**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
                  1934
  For
          the
          quarterly period ended September
          30, 2007


o
              TRANSITION
                  REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF
                  1934
  Commission
          file number: 000-51476
  **LIXTE
            BIOTECHNOLOGY HOLDINGS, INC.**
 (Exact
              name of small business issuer as specified in its
              charter)





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




**248
        Route 25A, No. 2**
 **East
        Setauket, New York 11733**


(Address
      of principal executive
      offices)




**(631)
        942-7959**
 (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
      October 31, 2007, the Company had 26,832,183 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**





**Page
                No.****PART
                I - FINANCIAL INFORMATION**Item
                1. Financial StatementsCondensed
                Consolidated Balance Sheets -September
                30, 2007 (Unaudited) and December 31, 2006 (Restated)
            
            4Condensed
                Consolidated Statements of Operations (Unaudited) -Three
                Months Ended September 30, 2007 and 2006, Nine Months Ended September
                30,
                2007 and 2006, and August 9, 2005 (Inception) to September 30, 2007
                (Cumulative)
            
            5Condensed
                Consolidated Statement of Changes in Stockholders’ Equity (Deficiency)
                (Unaudited) -August 9,
                2005 (Inception) to September 30, 2007
            
            6Condensed
                Consolidated Statements of Cash Flows (Unaudited) -Nine
                Months Ended September 30, 2007 and 2006, and August 9, 2005
                (Inception) to
              September
                30, 2007 (Cumulative)
            
            7Notes
                to Condensed Consolidated Financial Statements -September
                30, 2007 (Unaudited) and December 31, 2006 (Restated)
            
            9Item
                2. Management’s Discussion and Analysis or Plan of
                Operation
            
            20Item
                3. Controls and Procedures
            
            30**PART
                II - OTHER INFORMATION**Item
                1 Legal
                Proceedings
            
            31Item
                2 Unregistered
                Sales of Equity Securities and Use of Proceeds
            
            31Item
                3 Defaults
                Upon Senior Securities
            
            31Item
                4 Submission
                of Matters to a Vote of Security Holders
            
            32Item
                5 Other
                Information
            
            32Item
                6 Exhibits
            
            32SIGNATURES
            
            33




2


**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.





3


**LIXTE
      BIOTECHNOLOGY HOLDINGS, INC.**


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


**AND
      SUBSIDIARY**


(a
      development stage company)




**CONDENSED
      CONSOLIDATED BALANCE SHEETS**




**September
                30,**
              **2007**
              (Unaudited)
            
            **December
                31,**
              **2006**
              (Restated)ASSETSCurrent
                assets:Cash
                and cash equivalents
            
            $
            124,069
            
            $
            679,640Advances
                on research and development contract services
            
            
            124,963
            
            
            50,000Prepaid
                insurance
            
            
            22,828
            
            
            20,365Total
                current assets
            
            
            271,860
            
            
            750,005Office
                equipment**,**net of accumulated depreciation of $1,019 at
              September
                30, 2007 and $575 at December 31, 2006
            
            
            890
            
            
            1,062Total
                assets
            
            $
            272,750
            
            $
            751,067LIABILITIES
                AND STOCKHOLDERS’ EQUITYCurrent
                liabilities:Accounts
                payable and accrued expenses
            
            $
            37,931
            
            $
            31,786Liquidated
                damages payable under registration rights agreement
            
            
            74,000
            
            
            74,000Research
                and development contract liabilities
            
            
            38,335
            
            
            ---Due
                to stockholder
            
            
            92,717
            
            
            92,717Total
                current liabilities
            
            
            242,983
            
            
            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 -
              26,832,183
                shares at September 30, 2007 and 26,582,183 shares at
              December
                31, 2006
            
            
            2,683
            
            
            2,658Additional
                paid-in capital
            
            
            1,955,321
            
            
            1,128,114Deficit
                accumulated during the development stage
            
            
            (1,927,987
            )
            
            (578,208
            )30,017
            
            
            552,564Less
                receivable from sale of common stock
            
            
            (250
            )
            
            ---Total
                stockholders’ equity
            
            
            29,767
            
            
            552,564Total
                liabilities and stockholders’ equity
            
            $
            272,750
            
            $
            751,067





See
      accompanying notes to condensed consolidated financial statements.





4


**LIXTE
      BIOTECHNOLOGY HOLDINGS, INC.**


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


**AND
      SUBSIDIARY**


(a
      development stage company)




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




**Three
                Months Ended**
              **September****30,**
            
            **Nine
                Months Ended**
              **September 30,**
            
            **Period from**
              **August 9,**
              **2005**
              **(Inception)
                to**
              **September 30,
                2007****2007**
            
            **2006**
            
            **2007**
            
            **2006**
            
            **(Cumulative)**Revenues
            
            $
            ---
            
            $
            ---
            
            $
            ---
            
            $
            ---
            
            $
            ---Costs
                and expenses:General
                and administrative,
              including
                $773,356 and $8,917 of
              stock-based
                compensation during
              the
                three months ended September
              30,
                2007 and 2006, $791,064 and
              $88,483
                during the nine months
              ended
                September 30, 2007 and
              2006,
                respectively, and $888,464
              for
                the period from August 9, 2005
              (inception)
                to September 30, 2007
              (cumulative)
            
            
            853,075
            
            
            65,251
            
            
            1,109,061
            
            
            201,104
            
            
            1,424,492Depreciation
            
            
            148
            
            
            115
            
            
            444
            
            
            344
            
            
            1,019Research
                and development costs,
              including
                $4,918 of stock-based
              expense
                during the three months
              ended
                September 30, 2007,
              $35,918
                for the nine months ended
              September
                30, 2007 and the period
              from
                August 9, 2005 inception) to
              September
                30, 2007 (cumulative)
            
