**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-QSB**







x
            QUARTERLY
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934For
                the quarterly period endedMarch
                31, 2007o
            TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF
                1934Commission
                file number: 000-51476




**LIXTE
                BIOTECHNOLOGY HOLDINGS, INC.**(Exact
                name of small business issueras
                specified in itscharter)




**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**(Issuer’
                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 issuer (1) has
      filed all reports required to be filed by Section 13 or 15(d) of the Securities
      Exchange Act of 1934 during the preceding 12 months (or for such shorter period
      that the registrant was required to file such reports), and (2) has been
      subject to such filing requirements for the past 90 days. Yes x 
      No o




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes o 
No
x




As
        of
        April 30, 2007, the Company had 26,582,183 shares of common stock, $0.0001
        par
        value, issued and outstanding.
  Transitional
          Small Business Disclosure Format: Yes o 
No
x


Documents
        incorporated by reference: None











**LIXTE
      BIOTECHNOLOGY HOLDINGS, INC.**


**(FORMERLY
      SRKP 7, INC.)**


**INDEX**




**PART
                  I - FINANCIAL INFORMATION**Item
                  1. Condensed Financial StatementsCondensed
                  Consolidated Balance Sheets -March
                  31, 2007 (Unaudited) and December 31, 2006
              1Condensed
                  Consolidated Statements of Operations (Unaudited) -Three
                  Months Ended March 31, 2007 and 2006, and August 9, 2005 (Inception)
                  to March 31,
                2007
                  (Cumulative)
              2Condensed
                  Consolidated Statement of Changes in Stockholders’ Equity (Deficiency)
                  (Unaudited) -August 9,
                  2005 (Inception) to March 31, 2007
              3Condensed
                  Consolidated Statements of Cash Flows (Unaudited) -Three
                  Months Ended March 31, 2007 and 2006, and August 9, 2005 (Inception)
                  to March 31,
                2007
                  (Cumulative)
              4Notes
                  to Condensed Consolidated Financial Statements -March
                  31, 2007 (Unaudited) and December 31, 2006
              6Item
                  2. Management’s Discussion and Analysis or Plan of
                  Operation
              15Item
                  3. Controls and Procedures
              26




**PART
                  II - OTHER INFORMATION**Item
                  1
              
              Legal
                  Proceedings
              27Item
                  2
              
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              27Item
                  3
              
              Defaults
                  Upon Senior Securities
              27Item
                  4
              
              Submission
                  of Matters to a Vote of Security Holders
              27Item
                  5
              
              Other
                  Information
              27Item
                  6
              
              Exhibits
              27SIGNATURES
              
              28




i


**LIXTE
      BIOTECHNOLOGY HOLDINGS, INC.**


**(FORMERLY
      SRKP 7, INC.)**


**AND
      SUBSIDIARY**


(a
      development stage company)




**CONDENSED
      CONSOLIDATED BALANCE SHEETS**




**March
                31,**
              **2007**
              (Unaudited)
            
            **December
                31,**
              **2006**
              (Restated)ASSETSCurrent
                assets:Cash
                and cash equivalents
            
            $
            536,616
            
            $
            679,640Advances
                on research and development contract services
            
            
            237,387
            
            
            50,000Prepaid
                insurance
            
            
            13,177
            
            
            20,365Total
                current assets
            
            
            787,180
            
            
            750,005Office
                equipment**,**net of accumulated depreciation of $723 at March 31, 2007
              and
                $575 at December 31, 2006
            
            
            1,186
            
            
            1,062Total
                assets
            
            $
            788,366
            
            $
            751,067LIABILITIES
                AND STOCKHOLDERS’ EQUITYCurrent
                liabilities:Accounts
                payable and accrued expenses
            
            $
            68,861
            
            $
            31,786Estimated
                liquidated damages payable under registration rights
                agreement
            
            
            74,000
            
            
            74,000Research
                and development contract liabilities
            
            
            213,410
            
            
            ---Due
                to stockholder
            
            
            92,717
            
            
            92,717Total
                current liabilities
            
            
            448,988
            
            
            198,503Commitments
                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 - 26,582,183
                shares
            
            
            2,658
            
            
            2,658Additional
                paid-in capital
            
            
            1,168,031
            
            
            1,128,114Deficit
                accumulated during the development stage
            
            
            (831,311
            )
            
            (578,208
            )Total
                stockholders’ equity
            
            
            339,378
            
            
            552,564Total
                liabilities and stockholders’ equity
            
            $
            788,366
            
            $
            751,067





See
      accompanying notes to condensed consolidated financial statements.




1





**LIXTE
      BIOTECHNOLOGY HOLDINGS, INC.**


**(FORMERLY
      SRKP 7, 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,
                  2007****2007**
              
              **2006**
              
              **(Cumulative)**Revenues
              
              $
              —
              
              $
              —
              
              $
              —Costs
                  and expenses:General
                  and administrative, including $8,917 of stock-based compensation
                  during
                  the three months ended March 31, 2007 and $106,317 for the period
                  from
                  August 9, 2005 (inception) to March 31, 2007 (cumulative)
              
              
              182,753
              
              
              21,984
              
              
              498,184Depreciation
              
              
              148
              
              
              115
              
              
              723Research
                  and development costs, including $31,000 of stock-based expense
                  during the
                  three months ended March 31, 2007 and the period from August 9,
                  2005
                  inception) to March 31, 2007 (cumulative)
              
              
              74,925
              
              
              —
              
              
              225,025Reverse
                  merger costs
              
              
              ---
              
              
              5,000
              
              
              50,000Total
                  costs and expenses
              
              
              257,826
              
              
              27,099
              
              
              773,932(257,826
              )
              
              (27,099
              )
              
              (773,932
              )Interest
                  income
              
              
              4,723
              
              
              —
              
              
              16,621Estimated
                  liquidated damages under registration rights agreement
              
              
              ---
              
              
              —
              
              
              (74,000
              )Net
                  loss
              
              $
              (253,103
              )
              $
              (27,099
              )
              $
              (831,311
              )Net
                  loss per common share - basic and diluted
              
              $
              (0.01
              )
              $
              (0.00
              )Weighted
                  average number of common shares outstanding - basic and
                  diluted
              
              
              26,582,183
              
              
              19,021,786





See
      accompanying notes to condensed consolidated financial statements.




2





**LIXTE
      BIOTECHNOLOGY HOLDINGS, INC.**


**(FORMERLY
      SRKP 7, INC.)**


**AND
      SUBSIDIARY**


(a
      development stage company)




**CONDENSED
      CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
      (DEFICIENCY)**





**Period
      from August 9, 2005 (Inception) to March 31, 2007**


**Common
                Stock**
            
            **Additional****Paid-in**
            
            **Deficit**
                **Accumulated****During
                the****Development**
            
            **Total****Stockholders’****Equity****Shares**
            
            **Amount**
            
            **Capital**
            
            **Stage**
            
            **(Deficiency)**Balance,
                August 9, 2005 (inception)
            
            
            —
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —Shares
                issued to founding stockholder
            
            
            19,021,786
            
            
            1,902
            
            
            (402
            )
            
            —
            
            
            1,500Net
                loss
            
            
            —
            
            
            —
            
            
            —
            
            
            (16,124
            )
            
            (16,124
            )Balance,
                December 31, 2005
            
            
            19,021,786
            
            
            1,902
            
            
            (402
            )
            
            (16,124
            )
            
            (14,624
            )Shares
                issued in connection with reverse
              merger
                transaction
            
            
            4,005,177
            
            
            401
            
            
            62,099
            
            
            —
            
            
            62,500Shares
                issued in private placement, net of
              offering
                costs of $214,517
            
            
            3,555,220
            
            
            355
            
            
            969,017
            
            
            —
            
            
            969,372Stock-based
                compensation
            
            
            —
            
            
            —
            
            
            97,400
            
            
            —
            
            
            97,400Net
                loss
            
            
            —
            
            
            —
            
            
            —
            
            
            (562,084
            )
            
            (562,084
            )Balance,
                December 31, 2006
            
            
            26,582,183
            
            
            2,658
            
            
            1,128,114
            
            
            (578,208
            )
            
            552,564Stock-based
                compensation
            
            
            —
            
            
            —
            
            
            8,917
            
            
            —
            
            
            8,917Stock-based
                research and development costs
            
            
            —
            
            
            —
            
            
            31,000
            
            
            —
            
            
            31,000Net
                loss
            
            
            —
            
            
            —
            
            
            —
            
            
            (253,103
            )
            
            (253,103
            )Balance,
                March 31, 2007 (unaudited)
            
            
            26,582,183
            
            $
            2,658
            
            $
            1,168,031
            
            $
            (831,311
            )
            $
            339,378





See
      accompanying notes to condensed consolidated financial statements.




