**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-Q**




x
            QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934




For
      the
      quarterly period ended June 30, 2008




o
            TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF
                1934




Commission
      file number: 000-51476




**LIXTE
      BIOTECHNOLOGY HOLDINGS, INC.**


(Exact
      name of registrant as specified in its charter)





**Delaware**
            **20-2903526**(State
                or other jurisdiction of
              incorporation
                or organization)
            (I.R.S.
                Employer
              Identification
                Number)




**248
      Route 25A, No. 2**


**East
      Setauket, New York 11733**


(Address
      of principal executive offices)




**(631)
      942-7959**


(Registrant’s
      telephone number, including area code)




Not
      applicable


(Former
      name, former address and former fiscal year, if changed since last
      report)




Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 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 x No o




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of
      the
      Exchange Act).





Large
                accelerated filero
            Accelerated
                fileroNon-accelerated
                filero
            Smaller
                reporting companyx




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
      July 31, 2008, the Company had 27,932,178 shares of common stock, $0.0001 par
      value, issued and outstanding.





Documents
      incorporated by reference: None




1




**LIXTE
      BIOTECHNOLOGY HOLDINGS, INC.**





**INDEX**





**Page**
              **Number****PART
                I - FINANCIAL INFORMATION**Item
                1. Financial StatementsCondensed
                Consolidated Balance Sheets -June
                30, 2008 (Unaudited) and December 31, 2007
            4Condensed
                Consolidated Statements of Operations (Unaudited) -Three
                Months and Six Months Ended June 30, 2008 and 2007, and August 9,
                2005 (Inception) to June 30, 2008 (Cumulative)
            5Condensed
                Consolidated Statement of Changes in Stockholders’ Equity (Deficiency)
                (Unaudited) -August 9,
                2005 (Inception) to June 30, 2008
            6Condensed
                Consolidated Statements of Cash Flows (Unaudited) -Six
                Months Ended June 30, 2008 and 2007, and August 9, 2005 (Inception)
                to June 30, 2008 (Cumulative)
            7Notes
                to Condensed Consolidated Financial Statements -Three
                Months and Six Months Ended June 30, 2008 and 2007
                (Unaudited)
            9Item
                2. Management’s Discussion and Analysis of Financial Condition and Results
                of Operations
            22Item
                3. Quantitative and Qualitative Disclosures About Market
                Risk
            33Item
                4T. Controls and Procedures
            33**PART
                II - OTHER INFORMATION**Item
                1. Legal Proceedings
            34Item
                1A. Risk Factors
            34Item
                2. Unregistered Sales of Equity Securities and Use of
                Proceeds
            34Item
                3. Defaults Upon Senior Securities
            34Item
                4. Submission of Matters to a Vote of Security
                Holders
            34Item
                5. Other Information
            34Item
                6. Exhibits
            34SIGNATURES
            35




2




**Forward-Looking
      Statements**




This
      Quarterly Report on Form 10-Q contains certain forward-looking statements within
      the meaning of Section 27A of the Securities Act of 1933, and Section 21E of
      the
      Securities Exchange Act of 1934. For example, statements regarding the Company’s
      financial position, business strategy and other plans and objectives for future
      operations, and assumptions and predictions about future product demand, supply,
      manufacturing, costs, marketing and pricing factors are all forward-looking
      statements. These statements are generally accompanied by words such as
“intend,” anticipate,” “believe,” “estimate,” “potential(ly),” “continue,”
“forecast,” “predict,” “plan,” “may,” “will,” “could,” “would,” “should,”
“expect” or the negative of such terms or other comparable terminology. The
      Company believes that the assumptions and expectations reflected in such
      forward-looking statements are reasonable, based on information available to
      it
      on the date hereof, but the Company cannot provide assurances that these
      assumptions and expectations will prove to have been correct or that the Company
      will take any action that the Company may presently be planning. However, these
      forward-looking statements are inherently subject to known and unknown risks
      and
      uncertainties. Actual results or experience may differ materially from those
      expected or anticipated in the forward-looking statements. Factors that could
      cause or contribute to such differences include, but are not limited to,
      regulatory policies, available cash, research results, competition from other
      similar businesses, and market and general economic factors. This discussion
      should be read in conjunction with the condensed consolidated financial
      statements and notes thereto included in Item 1of this Quarterly Report on
      Form 10-Q.




3




**LIXTE
      BIOTECHNOLOGY HOLDINGS, INC.**


**AND
      SUBSIDIARY**


(a
      development stage company)




**CONDENSED
      CONSOLIDATED BALANCE SHEETS**




**June 30,**
              **2008**
            
            **December 31,**
              **2007**(Unaudited)ASSETSCurrent
                assets:Cash
                and cash equivalents
            
            $
            201,935
            
            $
            508,070Advances
                on research and development contract services
            
            
            18,750
            
            
            88,180Prepaid
                expenses
            
            
            5,308
            
            
            32,117Total
                current assets
            
            
            225,993
            
            
            628,367Office
                equipment**,**net of accumulated depreciation of $1,485 at June 30, 2008
              and
                $1,167 at December 31, 2007
            
            
            424
            
            
            742Total
                assets
            
            $
            226,417
            
            $
            629,109LIABILITIES
                AND STOCKHOLDERS’ EQUITYCurrent
                liabilities:Accounts
                payable and accrued expenses
            
            $
            48,194
            
            $
            73,741Liquidated
                damages payable under registration rights agreement
            
            
            74,000
            
            
            74,000Research
                and development contract liabilities
            
            
            —
            
            
            11,725Due
                to stockholder
            
            
            92,717
            
            
            92,717Total
                current liabilities
            
            
            214,911
            
            
            252,183Commitments
                and contingenciesStockholders’
                equity:Preferred
                stock, $0.0001 par value; authorized - 10,000,000 shares;
              issued -
                none
            
            
            —
            
            
            —Common
                stock, $0.0001 par value; authorized - 100,000,000 shares;
              issued
                and outstanding - 27,932,178 shares at June 30, 2008 and
              27,832,178
                shares at December 31, 2007
            
            
            2,793
            
            
            2,783Additional
                paid-in capital
            
            
            2,748,992
            
            
            2,600,839Deficit
                accumulated during the development stage
            
            
            (2,740,279
            )
            
            (2,226,696
            )Total
                stockholders’ equity
            
            
            11,506
            
            
            376,926Total
                liabilities and stockholders’ equity
            
            $
            226,417
            
            $
            629,109





See
      accompanying notes to condensed consolidated financial statements.




4




**LIXTE
      BIOTECHNOLOGY HOLDINGS, INC.**


**AND
      SUBSIDIARY**


(a
      development stage company)




**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)**




**Period from**
                **August 9,**
                **2005**
                **(Inception) to****Three Months Ended**
                **June 30,**
            
            
            **Six Months Ended**
                **June 30,**
            
            
            **June 30,**
                **2008****2008**
            
            
            **2007**
            
            
            **2008**
            
            
            **2007**
            
            
            **(Cumulative)**Revenues
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —Costs
                and expenses:General
                and administrative, including $(100,355) and $8,792 of stock-based
                expense
                during  the three months ended June 30, 2008 and 2007, respectively,
                $64,794 and $17,708 of stock-based expense during the six months
                ended June 30, 2008 and 2007, respectively, and $1,052,638 for the
                period
                from August 9, 2005 (inception) to June 30, 2008
                (cumulative)
            
            
            (50,947
            )
            
            89,241
            
            
            217,869
            
            
            199,244
            
            
            1,669,791Depreciation
            
            
            159
            
            
            148
            
            
            318
            
            
            296
            
            
            1,485Research
                and development costs, including $(25,564) and $0 of stock-based
                expense
                during the three months ended June 30, 2008 and 2007, respectively,
                $83,369 and $31,000 of stock-based expense during the six months
                ended June 30, 2008 and 2007, respectively, and $134,205 for the
                period
                from August 9, 2005 (inception) to June 30, 2008
                (cumulative)
            
            
            61,782
            
            
            89,917
            
            
            298,233
            
            
            237,592
            
            
            970,288Reverse
                merger costs
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            50,000Total
                costs and expenses
            
            
            10,994
            
            
            179,306
            
            
            516,420
            
            
            437,132
            
            
            2,691,564(10,994
            )
            
            (179,306
            )
            
            (516,420
            )
            
            (437,132
            )
            
            (2,691,564
            )Interest
                income
            
            
            733
            
            
            3,584
            
            
            2,838
            
            
            8,307
            
            
            25,285Liquidated
                damages under registration rights agreement
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (74,000
            )Net
                loss
            
            $
            (10,261
            )
            $
            (175,722
            )
            $
            (513,582
            )
            $
            (428,825
            )
            $
            (2,740,279
            )Net
                loss per common share - basic and diluted
            
            $
            (0.00
            )
            $
            (0.01
            )
            $
            (0.02
            )
            $
            (0.02
            )Weighted
                average common shares outstanding - basic and diluted
            
            
            27,932,178
            
            
            26,582,183
            
            
            27,916,793
            
            
            26,582,183





See
      accompanying notes to condensed consolidated financial statements.




5





**LIXTE
      BIOTECHNOLOGY HOLDINGS, INC.**


**AND
      SUBSIDIARY**


(a
      development stage company)




**CONDENSED
      CONSOLIDATED STATEMENT OF CHANGES**


**IN
      STOCKHOLDERS’ EQUITY (DEFICIENCY)**





**Period
      from August 9, 2005 (Inception) to June 30, 2008**




**Common
                Stock**
            
            
            **Additional**
              **Paid-in**
            
            
            **Deficit**
              **Accumulated**
              **During
                the**
              **Development**
            
            
            **Total**
              **Stockholders’**
              **Equity****Shares**
            
            
            **Amount**
            
            
            **Capital**
            
            
            **Stage**
            
            
            **(Deficiency)**Balance,
                August 9, 2005 (inception)
            
            
            —
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —Shares
                issued to founding stockholder
            
            
            19,021,786
            
            
            1,902
            
            
            (402
            )
            
            —
            
            
            1,500Net
                loss for the period August 9, 2005 (inception) to December 31,
                2005
            
            
            —
            
            
            —
            
            
            —
            
            
            (16,124
            )
            
            (16,124
            )Balance,
                December 31, 2005
            
            
            19,021,786
            
            
            1,902
            
            
            (402
            )
            
            (16,124
            )
            
            (14,624
            )Shares
                issued in connection with reverse merger transaction
            
            
            4,005,177
            
            
            401
            
            
            62,099
            
            
            —
            
            
            62,500Shares
                issued in private placement, net of offering costs of
                $214,517
            
            
            3,555,220
            
            
            355
            
            
            969,017
            
            
            —
            
            
            969,372Stock-based
                compensation
            
            
            —
            
            
            —
            
            
            97,400
            
            
            —
            
            
            97,400Net
                loss for the year
            
            
            —
            
            
            —
            
            
            —
            
            
            (562,084
            )
            
            (562,084
            )Balance,
                December 31, 2006
            
            
            26,582,183
            
            
            2,658
            
            
            1,128,114
            
            
            (578,208
            )
            
            552,564Shares
                issued in private placement, net of offering costs of
                $118,680
            
            
            999,995
            
            
            100
            
            
            531,220
            
            
            —
            
            
            531,320Stock-based
                compensation
            
            
            250,000
            
            
            25
            
            
            890,669
            
            
            —
            
            
            890,694Stock-based
                research and development costs
            
            
            —
            
            
            —
            
            
            50,836
            
            
            —
            
            
            50,836Net
                loss for the year
            
            
            
            
            
            
            
            
            
            
            
            (1,648,488
            )
            
            (1,648,488
            )Balance,
                December 31, 2007
            
            
            27,832,178
            
            
            2,783
            
            
            2,600,839
            
            
            (2,226,696
            )
            
            376,926Stock-based
                compensation
            
            
            —
            
            
            —
            
            
            64,794
            
            
            —
            
            
            64,794Stock-based
                research and development costs
            
            
            100,000
            
            
            10
            
            
            83,359
            
            
            —
            
            
            83,369Net
                loss for the six months ended June 30, 2008
            
            
            —
            
            
            —
            
            
            —
            
            
            (513,583
            )
            
            (513,583
            )Balance,
                June 30, 2008 (unaudited)
            
            
            27,932,178
            
            $
            2,793
            
            $
            2,748,992
            
            $
            (2,740,279
            )
            $
            11,506




See
      accompanying notes to condensed consolidated financial statements.




6




**LIXTE
      BIOTECHNOLOGY HOLDINGS, INC.**


**AND
      SUBSIDIARY**


(a
      development stage company)




**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)**




**Six Months Ended**
              **June
                30,**
            
            **Period from**
              **August 9,**
              **2005**
              **(Inception) to**
              **June
                30, 2008****2008**
            
            **2007**
            
            **(Cumulative)**Cash
                flows from operating activitiesNet
                loss
            
            $
            (513,583
            )
            $
            (428,825
            )
            $
            (2,740,279
            )Adjustments
                to reconcile net loss to net cash used inoperating
                activities:Depreciation
            
            
            318
            
            
            296
            
            
            1,485Stock-based
                compensation
            
            
            64,794
            
            
            17,708
            
            
            1,052,638Stock-based
                research and development costs
            
            
            83,369
            
            
            31,000
            
            
            134,205Changes
                in operating assets and liabilities:(Increase)
                decrease in -Advances
                on research and development contract services
            
            
            69,430
            
            
            (124,925
            )
            
            (18,750
            )Prepaid
                expenses
            
            
            26,809
            
            
            14,375
            
            
            (5,308
            )Increase
                (decrease) in -Accounts
                payable and accrued expenses
            
            
            (25,547
            )
            
            (20,199
            )
            
            48,194Research
                and development contract liabilities
            
            
            (11,725
            )
            
            25,873
            
            
            —Liquidated
                damages payable under registration rights agreement
            
            
            —
            
            
            —
            
            
            74,000Net
                cash used in operating activities
            
            
            (306,135
            )
            
            (484,697
            )
            
            (1,453,815
            )Cash
                flows from investing activitiesPurchase
                of office equipment
            
            
            —
            
            
            (272
            )
            
            (1,909
            )Net
                cash used in investing activities
            
            
            —
            
            
            (272
            )
            
            (1,909
            )Cash
                flows from financing activitiesProceeds
                from sale of common stock to consulting firm
            
            
            —
            
            
            —
            
            
            250Proceeds
                from sale of common stock to founder
            
            
            —
            
            
            —
            
            
            1,500Cash
                acquired in reverse merger transaction
            
            
            —
            
            
            —
            
            
            62,500Gross
                proceeds from sale of common stock
            
            
            —
            
            
            —
            
            
            1,833,889Payment
                of private placement offering costs
            
            
            —
            
            
            —
            
            
            (333,197
            )Advances
                from stockholder
            
            
            —
            
            
            —
            
            
            92,717Net
                cash provided by financing activities
            
            
            —
            
            
            —
            
            
            1,657,659Net
                increase (decrease) in cash
            
            
            (306,135
            )
            
            (484,969
            )
            
            201,935Cash
                at beginning of period
            
            
            508,070
            
            
            679,640
            
            
            —Cash
                at end of period
            
            $
            201,935
            
            $
            194,671
            
            $
            201,935





(continued)




7




**LIXTE
      BIOTECHNOLOGY HOLDINGS, INC**


**AND
      SUBSIDIARY**


(a
      development stage company)




**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
      (continued)**





**Six Months Ended**
              **June
                30,**
            
            **Period from**
              **August 9,****2005**
              **(Inception)**
              **to**
              **June 30,****2008****2008**
            
            **2007**
            
            **(Cumulative)**Supplemental
                disclosures of cash flow information:Cash
                paid for -Interest
            
            $
            —
            
            $
            —
            
            $
            —Income
                taxes
            
            $
            —
            
            $
            —
            
            $
            —




See
      accompanying notes to condensed consolidated financial statements.




