**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-QSB**





(Mark
      One)


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





**For
      the Quarterly Period Ended December 31, 2006**





**o
      TRANSITION REPORT UNDER
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**





**For
      the Transition Period from _________ to _________**





**Commission
      file number: 0-32835**





**GAMMACAN
      INTERNATIONAL, INC.**


(Exact
      name of registrant as specified in its charter)





**Delaware**
            **33-0956433**(State
                or other jurisdiction of incorporation or organization)
            (IRS
                Employer Identification No.)





**Kiryat
      Ono Mall**


**Azorim
      Center A**


**39
      Jerusalem st.,**


**55423
      Kiryat Ono, Israel**


(Address
      of principal executive offices)





**+
      972 3 7382616**


(Registrant's
      telephone number, including area code)





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





Indicate
      by check mark whether the registrant: (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      past 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





**APPLICABLE
      ONLY TO CORPORATE ISSUERS:**





State
      the
      number of shares outstanding of each of the registrant's classes of common
      equity, as of the latest practicable date: 28,625,164 shares issued and
      outstanding as of February 5, 2007.





**GAMMACAN
      INTERNATIONAL, INC.**





**FORM
      10-QSB**





**TABLE
      OF CONTENTS**





Page
                No.PART
                IItem 1.
                Financial Statements
            
            
            1Item 2.
                Management’s Discussion and Analysis of Financial Condition and Results of
                Operation
            
            
            14Item 3.
                Controls And Procedures
            
            
            21PART
                IIItem 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
            
            
            23








***Forward
      Looking Statements***





This
      Form
      10-QSB includes a number of forward-looking statements that reflect management's
      current views with respect to future events and financial performance. Those
      statements include statements regarding the intent, belief or current
      expectations of GammaCan and members of its management team as well as the
      assumptions on which such statements are based. Prospective investors are
      cautioned that any such forward-looking statements are not guarantees of future
      performance and involve risk and uncertainties, and that actual results may
      differ materially from those contemplated by such forward-looking statements.
      Readers are urged to carefully review and consider the various disclosures
      made
      in this report and in our other reports filed with the Securities and Exchange
      Commission. Important factors currently known to Management could cause actual
      results to differ materially from those in forward-looking statements. We
      undertake no obligation to update or revise forward-looking statements to
      reflect changed assumptions, the occurrence of unanticipated events or changes
      in the future operating results over time. GammaCan believes that its
      assumptions are based upon reasonable data derived from and known about its
      business and operations and the business and operations of GammaCan. No
      assurances are made that actual results of operations or the results of
      GammaCan's future activities will not differ materially from its
      assumptions.








**ITEM
      1. - FINANCIAL STATEMENTS**










**GAMMACAN
      INTERNATIONAL INC.**


(A
      Development Stage Company)


INTERIM
      FINANCIAL STATEMENTS


AS
      OF
      DECEMBER 31, 2006







TABLE
      OF
      CONTENTS








**Page****CONDENSED
                CONSOLIDATED FINANCIAL STATEMENTS:**Balance
                sheets
            
            2Statements
                of operations
            
            3Statements
                of changes in stockholders’ equity
            
            4Statements
                of cash flows
            
            5Notes
                to financial statements
            
            6-13













1


**GAMMACAN
      INTERNATIONAL INC.**


(A
      Development Stage Company)




CONDENSED
      CONSOLIDATED BALANCE SHEETS


(US
      $,
      except share data)





**December
                31,**
            
            **September
                30,****2006**
            
            **2006****(Unaudited)**
            
            **(Audited)****A
                s s e t s****CURRENT
                ASSETS:**Cash
                and cash equivalents
            
            $
            516,545
            
            $
            538,738Prepaid
                expenses
            
            
            33,750
            
            
            -Other
            
            
            8,010
            
            
            12,494T
                o
                t a l current assets
            
            
            558,305
            
            
            551,232**FUNDS
                IN RESPECT OF EMPLOYEE RIGHTS UPON RETIREMENT**
            
            
            26,735
            
            
            21,071**LONG
                TERM DEPOSITS**
            
            
            18,791
            
            
            22,270**PROPERTY
                AND EQUIPMENT, NET**
            
            
            23,748
            
            
            25,247T
                o
                t a l assets
            
            $
            627,579
            
            $
            619,820**Liabilities
                and stockholders' equity****CURRENT
                LIABILITIES:**Accounts
                payable
            
            $
            383,956
            
            $
            279,857Convertible
                promissory note
            
            
            353,145
            
            
            -Payroll
                and related accruals
            
            
            57,637
            
            
            49,242T
                o
                t a l current liabilities
            
            
            794,738
            
            
            329,099**LIABILITY
                FOR EMPLOYEE RIGHTS UPON RETIREMENT**
            
            
            38,339
            
            
            31,531**STOCKHOLDERS’
                EQUITY (CAPITAL DEFICIENCY):**Preferred
                stock, $ 0.0001 par value (20,000,000 sharesauthorized;
                none issued and outstanding)Common
                stock, $ 0.0001 par value (100,000,000 authorized shares;28,496,590
                and 28,453,732 shares issued andoutstanding
                as of December 31, 2006 and September 30, 2006,
                respectively)
            
