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 March 31, 2010




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 has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files).  Yes o 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 filer o
            Accelerated
      filer oNon-accelerated
      filer o
            Smaller
      reporting company x





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
April 30, 2010, the Company had 35,077,178 shares of common stock, $0.0001 par
value, issued and outstanding.





Documents
incorporated by reference: None














LIXTE
BIOTECHNOLOGY HOLDINGS, INC.





TABLE
OF CONTENTS





Page
                        NumberPART
      I - FINANCIAL INFORMATION
                      
                      4Item
      1. Condensed Consolidated Financial Statements
                      
                      4Condensed
      Consolidated Balance Sheets -March
      31, 2010 (Unaudited) and December 31, 2009
                      
                      4Condensed
      Consolidated Statements of Operations (Unaudited) -Three
      Months End March 31, 2010 and 2009, and Period from August 9, 2005
      (Inception) to March 31, 2010 (Cumulative)
                      
                      5Condensed
      Consolidated Statement of Changes in Stockholders’ Equity (Deficiency)
      (Unaudited) -
                        August 9,
      2005 (Inception) to March 31, 2010
                      
                      6Condensed
      Consolidated Statements of Cash Flows (Unaudited) -Three
      Months Ended March 31, 2010 and 2009, and Period from August 9, 2005
      (Inception) to March 31, 2010 (Cumulative)
                      
                      7Notes
      to Condensed Consolidated Financial Statements (Unaudited)
    -Three
      Months Ended March 31, 2010 and 2009, and Period from August 9, 2005
      (Inception) to March 31, 2010 (Cumulative)
                      
                      8Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations
                      
                      25Item
      3. Quantitative and Qualitative Disclosures About Market
    Risk
                      
                      33Item
      4T. Controls and Procedures
                      
                      33PART
      II - OTHER INFORMATION
                      
                      34Item
      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 1 of this Quarterly Report on
Form 10-Q.


3


PART
I - FINANCIAL INFORMATION





ITEM
1.             CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS





LIXTE
BIOTECHNOLOGY HOLDINGS, INC.


AND
SUBSIDIARY


(a
development stage company)





CONDENSED
CONSOLIDATED BALANCE SHEETS





March 31,
                                            
                                            
                                            December 31,2010
                                            
                                            
                                            2009(Unaudited)ASSETSCurrent
      assets:Cash
                                            
                                            $
                                            329,123
                                            
                                            
                                            $
                                            1,543,991Money
      market funds
                                            
                                            
                                            2,075,042
                                            
                                            
                                            
                                            25,000Advances
      on research and development contract services
                                            
                                            
                                            32,530
                                            
                                            
                                            
                                            5,000Prepaid
      expenses and other current assets
                                            
                                            
                                            21,229
                                            
                                            
                                            
                                            27,354Total
      current assets
                                            
                                            $
                                            2,457,924
                                            
                                            
                                            $
                                            1,601,345LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Accounts
      payable and accrued expenses
                                            
                                            $
                                            104,202
                                            
                                            
                                            $
                                            83,546Research
      and development contract liabilities
                                            
                                            
                                            56,031
                                            
                                            
                                            
                                            50,000Liquidated
      damages payable under registration rights agreement
                                            
                                            
                                            74,000
                                            
                                            
                                            
                                            74,000Due
      to stockholder
                                            
                                            
                                            92,717
                                            
                                            
                                            
                                            92,717Total
      current liabilities
                                            
                                            
                                            326,950
                                            
                                            
                                            
                                            300,263Commitments
      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 - 35,077,178 shares and 30,502,178 shares at March 31, 2010
      and December 31, 2009, respectively
                                            
                                            
                                            3,508
                                            
                                            
                                            
                                            3,050Advances
      under equity financing
                                            
                                            
                                            —
                                            
                                            
                                            
                                            1,200,000Additional
      paid-in capital
                                            
                                            
                                            7,527,253
                                            
                                            
                                            
                                            5,147,583Deficit
      accumulated during the development stage
                                            
                                            
                                            (5,399,787
                                            )
                                            
                                            
                                            (5,049,551
                                            )Total
      stockholders’ equity
                                            
                                            
                                            2,130,974
                                            
                                            
                                            
                                            1,301,082Total
      liabilities and stockholders’ equity
                                            
                                            $
                                            2,457,924
                                            
                                            
                                            $
                                            1,601,345





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)





Three Months Ended
                                March 31,
                              
                              
                              Period from
                                August 9,
                                2005
                                (Inception) to
                                March 31,
                                20102010
                              
                              
                              2009
                              
                              
                              (Cumulative)Revenues
                              
                              $
                              —
                              
                              
                              $
                              —
                              
                              
                              $
                              —Costs
      and expenses:General
      and administrative costs, including $72,740, $37,514 and $2,164,551 of
      stock-based compensation costs for the  three months ended March
      31, 2010 and 2009, and the period from August 9, 2005 (inception) to March
      31, 2010 (cumulative), respectively
                              
                              
                              188,579
                              
                              
                              
                              153,119
                              
                              
                              
                              3,358,313Depreciation
                              
                              
                              —
                              
                              
                              
                              127
                              
                              
                              
                              1,910Research
      and development costs, including $19,888, $39,862 and $416,718 of
      stock-based costs for the three months ended March  31, 2010 and
      2009, and the period from August 9, 2005 (inception) to March 31, 2010
      (cumulative), respectively
                              
                              
                              161,872
                              
                              
                              
                              125,878
                              
                              
                              
                              1,939,177Reverse
      merger costs
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              50,000Total
      costs and expenses
                              
                              
                              350,451
                              
                              
                              
                              279,124
                              
                              
                              
                              5,349,400Loss
      from operations
                              
                              
                              (350,451
                              )
                              
                              
                              (279,124
                              )
                              
                              
                              (5,349,400
                              )Interest
      income
                              
                              
                              215
                              
                              
                              
                              7
                              
                              
                              
                              26,082Interest
      expense
                              
                              
                              —
                              
                              
                              
                              (452
                              )
                              
                              
                              (2,469
                              )Liquidated
      damages under registration rights agreement
                              
                              
                              —
                              
                              
                              
                              —
                              
                              
                              
                              (74,000
                              )Net
      loss
                              
                              $
                              (350,236
                              )
                              
                              $
                              (279,569
                              )
                              
                              $
                              (5,399,787Net
      loss per common share – basic and diluted
                              
                              $
                              (0.01
                              )
                              
                              $
                              (0.01
                              )Weighted
      average common shares outstanding –
                                basic
      and diluted
                              
                              
                              33,693,845
                              
                              
                              
                              28,374,845





See
accompanying notes to condensed consolidated financial
statements.


5


LIXTE
BIOTECHNOLOGY HOLDINGS, INC.


AND
SUBSIDIARY


(a
development stage company)





CONDENSED
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIENCY)





Period
from August 9, 2005 (Inception) to March 31, 2010





Common Stock
                
                
                Advances
                  Under
                  Equity
                
                
                Additional
                  Paid-in
                
                
                Deficit
                  Accumulated
                  During the
                  Development
                
                
                Total
                  Stockholders’
                  EquityShares
                
                
                Amount
                
                
                Financing
                
                
                Capital
                
                
                Stage
                
                
                (Deficiency)Balance,
      August 9, 2005 (inception)
                
                
                —
                
                
                $
                —
                
                
                $
                —
                
                
                $
                —
                
                
                $
                —
                
                
                $
                —Shares
      issued to founding Stockholder
                
                
                19,021,786
                
                
                
                1,902
                
                
                
                —
                
                
                
                (402
                )
                
                
                —
                
                
                
                1,500Net
      loss
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (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
                
                
                3,555,220
                
                
                
                355
                
                
                
                —
                
                
                
                969,017
                
                
                
                —
                
                
                
                969,372Stock-based
      compensation costs
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                97,400
                
                
                
                —
                
                
                
                97,400Net
      loss
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (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
                
                
                999,995
                
                
                
                100
                
                
                
                —
                
                
                
                531,220
                
                
                
                —
                
                
                
                531,320Stock-based
      compensation costs
                
                
                250,000
                
                
                
                25
                
                
                
                —
                
                
                
                890,669
                
                
                
                —
                
                
                
                890,694Stock-based
      research and development costs
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                50,836
                
                
                
                —
                
                
                
                50,836Net
      loss
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (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 costs
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                357,987
                
                
                
                —
                
                
                
                357,987Stock-based
      research and development costs
                
                
                100,000
                
                
                
                10
                
                
                
                —
                
                
                
                213,051
                
                
                
                —
                
                
                
                213,061Net
      loss
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (1,271,522
                )
                
                
                (1,271,522
                )Balance,
      December 31, 2008
                
                
                27,932,178
                
                
                
                2,793
                
                
                
                —
                
                
                
                3,171,877
                
                
                
                (3,498,218
                )
                
                
                (323,548
                )Shares
      issued in private placements, net of offering costs
                
                
                2,420,000
                
                
                
                242
                
                
                
                —
                
                
                
                1,096,808
                
                
                
                —
                
                
                
                1,097,050Advances
      under equity financing
                
                
                —
                
                
                
                —
                
                
                
                1,200,000
                
                
                
                —
                
                
                
                —
                
                
                
                1,200,000Stock-based
      compensation costs
                
                
                150,000
                
                
                
                15
                
                
                
                —
                
                
                
                745,965
                
                
                
                —
                
                
                
                745,980Stock-based
      research and development costs
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                132,933
                
                
                
                —
                
                
                
                132,933Net
      loss
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (1,551,333
                )
                
                
                (1,551,333
                )Balance,
      December 31, 2009
                
                
                30,502,178
                
                
                
                3,050
                
                
                
                1,200,000
                
                
                
                5,147,583
                
                
                