3




**LIXTE
      BIOTECHNOLOGY HOLDINGS, INC.**


**(FORMERLY
      SRKP 7, 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, 2007****2007**
              
              **2006**
              
              **(Cumulative)**Cash
                  flows from operating activitiesNet
                  loss
              
              $
              (253,103
              )
              $
              (27,099
              )
              $
              (831,311
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Depreciation
              
              
              148
              
              
              115
              
              
              723Stock-based
                  compensation
              
              
              8,917
              
              
              ---
              
              
              106,317Stock-based
                  research and development costs
              
              
              31,000
              
              
              ---
              
              
              31,000Changes
                  in operating assets and liabilities:(Increase)
                  decrease in -Advances
                  on research and development contract services
              
              
              (187,387
              )
              
              (200,000
              )
              
              (237,387
              )Prepaid
                  expenses
              
              
              7,188
              
              
              (25,000
              )
              
              (13,177
              )Increase
                  (decrease) in -Accounts
                  payable and accrued expenses
              
              
              37,075
              
              
              (12,802
              )
              
              68,861Research
                  and development contract liabilities
              
              
              213,410
              
              
              200,000
              
              
              213,410Estimated
                  liquidated damages payable under registration rights
                  agreement
              
              
              ---
              
              
              ---
              
              
              74,000Net
                  cash used in operating activities
              
              
              (142,752
              )
              
              (64,786
              )
              
              (587,564
              )Cash
                  flows from investing activitiesPurchase
                  of office equipment
              
              
              (272
              )
              
              (237
              )
              
              (1,909
              )Net
                  cash used in investing activities
              
              
              (272
              )
              
              (237
              )
              
              (1,909
              )Cash
                  flows from financing activitiesProceeds
                  from sale of common stock to founder
              
              
              ---
              
              
              ---
              
              
              1,500Cash
                  acquired in reverse merger transaction
              
              
              ---
              
              
              ---
              
              
              62,500Gross
                  proceeds from sale of common stock
              
              
              ---
              
              
              ---
              
              
              1,183,889Payment
                  of private placement offering costs
              
              
              ---
              
              
              ---
              
              
              (214,517
              )Advances
                  from stockholder
              
              
              ---
              
              
              70,480
              
              
              92,717Net
                  cash provided by financing activities
              
              
              ---
              
              
              70,480
              
              
              1,126,089Net
                  increase (decrease) in cash
              
              
              (143,024
              )
              
              5,457
              
              
              536,616Cash
                  at beginning of period
              
              
              679,640
              
              
              4,946
              
              
              ---Cash
                  at end of period
              
              $
              536,616
              
              $
              10,403
              
              $
              536,616





(continued)




4


**LIXTE
      BIOTECHNOLOGY HOLDINGS, INC.**


**(FORMERLY
      SRKP 7, INC.)**


**AND
      SUBSIDIARY**


(a
      development stage company)




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


**Three
                    Months Ended **March
                    31,****
                
                **Period from**
                  **August 9,**
                  **2005**
                  **(Inception)
                    to**
                  **March
                    31, 2007****2007**
                
                **2006**
                
                **(Cumulative)**Supplemental
                    disclosures of cash flow information:Cash
                    paid for -Interest
                
                $
                —
                
                $
                —
                
                $
                —Income
                    taxes
                
                $
                —
                
                $
                —
                
                $
                —




See
      accompanying notes to condensed consolidated financial statements.




5





**LIXTE
      BIOTECHNOLOGY HOLDINGS, INC.**


**(FORMERLY
      SRKP 7, INC.)**


**AND
      SUBSIDIARY**


(a
      development stage company)





**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)**





**March
      31, 2007 (Unaudited) and December 31, 2006**





**1.
      Organization and Basis of Presentation**




On
      June
      30, 2006, Lixte Biotechnology, Inc., a privately-held Delaware corporation
      (“Lixte”), completed a reverse merger transaction with SRKP 7, Inc. (“SRKP”), a
      public “shell” company, whereby Lixte became a wholly-owned subsidiary of SRKP.
      For financial reporting purposes, Lixte was considered the accounting acquirer
      in the merger and the merger was accounted for as a reverse merger. Accordingly,
      the historical financial statements presented herein are those of Lixte and
      do
      not include the historical financial results of SRKP. The stockholders’ equity
      section of SRKP has been retroactively restated for all periods presented to
      reflect the accounting effect of the reverse merger transaction. All costs
      associated with the reverse merger transaction were expensed as incurred.
      Comparative financial statements for the period ended March 31, 2006 reflect
      the
      results of operations of Lixte, the accounting acquirer in the reverse merger
      transaction. Unless the context indicates otherwise, SRKP and Lixte are
      hereinafter referred to as the “Company”. On December 7, 2006, the Company
      amended its Certificate of Incorporation to change its name from SRKP 7, Inc.
      to
      Lixte Biotechnology Holdings, Inc. (“Holdings”).




The
      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.




The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities at the date of the financial statements and the reported amounts
      of
      expenses during the reporting period. Actual results could differ from those
      estimates.




The
      condensed consolidated financial statements of Lixte (the “Company”) at March
      31, 2007, for the three months ended March 31, 2007 and 2006, and for the period
      from August 9, 2005 (Inception) to March 31, 2007 (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, 2007 and the results of its
      operations and its cash flows for the three months ended March 31, 2007 and
      2006, and for the period from August 9, 2005 (Inception) to March 31, 2007
      (cumulative). Operating results for the interim periods presented are not
      necessarily indicative of the results to be expected for a full fiscal year.
      The
      condensed consolidated balance sheet at December 31, 2006 has been derived
      from
      the Company’s audited financial statements (as restated) as of that
      date.




The
      statements and related notes have been prepared pursuant to the rules and
      regulations of the U.S. Securities and Exchange Commission. Accordingly, certain
      information and footnote disclosures normally included in financial statements
      prepared in accordance with generally accepted accounting principles have been
      omitted pursuant to such rules and regulations. These financial statements
      should be read in conjunction with the financial statements and other
      information included in the Company’s Annual Report on Form 10-KSB, as amended,
      as filed with the U.S. Securities and Exchange Commission on May 17,
      2007.




6




**2.
      Business Operations and Summary of Significant Accounting
      Policies**




***Nature
      of Operations***




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




The
      Company’s initial focus is on developing new treatments for the most common and
      most aggressive type of primary brain cancer, glioblastoma multiforme (“GBM”).
      Lixte entered into a Cooperative Research and Development Agreement (“CRADA”)
      with the National Institute of Neurological Diseases and Stroke (“NINDS”) of the
      National Institutes of Health (“NIH”) to identify and evaluate drugs that target
      a specific biochemical pathway for GBM cell differentiation. The CRADA also
      covers research to determine whether expression of a component of this pathway
      correlates with prognosis in glioma patients.




The
      Company expects that its products will derive directly from its intellectual
      property, which will consist of patents that it anticipates will arise out
      of
      its research activities. These patents are expected to cover biomarkers uniquely
      associated with the specific types of cancer, patents on methods to identify
      drugs that inhibit growth of specific tumor types, and combinations of drugs
      and
      potential drugs and potential therapeutic agents for the treatment of specific
      cancers.




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




***Going
      Concern and Plan of Operations***




The
      Company’s financial statements have been presented on the basis that it is a
      going concern, which contemplates the realization of assets and satisfaction
      of
      liabilities in the normal course of business. The Company is in the development
      stage and has not earned any revenues from operations to date, which raises
      substantial doubt about its 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 ultimately achieve profitable
      operations. The accompanying financial statements do not include any adjustments
      that might result from the outcome of these uncertainties.




The
      Company is currently devoting its efforts to research and development related
      to
      specific cancer biomarkers for early detection, estimation of prognosis,
      monitoring response to treatment, and development of targeted therapeutic
      agents. The Company is seeking to exploit this opportunity through execution
      of
      its business plan and the development of related patents.