8




**LIXTE
      BIOTECHNOLOGY HOLDINGS, INC.**


**AND
      SUBSIDIARY**


(a
      development stage company)





**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**





**Three
      Months and Six Months Ended June 30, 2008 and 2007
      (Unaudited)**




**1.
      Organization and Business Operations**




***Organization***





On
      June
      30, 2006, Lixte Biotechnology, Inc., a privately-held Delaware corporation
      (“Lixte”), completed a reverse merger transaction with SRKP 7, Inc. (“SRKP”), a
      non-trading public “shell” company, whereby Lixte became a wholly-owned
      subsidiary of SRKP. For financial reporting purposes, Lixte was considered
      the
      accounting acquirer in the merger and the merger was accounted for as a reverse
      merger. Accordingly, the historical financial statements presented herein are
      those of Lixte and do not include the historical financial results of SRKP.
      The
      stockholders’ equity section of SRKP has been retroactively restated for all
      periods presented to reflect the accounting effect of the reverse merger
      transaction. All costs associated with the reverse merger transaction were
      expensed as incurred.





Lixte
      was
      incorporated in Delaware on August 9, 2005 to capitalize on opportunities to
      develop low cost, specific and sensitive tests for the early detection of
      cancers to better estimate prognosis, to monitor treatment response, and to
      reveal targets for development of more effective treatments.





Unless
      the context indicates otherwise, SRKP and Lixte are hereinafter referred to
      as
      the “Company”. On December 7, 2006, the Company amended its Certificate of
      Incorporation to change its name from SRKP 7, Inc. to Lixte Biotechnology
      Holdings, Inc. (“Holdings”).





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 at the date of the financial statements and the reported amounts
      of
      expenses during the reporting period. Actual results could differ from those
      estimates.




The
      condensed consolidated financial statements at June 30, 2008, for the three
      months and six months ended June 30, 2008 and 2007, and for the period from
      August 9, 2005 (inception) to June 30, 2008 (cumulative), are unaudited. In
      the opinion of management, all adjustments (including normal recurring
      adjustments) have been made that are necessary to present fairly the financial
      position of the Company as of June 30, 2008, the results of its operations
      for
      the three months and six months ended June 30, 2008 and 2007, and for the period
      from August 9, 2005 (inception) to June 30, 2008 (cumulative), and its cash
      flows for the six months ended June 30, 2008 and 2007, and for the period from
      August 9, 2005 (inception) to June 30, 2008 (cumulative). Operating results
      for the interim periods presented are not necessarily indicative of the results
      to be expected for a full fiscal year. The condensed consolidated balance sheet
      at December 31, 2007 has been derived from the Company’s audited financial
      statements as of that date.




The
      statements and related notes have been prepared pursuant to the rules and
      regulations of the Securities and Exchange Commission. Accordingly, certain
      information and footnote disclosures normally included in financial statements
      prepared in accordance with generally accepted accounting principles have been
      omitted pursuant to such rules and regulations. These financial statements
      should be read in conjunction with the financial statements and other
      information included in the Company’s Annual Report on Form 10-KSB for the
      fiscal year ended December 31, 2007, as filed with the Securities and Exchange
      Commission.





***Operations***




The
      Company is concentrating on discovering biomarkers for common cancers and on
      developing new treatments based on an understanding of the molecular activity
      of
      these biomarkers for common cancers. For each of these diseases, a biomarker
      that would enable identification of the presence of cancer at a stage curable
      by
      surgery could possibly save thousands of lives annually. In addition, biomarkers
      specific to these diseases may also provide clues as to processes (biological
      pathways) that characterize specific cancer types and that may be vulnerable
      to
      drug treatment targeted to the activity of the biomarker.




9




The
      Company is currently focusing on developing new treatments for the most common
      and most aggressive type of brain cancer of adults, glioblastoma multiforme
      (“GBM”). The Company is conducting its anti-cancer activities primarily through
      a collaborative program governed by a Cooperative Research and Development
      Agreement (“CRADA”) with the National Institute of Neurological Disorders and
      Stroke (“NINDS”) of the National Institutes of Health (“NIH”).





The
      Company has expanded the scope of its anti-cancer investigational activities
      to
      include the most common brain tumor of children, medulloblastoma, and also
      to
      several other types of more common cancers. This expansion of activity is based
      on documentation that each of two distinct types of drugs being developed by
      the
      Company inhibits the growth of cell lines of breast, colon, lung, prostate,
      pancreas, ovary, stomach and liver cancer, as well as the major types of
      leukemias. During the three months ended June 30, 2008, two different lead
      compounds, previously shown to have activity again brain tumors, were found
      to
      also have activity in a mouse model of human pancreatic cancer.




The
      Company expects that its products will derive directly from its intellectual
      property, which will consist of patents that it anticipates will arise out
      of
      its research activities. These patents are expected to cover biomarkers uniquely
      associated with the specific types of cancer, patents on methods to identify
      drugs that inhibit growth of specific tumor types, and combinations of drugs
      and
      other potential therapeutic agents for the treatment of specific cancers. The
      Company will continue to use discovery and/or recognition of molecular variants
      characteristic of specific human cancers as a guide to drug discovery and
      potentially new diagnostic tests.





The
      Company is considered a “development stage company” as defined in SFAS No. 7,
“Accounting and Reporting by Development Stage Enterprises”, as it has not yet
      commenced any revenue-generating operations, does not have any cash flows from
      operations, and is dependent on debt and equity funding to finance its
      operations. The Company has selected December 31 as its fiscal year
      end.





***Going
      Concern***




The
      Company’s financial statements have been presented on the basis that it is a
      going concern, which contemplates the realization of assets and satisfaction
      of
      liabilities in the normal course of business. The Company is in the development
      stage and has not generated any revenues from operations to date.




The
      Company’s ability to continue as a going concern is dependent upon its ability
      to develop additional sources of capital and to ultimately achieve profitable
      operations. The accompanying financial statements do not include any adjustments
      that might result from the outcome of these uncertainties.





The
      Company is currently devoting its efforts to research and development related
      to
      discovering specific cancer biomarkers for early detection, estimation of
      prognosis, monitoring response to treatment, development of targeted therapeutic
      agents and new treatments based on an understanding of the molecular activity
      of
      these biomarkers for common cancers. The Company is seeking to exploit this
      opportunity through execution of its business plan and the development of
      related patents.





At
      June
      30, 2008, the Company had not yet commenced any revenue-generating operations.
      All activity through June 30, 2008 is related to the Company’s formation,
      capital raising efforts and initial research and development activities. As
      such, the Company has yet to generate any cash flows from operations, and is
      essentially dependent on debt and equity funding from both related and unrelated
      parties to finance its operations. Prior to June 30, 2006, the Company’s cash
      requirements were funded by advances from Lixte’s founder. On June 30, 2006, the
      Company completed an initial closing of a private placement (see Note 3),
      selling 1,973,869 shares of common stock at a price of $0.333 per share and
      receiving net proceeds of $522,939. On July 27, 2006, the Company completed
      a
      second closing of the private placement, selling 1,581,351 shares of common
      stock at a price of $0.333 per share and receiving net proceeds of $446,433.
      On
      December 12, 2007, the Company completed a second private placement, selling
      999,995 shares of common stock at a price of $0.65 per share and receiving
      net
      proceeds of $531,320.




10





Because
      the Company is currently engaged in research at an early stage, it will likely
      take a significant amount of time to develop any product or intellectual
      property capable of generating revenues. As such, the Company’s business is
      unlikely to generate any revenue in the next several years and may never do
      so.
      Even if the Company is able to generate revenues in the future through licensing
      its technologies or through product sales, there can be no assurance that such
      revenues will exceed its expenses.





The
      Company’s current resources are marginally adequate to fund the Company’s basic
      operating budget through December 31, 2008, but are not sufficient to fund
      expanded research activities with respect to the Company’s promising
      intellectual property during the remainder of 2008 and beyond. The Company
      does
      not have sufficient resources to fully develop and commercialize any products
      that may arise from its research. Accordingly, the Company will need to raise
      additional funds in order to satisfy its future working capital requirements.





Based
      on
      the Company’s revised and updated research program, the Company currently
      estimates that it will require additional funds of approximately $2,000,000
      for
      the year ending December 31, 2009 in order to fund operations and continuing
      drug discovery and to bring one drug through the pre-clinical evaluation process
      needed for submission of an IND. The Company is attempting to arrange such
      funding during the next few months, although there can be no assurances that
      the
      Company will be successful in this regard. The amount and timing of future
      cash
      requirements will depend on the market’s evaluation of the Company’s technology
      and products, and the resources that the Company devotes to developing and
      supporting its activities. The Company anticipates funding these cash
      requirements from a combination of debt or equity financings and the sale,
      licensing or joint venturing of its intellectual properties.




Current
      market conditions present uncertainty as to the Company’s ability to secure
      additional funds, as well as its ability to reach profitability. There can
      be no
      assurances that the Company will be able to secure additional financing, or
      obtain favorable terms on such financing if it is available, or as to its
      ability to achieve positive cash flow from operations. Continued negative cash
      flows and lack of liquidity create significant uncertainty about the Company’s
      ability to fully implement its operating plan, as a result of which the Company
      may have to reduce the scope of its planned operations. If cash resources are
      insufficient to satisfy the Company’s liquidity requirements, the Company would
      be required to scale back or discontinue its technology and product development
      programs, or obtain funds, if available, through strategic alliances that may
      require the Company to relinquish rights to certain of its technologies
      products, or to discontinue its operations entirely.





**2.
      Summary of Significant Accounting Policies**




***Principles
      of Consolidation***




The
      accompanying consolidated financial statements include the financial statements
      of Holdings and its wholly-owned subsidiary, Lixte. All intercompany balances
      and transactions have been eliminated in consolidation.





***Cash
      and Cash Equivalents and Concentrations***




The
      Company considers all highly liquid investments with an original maturity of
      three months or less when purchased to be cash equivalents. At times, such
      cash
      and cash equivalents may exceed federally insured limits. The Company has not
      experienced a loss in such accounts to date. The Company maintains its accounts
      with financial institutions with high credit ratings.





***Research
      and Development***





Research
      and development costs are expensed as incurred.  Research and development
      expenses consist primarily of fees paid to consultants and outside service
      providers, patent fees and costs, and other expenses relating to the
      acquisition, design, development and testing of the Company's treatments
      and product candidates.




11




Amounts
      due, pursuant to contractual commitments, on research and development contracts
      with third parties are recorded as a liability, with the related amount of
      such
      contracts recorded as advances on research and development contract services
      on
      the Company’s balance sheet. Such advances on research and development contract
      services are expensed over their life on the straight-line basis, unless the
      achievement of milestones, the completion of contracted work, or other
      information indicates that a different expensing schedule is more appropriate.
      The Company accounts for its research and development contracts in accordance
      with EITF 07-3.




The
      funds
      paid to NINDS of the NIH, pursuant to the CRADA effective March 22, 2006,
      as amended, represent an advance on research and development costs and therefore
      have future economic benefit. As such, such costs are being charged to expense
      when they are actually expended by the provider, which is, effectively, as
      they
      perform the research activities that they are contractually committed to
      provide. Absent information that would indicate that a different expensing
      schedule is more appropriate (such as, for example, from the achievement of
      performance milestones or the completion of contract work), such advances are
      being expensed over the contractual service term on a straight-line basis,
      which
      reflects a reasonable estimate of when the underlying research and development
      costs are being incurred. The Company’s $200,000 financial obligation due under
      the CRADA as of March 22, 2007 was paid on June 29, 2007, and funded ongoing
      research and development activities through June 30, 2008. In June 2008, the
      CRADA was extended to September 30, 2009 with no additional funding required
      for
      the period between July 1, 2008 and September 30, 2008. However, for the period
      from October 1, 2008 through September 30, 2009, the Company has agreed to
      provide additional funding under the CRADA of $200,000, to be paid in four
      quarterly installments of $50,000 commencing on October 1, 2008.




***Patent
      Costs***




Due
      to
      the significant uncertainty associated with the successful development of
      one or more commercially viable products based on the Company's research efforts
      and any related patent applications, all patent costs, including patent-related
      legal fees, are expensed as incurred. Patent costs were $34,224 and $6,592
      for
      the three months ended June 30, 2008 and 2007, respectively, $74,224 and $46,592
      for the six months ended June 30, 2008 and 2007, respectively, and $235,133
      for
      the period from August 9, 2005 (inception) to June 30, 2008 (cumulative). Patent
      costs are included in research and development costs in the Company's statement
      of operations.





