 350,150 and 366,210 common stock options outstanding at March
        31,
        2006 and 2005, respectively. Since the Company
        has losses, the stock options outstanding would have an anti-dilutive effect
        on
        loss per common share and are not included in the calculation.
  6
 
 5.
              Stock
                  Options Plans
 
 Cortech
        has issued certain common stock options to its employees, directors and
        consultants. At March 31, 2006 Cortech had 350,150 common stock options
        outstanding, and none were issued during the three months ended March 31,
        2006.
  Until
        December 31, 2005, the Company applied Accounting Principles Board Opinion
        No.
        25 and related interpretations in accounting for its common stock options.
        Accordingly, no compensation cost had been recognized for the common stock
        options issued.
 
 In
        December 2004, the FASB issued SFAS No. 123(R), "Share-Based Payment," (“SFAS
        123(R)”), a revision of SFAS 123, "Accounting for Stock-Based Compensation.”
SFAS 123(R) requires that the compensation cost relating to share-based payment
        transactions be recognized in financial statements. The compensation cost
        is
        measured based on the fair value of the equity or liability instruments issued.
        SFAS 123(R) was effective as of the beginning of the first interim or annual
        period beginning after December 15, 2005. Cortech adopted SFAS 123(R) on
        January
        1, 2006. The adoption did not have a material impact on the Company’s financial
        position or results of operations. All stock options granted to date were
        fully
        vested prior to January 1, 2006.
 
 6.
              New
                  Accounting Pronouncements
 
 In
        May
        2005, the FASB issued Statement 154, “Accounting Changes and Error Corrections,
        a replacement of APB Opinion No. 20 and FASB Statement No. 3.”  The
        standard requires retrospective application to prior periods’ financial
        statements of a voluntary change in accounting principle unless it is deemed
        impracticable. The standard states that a change in method of depreciation,
        amortization or depletion for long-lived, non-financial assets be accounted
        for
        as a change in accounting estimate that is affected by a change in accounting
        principle.  The standard is effective for accounting changes and
        corrections of errors made in fiscal years beginning after December 15,
        2005.
  7
  **ITEM
                  2****.**
              **Management’s
                  Discussion and Analysis of Financial Condition and Results of
                  Operations**
 
 The
        following discussion and analysis should be read in conjunction with Cortech’s
        Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005
        as well
        as the Company’s financial statements and notes thereto included elsewhere in
        this Quarterly Report on Form 10-QSB. When used in this discussion, the word
        “expects” and similar expressions are intended to identify forward-looking
        statements. Such statements are subject to risks and uncertainties that could
        cause actual results to differ materially from those projected. The
        forward-looking statements contained herein speak only as of the date hereof.
        The Company expressly disclaims any obligation or undertaking to release
        publicly any updates or revisions to any forward-looking statements contained
        herein to reflect any change in the Company’s expectations with regard thereto
        or any change in events, conditions or circumstances on which any such statement
        is based.
 
 General
 
 Cortech
        was a biopharmaceutical company whose primary focus had been the discovery
        and
        development of novel therapeutics for the treatment of inflammatory disorders.
        Specifically, Cortech had directed its research and development efforts
        principally toward protease inhibitors and bradykinin antagonists. These
        efforts
        produced certain intellectual property rights.
 
 In
        response to disappointing test results and its loss of collaborative partner
        support, Cortech implemented a series of workforce reductions which resulted
        in
        the Company having no compensated employees from 1999 until November 2005,
        and
        effectively discontinued all internal research and development activities.
        In
        addition, in 1998 Cortech decommissioned its laboratories and sold all of
        its
        remaining scientific, technical and office equipment. As a result of these
        actions, Cortech no longer has the staff or operative facilities required
        to
        conduct internal research and development activities.
 