            
            68,593
            
            
            50,100
            
            
            249,443
            
            
            100,100
            
            
            399,543Reverse
                merger costs
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            50,000
            
            
            50,000Total
                costs and expenses
            
            
            921,816
            
            
            115,466
            
            
            1,358,948
            
            
            351,548
            
            
            1,875,054(921,816
            )
            
            (115,466
            )
            
            (1,358,948
            )
            
            (351,548
            )
            
            (1,875,054
            )Interest
                income
            
            
            862
            
            
            6,588
            
            
            9,169
            
            
            6,588
            
            
            21,067Liquidated
                damages under
              registration
                rights agreement
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            (74,000
            )Net
                loss
            
            $
            (920,954
            )
            $
            (108,878
            )
            $
            (1,349,779
            )
            $
            (344,960
            )
            $
            (1,927,987
            )Net
                loss per common share -
              basic
                and diluted
            
            $
            (0.03
            )
            $
            (0.00
            )
            $
            (0.05
            )
            $
            (0.02
            )Weighted
                   average number of
              common
                shares outstanding -
              basic
                and diluted
            
            
            26,612,403
            
            
            26,135,279
            
            
            26,592,256
            
            
            21,440,909





See
      accompanying notes to condensed consolidated financial statements.




5


**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 September 30, 2007**





**Common
                Stock**
            
            **Additional**
              **Paid-in**
            
            **Deficit**
              **Accumulated**
              **During**
              **the**
              **Development**
            
            **Receivable**
              **from**
              **Sale**
              **of**
              **Common**
            
            **Total**
              **Stockholders’**
              **Equity****Shares**
            
            **Amount**
            
            **Capital**
            
            **Stage**
            
            **Stock**
            
            **(Deficiency)**Balance,
                August 9, 2005
              (inception)
            
            
            —
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —Shares
                issued to founding
              stockholder
            
            
            19,021,786
            
            
            1,902
            
            
            (402
            )
            
            —
            
            
            —
            
            
            1,500Net
                loss for the period
              August
                9, 2005 (inception)
              to
                December 31, 2005
            
            
            —
            
            
            —
            
            
            —
            
            
            (16,124
            )
            
            —
            
            
            (16,124
            )Balance,
                December 31,
              2005
            
            
            19,021,786
            
            
            1,902
            
            
            (402
            )
            
            (16,124
            )
            
            —
            
            
            (14,624
            )Shares
                issued in connection
              with
                reverse merger
              transaction
            
            
            4,005,177
            
            
            401
            
            
            62,099
            
            
            —
            
            
            —
            
            
            62,500Shares
                issued in private
              placement,
                net of offering
              costs
                of $214,517
            
            
            3,555,220
            
            
            355
            
            
            969,017
            
            
            —
            
            
            —
            
            
            969,372Stock-based
                compensation
            
            
            —
            
            
            —
            
            
            97,400
            
            
            —
            
            
            
            
            
            97,400Net
                loss for the year
            
            
            —
            
            
            —
            
            
            —
            
            
            (562,084
            )
            
            —
            
            
            (562,084
            )Balance,
                December 31,
              2006
                (Restated)
            
            
            26,582,183
            
            
            2,658
            
            
            1,128,114
            
            
            (578,208
            )
            
            —
            
            
            552,564Stock-based
                compensation
            
            
            250,000
            
            
            25
            
            
            791,289
            
            
            —
            
            
            (250
            )
            
            791,064Stock-based
                research and
              development
                costs
            
            
            —
            
            
            —
            
            
            35,918
            
            
            —
            
            
            —
            
            
            35,918Net
                loss for the nine months
              ended
                September 30, 2007
            
            
            —
            
            
            —
            
            
            —
            
            
            (1,349,779
            )
            
            —
            
            
            (1,349,779
            )Balance,
                September 30,
              2007
                (Unaudited)
            
            
            26,832,183
            
            $
            2,683
            
            $
            1,955,321
            
            $
            (1,927,987
            )
            $
            (250
            )
            $
            29,767




See
      accompanying notes to condensed consolidated financial statements.





6


**LIXTE
      BIOTECHNOLOGY HOLDINGS, INC.**


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


**AND
      SUBSIDIARY**


(a
      development stage company)




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





**Nine
                Months Ended**
              **September
                30,**
            
            **Period from**
              **August 9,**
              **2005**
              **(Inception)
                to**
              **September
                30, 2007****2007**
            
            **2006**
            
            **(Cumulative)**Cash
                flows from operating activitiesNet
                loss
            
            $
            (1,349,779
            )
            $
            (344,960
            )
            $
            (1,927,987
            )Adjustments
                to reconcile net loss to net cash used in
              operating
                activities:Depreciation
            
            
            444
            
            
            344
            
            
            1,019Stock-based
                compensation
            
            
            791,064
            
            
            88,483
            
            
            888,464Stock-based
                research and development costs
            
            
            35,918
            
            
            ---
            
            
            35,918Changes
                in operating assets and liabilities:(Increase)
                decrease in -Advances
                on research and development contract services
            
            
            (74,963
            )
            
            (100,000
            )
            
            (124,963
            )Prepaid
                expenses
            
            
            (2,463
            )
            
            (27,552
            )
            
            (22,828
            )Increase
                (decrease) in -Accounts
                payable and accrued expenses
            
            
            6,145
            
            
            2,579
            
            
            37,931Research
                and development contract liabilities
            
            
            38,335
            
            
            ---
            
            
            38,335Liquidated
                damages payable under registration rights
              agreement
            
