**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-QSB**




x
            QUARTERLY
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934For
                the quarterly period endedJune
                30, 2007o
            TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF
                1934Commission
                file number: 000-51476





**LIXTE
                BIOTECHNOLOGY HOLDINGS, INC.**(Exact
                name of small business 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
      July 31, 2007, the Company had 26,582,183 shares of common stock, $0.0001 par
      value, issued and outstanding.




Transitional
      Small Business Disclosure Format:  Yes o No x




Documents
      incorporated by reference: None








**LIXTE
      BIOTECHNOLOGY HOLDINGS, INC.**


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


**INDEX**







**Page
                No.****PART
                I - FINANCIAL INFORMATION**Item
                1. Financial StatementsCondensed
                Consolidated Balance Sheets -June
                30, 2007 (Unaudited) and December 31, 2006 (Restated)
            1Condensed
                Consolidated Statements of Operations (Unaudited) -Three
                Months Ended June 30, 2007 and 2006, Six Months Ended June 30, 2007
                and
                2006,
              and
                August 9, 2005 (Inception) to June 30, 2007 (Cumulative)
            2Condensed
                Consolidated Statement of Changes in Stockholders’ Equity (Deficiency)
                (Unaudited) -August 9,
                2005 (Inception) to June 30, 2007
            3Condensed
                Consolidated Statements of Cash Flows (Unaudited) -Six
                Months Ended June 30, 2007 and 2006, and August 9, 2005 (Inception)
                to June 30, 2007 (Cumulative)
            4-5Notes
                to Condensed Consolidated Financial Statements -June
                30, 2007 (Unaudited) and December 31, 2006 (Restated)
            6Item
                2. Management’s Discussion and Analysis or Plan of
                Operation
            13Item
                3. Controls and Procedures
            21




**PART
                II - OTHER INFORMATION**Item
                1
            
            Legal
                Proceedings
            22Item
                2
            
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            22Item
                3
            
            Defaults
                Upon Senior Securities
            22Item
                4
            
            Submission
                of Matters to a Vote of Security Holders
            22Item
                5
            
            Other
                Information
            22Item
                6
            
            Exhibits
            22SIGNATURES
            
            24








**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.










**LIXTE
      BIOTECHNOLOGY HOLDINGS, INC.**


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


**AND
      SUBSIDIARY**


(a
      development stage company)




**CONDENSED
      CONSOLIDATED BALANCE SHEETS**




**June
                30,**
              **2007**
              (Unaudited)
            
            **December
                31,**
              **2006**
              (Restated)ASSETSCurrent
                assets:Cash
                and cash equivalents
            
            $
            194,671
            
            $
            679,640Advances
                on research and development contract services
            
            
            174,925
            
            
            50,000Prepaid
                insurance
            
            
            5,990
            
            
            20,365Total
                current assets
            
            
            375,586
            
            
            750,005Office
                equipment**,**net of accumulated depreciation of $871 at June 30, 2007and
                $575 at December 31, 2006
            
            
            1,038
            
            
            1,062Total
                assets
            
            $
            376,624
            
            $
            751,067LIABILITIES
                AND STOCKHOLDERS’ EQUITYCurrent
                liabilities:Accounts
                payable and accrued expenses
            
            $
            11,587
            
            $
            31,786Liquidated
                damages payable under registration rights agreement
            
            
            74,000
            
            
            74,000Research
                and development contract liabilities
            
            
            25,873
            
            
            ---Due
                to stockholder
            
            
            92,717
            
            
            92,717Total
                current liabilities
            
            
            204,177
            
            
            198,503Commitments
                and contingenciesStockholders’
                equity:Preferred
                stock, $0.0001 par value;
              authorized
                - 10,000,000 shares; issued - none
            
            
            —
            
            
            —Common
                stock, $0.0001 par value;
              authorized
                - 100,000,000 shares; issued and outstanding - 26,582,183
                shares
            
            
            2,658
            
            
            2,658Additional
                paid-in capital
            
            
            1,176,822
            
            
            1,128,114Deficit
                accumulated during the development stage
            
            
            (1,007,033
            )
            
            (578,208
            )Total
                stockholders’ equity
            
            
            172,447
            
            
            552,564Total
                liabilities and stockholders’ equity
            
            $
            376,624
            
            $
            751,067





See
      accompanying notes to condensed consolidated financial
      statements.