 In
        November 2005, the Company hired Dr. Qun Yi Zheng as its President. From
        1995 to
        2005, Dr. Zheng was associated with Pure World, Inc., a leading manufacturer
        of
        natural products. Dr. Zheng was President of Pure World from January 2004
        until
        it was sold in July 2005. Under Dr. Zheng’s leadership, Cortech intends to
        pursue business opportunities in China, Eastern Europe and the United States.
        The Company may consider potential opportunities in a number of areas including
        outsourcing for U.S. companies, consulting for U.S. and non U.S. companies
        interested in cross-border business relationships, surveys of small businesses
        for sale in China and Eastern Europe and import/export distribution
        contracts.
  8
  The
        Company does not expect that these activities will generate any revenues
        for an
        indefinite period as these new efforts are in their early stages. As a result,
        this new program may produce a significant loss until such time as meaningful
        revenues are achieved.
 
 Results
        of Operations
 
 Cortech
        had a net loss of $67,000, or $.02 basic and fully diluted loss per share,
        for
        the three months ended March 31, 2006, compared to a net loss of $20,000,
        or
        $.01 basic and fully diluted loss per share, for the same period of 2005.
 
 Revenues
 
 Interest
        income was $115,000 and $64,000 for the three months ended March 31, 2006
        and
        2005, respectively. Higher yields on investments was the reason for the
        increase.
 
 Expenses
 
 General
        and administrative expenses were $181,000 in the three months ended March
        31,
        2006 compared to $84,000 in the three months ended March 31, 2005, an increase
        of $97,000.
 
 Personnel
        expenses in the first quarter of 2006, relating to the Company’s president who
        was hired in November 2005, were $55,000. The Company had no personnel expenses
        in the first quarter of 2005.
 
 Management
        fees increased to $63,000 in the first quarter of 2006 from $45,000 in the
        first
        quarter of 2005 due to a $6,000 increase, effective September 2005, in the
        monthly management fee paid to an affiliated entity. (See Other Disclosures
        -
        Related Party Transaction in this Item 2 for more information about Management
        Fees.)
 
 All
        other
        expenses increased to $63,000 in the first quarter of 2006 from $39,000 in
        the
        first quarter of 2005, due primarily to an increase in office and travel
        expenses, in connection with business development activities performed by
        the
        Company’s President.
 
 Liquidity
        and Capital Resources
 
 At
        March
        31, 2006, the Company had cash and cash equivalents of $208,000. Cash and
        cash
        equivalents consist of cash held in banks and brokerage firms. The Company
        had
        short-term investments, consisting of U.S. treasury bills with original
        maturities of six months, of $10.97 million at March 31, 2006. Working capital
        at March 31, 2006 was approximately $11.1 million. Management believes its
        cash
        and cash equivalents are sufficient for its
        operations for the next twelve months and for the costs of seeking an
        acquisition of or starting an operating business.
  9
  Net
        cash
        of $217,000 and $28,000 was used in operations for the quarters ended March
        31,
        2006 and 2005, respectively, due primarily to the net losses sustained in
        each
        period. Short-term investments increased by $115,000 due to interest earned.
 
 Factors
        That May Affect Future Results
 
 Future
        earnings of the Company are dependent on interest rates earned on the Company’s
        invested balances and expenses incurred. Cortech expects to incur significant
        expenses in connection with its objective of redeploying its assets into
        an
        operating business.
 
 Other
        Disclosures - Related Party Transactions
 
 The
        Company pays a monthly management fee of $21,000 to Asset Value Fund Limited
        Partnership (“AVF”) for management services. These services include, among other
        things, periodic and other filings with the Securities and Exchange Commission,
        evaluating merger and acquisition proposals, internal accounting and shareholder
        relations. The Company believes that the management fee is less than the
        cost
        for the Company to perform these services. This arrangement may be terminated
        at
        will by either party. AVF was the beneficial owner of approximately 51.77%
        of
        the Company’s outstanding common stock at March 31, 2006 and 53.22% at April 30,
        2006. The sole general partner of AVF is Asset Value Management, Inc. (“AVM”), a
        Delaware Corporation and wholly owned subsidiary of Kent Financial Services,
        Inc. (“Kent”), a Delaware Corporation. Paul O. Koether, Chairman of the Company,
        is also the Chairman of Kent and the beneficial owner of approximately 54.93%
        of
        Kent’s outstanding common stock. Qun Yi Zheng, President of the Company, is also
        the President of Kent, and Sue Ann Merrill, Chief Financial Officer of the
        Company, is also the Chief Financial Officer of Kent.
 