***Income
      Taxes***




The
      Company accounts for income taxes pursuant to Statement of Financial Accounting
      Standards No. 109, “Accounting for Income Taxes” (“SFAS No. 109”), which
      establishes financial accounting and reporting standards for the effects of
      income taxes that result from an enterprise’s activities during the current and
      preceding years. SFAS No. 109 requires an asset and liability approach for
      financial accounting and reporting for income taxes. Accordingly, the Company
      recognizes deferred tax assets and liabilities for the expected impact of
      differences between the financial statements and the tax basis of assets and
      liabilities.




For
      federal income tax purposes, substantially all expenses, except for interest,
      taxes, and research and development, are deemed start-up and organization costs
      and must be deferred until the Company commences business operations at which
      time they may be written off over a 180-month period. The Company has elected
      to
      deduct research and development costs currently.




The
      Company records a valuation allowance to reduce its deferred tax assets to
      the
      amount that is more likely than not to be realized. In the event the Company
      was
      to determine that it would be able to realize its deferred tax assets in the
      future in excess of its recorded amount, an adjustment to the deferred tax
      assets would be credited to operations in the period such determination was
      made. Likewise, should the Company determine that it would not be able to
      realize all or part of its deferred tax assets in the future, an adjustment
      to
      the deferred tax assets would be charged to operations in the period such
      determination was made.





For
      federal income tax purposes, net operating losses can be carried forward for
      a
      period of 20 years until they are either utilized or until they
      expire.





In
      July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB
      Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an
      interpretation of FASB Statement No. 109” (“FIN 48”), which provides
      criteria for the recognition, measurement, presentation and disclosure of
      uncertain tax positions. A tax benefit from an uncertain position may be
      recognized only if it is “more likely than not” that the position is sustainable
      based on its technical merits. The Company adopted the provisions of FIN 48
      on January 1, 2007.




12





***Stock-Based
      Compensation***





Effective
      January 1, 2006, the Company adopted SFAS No. 123 (revised 2004), "Share-Based
      Payment" ("SFAS No. 123R"), a revision to SFAS No. 123, "Accounting for
      Stock-Based Compensation". SFAS No. 123R requires that the Company measure
      the
      cost of employee services received in exchange for equity awards based on the
      grant date fair value of the awards, with the cost to be recognized as
      compensation expense in the Company’s financial statements over the vesting
      period of the awards. Accordingly, the Company recognizes compensation cost
      for
      equity-based compensation for all new or modified grants issued after December
      31, 2005. The Company did not have any modified grants subsequent to December
      31, 2005.




In
      December 2007, the Securities and Exchange Commission issued Staff Accounting
      Bulletin No. 110 (“SAB 110”), which expresses the views of the staff regarding
      the use of a “simplified” method, as discussed in Staff Accounting Bulletin No.
      107, in developing an estimate of expected term of “plain vanilla” share options
      in accordance with SFAS No. 123R. The staff indicated that it will accept a
      company’s election to use the simplified method, regardless of whether the
      company has sufficient information to make more refined estimates of expected
      term. SAB 110 was effective January 1, 2008, and did not have a significant
      impact on the Company’s consolidated financial statements.




In
      addition, commencing January 1, 2006, the Company was required to recognize
      the
      unvested portion of the grant date fair value of awards issued prior to the
      adoption of SFAS No. 123R based on the fair values previously calculated for
      disclosure purposes over the remaining vesting period of the outstanding stock
      options and warrants. The Company did not have any unvested outstanding stock
      options or warrants at December 31, 2005.





The
      Company accounts for stock option and warrant grants issued and vesting to
      non-employees in accordance with EITF No. 96-18, “Accounting for Equity
      Instruments that are Issued to Other Than Employees for Acquiring, or in
      Conjunction with Selling, Goods or Services”, and EITF 00-18, “Accounting
      Recognition for Certain Transactions involving Equity Instruments Granted to
      Other Than Employees”, whereas the value of the stock compensation is based upon
      the measurement date as determined at either (a) the date at which a performance
      commitment is reached or (b) at the date at which the necessary performance
      to
      earn the equity instruments is complete.





***Earnings
      Per Share***




The
      Company computes earnings per share (“EPS”) in accordance with SFAS
      No. 128, “Earnings per Share” and SEC Staff Accounting Bulletin
      No. 98.  SFAS No. 128 requires companies with complex capital
      structures to present basic and diluted EPS.  Basic EPS is measured as the
      income (loss) available to common shareholders divided by the weighted average
      common shares outstanding for the period.  Diluted EPS is similar to basic
      EPS but presents the dilutive effect on a per share basis of potential common
      shares (e.g., warrants and options) as if they had been converted at the
      beginning of the periods presented, or issuance date, if later.  Potential
      common shares that have an anti-dilutive effect (i.e., those that increase
      income per share or decrease loss per share) are excluded from the calculation
      of diluted EPS.





Loss
      per
      common share is computed by dividing net loss by the weighted average number
      of
      shares of common stock outstanding during the respective periods. Basic and
      diluted loss per common share are the same for all periods presented because
      all
      warrants and stock options outstanding are anti-dilutive. The 19,021,786 shares
      of common stock issued to the founder of Lixte in conjunction with the closing
      of the reverse merger transaction on June 30, 2006 have been presented as
      outstanding for all periods presented.




13





At
      June
      30, 2008 and December 31, 2007, the Company had securities outstanding entitling
      the holder thereof to acquire shares of common stock as
      follows:




**June
                30,**
              **2008**
            
            **December 31,**
              **2007**Warrants
            
            
            546,626
            
            
            546,626Stock
                options
            
            
            2,290,000
            
            
            2,090,000Total
            
            
            2,836,626
            
            
            2,636,626





***Equipment***




Equipment
      is recorded at cost. Depreciation expense is provided on a straight-line basis
      using estimated useful lives of 3 years. Maintenance and repairs are charged
      to
      expense as incurred. When assets are retired or otherwise disposed of, the
      property accounts are relieved of costs and accumulated depreciation and any
      resulting gain or loss is credited or charged to operations.




***Fair
      Value of Financial Instruments***




The
      carrying amounts of cash and cash equivalents, prepaid expenses, accounts
      payable, accrued expenses and due to stockholder approximate their respective
      fair values due to the short-term nature of these items and/or the current
      interest rates payable in relation to current market conditions.




***Use
      of Estimates*** ****




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 at the date of the financial statements and the reported amounts
      of
      expenses during the reporting period. Actual results could differ from those
      estimates.




***Reclassification***




Certain
      reclassifications have been made to prior period balances to conform to the
      June
      30, 2008 presentation. Such reclassifications did not have any effect on results
      of operations.




***Adoption
      of New Accounting Policies***





In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No. 157, “Fair Value Measurements” (“SFAS No. 157”), which
      establishes a formal framework for measuring fair value under Generally Accepted
      Accounting Principles (“GAAP”). SFAS No. 157 defines and codifies the
      many definitions of fair value included among various other authoritative
      literature, clarifies and, in some instances, expands on the guidance for
      implementing fair value measurements, and increases the level of disclosure
      required for fair value measurements. Although SFAS No. 157 applies to
      and amends the provisions of existing FASB and American Institute of Certified
      Public Accountants (“AICPA”) pronouncements, it does not, of itself, require any
      new fair value measurements, nor does it establish valuation standards.
      SFAS No. 157 applies to all other accounting pronouncements requiring
      or permitting fair value measurements, except for: SFAS No. 123R,
      share-based payment and related pronouncements, the practicability exceptions
      to
      fair value determinations allowed by various other authoritative pronouncements,
      and AICPA Statements of Position 97-2 and 98-9 that deal with software revenue
      recognition. SFAS No. 157 was effective January 1, 2008, and did
      not have any impact on the Company’s financial statement presentation or
      disclosures in 2008.





In
      February 2007, the FASB issued Statement of Financial Accounting Standards
      No. 159, “The Fair Value Option for Financial Assets and Financial
      Liabilities” (“SFAS No. 159”), which provides companies with an option
      to report selected financial assets and liabilities at fair value.
      SFAS No. 159’s objective is to reduce both complexity in accounting
      for financial instruments and the volatility in earnings caused by measuring
      related assets and liabilities differently. Generally accepted accounting
      principles have required different measurement attributes for different assets
      and liabilities that can create artificial volatility in earnings.
      SFAS No. 159 helps to mitigate this type of accounting-induced
      volatility by enabling companies to report related assets and liabilities at
      fair value, which would likely reduce the need for companies to comply with
      detailed rules for hedge accounting. SFAS No. 159 also establishes
      presentation and disclosure requirements designed to facilitate comparisons
      between companies that choose different measurement attributes for similar
      types
      of assets and liabilities. SFAS No. 159 requires companies to provide
      additional information that will help investors and other users of financial
      statements to more easily understand the effect of the company’s choice to use
      fair value on its earnings. SFAS No. 159 also requires companies to
      display the fair value of those assets and liabilities for which the company
      has
      chosen to use fair value on the face of the balance sheet.
      SFAS No. 159 does not eliminate disclosure requirements included in
      other accounting standards, including requirements for disclosures about fair
      value measurements included in SFAS No. 157 and
      SFAS No. 107. SFAS No. 159 was effective January 1, 2008,
      and did not
      have any impact on the Company’s financial statement presentation or disclosures
      in 2008.




14




***Recent
      Accounting Pronouncements***




In
      December 2007, the FASB issued SFAS No. 141(R), “Business
      Combinations” (“SFAS No. 141(R)”), which requires an acquirer to
      recognize in its financial statements as of the acquisition date (i) the
      identifiable assets acquired, the liabilities assumed, and any noncontrolling
      interest in the acquiree, measured at their fair values on the acquisition
      date,
      and (ii) goodwill as the excess of the consideration transferred plus the
      fair value of any noncontrolling interest in the acquiree at the acquisition
      date over the fair values of the identifiable net assets acquired.
      Acquisition-related costs, which are the costs an acquirer incurs to effect
      a
      business combination, will be accounted for as expenses in the periods in which
      the costs are incurred and the services are received, except that costs to
      issue
      debt or equity securities will be recognized in accordance with other applicable
      GAAP. SFAS No. 141(R) makes significant amendments to other Statements
      and other authoritative guidance to provide additional guidance or to conform
      the guidance in that literature to that provided in SFAS No. 141(R).
      SFAS No. 141(R) also provides guidance as to what information is to be
      disclosed to enable users of financial statements to evaluate the nature and
      financial effects of a business combination. SFAS No. 141(R) is
      effective for financial statements issued for fiscal years beginning on or
      after
      December 15, 2008. Early adoption is prohibited. The
      adoption of SFAS No. 141(R) will affect how the Company accounts for a
      business combination concluded after December 31, 2008.




In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests
      in Consolidated Financial Statements — an amendment of ARB No. 51”
(“SFAS No. 160”), which revises the relevance, comparability, and
      transparency of the financial information that a reporting entity provides
      in
      its consolidated financial statements by establishing accounting and reporting
      standards that require (i) the ownership interests in subsidiaries held by
      parties other than the parent be clearly identified, labeled, and presented
      in
      the consolidated statement of financial position within equity, but separate
      from the parent’s equity, (ii) the amount of consolidated net income
      attributable to the parent and to the noncontrolling interest be clearly
      identified and presented on the face of the consolidated statement of income,
      (iii) changes in a parent’s ownership interest while the parent retains its
      controlling financial interest in its subsidiary be accounted for consistently
      as equity transactions, (iv) when a subsidiary is deconsolidated, any
      retained noncontrolling equity investment in the former subsidiary be initially
      measured at fair value, with the gain or loss on the deconsolidation of the
      subsidiary being measured using the fair value of any noncontrolling equity
      investment rather than the carrying amount of that retained investment, and
      (v) entities provide sufficient disclosures that clearly identify and
      distinguish between the interests of the parent and the interests of the
      noncontrolling owners. SFAS No. 160 amends FASB No. 128 to
      provide that the calculation of earnings per share amounts in the consolidated
      financial statements will continue to be based on the amounts attributable
      to
      the parent. SFAS No. 160 is effective for financial statements issued
      for fiscal years, and interim periods within those fiscal years, beginning
      on or
      after December 15, 2008. Early adoption is prohibited.
      SFAS No. 160 shall be applied prospectively as of the beginning of the
      fiscal year in which it is initially applied, except for the presentation and
      disclosure requirements, which shall be applied retrospectively for all periods
      presented. The Company has not yet determined the effect on its consolidated
      financial statements, if any, upon adoption of SFAS No. 160.





In
      March
      2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
      and Hedging Activities - an amendment of FASB Statement No. 133” (“SFAS No.
      161”). SFAS No. 161 amends and expands the disclosure requirements of SFAS No.
      133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No.
      133”). The objective of SFAS No. 161 is to provide users of financial statements
      with an enhanced understanding of how and why an entity uses derivative
      instruments, how derivative instruments and related hedged items are accounted
      for under SFAS No. 133 and its related interpretations, and how derivative
      instruments and related hedged items affect an entity’s financial position,
      financial performance, and cash flows. SFAS No. 161 requires qualitative
      disclosures about objectives and strategies for using derivatives, quantitative
      disclosures about fair value amounts of and gains and losses on derivative
      instruments, and disclosures about credit-risk-related contingent features
      in
      derivative agreements. SFAS No. 161 applies to all derivative financial
      instruments, including bifurcated derivative instruments (and nonderivative
      instruments that are designed and qualify as hedging instruments pursuant to
      paragraphs 37 and 42 of SFAS No. 133) and related hedged items accounted for
      under SFAS No. 133 and its related interpretations. SFAS No. 161 also amends
      certain provisions of SFAS No. 131. SFAS No. 161 is effective for financial
      statements issued for fiscal years and interim periods beginning after November
      15, 2008, with early application encouraged. SFAS No. 161 encourages, but does
      not require, comparative disclosures for earlier periods at initial adoption.
      The Company has not yet determined the effect on its consolidated financial
      statements, if any, upon adoption of SFAS No. 161.