At
      March 31, 2007, the Company had not yet commenced any revenue-generating
      operations. All activity through March 31, 2007 related to the Company’s
      formation, capital raising efforts and initial research and development
      activities. As such, the Company has yet to generate any cash flows from
      operations, and is essentially dependent on debt and equity funding from both
      related and unrelated parties to finance its operations. Prior to June 30,
      2006,
      the Company’s cash requirements were funded by advances from Lixte’s founder. On
      June 30, 2006, the Company completed an initial closing of its private placement
      (see Note 3), selling 1,973,869 shares of common stock at a price of $0.333
      per
      share and receiving net proceeds of $522,939. On July 27, 2006, the Company
      completed a second closing of its private placement, selling 1,581,351 shares
      of
      common stock at a price of $0.333 per share and receiving net proceeds of
      $446,433.




7




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




Based
      on
      the proceeds received from the private placement (see Note 3), the Company
      may
      not have sufficient resources to completely fund its planned operations for
      the
      next twelve months. The
      strain on the Company’s limited cash resources has been further exacerbated by
      the accrual of a registration penalty obligation under EITF 00-19-2 at March
      31,
      2007 and December 31, 2006 of $74,000 (reflecting the cash amount payable for
      the registration penalty through mid-May 2007, as described at Note 3). If
      the
      Company does not maintain the effectiveness of its registration statement,
      the
      Company would be subject to a registration penalty at the rate of approximately
      $12,000 per 30-day period thereafter, continuing through July 2008. Since the
      Company only has cash of $536,616 and working capital of $338,192 (net of the
      $74,000 registration penalty obligation referred to above) at March 31, 2007,
      this short-term cash obligation and the uncertainty related to it could have
      a
      material adverse impact on the Company’s ability to fund its business plan and
      conduct operations.




The
      Company does not have sufficient resources to fully develop and commercialize
      any products that may arise from its research. Accordingly, the Company will
      need to raise additional funds in order to satisfy its future working capital
      requirements. In the short-term, in addition to the net proceeds from the
      private placement, the Company estimates that it will require additional funding
      of approximately $2,300,000. Additionally, the amount and timing of future
      cash
      requirements will depend on market acceptance of the Company’s products, if any,
      and the resources that the Company devotes to developing and supporting its
      products. The Company will need to fund these cash requirements from either
      one
      or a combination of additional financings, mergers or acquisitions, or via
      the
      sale or license of certain of its assets.




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




***Stock-Based
      Compensation***




In
      December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS
      No.
      123 (revised 2004), "Share-Based Payment" ("SFAS No. 123R"), a revision to
      SFAS
      No. 123, "Accounting for Stock-Based Compensation". SFAS No. 123R superseded
      APB
      No. 25. Effective January 1, 2006, SFAS No. 123R requires that the Company
      measure the cost of employee services received in exchange for equity awards
      based on the grant date fair value of the awards, with the cost to be recognized
      as compensation expense in the Company’s financial statements over the vesting
      period of the awards.




The
      Company adopted SFAS No. 123R effective January 1, 2006, and is using the
      modified prospective method in which compensation cost is recognized beginning
      with the effective date (a) based on the requirements of SFAS No. 123R for
      all
      share-based payments granted after the effective date and (b) based on the
      requirements of SFAS No. 123R for all awards granted to employees prior to
      the
      effective date of SFAS No. 123R that remain unvested on the effective
      date.




8




Accordingly,
      the Company recognizes compensation cost for equity-based compensation for
      all
      new or modified grants issued after December 31, 2005. The Company did not
      have
      any modified grants during the year ended December 31, 2006.




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




***Adoption
      of New Accounting Policies***





In
      December 2006, the FASB issued FSP EITF 00-19-2, “Accounting for
      Registration Payment Arrangements” (“EITF 00-19-2”), which addresses an issuer’s
      accounting for registration payment arrangements. EITF 00-19-2 specifies that
      the contingent obligation to make future payments or otherwise transfer
      consideration under a registration payment arrangement, whether issued as a
      separate agreement or included as a provision of a financial instrument or
      other
      agreement, should be separately recognized and measured in accordance with
      FASB
      No. 5, “Accounting for Contingencies”. EITF 00-19-2 further clarifies that a
      financial instrument subject to a registration payment arrangement should be
      accounted for in accordance with other applicable generally accepted accounting
      principles without regard to the contingent obligation to transfer consideration
      pursuant to the registration payment arrangement. EITF 00-19-2 is effective
      immediately for registration payment arrangements and the financial instruments
      subject to those arrangements that are entered into or modified subsequent
      to
      the date of issuance of EITF 00-19-2. For registration payment arrangements
      and
      financial instruments subject to those arrangements that were entered into
      prior
      to the issuance of EITF 00-19-2, EITF 00-19-2 is effective for financial
      statements issued for fiscal years beginning after December 15, 2006, and
      interim periods within those fiscal years. Early adoption of EITF 00-19-2 for
      interim or annual periods for which financial statements or interim reports
      have
      not been issued is permitted. The Company chose to early adopt EITF 00-19-2
      effective December 31, 2006 (see Note 3).




Effective
      January 1, 2007, the Company adopted FASB Interpretation No. 48, “Accounting for
      Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109,
      Accounting for Income Taxes” (“FIN 48”). FIN 48 addresses the determination of
      whether tax benefits claimed or expected to be claimed on a tax return should
      be
      recorded in the financial statements. Under FIN 48, 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 should be measured
      based on the largest benefit that has a greater than fifty percent likelihood
      of
      being realized upon ultimate settlement. FIN 48 also provides guidance on
      derecognition, classification, interest and penalties on income taxes,
      accounting in interim periods and requires increased disclosures. The adoption
      of the provisions of FIN 48 did not have a material effect on the Company’s
      financial statements. As of March 31, 2007, no liability for unrecognized
      tax benefits was required to be recorded.





The
      Company files income tax returns in the U.S. federal jurisdiction and various
      states. The Company is subject to U.S. federal or state income tax examinations
      by tax authorities for years after 2004.





The
      Company’s policy is to record interest and penalties on uncertain tax provisions
      as income tax expense. As of March 31, 2007, the Company has no accrued interest
      or penalties related to uncertain tax positions.




9




***Recent
      Accounting Pronouncements***




In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      157, “Fair Value Measurements” (“SFAS No. 157”), which establishes a formal
      framework for measuring fair value under generally accepted accounting
      principles. SFAS No. 157 defines and codifies the many definitions of fair
      value
      included among various other authoritative literature, clarifies and, in some
      instances, expands on the guidance for implementing fair value measurements,
      and
      increases the level of disclosure required for fair value measurements. Although
      SFAS No. 157 applies to and amends the provisions of existing FASB and AICPA
      pronouncements, it does not, of itself, require any new fair value measurements,
      nor does it establish valuation standards. SFAS No. 157 applies to all other
      accounting pronouncements requiring or permitting fair value measurements,
      except for: SFAS No. 123R, share-based payment and related pronouncements,
      the
      practicability exceptions to fair value determinations allowed by various other
      authoritative pronouncements, and AICPA Statements of Position 97-2 and 98-9
      that deal with software revenue recognition. SFAS No. 157 is effective for
      financial statements issued for fiscal years beginning after November 15, 2007,
      and interim periods within those fiscal years. The Company is currently
      assessing the potential effect of SFAS No. 157 on its consolidated financial
      statements.




In
      February 2007, the FASB issued Statement of Financial Accounting Standards
      No.
      159, “The Fair Value Option for Financial Assets and Financial Liabilities”
(“SFAS No. 159”), which provides companies with an option to report selected
      financial assets and liabilities at fair value.  SFAS No. 159’s objective
      is to reduce both complexity in accounting for financial instruments and the
      volatility in earnings caused by measuring related assets and liabilities
      differently. Generally accepted accounting principles have required different
      measurement attributes for different assets and liabilities that can create
      artificial volatility in earnings. SFAS No. 159 helps to mitigate this type
      of
      accounting-induced volatility by enabling companies to report related assets
      and
      liabilities at fair value, which would likely reduce the need for companies
      to
      comply with detailed rules for hedge accounting. SFAS No. 159 also establishes
      presentation and disclosure requirements designed to facilitate comparisons
      between companies that choose different measurement attributes for similar
      types
      of assets and liabilities. SFAS No. 159 requires companies to provide additional
      information that will help investors and other users of financial statements
      to
      more easily understand the effect of the company’s choice to use fair value on
      its earnings. SFAS No. 159 also requires companies to display the fair value
      of
      those assets and liabilities for which the company has chosen to use fair value
      on the face of the balance sheet. SFAS No. 159 does not eliminate disclosure
      requirements included in other accounting standards, including requirements
      for
      disclosures about fair value measurements included in SFAS No. 157 and SFAS
      No.
      107. SFAS No. 159 is effective as of the beginning of a company’s first fiscal
      year beginning after November 15, 2007. Early adoption is permitted as of the
      beginning of the previous fiscal year provided that the company makes that
      choice in the first 120 days of that fiscal year and also elects to apply the
      provisions of SFAS No. 157. The Company is currently assessing the potential
      effect of SFAS No. 159 on its consolidated financial statements.