1


**LIXTE
      BIOTECHNOLOGY HOLDINGS, INC.**


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


**AND
      SUBSIDIARY**


(a
      development stage company)




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




**Three
                Months Ended June 30,**
            
            
            **Six
                Months Ended**
              **June 30,**
            
            
            **Period from**
              **August 9,**
              **2005**
              **(Inception)
                to**
              **June 30,
                2007****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**
            
            
            **(Cumulative)**Revenues
            
            $
            ---
            
            $
            ---
            
            $
            —
            
            $
            —
            
            $
            —Costs
                and expenses:General
                and administrative, including $8,792 and $79,566 of stock-based
                compensation during the three months ended June 30, 2007 and 2006,
                $17,708
                and $79,566 during the six months ended June 30, 2007 and 2006,
                respectively, and $115,108 for the period from August 9, 2005 (inception)
                to June 30, 2007 (cumulative)
            
            
            104,233
            
            
            113,869
            
            
            255,986
            
            
            135,853
            
            
            571,417Depreciation
            
            
            148
            
            
            114
            
            
            296
            
            
            229
            
            
            871Research
                and development costs, including $31,000 of stock-based expense during
                the
                six months ended June 30, 2007 and the period from August 9, 2005
                inception) to June 30, 2007 (cumulative)
            
            
            74,925
            
            
            50,000
            
            
            180,850
            
            
            50,000
            
            
            330,950Reverse
                merger costs
            
            
            ---
            
            
            45,000
            
            
            ---
            
            
            50,000
            
            
            50,000Total
                costs and expenses
            
            
            179,306
            
            
            208,983
            
            
            437,132
            
            
            236,082
            
            
            953,238(179,306
            )
            
            (208,983
            )
            
            (437,132
            )
            
            (236,082
            )
            
            (953,238
            )Interest
                income
            
            
            3,584
            
            
            ---
            
            
            8,307
            
            
            —
            
            
            20,205Liquidated
                damages under registration rightsagreement
            
            
            ---
            
            
            ---
            
            
            ---
            
            
            —
            
            
            (74,000
            )Net
                loss
            
            $
            (175,722
            )
            $
            (208,983
            )
            $
            (428,825
            )
            $
            (236,082
            )
            $
            (1,007,033
            )Net
                loss per common share - basic and diluted
            
            $
            (0.01
            )
            $
            (0.01
            )
            $
            (0.02
            )
            $
            (0.01
            )Weighted
                average number of common shares outstanding - basic and
                diluted
            
            
            26,582,183
            
            
            19,087,490
            
            
            26,582,183
            
            
            19,054,819





See
      accompanying notes to condensed consolidated financial
      statements.


2





**LIXTE
      BIOTECHNOLOGY HOLDINGS, INC.**


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


**AND
      SUBSIDIARY**


(a
      development stage company)




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





**Period
      from August 9, 2005 (Inception) to June 30, 2007**


**Common
                Stock**
            
            **Additional**
              **Paid-in**
            
            **Deficit**
              **Accumulated**
              **During
                the****Development**
            
            **Total**
              **Stockholders’****Equity****Shares**
            
            **Amount**
            
            **Capital**
            
            **Stage**
            
            **(Deficiency)**Balance,
                August 9, 2005 (inception)
            
            
            —
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —Shares
                issued to founding stockholder
            
            
            19,021,786
            
            
            1,902
            
            
            (402
            )
            
            —
            
            
            1,500Net
                loss
            
            
            —
            
            
            —
            
            
            —
            
            
            (16,124
            )
            
            (16,124
            )Balance,
                December 31, 2005
            
            
            19,021,786
            
            
            1,902
            
            
            (402
            )
            
            (16,124
            )
            
            (14,624
            )Shares
                issued in connection with reversemerger
                transaction
            