15




**3.
      Share Exchange Agreement and Private Placement**




***Share
      Exchange Agreement***




On
      June
      30, 2006, pursuant to a Share Exchange Agreement dated as of June 8, 2006 (the
      “Share Exchange Agreement”) by and among Holdings, Dr. John S. Kovach (“Seller”)
      and Lixte, Holdings issued 19,021,786 shares of its common stock in exchange
      for
      all of the issued and outstanding shares of Lixte (the “Exchange”). Previously,
      on October 3, 2005, Lixte had issued 1,500 shares of its no par value common
      stock to its founder for $1,500, which constituted all of the issued and
      outstanding shares of Lixte prior to the Exchange. As a result of the Exchange,
      Lixte became a wholly-owned subsidiary of Holdings.




Pursuant
      to the Exchange, Holdings issued to the Seller 19,021,786 shares of its common
      stock. Holdings had a total of 25,000,832 shares of common stock issued and
      outstanding after giving effect to the Exchange and the 1,973,869 shares of
      common stock issued in the initial closing of the private
      placement.




As
      a
      result of the Exchange and the shares of common stock issued in the initial
      closing of the private placement, on June 30, 2006, the stockholders of the
      Company immediately prior to the Exchange owned 4,005,177 shares of common
      stock, equivalent to approximately 16% of the issued and outstanding shares
      of
      the Company’s common stock, and the Company is now controlled by the former
      stockholder of Lixte.




The
      Share
      Exchange Agreement was determined through arms-length negotiations between
      Holdings, the Seller and Lixte. In connection with the Exchange, the Company
      paid WestPark Capital, Inc. an aggregate cash fee of $50,000.





***Private
      Placements***





On
      June
      30, 2006, concurrently with the closing of the Exchange, the Company sold an
      aggregate of 1,973,869 shares of its common stock to accredited investors in
      an
      initial closing of a private placement at a per share price of $0.333, resulting
      in aggregate gross proceeds to the Company of $657,299. The Company paid to
      WestPark Capital, Inc., as placement agent, a commission of 10% and a
      non-accountable fee of 4% of the gross proceeds of the private placement and
      issued five-year warrants to purchase common stock equal to (a) 10% of the
      number of shares sold in the private placement exercisable at $0.333 per share
      and (b) an additional 2% of the number of shares sold in the private placement
      also exercisable at $0.333 per share. A total of 236,864 warrants were issued.
      Net cash proceeds to the Company, after the deduction of all private placement
      offering costs and expenses, were $522,939.





On
      July
      27, 2006, the Company sold an aggregate of 1,581,351 shares of its common stock
      to accredited investors in a second closing of the private placement at a per
      share price of $0.333 resulting in aggregate gross proceeds to the Company
      of
      $526,590. The Company paid to WestPark Capital, Inc., as placement agent, a
      commission of 10% and a non-accountable fee of 4% of the gross proceeds of
      the
      private placement and issued five-year warrants to purchase common stock equal
      to (a) 10% of the number of shares sold in the private placement exercisable
      at
      $0.333 per share and (b) an additional 2% of the number of shares sold in the
      private placement also exercisable at $0.333 per share. A total of 189,762
      warrants were issued. Net cash proceeds to the Company were
      $446,433.




16




In
      conjunction with the private placement of common stock, the Company issued
      a
      total of 426,626 five-year warrants to WestPark Capital, Inc. exercisable at
      the
      per share price of the common stock sold in the private placement ($0.333 per
      share). The warrants issued to WestPark Capital, Inc. do not contain any price
      anti-dilution provisions. However, such warrants contain cashless exercise
      provisions and demand registration rights, but the warrant holder has agreed
      to
      waive any claims to monetary damages or financial penalties for any failure
      by
      the Company to comply with such registration requirements. Based on the
      foregoing, the warrants have been accounted for as equity.




The
      fair
      value of the warrants, as calculated pursuant to the Black-Scholes
      option-pricing model, was determined to be $132,254 ($0.31 per share) using
      the
      following Black-Scholes input variables: stock price on date of grant - $0.333;
      exercise price - $0.333; expected life - 5 years; expected volatility - 150%;
      expected dividend yield - 0%; risk-free interest rate - 5%.





As
      part
      of the Company’s private placement of its securities completed on July 27, 2006,
      the Company entered into a registration rights agreement with the purchasers,
      whereby the Company agreed to register the shares of common stock sold in the
      private placement, and to maintain the effectiveness of such registration
      statement, subject to certain conditions. The agreement required the Company
      to
      file a registration statement within 45 days of the closing of the private
      placement and to have the registration statement declared effective within
      120
      days of the closing of the private placement. On September 8, 2006, the Company
      filed a registration statement on Form SB-2 to register 3,555,220 shares of
      the
      common stock sold in the private placement. Since the registration statement
      was
      not declared effective by the Securities and Exchange Commission within 120
      days
      of the closing of the private placement, the Company was required to pay each
      investor prorated liquidated damages equal to 1.0% of the amount raised per
      month, payable monthly in cash.





In
      accordance with EITF 00-19-2, “Accounting for Registration Payment
      Arrangements”, on the date of the closing of the private placement, the Company
      believed it would meet the deadlines under the registration rights agreement
      with respect to filing a registration statement and having it declared effective
      by the Securities and Exchange Commission. As a result, the Company did not
      record any liabilities associated with the registration rights agreement at
      June
      30, 2006. At December 31, 2006, the Company determined that the registration
      statement covering the shares sold in the private placement would not be
      declared effective within the requisite time frame and therefore accrued six
      months liquidated damages under the registration rights agreement aggregating
      approximately $74,000, which has been presented as a current liability at June
      30, 2008 and December 31, 2007. The Company’s registration statement on Form
      SB-2 was declared effective by the Securities and Exchange Commission on May
      14,
      2007. At June 30, 2008, the registration penalty to the investors was still
      due
      and payable.





On
      December 12, 2007, the Company sold an aggregate of 999,995 shares of its common
      stock to accredited investors in a second private placement at a per share
      price
      of $0.65, resulting in aggregate gross proceeds to the Company of $650,000.
      The
      Company paid to WestPark Capital, Inc., as placement agent, a commission of
      10%
      and a non-accountable fee of 4% of the gross proceeds of the private placement
      and issued five-year warrants to purchase common stock equal to (a) 10% of
      the
      number of shares sold in the private placement exercisable at $0.65 per share
      and (b) an additional 2% of the number of shares sold in the private placement
      also exercisable at $0.65 per share. Net cash proceeds to the Company were
      $531,320.




In
      conjunction with the second private placement of common stock, the Company
      issued a total of 120,000 five-year warrants to WestPark Capital, Inc.
      exercisable at the per share price of the common stock sold in the private
      placement ($0.65 per share). The warrants issued to WestPark Capital, Inc.
      do
      not contain any price anti-dilution provisions. However, such warrants contain
      cashless exercise provisions and demand registration rights, but the warrant
      holder has agreed to waive any claims to monetary damages or financial penalties
      for any failure by the Company to comply with such registration requirements.
      Based on the foregoing, the warrants have been accounted for as
      equity.





The
      fair
      value of the warrants, as calculated pursuant to the Black-Scholes
      option-pricing model, was determined to be $115,200 ($0.96 per share) using
      the
      following Black-Scholes input variables: stock price on date of grant - $1.10;
      exercise price - $0.65; expected life - 5 years; expected volatility - 118.6%;
      expected dividend yield - 0%; risk-free interest rate - 4%.




17




As
      part
      of the Company’s second private placement of its securities completed on
      December 12, 2007, the Company entered into a registration rights agreement
      with
      the purchasers, whereby the Company agreed to register the shares of common
      stock sold in the second private placement at its sole cost and expense. The
      registration rights agreement terminates at such time as the common shares
      may
      be sold in market transactions without regard to any volume limitations. The
      registration rights agreement requires the Company to file a registration
      statement within 75 days of receipt of written demand from holders who represent
      at least 50% of the common shares issued pursuant to the second private
      placement, provided that no demand shall be made for less than 500,000 shares,
      and to use its best efforts to cause such registration statement to become
      and
      remain effective for the requisite period. The registration rights agreement
      also provides for unlimited piggyback registration rights. The registration
      rights agreement does not provide for any penalties in the event that the
      Company is unable to comply with its terms.





The
      Company’s common stock was listed for trading on the OTC Bulletin Board
      commencing September 24, 2007.





**4.
      Related Party Transactions**




Since
      inception, Lixte’s founding stockholder and Chief Executive Officer, Dr. John
      Kovach, has periodically made advances to the Company to meet operating
      expenses. Such advances are non-interest-bearing and are due on demand. At
      June
      30, 2008 and December 31, 2007, stockholder advances totaled
      $92,717.




The
      Company’s office facilities have been provided without charge by Dr. Kovach.
      Such costs were not material to the financial statements and, accordingly,
      have
      not been reflected therein.




Dr.
      Kovach did not receive any compensation from the Company during the three months
      and six months ended June 30, 2008 and 2007, and for the period from August
      9,
      2005 (inception) through June 30, 2008 (cumulative), in view of the Company’s
      development stage status and limited resources. Any future compensation
      arrangements will be subject to the approval of the Board of
      Directors.





Dr.
      Kovach is involved in other business activities and may, in the future, become
      involved in other business opportunities that become available. Accordingly,
      he
      may face a conflict in selecting between the Company and his other business
      interests. The Company has not yet formulated a policy for the resolution of
      such potential conflicts.




**5.
      Common Stock and Preferred Stock**




The
      Company’s Certificate of Incorporation provides for authorized capital of
      110,000,000 shares, of which 100,000,000 shares are common stock with a par
      value of $0.0001 per share and 10,000,000 shares are preferred stock with a
      par
      value of $0.0001 per share.




The
      Company is authorized to issue 10,000,000 shares of preferred stock with such
      designations, voting and other rights and preferences, as may be determined
      from
      time to time by the Board of Directors.





**6.
      Stock Options and Warrants**




On
      June
      30, 2006, effective with the closing of the Exchange, the Company granted to
      Dr. Philip Palmedo, an outside director of the Company, stock options to
      purchase an aggregate of 200,000 shares of common stock, exercisable for a
      period of five years at $0.333 per share, with one-third of the options (66,666
      shares) vesting immediately upon joining the Board and one-third vesting
      annually on each of June 30, 2007 and 2008. The fair value of these options,
      as
      calculated pursuant to the Black-Scholes option-pricing model, was determined
      to
      be $62,000 ($0.31 per share), of which $20,666 was charged to operations on
      June
      30, 2006, and the remaining $41,334 is being charged to operations ratably
      from
      July 1, 2006 through June 30, 2008. During the three months ended June 30,
      2008
      and 2007, the Company recorded a charge to operations of $5,165 and $5,167,
      respectively, with respect to these options. During the six months ended
      June 30, 2008 and 2007, the Company recorded a charge to operations of $10,332
      and $10,334, respectively, with respect to these
      options.




18




On
      June
      30, 2006, effective with the closing of the Exchange, the Company also granted
      to Dr. Palmedo additional stock options to purchase 190,000 shares of
      common stock exercisable for a period of five years at $0.333 per share for
      services rendered in developing the business plan for Lixte, all of which were
      fully vested upon issuance. The fair value of these options, as calculated
      pursuant to the Black-Scholes option-pricing model, was determined to be $58,900
      ($0.31 per share), and was charged to operations at June 30, 2006.




On
      June
      30, 2006, effective with the closing of the Exchange, the Company granted to
      certain members of its Scientific Advisory Committee stock options to purchase
      an aggregate of 100,000 shares of common stock exercisable for a period of
      five
      years at $0.333 per share, with one-half of the options vesting annually on
      each
      of June 30, 2007 and June 30, 2008. The fair value of these options, as
      calculated pursuant to the Black-Scholes option-pricing model, was initially
      determined to be $31,000 ($0.31 per share), and is being charged to operations
      ratably from July 1, 2006 through June 30, 2008. On June 30, 2008 and 2007,
      the
      fair value of these options, as calculated pursuant to the Black-Scholes
      option-pricing model, was determined to be $25,000 ($0.25 per share) and $29,000
      ($0.29 per share), respectively, which resulted in a charge (credit) to
      operations of $(17,930) and $3,626 during the three months ended June 30, 2008
      and 2007, respectively. During the six months ended June 30, 2008 and 2007,
      the
      Company recorded a charge (credit) to operations of $(3,336) and $7,376,
      respectively, with respect to these options.





On
      June
      30, 2006, the fair value of the aforementioned stock options was initially
      calculated using the following Black-Scholes input variables: stock price -
      $0.333; exercise price - $0.333; expected life - 5 to 7 years; expected
      volatility - 150%; expected dividend yield - 0%; risk-free interest rate -
      5%.
      On June 30, 2007, the Black-Scholes input variables utilized to determine the
      fair value of the aforementioned stock options were stock price - $0.333;
      exercise price - $0.333; expected life - 4 to 6 years; expected volatility
      -
      150%; expected dividend yield - 0%; risk-free interest rate - 4.5%. On June
      30,
      2008, the fair value of the aforementioned stock options was calculated using
      the following Black-Scholes input variables: stock price - $0.30; exercise
      price
      - $0.333; expected life - 3 to 5 years; expected volatility - 154.5%; expected
      dividend yield - 0%; risk-free interest rate - 3.28%.





On
      June
      20, 2007, the Board of Directors of the Company approved the 2007 Stock
      Compensation Plan (the “2007 Plan”), which provides for the granting of awards,
      consisting of common stock options, stock appreciation rights, performance
      shares, or restricted shares of common stock, to employees and independent
      contractors, for up to 2,500,000 shares of the Company’s common stock, under
      terms and condition, as determined by the Company’s Board of Directors.





On
      September 12, 2007, in conjunction with his appointment as a director of the
      Company, the Company granted to Dr. Stephen Carter stock options to purchase
      an
      aggregate of 200,000 shares of common stock under the 2007 Plan, exercisable
      for
      a period of five years from vesting date at $0.333 per share, with one-half
      (100,000 shares) vesting annually on each of September 12, 2008 and 2009. The
      fair value of these options, as calculated pursuant to the Black-Scholes
      option-pricing model, was determined to be $204,000 ($1.02 per share), and
      is
      being charged to operations ratably from September 12, 2007 through September
      12, 2009, which resulted in a charge to operations of $25,361 and $50,722 during
      the three months and six months ended June 30, 2008, respectively.