            
            2,849
            
            
            2,845Additional
                paid-in capital
            
            
            3,515,007
            
            
            3,172,284Warrants
            
            
            861,474
            
            
            861,474Deficit
                accumulated during the development stage
            
            
            (4,584,828
            )
            
            (3,777,413
            )T
                o
                t a l stockholders' equity (capital deficiency)
            
            
            (205,498
            )
            
            259,190T
                o
                t a l liabilities and stockholders’ equity
            
            $
            627,579
            
            $
            619,820








**The
      accompanying notes are an integral part of the financial
      statements.**


2


**GAMMACAN
      INTERNATIONAL INC.**


(A
      Development Stage Company)





CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS


(US
      $,
      except share data)




**Period
                from****October
                6, 1998*****Three
                months ended**
            
            **through****December
                31**
            
            **December
                31,****2006**
            
            **2005**
            
            **2006****(Unaudited)**
            
            **(Unaudited)**
            
            **(Unaudited)****RESEARCH
                AND DEVELOPMENT COSTS**
            
            $
            167,972
            
            $
            225,161
            
            $
            1,683,146**GENERAL
                AND ADMINISTRATIVE EXPENSES**
            
            
            632,866
            
            
            212,775
            
            
            2,921,577**OPERATING
                LOSS**
            
            
            800,838
            
            
            437,936
            
            
            4,604,723**FINANCIAL
                INCOME**
            
            
            (4,827
            )
            
            (8,058
            )
            
            (69,660
            )**FINANCIAL
                EXPENSES**
            
            
            7,048
            
            
            3,036
            
            
            29,162**LOSS
                BEFORE TAXES ON INCOME**
            
            
            803,059
            
            
            432,914
            
            
            4,564,225**TAXES
                ON INCOME**
            
            
            4,356
            
            
            -
            
            
            32,978**LOSS
                FROM OPERATIONS OF THE COMPANY AND ITS CONSOLIDATED
                SUBSIDIARY**
            
            
            807,415
            
            
            432,914
            
            
            4,597,203**MINORITY
                INTERESTS IN LOSSES OF A SUBSIDIARY**
            
            
            -
            
            
            -
            
            
            (12,375
            )**NET
                LOSS FOR THE PERIOD**
            
            $
            (807,415
            )
            $
            (432,914
            )
            $
            (4,584,828
            )**BASIC
                AND DILUTED LOSS PER****COMMON
                SHARES**
            
            $
            (0.028
            )
            $
            (0.016
            )**WEIGHTED
                AVERAGE NUMBER OF COMMON****SHARES
                USED IN COMPUTING BASIC AND****DILUTED
                LOSS PER COMMON SHARE**
            
            
            28,475,161
            
            
            26,847,065






*
      Incorporation date, see note 1a.





**The
      accompanying notes are an integral part of the financial
      statements.**


3




**GAMMACAN
      INTERNATIONAL INC. AND SUBSIDIARY**


(A
      Development Stage Company)




CONDENSED
      CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY


(CAPITAL
      DEFICIENCY)


(US
      $,
      except share data)








**Deficit****accumulated****Common**
            
            
            
            **Additional**
            
            **during****Number
                of**
            
            **Stock**
            
            
            
            **paid-in**
            
            **development****Shares**
            
            **Amount**
            
            **Warrants**
            
            **capital**
            
            **stage**
            
            **Total****Changes
                during the period from****October
                6, 1998 (date of incorporation)****to
                September 30, 2004 (audited)**Common
                stock and warrantsissued
                for cash
            
            
            57,506,498
            
            $
            5,750
            
            $
            139,494
            
            $
            782,141
            
            $
            -
            
            $
            927,385Contributed
                capital
            
            
            
            
            
            
            
            
            
            
            
            7,025
            
            
            
            
            
            7,025Cancellation
                of shares atJune
                8, 2004
            
            
            (32,284,988
            )
            
            (3,228
            )
            
            
            
            
            3,228Gain
                on issuance of subsidiaryStock
                to third party
            
            
            
            
            
            
            
            
            
            
            
            86,625
            
            
            
            
            
            86,625Stock
                based compensation
            
            
            
            
            
            
            
            
            
            
            
            62,600
            
            
            
            
            
            62,600Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (514,086
            )
            
            (514,086
            )**Balance
                at September 30, 2004****(audited)**
            
            
            25,221,510
            
            
            2,522
            
            
            139,494
            
            
            941,619
            
            
            (514,086
            )
            
            569,549Common
                stock and warrantsissued
                for cash on November 11,2004,
                net of issuance costs
            
            
            978,000
            
            
            97
            
            
            367,892
            
            
            766,630
            
            
            
            
            
            1,134,619Common
                stock and warrantsissued
                for cash on January 25,2005,
                net of issuance costs
            
            
            32,000
            
            
            3
            
            
            12,037
            
            
            24,760
            
            
            
            
            
            36,800Issuance
                of warrants to Consultants'
            
            
            
            
            
            
            
            
            
            
            