            
            4,005,177
            
            
            401
            
            
            62,099
            
            
            —
            
            
            62,500Shares
                issued in private placement, net ofoffering
                costs of $214,517
            
            
            3,555,220
            
            
            355
            
            
            969,017
            
            
            —
            
            
            969,372Stock-based
                compensation
            
            
            —
            
            
            —
            
            
            97,400
            
            
            —
            
            
            97,400Net
                loss
            
            
            —
            
            
            —
            
            
            —
            
            
            (562,084
            )
            
            (562,084
            )Balance,
                December 31, 2006 (Restated)
            
            
            26,582,183
            
            
            2,658
            
            
            1,128,114
            
            
            (578,208
            )
            
            552,564Stock-based
                compensation
            
            
            —
            
            
            —
            
            
            17,708
            
            
            —
            
            
            17,708Stock-based
                research and development costs
            
            
            —
            
            
            —
            
            
            31,000
            
            
            —
            
            
            31,000Net
                loss
            
            
            —
            
            
            —
            
            
            —
            
            
            (428,825
            )
            
            (428,825
            )Balance,
                June 30, 2007 (Unaudited)
            
            
            26,582,183
            
            $
            2,658
            
            $
            1,176,822
            
            $
            (1,007,033
            )
            $
            172,447







See
      accompanying notes to condensed consolidated financial
      statements.


3


**LIXTE
      BIOTECHNOLOGY HOLDINGS, INC.**


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


**AND
      SUBSIDIARY**


(a
      development stage company)




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





**Six
                Months Ended**
              **June
                30,**
            
            **Period from**
              **August 9,**
              **2005**
              **(Inception)
                to**
              **June
                30, 2007****2007**
            
            **2006**
            
            **(Cumulative)**Cash
                flows from operating activitiesNet
                loss
            
            $
            (428,825
            )
            $
            (236,082
            )
            $
            (1,007,033
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Depreciation
            
            
            296
            
            
            229
            
            
            871Stock-based
                compensation
            
            
            17,708
            
            
            79,566
            
            
            115,108Stock-based
                research and development costs
            
            
            31,000
            
            
            ---
            
            
            31,000Changes
                in operating assets and liabilities:(Increase)
                decrease in -Advances
                on research and development contract services
            
            
            (124,925
            )
            
            (150,000
            )
            
            (174,925
            )Prepaid
                expenses
            
            
            14,375
            
            
            ---
            
            
            (5,990
            )Increase
                (decrease) in -Accounts
                payable and accrued expenses
            
            
            (20,199
            )
            
            15,958
            
            
            11,587Research
                and development contract liabilities
            
            
            25,873
            
            
            197,000
            
            
            25,873Liquidated
                damages payable under registration rights agreement
            
            
            ---
            
            
            ---
            
            
            74,000Net
                cash used in operating activities
            
            
            (484,697
            )
            
            (93,329
            )
            
            (929,509
            )Cash
                flows from investing activitiesPurchase
                of office equipment
            
            
            (272
            )
            
            (237
            )
            
            (1,909
            )Net
                cash used in investing activities
            
            
            (272
            )
            
            (237
            )
            
            (1,909
            )Cash
                flows from financing activitiesProceeds
                from sale of common stock to founder
            
            
            ---
            
            
            ---
            
            
            1,500Cash
                acquired in reverse merger transaction
            
            
            ---
            
            
            62,500
            
            
            62,500Gross
                proceeds from sale of common stock
            
            
            ---
            
            
            657,299
            
            
            1,183,889Payment
                of private placement offering costs
            
            
            ---
            
            
            (134,360
            )
            
            (214,517
            )Advances
                from stockholder
            
            
            ---
            
            
            86,771
            
            
            92,717Net
                cash provided by financing activities
            
            
            ---
            
            
            672,210
            
            
            1,126,089Net
                increase (decrease) in cash
            
            
            (484,969
            )
            
            578,644
            
            
            194,671Cash
                at beginning of period
            
            
            679,640
            
            
            4,946
            
            
            ---Cash
                at end of period
            
            $
            194,671
            
            $
            583,590
            
            $
            194,671





(continued)