                (5,049,551
                )
                
                
                1,301,082Shares
      issued in private placements, net of offering costs
                
                
                4,575,000
                
                
                
                458
                
                
                
                (1,200,000
                )
                
                
                2,287,042
                
                
                
                —
                
                
                
                1,087,500Stock-based
      compensation costs
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                72,740
                
                
                
                —
                
                
                
                72,740Stock-based
      research and development costs
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                19,888
                
                
                
                —
                
                
                
                19,888Net
      loss
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (350,236
                )
                
                
                (350,236
                )Balance,
      March 31, 2010 (Unaudited)
                
                
                35,077,178
                
                
                $
                3,508
                
                
                $
                —
                
                
                $
                7,527,253
                
                
                $
                (5,399,787
                )
                
                $
                2,130,974





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)





Three Months Ended
                      March 31,
                    
                    
                    Period from
                      August 9,
                      2005
                      (Inception) to
                      March 31,
                      20102010
                    
                    
                    2009
                    
                    
                    (Cumulative)Cash
      flows from operating activities:Net
      loss
                    
                    $
                    (350,236
                    )
                    
                    $
                    (279,569
                    )
                    
                    $
                    (5,399,787
                    )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
                    
                    
                    —
                    
                    
                    
                    127
                    
                    
                    
                    1,909Stock-based
      compensation costs
                    
                    
                    72,740
                    
                    
                    
                    37,514
                    
                    
                    
                    2,164,551Stock-based
      research and development costs
                    
                    
                    19,888
                    
                    
                    
                    39,862
                    
                    
                    
                    416,718Changes
      in operating assets and liabilities:(Increase)
      decrease in -Advances
      on research and development contract services
                    
                    
                    (27,530
                    )
                    
                    
                    6,250
                    
                    
                    
                    (32,530
                    )Prepaid
      expenses and other current assets
                    
                    
                    6,125
                    
                    
                    
                    6,580
                    
                    
                    
                    (21,229
                    )Increase
      (decrease) in -Accounts
      payable and accrued expenses
                    
                    
                    20,656
                    
                    
                    
                    (16,586
                    )
                    
                    
                    104,202Liquidated
      damages payable under registration rights agreement
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    74,000Research
      and development contract liabilities
                    
                    
                    6,031
                    
                    
                    
                    —
                    
                    
                    
                    56,031Net
      cash used in operating activities
                    
                    
                    (252,326
                    )
                    
                    
                    (205,822
                    )
                    
                    
                    (2,636,135
                    )Cash
      flows from investing activities:Increase
      in money market funds
                    
                    
                    (2,050,042
                    )
                    
                    
                    —
                    
                    
                    
                    (2,075,042
                    )Purchase
      of office equipment
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    (1,909
                    )Net
      cash used in investing activities
                    
                    
                    (2,050,042
                    )
                    
                    
                    —
                    
                    
                    
                    (2,076,951
                    )Cash
      flows from financing activities:Proceeds
      from sale of common stock to consulting firm
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    250Proceeds
      from sale of common stock to founder
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    1,500Proceeds
      from issuance of notes payable to consultant
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    200,000Repayment
      of notes payable to consultant
                    
                    
                    —
                    
                    
                    
                    (100,000
                    )
                    
                    
                    (200,000
                    )Cash
      acquired in reverse merger transaction
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    62,500Gross
      proceeds from sale of securities
                    
                    
                    1,087,500
                    
                    
                    
                    460,000
                    
                    
                    
                    5,331,389Payment
      of private placement offering costs
                    
                    
                    —
                    
                    
                    
                    (77,750
                    )
                    
                    
                    (446,147
                    )Advances
      received from stockholder
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    92,717Net
      cash provided by financing activities
                    
                    
                    1,087,500
                    
                    
                    
                    282,250
                    
                    
                    
                    5,042,209Cash:Net
      increase (decrease)
                    
                    
                    (1,214,868
                    )
                    
                    
                    76,428
                    
                    
                    
                    329,123Balance
      at beginning of period
                    
                    
                    1,543,991
                    
                    
                    
                    10,381
                    
                    
                    
                    —Balance
      at end of period
                    
                    $
                    329,123
                    
                    
                    $
                    86,809
                    
                    
                    $
                    329,123Supplemental
      disclosures of cash flow information:Cash
      paid for -Interest
                    
                    $
                    —
                    
                    
                    $
                    834
                    
                    
                    $
                    2,465Income
      taxes
                    
                    $
                    —
                    
                    
                    $
                    —
                    
                    
                    $
                    —Non-cash
      financing activities:Decrease
      in advances under equity financing
                    
                    $
                    1,200,000
                    
                    
                    $
                    —
                    
                    
                    $
                    1,200,000





See
accompanying notes to condensed consolidated financial
statements.


7


LIXTE
BIOTECHNOLOGY HOLDINGS, INC.


AND
SUBSIDIARY


(a
development stage company)





NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)





Three
Months Ended March 31, 2010 and 2009, and


Period
from August 9, 2005 (Inception) to March 31, 2010 (Cumulative)





1.
Basis of Presentation





The
condensed consolidated financial statements of Lixte Biotechnology Holdings,
Inc. and its wholly-owned subsidiary, Lixte Biotechnology, Inc. (the “Company”)
at March 31, 2010, for the three months ended March 31, 2010 and 2009, and for
the period from August 9, 2005 (inception) to March 31, 2010 (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 March 31, 2010, the results of its
operations for the three months ended March 31, 2010 and 2009, and for the
period from August 9, 2005 (inception) to March 31, 2010 (cumulative), and its
cash flows for the three months ended March 31, 2010 and 2009, and for the
period from August 9, 2005 (inception) to March 31, 2009 (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 balance sheet at
December 31, 2009 has been derived from the audited financial
statements.





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-K for the
fiscal year ended December 31, 2009, as filed with Securities and Exchange
Commission.





2.  Organization
and Business Operations





Organization





On June
30, 2006, Lixte Biotechnology, Inc., a privately-held Delaware corporation
(“Lixte”) incorporated on August 9, 2005, 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. On December 7, 2006, SRKP amended its
Certificate of Incorporation to change its name to Lixte Biotechnology Holdings,
Inc. (“Holdings”).  Unless the context indicates otherwise, Lixte and
Holdings are hereinafter referred to as the “Company”.





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. 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.





The
Company is considered a “development stage company” under current accounting
standards, 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’s common stock was listed for trading on the OTC Bulletin Board
commencing September 24, 2007 under the symbol “LIXT”.


8


Operating
Plans





The
Company’s original focus was the development of new treatments for the most
common and most aggressive type of brain cancer of adults, glioblastoma
multiforme (“GBM”), and the most common cancer of children, neuroblastoma. 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 has activity against cell lines of breast, colon, lung, prostate,
pancreas, ovary, stomach and liver cancer, as well as against the major types of
leukemias. LB-100 has now been shown to have activity in animal models of brain
tumors of adults and children, and also against melanomas and
sarcomas.  Studies in animal models of human melanoma, lymphoma,
sarcoma, brain tumors, and the rare neuroendocrine cancer, pheochromocytoma,
have demonstrated marked potentiation by LB-100 of the anti-tumor activity of
the widely used standard chemotherapeutic drugs. These studies confirm that the
LB-100 compounds, combined with any of several “standard anti-cancer drugs”,
have broad activity, affecting many different cell types of cancer. This is
unusual and important because these compounds may be useful for treatment of
cancer in general.





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 Company has entered into an amendment to the
CRADA to extend its term from September 30, 2009 through September 30, 2011.
During 2009, the Company signed material transfer agreements with academic
investigators at major cancer centers in the United States, as well as with one
investigator in China with a unique animal model of a sarcoma, to expand
molecular and applied studies of the anti-cancer activity of the Company’s
compounds.  The Company retained the right to all discoveries made in
these studies.





The
Company’s longer-term goal is to secure one or more strategic partnerships with
pharmaceutical companies with major programs in cancer, anti-fungal treatments,
and/or neuroprotective measures. The Company’s immediate focus has shifted
to obtaining approval from the FDA to carry a lead compound of the LB-100 series
into clinical trial. The Company believes the potent activity of these drugs in
combination with standard non-specific chemotherapeutic drugs against a diverse
array of common and uncommon cancers of adults and children merits bringing this
treatment to patients as rapidly as possible. In addition, the demonstration of
clinical benefit would be very important to potential investors and to large
pharmaceutical companies looking to add an entirely new approach to their
anti-cancer drug pipelines.





The
significant diversity of the potential therapeutic value of the Company’s
compounds stems from the fact that these agents modify critical pathways in
cancer cells and in microorganisms such as fungi and appear to ameliorate
pathologic processes that lead to brain injury caused by trauma or toxins or
through as yet unknown mechanisms that underlie the major chronic neurologic
diseases, including Alzheimer’s Disease, Parkinson’s Disease, and Amyotrophic
Lateral Sclerosis (ALS, or Lou Gehrig’s Disease).  Studies of the
potential neuroprotective effects of homologs of each class of the Company’s
compounds are continuing under a contract with Southern Research Institute,
Birmingham, Alabama. However, the majority of the Company’s resources will be
directed to the clinical study of LB-100 for cancer therapy.





Going
Concern





The
Company’s condensed consolidated 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, and does not expect to do so in the foreseeable future.  The
Company has experienced recurring operating losses and negative operating cash
flows since inception, and has financed its working capital requirements through
the recurring sale of its equity securities.  As a result, the
Company’s independent registered public accounting firm, in its report on the
Company’s 2009 consolidated financial statements, has raised substantial doubt
about the Company’s ability to continue as a going concern.





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 sustainable
revenues and profitable operations. The Company’s consolidated financial
statements do not include any adjustments that might result from the outcome of
these uncertainties.