Management
      does not believe that any other recently issued, but not yet effective,
      accounting standards, if currently adopted, would have a material effect on
      the
      Company's financial statements.




***Loss
      Per Common Share***




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




10




***Research
      and Development***




Research
      and development costs are expensed as incurred. 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,
      represent an advance on research and development costs and therefore have future
      economic benefit. As such, such costs are being charged to expense when they
      are
      actually expended by the provider, which is, effectively, as they perform the
      research activities that they are contractually committed to provide. Absent
      information that would indicate that a different expensing schedule is more
      appropriate (such as, for example, from the achievement of performance
      milestones or the completion of contract work), such advances are being expensed
      over the contractual service term on a straight-line basis, which reflects
      a
      reasonable estimate of when the underlying research and development costs are
      being incurred. The Company’s $200,000 financial obligation due under the CRADA
      as of March 22, 2007, which has been recorded as a liability at March 31, 2007
      and is scheduled for payment in July 2007, is intended to fund ongoing research
      and development activities through March 2008.




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




***Share
      Exchange Agreement***




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




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




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




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




***Private
      Placement***




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 26 accredited investors
      in
      an initial closing of its 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.




11




On
      July
      27, 2006, the Company sold an aggregate of 1,581,351 shares of its common stock
      to 31 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 have been accounted for as equity.




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




As
      part
      of the Company’s private placement of its securities completed on July 27, 2006,
      the Company entered into a registration rights agreement with the purchasers,
      whereby the Company agreed to register the shares of common stock sold in the
      private placement, and to maintain the effectiveness of such registration
      statement, subject to certain conditions. The agreement required the Company
      to
      file a registration statement within 45 days of the closing of the private
      placement and to have the registration statement declared effective within
      120
      days of the closing of the private placement. 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 is required to pay
      each investor prorated liquidated damages equal to 1.0% of the amount raised.
      The liquidated damages are payable monthly in cash. 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.




In
      accordance with EITF 00-19-2, “Accounting for Registration Payment
      Arrangements”, on the date of the closing of the private placement, the Company
      believed it would meet the deadlines under the registration rights agreement
      with respect to filing a registration statement and having it declared effective
      by the SEC. 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
      timeframe. As a result, the Company accrued six months liquidated damages under
      the registration rights agreement aggregating approximately $74,000 as a current
      liability at December 31, 2006. No further registration penalty accrual was
      required at March 31, 2007. The registration statement on Form SB-2 was declared
      effective by the Securities and Exchange Commission on May 14, 2007. The Company
      will continue to review the status of the registration statement at each quarter
      end in the future and record further liquidated damages under the registration
      rights agreement as necessary.




12




***Stock
      Options***




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 will be charged to operations ratably from July 1, 2006
      through June 30, 2008. During the year ended December 31, 2006, and the three
      months ended March 31, 2007, the Company recorded a charge to operations of
      $31,000 and $5,167, respectively, with respect to these options.




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




On
      June
      30, 2006, effective with the closing of the Exchange, the Company granted to
      certain members of its Scientific Advisory Committee stock options to purchase
      an aggregate of 100,000 shares of common stock exercisable for a period of
      five
      years at $0.333 per share, with one-half of the options vesting annually on
      each
      of June 30, 2007 and June 30, 2008. The fair value of these options, as
      calculated pursuant to the Black-Scholes option-pricing model, was initially
      determined to be $31,000 ($0.31 per share). The fair value of such options
      will
      be charged to operations ratably from July 1, 2006 through June 30, 2008. In
      accordance with EITF 96-18, options granted to committee members are valued
      each
      reporting period to determine the amount to be recorded as an expense in the
      respective period. On December 31, 2006, and March 31, 2007, the fair value
      of
      these options, as calculated pursuant to the Black-Scholes option-pricing model,
      was determined to be $30,000 ($0.30 per share) which resulted in a charge to
      operations of $7,500 during the year ended December 31, 2006 and $3,750 during
      the three months ended March 31, 2007. As the options vest, they will be valued
      one final time on each vesting date and an adjustment will be recorded for
      the
      difference between the value already recorded and the then current value on
      the
      date of vesting.




On
      June
      30, 2006, the fair value of the aforementioned stock options was initially
      calculated using the following Black-Scholes input variables: stock price on
      date of grant - $0.333; exercise price - $0.333; expected life - 5 years;
      expected volatility - 150%; expected dividend yield - 0%; risk-free interest
      rate - 5%. On December 31, 2006, the Black-Scholes input variables utilized
      to
      determine the fair value of the aforementioned stock options were deemed to
      be
      the same as at June 30, 2006, except for an expected life of 4.5 years. On
      March
      31, 2007, the Black-Scholes input variables utilized to determine the fair
      value
      of the aforementioned stock options were deemed to be the same as at June 30,
      2006, except for an expected life of 4.25 years.




**4.
      Related Party Transactions**




Since
      inception, Dr. John Kovach, Lixte’s founding stockholder, has periodically made
      advances to the Company to meet operating expenses. Such advances are
      non-interest-bearing and are due on demand. At December 31, 2006 and March
      31,
      2007 stockholder advances totaled $92,717.




The
      Company’s office facilities have been provided without charge by the Company’s
      founding stockholder and Chief Executive Officer. Such costs were not material
      to the financial statements and accordingly, have not been reflected
      therein.




13




Dr.
      John
      Kovach, the Company’s Chief Executive Officer, did not receive any compensation
      from the Company in view of the Company’s early stage status and limited
      activities. Any future compensation arrangements will be subject to the approval
      of the Board of Directors.




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




**5.
      Common Stock and Preferred Stock**




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




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




**6.
       Commitments and Contingencies**




Effective
      March 22, 2006, Lixte entered into a CRADA with the NINDS of the NIH. The CRADA
      is for a term of two years from the effective date and may be unilaterally
      terminated by either party by providing written notice within sixty days. The
      CRADA provides for the collaboration between the parties in the identification
      and evaluation of agents that target the Nuclear Receptor CoRepressor (N-CoR)
      pathway for glioma cell differentiation. The CRADA also provided that NINDS
      and
      Lixte will conduct research to determine if expression of N-CoR correlates
      with
      prognosis in glioma patients.




Pursuant
      to the CRADA, Lixte agreed to provide funds under the CRADA in the amount of
      $200,000 per year to fund two technical assistants for the technical,
      statistical and administrative support for the research activities, as well
      as
      to pay for supplies and travel expenses. The first installment of $200,000
      was
      due within 180 days of the effective date and was paid in full on July 6, 2006.
      The second installment of $200,000 is scheduled for payment in July
      2007.




On
      January 5, 2007, Lixte entered into a Services Agreement with The Free State
      of
      Bavaria (Germany) represented by the University of Regensburg (the “University”)
      pursuant to which Lixte retained the University to provide to it certain samples
      of primary cancer tissue and related biological fluids to be obtained from
      patients afflicted with specified types of cancer. The University will also
      provide certain information relating to such patients. Lixte will pay the
      University 72,000 Euros (approximately $99,700) in two installments of 36,000
      Euros (approximately $49,850). The first installment was paid on March 7, 2007,
      and the second installment will be paid within sixty days of the earlier of
      (i)
      January 5, 2008 or (ii) the University’s fulfillment of certain obligations
      relating to the delivery of materials.