On
      September 12, 2007, the Company entered into a consulting agreement with Gil
      Schwartzberg and granted to Mr. Schwartzberg stock options to purchase an
      aggregate of 1,000,000 shares of common stock, exercisable for a period of
      four
      years from vesting date at $1.00 per share, with one-half of the options
      (500,000 shares) vesting immediately and one-half (500,000 shares) vesting
      on
      September 12, 2008. The fair value of these options, as calculated pursuant
      to
      the Black-Scholes option-pricing model, was initially determined to be $945,000
      ($0.945 per share), of which $465,000 was attributed to the fully-vested options
      and was thus charged to operations on September 12, 2007. The remaining portion
      of the fair value of these options is being charged to operations ratably from
      September 12, 2007 through September 12, 2008. During the three months and
      six
      months ended June 30, 2008, the Company recorded a charge (credit) to operations
      of $(112,951) and $7,076, respectively, with respect to these
      options.




19





On
      September 12, 2007, the Company entered into a consulting agreement with Francis
      Johnson, a co-owner of Chem-Master International, Inc. and granted to Professor
      Johnson stock options to purchase an aggregate of 300,000 shares of common
      stock, exercisable for a period of four years from vesting date at $0.333 per
      share, with one-third (100,000 shares) vesting annually on each of September
      12,
      2008, 2009 and 2010. The fair value of these options, as calculated pursuant
      to
      the Black-Scholes option-pricing model, was initially determined to be $300,000
      ($1.00 per share), and is being charged to operations ratably from September
      12,
      2007 through September 12, 2010. On June 30, 2008, the fair value of these
      options, as calculated pursuant to the Black-Scholes option-pricing model,
      was
      determined to be $81,000 ($0.27 per share), which resulted in a charge (credit)
      to operations of $(25,139) and $1,705 during the three months and six months
      ended June 30, 2008, respectively.




In
      accordance with EITF 96-18, options granted to committee members and outside
      consultants are revalued each reporting period to determine the amount to be
      recorded as an expense in the respective period. As the options vest, they
      are
      valued on each vesting date and an adjustment is recorded for the difference
      between the value already recorded and the then current value on the date of
      vesting.





On
      September 12, 2007, the fair value of the aforementioned stock options was
      initially calculated using the following Black-Scholes input variables: stock
      price - $1.05; exercise price - $0.333 to $1.00; expected life - 4 to 6 years;
      expected volatility - 150%; expected dividend yield - 0%; risk-free interest
      rate - 5%. On June 30, 2008, the fair value of the aforementioned stock options
      was calculated (for stock options revalued pursuant to EITF 98-16) using the
      following Black-Scholes input variables: stock price - $0.30; exercise price
      -
      $0.333 to $1.00; expected life - 4.2 years; expected volatility - 154.5%;
      expected dividend yield - 0%; risk-free interest rate - 3.28%. The Company
      used
      a revised volatility factor at June 30, 2008 as it had trading data commencing
      September 24, 2007.





Additional
      information with respect to common stock warrants and stock options issued
      is
      provided at Notes 3 and 7.





**7.**  **Commitments
      and Contingencies**




Effective
      March 22, 2006, Lixte entered into a CRADA, as amended, with the NINDS of the
      NIH. The CRADA is for a term of 42 months from the effective date and may be
      unilaterally terminated by either party by providing written notice within
      sixty
      days. The CRADA provides for the collaboration between the parties in the
      identification and evaluation of agents that target the Nuclear Receptor
      CoRepressor (N-CoR) pathway for glioma cell differentiation. The CRADA also
      provided that NINDS and Lixte will conduct research to determine if expression
      of N-CoR correlates with prognosis in glioma patients. Pursuant to the CRADA,
      Lixte agreed to provide funds under the CRADA in the amount of $200,000 per
      year
      to fund two technical assistants for the technical, statistical and
      administrative support for the research activities, as well as to pay for
      supplies and travel expenses. The first $200,000 was due within 180 days of
      the
      effective date and was paid in full on July 6, 2006. The second $200,000 was
      paid in full on June 29, 2007. In June 2008, the CRADA was extended to September
      30, 2009 with no additional funding required for the period between July 1,
      2008
      and September 30, 2008. However, for the period from October 1, 2008 through
      September 30, 2009, the Company has agreed to provide additional funding under
      the CRADA of $200,000, to be paid in four quarterly installments of $50,000
      commencing on October 1, 2008.





On
      January 5, 2007, Lixte entered into a Services Agreement with The Free State
      of
      Bavaria (Germany) represented by the University of Regensburg (the “University”)
      pursuant to which Lixte retained the University to provide to it certain samples
      of primary cancer tissue and related biological fluids to be obtained from
      patients afflicted with specified types of cancer. The University also agreed
      to
      provide certain information relating to such patients. Lixte agreed to pay
      the
      University 72,000 Euros in two equal installments. The first installment of
      36,000 Euros ($48,902) was paid on March 7, 2007. On January 12, 2008, Lixte
      terminated the Services Agreement in accordance with its terms, as a result
      of
      which payment of the second installment of 36,000 Euros was cancelled. The
      University agreed to deliver 50% of the aforementioned samples under the
      terminated Services Agreement.




On
      February 5, 2007, Lixte entered into a two-year agreement (the “Chem-Master
      Agreement”) with Chem-Master International, Inc. (“Chem-Master”), a company
      co-owned by Francis Johnson, a consultant to the Company, pursuant to which
      Lixte engaged Chem-Master to synthesize a compound designated as “LB-1”, and any
      other compound synthesized by Chem-Master pursuant to Lixte’s request, which
      have potential use in treating a disease, including, without limitation, cancers
      such as glioblastomas. Pursuant to the Chem-Master Agreement, Lixte agreed
      to
      reimburse Chem-Master for the cost of materials, labor, and expenses for other
      items used in the synthesis process, and also agreed to grant Chem-Master a
      five-year option to purchase 100,000 shares of the Company’s common stock at an
      exercise price of $0.333 per share. The fair value of this option, as calculated
      pursuant to the Black-Scholes option-pricing model, was determined to be $31,000
      ($0.31 per share) using the following Black-Scholes input variables: stock
      price
      on date of grant - $0.333; exercise price - $0.333; expected life - 5 years;
      expected volatility - 150%; expected dividend yield - 0%; risk-free interest
      rate - 4.5%. The $31,000 fair value was charged to operations as research
      and development costs during the year ended December 31, 2007, since the option
      was fully vested and non-forfeitable on the date of issuance.  Lixte has
      the right to terminate the Chem-Master Agreement at any time during its term
      upon sixty days prior written notice.  On February 5, 2009, provided that
      the Chem-Master Agreement has not been terminated prior to such date, the
      Company has agreed to grant Chem-Master a second five-year option to
      purchase an additional 100,000 shares of the Company’s common stock at an
      exercise price of $0.333 per share.




20





On
      January 29, 2008, the Chem-Master Agreement was amended to extend its term
      to
      February 15, 2014, and to expressly provide for the design and synthesis of
      a
      new series of compounds designated as “LB-3”. Pursuant to the amendment, Lixte
      issued 100,000 shares of its restricted common stock, valued at $75,000, and
      granted an option to Chem-Master to purchase 200,000 shares of the Company’s
      common stock. The option is exercisable for a period of two years from the
      vesting date at $1.65 per share, with one-half (100,000 shares) vesting on
      August 1, 2009, and one-half (100,000 shares) vesting on February 1, 2011.
      The
      fair value of this option, as calculated pursuant to the Black-Scholes
      option-pricing model, was initially determined to be $96,000 ($0.48 per share)
      using the following Black-Scholes input variables: stock price on date of grant
      - $0.75; exercise price - $1.65; expected life - 5 years; expected volatility
      -
      120.1%; expected dividend yield - 0%; risk-free interest rate -
      3.09%.





The
      fair
      value of the restricted common stock issued was charged to operations as
      research and development costs on January 29, 2008. On June 30, 2008, the fair
      value of the aforementioned stock options was determined to be $48,000 ($0.24
      per share calculated using the following Black-Scholes input variables: stock
      price - $0.30; exercise price - $1.65; expected life - 4.59 years; expected
      volatility - 154.5%; expected dividend yield - 0%; risk-free interest rate
      -
      3.28%, which resulted in a charge (credit) to operations of $(425) and $6,664
      during the three months and six months ended June 30, 2008, respectively.





On
      September 12, 2007, the Company entered into two consulting agreements for
      financial and scientific services. Compensation related to these agreements
      is
      primarily in the form of stock options (see Note 6).





On
      September 20, 2007, the Company entered into a one-year consulting agreement
      (the “Mirador Agreement”) with Mirador Consulting, Inc. (“Mirador”), pursuant to
      which Mirador was to provide the Company with various financial services.
      Pursuant to the Mirador Agreement, Lixte agreed to pay Mirador $5,000 per month
      and also agreed to sell Mirador 250,000 shares of the Company’s restricted
      common stock for $250 ($0.001 per share). The fair value of this transaction
      was
      determined to be in excess of the purchase price by $262,250 ($1.049 per share),
      reflecting the difference between the $0.001 purchase price and the $1.05 price
      per share as quoted on the OTC Bulletin Board on the transaction date, and
      was
      charged to operations as stock-based compensation during the year ended December
      31, 2007, since the shares were fully vested and non-forfeitable on the date
      of
      issuance. The Company made payments under the Mirador Agreement aggregating
      $10,000 during 2007. The Mirador Agreement was amended in February 2008 such
      that Mirador forgave all accrued but unpaid monthly fees through February 29,
      2008 and the Company agreed to pay Mirador a fee of $2,000 per month for the
      remaining six months of the Mirador Agreement.




21




**ITEM
              **2.****
            **MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND****RESULTS
                OF OPERATIONS**





**Overview**




On
      June
      30, 2006, Lixte Biotechnology, Inc., a privately-held Delaware corporation
      (“Lixte”), completed a reverse merger transaction with SRKP 7, Inc. (“SRKP”), a
      non-trading public “shell” company, whereby Lixte became a wholly-owned
      subsidiary of SRKP. For financial reporting purposes, Lixte was considered
      the
      accounting acquirer in the merger and the merger was accounted for as a reverse
      merger. Accordingly, the historical financial statements presented herein are
      those of Lixte and do not include the historical financial results of SRKP.
      The
      stockholders’ equity section of SRKP has been retroactively restated for all
      periods presented to reflect the accounting effect of the reverse merger
      transaction. All costs associated with the reverse merger transaction were
      expensed as incurred.




Lixte
      was
      incorporated in Delaware on August 9, 2005 to capitalize on opportunities to
      develop low cost, specific and sensitive tests for the early detection of
      cancers to better estimate prognosis, to monitor treatment response, and to
      reveal targets for development of more effective treatments.




Unless
      the context indicates otherwise, SRKP and Lixte are hereinafter referred to
      as
      the “Company”. On December 7, 2006, the Company amended its Certificate of
      Incorporation to change its name from SRKP 7, Inc. to Lixte Biotechnology
      Holdings, Inc. (“Holdings”).




The
      Company’s financial statements have been presented on the basis that it is a
      going concern, which contemplates the realization of assets and satisfaction
      of
      liabilities in the normal course of business. The Company is in the development
      stage and has not generated any revenues from operations to date. The Company’s
      ability to continue as a going concern is dependent upon its ability to develop
      additional sources of capital and to ultimately achieve profitable operations.
      The financial statements do not include any adjustments that might result from
      the outcome of these uncertainties (see “Liquidity and Capital Resources - June
      30, 2008 - Going Concern”).




**Recent
      Developments**





On
      April
      23, 2008, the Company announced that Dr. Jie Lu and Dr. Zhengping Zhuang of
      the
      Surgical Neurology Branch, National Institute of Neurological Disorders and
      Stroke, National Institutes of Health and the Company, as a collaborator in
      such
      study, reported at the Annual Meeting of the American Association of Cancer
      Research that the Company’s lead compound, LB-1, one of a patent-pending
      proprietary series of agents, has anti-cancer activity against human
      glioblastoma multiforme cells in a mouse model of cancer. Glioblastoma
      multiforme is the most common and aggressive brain tumor of adults. The Company
      and the Surgical Neurology Branch of the National Institute of Neurological
      Disorders and Stroke are continuing to develop LB-1 and analogs of the compound
      for the treatment of human brain cancers.





On
      August
      8, 2008, the Company announced that lead compounds from each of two different
      types of drugs being developed by it as a potential treatment for specific
      types
      of brain cancers have activity against human pancreatic cancers in a mouse
      model. The Company had previously reported that lead compounds from each of
      two
      different classes of pharmacologic agents have significant inhibitory activity
      against several types of human cancers in the test tube and against brain
      cancers in animal models. The Company has now found that two different lead
      compounds also have statistically significant activity against human pancreatic
      cancer cells growing in mice. These are early studies and there is no evidence
      that these drugs are able to eliminate pancreatic cancers, but rather slow
      their
      growth.





On
      August
      1, 2008, five patent applications were filed with regard to the Company’s
      various ongoing research activities.




22





**Adoption
      of New Accounting Policies**





In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No. 157, “Fair Value Measurements” (“SFAS No. 157”), which
      establishes a formal framework for measuring fair value under Generally Accepted
      Accounting Principles (“GAAP”). SFAS No. 157 defines and codifies the
      many definitions of fair value included among various other authoritative
      literature, clarifies and, in some instances, expands on the guidance for
      implementing fair value measurements, and increases the level of disclosure
      required for fair value measurements. Although SFAS No. 157 applies to
      and amends the provisions of existing FASB and American Institute of Certified
      Public Accountants (“AICPA”) pronouncements, it does not, of itself, require any
      new fair value measurements, nor does it establish valuation standards.
      SFAS No. 157 applies to all other accounting pronouncements requiring
      or permitting fair value measurements, except for: SFAS No. 123R,
      share-based payment and related pronouncements, the practicability exceptions
      to
      fair value determinations allowed by various other authoritative pronouncements,
      and AICPA Statements of Position 97-2 and 98-9 that deal with software revenue
      recognition. SFAS No. 157 was effective January 1, 2008, and did
      not have any impact on the Company’s financial statement presentation or
      disclosures in 2008.