9


At March
31, 2010, the Company had not yet commenced any revenue-generating operations.
All activity through March 31, 2010 has been related to the Company’s formation,
capital raising efforts and research and development activities. As such, the
Company has yet to generate any cash flows from operations, and is 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 the Company’s founder aggregating $92,717.





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 sustainable revenues 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 the Company will be able to generate a profit.




The
Company’s activities in 2010 will consist of continuing drug discovery and
development efforts. The Company’s primary goal will be to take the Company’s
LB-100 compound through a Phase I clinical trial by July 1, 2011. As a result of
the recent sale of its securities in November 2009, January 2010 and February
2010, the Company believes that its current resources are adequate to fund
operations during the remainder of 2010 and at a minimum through mid-2011, at a
level that will allow the continuation of the Company’s two drug development
programs currently in process and completion of the initial Phase I trial of
LB-100, if no unexpected delays occur in obtaining FDA approval, in late 2010 or
early 2011.





The
amount and timing of future cash requirements will depend on the pace of these
programs, in particular, completion of the Phase I trial of LB-100. After
completion of the Phase I trial, the next step will be to determine the
anti-cancer activity against a particular type of human cancer in Phase II
trials. To carry out Phase II trials, the Company anticipates that it will be
necessary to raise additional funds in 2011 from a combination of debt or equity
financings, and/or the sale, licensing or joint venturing of its intellectual
properties. 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 the Company’s ability to achieve positive earnings and cash flows from
operations. Continued negative cash flows and lack of liquidity create
significant uncertainty about the Company’s ability to fully implement its
operating plan beyond July 2011, 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.





3.  Summary
of Significant Accounting Policies





Principles
of Consolidation





The
accompanying condensed 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
Concentrations





The
Company’s cash balances may periodically 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.


10


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 funds
paid to NINDS of the NIH, pursuant to the CRADA effective March 22, 2006,
as amended, represented an advance on research and development costs and
therefore had future economic benefit. Accordingly, such costs have been charged
to expense when they are actually expended by the provider, which is,
effectively, as they perform the research activities that they were
contractually committed to provide. Absent information that would indicate that
a different expensing schedule was more appropriate (such as, for example, from
the achievement of performance milestones or the completion of contract work),
such advances have been expensed over the contractual service term on a
straight-line basis, which reflects a reasonable estimate of when the underlying
research and development costs were being incurred.




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 and filing fees, are expensed as incurred. Patent costs were $88,689 and
$20,766 for the three months ended March 31, 2010 and 2009, respectively, and
$613,838 for the period from August 9, 2005 (inception) to March 31, 2009
(cumulative). Patent costs are included in research and development costs in the
Company's condensed consolidated statements of operations.





Income
Taxes





The
Company accounts for income taxes under 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 has elected to deduct research and development costs on a current basis
for federal income tax purposes.  Start-up and organization costs are
being deferred until the Company commences revenue-generating operations, at
which time such costs will be written off over a 180-month period.





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.





On
January 1, 2007, the Company adopted new accounting rules which address the
determination of whether tax benefits claimed or expected to be claimed on a tax
return should be recorded in the financial statements.  The Company
may recognize the tax benefit from an uncertain tax position only if it is more
likely than not that the tax position will be sustained on examination by the
taxing authorities, based on the technical merits of the position. The tax
benefits recognized in the financial statements from such a position are
measured based on the largest benefit that has a greater than fifty percent
likelihood of being realized upon ultimate settlement. The new accounting
rules also provide guidance on de-recognition, classification, interest and
penalties on income taxes, accounting in interim periods and requires increased
disclosures.  The adoption of the new accounting rules did not have a
material effect on the Company’s financial statements. As of March 31, 2010, no
liability for unrecognized tax benefits was required to be
recorded.


11


The
Company files income tax returns in the U.S. federal jurisdiction and is subject
to income tax examinations by federal tax authorities for the year
2005 and thereafter.  The Company’s policy is to record interest and
penalties on uncertain tax provisions as income tax expense. As of March 31,
2010, the Company has no accrued interest or penalties related to uncertain tax
positions.





Stock-Based
Compensation





The
Company periodically issues stock options and warrants to officers, directors
and consultants for services rendered.  Options vest and expire
according to terms established at the grant date.





The
Company accounts for share-based payments to officers and directors by measuring
the cost of services received in exchange for equity awards based on the grant
date fair value of the awards, with the cost recognized as compensation expense
in the Company’s financial statements over the vesting period of the
awards.





The
Company accounts for share-based payments to consultants by determining the
value of the stock compensation based upon the measurement date 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.





Options
granted to Scientific Advisory Board 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.





Earnings
Per Share





The
Company’s computation of earnings per share (“EPS”) includes 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 is the same for all periods presented because all
warrants and stock options outstanding are anti-dilutive.





At March
31, 2010 and 2009, the Company excluded the outstanding securities summarized
below, which entitle the holders thereof to acquire shares of common stock, from
its calculation of earnings per share, as their effect would have been
anti-dilutive.




March 31,2010
                        
                        
                        2009Warrants
                        
                        
                        13,607,426
                        
                        
                        
                        1,687,426Stock
      options
                        
                        
                        3,540,000
                        
                        
                        
                        2,540,000Total
                        
                        
                        17,147,426
                        
                        
                        
                        4,227,426


12


Fair Value of
Financial Instruments





The
carrying amounts of cash, money market funds, advances on research and
development contracts services, prepaid expenses and other current assets,
accounts payable and accrued expenses, notes payable to consultant, research and
development contract liabilities, liquidated damages payable under registration
rights agreement and due to stockholder approximate their respective fair values
due to the short-term nature of these items.





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.




Recent
Accounting Pronouncements





In June
2009, the Financial Accounting Standards Board (“FASB”) issued authoritative
guidance on accounting standards codification and the hierarchy of generally
accepted accounting principles.  The FASB Accounting Standards
CodificationTM (“Codification”) has become the source of authoritative accounting
principles recognized by the FASB to be applied by nongovernmental entities in
the preparation of financial statements in accordance with general accepted
accounting principles (“GAAP”).  All existing accounting standard
documents were superseded by the Codification and any accounting literature not
included in the Codification will not be considered
authoritative.  However, rules and interpretive releases of the
Securities and Exchange Commission (“SEC”) issued under the authority of federal
securities laws will continue to be sources of authoritative GAAP for SEC
registrants.  The FASB authoritative guidance was effective for
interim and annual reporting periods ending after September 15,
2009.  Accordingly, all references made by the Company to GAAP in its
consolidated financial statements now use the new Codification numbering
system.  The Codification does not change or alter existing GAAP, and
therefore the adoption of the Codification by the Company on September 30, 2009
did not have any impact on the Company’s consolidated financial
statements.





Management
does not believe that any other recently issued, but not yet effective,
authoritative guidance, if currently adopted, would have a material effect on
the Company’s consolidated financial statement presentation or
disclosures.





4.  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 former stockholder of Lixte acquired control
of the Company.





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.


13


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.





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 were accounted for as equity and were not accounted for
separately from the common stock and additional paid-in capital
accounts.  The warrants had no accounting impact on the Company’s
consolidated financial statements.





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.





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 for all periods presented. The Company’s
registration statement on Form SB-2 was declared effective by the Securities and
Exchange Commission on May 14, 2007. At March 31, 2010, the registration penalty
to the investors had not been paid.





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.


14


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 were accounted for as equity and were not
accounted for separately from the common stock and additional paid-in capital
accounts.  The warrants had no accounting impact on the Company’s
consolidated financial statements.





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.





During
the year ended December 31, 2009, the Company completed three closings of a
third private placement of common stock units, consisting of a total of
1,420,000 shares of common stock and 1,420,000 warrants to acquire common stock,
as follows:





On
February 10, 2009, the Company sold an aggregate of 658,000 common stock units
to accredited investors in a first closing of a third private placement at a per
unit price of $0.50, resulting in aggregate gross proceeds to the Company of
$329,000. Net cash proceeds to the Company were $269,790.





On March
2, 2009, the Company sold an aggregate of 262,000 common stock units to
accredited investors in a second closing of the third private placement at a per
unit price of $0.50, resulting in aggregate gross proceeds to the Company of
$131,000. Net cash proceeds to the Company were $112,460.





On April
6, 2009, the Company sold an aggregate of 500,000 common stock units to
accredited investors in a third closing of the third private placement at a per
unit price of $0.50, resulting in aggregate gross proceeds to the Company of
$250,000. Net cash proceeds to the Company were $214,800.





Each unit
sold in the third private placement consisted of one share of the Company’s
common stock and a five-year warrant to purchase an additional share of the
Company’s common stock on a cashless exercise basis at an exercise price of
$0.50 per common share. 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 third private placement and issued five-year warrants to purchase common
stock equal to (a) 10% of the number of shares sold in the third private
placement exercisable at $0.50 per share and 10% of the number of shares
issuable upon exercise of warrants issued in the third private placement
exercisable at $0.50 per share; and (b) an additional 2% of the number of shares
sold in the third private placement also exercisable at $0.50 per share and 2%
of the number of shares issuable upon exercise of the warrants issued in the
third private placement exercisable at $0.50 per share.





In
conjunction with the closings of the third private placement of common stock
units during the year ended December 31, 2009, the Company issued a total of
340,800 five-year warrants to WestPark Capital, Inc., which are exercisable at
the per unit price of the common stock units sold in the third private placement
($0.50 per unit). Included in the 340,800 warrants issued to WestPark Capital,
Inc. are 170,400 warrants which are only exercisable with respect to common
shares that are acquired by investors upon their exercise of the warrants
acquired as part of the units sold in the third private placement. 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 were accounted for as equity and were not accounted for separately from
the common stock and additional paid-in capital accounts.  The
warrants had no accounting impact on the Company’s consolidated financial
statements.