4





**LIXTE
      BIOTECHNOLOGY HOLDINGS, INC.**


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


**AND
      SUBSIDIARY**


(a
      development stage company)




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





**Six
                Months Ended**
              **June
                30,**
            
            **Period from**
              **August 9,**
              **2005**
              **(Inception)
                to**
              **June
                30, 2007****2007**
            
            **2006**
            
            **(Cumulative)**Supplemental
                disclosures of cash flow information:Cash
                paid for -Interest
            
            $
            —
            
            $
            —
            
            $
            —Income
                taxes
            
            $
            —
            
            $
            —
            
            $
            —






See
      accompanying notes to condensed consolidated financial
      statements.


5


**LIXTE
      BIOTECHNOLOGY HOLDINGS, INC.**


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


**AND
      SUBSIDIARY**


(a
      development stage company)





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





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




**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.


6




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




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




The
      Company’s financial statements have been presented on the basis that it is a
      going concern, which contemplates the realization of assets and satisfaction
      of
      liabilities in the normal course of business. The Company is in the development
      stage and has not 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
      June
      30, 2007, the Company had not yet commenced any revenue-generating operations.
      All activity through June 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.




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 $194,671 and
      working capital of $171,409 (including the effect from the $74,000 registration
      penalty obligation referred to above) at June 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 revised
      operating budget, through December 31, 2008, the Company estimates that it
      will
      require approximately $1,500,000 of additional funding. The Company estimates
      that it will require an additional $3,500,000 to fund operations (including
      laboratory operations) in 2009 and 2010. 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
      certain of its assets.




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




7




***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.




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




***Adoption
      of New Accounting Policies***





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




Effective
      January 1, 2007, the Company adopted FASB Interpretation No. 48, “Accounting for
      Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109,
      Accounting for Income Taxes” (“FIN 48”). FIN 48 addresses the determination of
      whether tax benefits claimed or expected to be claimed on a tax return should
      be
      recorded in the financial statements. Under FIN 48, the Company may recognize
      the tax benefit from an uncertain tax position only if it is more likely than
      not that the tax position will be sustained on examination by the taxing
      authorities, based on the technical merits of the position. The tax benefits
      recognized in the financial statements from such a position should be measured
      based on the largest benefit that has a greater than fifty percent likelihood
      of
      being realized upon ultimate settlement. FIN 48 also provides guidance on
      derecognition, classification, interest and penalties on income taxes,
      accounting in interim periods and requires increased disclosures. The adoption
      of the provisions of FIN 48 did not have a material effect on the Company’s
      financial statements. As of June 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 June 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.


8




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.




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. 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 March 2008.




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




***Share
      Exchange Agreement***




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




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




9




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




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




***Private
      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 June 30, 2007 and December 31, 2006
      (Restated). No further registration penalty accrual was required at June 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 June 30, 2007, the Company had not yet
      paid
      the registration penalty to the investors.




***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 June 30, 2007, and the six months ended
      June
      30, 2007, the Company recorded a charge to operations of $31,000, $5,167 and
      $10,333, respectively, with respect to these options.





10




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




On
      June
      30, 2006, effective with the closing of the Exchange, the Company granted to
      certain members of its Scientific Advisory Committee stock options to purchase
      an aggregate of 100,000 shares of common stock exercisable for a period of
      five
      years at $0.333 per share, with one-half of the options vesting annually on
      each
      of June 30, 2007 and June 30, 2008. The fair value of these options, as
      calculated pursuant to the Black-Scholes option-pricing model, was initially
      determined to be $31,000 ($0.31 per share). The fair value of such options
      is
      being charged to operations ratably from July 1, 2006 through June 30, 2008.
      In
      accordance with EITF 96-18, options granted to committee members are valued
      each
      reporting period to determine the amount to be recorded as an expense in the
      respective period. On December 31, 2006 (Restated), and June 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 $29,000
      ($0.29 per share), respectively, which resulted in a charge to operations of
      $7,500 during the year ended December 31, 2006 (Restated), $3,625 during the
      three months ended June 30, 2007, and $7,375 during the six months ended June
      30, 2007. As the options vest, they will be valued one final time on each
      vesting date and an adjustment will be recorded for the difference between
      the
      value already recorded and the then current value on the date of
      vesting.