            
            ---
            
            
            ---
            
            
            74,000Net
                cash used in operating activities
            
            
            (555,299
            )
            
            (381,106
            )
            
            (1,000,111
            )Cash
                flows from investing activitiesPurchase
                of office equipment
            
            
            (272
            )
            
            (238
            )
            
            (1,909
            )Net
                cash used in investing activities
            
            
            (272
            )
            
            (238
            )
            
            (1,909
            )Cash
                flows from financing activitiesProceeds
                from sale of common stock to founder
            
            
            ---
            
            
            ---
            
            
            1,500Cash
                acquired in reverse merger transaction
            
            
            ---
            
            
            62,500
            
            
            62,500Gross
                proceeds from sale of common stock
            
            
            ---
            
            
            1,183,889
            
            
            1,183,889Payment
                of private placement offering costs
            
            
            ---
            
            
            (233,025
            )
            
            (214,517
            )Advances
                from stockholder
            
            
            ---
            
            
            86,771
            
            
            92,717Net
                cash provided by financing activities
            
            
            ---
            
            
            1,100,135
            
            
            1,126,089Net
                increase (decrease) in cash
            
            
            (555,571
            )
            
            718,791
            
            
            124,069Cash
                at beginning of period
            
            
            679,640
            
            
            4,946
            
            
            ---Cash
                at end of period
            
            $
            124,069
            
            $
            723,737
            
            $
            124,069





(continued)





7


**LIXTE
      BIOTECHNOLOGY HOLDINGS, INC.**


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


**AND
      SUBSIDIARY**


(a
      development stage company)




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





**Nine
                Months Ended**
              **September
                30,**
            
            **Period from**
              **August 9,**
              **2005**
              **(Inception)
                to**
              **September
                30, 2007****2007**
            
            **2006**
            
            **(Cumulative)**Supplemental
                disclosures of cash flow information:Cash
                paid for -Interest
            
            $
            —
            
            $
            —
            
            $
            —Income
                taxes
            
            $
            —
            
            $
            —
            
            $
            —Supplemental
                schedule of non-cash financing activities:Receivable
                from sale of common stock to consultant
            
            $
            250
            
            $
            —
            
            $
            250




See
      accompanying notes to condensed consolidated financial statements.





8


**LIXTE
      BIOTECHNOLOGY HOLDINGS, INC.**


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


**AND
      SUBSIDIARY**


(a
      development stage company)





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





**September
      30, 2007 (Unaudited) and December 31, 2006 (Restated)**





**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 periods ended June 30, 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
      September 30, 2007, for the three months and nine months ended September 30,
      2007 and 2006, and for the period from August 9, 2005 (Inception) to
      September 30, 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
      September 30, 2007 and the results of its operations for the three months and
      nine months ended September 30, 2007 and 2006, and for the period from
      August 9, 2005 (Inception) to September 30, 2007 (cumulative), and its cash
      flows for the nine months ended September 30, 2007 and 2006, and for the period
      from August 9, 2005 (Inception) to September 30, 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 (Restated) 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.




9


**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
      other 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 has not yet commenced any revenue-generating
      operations, does not have any cash flows from operations, and is dependent
      on
      debt and equity funding to finance its operations. The Company has selected
      December 31 as its fiscal year-end.




***Going
      Concern 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 generated 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
      September 30, 2007, the Company had not yet commenced any revenue-generating
      operations. All activity through September 30, 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.




10


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.




The
      Company does not currently have sufficient resources to fully fund its planned
      operations for the next twelve months. The strain on the Company’s limited cash
      resources has been further exacerbated by the registration penalty obligation
      of
      $74,000 (originally recorded at December 31, 2006 pursuant to EITF 00-19-2),
      reflecting the cash amount currently payable to the investors in the private
      placement for the registration penalty accrued 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 further 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 $124,069 and
      working capital of $28,877 (including the effect from the $74,000 registration
      penalty obligation referred to above) at September 30, 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. Based on the Company’s updated and revised operating budget, the
      Company estimates that it will require approximately $600,000 of additional
      funding through December 31, 2008. Thereafter, the Company currently estimates
      that it will require an additional $2,000,000 to fund future operations,
      including the possible establishment of a laboratory, depending on the
      availability of capital and various operating developments. 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 anticipates funding these
      cash requirements from debt or equity financings, mergers or acquisitions,
      and/or via the sale or license of its intellectual properties.




Current
      market conditions present uncertainty as to the Company’s ability to secure
      additional funds, as well as its ability to reach profitability. There can
      be no
      assurances that the Company will be able to secure additional financing, or
      obtain favorable terms on such financing if it is available, or as to its
      ability to achieve positive cash flow from operations. Continued negative cash
      flows and lack of liquidity create significant uncertainty about the Company’s
      ability to fully implement its operating plan and the Company may have to reduce
      the scope of its planned operations. If cash resources are insufficient to
      satisfy the Company’s liquidity requirements, the Company would be required to
      scale back or discontinue its 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". 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.
      Accordingly, the Company recognizes compensation cost for equity-based
      compensation for all new or modified grants issued after December 31, 2005.
      The
      Company did not have any modified grants subsequent to December 31,
      2005.




11


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




***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
      de-recognition, 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 September 30, 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 September 30, 2007, the Company has no accrued
      interest or penalties related to uncertain tax positions.




12


***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.  The objective of SFAS No.
      159 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.




Other
      than the foregoing, 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.