15


At the
request of the holders, the Company has agreed to include any shares sold in the
third private placement and any shares issuable upon exercise of the related
warrants to be included in any registration statement filed with the Securities
and Exchange Commission permitting the resale of such shares, subject to
customary cutbacks, at the Company’s sole cost and expense.





Effective
November 6, 2009, the Company sold 1,000,000 common stock units to an accredited
investor in a fourth private placement at a per unit price of $0.50, resulting
in proceeds to the Company of $500,000. There were no commissions paid with
respect to the fourth private placement. The closing price of the Company’s
common stock on November 6, 2009 was $0.50 per share.





Each unit
sold in the fourth private placement consisted of one share of the Company’s
common stock, one three-year warrant to purchase an additional share of the
Company’s common stock at an exercise price of $0.50 per share, and one
three-year warrant to purchase an additional share of the Company’s common stock
at an exercise price of $0.75 per share. The warrants do not have any reset
provisions.





At the
request of the holder, the Company has agreed to include the shares sold in the
fourth private placement and any shares issuable upon exercise of the related
warrants in any registration statement filed by the Company with the Securities
and Exchange Commission permitting the resale of such securities, subject to
customary cutbacks. The units sold were not registered under the Securities Act
of 1933, as amended (the “Act”), in reliance upon the exemption from
registration contained in Section 4(2) of the Act and Regulation D promulgated
thereunder. Based on the foregoing, the warrants were accounted for as equity
and were not accounted for separately from the common stock and additional
paid-in capital accounts.  The warrants had no accounting impact on
the Company’s consolidated financial statements.





Effective
January 20, 2010, the Company raised $1,787,500 in a fifth private placement of
units sold to certain of its existing stockholders or their designees, all of
whom were accredited investors, consisting of an aggregate of 3,575,000 units at
a purchase price of $0.50 per unit.  Each unit consisted of one share
of common stock, one three-year warrant to purchase a share of common stock at
an exercise price of $0.50 per share, and one three year-year warrant to
purchase a share of common stock at an exercise price of $0.75 per
share.  The warrants do not have any reset provisions.  The
closing price of the Company’s common stock on January 20, 2010 was $0.49 per
share.  There were no commissions paid with respect to the private
placement.  Upon request by the holder, the Company has agreed to
include the shares issued and those shares issuable upon exercise of the
warrants in any registration statement filed by the Company with the Securities
and Exchange Commission permitting the resale of such securities, subject to
customary cutbacks. The units sold were not registered under the Act, in
reliance upon the exemption from registration contained in Section 4(2) of the
Act and Regulation D promulgated thereunder. The Company accounted for the
issuance of the units as a capital transaction. As of December 31, 2009,
$1,200,000 had been advanced to the Company under this private
placement.





Effective
February 22, 2010, the Company raised $500,000 through the sale to an accredited
investor of 1,000,000 units at a purchase price of $0.50 per
unit.  Each unit consisted of one share of common stock, one
three-year warrant to purchase a share of common stock at an exercise price of
$0.50 per share, and one three year-year warrant to purchase a share of common
stock at an exercise price of $0.75 per share.  The warrants do not
have any reset provisions.  The closing price of the Company’s common
stock on February 22, 2010 was $0.50 per share.  There were no
commissions paid with respect to the private placement.  Upon request
by the holder, the Company has agreed to include the shares issued and those
shares issuable upon exercise of the warrants in any registration statement
filed by the Company with the Securities and Exchange Commission permitting the
resale of such securities, subject to customary cutbacks. The units sold were
not registered under the Act, in reliance upon the exemption from registration
contained in Section 4(2) of the Act and Regulation D promulgated thereunder.
The Company accounted for the issuance of the units as a capital
transaction


16


5. 
Money Market Funds — Fair Value





Money
market funds at March 31, 2010 and December 31, 2009 consisted of an investment
in the Class A Shares of Western Asset New York Municipal Money Market Fund with
a market value of $2,075,042 and $25,000, respectively.  The stated
purpose of this money market fund is to provide income exempt from both regular
federal income tax and New York State and New York City personal income tax from
a portfolio of high quality short-term municipal obligations selected for
liquidity and stability of principal.





Effective
January 1, 2008, the Company adopted new standards which established a framework
for measuring fair value, clarified the definition of fair value within that
framework, and expanded disclosures about fair value measurements.  These
new standards established a fair value hierarchy that prioritizes the inputs to
valuation techniques used to measure fair value into three levels, and requires
that assets and liabilities carried at fair value are classified and disclosed
in one of three categories, as presented below.  These new standards
also require disclosure as to transfers in and out of Levels 1 and 2, and
activity in Level 3 fair value measurements.





Level
1:  quoted prices (unadjusted) in active markets for an identical asset or
liability that the Company has the ability to access as of the measurement
date.  Financial assets and liabilities utilizing Level 1 inputs include
active-exchange traded securities and exchange-based derivatives.





Level
2:  inputs other than quoted prices included within Level 1 that are
directly observable for the asset or liability or indirectly observable through
corroboration with observable market data.  Financial assets and
liabilities utilizing Level 2 inputs include fixed income securities,
non-exchange based derivatives, mutual funds, and fair-value
hedges.





Level
3:  unobservable inputs for the asset or liability are only used when there
is little, if any, market activity for the asset or liability at the measurement
date.  Financial assets and liabilities utilizing Level 3 inputs include
infrequently-traded non-exchange-based derivatives and commingled investment
funds, and are measured using present value pricing models.





In
accordance with new standards, the Company determines the level in the fair
value hierarchy within which each fair value measurement falls in its entirety,
based on the lowest level input that is significant to the fair value
measurement in its entirety.  In determining the appropriate levels, the
Company performs an analysis of the assets and liabilities that are subject to
the new standards at each reporting period end.





Money
market funds are the only financial instrument that is measured and recorded at
fair value on the Company’s balance sheet on a recurring basis.  The
following table presents money market funds at their level within the fair value
hierarchy at March 31, 2010 and December 31, 2009.





Total
                                                                
                                                                
                                                                Level 1
                                                                
                                                                
                                                                Level 2
                                                                
                                                                
                                                                Level 3March
      31, 2010:Money
      market funds
                                                                
                                                                $
                                                                2,075,042
                                                                
                                                                
                                                                $
                                                                2,075,042
                                                                
                                                                
                                                                $
                                                                —
                                                                
                                                                
                                                                $
                                                                —December
      31, 2009:Money
      market funds
                                                                
                                                                $
                                                                25,000
                                                                
                                                                
                                                                $
                                                                25,000
                                                                
                                                                
                                                                $
                                                                —
                                                                
                                                                
                                                                $
                                                                —





6.  Related
Party Transactions





Prior to
June 30, 2006, the Company’s founding stockholder and Chief Executive Officer,
Dr. John Kovach, had periodically made advances to the Company to meet operating
expenses. Such advances are non-interest-bearing and are due on demand. At March
31, 2010 and December 31, 2009, 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
ended March 31, 2010 and 2009, and for the period from August 9, 2005
(inception) through March 31, 2010 (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.


17


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.





7.  Notes
Payable to Consultant





On
October 3, 2008, the Company borrowed $100,000 from Gil Schwartzberg, a
consultant to the Company, pursuant to an unsecured demand promissory note with
interest at 5% per annum, to fund the Company’s short-term working capital
requirements. The note, including accrued interest of $834, was repaid on
February 7, 2009. An additional interest payment of $851 was made on April 27,
2009.





On
September 30, 2009, the Company borrowed $100,000 from Gil Schwartzberg pursuant
to an unsecured demand promissory note with interest at 5% per annum, to fund
the Company’s short-term working capital requirements. The note, including
accrued interest of $780, was repaid on November 26, 2009.





Additional
transactions between the Company and Gil Schwartzberg are described in Note
9.





8.  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 consist of common stock with a
par value of $0.0001 per share and 10,000,000 shares consist of 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.





9.  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 was charged to operations ratably from July
1, 2006 through June 30, 2008.





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 two
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 charged to
operations ratably from July 1, 2006 through June 30, 2008. In August 2008, one
of the members resigned from his position and waived his right to his vested
stock option to purchase 50,000 shares of common stock.


18


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
February 5, 2007, the Company entered into an 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 the Company granted 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 on February 5, 2007 as
the option was fully vested and non-forfeitable on the date of issuance. The
Company 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 had not been terminated prior to such date, the
Company 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. As of September 30, 2008, the Company determined that it was
likely that this option would be issued. Accordingly, the fair value of the
option has been reflected as a charge to operations for the period from October
1, 2008 through February 5, 2009. On February 5, 2009, the fair value of this
option, as calculated pursuant to the Black-Scholes option-pricing model, was
determined to be $60,000 ($0.60 per share), which resulted in a charge to
operations of $19,143 during the three months ended March 31, 2009. The Company
granted the second five-year option on February 5, 2009.





On
September 30, 2008, the fair value of the aforementioned stock option was
initially calculated using the following Black-Scholes input variables: stock
price - $0.50; exercise price - $0.333; expected life – 5.35 years; expected
volatility – 275.7%; expected dividend yield - 0%; risk-free interest rate –
2.48%. On February 5, 2009, the fair value of the aforementioned stock option
was calculated for the stock option revaluation purposes using the following
Black-Scholes input variables: stock price - $0.60; exercise price - $0.333;
expected life – 5 years; expected volatility – 414.1%; expected dividend yield -
0%; risk-free interest rate – 1.89%.