On
      June
      30, 2006, the fair value of the aforementioned stock options was initially
      calculated using the following Black-Scholes input variables: stock price on
      date of grant - $0.333; exercise price - $0.333; expected life - 5 years;
      expected volatility - 150%; expected dividend yield - 0%; risk-free interest
      rate - 5%. On December 31, 2006 (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 June 30, 2007, the Black-Scholes input variables utilized to determine
      the fair value of the aforementioned stock options were deemed to be the same
      as
      at June 30, 2006, except for an expected life of 4 years.





On
      June
      20, 2007, the Board of Directors of the Company approved the 2007 Stock
      Compensation 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. As of June 30, 2007, no
      awards had been granted under the 2007 Stock Compensation Plan.




**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 June 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.
       Commitments and Contingencies**




Effective
      March 22, 2006, Lixte entered into a CRADA with the NINDS of the NIH. The CRADA
      is for a term of two years from the effective date and may be unilaterally
      terminated by either party by providing written notice within sixty days. The
      CRADA provides for the collaboration between the parties in the identification
      and evaluation of agents that target the Nuclear Receptor CoRepressor (N-CoR)
      pathway for glioma cell differentiation. The CRADA also provided that NINDS
      and
      Lixte will conduct research to determine if expression of N-CoR correlates
      with
      prognosis in glioma patients. Pursuant to the CRADA, Lixte agreed to provide
      funds under the CRADA in the amount of $200,000 per year to fund two technical
      assistants for the technical, statistical and administrative support for the
      research activities, as well as to pay for supplies and travel expenses. The
      first installment of $200,000 was due within 180 days of the effective date
      and
      was paid in full on July 6, 2006. The second installment of $200,000 was paid
      in
      full on June 29, 2007.


11




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 (approximately $99,700) in two installments of 36,000
      Euros (approximately $49,850). The first installment was paid on March 7, 2007,
      and the second installment will be paid within sixty days of the earlier of
      (i)
      January 5, 2008 or (ii) the University’s fulfillment of certain obligations
      relating to the delivery of materials.




On
      February 5, 2007, Lixte entered into a two-year agreement (the “Agreement”) with
      Chem-Master International, Inc. (“Chem-Master”) pursuant to which Lixte engaged
      Chem-Master to synthesize a compound designated as “LB-1”, and any other
      compound synthesized by Chem-Master pursuant to Lixte’s request, which have
      potential use in treating a disease, including, without limitation, cancers
      such
      as glioblastomas. Pursuant to the Agreement, Lixte agreed to reimburse
      Chem-Master for the cost of materials, labor, and expenses for other items
      used
      in the synthesis process, and also agreed to grant Chem-Master a five-year
      option to purchase 100,000 shares of the Company’s common stock at an exercise
      price of $0.333 per share. 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 six months ended June 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.


12




**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
      derecognition, classification, interest and penalties on income taxes,
      accounting in interim periods and requires increased disclosures. The adoption
      of the provisions of FIN 48 did not have a material effect on the Company’s
      financial statements. As of June 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 beginning in 2005.





The
      Company’s policy is to record interest and penalties on uncertain tax provisions
      as income tax expense. As of June 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.


13




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.




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




**Critical
      Accounting Policies and Estimates**




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




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




**Research
      and Development**




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





**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.




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.


14




**Plan
      of Operation**




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




The
      lead
      scientist at NINDS collaborating with the Company under the CRADA is Dr.
      Zhengping Zhuang. Dr. Zhuang is internationally recognized for his research
      in
      molecular pathology. Dr. Zhuang has four issued and two pending patents related
      to molecular pathology of human cancers. Dr. Zhuang recently discovered a
      biomarker of relevance to the growth of GBMs that the Company believes can
      be
      used as a tool for identifying drugs that affect the growth of GBM cells. Under
      the CRADA, the Company will support two persons at 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. The Company has received
      a draft of the proposed exclusive patent license agreement with the
      NIH.