            34,592
            
            
            
            
            
            34,592Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (1,198,532
            )
            
            (1,198,532
            )**Balance
                at September 30, 2005 (audited)**
            
            
            26,231,510
            
            
            2,622
            
            
            519,423
            
            
            1,767,601
            
            
            (1,712,618
            )
            
            577,028Common
                stock and warrantsissued
                for cash on October 31,2005,
                net of issuance costs
            
            
            666,666
            
            
            67
            
            
            72,410
            
            
            365,670
            
            
            
            
            
            438,147Common
                stock and warrantsissued
                for cash on December 20,2005,
                net of issuance costs
            
            
            1,555,556
            
            
            156
            
            
            269,641
            
            
            804,998
            
            
            
            
            
            1,074,795Employees
                and consultants stock based compensation expenses
            
            
            
            
            
            
            
            
            
            
            
            234,015
            
            
            
            
            
            234,015Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (2,064,795
            )
            
            (2,064,795
            )**Balance
                at September 30, 2006 (audited)**
            
            
            28,453,732
            
            
            2,845
            
            
            861,474
            
            
            3,172,284
            
            
            (3,777,413
            )
            
            259,190Common
                stockissued
                for services
            
            
            *42,858
            
            
            4
            
            
            
            
            
            29,996
            
            
            
            
            
            30,000Employees
                and consultants stock based compensation expenses
            
            
            
            
            
            
            
            
            
            
            
            312,727
            
            
            
            
            
            312,727Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (807,415
            )
            
            (807,415
            )**Balance
                at December 31, 2006 (unaudited)**
            
            
            28,496,590
            
            $
            2,849
            
            $
            861,474
            
            $
            3,515,007
            
            $
            (4,584,828
            )
            $
            (205,498
            )





*
            The
                Company issued a total of 171,432 shares. Shares presented in the
                statement above represent issued shares in respect of services received
                in
                the three months ended December 31, 2006 (see also Note 4(b)).




**The
      accompanying notes are an integral part of the financial
      statements.**


4




**GAMMACAN
      INTERNATIONAL INC. AND SUBSIDIARY**


(A
      Development Stage Company)


CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS


(US
      $)





**Period
                from****October
                6,****Three
                months ended**
            
            **1998*
                to****December
                31,**
            
            **December
                31,****2006**
            
            **2005**
            
            **2006****Unaudited**
            
            **Unaudited**
            
            **Unaudited****CASH
                FLOWS FROM OPERATING ACTIVITIES:**Net
                loss for the period
            
            $
            (807,415
            )
            $
            (432,914
            )
            $
            (4,584,828
            )Adjustments
                required to reconcile net loss to net cash usedin
                operating activities:Income
                and expenses not involving cash flows:Depreciation
            
            
            2,075
            
            
            843
            
            
            8,967Common
                stock issued for services
            
            
            30,000
            
            
            -
            
            
            33,000Minority
                interests in losses of a subsidiary
            
            
            -
            
            
            -
            
            
            (12,375
            )Write
                off of in process research and development
            
            
            -
            
            
            -
            
            
            100,000Employees
                and consultants stock based compensation expenses
            
            
            312,727
            
            
            34,190
            
            
            606,876Increase
                in liability for employee rights upon retirement
            
            
            6,808
            
            
            (2,709
            )
            
            38,339Changes
                in operating assets and liabilities:Increase
                in prepaid expenses
            
            
            (33,750
            )
            
            (39,405
            )
            
            (33,750
            )Decrease
                (increase) in other current assets
            
            
            7,755
            
            
            (3,829
            )
            
            (8,010
            )Increase
                in current liabilities
            
            
            115,639
            
            
            173,070
            
            
            443,738Net
                cash used in operating activities
            
            
            (366,161
            )
            
            (270,754
            )
            
            (3,408,043
            )**CASH
                FLOWS FROM INVESTING ACTIVITIES -**Decrease
                (increase) in long term deposits
            
            
            208
            
            
            (1,637
            )
            
            (18,791
            )Funds
                in respect of employee rights upon retirement
            
            
            (5,664
            )
            
            644
            
            
            (26,735
            )Purchase
                of property and equipment
            
            
            (576
            )
            
            (384
            )
            
            (32,715
            )Net
                cash used in investing activities
            
            
            (6,032
            )
            
            (1,377
            )
            
            (78,241
            )**CASH
                FLOWS FROM FINANCING ACTIVITIES:**Issuance
                of convertible promissory note
            
            
            350,000
            
            
            
            
            
            350,000Issuance
                of common stock and warrants net of issuance costs
            
            
            
            
            
            1,550,000
            
            
            3,652,829Net
                cash provided by financing activities
            
            
            350,000
            
            
            1,550,000
            
            
            4,002,829**INCREASE
                (DECREASE) IN CASH AND CASH EQUIVALENTS**
            
            
            (22,193
            )
            
            1,277,869
            
            
            516,545**BALANCE
                OF CASH AND CASH EQUIVALENTS AT****BEGINNING
                OF PERIOD**
            
            
            538,738
            
            
            713,342**BALANCE
                OF CASH AND CASH EQUIVALENTS****AT
                END OF PERIOD**
            
            $
            516,545
            
            $
            1,991,211
            
            $
            516,545




*
      Incorporation date, see note 1a.