On
January 29, 2008, the Chem-Master Agreement was amended to extend its term to
February 15, 2014. Pursuant to the amendment, the Company issued 100,000 shares
of its restricted common stock, valued at $75,000, and granted an option to
purchase 200,000 shares of 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 March 31, 2010, the fair
value of the aforementioned stock options was determined to be $92,000 ($0.46
per share) calculated using the following Black-Scholes input variables: stock
price - $0.50; exercise price - $1.65; expected life - 2.84 years; expected
volatility – 238.6%; expected dividend yield - 0%; risk-free interest rate -
1.60%, which resulted in a charge to operations of $7,258 during the three
months ended March 31, 2010. On March 31, 2009, the fair value of the
aforementioned stock options was determined to be $110,000 ($0.55 per share)
calculated using the following Black-Scholes input variables: stock price -
$0.55; exercise price - $1.65; expected life - 3.84 years; expected volatility –
414.1%; expected dividend yield - 0%; risk-free interest rate - 1.89%, which
resulted in a charge to operations of $7,760 during the three months ended March
31, 2009.





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.


19







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 was
charged to operations ratably from September 12, 2007 through September 12,
2009. During the three months ended March 31, 2009, the Company recorded a
charge to operations of $25,151 with respect to these options. Effective April
20, 2010, Dr. Carter resigned as a director for personal
reasons.  Consequently, pursuant to the stock option agreement, Dr.
Carter has twelve months from April 20, 2010 to exercise his stock options to
acquire 200,000 shares of the Company’s common stock.





On
September 12, 2007, the Company entered into a consulting agreement with Gil
Schwartzberg, pursuant to which the Company 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 the 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 unvested portion of the fair value of the options was
charged to operations ratably from September 12, 2007 through September 12,
2008. On September 12, 2008, the fair value of these options, as calculated
pursuant to the Black-Scholes option-pricing model, was determined to be
$325,000 ($0.65 per share).




On
October 15, 2009, the Company amended the above described consulting agreement
with Gil Schwartzberg to extend it for an additional four years and granted to
Mr. Schwartzberg stock options to purchase an additional aggregate of 1,000,000
shares of common stock, exercisable for a period of four years from the 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 October 15, 2010. The fair
value of these options, as calculated pursuant to the Black-Scholes
option-pricing model, was determined to be $750,000 ($0.75 per share) on October
15, 2009, of which $375,000 was attributed to the fully-vested options and was
thus charged to operations on October 15, 2009. The remaining unvested portion
of the fair value of the options is being charged to operations ratably from
October 15, 2009 through October 15, 2010. On March 31, 2010, the fair value of
the unvested portion of these options, as calculated pursuant to the
Black-Scholes option-pricing model, was determined to be $245,000 ($0.49 per
share) , which resulted in a charge to operations of $60,411 during the three
months ended March 31, 2010.




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 the 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 March 31, 2010 and 2009, the
fair value of these options, as calculated pursuant to the Black-Scholes
option-pricing model, was determined to be $150,000 ($0.50 per share) and
$165,000 ($0.55 per share), respectively, which resulted in a charge to
operations of $12,630 and $12,959 during the three months ended March 31, 2010
and 2009, respectively.




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 October 15, 2009, the fair value of the aforementioned stock
options was initially calculated using the following Black-Scholes input
variables: stock price - $0.75; exercise price - $1.00; expected life - 5 years;
expected volatility – 259.1%; expected dividend yield - 0%; risk-free interest
rate – 1.91%. On March 31, 2010, the fair value of the aforementioned stock
options was calculated for the stock option revaluation purposes using the
following Black-Scholes input variables:  stock price - $0.50;
exercise price - $0.333 to $1.00; expected life – 4.48 to 4.54 years; expected
volatility – 238.6%; expected dividend yield - 0%; risk-free interest rate -
1.60%. On March 31, 2009, the fair value of the aforementioned stock options was
calculated for the stock option revaluation purposes using the following
Black-Scholes input variables:  stock price - $0.55; exercise price -
$0.333; expected life - 4.48; expected volatility – 414.1%; expected dividend
yield - 0%; risk-free interest rate – 1.89%. As the Company’s common stock
commenced trading on September 24, 2007, the Company was able to utilize such
trading data to generate revised volatility factors at March 31, 2010 and
2009.


20





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, the Company 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 on September 20, 2007, being
that the shares were fully vested and non-forfeitable on the date of
issuance.





On
October 7, 2008, the Company appointed Dr. Mel Sorensen to its Board of
Directors. Dr. Sorensen is a medical oncologist with extensive experience in
cancer drug development, first at the National Cancer Institute, then at Bayer
and GlaxoSmithKline, before becoming President and Chief Executive Officer of a
new cancer therapeutics company, Ascenta Therapeutics, in 2004. Dr. Sorensen was
paid an annual consulting fee of $40,000, payable in quarterly installments over
a one year period commencing October 7, 2008, to assist the Company in
identifying a strategic partner. Dr. Sorensen was also granted a stock option to
purchase 200,000 shares of the Company’s common stock, exercisable at $0.50 per
share for a period of five years from each tranche’s vesting date. The option
vests as to 25,000 shares on January 1, 2009, and a further 25,000 shares on the
first day of each subsequent calendar quarter until all of the shares are
vested. The fair value of these options, as calculated pursuant to the
Black-Scholes option-pricing model, was determined to be $100,000 ($0.50 per
share), and is being charged to operations ratably from October 7, 2008 through
October 7, 2010. During the three months ended March 31, 2010 and 2009, the
Company recorded a charge to operations of $12,329 and $12,363, respectively,
with respect to these options. On April 7, 2010, a new agreement was established
with Dr. Sorensen providing for consultation and advice over the ensuing twelve
month period regarding the preparation and strategy for obtaining FDA approval
for the clinical trial of the lead compound of the LB-100 series for an annual
fee of $25,000, payable in two installments of $12,500 each due on April 15,
2010 and October 15, 2011.




On
October 7, 2008, the fair value of the aforementioned stock options was
calculated using the following Black-Scholes input variables:  stock
price - $0.50; exercise price - $0.50; expected life - 5 years; expected
volatility – 275.7%; expected dividend yield - 0%; risk-free interest rate –
2.48%.




On July
27, 2009, the Company entered into an agreement with Pro-Active Capital Group,
LLC (“Pro-Active”) to retain Pro-Active on a non-exclusive basis for a period of
twelve months to provide consulting advice to the Company to assist the Company
in obtaining research coverage, gaining web-site exposure and coverage on
financial blogs and web-sites, enhancing the Company’s visibility to the
institutional, retail brokerage and on-line trading communities, and organizing,
or assisting in organizing, investor road-shows and presentations.  In
exchange for such consulting advice, at the initiation of the agreement, the
Company agreed to issue to Pro-Active 150,000 shares of restricted common stock
and three-year warrants to purchase an aggregate of 150,000 shares of common
stock, exercisable 50,000 at $0.75 per share, 50,000 at $1.00 per share, and
50,000 at $1.25 per share. The fair value of the 150,000 shares issued was
determined to be $100,500 ($0.67 per share), reflecting the price per share of
the Company’s common stock, as quoted on the OTC Bulletin Board, on the
transaction date. The fair value of the three-year warrants, as calculated
pursuant to the Black-Scholes option-pricing model, was determined to be $97,500
($0.65 per share) using the following Black-Scholes input variables: stock price
on date of grant - $0.67; exercise price - $0.75 to $1.25; expected life - 3
years; expected volatility – 259.1%; expected dividend yield - 0%; risk-free
interest rate - 1.91%. The $198,000 aggregate fair value of the shares and
warrants issued was charged to operations as stock-based compensation on July
27, 2009, since the shares and warrants were fully vested and non-forfeitable on
the date of issuance.





Additional
information with respect to common stock warrants and stock options issued is
provided at Notes 4 and 10.


21





If and
when the aforementioned stock options and warrants are exercised, the Company
expects to satisfy such stock obligations through the issuance of authorized but
unissued shares of common stock.





A summary
of stock option and warrant activity, including warrants to purchase common
stock that were issued in conjunction with the Company’s private placements, is
presented in the tables below.




Number
                      of
                      Shares
                    
                    
                    Weighted
                      Average
                      Exercise
                      Price
                    
                    
                    Weighted
                      Average
                      Remaining
                      Contractual
                      Life
                      (in Years)Options
      and warrants outstanding at December 31, 2007
                    
                    
                    2,636,626
                    
                    
                    $
                    0.600
                    
                    
                    
                    4.32Granted
                    
                    
                    500,000
                    
                    
                    
                    0.927
                    
                    
                    
                    4.71Exercised
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —Cancelled
                    
                    
                    (50,000
                    )
                    
                    
                    0.333
                    
                    
                    
                    2.75Options
      and warrants outstanding at December 31, 2008
                    
                    
                    3,086,626
                    
                    
                    
                    0.658
                    
                    
                    
                    3.55Granted
                    
                    
                    4,910,800
                    
                    
                    
                    0.668
                    
                    
                    
                    3.61Exercised
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —Cancelled
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —Options
      and warrants outstanding at December 31, 2009
                    
                    
                    7,997,426
                    
                    
                    $
                    0.664
                    
                    
                    
                    3.30Granted
                    
                    
                    9,150,000
                    
                    
                    
                    0.625
                    
                    
                    
                    2.83Exercised
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —Cancelled
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —Options
      and warrants outstanding at March 31, 2010
                    
                    
                    17,147,426
                    
                    
                    $
                    0.643
                    
                    
                    
                    2.89Options
      and warrants exercisable at December 31, 2009
                    
                    
                    7,027,026
                    
                    
                    $
                    0.637
                    
                    
                    
                    3.02Options
      and warrants exercisable at March 31, 2010
                    
                    
                    16,202,026
                    
                    
                    $
                    0.630
                    
                    
                    
                    2.81





The
intrinsic value of exercisable but unexercised in-the-money stock options and
warrants at March 31, 2010 was $244,930, based on a fair market value of $0.50
per share on March 31, 2010. The intrinsic value of exercisable but unexercised
in-the-money stock options and warrants at December 31, 2009 was $230,260, based
on a fair market value of $0.49 per share on December 31, 2009.