On
      February 5, 2007, Lixte entered into a two-year agreement (the “Agreement”) with
      Chem-Master International, Inc. (“Chem-Master”) pursuant to which Lixte engaged
      Chem-Master to synthesize a compound designated as “LB-1”, and any other
      compound synthesized by Chem-Master pursuant to Lixte’s request, which have
      potential use in treating a disease, including, without limitation, cancers
      such
      as glioblastomas. Pursuant to the Agreement, Lixte agreed to reimburse
      Chem-Master for the cost of materials, labor, and expenses for other items
      used
      in the synthesis process, and also agreed to grant Chem-Master a five-year
      option to purchase 100,000 shares of the Company’s common stock at an exercise
      price of $0.333 per share. T he
      fair
      value of this option, as calculated pursuant to the Black-Scholes option-pricing
      model, was determined to be $31,000 ($0.31 per share) using the following
      Black-Scholes input variables: stock price on date of grant - $0.333; exercise
      price - $0.333; expected life - 5 years; expected volatility - 150%; expected
      dividend yield - 0%; risk-free interest rate - 4.5%. The $31,000
      fair value was charged to operations as research and development costs
      during the three months ended March 31, 2007, since the option was fully vested
      and non-forfeitable on the date of issuance.  Lixte has the right to
      terminate the Agreement at any time during the term of the Agreement upon 60
      days prior written notice.  On February 5, 2009, provided that the
      Agreement has 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.




14




**ITEM
      2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATION**




**Forward-Looking
      Statements**




This
      Quarterly Report on Form 10-QSB 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-QSB.




**Overview**




On
      June
      30, 2006, Lixte Biotechnology, Inc. (“Lixte”) a privately-held Delaware company
      incorporated on August 9, 2005, completed a reverse merger transaction with
      SRKP
      7, Inc. (“SRKP 7”), a non-trading public “shell” company, whereby Lixte became a
      wholly-owned subsidiary of SRKP 7. For financial reporting purposes, Lixte
      was
      considered the accounting acquirer in the merger and the merger was accounted
      for as a reverse merger. Accordingly, the historical financial statements
      presented herein are those of Lixte and do not include the historical financial
      results of SRKP 7. All costs associated with the reverse merger transaction
      were
      expensed as incurred.




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




On
      December 7, 2006, SRKP 7’s name was changed to Lixte Biotechnology Holdings,
      Inc. Lixte Biotechnology Holdings, Inc. is a holding company for Lixte the
      operating company acquired in the reverse merger transaction. Unless the context
      indicates otherwise, Lixte Biotechnology Holdings, Inc. and Lixte are
      hereinafter referred to collectively as the “Company”.




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




**Adoption
      of New Accounting Policies**





In
      December 2006, the FASB issued FSP EITF 00-19-2, “Accounting for
      Registration Payment Arrangements” (“EITF 00-19-2”), which addresses an issuer’s
      accounting for registration payment arrangements. EITF 00-19-2 specifies that
      the contingent obligation to make future payments or otherwise transfer
      consideration under a registration payment arrangement, whether issued as a
      separate agreement or included as a provision of a financial instrument or
      other
      agreement, should be separately recognized and measured in accordance with
      FASB
      No. 5, “Accounting for Contingencies”. EITF 00-19-2 further clarifies that a
      financial instrument subject to a registration payment arrangement should be
      accounted for in accordance with other applicable generally accepted accounting
      principles without regard to the contingent obligation to transfer consideration
      pursuant to the registration payment arrangement. EITF 00-19-2 is effective
      immediately for registration payment arrangements and the financial instruments
      subject to those arrangements that are entered into or modified subsequent
      to
      the date of issuance of EITF 00-19-2. For registration payment arrangements
      and
      financial instruments subject to those arrangements that were entered into
      prior
      to the issuance of EITF 00-19-2, EITF 00-19-2 is effective for financial
      statements issued for fiscal years beginning after December 15, 2006, and
      interim periods within those fiscal years. Early adoption of EITF 00-19-2 for
      interim or annual periods for which financial statements or interim reports
      have
      not been issued is permitted. The Company chose to early adopt EITF 00-19-2
      effective December 31, 2006.




15




Effective
      January 1, 2007, the Company adopted FASB Interpretation No. 48, “Accounting for
      Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109,
      Accounting for Income Taxes” (“FIN 48”). FIN 48 addresses the determination of
      whether tax benefits claimed or expected to be claimed on a tax return should
      be
      recorded in the financial statements. Under FIN 48, 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 should be measured
      based on the largest benefit that has a greater than fifty percent likelihood
      of
      being realized upon ultimate settlement. FIN 48 also provides guidance on
      derecognition, classification, interest and penalties on income taxes,
      accounting in interim periods and requires increased disclosures. The adoption
      of the provisions of FIN 48 did not have a material effect on the Company’s
      financial statements. As of March 31, 2007, no liability for unrecognized
      tax benefits was required to be recorded.





The
      Company files income tax returns in the U.S. federal jurisdiction and various
      states. The Company is subject to U.S. federal or state income tax examinations
      by tax authorities for years beginning in 2005.





The
      Company’s policy is to record interest and penalties on uncertain tax provisions
      as income tax expense. As of March 31, 2007, the Company has no accrued interest
      or penalties related to uncertain tax positions.




**Recent
      Accounting Pronouncements**




In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      157, “Fair Value Measurements” (“SFAS No. 157”), which establishes a formal
      framework for measuring fair value under generally accepted accounting
      principles. SFAS No. 157 defines and codifies the many definitions of fair
      value
      included among various other authoritative literature, clarifies and, in some
      instances, expands on the guidance for implementing fair value measurements,
      and
      increases the level of disclosure required for fair value measurements. Although
      SFAS No. 157 applies to and amends the provisions of existing FASB and AICPA
      pronouncements, it does not, of itself, require any new fair value measurements,
      nor does it establish valuation standards. SFAS No. 157 applies to all other
      accounting pronouncements requiring or permitting fair value measurements,
      except for: SFAS No. 123R, share-based payment and related pronouncements,
      the
      practicability exceptions to fair value determinations allowed by various other
      authoritative pronouncements, and AICPA Statements of Position 97-2 and 98-9
      that deal with software revenue recognition. SFAS No. 157 is effective for
      financial statements issued for fiscal years beginning after November 15, 2007,
      and interim periods within those fiscal years. The Company is currently
      assessing the potential effect of SFAS No. 157 on its consolidated financial
      statements.




16




In
      February 2007, the FASB issued Statement of Financial Accounting Standards
      No.
      159, “The Fair Value Option for Financial Assets and Financial Liabilities”
(“SFAS No. 159”), which provides companies with an option to report selected
      financial assets and liabilities at fair value.  SFAS No. 159’s objective
      is to reduce both complexity in accounting for financial instruments and the
      volatility in earnings caused by measuring related assets and liabilities
      differently. Generally accepted accounting principles have required different
      measurement attributes for different assets and liabilities that can create
      artificial volatility in earnings. SFAS No. 159 helps to mitigate this type
      of
      accounting-induced volatility by enabling companies to report related assets
      and
      liabilities at fair value, which would likely reduce the need for companies
      to
      comply with detailed rules for hedge accounting. SFAS No. 159 also establishes
      presentation and disclosure requirements designed to facilitate comparisons
      between companies that choose different measurement attributes for similar
      types
      of assets and liabilities. SFAS No. 159 requires companies to provide additional
      information that will help investors and other users of financial statements
      to
      more easily understand the effect of the company’s choice to use fair value on
      its earnings. SFAS No. 159 also requires companies to display the fair value
      of
      those assets and liabilities for which the company has chosen to use fair value
      on the face of the balance sheet. SFAS No. 159 does not eliminate disclosure
      requirements included in other accounting standards, including requirements
      for
      disclosures about fair value measurements included in SFAS No. 157 and SFAS
      No.
      107. SFAS No. 159 is effective as of the beginning of a company’s first fiscal
      year beginning after November 15, 2007. Early adoption is permitted as of the
      beginning of the previous fiscal year provided that the company makes that
      choice in the first 120 days of that fiscal year and also elects to apply the
      provisions of SFAS No. 157. The Company is currently assessing the potential
      effect of SFAS No. 159 on its consolidated financial statements.




Management
      does not believe that any other recently issued, but not yet effective,
      accounting standards, if currently adopted, would have a material effect on
      the
      Company's financial statements.




**Critical
      Accounting Policies and Estimates**




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




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




**Research
      and Development**




Research
      and development costs are expensed as incurred. Amounts due 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.