**The
      accompanying notes are an integral part of the financial
      statements.**


5
 **GAMMACAN
          INTERNATIONAL INC.**
 (A
          Development Stage Company)
  NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


**NOTE
      1 - SIGNIFICANT ACCOUNTING POLICIES:**




**a.**
            **General:**





GammaCan
      International Inc. (A Development Stage Company; "the Company") was incorporated
      on October 6, 1998, under the laws of the State of Delaware, under the name
      of
      San Jose International, Inc. The Company has no significant revenues and in
      accordance with Statement of financial Accounting Standard (“SFAS”) No. 7
“Accounting and Reporting by Development Stage enterprises”, the Company is
      considered a development stage company.





On
      August
      19, 2004, the name of the company was changed from "San Jose International,
      Inc." into "GammaCan International, Inc.".





At
      this
      point in the development stage, the company's focus is to demonstrate efficacy
      of IgG cancer immunotherapy in human clinical trials. In July 2005, the company
      commenced Phase 2 clinical trials in humans to demonstrate clinical efficacy
      of
      IgG immunotherapy in three major cancers: colon, prostate and melanoma. These
      Phase 2 clinical trials are being conducted at three medical centers in Israel
      and results are anticipated during 2007. Following analysis and publication
      of
      the results the Company will decide on how to proceed with its future clinical
      work regarding the use of IgG. The decision will be based on several factors
      including the ability to attract strategic partners for co-development.





The
      Company is in the process of applying for an IND with the US FDA for VitiGam,
      the Company’s second generation IgG product and first-in-class anti-cancer
      immunotherapy. VitiGam is slated to enter the clinic under a US IND in the
      near
      future. VitiGam is designed to target metastatic melanoma patients with Stage
      III and IV melanoma.





The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. The Company has net losses for the period
      from
      inception (October 6, 1998) through December 31, 2006 of $4,584,828, as
      well as negative cash flow from operating activities. Presently, the company
      does not have sufficient cash resources to meet its requirements in the twelve
      months following January 1, 2007. These factors raise substantial doubt about
      the company's ability to continue as a going concern. Management is in the
      process of evaluating various financing alternatives as the Company will need
      to
      finance future research and development activities and general and
      administrative expenses through fund raising in the public or private equity
      markets. Although there is no assurance that the Company will be successful
      with
      those initiatives, management is confident that it will be able to secure the
      necessary financing as a result of ongoing financing discussions with third
      party investors and existing shareholders.





These
      financial statements do not include any adjustments that may be necessary should
      the company be unable to continue as a going concern. The Company's continuation
      as a going concern is dependent on its ability to obtain additional financing
      as
      may be required and ultimately to attain profitability.


.


6
 **GAMMACAN
          INTERNATIONAL INC.**
 (A
          Development Stage Company)
 
 NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
          (continued)


**NOTE
      1 - SIGNIFICANT ACCOUNTING POLICIES (continued):**





**b.**
            **Accounting
                principles**





The
      accompanying unaudited financial statements of the Company and the subsidiary
      GammaCan Ltd. ("the Subsidiary") have been prepared in accordance with
      accounting principles generally accepted in the United States for interim
      financial information and with the instructions to Form 10-QSB and Item 310
      of
      Regulation S-B. Accordingly, they do not include all of the information and
      footnotes required by accounting principles generally accepted in the United
      States for complete financial statements.





In
      the
      opinion of management, all adjustments (consisting of normal recurring accruals)
      considered necessary for a fair presentation have been included. Operating
      results for the three-month period ended December 30, 2006, are not necessarily
      indicative of the results that may be expected for the year ended September
      30,
      2007. For further information, refer to the financial statements and footnotes
      thereto included in the consolidated annual report on Form 10-KSB for the year
      ended September 30, 2006.





**c.**
            **Use
                of estimates in the preparation of financial
                statements**





The
      preparation of the financial statements in conformity with U.S. GAAP requires
      management to make estimates and assumptions that affect the reported amounts
      of
      assets and liabilities and disclosure of contingent assets and liabilities
      at
      the financial statement date and the reported expenses during the reporting
      periods. Actual results could differ from those estimates.





**d.**
            **Principles
                of consolidation**





The
      consolidated financial statements include the accounts of the Company and its
      subsidiary GammaCan Ltd. All material intercompany transactions and balances
      have been eliminated in consolidation.





**e.**
            **Cash
                equivalents**





The
      company considers all short term, highly liquid investments, which include
      short-term deposits with original maturities of three months or less from the
      date of purchase that are not restricted as to withdrawal or use and are readily
      convertible to known amounts of cash, to be cash equivalents.





**f.**
            **Loss
                per share**





Basic
      and
      diluted net losses per common share are presented in accordance with FAS No.
      128
“Earning per share” (“FAS128”), for all periods presented. Outstanding stock
      options and warrants have been excluded from the calculation of the diluted
      loss
      per share because all such securities are anti-dilutive for all periods
      presented. The total number of common stocks options and warrants excluded
      from
      the calculations of diluted net loss was 6,317,775 for the three months ended
      December 31, 2006 (3,967,775 for the three months ended December 31,
      2005).