Total
deferred compensation expense for the outstanding value of unvested stock
options was approximately $206,275 at March 31, 2010, which is being recognized
subsequent to March 31, 2010 over a weighted-average period of 6.8
months.





Information
regarding stock options and warrants outstanding and exercisable is summarized
as follows at March 31, 2010:





Warrants
                                    And
                                  
                                  
                                  Warrants
                                    AndExercise
                                  
                                  Options
                                    Outstanding
                                  
                                  
                                  Options
                                    ExercisablePrices
                                  
                                  (Shares)
                                  
                                  
                                  (Shares)$
                                  0.333
                                  
                                  
                                  1,566,626
                                  
                                  
                                  
                                  1,466,626$
                                  0.500
                                  
                                  
                                  7,535,800
                                  
                                  
                                  
                                  7,290,400$
                                  0.650
                                  
                                  
                                  120,000
                                  
                                  
                                  
                                  120,000$
                                  0.750
                                  
                                  
                                  5,625,000
                                  
                                  
                                  
                                  5,625,000$
                                  1.000
                                  
                                  
                                  2,050,000
                                  
                                  
                                  
                                  1,550,000$
                                  1.250
                                  
                                  
                                  50,000
                                  
                                  
                                  
                                  50,000$
                                  1.650
                                  
                                  
                                  200,000
                                  
                                  
                                  
                                  100,00017,147,426
                                  
                                  
                                  
                                  16,202,026




Outstanding
options and warrants to acquire 775,000 shares of the Company’s common stock had
not vested at March 31, 2010. At March 31, 2010, warrants and options
exercisable do not include warrants to acquire 170,400 shares of common stock
that are contingent upon the exercise of warrants contained in units sold as
part of the third private placement (see Note 4).


22





10.  Commitments and
Contingencies





Effective
March 22, 2006, the Company entered into a CRADA, as amended, with the NINDS of
the NIH. The CRADA is for a term of 66 months from the effective date and can 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
provides that NINDS and the Company will conduct research to determine if
expression of N-CoR correlates with prognosis in glioma patients. Pursuant to
the CRADA, the Company initially 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. For the period from October 1, 2008
through September 30, 2009, the Company agreed to provide additional funding
under the CRADA of $200,000, to be paid in four quarterly installments of
$50,000 each commencing on October 1, 2008. The first and second quarterly
installments of $50,000 were paid on September 29, 2008 and March 5, 2009,
respectively. During August 2009, the Company entered into an
amendment to the CRADA to extend its term from September 30, 2009 through
September 30, 2011.  Pursuant to such amendment, the Company has
agreed to aggregate payments of $100,000 in two installments of $50,000 payable
on October 1, 2010 and January 5, 2011, inclusive of any prior unpaid
commitments.





On
February 5, 2007, the Company entered into a two-year agreement pursuant to
which the Company engaged Chem-Master to synthesize a compound designated as
“LB-1”, and any other compound synthesized by Chem-Master pursuant to the
Company’s request, which have potential use in treating a disease, including,
without limitation, cancers such as glioblastomas. Pursuant to the Chem-Master
Agreement, the Company 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 shares of
the Company’s common stock. The Company has the right to terminate the
Chem-Master Agreement at any time during its term upon sixty days prior written
notice.





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 Chem-Master
Agreement, as amended, the Company reimbursed Chem-Master for the costs of
materials, labor, and expenses aggregating $13,000 and $9,000 during the three
months ended March 31, 2010 and 2009, respectively.





Effective
as of September 19, 2008, the Company entered into an agreement with the NIH
providing the Company with an exclusive license for all patents submitted
jointly with the NIH under the CRADA. The agreement provided for an initial
payment of $25,000 to NIH within 60 days of September 19, 2008, and for a
minimum annual royalty of $30,000 on January 1 of each calendar year following
the year in which the CRADA is terminated. The agreement also provides for the
Company to pay specified royalties based on (i) net sales by the Company and its
sub-licensees, (ii) the achievement of certain clinical benchmarks, and (iii)
the granting of sublicenses. The Company paid the initial $25,000 obligation on
November 10, 2008 and charged the amount to general and administrative costs
during the year ended December 31, 2008.





On
October 9, 2008, the Company engaged Southern Research Institute, Birmingham,
Alabama, to assess one lead compound from each of two classes of its proprietary
pharmacological agents for effects on normal neuronal cells and to determine if
the compounds protect normal brain cells from injury in several different models
of chemical and traumatic brain injury. The goal is to determine if these agents
have promise as potentially useful for the prevention, amelioration or delay of
progression of neurodegenerative diseases such as Alzheimer’s disease and other
neurological diseases or impairments resulting from trauma and/or other diverse
or unknown origins. The Company agreed to pay a fee not to exceed a total of
$50,000 for such services, all of which had been paid as of December 31,
2009.


23





On
November 17, 2009, the Company entered into an agreement with Johnson Matthey
Pharma Services for the preparation of drug materials at a total estimated cost
of $45,500, of which $8,125 had been paid as of March 31, 2010.





On
December 23, 2009, the Company’s agreement with Southern Research Institute was
amended to include certain additional studies of neurodegenerative diseases at
an additional estimated cost of $21,200.





On
January 5, 2010, the Company engaged Southern Research Institute to perform
several of the pre-clinical studies of LB-100 needed for an Investigational New
Drug (“IND”) application at a total estimated cost of $109,800, of which $48,045
had been paid as of March 31, 2010.





On March
17, 2010, the Company engaged Theradex to assist the Company in bringing LB-100
through the FDA approval process at a total estimated cost of
$105,064.





On April
15, 2010, the Company entered into an agreement with Ascentage Pharma Group to
assist in the pharmacological characterization of the Company’s proprietary
compounds at a total estimated cost of $30,000. Ascentage Pharma Group is an
offshoot of Ascenta Therapeutics, of which Dr. Mel Sorensen, a director of the
Company, is the President and Chief Executive Officer and a
director.  Ascentage Pharma Group and Ascenta Therapeutics have a
continuing business relationship and certain common
shareholders.  However, Dr. Sorensen does not have any direct business
relationship with or ownership in Ascentage Pharma Group.





The
following table sets forth the Company’s principal cash obligations and
commitments for the next five fiscal years as of March 31, 2010 aggregating
$492,111, of which $222,748 is included in current liabilities in the condensed
consolidated balance sheet at March 31, 2010.





Payments Due
    By YearTotal
                  
                  
                  2010
                  
                  
                  2011CRADA
                  
                  $
                  100,000
                  
                  
                  $
                  50,000
                  
                  
                  $
                  50,000Research
      and development contracts
                  
                  
                  225,394
                  
                  
                  
                  225,394
                  
                  
                  
                  —Liquidated
      damages payable under registration rights agreement
                  
                  
                  74,000
                  
                  
                  
                  74,000
                  
                  
                  
                  —Due
      to stockholder
                  
                  
                  92,717
                  
                  
                  
                  92,717
                  
                  
                  
                  —Total
                  
                  $
                  492,111
                  
                  
                  $
                  442,111
                  
                  
                  $
                  50,000




24





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”) incorporated on August 9, 2005, 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. On December 7, 2006, SRKP amended its
Certificate of Incorporation to change its name to Lixte Biotechnology Holdings,
Inc. (“Holdings”).  Unless the context indicates otherwise, Lixte and
Holdings are hereinafter referred to as the “Company”.




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. 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.




The
Company is considered a “development stage company” under current accounting
standards, 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’s common stock was listed for trading on the OTC Bulletin Board
commencing September 24, 2007 under the symbol “LIXT”.




Recent
Developments




In
January and February 2010, the Company raised $1,787,500 and $500,000,
respectively, through the sale of its securities.





Going
Concern





The
Company’s condensed consolidated 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, and does not expect to do so in the foreseeable future.  The
Company has experienced recurring operating losses and negative operating cash
flows since inception, and has financed its working capital requirements through
the recurring sale of its equity securities.  As a result, the
Company’s independent registered public accounting firm, in its report on the
Company’s 2009 consolidated financial statements, has raised substantial doubt
about the Company’s ability to continue as a going concern.




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 sustainable
revenues and profitable operations. The Company’s condensed consolidated
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.




At March
31, 2010, the Company had not yet commenced any revenue-generating operations.
All activity through March 31, 2010 has been related to the Company’s formation,
capital raising efforts and research and development activities. As such, the
Company has yet to generate any cash flows from operations, and is 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 the Company’s founder aggregating $92,717.





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 sustainable revenues 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 the Company will be able to generate a profit.


25





The
Company’s activities in 2010 will consist of continuing drug discovery and
development efforts. The Company’s primary goal will be to take the Company’s
LB-100 compound through a Phase I clinical trial by July 1, 2011. As a result of
the recent sale of its securities in November 2009, January 2010 and February
2010, the Company believes that its current resources are adequate to fund
operations during the remainder of 2010 and at a minimum through mid-2011, at a
level that will allow the continuation of the Company’s two drug development
programs currently in process and completion of the initial Phase I trial of
LB-100, if no unexpected delays occur in obtaining FDA approval, in late 2010 or
early 2011.