***Research
      and Development***




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




13


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




The
      funds paid to NINDS of the NIH, pursuant to the CRADA effective March 22,
      2006, represent an advance on research and development costs and therefore
      have
      future economic benefit. As such, such costs are being charged to expense when
      they are actually expended by the provider, which is, effectively, as they
      perform the research activities that they are contractually committed to
      provide. Absent information that would indicate that a different expensing
      schedule is more appropriate (such as, for example, from the achievement of
      performance milestones or the completion of contract work), such advances are
      being expensed over the contractual service term on a straight-line basis,
      which
      reflects a reasonable estimate of when the underlying research and development
      costs are being incurred. The Company’s $200,000 financial obligation due under
      the CRADA as of March 22, 2007, was paid on June 29, 2007, and is intended
      to
      fund ongoing research and development activities through June 2008.




***Patent
      Costs***




Due
      to the significant uncertainty associated with the successful development
      of one or more commercially viable products based on the Company's research
      efforts and any related patent applications, all patent costs are expensed
      as
      incurred. Patent costs were $19,500 and $5,000 for the three months ended
      September 30, 2007 and 2006, respectively, $66,092 and $33,064 for the nine
      months ended September 30, 2007 and 2006, respectively, and $132,769 for the
      period from August 9, 2005 (inception) to September 30, 2007 (cumulative).
      Patent costs are included in general and administrative expense in the Company's
      statement of operations.





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




***Share
      Exchange Agreement***




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




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




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




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




14


***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. 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 was required to pay
      each investor prorated liquidated damages equal to 1.0% of the amount raised
      per
      month, 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
      (Restated), the Company determined that the registration statement covering
      the
      shares sold in the private placement would not be declared effective within
      the
      requisite time frame. As a result, the Company has accrued six months liquidated
      damages under the registration rights agreement aggregating approximately
      $74,000 as a current liability at September 30, 2007 and December 31, 2006
      (Restated). No further registration penalty accrual was required at September
      30, 2007, as the Company’s 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. As of September 30, 2007, the Company had not
      yet
      paid the registration penalty to the investors.





15


**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 September 30, 2007 and December
      31, 2006 (Restated), 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.




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.
       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 is being charged to operations ratably
      from
      July 1, 2006 through June 30, 2008. During the year ended December 31, 2006
      (Restated), the three months ended September 30, 2007, and the nine months
      ended
      September 30, 2007, the Company recorded a charge to operations of $31,000,
      $5,167 and $15,500, 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.




16


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
      is
      being charged to operations ratably from July 1, 2006 through June 30, 2008.
      On
      December 31, 2006 (Restated), and September 30, 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) and $98,000 ($0.98 per share),
      respectively, which resulted in a charge to operations of $7,500 during the
      year
      ended December 31, 2006 (Restated), $12,316 during the three months ended
      September 30, 2007, and $19,691 during the nine months ended September 30,
      2007.




On
      June
      20, 2007, the Board of Directors of the Company approved the 2007 Stock
      Compensation Plan (the “2007 Plan”), which provides for the granting of awards,
      consisting of common stock options, stock appreciation rights, performance
      shares, or restricted shares of common stock, to employees and independent
      contractors, for up to 2,500,000 shares of the Company’s common stock, under
      terms and condition, as determined by the Company’s Board of Directors. On
      September 12, 2007, pursuant to the 2007 Plan, the Company granted to Dr.
      Stephen Carter, stock options to purchase an aggregate of 200,000 shares of
      common stock, exercisable for a period of five years from vesting date at $0.333
      per share, with one-half (100,000 shares) vesting annually on each of September
      12, 2008 and 2009. The fair value of these options, as calculated pursuant
      to
      the Black-Scholes option-pricing model, was determined to be $204,000 ($1.02
      per
      share), which is being charged to operations ratably from September 12, 2007
      through September 12, 2009. During the three months and the nine months ended
      September 30, 2007, the Company recorded a charge to operations of $5,016 with
      respect to these options.





On
      September 12, 2007, the Company entered into a consulting agreement with Gil
      Schwartzberg and granted to Mr. Schwartzberg stock options to purchase an
      aggregate of 1,000,000 shares of common stock, exercisable for a period of
      four
      years from vesting date at $1.00 per share, with one-half of the options
      (500,000 shares) vesting immediately and one-half (500,000 share) vesting on
      September 12, 2008. The fair value of these options, as calculated pursuant
      to
      the Black-Scholes option-pricing model, was determined to be $945,000 ($0.945
      per share), of which $465,000 was charged to operations on September 12, 2007,
      and the remaining $480,000 is being charged to operations ratably from September
      12, 2007 through September 12, 2008. During the three months and the nine months
      ended September 30, 2007, the Company recorded a charge to operations of
      $488,607 with respect to these options.





On
      September 12, 2007, the Company entered into a consulting agreement with Francis
      Johnson and granted to Professor Johnson stock options to purchase an aggregate
      of 300,000 shares of common stock, exercisable for a period of four years from
      vesting date at $0.333 per share, with one-third (100,000 shares) vesting
      annually on each of September 12, 2008, 2009 and 2010. The fair value of these
      options, as calculated pursuant to the Black-Scholes option-pricing model,
      was
      determined to be $300,000 ($1.00 per share), which is being charged to
      operations ratably from September 12, 2007 through September 12, 2010. During
      the three months and the nine months ended September 30, 2007, the Company
      recorded a charge to operations of $4,918, with respect to these
      options.




In
      accordance with EITF 96-18, options granted to committee members and outside
      consultants are valued each reporting period to determine the amount to be
      recorded as an expense in the respective period. 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 (Restated), 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 September 30, 2007, the fair value of the aforementioned stock options
      was calculated using the following Black-Scholes input variables: stock price
      on
      date of grant - $1.05; exercise price - $0.333 to $1.00; expected life - 3.75
      to
      6 years; expected volatility - 150%; expected dividend yield - 0%; risk-free
      interest rate - 5%.