7
 **GAMMACAN
          INTERNATIONAL INC.**
 (A
          Development Stage Company)
 
 NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
          (continued)


**NOTE
      1 - SIGNIFICANT ACCOUNTING POLICIES** (continued) **:**





**g.**
            **Stock
                based compensation**





On
      August
      17, 2004, the company’s board of directors adopted the 2004 Employees and
      Consultants Stock Option Plan (hereafter - the Stock Option Plan). Under the
      Plan 5,000,000 shares have been reserved for the grant of options, which may
      be
      issued at the discretion of the Company’s board of directors from time to time.
      Under this Plan, each option is exercisable to purchase one common share of
      $0.0001 par value of the Company.





The
      options may be exercised after vesting and only in accordance with the
      following:


1.
            On
                the first anniversary commencing the grant date - 25% of the
                options.


2.
            On
                the last day of each of the 36 months following the first anniversary
                of
                the grant date, the remaining options shall vest in equal monthly
                installments.





The
      maximum term of the option is 10 years.





A
      summary
      of the status of the company’s plan as of December 31, 2006, and changes during
      the three months period ending on this date, is presented below:




Three
                months endedDecember
                31, 2006Weighted
                averageNumber
            
            exercise
                price$For
                options granted toemployees:Options
                outstanding at beginning of the period
            
            
            2,830,000
            
            $
            1.24Changes
                during the period:Granted
                - at market price
            
            
            300,000
            
            
            0.45Granted
                - at an exercise price less thenmarket
                price
            
            
            -
            
            
            -Exercised
            
            
            -
            
            
            -Forfeited
            
            
            -
            
            
            -Expired
            
            
            -
            
            
            -Options
                outstanding at end of the period
            
            
            3,130,000
            
            
            1.16Options
                exercisable at end of the period
            
            
            282,708Weighted
                average fair value of options grantedduring
                the period
            
            $
            0.37





The
      following table presents summary information concerning the options outstanding
      as of December 31, 2006:





Options
                outstanding
            
            Options
                exercisableNumber
            
            Weighted
            
            Weighted
            
            Number
            
            WeightedRange
            
            outstanding
            
            average
            
            average
            
            exercisable
            
            averageof
            
            at
            
            remaining
            
            exercise
            
            at
            
            exerciseexercise
            
            December
                31,
            
            contractual
            
            price
            
            December
                31,
            
            priceprices
            
            2006
            
            life
            
            
            
            2006$
            
            
            
            Years
            
            $
            
            
            
            $0.45
                to 0.93
            
            
            300,000
            
            
            9.85
            
            
            0.45
            
            
            -
            
            
            -0.93
                to 1.37
            
            
            2,830,000
            
            
            9.10
            
            
            1.24
            
            
            282,708
            
            
            1.12


8
 **GAMMACAN
          INTERNATIONAL INC.**
 (A
          Development Stage Company)
 
 NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
          (continued)


**NOTE
      1 - SIGNIFICANT ACCOUNTING POLICIES** (continued) **:**





Unrecognized
      compensation as determined under FAS 123R as of December 31, 2006 totaled
      $1,924,230, to be depreciated over the next 39 months.





Until
      September 30, 2006 the Company accounted for employee stock based compensation
      in accordance with Accounting Principles Board Opinion No. 25 “Accounting for
      Stock Issued to Employees” (“APB 25”) and related interpretations. In accordance
      with FAS 123 - “Accounting for Stock-Based Compensation” (“FAS 123”), the
      Company disclosed pro forma data assuming the Company had accounted for employee
      stock option grants using the fair value-based method defined in FAS
      123.





On
      October 1, 2006 the Company adopted the revised Statement of Financial
      Accounting Standards ("FAS") No. 123, Share-Based Payment (FAS 123R), which
      addresses the accounting for share-based payment transactions in which the
      Company obtains employee services in exchange for (a) equity instruments of
      the
      Company or (b) liabilities that are based on the fair value of the Company’s
      equity instruments or that may be settled by the issuance of such equity
      instruments. FAS 123R eliminates the ability to account for employee share-based
      payment transactions using APB Opinion No. 25, Accounting for Stock Issued
      to
      Employees, and requires instead that such transactions be accounted for using
      the grant-date fair value based method. This Statement is effective as of the
      beginning of the first annual reporting period that begins after
      December 15, 2005, for small business issuers, which is October 1, 2006 for
      the Company.





This
      Statement applies to all awards granted or modified after the Statement’s
      effective date. In addition, compensation cost for the unvested portion of
      previously granted awards that remain outstanding on the Statement’s effective
      date shall be recognized on or after the effective date, as the related services
      are rendered, based on the awards’ grant-date fair value as previously
      calculated for the pro-forma disclosure under FAS 123.





The
      Company applied the modified prospective application transition method, as
      permitted by the Statement. Under such transition method, upon the adoption
      of
      FAS 123R, the Company’s financial statements for periods prior to the effective
      date of the Statement is not restated.