 Off-Balance
        Sheet Arrangements
 
 The
        Company has no off-balance sheet arrangements.
 
 **Item
                  3.**
              **Controls
                  and Procedures**
 
 As
        of the
        end of the period covered by this report, the Company carried out, under
        the
        supervision and with the participation of the Company’s management, including
        its Chief Executive Officer and Chief Financial Officer, an evaluation of
        the
        effectiveness of the design and operation of the Company’s disclosure controls
        and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities
        Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer
        and Chief Financial Officer concluded that the design and operation of these
        disclosure controls and procedures
        are effective. There was no change in the Company’s internal control over
        financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the
        Securities Exchange Act of 1934) during the quarter ended March 31, 2006,
        that
        has materially affected or is reasonably likely to materially affect the
        Company’s internal control over financial reporting.
 
 Compliance
        with Section 404 of Sarbanes-Oxley Act
 
 In
        order
        to achieve compliance with Section 404 of the Sarbanes-Oxley Act of 2002
        (the
“Act”) by December 31, 2007, the Company expects to begin, in fiscal 2006, the
        system and process documentation and evaluation needed to comply with Section
        404.
  10
  **PART
                  II.**
              **OTHER
                  INFORMATION**
  **ITEM
                  1.**
              **Legal
                  Proceedings**
 
 None.
 
 **ITEM
                  2.**
              **Unregistered
                  Sale of Equity Securities and Use of
                  Proceeds**
 
 Purchase
        of Equity Securities
 
 In
        October 2000, the Board of Directors approved a stock repurchase program
        authorizing the Company to repurchase up to 320,000 shares of its common
        stock.
        This program has no expiration date. No shares were acquired in the quarter
        ended March 31, 2006.
 
 **ITEM
                  3.**
              **Defaults
                  Upon Senior Securities**
 
 None.
 
 **ITEM
                  4.**
              **Submission
                  of Matters to a Vote of Security
                  Holders**
 
 None.
 
 **ITEM
                  5.**
              **Other
                  Information**
 
 None.
 
 **ITEM
                  6.**
              **Exhibits
                  and Reports on Form
                  8-K**
 
 (a)
              
              Exhibits3.1
              (a)
              Certificate
                  of Incorporation of Cortech, Inc. as amended.(1)(b)
              Certificate
                  of Amendment of Certificate of Incorporated of Cortech, Inc.(2)3.3
              
              Certificate
                  of Designation for Series A Junior Participating Preferred
                  Stock.(3)3.4
              
              Amended
                  and Restated ByLaws of Cortech, Inc.(4)10.1
              
              Employment
                  Agreement dated November 25, 2005 between Cortech, Inc., and Dr.
                  Qun Yi
                  Zheng(5)31.1
              
              Certification
                  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
                  ***31.2
              
              Certification
                  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
                  ***32
              
              Certification
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
                  ***
  11
 (1)
                Filed
                    as an exhibit to the Company’s Registration Statement of Form S-1, filed
                    October 13, 1992, file number 33-53244, or amendments thereto
                    and
                    incorporated herein by reference.
 
 (2)
                Filed
                    as an exhibit to the Company’s annual report on Form 10-K for the year
                    ended December 31, 1992, and incorporated herein by
                    reference.
 
 (3)
                Filed
                    as an exhibit to the Company’s Registration Statement on Form S-8, filed
                    March 29, 1993, file number 33-60242, or amendments thereto and
                    incorporated herein by reference.
 
 (4)
                Filed
                    as an exhibit to the Company’s annual report on Form 10-K for the year
                    ended December 31, 1993, and incorporated herein by
                    reference.
 
 (5)
                Filed
                    as an exhibit to Cortech, Inc’s. Form 8-K filed on December 1, 2005.
                    **
 
 **
                Compensatory
                    Plan
  ***
                Filed
                    herewith.
 12
  **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.
 
 CORTECH,
                  INC.Date:
                  May 9, 2006
              By:
              /s/
                  Sue Ann MerrillSue
                  Ann MerrillChief
                  Financial Officer, Treasurer and Secretary(Principal
                  Accounting and Financial Officer and officer duly authorized to
                  sign on
                  behalf of the small business issuer)




13