The
amount and timing of future cash requirements will depend on the pace of these
programs, in particular, completion of the Phase I trial of LB-100. After
completion of the Phase I trial, the next step will be to determine the
anti-cancer activity against a particular type of human cancer in Phase II
trials. To carry out Phase II trials, the Company anticipates that it will be
necessary to raise additional funds in 2011 from a combination of debt or equity
financings, and/or the sale, licensing or joint venturing of its intellectual
properties. 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 the Company’s ability to achieve positive earnings and cash flows from
operations. Continued negative cash flows and lack of liquidity create
significant uncertainty about the Company’s ability to fully implement its
operating plan beyond July 2011, 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.




Recently
Accounting Pronouncements




In June
2009, the Financial Accounting Standards Board (“FASB”) issued authoritative
guidance on accounting standards codification and the hierarchy of generally
accepted accounting principles.  The FASB Accounting Standards
CodificationTM (“Codification”) has become the source of authoritative accounting
principles recognized by the FASB to be applied by nongovernmental entities in
the preparation of financial statements in accordance with general accepted
accounting principles (“GAAP”).  All existing accounting standard
documents were superseded by the Codification and any accounting literature not
included in the Codification will not be considered
authoritative.  However, rules and interpretive releases of the
Securities and Exchange Commission (“SEC”) issued under the authority of federal
securities laws will continue to be sources of authoritative GAAP for SEC
registrants.  The FASB authoritative guidance was effective for
interim and annual reporting periods ending after September 15,
2009.  Accordingly, all references made by the Company to GAAP in its
consolidated financial statements now use the new Codification numbering
system.  The Codification does not change or alter existing
GAAP.  The adoption of the Codification by the Company on September
30, 2009 did not have any impact on the Company’s consolidated financial
statements.





Management
does not believe that any other recently issued, but not yet effective,
authoritative guidance, if currently adopted, would have a material effect on
the Company’s consolidated financial statement presentation or
disclosures.




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.


26





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.




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 and filing fees, are expensed as incurred.




Stock-Based
Compensation




The
Company periodically issues stock options and warrants to officers, directors
and consultants for services rendered. Options vest and expire according to
terms established at the grant date.




The
Company accounts for share-based payments to officers and directors by measuring
the cost of services received in exchange for equity awards based on the grant
date fair value of the awards, with the cost recognized as compensation expense
in the Company’s financial statements over the vesting period of the
awards.





The
Company accounts for share-based payments to consultants by determining the
value of the stock compensation based upon the measurement date 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.




Options
granted to Scientific Advisory Board 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.




The fair
value of stock-based compensation is affected by several variables, the most
significant of which are the life of the equity award, the exercise price of the
security as compared to the fair market value of the common stock on the grant
date, and the estimated volatility of the common stock over the term of the
equity award.




Income
Taxes




The
Company accounts for income taxes under 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.


27





Plan
of Operation




General
Overview of Plans




The
Company’s original focus was the development of new treatments for the most
common and most aggressive type of brain cancer of adults, glioblastoma
multiforme (“GBM”), and the most common cancer of children, neuroblastoma. 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 has activity against cell lines of breast, colon, lung, prostate,
pancreas, ovary, stomach and liver cancer, as well as against the major types of
leukemias. LB-100 has now been shown to have activity in animal models of brain
tumors of adults and children, and also against melanomas and
sarcomas.  Studies in animal models of human melanoma, lymphoma,
sarcoma, brain tumors, and the rare neuroendocrine cancer, pheochromocytoma,
have demonstrated marked potentiation by LB-100 of the anti-tumor activity of
the widely used standard chemotherapeutic drugs. These studies confirm that the
LB-100 compounds, combined with any of several “standard anti-cancer drugs”,
have broad activity, affecting many different cell types of cancer. This is
unusual and important because these compounds may be useful for treatment of
cancer in general.





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 Company has entered into an amendment to the
CRADA to extend its term from September 30, 2009 through September 30,
2011.





During
2009, the Company signed material transfer agreements with academic
investigators at major cancer centers in the United States, as well as with one
investigator in China with a unique animal model of a sarcoma, to expand
molecular and applied studies of the anti-cancer activity of the Company’s
compounds.  The Company retained the right to all discoveries made in
these studies.




The
Company’s longer-term goal is to secure one or more strategic partnerships with
pharmaceutical companies with major programs in cancer, anti-fungal treatments,
and/or neuroprotective measures. The Company’s immediate focus has shifted to
obtaining approval from the FDA to carry a lead compound of the LB-100 series
into clinical trial. The Company believes the potent activity of these drugs in
combination with standard non-specific chemotherapeutic drugs against a diverse
array of common and uncommon cancers of adults and children merits bringing this
treatment to patients as rapidly as possible. In addition, the demonstration of
clinical benefit would be very important to potential investors and to large
pharmaceutical companies looking to add an entirely new approach to their
anti-cancer drug pipelines.




The
significant diversity of the potential therapeutic value of the Company’s
compounds stems from the fact that these agents modify critical pathways in
cancer cells and in microorganisms such as fungi and appear to ameliorate
pathologic processes that lead to brain injury caused by trauma or toxins or
through as yet unknown mechanisms that underlie the major chronic neurologic
diseases, including Alzheimer’s Disease, Parkinson’s Disease, and Amyotrophic
Lateral Sclerosis (ALS, or Lou Gehrig’s Disease).  Studies of the
potential neuroprotective effects of homologs of each class of the Company’s
compounds are continuing under a contract with Southern Research Institute,
Birmingham, Alabama.




Plans
for 2010 and Beyond




The
Company’s primary objective is to complete studies needed for a successful
application to the FDA for an Investigational New Drug (“IND”) for the clinical
evaluation of LB-100 by the end of the first quarter of 2011. The estimated cost
for drug synthesis formulation, pharmacokinetic, and toxicologic studies needed
for an IND application has been revised downward to approximately $1,200,000
Accordingly, the Company believes that it currently has sufficient capital to
fund its operations, including the continued development of the LB-200 series
and the sponsorship of a Phase I clinical trial of LB-100.


28





The
critical need for the next step in the clinical development of LB-100 is to
obtain IND approval from the FDA to administer the drug to patients. In order to
do this, the Company must demonstrate that LB-100 can be administered safely to
human beings at a dose and at a frequency that achieves the desired
pharmacologic effect, in this case inhibition of a specific enzyme, without
being associated with toxicities considered unacceptable. A compound that has a
mechanism of action similar to that of LB-100 has been given with safety and
benefit to cancer patients outside the United States in the past. This compound
has a chemical feature which appears to be responsible for most of its toxicity.
This feature has been removed from LB-100, making it likely that the Company’s
compound will be less toxic and, therefore, safer for human use.




With
current resources, the Company will further characterize of the anti-cancer and
anti-fungal activity of certain homologs of drugs of the LB-200 series. These
studies would be done in collaboration with academic partners.




Results
of Operations




The
Company is a development stage company and had not commenced revenue-generating
operations at March 31, 2010.





Three
Months Ended March 31, 2010 and 2009




General and Administrative
Expenses.  For the three months ended March 31, 2010, general
and administrative expenses were $188,579, which consisted of the vested portion
of the fair value of stock options issued to directors and consultants of
$72,740, consulting and professional fees of $103,652, insurance expense of
$6,125, stock transfer fees of $2,278, travel and entertainment costs of $610,
and other operating costs of $3,174.




For the
three months ended March 31, 2009, general and administrative expenses were
$153,119, which consisted of the vested portion of the fair value of stock
options issued to directors and consultants of $37,514, consulting and
professional fees of $97,145, insurance expense of $5,955, stock transfer fees
of $3,170, travel and entertainment costs of $1,401, and other operating costs
of $7,934.




Depreciation.  For
the three months ended March 31, 2010 and 2009, depreciation expense
was


$-0-
and $127, respectively.




Research and Development
Costs.  For the three months ended March 31, 2010, research and
development costs were $161,872, which consisted of the vested portion of the
fair value of stock options issued to a consultant and a vendor of $19,888,
patent costs of $88,688, laboratory supplies of $13,000, and other costs of
$40,296.




For the
three months ended March 31, 2009, research and development costs were $125,878,
which consisted of the vested portion of the fair value of stock options issued
to a consultant and a vendor of $39,862, patent costs of $20,766, laboratory
supplies of $9,000, and other costs of $56,250.




Interest
Income.  For the three months ended March 31, 2010 and 2009,
interest income was $215 and $7, respectively.




Net
loss.  For the three months ended March 31, 2010, the Company
incurred a net loss of $350,236, as compared to a net loss of $279,569 for the
three months ended March 31, 2009.




Liquidity
and Capital Resources – March 31, 2010




The
Company’s condensed consolidated 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, and does not expect to do so in the foreseeable future.  The
Company has experienced recurring operating losses and negative operating cash
flows since inception, and has financed its working capital requirements through
the recurring sale of its equity securities.  As a result, the
Company’s independent registered public accounting firm, in its report on the
Company’s 2009 consolidated financial statements, has raised substantial doubt
about the Company’s ability to continue as a going concern (see “Going Concern”
above”).


29




The
Company’s activities in 2010 will consist of continuing drug discovery and
development efforts. The Company’s primary goal will be to take the Company’s
LB-100 compound through a Phase I clinical trial by July 1, 2011. As a result of
the recent sale of its securities in November 2009, January 2010 and February
2010, the Company believes that its current resources are adequate to fund
operations during the remainder of 2010 and at a minimum through mid-2011, at a
level that will allow the continuation of the Company’s two drug development
programs currently in process and completion of the initial Phase I trial of
LB-100, if no unexpected delays occur in obtaining FDA approval, in late 2010 or
early 2011.





Operating
Activities.  For the three months ended March 31, 2010,
operating activities utilized cash of $252,326, as compared to utilizing cash of
$205,822 for the three months ended March 31, 2009.