The
      company accounts for equity instruments issued to third party service providers
      (non-employees) in accordance with the fair value based on an option-pricing
      model, pursuant to the guidance in EITF 96-18 “Accounting for Equity Instruments
      That Are Issued to Other Than Employees for Acquiring, or in Conjunction with
      Selling Goods or Services”. The fair value of the options granted is revalued
      over the related service periods and recognized using the accelerated
      method.


9
 **GAMMACAN
          INTERNATIONAL INC.**
 (A
          Development Stage Company)
 
 NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
          (continued)


**NOTE
      1 - SIGNIFICANT ACCOUNTING POLICIES** (continued) **:**





The
      following table illustrates the pro - forma effect on net loss and loss per
      common share assuming the Company had applied the fair value recognition
      provisions of FAS 123 to its stock-based employee:





**Three
                months ended**
              **December
                31,****2005**Net
                loss as reported
            
            $
            (432,914
            )Deduct:
                Stock based employee compensation expenseincluded
                in net loss as reported
            
            
            4,365Add:
                pro forma stock based employee compensationexpense
                determined under fair valuemethod
                for all awards, net of related tax effects
            
            
            (62,726
            )Recognize
                the reversal of the pro forma stock based employee compensation
                expensedetermined
                under fair value method due to forfeitureof
                awards granted to employees
            
            
            79,676Pro
                forma net loss
            
            $
            (411,599
            )Net
                loss per common shares:Basic
                and diluted loss per share - as reported
            
            $
            (0.016
            )Basic
                and diluted loss per share - pro forma
            
            $
            (0.015
            )





**h.**
            **Recently
                issued accounting
                pronouncements**





1.
            In
                July 2006, the FASB issued FASB Interpretation (FIN) No. 48 “Accounting
                for Uncertainty in Income Taxes” (FIN 48). FIN 48 prescribes a
                comprehensive model for recognizing, measuring, presenting and disclosing
                in the financial statements tax positions taken or expected to be
                taken on
                a tax return, including a decision whether to file or not to file
                in a
                particular jurisdiction. FIN 48 is effective for fiscal years beginning
                after December 15, 2006 (year beginning October 1, 2007 for the Company).
                If there are changes in net assets as a result of application of
                FIN 48
                these will be accounted for as an adjustment to retained earnings.
                In the
                Company’s opinion, implementation of this standard is not expected to have
                a material effect on its financial statements in future
                periods.





2.
            In
                September 2006, the FASB issued Statement of Financial Accounting
                Standard
                (SFAS) No. 157, "Fair Value Measurements" (“FAS 157”). FAS 157 defines
                fair value, establishes a framework for measuring fair value in accordance
                with generally accepted accounting principles, and expands disclosures
                about fair value measurements. SFAS No. 157 will apply whenever another
                standard requires (or permits) assets or liabilities to be measured
                at
                fair value. The standard does not expand the use of fair value to
                any new
                circumstances. SFAS No. 157 is effective for financial statements
                issued
                for fiscal years beginning after November 15, 2007, and interim periods
                within those fiscal years, which is the year beginning October 1,
                2008 for
                the company.


10
 **GAMMACAN
          INTERNATIONAL INC.**
 (A
          Development Stage Company)
 
 NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
          (continued)


**NOTE
      1 - SIGNIFICANT ACCOUNTING POLICIES** (continued) **:**





3.
            In
                September 2006, the Financial Accounting Standards Board (the "FASB")
                issued Statement of Financial Accounting Standard No. 158, "Employers'
                Accounting for Defined Benefit Pension and Other Postretirement Plans"
                (FAS 158). FAS 158 requires employers to fully recognize the obligations
                associated with single-employer defined benefit pension, retiree
                healthcare and other postretirement plans in their financial statements.
                The provisions of FAS 158 are effective as of the end of the fiscal
                year
                ending after December 15, 2006, which is the year beginning October
                1,
                2007 for the Company. In the Company’s opinion, implementation of this
                standard is not expected to have a material effect on its financial
                statements in future periods.





**i.**
            **Reclassifications**





Certain
      figures in respect of prior years have been reclassified to conform to the
      current year presentation.


.


**NOTE
      2 - LONG TERM DEPOSITS:**





Amount
      represents deposits in respect of lease agreements for the company’s office
      facilities and vehicles used by its employees.





**NOTE
      3 - CONVERTIBLE PROMISSORY NOTE:**





On
      November 20, 2006 the Company issued a convertible promissory note, in a
      principal amount of $350,000, which bears interest at 8% payable on maturity
      of
      the note and matures on November 20, 2007. At the discretion of the lender,
      in
      the event that the Company raises debt or equity financing during the 12 month
      period following the issuance of the note, the principal and interest due under
      the note is convertible on the same terms as such financing.





The
      option to convert the amount into equity is measured by its fair value. The
      fair
      value allocated to the option estimated by using the Black Scholes
      option-pricing model is $109,705. The value was based on the following
      assumptions: dividend yield of 0%; expected volatility of 90%; risk-free
      interest rates of 5.2%; and expected lives of 0.7 years.