**Stock-Based
      Compensation**




In
      December 2004, the FASB issued Statement of Financial Accounting Standards
      No.
      123R, “Share-Based Payment” (“SFAS 123R”). SFAS 123R requires all share-based
      payments, including grants of employee stock options to employees, to be
      recognized in the financial statements based on their grant date fair values.
      Effective January 1, 2006, SFAS 123R requires that the Company measure the
      cost
      of employee services received in exchange for equity awards based on the grant
      date fair value of the awards, with the cost to be recognized as compensation
      expense in the Company’s financial statements over the vesting period of the
      awards.




17




**Income
      Taxes**




The
      Company accounts for income taxes under Statement of Financial Accounting
      Standards No. 109, “Accounting for Income Taxes”, which requires the
      recognition of deferred tax assets and liabilities for the expected impact
      of
      differences between the financial statements and the tax basis of assets and
      liabilities.




For
      federal income tax purposes, substantially all expenses must be deferred until
      the Company commences business operations and then they may be written off
      over
      a 60-month period. These expenses will not be deducted for tax purposes and
      will
      represent a deferred tax asset. The Company provides a valuation allowance
      for
      the full amount of the deferred tax asset since there is no assurance of future
      taxable income. Tax deductible losses can be carried forward for 20 years until
      utilized.




**Plan
      of Operation**




The
      Company’s initial focus is on developing new treatments for the most common and
      most aggressive type of primary brain cancer, glioblastoma multiforme (“GBM”).
      The Company entered into a Cooperative Research and Development Agreement (the
      “CRADA”) with the National Institute of Neurological Diseases and Stroke
      (“NINDS”) of the National Institutes of Health (“NIH”) to identify and evaluate
      drugs that target a specific biochemical pathway for GBM cell differentiation.
      The CRADA also covers research to determine whether expression of a component
      of
      this pathway correlates with prognosis in glioma patients.




The
      lead
      scientist at NINDS collaborating with the Company under the CRADA is Dr.
      Zhengping Zhuang. Dr. Zhuang is internationally recognized for his research
      in
      molecular pathology. Dr. Zhuang has four issued and two pending patents related
      to molecular pathology of human cancers. Dr. Zhuang recently discovered a
      biomarker of relevance to the growth of GBMs that the Company believes can
      be
      used as a tool for identifying drugs that affect the growth of GBM cells. Under
      the CRADA, the Company will support two persons at NIH to work under the
      direction of Dr. Zhuang. The goal is to identify drugs that inhibit GBM cell
      growth and to determine if the identified biomarker may be useful for estimation
      of prognosis. The Company’s contribution to the collaborative research done by
      the Company and NIH is $200,000 annually for two years to fund two research
      assistants expected to be at the post-doctoral level, as well as supplies and
      travel expenses.




On
      February 6, 2006, the Company filed a provisional patent application naming
      as co-inventors Dr. Zhuang and several other NIH investigators, and
      Dr. Kovach covering certain methods and classes of molecules that are
      expected to be the foundation of product development and commercialization
      efforts with respect to human brain tumors. On February 6, 2007, the
      Company filed on behalf of NIH co-inventors and Dr. Kovach a PCT
      international patent including all countries participating in the Patent
      Cooperation Treaty (except the USA) and an identical non-provisional patent
      in
      the USA. These two patent applications contain all claims in the provisional
      patent of February 6, 2006 plus additional claims. The Company has received
      a draft of the proposed exclusive patent license agreement with NIH.




18




Both
      February 6, 2007 patent filings fall under the CRADA agreement with the
      NINDS of the NIH. Patents resulting from these applications are jointly owned
      by
      Lixte and the U.S. Government. All NIH co-inventors are required to assign
      their
      rights to NIH. As specified in the CRADA agreement between the Company and
      the
      NINDS of the NIH, the Company is entitled to obtain an exclusive license from
      NIH to all claims in these patents. The Company has received a draft of the
      proposed exclusive patent license agreement with NIH. Under the proposed
      agreement, the Company will pay a non-creditable, nonrefundable upfront fee
      of
      $150,000 within thirty days from the effective date of the agreement, a royalty
      of 6% on net sales with a minimum annual royalty of $30,000 and royalties upon
      achieving the following benchmarks: (a) $50,000 upon starting Phase I Clinical
      Trials; (b) $100,000 upon starting Phase II Clinical Trials; (c) $200,000 upon
      starting Phase III Clinical Trials; (d) $300,000 upon filing an IND submission;
      and (e) $500,000 upon the first commercial sale. Additionally, the Company
      is
      required to pay royalties of 15% of the consideration received for the guaranty
      of sublicensing rights. The Company intends to negotiate these economic terms
      in
      order to attempt to obtain more advantageous economic terms. The Company
      believes that the other terms of the proposed agreement are customary for
      agreements of this type.


Also
        on
        February 6, 2007, the Company filed a new US provisional application in its
        sole
        name. This filing does not fall under the CRADA. The Company has
        the
        sole right to any patent issued pursuant to this application. This application
        identifies a method of synthesis and documents activity against glioblastoma
        multiforme cell lines in vitro of a proprietary lead compound synthesized
        by the
        Company. This provisional patent application also describes a series of homologs
        of this lead compound.




The
      Company expects that the products will derive directly from its intellectual
      property, which will consist of patents that the Company anticipates will arise
      out of its research activities. These patents are expected to cover biomarkers
      uniquely associated with the specific types of cancer, patents on methods to
      identify drugs that inhibit growth of specific tumor types, and combinations
      of
      drugs and potential drugs and potential therapeutic agents for the treatment
      of
      specific cancers.




The
      Company faces several potential challenges in its efforts to achieve commercial
      success, including raising sufficient capital to fund its business plan,
      achieving commercially applicable results of its research program, continued
      access to tissue and blood samples from cancer patients, competition from more
      established, well-funded companies with competitive technologies, and future
      competition from companies that are developing competitive technologies, some
      of
      whom are larger companies with greater capital resources than the
      Company.




There
      is
      substantial uncertainty as to the Company’s ability to fund its operations and
      continue as a going concern (see “Liquidity and Capital Resources - March 31,
      2007 - Going Concern” below).




The
      Company has two major goals to achieve over the next 9 months. The prime
      objective, in collaboration with NINDS under the CRADA, is to extend the
      characterization of potentially more effective drugs and drug combinations
      (identified by the Company and jointly with NINDS for the treatment of the
      incurable human brain tumor, GBM. The second goal is to obtain well
      characterized samples of common human cancers other than GBM under conditions
      needed to identify new biomarkers for the earlier detection and identification
      of biochemical pathways as potential targets for new treatments.




**Goal
      I: Development of More Effective Regimens for the Treatment of
      GBM**




Over
      the
      next 9 months, the Company will continue to develop preclinical data supporting
      the potential effectiveness of several drugs for the treatment of GBM when
      used
      alone or in combination. The drugs that have been identified as active in vitro
      have never been used for the treatment of GBM in humans. Some of these compounds
      were included in claims of a provisional patent filed jointly by the Company
      and
      NINDS in February 2006. Over the past 9 months, the activity of these drugs
      has
      been documented and several new lead compounds were identified. This work was
      done under the CRADA. The combinations of several pairs of lead drugs appear
      to
      have some specificity for GBM in that at equimolar doses these drugs are more
      active against GBMs than against other human cancer cell types tested. Some
      of
      the drug combinations are synergistic in their ability to inhibit the growth
      of
      GBMs, e.g., the combination of two drugs inhibits GBMs to a greater extent
      than
      would be expected from the sum of their inhibitory effects when used
      alone.




19




For
      several of the lead compounds, toxicity in mice was determined previously by
      others and for two lead compounds, doses that are tolerable in man and the
      specific toxicities induced by those doses are known. None of the lead
      compounds, however, have been evaluated as potential treatments for
      GBM.




Over
      the
      next 3-9 months, the Company will evaluate two or more lead compounds alone
      and
      in combination for activity against human GBMs in an animal (mouse) model.
      These
      evaluations will be done at NIH under protocols developed by NINDS and the
      Company. The protocols will be approved by NIH committees responsible for
      approving the conduct of animal research at NIH and will be carried out by
      NIH
      personnel as a joint activity under the CRADA. The CRADA agreement specifies
      evaluation of drug regimens in animal models as one of the activities to be
      pursued by the Company and NINDS. It is anticipated that the animal studies
      will
      include 3 regimens identified under the CRADA that have never been investigated
      as treatment for human GBMs. The Company expects these animal studies to be
      completed in September 2007.