17


**7.
       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 27 months, as amended, 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 was paid in full on June 29, 2007. The CRADA was
      extended to June 30, 2008 from March 2008 at no additional cost as the funds
      provided by the Company will support the collaboration at least until that
      date.





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
      agreed to pay the University 72,000 Euros in two equal installments. The first
      installment of 36,000 Euros ($48,902) was paid on March 7, 2007, and the second
      installment of 36,000 Euros (approximately $51,380 at September 30, 2007) 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. The fair value of this option, as calculated pursuant
      to the Black-Scholes option-pricing model, was determined to be $31,000 ($0.31
      per share) using the following Black-Scholes input variables: stock price on
      date of grant - $0.333; exercise price - $0.333; expected life - 5 years;
      expected volatility - 150%; expected dividend yield - 0%; risk-free interest
      rate - 4.5%. The $31,000 fair value was charged to operations as research
      and development costs during the nine months ended September 30, 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 sixty 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.





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





18


On
      September 20, 2007, the Company entered into a one-year consulting agreement
      (the “Agreement”) with Mirador Consulting, Inc. (“Mirador”), pursuant to which
      Mirador is to provide the Company with various financial services. Pursuant
      to
      the Agreement, Lixte agreed to pay Mirador $5,000 per month and also agreed
      to
      sell Mirador 250,000 shares of the Company’s restricted common stock for $250
      ($0.001 per share). The fair value of this transaction was determined to be
      in
      excess of the purchase price by $262,250 ($1.049 per share), reflecting the
      difference between the $0.001 purchase price and the $1.05 price per share
      as
      quoted on the OTC Bulletin Board, and was charged to operations as stock-based
      compensation during the three months and nine months ended September 30,
      2007.





On
      September 27, 2007, the Company entered into an agreement with Southern Research
      Institute (“Southern”), pursuant to which Southern agreed to conduct certain
      scientific studies. The studies are expected to be completed by November 1,
      2007
      at a total cost of $22,710.





19




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





**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.




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
      de-recognition, 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 September 30, 2007, no liability for unrecognized
      tax benefits was required to be recorded.





20


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 September 30, 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.





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.  The objective of SFAS No.
      159 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.




21


Other
      than the foregoing, 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.  Research and development
      expenses consist primarily of fees paid to consultants and outside service
      providers, and other expenses relating to the acquisition, design, development
      and testing of the Company's treatments and product
      candidates.




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




**Patent
      Costs**





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




**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.




**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.




22


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 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 the 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 the 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.





These
      patent applications 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
      the
      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 the NIH
      to
      all claims in these patents. The Company has received a draft of the proposed
      exclusive patent license agreement with the NIH. Under the proposed agreement,
      the Company will pay a non-creditable, non-refundable 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. The Company is attempting to finalize the
      agreement with the NIH Office of Technology Transfer by January 2008.





In
      February 2007, the Company also filed a new U.S. provisional patent application
      that does not fall under the CRADA. This application identifies a method of
      synthesis and documents activity against glioblastoma multiforme cell lines
      in
      vitro of a proprietary lead compound, LB-1, and a series of homologs of this
      compound. Additional patent applications were filed with new claims for homologs
      of LB-1 (July, 2007); for extension of the use of the treatments claimed for
      GBM
      to the treatments of two types of pediatric cancers, meduloblastoma and
      neuroblastoma (August, 2007); and for a new lead compound, LB-2.5, as
      representative of several novel agents distinct in pharmacological activity
      from
      LB-1 also possessing anti-GBM activity (October 1, 2007).





23


Accordingly,
      in the past nine months, the Company has filed five patent applications focused
      on the identification of two classes of drugs, members of which inhibit the
      growth of brain tumor cells and other types of cancers in model systems. The
      patents claim the identity, methods of synthesis, and use for anti-cancer
      treatment of lead compounds from each of the two classes. The compounds are
      proprietary to the Company and the use claims are filed jointly with NIH under
      the CRADA.




The
      Company expected and continues to expect that its products will derive directly
      from the intellectual property arising from its research activities. The
      development of lead compounds with different mechanisms of action that are
      both
      active against GBM cells was based upon insight as to potential tumor cell
      vulnerability derived from identification of the biomarker for GBM by the
      Company’s collaborators at NINDS, NIH and claimed in a joint patent application
      with NIH. The approach used to develop potentially effective drugs for GBM
      will
      continue to be the primary strategy of the Company to develop new therapies
      and
      potentially new diagnostic tests (based on biomarkers) for cancers other than
      GBM in the future, subject to the availability of the appropriate resources
      to
      support such activities.





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 - September
      30, 2007 - Going Concern” below).





**Primary
      Goal for the Next 12 Months**





Because
      of progress in identifying compounds that have anti-cancer activity against
      human brain tumor cells in the test tube and in animal models, the Company’s
      primary focus in the near-term will be to characterize of its two lead
      compounds, LB-1 and LB-2.5, to meet the requirements of the FDA for submitting
      an IND for a phase I clinical trial of one or both compounds. At the same time,
      the Company will evaluate the activity of its lead compounds against other
      common human cancers, first in the test tube, and then in animal models for
      compounds showing activity.




The
      Company will continue to develop preclinical data supporting the potential
      effectiveness of these 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. An abstract of the activity of
      LB-1 against human GBM cells in the test tube and growing in the mouse is being
      submitted to be considered for presentation at a national cancer meeting in
      spring 2008.