Both
      February 6, 2007 patent filings fall under the CRADA agreement with the
      NINDS of the NIH. Patents resulting from these applications are jointly owned
      by
      Lixte and the U.S. Government. All NIH co-inventors are required to assign
      their
      rights to 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 in continuing discussions with the NIH’s Office of Technology
      Transfer regarding the schedule of payments based on milestones and the amount
      of royalty to be paid. Nothing has arisen in these discussions to date to
      suggest that there is any issue with the Company receiving exclusive licenses
      on
      reasonable terms for work done under the CRADA.





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




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




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




There
      is
      substantial uncertainty as to the Company’s ability to fund its operations and
      continue as a going concern (see “Liquidity and Capital Resources - June 30,
      2007 - Going Concern” below).





The
      Company has two major goals to achieve over the next 12 months. The prime
      objective, in collaboration with NINDS under the CRADA, is to extend the
      characterization of potentially more effective drugs and drug combinations
      (identified by the Company and jointly with NINDS for the treatment of the
      incurable human brain tumor, GBM. The second goal is to obtain well
      characterized samples of common human cancers other than GBM under conditions
      needed to identify new biomarkers for the earlier detection and identification
      of biochemical pathways as potential targets for new
      treatments.


15




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




Over
      the
      next 12 months, the Company will continue to develop preclinical data supporting
      the potential effectiveness of several drugs for the treatment of GBM when
      used
      alone or in combination. The drugs that have been identified as active in vitro
      have never been used for the treatment of GBM in humans. Some of these compounds
      were included in claims of a provisional patent filed jointly by the Company
      and
      NINDS in February 2006. Over the past 12 months, the activity of these drugs
      has
      been documented and several new lead compounds were identified. This work was
      done under the CRADA. The combinations of several pairs of lead drugs appear
      to
      have some specificity for GBM in that at equimolar doses these drugs are more
      active against GBMs than against other human cancer cell types tested. Some
      of
      the drug combinations are synergistic in their ability to inhibit the growth
      of
      GBMs, e.g., the combination of two drugs inhibits GBMs to a greater extent
      than
      would be expected from the sum of their inhibitory effects when used
      alone.




Over
      the
      next 12 months, the Company will evaluate two or more lead compounds alone
      and
      in combination for activity against human GBMs in an animal (mouse) model.
      These
      evaluations will be done at the NIH under protocols developed by NINDS and
      the
      Company. The protocols will be approved by NIH committees responsible for
      approving the conduct of animal research at the NIH and will be carried out
      by
      NIH personnel as a joint activity under the CRADA. The CRADA agreement specifies
      evaluation of drug regimens in animal models as one of the activities to be
      pursued by the Company and NINDS. It is anticipated that the animal studies
      will
      include three regimens identified under the CRADA that have never been
      investigated as treatment for human GBMs. The Company expects initial animal
      studies at the NIH will be completed in September 2007.





If
      the
      current animal experiments at the NIH show anti-cancer activity against GBMs
      without significant toxicity, the Company will rapidly expand the evaluation
      of
      the lead compound(s) by screening for anti-cancer activity against other types
      of human cancers not included under the CRADA. The Company will also evaluate
      the activity of its lead compound(s) in an animal (mouse) model of GBM in which
      human GBM cells are growing intra-cranially. These studies will be outsourced
      to
      a contract research organization (“CRO”) experienced in the evaluation and
      pharmacologic characterization of new anti-cancer agents under conditions
      required by the National Cancer Institute and the FDA. The Company will contract
      for these studies because the scope of the activities and the technical demands
      for this type of animal study lies outside the agreement and capabilities of
      its
      NIH partner. As a result, the Company’s projected operating budget will increase
      by approximately $500,000 to reflect the costs of carrying out these evaluations
      with a CRO and the costs of additional patent applications and the maintenance
      of the national and international status of filed applications.




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


16




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




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




Over
      the
      next 12 months, samples of human tumors and associated blood and urine samples
      will be collected by the University of Regensburg under the Company’s January 5,
      2007 agreement with the Free State of Bavaria, Germany. Technology comparable
      to
      that used to detect the biomarker for GBM will be applied to these tumors to
      identify new biomarkers for cancers of the breast, colon, stomach, kidney,
      bladder, prostate, and ovary. The present CRADA with NINDS is limited to the
      study of GBM.