As
      the
      effectiveness of lead regimens against GBMs in the animal model is determined,
      a
      decision will be made as to which regimens are most promising for development
      for human studies. This decision will be made jointly by the Company with the
      advice of its scientific advisory board and its CRADA partner, NINDS. At this
      point, NINDS and the Company will consider whether development of specific
      regimens for evaluation in humans should proceed via an extension of the
      existing CRADA, under a new CRADA with NINDS, or possibly with another institute
      at NIH and/or with a partner in the pharmaceutical industry interested in and
      capable of taking the drug though the IND process and conducting clinical
      evaluations.




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




After
      completion of phase I trials, the Company, potentially in partnership with
      NIH or on its own, would collaborate with the third party to carry new therapies
      found to be safe for administration to humans in the phase I trials into
      phase II trials.




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




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




**Goal
      II: Collection of Human Tumor Samples**




Over
      the
      next 9 months, samples of human tumors and associated blood and urine samples
      will be collected by the University of Regensburg under the Company’s January 5,
      2007 agreement with the Free State of Bavaria, Germany. Technology comparable
      to
      that used to detect the biomarker for GBM will be applied to these tumors to
      identify new biomarkers for cancers of the breast, colon, stomach, kidney,
      bladder, prostate, and ovary. The present CRADA with NINDS is limited to the
      study of GBM.




20




**Plans
      Beyond the Next 9 Months**




In
      early
      2008, the Company expects to be in a position to begin analyses of tumor types
      other than GBM. The Company plans to establish a laboratory to proceed with
      biomarker discovery independent of NIH. To do this the Company will need
      approximately $2,300,000 to establish and operate the laboratory for 2 years,
      i.e., to January 2010. The creation and operation of the laboratory for two
      years until December 2009 will cost about $1,700,000. During this period,
      patent, legal, accounting/audit and office management expenses are
      estimated to be approximately $500,000. Thus, the Company will need to raise
      about $2,300,000 at the end of 2007 and the beginning of 2008 to take the
      next step to biomarker discovery in cancers other than GBM. Funds are
      expected to come from either payments as part of licensing rights to
      compounds for the treatment of GBMs or though the sale
      of stock.




The
      laboratory (rented space) is expected to be located in a biotechnology incubator
      of the State of Maryland in close proximity to NIH or comparable incubator
      near
      an academic biomedical research center. This incubator offers low-cost,
      high-quality space and shared resources necessary for a molecular biology
      research. Because of proximity to NIH or other academic biomedical research
      center, the Company will have access to many highly trained scientists and
      technical personnel to staff the laboratory.




Projected
      major expenses for the wet laboratory are:


Year
                  1:$48,000
              
              for
                  rental of 800 sq. ft. wet lab in MD incubator ($4,000/month plus
                  utilities/phone/internet)$300,000
              
              for
                  staff salaries plus fringe (1 scientist and 2
                  technicians)$100,000
              
              for
                  disposable equipment and reagents ($33,000/lab person)$300,000
              
              for
                  equipment (one time expense)$100,000
              
              for
                  outsourced technical services (LC/MS/MS, immunoassay
                  development)Total
                  Year 1:
              
              $848,000





Year
                2:$50,400
            
            for
                rental of wet lab$315,000
            
            for
                staff salaries$105,000
            
            for
                supplies$300,000
            
            for
                outsource technology services (LC/MS/MS, immunoassay
                development)Total
                Year 2:
            
            $770,400




Total
      Costs for Laboratory Start Up and 2 Years of Operation = $1,618,400




21




**Results
      of Operations - Three Months Ended March 31, 2007 and 2006**




The
      Company is a development stage company and has not yet commenced
      revenue-generating operations. Comparative financial statements for the period
      ended March 31, 2006 reflect the results of operations of Lixte Biotechnology,
      Inc. the Company’s operating subsidiary, as it was the accounting acquirer in
      the reverse merger transaction.




General
      and Administrative Expenses .
      For the
      three months ended March 31, 2007, general and administrative expenses were
      $182,753, which included $8,917 for the vested portion of the fair value of
      stock options issued to a director and certain members of the Company’s
      Scientific Advisory Committee on June 30, 2006, as compared to $21,984 for
      the
      three months ended March 31, 2006. The significant components of general and
      administrative expenses to date consist primarily of legal and accounting fees,
      including costs associated with the registration of the common stock sold in
      the
      Company’s private placement in June and July 2006.




Depreciation .
      For the
      three months ended March 31, 2007 and 2006, depreciation expense was $148 and
      $115, respectively.




Research
      and Development Costs .
      For the
      three months ended March 31, 2007, research and development costs were $74,925,
      including $31,000 of stock-based expense related to a five-year stock option
      to
      purchase 100,000 shares of the Company’s common stock at $0.333 per share issued
      to Chem-Master International, Inc. on February 5, 2007 that was fully vested
      and
      non-forfeitable on the date of issuance. The Company did not have any research
      and development costs for the three months ended March 31, 2006.




Reverse
      Merger Costs .
      In
      conjunction with the reverse merger transaction completed on June 30, 2006,
      WestPark Capital, Inc. was paid a non-refundable cash fee of $5,000 on March
      21,
      2006, which was charged to operations during the three months ended March 31,
      2006.




Interest
      Income .
      For the
      three months ended March 31, 2007, interest income was $4,723. The Company
      did
      not have any interest income for the three months ended March 31,
      2006.




Estimated
      Liquidated Damages Under Registration Rights Agreement .
      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. 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 is required to pay
      each investor prorated liquidated damages equal to 1.0% of the amount raised.
      The liquidated damages are payable monthly in cash. 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.




In
      accordance with EITF 00-19-2, “Accounting for Registration Payment
      Arrangements”, on the date of the closing of the private placement, the Company
      believed it would meet the deadlines under the registration rights agreement
      with respect to filing a registration statement and having it declared effective
      by the SEC. 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
      timeframe. As a result, the Company accrued six months liquidated damages under
      the registration rights agreement aggregating approximately $74,000 as a current
      liability at December 31, 2006. No further registration penalty accrual was
      required at March 31, 2007. The registration statement on Form SB-2 was declared
      effective by the Securities and Exchange Commission on May 14, 2007. The Company
      will continue to review the status of the registration statement at each quarter
      end in the future and record further liquidated damages under the registration
      rights agreement as necessary.




22




Net
      Loss .
      For the
      three months ended March 31, 2007, the Company incurred a net loss of $253,103,
      as compared to a net loss of $27,099 for the three months ended March 31,
      2006.




**Liquidity
      and Capital Resources - March 31, 2007**




**Going
      Concern**




At
      March
      31, 2007, the Company had not yet commenced any revenue-generating operations
      and were therefore considered a “development stage company”. All activity
      through March 31, 2007 related to the Company’s formation, capital raising
      efforts and initial research and development activities. As such, the Company
      has yet to generate any cash flows from operations, and is essentially dependent
      on debt and equity funding from both related and unrelated parties to finance
      its operations. Prior to June 30 2006, the Company’s cash requirements were
      funded by advances from its founder, Dr. John Kovach, the Company’s Chief
      Executive Officer. On June 30, 2006, the Company completed an initial closing
      of
      its private placement, selling 1,973,869 shares of common stock at a price
      of
      $0.333 per share and receiving net proceeds of $522,939. On July 27, 2006,
      the
      Company completed a second closing of its private placement, selling 1,581,351
      shares of common stock at a price of $0.333 per share and receiving net proceeds
      of $446,433.




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




Based
      on
      the proceeds received from the private placement, the Company may not have
      sufficient resources to completely fund its planned operations for the next
      twelve months. The
      strain on the Company’s limited cash resources has been further exacerbated by
      the accrual of a registration penalty obligation under EITF 00-19-2 at March
      31,
      2007 and December 31, 2006 of $74,000 (reflecting the cash amount payable for
      the registration penalty through mid-May 2007, as described above at “Results of
      Operations - Three Months Ended March 31, 2007 and 2006 - Estimated Liquidated
      Damages Under Registration Rights Agreement”). If the Company does not maintain
      the effectiveness of its registration statement, the Company would be subject
      to
      a registration penalty at the rate of approximately $12,000 per 30-day period
      thereafter, continuing through July 2008. Since the Company only has cash of
      $536,616 and working capital of $338,192 (net of the $74,000 registration
      penalty obligation referred to above) at March 31, 2007, this short-term cash
      obligation and the uncertainty related to it could have a material adverse
      impact on the Company’s ability to fund its business plan and conduct
      operations.