11
 **GAMMACAN
          INTERNATIONAL INC.**
 (A
          Development Stage Company)
 
 NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
          (continued)


**NOTE
      4 - STOCK TRANSACTIONS:**





Following
      are transactions that took place during the quarter ending December 30,
      2006:





**a.**
            On
                October 12, 2006 50,000 options were granted under the Stock Option
                Plan
                to a new member of the scientific advisory board, an outside party.
                The
                exercise price has been determined at $0.65 per share, which was
                equivalent to the traded market price on the date of
                grant.


The
      options may be exercised after vesting and only in accordance with the
      following:


1.
            On
                the first anniversary commencing the grant date - 25% of the
                options.


2.
            On
                the last day of each of the 36 months following the first anniversary
                of
                the grant date, the remaining options shall vest in equal monthly
                installments





The
      fair
      value of the above options is estimated by using Black Scholes option-pricing
      model as $15,553, and was based on the following assumptions: dividend yield
      of
      0% for all years; expected volatility of 91%; risk-free interest rates of 4.65%;
      and expected lives of 7.88 years.





**b.**
            On
                October 18, 2006 the Company entered into a Strategic Alliance Agreement
                with UTEK Corporation (“UTEK”), pursuant to which UTEK would assist the
                Company in identifying technology acquisition opportunities. Per
                the
                agreement in consideration for the services being provided to the
                Company
                by UTEK, the Company shall pay $120,000 in the form of 171,432
                unregistered shares of common stock. The Company had the option of
                paying
                UTEK $10,000 per month. The Company has agreed to issue UTEK an aggregate
                of 171,432 shares of common stock, par value $0.0001 per share, of
                the
                Company, which will vest in 12 equal monthly instalments of 14,286
                shares.If
                the agreement is terminated any unvested shares will be returned
                to the
                Company.





The
      shares presented in the statement of changes in shareholders equity represent
      issued shares in respect of service received up to December 31,2006, since
      the
      rest of the shares are not considered issued for accounting purposes.





**c.**
            On
                November 13, 2006 150,000 options were granted under the Stock Option
                Plan
                to each of the Company’s two board members who joined the board on
                November 6, 2006 (total - 300,000
                options).


The
      exercise price has been determined at $0.45 per share, which was equivalent
      to
      the traded market price on the date of grant.


The
      options may be exercised after vesting and only in accordance with the
      following:


1.
            On
                the first anniversary commencing the grant date - 25% of the
                options.


2.
            On
                the last day of each of the 36 months following the first anniversary
                of
                the grant date, the remaining options shall vest in equal monthly
                installments





The
      fair
      value of the above options on the date of grant was estimated by using Black
      Scholes option-pricing model as $111,859, and was based on the following
      assumptions: dividend yield of 0%; expected volatility of 90%; risk-free
      interest rates of 4.65%; and expected lives of 7.88 years.


12
 **GAMMACAN
          INTERNATIONAL INC.**
 (A
          Development Stage Company)
 
 NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
          (continued)


**NOTE
      4 - STOCK TRANSACTIONS (continued):**





**d.**
            On
                December 5, 2006 50,000 options were granted under the Stock Option
                Plan
                to a new member of the scientific advisory board, an outside party.
                The
                exercise price has been determined at $0.50 per share, which was
                equivalent to the traded market price on the date of
                grant.


The
      options may be exercised after vesting and only in accordance with the
      following:


1.
            On
                the first anniversary commencing the grant date - 25% of the
                options.


2.
            On
                the last day of each of the 36 months following the first anniversary
                of
                the grant date, the remaining options shall vest in equal monthly
                installments





The
      fair
      value of the above options is estimated by using Black Scholes option-pricing
      model as $16,138, and was based on the following assumptions: dividend yield
      of
      0% for all years; expected volatility of 90%; risk-free interest rates of 4.65%;
      and expected lives of 7.88 year





**NOTE
      5 -SUBSEQUENT EVENT:**





**1.**
            On
                January 30, 2007, Gammacan, Ltd., a subsidiary of the Company (the
                "Subsidiary") entered into a Master Services Agreement with BioSolutions
                Services, LLC (“BioSolutions”), pursuant to which the subsidiary will from
                time-to-time engage BioSolutions for various projects to assist the
                Corporation with the commercialization of its anti-cancer immunotherapy
                to
                treat metastatic cancer. The services to be performed under the Master
                Services Agreement will be specified in separate work orders, which
                will
                set forth the scope of the work, schedule and costs.





Work
      order 1 relates to regulatory consulting services to be provided by Biosolutions
      in connection with the application for an IND with the US FDA for VitiGam.
      As
      compensation for the services the Subsidiary will pay BioSolutions a cash fee
      between $170,000 to $290,000 based on several factors, and the Company will
      issue to BioSolutions a warrant to purchase 434,783 shares of its common stock
      at a purchase price of the lower of $0.48 per share or the average trading
      price
      of the preceding 30 days from the date of grant. The warrant shall be vested
      as
      follows: 1) 33% upon signature of a definitive agreement with a manufacturer,
      2)
      33% upon IND filing and 3) 34% when IND has been approved by the
      FDA.