In
      February 2007, the FASB issued Statement of Financial Accounting Standards
      No. 159, “The Fair Value Option for Financial Assets and Financial
      Liabilities” (“SFAS No. 159”), which provides companies with an option
      to report selected financial assets and liabilities at fair value.
      SFAS No. 159’s objective is to reduce both complexity in accounting
      for financial instruments and the volatility in earnings caused by measuring
      related assets and liabilities differently. Generally accepted accounting
      principles have required different measurement attributes for different assets
      and liabilities that can create artificial volatility in earnings.
      SFAS No. 159 helps to mitigate this type of accounting-induced
      volatility by enabling companies to report related assets and liabilities at
      fair value, which would likely reduce the need for companies to comply with
      detailed rules for hedge accounting. SFAS No. 159 also establishes
      presentation and disclosure requirements designed to facilitate comparisons
      between companies that choose different measurement attributes for similar
      types
      of assets and liabilities. SFAS No. 159 requires companies to provide
      additional information that will help investors and other users of financial
      statements to more easily understand the effect of the company’s choice to use
      fair value on its earnings. SFAS No. 159 also requires companies to
      display the fair value of those assets and liabilities for which the company
      has
      chosen to use fair value on the face of the balance sheet.
      SFAS No. 159 does not eliminate disclosure requirements included in
      other accounting standards, including requirements for disclosures about fair
      value measurements included in SFAS No. 157 and
      SFAS No. 107. SFAS No. 159 was effective January 1, 2008,
      and did not
      have any impact on the Company’s financial statement presentation or disclosures
      in 2008.




**Recent
      Accounting Pronouncements**




In
      December 2007, the FASB issued SFAS No. 141(R), “Business
      Combinations” (“SFAS No. 141(R)”), which requires an acquirer to
      recognize in its financial statements as of the acquisition date (i) the
      identifiable assets acquired, the liabilities assumed, and any noncontrolling
      interest in the acquiree, measured at their fair values on the acquisition
      date,
      and (ii) goodwill as the excess of the consideration transferred plus the
      fair value of any noncontrolling interest in the acquiree at the acquisition
      date over the fair values of the identifiable net assets acquired.
      Acquisition-related costs, which are the costs an acquirer incurs to effect
      a
      business combination, will be accounted for as expenses in the periods in which
      the costs are incurred and the services are received, except that costs to
      issue
      debt or equity securities will be recognized in accordance with other applicable
      GAAP. SFAS No. 141(R) makes significant amendments to other Statements
      and other authoritative guidance to provide additional guidance or to conform
      the guidance in that literature to that provided in SFAS No. 141(R).
      SFAS No. 141(R) also provides guidance as to what information is to be
      disclosed to enable users of financial statements to evaluate the nature and
      financial effects of a business combination. SFAS No. 141(R) is
      effective for financial statements issued for fiscal years beginning on or
      after
      December 15, 2008. Early adoption is prohibited. The
      adoption of SFAS No. 141(R) will affect how the Company accounts for a
      business combination concluded after December 31, 2008.




In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests
      in Consolidated Financial Statements — an amendment of ARB No. 51”
(“SFAS No. 160”), which revises the relevance, comparability, and
      transparency of the financial information that a reporting entity provides
      in
      its consolidated financial statements by establishing accounting and reporting
      standards that require (i) the ownership interests in subsidiaries held by
      parties other than the parent be clearly identified, labeled, and presented
      in
      the consolidated statement of financial position within equity, but separate
      from the parent’s equity, (ii) the amount of consolidated net income
      attributable to the parent and to the noncontrolling interest be clearly
      identified and presented on the face of the consolidated statement of income,
      (iii) changes in a parent’s ownership interest while the parent retains its
      controlling financial interest in its subsidiary be accounted for consistently
      as equity transactions, (iv) when a subsidiary is deconsolidated, any
      retained noncontrolling equity investment in the former subsidiary be initially
      measured at fair value, with the gain or loss on the deconsolidation of the
      subsidiary being measured using the fair value of any noncontrolling equity
      investment rather than the carrying amount of that retained investment, and
      (v) entities provide sufficient disclosures that clearly identify and
      distinguish between the interests of the parent and the interests of the
      noncontrolling owners. SFAS No. 160 amends FASB No. 128 to
      provide that the calculation of earnings per share amounts in the consolidated
      financial statements will continue to be based on the amounts attributable
      to
      the parent. SFAS No. 160 is effective for financial statements issued
      for fiscal years, and interim periods within those fiscal years, beginning
      on or
      after December 15, 2008. Early adoption is prohibited.
      SFAS No. 160 shall be applied prospectively as of the beginning of the
      fiscal year in which it is initially applied, except for the presentation and
      disclosure requirements, which shall be applied retrospectively for all periods
      presented. The Company has not yet determined the effect on its consolidated
      financial statements, if any, upon adoption of SFAS No. 160.




23





In
      March
      2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
      and Hedging Activities - an amendment of FASB Statement No. 133” (“SFAS No.
      161”). SFAS No. 161 amends and expands the disclosure requirements of SFAS No.
      133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No.
      133”). The objective of SFAS No. 161 is to provide users of financial statements
      with an enhanced understanding of how and why an entity uses derivative
      instruments, how derivative instruments and related hedged items are accounted
      for under SFAS No. 133 and its related interpretations, and how derivative
      instruments and related hedged items affect an entity’s financial position,
      financial performance, and cash flows. SFAS No. 161 requires qualitative
      disclosures about objectives and strategies for using derivatives, quantitative
      disclosures about fair value amounts of and gains and losses on derivative
      instruments, and disclosures about credit-risk-related contingent features
      in
      derivative agreements. SFAS No. 161 applies to all derivative financial
      instruments, including bifurcated derivative instruments (and nonderivative
      instruments that are designed and qualify as hedging instruments pursuant to
      paragraphs 37 and 42 of SFAS No. 133) and related hedged items accounted for
      under SFAS No. 133 and its related interpretations. SFAS No. 161 also amends
      certain provisions of SFAS No. 131. SFAS No. 161 is effective for financial
      statements issued for fiscal years and interim periods beginning after November
      15, 2008, with early application encouraged. SFAS No. 161 encourages, but does
      not require, comparative disclosures for earlier periods at initial adoption.
      The Company has not yet determined the effect on its consolidated financial
      statements, if any, upon adoption of SFAS No. 161.





**Critical
      Accounting Policies and Estimates**




The
      Company prepared its consolidated financial statements in accordance with
      accounting principles generally accepted in the United States of America. The
      preparation of these financial statements requires the use of estimates and
      assumptions that affect the reported amounts of assets and liabilities and
      the
      disclosure of contingent assets and liabilities at the date of the financial
      statements and the reported amount of revenues and expenses during the reporting
      period. Management periodically evaluates the estimates and judgments made.
      Management bases its estimates and judgments on historical experience and on
      various factors that are believed to be reasonable under the circumstances.
      Actual results may differ from these estimates as a result of different
      assumptions or conditions.




The
      following critical accounting policies affect the more significant judgments
      and
      estimates used in the preparation of the Company’s consolidated financial
      statements.




**Research
      and Development**




Research
      and development costs are expensed as incurred.  Research and development
      expenses consist primarily of fees paid to consultants and outside service
      providers, patent fees and costs, and other expenses relating to the
      acquisition, design, development and testing of the Company's treatments
      and product candidates.




Amounts
      due, pursuant to contractual commitments, on research and development contracts
      with third parties are recorded as a liability, with the related amount of
      such
      contracts recorded as advances on research and development contract services
      on
      the Company’s balance sheet. Such advances on research and development contract
      services are expensed over their life on the straight-line basis, unless the
      achievement of milestones, the completion of contracted work, or other
      information indicates that a different expensing schedule is more appropriate.
      The Company accounts for its research and development contracts in accordance
      with EITF 07-3.




24




**Patent
      Costs**




Due
      to
      the significant uncertainty associated with the successful development of
      one or more commercially viable products based on the Company's research efforts
      and any related patent applications, all patent costs, including patent-related
      legal fees, are expensed as incurred.




**Stock-Based
      Compensation**




Effective
      January 1, 2006, the Company adopted SFAS No. 123 (revised 2004), "Share-Based
      Payment" ("SFAS No. 123R"), a revision to SFAS No. 123, "Accounting for
      Stock-Based Compensation". SFAS No. 123R requires that the Company measure
      the
      cost of employee services received in exchange for equity awards based on the
      grant date fair value of the awards, with the cost to be recognized as
      compensation expense in the Company’s financial statements over the vesting
      period of the awards.




The
      Company accounts for stock option and warrant grants issued and vesting to
      non-employees in accordance with EITF No. 96-18, “Accounting for Equity
      Instruments that are Issued to Other Than Employees for Acquiring, or in
      Conjunction with Selling, Goods or Services”, and EITF 00-18, “Accounting
      Recognition for Certain Transactions involving Equity Instruments Granted to
      Other Than Employees”, whereas the value of the stock compensation is based upon
      the measurement date as determined at either (a) the date at which a performance
      commitment is reached or (b) at the date at which the necessary performance
      to
      earn the equity instruments is complete.




**Income
      Taxes**




The
      Company accounts for income taxes pursuant to Statement of Financial Accounting
      Standards No. 109, “Accounting for Income Taxes” (“SFAS No. 109”), which
      establishes financial accounting and reporting standards for the effects of
      income taxes that result from an enterprise’s activities during the current and
      preceding years. SFAS No. 109 requires an asset and liability approach for
      financial accounting and reporting for income taxes. Accordingly, the Company
      recognizes deferred tax assets and liabilities for the expected impact of
      differences between the financial statements and the tax basis of assets and
      liabilities.




The
      Company records a valuation allowance to reduce its deferred tax assets to
      the
      amount that is more likely than not to be realized. In the event the Company
      was
      to determine that it would be able to realize its deferred tax assets in the
      future in excess of its recorded amount, an adjustment to the deferred tax
      assets would be credited to operations in the period such determination was
      made. Likewise, should the Company determine that it would not be able to
      realize all or part of its deferred tax assets in the future, an adjustment
      to
      the deferred tax assets would be charged to operations in the period such
      determination was made.




**Plan
      of Operation**





***General
      Overview of Plans***




The
      Company is concentrating on discovering biomarkers for common cancers for which
      better diagnostic and therapeutic measures are needed. For each of these
      diseases, a biomarker that would enable identification of the presence of cancer
      at a stage curable by surgery could possibly save thousands of lives annually.
      In addition, biomarkers specific to these diseases may also provide clues as
      to
      processes (biological pathways) that characterize specific cancer types and
      that
      may be vulnerable to drug treatment targeted to the activity of the
      biomarker.




The
      Company is currently focusing on developing new treatments for the most common
      and most aggressive type of brain cancer of adults, glioblastoma multiforme
      (“GBM”). The Company has expanded the scope of its anti-cancer investigational
      activities to include the most common brain tumor of children, medulloblastoma,
      and also to several other types of more common cancers. This expansion of
      activity is based on documentation that each of two distinct types of drugs
      being developed by the Company inhibits the growth of cell lines of breast,
      colon, lung, prostate, pancreas, ovary, stomach and liver cancer, as well as
      the
      major types of leukemias. Activity of lead compounds of both types of drugs
      was
      recently demonstrated against human pancreatic cancer cells in a mouse model.
      Because there is a great need for any kind of effective treatment for pancreatic
      cancer, this cancer will be studied concomitantly with the primary target of
      the
      Company’s research program focused on brain cancers.




25





The
      research on brain tumors is proceeding in collaboration with the National
      Institute of Neurological Disorders and Stroke (“NINDS”) of the National
      Institutes of Health (“NIH”) under a Cooperative Research and Development
      Agreement (“CRADA”) entered into on March 22, 2006, as amended. The research at
      NINDS continues to be led by Dr. Zhengping Zhuang, an internationally recognized
      investigator in the molecular pathology of cancer. Dr. Zhuang is aided by two
      senior research technicians supported by the Company as part of the CRADA.
      The
      goal of the CRADA is to develop more effective drugs for the treatment of GBM
      through the processes required to gain Food and Drug Administration (“FDA”)
      approval for clinical trials. The CRADA was further amended on June 17, 2008.
      Accordingly, the Company is committed to provide funding of $600,000 under
      the
      CRADA over a period of 42 months, of which $400,000 had been paid as of June
      30,
      2008 and the remaining $200,000 is to be paid in four quarterly installments
      of
      $50,000 commencing on October 1, 2008. The CRADA is presently scheduled to
      end
      on September 30, 2009.




The
      Company developed five patent applications that were filed on August 1, 2008.
      Two of these patent filings deal with applications filed earlier jointly with
      NIH for work done under the CRADA: (1) a filing entering the regional stage
      of a
      PCT application involving the use of certain compounds to treat human tumors
      expressing a biomarker for brain and other human cancers, and (2) an application
      for the treatment of the pediatric tumors, medulloblastoma (the most common
      brain tumor in children) and neuroblastoma (a tumor arising from neural cells
      outside the brain that is the most common cancer of children). The three new
      patent applications include (1) a joint application with NIH identifying a
      new
      biomarker for many common human cancers that when targeted by compounds
      developed by the Company result in inhibition of growth and death of cancer
      cells; (2) an application by the Company regarding the structure, synthesis
      and
      use of a group of new homologs of its LB-1 compounds; and (3) an application
      by
      the Company for the use of certain homologs of its drugs as neuroprotective
      agents with potential application to common neurodegenerative conditions such
      as
      Alzheimer’s and Parkinson’s diseases.





The
      Company continues to evaluate compounds for activity against several types
      of
      fungi that cause serious infections, particularly in immuno-compromised
      individuals, such as those with HIV-AIDS, and those having bone marrow
      transplantations. The Company is also exploring indications that specific
      analogy of one class of drugs has activity against strains of fungi that cause
      the most common fungal infections of the skin and nails. Discussions are in
      progress with experts in fungal infections regarding the most reliable methods
      of assessing the potential of new agents for the management of common fungal
      diseases.