Over
      the
      next six months, the Company will assess the potential interest of two or three
      of the major pharmaceutical companies in participating in the development of
      its
      lead compounds in the future. 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 the NIH, by the Company alone via outsourcing all
      pre-clinical drug evaluations required by the FDA to a commercial CRO, and/or
      with a partner in the pharmaceutical industry capable of taking the drug(s)
      though the IND process and conducting clinical evaluations. The existing CRADA
      was extended to June 30, 2008 from March 2008 at no additional cost as the
      funds
      provided by the Company will support the collaboration at least until that
      date.





24


**Additional
      Activities for the Next 12 Months**





The
      Company will also evaluate the anti-cancer activity of its two lead compounds
      alone and in combination for activity against human GBMs in an animal (mouse)
      model. The lead drugs appear to be synergistic in their ability to inhibit
      the
      growth of GBMs, e.g., a combination of two drugs inhibits GBMs to a greater
      extent than would be expected from the sum of their inhibitory effects when
      used
      alone. These evaluations are being done at the NIH under protocols
      developed by NINDS and the Company. The CRADA specifies evaluation of drug
      regimens in animal models as one of the activities to be pursued by the Company
      and NINDS.





In
      addition, the Company will evaluate the effectiveness of LB-1 and LB-2.5 against
      tumors other that GBM in the test tube. Since both compounds affect processes
      that are disordered in cancer cells other than brain tumors, both drugs will
      be
      assessed for activity against a wide variety of common human cancers, including
      cancers of the lung, colon, breast, stomach and ovary. This screening will
      be
      done under contract with a CRO, and results are expected by mid-2008. If
      activity is found, the active drug(s) will be evaluated in mouse models of
      the
      appropriate cancer type analogous to the process being pursued for development
      of new treatments for GBM.





The
      Company will also continue to collect samples of human tumors and associated
      blood and urine samples through the University of Regensburg under the Company’s
      January 5, 2007 agreement with the Free State of Bavaria, Germany. The samples
      will be used in the future to apply technology to search for new biomarkers
      for
      cancers other than GBM. The present CRADA with NINDS is limited to the study
      of
      GBM.





**Plans
      Beyond the Next 12 Months**





The
      Company expects to participate in clinical trials of new therapies in
      partnership with an organization experienced in such undertakings. The
      partnering organization may be either a clinical branch of NIH or a
      pharmaceutical company with expertise in the conduct of clinical trials. The
      Company’s present position is to take one or more of its new therapies for the
      treatment of glioblastoma multiforme through pre-clinical evaluation as part
      of
      the CRADA with the NINDS of the NIH. After completing pre-clinical evaluation,
      the Company will consider partnering with the NIH to conduct a phase I
      trial or jointly with the NIH seek a third party, most probably a large
      pharmaceutical company to carry the new therapies into Phase I trials.
      After completion of Phase I trials, the Company, potentially in partnership
      with the NIH 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. However,
      in all cases of clinical trial participation, the Company will be subject to
      FDA
      regulation. These regulations are specific and form the basis for assessing
      the
      potential clinical benefit of new therapeutic regimens while safeguarding the
      health of patients participating in investigational studies. Even after a drug
      receives approval from the FDA for sale as a new treatment for a specific
      disease indication, the sponsors of the drug are subject to reporting
      potentially adverse effects of a new regimen to the FDA.




25


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





The
      Company had planned to begin its own analyses of tumor types other than GBM
      for
      new biomarkers by late 2008. However, in order to do this, the Company would
      need to establish and operate an independent laboratory. The creation and
      operation of such a laboratory for two years is estimated to cost approximately
      $2,000,000. Accordingly, the Company is deferring plans to open and staff an
      independent laboratory until the full intellectual property value of its initial
      lead compounds for treatment of brain tumors is determined.




**Results
      of Operations**




The
      Company is a development stage company and has not yet commenced
      revenue-generating operations.





**Three
      Months Ended September 30, 2007 and 2006**





General
      and Administrative Expenses .
      For the
      three months ended September 30, 2007, general and administrative expenses
      were
      $853,075, which included $773,356 for the vested portion of the fair value
      of
      stock options issued and the fair value of common stock sold to a consultant,
      as
      compared to $65,251 for the three months ended September 30, 2006, which
      included $8,917 for the vested portion of the fair value of stock options
      issued. Included in general and administrative expenses for the three months
      ended September 30, 2007 and 2006 was $19,500 and $5,000 of patent costs,
      respectively.





The
      significant components of general and administrative expenses to date consist
      primarily of legal fees (including patent costs) 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 September 30, 2007 and 2006, depreciation expense was $148
      and $115, respectively.




Research
      and Development Costs .
      For the
      three months ended September 30, 2007, research and development costs were
      $68,593, which included $4,918 for the vested portion of the fair value of
      stock
      options issued, as
      compared to $50,100 for the three months ended September 30, 2006.




Interest
      Income .
      For the
      three months ended September 30, 2007, interest income was $862, as compared
      to
      $6,588 for the three months ended September 30, 2006.





Net
      Loss .
      For the
      three months ended September 30, 2007, the Company incurred a net loss of
      $920,954, as compared to a net loss of $108,878 for the three months ended
      September 30, 2006.





**Nine
      Months Ended September 30, 2007 and 2006**





General
      and Administrative Expenses .
      For the
      nine months ended September 30, 2007, general and administrative expenses were
      $1,109,061, which included $791,064 for the vested portion of the fair value
      of
      stock options issued and the fair value of common stock sold to a consultant,
      as
      compared to $201,104 for the nine months ended September 30, 2006, which
      included $88,483 for the vested portion of the fair value of stock options
      issued. Included in general and administrative expenses for the nine months
      ended September 30, 2007 and 2006 was $66,092 and $33,064 of patent costs,
      respectively.