**Plans
      Beyond the Next 12 Months**




In
      late
      2008, the Company expects to be in a position to begin analyses of tumor types
      other than GBM. In order to do this, the Company estimates that it will need
      to
      establish and operate a laboratory for a period of two years (originally
      estimated to be 2008 and 2009, now estimated to be 2009 and 2010) to
      proceed with biomarker discovery in cancers other than GMB independent of the
      NIH. The creation and operation of the laboratory for two years is estimated
      to
      cost approximately $1,700,000. The Company will continue to incur additional
      costs, including, among others, patent, legal, accounting/audit,
      insurance and office expenses. Accordingly, the Company’s revised operating
      budget indicates that in addition to the estimated $1,500,000 required to fund
      operations through December 2008, the Company will also require an additional
      $3,500,000 to fund operations (including laboratory operations) in 2009 and
      2010. The Company anticipates funding these cash requirements from debt or
      equity financings, mergers or acquisitions, and/or via the sale or license
      of
      certain of its assets (including licensing rights to compounds for the treatment
      of GBMs).




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




Projected
      major expenses for the wet laboratory are estimated as follows:





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





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




Budget
      summary (2 years):





Total
              budgeted costs for laboratory operations
            
            $
            1,318,400Equipment
            
            $
            300,000Miscellaneous
            
            $
            81,600Total
              budget
            
            $
            1,700,000




**Results
      of Operations**




The
      Company is a development stage company and has not yet commenced
      revenue-generating operations. Comparative financial statements for the three
      months and six months ended June 30, 2006 reflect the results of operations
      of
      Lixte Biotechnology, Inc. the Company’s operating subsidiary, as it was the
      accounting acquirer in the reverse merger transaction.


17




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





General
      and Administrative Expenses .
      For the
      three months ended June 30, 2007, general and administrative expenses were
      $104,233, which included $8,792 for the vested portion of the fair value of
      stock options issued to a director and certain members of the Company’s
      Scientific Advisory Committee on June 30, 2006, as compared to $113,869 for
      the
      three months ended June 30, 2006, which included $79,566 for the vested portion
      of the fair value of stock options issued to a director and certain members
      of
      the Company’s Scientific Advisory Committee on June 30, 2006. The significant
      components of general and administrative expenses to date consist primarily
      of
      legal and accounting fees, including costs associated with the registration
      of
      the common stock sold in the Company’s private placement in June and July
      2006.




Depreciation .
      For the
      three months ended June 30, 2007 and 2006, depreciation expense was $148 and
      $114, respectively.




Research
      and Development Costs .
      For the
      three months ended June 30, 2007, research and development costs were $74,925,
      as compared to $50,000 for the three months ended June 30, 2006.




Reverse
      Merger Costs .
      In
      conjunction with the reverse merger transaction completed on June 30, 2006,
      WestPark Capital, Inc. was paid a cash fee of $45,000 on June 30, 2006, which
      was charged to operations during the three months ended June 30,
      2006.




Interest
      Income .
      For the
      three months ended June 30, 2007, interest income was $3,584. The Company did
      not have any interest income for the three months ended June 30,
      2006.




Net
      Loss .
      For the
      three months ended June 30, 2007, the Company incurred a net loss of $175,722,
      as compared to a net loss of $208,983 for the three months ended June 30,
      2006.





**Six
      Months Ended June 30, 2007 and 2006**





General
      and Administrative Expenses .
      For the
      six months ended June 30, 2007, general and administrative expenses were
      $255,986, which included $17,708 for the vested portion of the fair value of
      stock options issued to a director and certain members of the Company’s
      Scientific Advisory Committee on June 30, 2006, as compared to $135,853 for
      the
      six months ended June 30, 2006, which included $79,566 for the vested portion
      of
      the fair value of stock options issued to a director and certain members of
      the
      Company’s Scientific Advisory Committee on June 30, 2006. The significant
      components of general and administrative expenses to date consist primarily
      of
      legal and accounting fees, including costs associated with the registration
      of
      the common stock sold in the Company’s private placement in June and July
      2006.