The
      Company expects that its products will derive directly from the intellectual
      property from its research activities. The development of lead compounds with
      different mechanisms of action that have now been shown to have activity against
      brain tumors and several other much more common human cancers, as well as
      serious fungal infections, originated from its original focus on a biochemical
      defect in GBM. The Company will continue to use discovery and/or recognition
      of
      molecular variants characteristic of specific human cancers as a guide to drug
      discovery and potentially new diagnostic tests. Examples of the productivity
      of
      this approach to discovery of new therapeutics are (1) the recent patent
      application filing for a new bio-marker of several common cancers that when
      targeted by certain of the Company’s drugs results in inhibition of growth and
      death of cancer cells displaying the marker, and (2) the filing of a patent
      on
      certain homologs of one group of compounds as potentially useful for the
      treatment of neurodegenerative diseases.





The
      Company faces several potential challenges to its goal of commercial success.
      These include raising sufficient capital to fund its business plan, achieving
      commercially applicable results from its research programs, competition from
      more established, well-funded companies with competitive technologies, and
      future competition from companies developing new competitive technologies.
      Because of these challenges, there is substantial uncertainty as to the
      Company’s ability to fund its operations and continue as a going concern (see
“Liquidity and Capital Resources - June 30, 2008 - Going Concern”
below).




***Plans
      for the Remainder of 2008***





The
      Company’s primary financial goal is to raise funds to cover ongoing operations
      and development of its lead compounds for the treatment of brain cancers and
      to
      also include another devastating human cancer, pancreatic cancer, in its
      research efforts. The Company’s objective is to have sufficient resources
      available to explore, most likely in partnership with a pharmaceutical company,
      new data indicating potentially significant activity of some derivatives of
      its
      lead anti-cancer drugs for the management of fungal diseases and, possibly,
      use
      in neurodegenerative diseases where pharmacologic neuroprotection may be
      therapeutically beneficial.




26





The
      Company has three major therapeutic goals, as follows:





The
      first
      goal is to continue to evaluate lead compounds of the LB-1 and LB-2 series
      for
      effectiveness in a rat model of brain cancer in which drugs are administered
      systemically or by direct infusion into the diseased area of the brain. The
      latter method of administration is called “convection administration”. In
      addition to its current lead compounds, new analogs designed to have enhanced
      penetration of the brain and combinations of current drugs with activity in
      the
      rat model will be evaluated alone and in combination with other known active
      anti-cancer drugs that have complementary activity to Company drugs.





The
      second goal is to evaluate the recently documented anti-cancer activity of
      lead
      compounds from the LB-1 and LB-2 series against a series of common human
      cancers. These studies are being done independently of NIH and are therefore
      not
      part of the CRADA.




The
      Company will seek the interest of NIH in supporting development of one or two
      lead compounds from the LB-1 series through pre-clinical studies necessary
      to
      receive FDA approval to take the drugs into Phase I clinical trials. The NIH
      offers opportunities for academic laboratories, including laboratories at NIH
      with a for-profit partner, to seek NIH support and expertise in expediting
      development of particularly promising new compounds as anti-cancer drugs. The
      Company will also explore the potential interest of major pharmaceutical
      companies in collaborating in the development of one or more of its lead
      compounds through Phase I clinical trials of their anti-cancer activity.




The
      third
      goal is to assess the interest of pharmaceutical companies in collaborating
      with
      the Company or in licensing from the Company rights to some of its lead
      compounds as anti-fungal drugs. Certain molecular pathways essential for growth
      by cancer cells are also used by microorganisms, including fungi. Anti-fungal
      therapy is an additional potentially large market for the Company’s compounds,
      but one in which outside expertise will be necessary to plan efficient
      assessment and development of their potential value.





Existing
      resources will not permit evaluation of activity of the Company’s lead drugs
      against many of the common cancers against which the Company’s compounds may
      have anti-cancer activity. Current resources also will not be sufficient to
      carry out pre-clinical studies necessary to apply to the FDA for approval of
      drug evaluations in Phase I trials. Accordingly, the Company is seeking to
      raise
      approximately $2,000,000 from the issuance of new debt and/or equity during
      the
      latter part of 2008 in order to fund its planned operations in 2009. However,
      there can be no assurances that the Company will be able to secure such
      additional financing, or obtain favorable terms on such financing if it is
      available.




The
      Company faces several potential challenges in its efforts to achieve commercial
      success, including raising sufficient capital to fund its business plan,
      achieving commercially applicable results of its research program, competition
      from more established, well-funded companies with competitive technologies,
      and
      future competition from companies that are developing competitive technologies,
      some of whom are larger companies with greater capital resources than the
      Company. There is substantial uncertainty as to the Company’s ability to fund
      its operations and continue as a going concern (see “Liquidity and Capital
      Resources - June 30, 2008 - Going Concern”). Should the Company be unable to
      raise the required capital on a timely basis, the Company’s business plans would
      be materially adversely affected.




The
      Company had initially planned to begin its own analyses of tumor types other
      than GBM for new biomarkers by late 2008. However, in order to do this, the
      Company would need to establish and operate a laboratory. The Company had
      estimated that the creation and operation of such a laboratory for two years
      would cost approximately $2,000,000. The Company has revised its research plans
      as described above, as a result of which it has deferred such plans to open
      and
      staff such a laboratory indefinitely.




27





***Plans
      for 2009***




A
      goal of
      the Company is to continue the synthesis of new compounds that target other
      components of molecular pathways already identified by the Company to be
      vulnerable to attack by small molecule drugs, and to explore the vulnerability
      of additional potential new targets revealed through the molecular
      characterization of the effects of the Company’s lead compounds.




The
      Company expects to participate in clinical trials of new therapies in
      partnership with an organization experienced in such undertakings. The
      partnering organization may be either a clinical branch of NIH or a
      pharmaceutical company with expertise in the conduct of clinical trials. The
      Company’s present position is to take one or more of its new therapies for the
      treatment of glioblastoma multiforme through pre-clinical evaluation as part
      of
      the CRADA with the NINDS of the NIH. After completing pre-clinical evaluation,
      the Company will consider partnering with the NIH to conduct a Phase I
      trial or jointly with the NIH to seek a third party, most probably a large
      pharmaceutical company, to carry the new therapies into Phase I trials.
      After completion of Phase I trials, the Company, potentially in partnership
      with the NIH, would collaborate with the third party to carry new therapies
      found to be safe for administration to humans in the Phase I trials into
      Phase II trials.




Phase II
      trials test the safety and effectiveness, as well as the best estimate of the
      proper dose of the new therapies, in a group of patients with the same type
      of
      cancer at the same stage. For the Company’s initial studies, the focus will be
      brain tumors. The duration of Phase II trials may run from 6 to 24 months.
      New regimens showing beneficial activity in Phase II trials may then be
      considered for evaluation in Phase III trials. Phase III trials for
      the evaluation of new cancer treatments are comparative trials in which the
      therapeutic benefit of a new regimen is compared to the therapeutic benefit
      of
      the best standard regimen in a randomized study.




Whether
      the Company will participate in or be in a position to participate in any
      clinical trials will depend upon partnerships and specific licensing agreements.
      However, in all cases of clinical trial participation, the Company will be
      subject to FDA regulation. These regulations are specific and form the basis
      for
      assessing the potential clinical benefit of new therapeutic regimens while
      safeguarding the health of patients participating in investigational studies.
      Even after a drug receives approval from the FDA for sale as a new treatment
      for
      a specific disease indication, the sponsors of the drug are subject to reporting
      potentially adverse effects of the new regimen to the FDA.




Given
      the
      progress in identifying two lead compounds with activity in animal models of
      GBM, the Company is devoting its resources to bring the agents to a point at
      which an Investigational New Drug (“IND”) application can be submitted to the
      FDA for a Phase I clinical trial. One lead compound (LB-1) is the most advanced
      in the process and the Company plans to be ready for IND submission by early
      2009. The other lead compound (LB-2.5), which inhibits cancer cells by a
      mechanism distinct from that of LB-1, is anticipated to complete its evaluation
      by the end of 2009.





On
      January 29, 2008, the Chem-Master Agreement was amended to extend its term
      to
      February 15, 2014, pursuant to which Chem-Master was engaged to synthesize
      certain compounds, and to expressly provide for the expansion of the Company’s
      drug development program, through consultation with the medicinal chemists
      at
      Chem-Master. The Company is exploring the synthesis of additional novel
      anti-cancer drugs. Several targets for anti-cancer drug development are under
      consideration. When the next group of compounds is developed, it will be
      designated as “LB-3”, as distinguished from the first two classes of compounds
      that were designated as “LB-1” and “LB-2”. This process is currently in the
      planning stage and no compounds have been made as yet.





**Results
      of Operations**




The
      Company is a development stage company and had not commenced revenue-generating
      operations at June 30, 2008.




**Three
      Months Ended June 30, 2008 and 2007**





General
      and Administrative Expenses .
      For the
      three months ended June 30, 2008, general and administrative expenses were
      $(50,947), which consisted of a credit to stock-based compensation of $100,355,
      and charges to consulting and professional fees of $34,060, insurance expense
      of
      $5,955, travel costs of $2,235, and other operating costs of $7,158. The Company
      recorded a credit with respect to stock-based general and administrative
      expenses during the three months ended June 30, 2008 as a result of a decrease
      in the fair value of unvested stock options resulting from a decline in the
      market price of the Company’s common stock during the period.




28





For
      the
      three months ended June 30, 2007, general and administrative expenses were
      $89,241, which consisted of stock-based compensation of $8,791, consulting
      and
      professional fees of $62,304, insurance expense of $7,188, filing fees of
      $5,101, and other operating costs of $5,857.




Depreciation .
      For the
      three months ended June 30, 2008 and 2007, depreciation expense was $159 and
      $148, respectively.




Research
      and Development Costs .
      For the
      three months ended June 30, 2008, research and development costs were $61,782,
      which consisted of a credit for the vested portion of the fair value of stock
      options issued to a consultant and a vendor of $25,564, and charges for patent
      costs of $34,224, laboratory supplies of $15,500, and other costs of $37,622.
      The Company recorded a credit with respect to stock-based research and
      development costs during the three months ended June 30, 2008 as a result of
      a
      decrease in the fair value of unvested stock options resulting from a decline
      in
      the market price of the Company’s common stock during the period.





For
      the
      three months ended June 30, 2007, research and development costs were $89,917,
      which consisted of patent costs of $6,592, laboratory supplies of $8,400, and
      other costs of $74,925.




Interest
      Income .
      For the
      three months ended June 30, 2008, interest income was $733, as compared to
      interest income of $3,584 for the three months ended June 30,
      2007.





Net
      Loss .
      For the
      three months ended June 30, 2008, the Company incurred a net loss of $10,261,
      as
      compared to a net loss of $175,722 for the three months ended June 30,
      2007.




**Six
      Months Ended June 30, 2008 and 2007**





General
      and Administrative Expenses .
      For the
      six months ended June 30, 2008, general and administrative expenses were
      $217,869, which consisted of stock-based compensation of $64,794, consulting
      and
      professional fees of $105,785, insurance expense of $11,911, travel costs of
      $20,223, and other operating costs of $15,156.





For
      the
      six months ended June 30, 2007, general and administrative expenses were
      $199,244, which consisted of stock-based compensation of $17,708, consulting
      and
      professional fees of $149,264, insurance expense of $14,375, filing fees of
      $8,295, and other operating costs of $9,602.




Depreciation .
      For the
      six months ended June 30, 2008 and 2007, depreciation expense was $318 and
      $296,
      respectively.




Research
      and Development Costs .
      For the
      six months ended June 30, 2008, research and development costs were $298,233,
      which consisted of the fair value of restricted common stock issued to a vendor
      of $75,000, the vested portion of the fair value of stock options issued to
      a
      consultant and a vendor of $8,369, patent costs of $74,224, laboratory supplies
      of $24,250, and other costs of $116,390.





For
      the
      six months ended June 30, 2007, research and development costs were $237,592,
      which consisted of the vested portion of the fair value of stock options issued
      to a vendor of $31,000, patent costs of $46,592, laboratory supplies of $10,150,
      and other costs of $149,850.




Interest
      Income .
      For the
      six months ended June 30, 2008, interest income was $2,838, as compared to
      interest income of $8,307 for the six months ended June 30,
      2007.





Net
      Loss .
      For the
      six months ended June 30, 2008, the Company incurred a net loss of $513,582,
      as
      compared to a net loss of $428,825 for the six months ended June 30,
      2007.




29





**Liquidity
      and Capital Resources - June 30, 2008**





**Going
      Concern**




The
      Company’s financial statements have been presented on the basis that it is a
      going concern, which contemplates the realization of assets and satisfaction
      of
      liabilities in the normal course of business. The Company is in the development
      stage and has not generated any revenues from operations to date.




The
      Company’s ability to continue as a going concern is dependent upon its ability
      to develop additional sources of capital and to ultimately achieve profitable
      operations. The accompanying financial statements do not include any adjustments
      that might result from the outcome of these uncertainties.





The
      Company is currently devoting its efforts to research and development related
      to
      discovering specific cancer biomarkers for early detection, estimation of
      prognosis, monitoring response to treatment, development of targeted therapeutic
      agents and new treatments based on an understanding of the molecular activity
      of
      these biomarkers for common cancers. The Company is seeking to exploit this
      opportunity through execution of its business plan and the development of
      related patents.





At
      June
      30, 2008, the Company had not yet commenced any revenue-generating operations.
      All activity through June 30, 2008 is related to the Company’s formation,
      capital raising efforts and initial research and development activities. As
      such, the Company has yet to generate any cash flows from operations, and is
      essentially dependent on debt and equity funding from both related and unrelated
      parties to finance its operations. Prior to June 30, 2006, the Company’s cash
      requirements were funded by advances from Lixte’s founder. On June 30, 2006, the
      Company completed an initial closing of a private placement, selling 1,973,869
      shares of common stock at a price of $0.333 per share and receiving net proceeds
      of $522,939. On July 27, 2006, the Company completed a second closing of the
      private placement, selling 1,581,351 shares of common stock at a price of $0.333
      per share and receiving net proceeds of $446,433. On December 12, 2007, the
      Company completed a second private placement, selling 999,995 shares of common
      stock at a price of $0.65 per share and receiving net proceeds of
      $531,320.





Because
      the Company is currently engaged in research at an early stage, it will likely
      take a significant amount of time to develop any product or intellectual
      property capable of generating revenues. As such, the Company’s business is
      unlikely to generate any revenue in the next several years and may never do
      so.
      Even if the Company is able to generate revenues in the future through licensing
      its technologies or through product sales, there can be no assurance that such
      revenues will exceed its expenses.