26


The
      significant components of general and administrative expenses to date consist
      primarily of legal fees (including patent costs) 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
      nine months ended September 30, 2007 and 2006, depreciation expense was $444
      and
      $344, respectively.




Research
      and Development Costs .
      For the
      nine months ended September 30, 2007, research and development costs were
      $249,443, including $35,918 for the vested portion of the fair value of stock
      options issued to a consultant and the fair value of 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. Research and development costs were
      $100,100 for the nine months ended September 30, 2006.




Reverse
      Merger Costs .
      In
      conjunction with the reverse merger transaction completed on June 30, 2006,
      WestPark Capital, Inc. was paid an aggregate cash fee of $50,000, which was
      charged to operations during the nine months ended September 30,
      2006.




Interest
      Income .
      For the
      nine months ended September 30, 2007, interest income was $9,169, as compared
      to
      $6,588 for the nine months ended September 30, 2006.




Net
      Loss .
      For the
      nine months ended September 30, 2007, the Company incurred a net loss of
      $1,349,779, as compared to a net loss of $344,960 for the nine months ended
      September 30, 2006.




**Liquidity
      and Capital Resources - September 30, 2007**




**Going
      Concern**




At
      September 30, 2007, the Company had not yet commenced any revenue-generating
      operations and was therefore considered a “development stage company”. All
      activity through September 30, 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.




The
      Company does not currently have sufficient resources to fully fund its planned
      operations for the next nine months. The strain on the Company’s limited cash
      resources has been further exacerbated by the registration penalty obligation
      of
      $74,000 (originally recorded at December 31, 2006 pursuant to EITF 00-19-2),
      reflecting the cash amount currently payable to the investors in the private
      placement for the registration penalty accrued through mid-May 2007. If the
      Company does not maintain the effectiveness of its registration statement,
      the
      Company would be subject to a further 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 $124,069 and working capital of $28,877
      (including the effect from the $74,000 registration penalty obligation referred
      to above) at September 30, 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.




27


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 September 30, 2007 and December
      31, 2006 (Restated), stockholder advances totaled $92,717. The Company currently
      does not anticipate repaying such advances until sufficient funds are available
      to fund the Company’s business plan.





The
      Company does not have sufficient resources to fully develop and commercialize
      any products that may arise from its research. Accordingly, the Company will
      need to raise additional funds in order to satisfy its future working capital
      requirements. Based on the Company’s updated and revised operating budget, the
      Company estimates that it will require approximately $600,000 of additional
      funding through December 31, 2008. Thereafter, the Company currently estimates
      that it will require an additional $2,000,000 to fund future operations,
      including the possible establishment of a laboratory, depending on the
      availability of capital and various operating developments. 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 anticipates funding these
      cash requirements from debt or equity financings, mergers or acquisitions,
      and/or via the sale or license of its intellectual properties.




Current
      market conditions present uncertainty as to the Company’s ability to secure
      additional funds, as well as its ability to reach profitability. There can
      be no
      assurances that the Company will be able to secure additional financing, or
      obtain favorable terms on such financing if it is available, or as to its
      ability to achieve positive cash flow from operations. Continued negative cash
      flows and lack of liquidity create significant uncertainty about the Company’s
      ability to fully implement its operating plan and the Company may have to reduce
      the scope of its planned operations. If cash resources are insufficient to
      satisfy the Company’s liquidity requirements, the Company would be required to
      scale back or discontinue its 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
      nine months ended September 30, 2007, operating activities utilized cash of
      $555,299, as compared to utilizing cash of $381,106 for the nine months ended
      September 30, 2006.




The
      Company had working capital of $28,877 at September 30, 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
      nine months ended September 30, 2007 and 2006, investing activities utilized
      net
      cash of $272 and $238, respectively, for the purchase of office
      equipment.




Financing
      Activities .
      There
      were no financing activities for the nine months ended September 30, 2007.
      For
      the nine months ended September 30, 2006, financing activities provided net
      cash
      of $1,100,135, consisting of the gross proceeds from the sale of common stock
      of
      $1,183,889, the cash acquired in the reverse merger transaction of $62,500,
      and
      advances from stockholder of $86,771, reduced by the payment of private
      placement offering costs of $233,025.





**Principal
      Commitments**




At
      September 30, 2007, the Company did not have any material commitments for
      capital expenditures. The Company had paid its second and final installment
      due
      under the CRADA of $200,000 on June 29, 2007. The Company’s principal
      commitments at September 30, 2007 consisted of the estimated liquidated damages
      payable under the registration rights agreement of $74,000 and the contractual
      obligations as summarized below.




28


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 agreed to pay
      the
      University 72,000 Euros in two equal installments. The first installment of
      36,000 Euros ($48,902) was paid on March 7, 2007, and the second installment
      of
      36,000 Euros (approximately $51,380 at September 30, 2007) 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. Lixte has the right to terminate the Agreement at
      any
      time during the term of the Agreement upon sixty 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.




On
      September 20, 2007, the Company entered into a one-year consulting agreement
      (the “Agreement”) with Mirador Consulting, Inc. (“Mirador”), pursuant to which
      Mirador is to provide the Company with various financial services. Pursuant
      to
      the Agreement, Lixte agreed to pay Mirador $5,000 per month and also agreed
      to
      sell Mirador 250,000 shares of the Company’s restricted common stock for $250
      ($0.001 per share).





**Off-Balance
      Sheet Arrangements**




At
      September 30, 2007, the Company did not have any transactions, obligations
      or
      relationships that could be considered off-balance sheet
      arrangements.




29


**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
      September 30, 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 control over financial reporting or in
      other factors that materially affect, or are reasonably likely to materially
      affect, those controls subsequent to the date of the Company’s most recent
      evaluation.