At March
31, 2010, the Company had a working capital surplus of $2,130,974, as compared
to a working capital surplus of $1,301,082 at December 31, 2009. The increase in
working capital at March 31, 2010 was due primarily to the sale of the Company’s
securities pursuant to two private placements occurring in January and February
2010 that generated net proceeds of $1,087,501 reduced by $1,200,000 of advances
on such financing received in December 2009.




Investing
Activities.  For the three months ended March 31, 2010,
investing activities consisted of $2,050,042 placed into a money market fund.
There were no investing activities during the three months ended March 31,
2009.




Financing
Activities.  For the three months ended March 31, 2010,
financing activities provided net cash of $1,087,500, consisting of the gross
proceeds from the sale of securities of $2,287,500, less $1,200,000 of advances
received through December 31, 2009. For the three months ended March 31, 2009,
financing activities provided net cash of $282,250, consisting of the gross
proceeds from the sale of common stock of $460,000, reduced by the payment of
private placement offering costs of $77,750 and the repayment of a note payable
to a consultant of $100,000.




Principal
Commitments




Effective
March 22, 2006, the Company entered into a CRADA, as amended, with the NINDS of
the NIH. The CRADA is for a term of 66 months from the effective date and can 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
provides that NINDS and the Company will conduct research to determine if
expression of N-CoR correlates with prognosis in glioma patients. Pursuant to
the CRADA, the Company initially 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. For the period from October 1, 2008
through September 30, 2009, the Company agreed to provide additional funding
under the CRADA of $200,000, to be paid in four quarterly installments of
$50,000 each commencing on October 1, 2008. The first and second quarterly
installments of $50,000 were paid on September 29, 2008 and March 5, 2009,
respectively. During August 2009, the Company entered into an
amendment to the CRADA to extend its term from September 30, 2009 through
September 30, 2011.  Pursuant to such amendment, the Company has
agreed to aggregate payments of $100,000 in two installments of $50,000 payable
on October 1, 2010 and January 5, 2011, inclusive of any prior unpaid
commitments.





On
February 5, 2007, the Company entered into a two-year agreement pursuant to
which the Company engaged Chem-Master to synthesize a compound designated as
“LB-1”, and any other compound synthesized by Chem-Master pursuant to the
Company’s request, which have potential use in treating a disease, including,
without limitation, cancers such as glioblastomas. Pursuant to the Chem-Master
Agreement, the Company 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 shares of
the Company’s common stock. The Company has the right to terminate the
Chem-Master Agreement at any time during its term upon sixty days prior written
notice.


30





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 Chem-Master
Agreement, as amended, the Company reimbursed Chem-Master for the costs of
materials, labor, and expenses aggregating $13,000 and $9,000 during the three
months ended March 31, 2010 and 2009, respectively.





Effective
as of September 19, 2008, the Company entered into an agreement with the NIH
providing the Company with an exclusive license for all patents submitted
jointly with the NIH under the CRADA. The agreement provided for an initial
payment of $25,000 to NIH within 60 days of September 19, 2008, and for a
minimum annual royalty of $30,000 on January 1 of each calendar year following
the year in which the CRADA is terminated. The agreement also provides for the
Company to pay specified royalties based on (i) net sales by the Company and its
sub-licensees, (ii) the achievement of certain clinical benchmarks, and (iii)
the granting of sublicenses. The Company paid the initial $25,000 obligation on
November 10, 2008 and charged the amount to general and administrative costs
during the year ended December 31, 2008.





On
October 9, 2008, the Company engaged Southern Research Institute, Birmingham,
Alabama, to assess one lead compound from each of two classes of its proprietary
pharmacological agents for effects on normal neuronal cells and to determine if
the compounds protect normal brain cells from injury in several different models
of chemical and traumatic brain injury. The goal is to determine if these agents
have promise as potentially useful for the prevention, amelioration or delay of
progression of neurodegenerative diseases such as Alzheimer’s disease and other
neurological diseases or impairments resulting from trauma and/or other diverse
or unknown origins. The Company agreed to pay a fee not to exceed a total of
$50,000 for such services, all of which had been paid as of December 31,
2009.





On
December 23, 2009, the Company’s agreement with Southern Research Institute was
amended to include certain additional studies of neurodegenerative diseases at
an additional estimated cost of $21,200.





On
January 5, 2010, the Company engaged Southern Research Institute to perform
several of the pre-clinical studies of LB-100 needed for an Investigational New
Drug (“IND”) application at a total estimated cost of $109,800, of which $48,045
had been paid as of March 31, 2010.





On
November 17, 2009, the Company entered into an agreement with Johnson Matthey
Pharma Services for the preparation of drug materials at a total estimated cost
of $45,500, of which $8,125 had been paid as of March 31, 2010.





On March
17, 2010, the Company engaged Theradex to assist the Company in bringing LB-100
through the FDA approval process at a total estimated cost of
$105,064.





On April
15, 2010, the Company entered into an agreement with Ascentage Pharma Group to
assist in the pharmacological characterization of the Company’s proprietary
compounds at a total estimated cost of $30,000. Ascentage Pharma Group is an
offshoot of Ascenta Therapeutics, of which Dr. Mel Sorensen, a director of the
Company, is the President and Chief Executive Officer and a
director.  Ascentage Pharma Group and Ascenta Therapeutics have a
continuing business relationship and certain common
shareholders.  However, Dr. Sorensen does not have any direct business
relationship with or ownership in Ascentage Pharma Group.





The
following table sets forth the Company’s principal cash obligations and
commitments for the next five fiscal years as of March 31, 2010 aggregating
$492,111, of which $222,748 is included in current liabilities in the condensed
consolidated balance sheet at March 31, 2010.


31





Payments Due By YearTotal
                  
                  
                  2010
                  
                  
                  2011CRADA
                  
                  $
                  100,000
                  
                  
                  $
                  50,000
                  
                  
                  $
                  50,000Research
      and development contracts
                  
                  
                  225,394
                  
                  
                  
                  225,394
                  
                  
                  
                  —Liquidated
      damages payable under registration rights agreement
                  
                  
                  74,000
                  
                  
                  
                  74,000
                  
                  
                  
                  —Due
      to stockholder
                  
                  
                  92,717
                  
                  
                  
                  92,717
                  
                  
                  
                  —Total
                  
                  $
                  492,111
                  
                  
                  $
                  442,111
                  
                  
                  $
                  50,000




Off-Balance
Sheet Arrangements




At March
31, 2010, the Company did not have any transactions, obligations or
relationships that could be considered off-balance sheet
arrangements.


32





ITEM 3.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISK




Not
applicable.




ITEM 4T.
            CONTROLS
      AND PROCEDURES




(a)
Evaluation of Disclosure Controls and Procedures





The
Company carried out an evaluation, under the supervision and with the
participation of its management, including its principal executive officer and
principal financial officer (who is the same individual), of the effectiveness
of the Company’s disclosure controls and procedures (as
defined  in  Rules  13a-15(e) and 15d-15(e) of
the  Exchange  Act (defined  below)). Based upon
that evaluation, the Company’s principal executive officer and principal
financial officer concluded that, as of the end of the period covered in this
report, the Company’s disclosure controls and procedures were effective to
ensure that information required to be disclosed in reports filed under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded,
processed, summarized and reported within the required time periods and is
accumulated and communicated to the Company’s management, including the
Company’s principal executive officer and principal financial officer, as
appropriate, to allow timely decisions regarding required
disclosure.





The
Company’s management, including its principal executive officer and principal
financial officer, does not expect that its disclosure controls and procedures
or its internal controls will prevent all error or fraud.  A control
system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met. Further, the design of a control system must reflect the fact that
there are resource constraints and the benefits of controls must be considered
relative to their costs.  Due to the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, have been detected. Accordingly,
management believes that the financial statements included in this report fairly
present in all material respects the Company’s financial condition, results of
operations and cash flows for the periods presented.





(b)
Changes in Internal Controls Over Financial Reporting





In
addition, the Company’s management, with the participation of its principal
executive officer and principal financial officer, has determined that no change
in the Company’s internal control over financial reporting (as that term is
defined in Rules 13(a)-15(f) and 15(d)-15(f) of the Securities Exchange Act of
1934) occurred during or subsequent to the end of the period covered in this
report that has materially affected, or is reasonably likely to materially
affect, the Company’s internal control over financial reporting.





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




Effective
January 20, 2010, the Company raised $1,787,500 in a fifth private placement of
units sold to certain of its existing stockholders or their designees, all of
whom were accredited investors, consisting of an aggregate of 3,575,000 units at
a purchase price of $0.50 per unit.  Each unit consisted of one share
of common stock, one three-year warrant to purchase a share of common stock at
an exercise price of $0.50 per share, and one three year-year warrant to
purchase a share of common stock at an exercise price of $0.75 per
share.  The units sold were not registered under the Securities Act of
1933, as amended (the “Act”), in reliance upon the exemption from registration
contained in Section 4(2) of the Act and Regulation D promulgated
thereunder.




Effective
February 22, 2010, the Company raised $500,000 through the sale to an accredited
investor of 1,000,000 units at a purchase price of $0.50 per
unit.  Each unit consisted of one share of common stock, one
three-year warrant to purchase a share of common stock at an exercise price of
$0.50 per share, and one three year-year warrant to purchase a share of common
stock at an exercise price of $0.75 per share.  The units sold were
not registered under the Act, in reliance upon the exemption from registration
contained in Section 4(2) of the Act and Regulation D promulgated
thereunder.





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




Effective
April 20, 2010, Stephen Carter resigned from the Company’s Board of
Directors for personal reasons.





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 is presented elsewhere in this document, 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: 
      May 3, 2010
              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 Document31.1
                        
                        Officer’s
      Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
      (1)32.1
                        
                        Officer’s
      Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
      (1)





(1)
              Filed
      herewith.


36