The
      Company’s current resources are marginally adequate to fund the Company’s
      basic operating budget through December 31, 2008, but are not sufficient to
      fund
      expanded research activities with respect to the Company’s promising
      intellectual property during the remainder of 2008 and beyond. The Company
      does
      not have sufficient resources to fully develop and commercialize any products
      that may arise from its research. Accordingly, the Company will need to raise
      additional funds in order to satisfy its future working capital requirements.





Based
      on
      the Company’s revised and updated research program, the Company currently
      estimates that it will require additional funds of approximately $2,000,000
      for
      the year ending December 31, 2009 in order to fund operations and continuing
      drug discovery and to bring one drug through the pre-clinical evaluation process
      needed for submission of an IND. The Company is attempting to arrange such
      funding during the next few months, although there can be no assurances that
      the
      Company will be successful in this regard. The amount and timing of future
      cash
      requirements will depend on the market’s evaluation of the Company’s technology
      and products, and the resources that the Company devotes to developing and
      supporting its activities. The Company anticipates funding these cash
      requirements from a combination of debt or equity financings and the sale,
      licensing or joint venturing of its intellectual properties.





Current
      market conditions present uncertainty as to the Company’s ability to secure
      additional funds, as well as its ability to reach profitability. There can
      be no
      assurances that the Company will be able to secure additional financing, or
      obtain favorable terms on such financing if it is available, or as to its
      ability to achieve positive cash flow from operations. Continued negative cash
      flows and lack of liquidity create significant uncertainty about the Company’s
      ability to fully implement its operating plan, as a result of which the Company
      may have to reduce the scope of its planned operations. If cash resources are
      insufficient to satisfy the Company’s liquidity requirements, the Company would
      be required to scale back or discontinue its technology and product development
      programs, or obtain funds, if available, through strategic alliances that may
      require the Company to relinquish rights to certain of its technologies
      products, or to discontinue its operations entirely.




30




Operating
      Activities .
      For the
      six months ended June 30, 2008, operating activities utilized cash of $306,135,
      as compared to utilizing cash of $484,697 for the six months ended June 30,
      2007, primarily as a result of a decrease in advances on research and
      development contract services in 2008, as compared to an increase in advances
      on
      research and development contract services in 2007 related to an installment
      payment made under the CRADA in 2007.




The
      Company had working capital of $11,082 at June 30, 2008. At December 31, 2007,
      the Company had working capital of $376,184, primarily as a result of the sale
      of the Company’s common stock pursuant to a second private placement in December
      2007 that generated net proceeds of $531,320.




Investing
      Activities .
      There
      were no investing activities during the six months ended June 30, 2008. For
      the
      six months ended June 30, 2007, investing activities utilized cash of $272
      for
      the purchase of office equipment.




Financing
      Activities .
      There
      were no financing activities during the six months ended June 30, 2008 and
      2007.




**Principal
      Commitments**




At
      June
      30, 2008, the Company did not have any material commitments for capital
      expenditures. The Company’s principal commitments at June 30, 2008 consisted of
      the liquidated damages payable under the registration rights agreement of
      $74,000 and the contractual obligations as summarized below.





Effective
      March 22, 2006, Lixte entered into a CRADA, as amended, with the NINDS of the
      NIH. The CRADA is for a term of 42 months from the effective date and may be
      unilaterally terminated by either party by providing written notice within
      sixty
      days. The CRADA provides for the collaboration between the parties in the
      identification and evaluation of agents that target the Nuclear Receptor
      CoRepressor (N-CoR) pathway for glioma cell differentiation. The CRADA also
      provided that NINDS and Lixte will conduct research to determine if expression
      of N-CoR correlates with prognosis in glioma patients. Pursuant to the CRADA,
      Lixte agreed to provide funds under the CRADA in the amount of $200,000 per
      year
      to fund two technical assistants for the technical, statistical and
      administrative support for the research activities, as well as to pay for
      supplies and travel expenses. The first $200,000 was due within 180 days of
      the
      effective date and was paid in full on July 6, 2006. The second $200,000 was
      paid in full on June 29, 2007. In June 2008, the CRADA was extended to September
      30, 2009 with no additional funding required for the period between July 1,
      2008
      and September 30, 2008. However, for the period from October 1, 2008 through
      September 30, 2009, the Company has agreed to provide additional funding under
      the CRADA of $200,000, to be paid in four quarterly installments of $50,000
      commencing on October 1, 2008.





On
      January 5, 2007, Lixte entered into a Services Agreement with The Free State
      of
      Bavaria (Germany) represented by the University of Regensburg (the “University”)
      pursuant to which Lixte retained the University to provide to it certain samples
      of primary cancer tissue and related biological fluids to be obtained from
      patients afflicted with specified types of cancer. The University also agreed
      to
      provide certain information relating to such patients. Lixte agreed to pay
      the
      University 72,000 Euros in two equal installments. The first installment of
      36,000 Euros ($48,902) was paid on March 7, 2007. On January 12, 2008, Lixte
      terminated the Services Agreement in accordance with its terms, as a result
      of
      which payment of the second installment of 36,000 Euros was cancelled. The
      University agreed to deliver 50% of the aforementioned samples under the
      terminated Services Agreement.




On
      February 5, 2007, Lixte entered into a two-year agreement (the “Chem-Master
      Agreement”) with Chem-Master International, Inc. (“Chem-Master”), a company
      co-owned by Francis Johnson, a consultant of the Company, pursuant to which
      Lixte engaged Chem-Master to synthesize a compound designated as “LB-1”, and any
      other compound synthesized by Chem-Master pursuant to Lixte’s request, which
      have potential use in treating a disease, including, without limitation, cancers
      such as glioblastomas. Pursuant to the Chem-Master Agreement, Lixte agreed
      to
      reimburse Chem-Master for the cost of materials, labor, and expenses for other
      items used in the synthesis process, and also agreed to grant Chem-Master a
      five-year option to purchase 100,000 shares of the Company’s common stock at an
      exercise price of $0.333 per share. Lixte has the right to terminate the
      Chem-Master Agreement at any time during its term upon sixty days prior written
      notice.  On February 5, 2009, provided that the Chem-Master Agreement has
      not been terminated prior to such date, the Company has agreed to
      grant Chem-Master a second five-year option to purchase an additional
      100,000 shares of the Company’s common stock at an exercise price of $0.333 per
      share.




31





On
      January 29, 2008, the Chem-Master Agreement was amended to extend its term
      to
      February 15, 2014, and to expressly provide for the design and synthesis of
      a
      new series of compounds designated as “LB-3”. Pursuant to the amendment, Lixte
      issued 100,000 shares of its restricted common stock, valued at $75,000, and
      granted an option to Chem-Master to purchase 200,000 shares of the Company’s
      common stock. The option is exercisable for a period of two years from vesting
      date at $1.65 per share, with one-half (100,000 shares) vesting on August 1,
      2009, and one-half (100,000 shares) vesting on February 1, 2011.





On
      September 20, 2007, the Company entered into a one-year consulting agreement
      (the “Mirador Agreement”) with Mirador Consulting, Inc. (“Mirador”), pursuant to
      which Mirador was to provide the Company with various financial services.
      Pursuant to the Mirador Agreement, Lixte agreed to pay Mirador $5,000 per month
      and also agreed to sell Mirador 250,000 shares of the Company’s restricted
      common stock for $250 ($0.001 per share). The Company made payments under the
      Mirador Agreement aggregating $10,000 during 2007. The Mirador Agreement was
      amended in February 2008 such that Mirador forgave all accrued but unpaid
      monthly fees through February 29, 2008 and the Company agreed to pay Mirador
      a
      fee of $2,000 per month for the remaining six months of the Mirador
      Agreement.




**Off-Balance
      Sheet Arrangements**




At
      June
      30, 2008, the Company did not have any transactions, obligations or
      relationships that could be considered off-balance sheet
      arrangements.




32




**ITEM
              3.**
            **QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT MARKET
                RISK**





Not
      applicable.




**ITEM
              4T.**
            **CONTROLS
                AND PROCEDURES**




(a)  Evaluation
      of Disclosure Controls and Procedures




Disclosure
      Controls and procedures are designed to ensure that information required to
      be
      disclosed in the reports filed or submitted under the Exchange Act is recorded,
      processed, summarized and reported, within the time periods specified in the
      Securities and Exchange Commission’s rules and forms. Disclosure controls and
      procedures include, without limitation, controls and procedures designed to
      ensure that information required to be disclosed in the reports filed under
      the
      Exchange Act is accumulated and communicated to management.




As
      of
      June 30, 2008, the Company’s Chief Executive Officer and Chief Financial Officer
      (who is the same individual) evaluated the effectiveness of the design and
      operation of the Company’s disclosure controls and procedures. Based upon and as
      of the date of that evaluation, the Chief Executive Officer and Chief Financial
      Officer concluded that the Company’s disclosure controls and procedures are
      effective to ensure that the information required to be disclosed in the reports
      the Company files and submits under the Exchange Act is recorded, processed,
      summarized, and reported as and when required.




(b)  Changes
      in Internal Controls Over Financial Reporting




There
      were no changes in the Company’s internal control over financial reporting or in
      other factors that materially affect, or are reasonably likely to materially
      affect, those controls subsequent to the date of the Company’s most recent
      evaluation.




33




**PART
      II. OTHER INFORMATION**





Item
      1.
      Legal Proceedings





The
      Company is currently not a party to any pending or threatened legal
      proceedings.




Item
      1A.
      Risk Factors





Not
      applicable.





Item
      2.
      Unregistered Sales of Equity Securities and Use of Proceeds





Not
      applicable.





Item
      3.
      Defaults Upon Senior Securities





Not
      applicable.




Item
      4.
      Submission of Matters to a Vote of Security Holders





Not
      applicable.




Item
      5.
      Other Information





Not
      applicable.




Item
      6.
 Exhibits




A
      list of
      exhibits required to be filed as part of this report is set forth in the Index
      to Exhibits, which immediately precedes such exhibits, and is incorporated
      herein by reference.




34




**SIGNATURES**




In
      accordance with the requirements of the Securities and Exchange Act of 1934,
      the
      registrant has duly caused this report to be signed on its behalf by the
      undersigned thereunto duly authorized.




LIXTE
                BIOTECHNOLOGY HOLDINGS, INC.(Registrant)Date: 
                August 12, 2008
            By:
            /s/ JOHN
                S. KOVACHJohn
                S. KovachChief
                Executive Officer and Chief Financial Officer(Principal
                financial and accounting officer)




35




INDEX
      TO
      EXHIBITS





Exhibit
              Number
            
            Description
                of Document10.1
            
            Services
                Agreement between Lixte Biotechnology, Inc. and Freestate of Bavaria
                represented by University of Regensburg dated January 5, 2007, previously
                filed as an exhibit to the Company’s Current Report on Form 8-K filed on
                January 11, 2007, and incorporated herein by reference.10.2
            
            Agreement
                between Lixte Biotechnology Holdings, Inc. and Chem-Master International,
                Inc. dated February 5, 2007, previously filed as an exhibit to the
                Company’s Current Report on Form 8-K filed on February 9, 2007, and
                incorporated herein by reference.10.3
            
            2007
                Stock Compensation Plan adopted by the Company’s Board of Directors on
                June 20, 2007, previously filed as an exhibit to the Company’s Quarterly
                Report on Form 10-QSB for the Quarterly Period Ended June 30, 2007,
                and
                incorporated herein by reference.10.4
            
            Stock
                Option Agreement between Lixte Biotechnology Holdings, Inc. and Stephen
                K.
                Carter dated September 12, 2007, previously filed as an exhibit to
                the
                Company’s Quarterly Report on Form 10-QSB for the Quarterly Period Ended
                September 30, 2007, and incorporated herein by
                reference.10.5
            
            Stock
                Option Agreement between Lixte Biotechnology Holdings, Inc. and Francis
                Johnson dated September 12, 2007, previously filed as an exhibit
                to the
                Company’s Quarterly Report on Form 10-QSB for the Quarterly Period Ended
                September 30, 2007, and incorporated herein by
                reference.10.6
            
            Stock
                Option Agreement between Lixte Biotechnology Holdings, Inc. and Gil
                Schwartzberg dated September 12, 2007, previously filed as an exhibit
                to
                the Company’s Quarterly Report on Form 10-QSB for the Quarterly Period
                Ended September 30, 2007, and incorporated herein by
                reference.10.7
            
            Consulting
                Agreement between Lixte Biotechnology Holdings, Inc. and Gil Schwartzberg
                dated September 12, 2007, previously filed as an exhibit to the Company’s
                Quarterly Report on Form 10-QSB for the Quarterly Period Ended September
                30, 2007, and incorporated herein by reference.10.8
            
            Consulting
                Agreement between Lixte Biotechnology Holdings, Inc. and Mirador
                Consulting, Inc. dated September 20, 2007, previously filed as an
                exhibit
                to the Company’s Quarterly Report on Form 10-QSB for the Quarterly Period
                Ended September 30, 2007, and incorporated herein by
                reference.10.9
            
            Consulting
                Agreement between Lixte Biotechnology Holdings, Inc. and Francis
                Johnson
                dated September 12, 2007, previously filed as an exhibit to the Company’s
                Quarterly Report on Form 10-QSB for the Quarterly Period Ended September
                30, 2007, and incorporated herein by reference.10.10
            
            Amendment
                to Agreement between Lixte Biotechnology Holdings, Inc. and Chem-Master
                International, Inc. dated January 29, 2008, previously filed as an
                exhibit
                to the Company’s Quarterly Report on Form 10-Q for the Quarterly Period
                Ended March 31, 2008, and incorporated herein by reference.10.11
            
            Amendment
                No. 5 to Cooperative Research and Development Agreement between The
                National Institute of Neurological Disorders and Stroke and Lixte
                Biotechnology, Inc. dated June 17, 2008. (1)31.1
            
            Certifications
                under Section 302 of the Sarbanes-Oxley Act of 2002.
                (1)32.1
            
            Certifications
                under Section 906 of the Sarbanes-Oxley Act of 2002.
                (1)





(1)
            Filed
                herewith.




36