30


**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
      June
      20, 2007, the Board of Directors of the Company approved the 2007 Stock
      Compensation Plan (the “2007 Plan”), which provides for the granting of awards,
      consisting of common stock options, stock appreciation rights, performance
      shares, or restricted shares of common stock, to employees and independent
      contractors, for up to 2,500,000 shares of the Company’s common stock, under
      terms and condition, as determined by the Company’s Board of Directors. On
      September 12, 2007, pursuant to the 2007 Plan, the Company granted to Dr.
      Stephen Carter, stock options to purchase an aggregate of 200,000 shares of
      common stock, exercisable for a period of five years from vesting date at $0.333
      per share, with one-half (100,000 shares) vesting annually on each of September
      12, 2008 and 2009. The fair value of these options, as calculated pursuant
      to
      the Black-Scholes option-pricing model, was determined to be $204,000 ($1.02
      per
      share), which is being charged to operations ratably from September 12, 2007
      through September 12, 2009. During the three months ended September 30, 2007,
      the Company recorded a charge to operations of $5,016 with respect to these
      options.





On
      September 12, 2007, the Company entered into a consulting agreement with Gil
      Schwartzberg and granted to Mr. Schwartzberg stock options to purchase an
      aggregate of 1,000,000 shares of common stock, exercisable for a period of
      four
      years from vesting date at $1.00 per share, with one-half of the options
      (500,000 shares) vesting immediately and one-half (500,000 share) vesting on
      September 12, 2008. The fair value of these options, as calculated pursuant
      to
      the Black-Scholes option-pricing model, was determined to be $945,000 ($0.945
      per share), of which $465,000 was charged to operations on September 12, 2007,
      and the remaining $480,000 is being charged to operations ratably from September
      12, 2007 through September 12, 2008. During the three months ended September
      30,
      2007, the Company recorded a charge to operations of $488,607 with respect
      to
      these options.





On
      September 12, 2007, the Company entered into a consulting agreement with Francis
      Johnson and granted to Professor Johnson stock options to purchase an aggregate
      of 300,000 shares of common stock, exercisable for a period of four years from
      vesting date at $0.333 per share, with one-third (100,000 shares) vesting
      annually on each of September 12, 2008, 2009 and 2010. The fair value of these
      options, as calculated pursuant to the Black-Scholes option-pricing model,
      was
      determined to be $300,000 ($1.00 per share), which is being charged to
      operations ratably from September 12, 2007 through September 12, 2010. During
      the three months ended September 30, 2007, the Company recorded a charge to
      operations of $4,918, with respect to these options.




On
      September 20, 2007, the Company entered into a one-year consulting agreement
      (the “Agreement”) with Mirador Consulting, Inc. (“Mirador”), pursuant to which
      Mirador is to provide the Company with various financial services. Pursuant
      to
      the Agreement, Lixte agreed to pay Mirador $5,000 per month and also agreed
      to
      sell Mirador 250,000 shares of the Company’s restricted common stock for $250
      ($0.001 per share). The fair value of this transaction was determined to be
      in
      excess of the purchase price by $262,250 ($1.049 per share), reflecting the
      difference between the $0.001 purchase price and the $1.05 price per share
      as
      quoted on the OTC Bulletin Board, and was charged to operations as stock-based
      compensation during the three months ended September 30, 2007.





Item
      3.
      Defaults Upon Senior Securities





Not
      applicable.




31


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.





32


**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: 
                November 13, 2007
            By:
            /s/ JOHN
              S.
              KOVACHJohn
                S. KovachChief
              Executive
              Officer and Chief Financial Officer(Principal
                financial and accounting officer)




33


INDEX
      TO
      EXHIBITS





Exhibit
              Number
            
            Description
                of Document10.1
            
            Services
                Agreement between Lixte Biotechnology, Inc. and Freestate of Bavaria
                represented by University
                of Regensburg dated January 5, 2007, previously filed as an exhibit
                to the
                Company’s
                Current Report on Form 8-K filed on January 11, 2007, and incorporated
                herein by reference.10.2
            
            Agreement
                between Lixte Biotechnology Holdings, Inc. and Chem-Master International,
                Inc. dated
                February 5, 2007, previously filed as an exhibit to the Company’s Current
                Report on Form 8-K
                filed on February 9, 2007, and incorporated herein by
                reference.10.3
            
            2007
                Stock Compensation Plan adopted by the Company’s Board of Directors on
                June 20, 2007, previously filed as an exhibit to the Company’s Quarterly
                Report on Form 10-QSB for the Quarterly Period Ended June 30, 2007,
                and
                incorporated herein by reference.10.4
            
            Stock
                Option Agreement between Lixte Biotechnology Holdings, Inc. and Stephen
                K.
                Carter dated September 12, 2007. (1)10.5
            
            Stock
                Option Agreement between Lixte Biotechnology Holdings, Inc. and Francis
                Johnson dated September 12, 2007. (1)10.6
            
            Stock
                Option Agreement between Lixte Biotechnology Holdings, Inc. and Gil
                Schwartzbergdated
                September 12, 2007. (1)10.7
            
            Consulting
                Agreement between Lixte Biotechnology Holdings, Inc. and Gil Schwartzberg
                dated September 12, 2007. (1)10.8
            
            Consulting
                Agreement between Lixte Biotechnology Holdings, Inc. and Mirador
                Consulting, Inc. dated September 20, 2007. (1)10.9
            
            Consulting
              Agreement
              between Lixte Biotechnology Holdings, Inc. and Francis Johnson dated
              September 12, 2007. (1)31
            
            Certifications
                Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
                (1)32
            
            Certifications
                Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
                (1)




(1)
            Filed
                herewith.





34