Depreciation .
      For the
      six months ended June 30, 2007 and 2006, depreciation expense was $296 and
      $229,
      respectively.




Research
      and Development Costs .
      For the
      six months ended June 30, 2007, research and development costs were $180,850,
      including $31,000 of stock-based expense related to a five-year stock option
      to
      purchase 100,000 shares of the Company’s common stock at $0.333 per share issued
      to Chem-Master International, Inc. on February 5, 2007 that was fully vested
      and
      non-forfeitable on the date of issuance. Research and development costs were
      $50,000 for the six months ended June 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 six months ended June 30, 2006.




Interest
      Income .
      For the
      six months ended June 30, 2007, interest income was $8,307. The Company did
      not
      have any interest income for the six months ended June 30, 2006.




Net
      Loss .
      For the
      six months ended June 30, 2007, the Company incurred a net loss of $428,825,
      as
      compared to a net loss of $236,082 for the six months ended June 30,
      2006.






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




**Going
      Concern**




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


18




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. 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 $194,671 and working capital of
      $171,409 (including the effect from the $74,000 registration penalty obligation
      referred to above) at June 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.




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 June 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. Through December 31, 2008, the Company estimates that it will
      require approximately $1,500,000 of additional funding. The Company estimates
      that it will require an additional $3,500,000 to fund operations (including
      laboratory operations) in 2009 and 2010. 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
      certain of its assets.




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




Operating
      Activities .
      For the
      six months ended June 30, 2007, operating activities utilized cash of $484,697,
      as compared to utilizing cash of $93,329 for the six months ended June 30,
      2006.




The
      Company had working capital of $171,409 at June 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
      six months ended June 30, 2007 and 2006, investing activities utilized net
      cash
      of $272 and $237, respectively, for the purchase of office
      equipment.




Financing
      Activities .
      There
      were no financing activities for the six months ended June 30, 2007. For the
      six
      months ended June 30, 2006, financing activities provided net cash of $672,210,
      consisting of the gross proceeds from the sale of common stock of $657,299,
      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 $134,360.





**Principal
      Commitments**




At
      June
      30, 2007, the Company did not have any material commitments for capital
      expenditures. The Company’s principal commitments at June 30, 2007 consisted of
      the estimated liquidated damages payable under the registration rights agreement
      of $74,000 and the contractual obligations as summarized below.




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 (approximately $100,000) in two installments of 36,000
      Euros (approximately $50,000). The first installment was paid on March 7, 2007,
      and the second installment will be paid within sixty days of the earlier of
      (i)
      January 5, 2008 or (ii) the University’s fulfillment of certain obligations
      relating to the delivery of materials.




19


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 six months ended June 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,
      Lixte agreed to grant Chem-Master a second five-year option to purchase an
      additional 100,000 shares of the Company’s common stock at an exercise price of
      $0.333 per share.




**Off-Balance
      Sheet Arrangements**




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




20





**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
      June 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.


21


**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





Not
      applicable.





Item
      3.
      Defaults Upon Senior Securities





Not
      applicable.




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





Not
      applicable.




Item
      5.
      Other Information





Not
      applicable.




Item
      6.
  Exhibits




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


22




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




23





INDEX
      TO
      EXHIBITS





Exhibit
              Number
            Description
                of Document10.1
            Services
                Agreement between Lixte Biotechnology, Inc. and Freestate of Bavaria
                represented byUniversity
                of Regensburg dated January 5, 2007, previously filed as an exhibit
                to
                theCompany’s
                Current Report on Form 8-K filed on January 11, 2007, and incorporated
                herein byreference.10.2
            Agreement
                between Lixte Biotechnology Holdings, Inc. and Chem-Master International,
                Inc.dated
                February 5, 2007, previously filed as an exhibit to the Company’s Current
                Report on Form8-K
                filed on February 9, 2007, and incorporated herein by
                reference.10.3
            2007
                Stock Compensation Plan adopted by the Company’s Board of Directors on
                June 20, 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.




24