The
      Company does not have sufficient resources to fully develop and commercialize
      any products that may arise from its research. Accordingly, the Company will
      need to raise additional funds in order to satisfy its future working capital
      requirements. In the short-term, in addition to the net proceeds from the
      private placement, the Company estimates that it will require additional funding
      of approximately $2,300,000. Additionally, the amount and timing of future
      cash
      requirements will depend on market acceptance of the Company’s products, if any,
      and the resources that the Company devotes to developing and supporting its
      products. The Company will need to fund these cash requirements from either
      one
      or a combination of additional debt and/or equity financings, mergers or
      acquisitions, or via the sale or license of certain of its assets.




23




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




Operating
      Activities .
      For the
      three months ended March 31, 2007, operating activities utilized cash of
      $142,752, as compared to utilizing cash of $64,786 for the three months ended
      March 31, 2006.




The
      Company had working capital of $338,192 at March 31, 2007, primarily as a result
      of the sale of the Company’s common stock pursuant to private placement in June
      and July 2006 that generated net proceeds of $969,372.




Investing
      Activities .
      For the
      three months ended March 31, 2007 and 2006, investing activities utilized net
      cash of $272 and $237, respectively, for the purchase of office
      equipment.




Financing
      Activities .
      There
      were no financing activities for the three months ended March 31, 2007. For
      the
      three months ended March 31, 2006, financing activities provided net cash of
      $70,480 from advances from stockholder.




**Principal
      Commitments**




At
      March
      31, 2007, the Company did not have any material commitments for capital
      expenditures. The Company’s principal commitments at March 31, 2007 consisted of
      the estimated liquidated damages payable under the registration rights agreement
      (see "Results of Operations—Three Months Ended March 31, 2007 and 2006" above)
      and the contractual obligations as summarized below.




Effective
      March 22, 2006, Lixte entered into a CRADA with the NINDS of the NIH. The CRADA
      is for a term of two years from the effective date and may be unilaterally
      terminated by either party by providing written notice within sixty days. The
      CRADA provides for the collaboration between the parties in the identification
      and evaluation of agents that target the Nuclear Receptor CoRepressor (N-CoR)
      pathway for glioma cell differentiation. The CRADA also provided that NINDS
      and
      Lixte will conduct research to determine if expression of N-CoR correlates
      with
      prognosis in glioma patients.




Pursuant
      to the CRADA, Lixte agreed to provide funds under the CRADA in the amount of
      $200,000 per year to fund two technical assistants for the technical,
      statistical and administrative support for the research activities, as well
      as
      to pay for supplies and travel expenses. The first installment of $200,000
      was
      due within 180 days of the effective date and was paid in full on July 6, 2006.
      The second installment of $200,000 is scheduled for payment in July
      2007.




On
      January 5, 2007, Lixte entered into a Services Agreement with The Free State
      of
      Bavaria (Germany) represented by the University of Regensburg (the “University”)
      pursuant to which Lixte retained the University to provide to it certain samples
      of primary cancer tissue and related biological fluids to be obtained from
      patients afflicted with specified types of cancer. The University will also
      provide certain information relating to such patients. Lixte will pay the
      University 72,000 Euros (approximately $99,700) in two installments of 36,000
      Euros (approximately $49,850). The first installment was paid on March 7, 2007,
      and the second installment will be paid within sixty days of the earlier of
      (i)
      January 5, 2008 or (ii) the University’s fulfillment of certain obligations
      relating to the delivery of materials.




24




On
      February 5, 2007, Lixte entered into a two-year agreement (the “Agreement”) with
      Chem-Master International, Inc. (“Chem-Master”) pursuant to which Lixte engaged
      Chem-Master to synthesize a compound designated as “LB-1”, and any other
      compound synthesized by Chem-Master pursuant to Lixte’s request, which have
      potential use in treating a disease, including, without limitation, cancers
      such
      as glioblastomas. Pursuant to the Agreement, Lixte agreed to reimburse
      Chem-Master for the cost of materials, labor, and expenses for other items
      used
      in the synthesis process, and also agreed to grant Chem-Master a five-year
      option to purchase 100,000 shares of the Company’s common stock at an exercise
      price of $0.333 per share.  T he
      fair
      value of this option, as calculated pursuant to the Black-Scholes option-pricing
      model, was determined to be $31,000 ($0.31 per share) using the following
      Black-Scholes input variables: stock price on date of grant - $0.333; exercise
      price - $0.333; expected life - 5 years; expected volatility - 150%; expected
      dividend yield - 0%; risk-free interest rate - 4.5%. The
      $31,000 fair value was charged to operations as research and development
      costs during the three months ended March 31, 2007, since the option was fully
      vested and non-forfeitable on the date of issuance.  Lixte has the right to
      terminate the Agreement at any time during the term of the Agreement upon 60
      days prior written notice.  On February 5, 2009, provided that the
      Agreement has not been terminated prior to such date, Lixte 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.




**Off-Balance
      Sheet Arrangements**




At
      March
      31, 2007, the Company did not have any transactions, obligations or
      relationships that could be considered off-balance sheet
      arrangements.




25









**ITEM
      3. CONTROLS AND PROCEDURES**




(a)
            
            Evaluation
                of Disclosure Controls and
                Procedures




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




As
      of
      March 31, 2007, the Company’s Chief Executive Officer and Chief Financial
      Officer (who is the same individual) evaluated the effectiveness of the design
      and operation of the Company’s disclosure controls and procedures. Based upon
      and as of the date of that evaluation, the Chief Executive Officer and Chief
      Financial Officer concluded that the Company’s disclosure controls and
      procedures are effective to ensure that the information required to be disclosed
      in the reports the Company files and submits under the Exchange Act is recorded,
      processed, summarized, and reported as and when required.




(b)
            
            Changes
                in Internal Controls Over Financial
                Reporting




There
      were no changes in the Company’s internal controls or in other factors that
      could have significantly affected those controls during the quarter ended March
      31, 2007.




26


**PART
      II. OTHER INFORMATION**




Item
      1.
      Legal Proceedings





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





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





On
      February 5, 2007, Lixte entered into a two-year agreement (the “Agreement”) with
      Chem-Master International, Inc. (“Chem-Master”) pursuant to which Lixte engaged
      Chem-Master to synthesize a compound designated as “LB-1”, and any other
      compound synthesized by Chem-Master pursuant to Lixte’s request, which have
      potential use in treating a disease, including, without limitation, cancers
      such
      as glioblastomas. Pursuant to the Agreement, Lixte agreed to reimburse
      Chem-Master for the cost of materials, labor, and expenses for other items
      used
      in the synthesis process, and also agreed to grant Chem-Master a five-year
      option to purchase 100,000 shares of the Company’s common stock at an exercise
      price of $0.333 per share. T he
      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), and was charged
      to operations as research and development costs during the three months ended
      March 31, 2007, since the option was fully vested and non-forfeitable on the
      date of issuance.  Lixte has the right to terminate the Agreement at any
      time during the term of the Agreement upon 60 days prior written notice. 
On February 5, 2009, provided that the Agreement has 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.




Item
      3.
      Defaults Upon Senior Securities





Not
      applicable.





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





Not
      applicable.





Item
      5.
      Other Information





Not
      applicable.





Item
      6.  Exhibits




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





27





**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 18, 2007
            By:
            /s/ John
              S.
              KovachJohn
              S. KovachChief
                Executive Officer and Chief Financial Officer
              (Principal
                financial and accounting
                officer)


28








INDEX
      TO
      EXHIBITS





Exhibit
                Number
              Description
                  of Document10.1
              Services
                  Agreement between Lixte Biotechnology, Inc. and Freestate of Bavaria
                  represented byUniversity
                  of Regensburg dated January 5, 2007, previously filed as an exhibit
                  to theCompany’s
                  Current Report on Form 8-K filed on January 11, 2007, and incorporated
                  herein byreference.10.2
              Agreement
                  between Lixte Biotechnology Holdings, Inc. and Chem-Master International,
                  Inc.dated
                  February 5, 2007, previously filed as an exhibit to the Company’s Current
                  Report on Form8-K
                  filed on February 9, 2007, and incorporated herein by
                  reference.31
              Certifications
                  (1)32
              Certification
                  Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
                  (1)





(1)
      Filed
      herewith.




29