**2****.**
            On
                February 1, 2007 the Subsidiary entered into a Cooperation and Project
                Funding Agreement with Cooperation and Project Funding (the “BIRD
                Foundation”) and Life Therapeutics (“Life”), pursuant to which the BIRD
                Foundation will provide the Subsidiary and Life with funding of the
                lesser
                of $1,000,000 or 50% of expenditures on the development of an anti-cancer
                immunotherapy to treatment for metastatic cancer. The funding will
                be
                repaid to the BIRD Foundation if the development work goes beyond
                a Phase
                2 clinical trial.


13


**ITEM
      2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF
      OPERATION**





As
      used
      in this current report, the terms "we", "us", "our", "the Company" and
      "GammaCan" mean GammaCan International, Inc. and our subsidiary, GammaCan,
      Ltd.,
      unless otherwise indicated.





All
      dollar amounts refer to US dollars unless otherwise indicated.





We
      are a
      development stage Company and currently have no revenue from operations. Other
      than existing cash reserves and our intellectual property we have no significant
      assets, tangible or intangible. There can be no assurance that we will generate
      revenues in the future, or that we will be able to operate profitably in the
      future, if at all. We have incurred net losses in each fiscal year since
      inception of our operations.





**Plan
      of Operation**





**Short
      Term Business Plan**





Our
      initial focus over the next several years is to demonstrate efficacy of
      Immunoglobulin G (“IgG”) cancer immunotherapy in human clinical trials. Efficacy
      is the ability of a drug or other treatment to produce the desired result when
      taken by its intended users. If ultimately proven to be successful, and there
      can be no assurance that it will be, we could be well-positioned to enter a
      licensing agreement with a major pharmaceutical partner for commercial market
      development and sales.





IgG
      immunotherapy will require regulatory approval before being commercially
      marketed for human therapeutic use. Clinical trials generally include three
      phases that together may take several years to complete. Phase 1 clinical
      studies (toxicity trials) are primarily conducted to establish the safety and
      determine the maximally tolerated dose (MTD). Phase 2 studies are designed
      to
      determine preliminary efficacy and establish dosing. Phase 3 studies are
      conducted to optimize therapeutic efficacy in a statistically significant manner
      at the levels of optimal dose, method of delivery into the body or route, and
      schedule of administration. Once clinical trials are completed successfully,
      products may receive regulatory approval.





Since
      July 2005, we have been conducting a Phase 2 clinical trial in humans to
      demonstrate clinical efficacy of IgG immunotherapy in three major cancers:
      colon, prostate and melanoma. To date, 32 patients have been enrolled, out
      of
      which 27 have actually received the IgG treatment. This phase 2 clinical trial
      is being conducted at three medical centers in Israel and results will likely
      be
      available during 2007. The trial is due to be completed during 2007. We may
      continue to monitor patients for a number of years after the trial in order
      to
      collect additional evidence of efficacy and potential benefits or adverse
      effects of the IgG treatment. If successful or promising, and at this
      preliminary stage there is no assurance they will be, results of these clinical
      trials may be used to enter into discussions with a major pharmaceutical partner
      and plasma based product manufacturers to work with us to potentially
      commercialize this IgG product. This commercialization will include the need
      to
      conduct Phase 3 clinical trials in accordance with local regulatory
      requirements. Such trials may be long-term trials and may require substantial
      financial resources that we do not presently possess.





We
      are
      also in the process of applying for an Investigational New Drug Application
      (“IND”) with the US FDA for VitiGam, GammaCan’s second generation IgG product
      and first-in-class anti-cancer immunotherapy. We expect that VitiGam will enter
      the clinic under a US IND with in the next 12 months. VitiGam is designed to
      target metastatic melanoma patients with stage III and IV melanoma.





14


VitiGam
      is an intravenous IgG mixture derived from IgG manufactured from plasma
      collected from donors with vitiligo, a benign autoimmune skin condition
      affecting up to 2% of the general population. GammaCan scientists have shown
      that vitiligo derived IgG (VitiGam) contains anti-melanoma activities in
      substantially higher quantities than those found in IgG from other donors.
      This
“enriched” vitiligo IgG (VitiGam) has potent anti-melanoma activity in both *in
      vitro* and *in
      vivo* melanoma
      models. Preliminary data from the ongoing, open-label Phase 2 trial of GCAN
      101
      (“standard” IgG) in melanoma patients further support the rationale underling
      the VitiGam program.





The
      Company intends to conduct a Phase 1/2 trial under a US IND to evaluate VitiGam
      in patients with stage III and IV melanoma. As described under the Planned
      Expenditure section, the estimated costs of this Phase 1/2 are substantial;
      the
      timing of initiation of the Phase 1/2 trials will be based on several major
      factors, including the ability of the Company to attract sufficient financing
      on
      acceptable terms.





We
      are
      also contemplating conduct additional clinical trials to test new formulations
      and/or combinations of IgG and to test IgG immunotherapies for different cancers
      at different stages of disease progression with varying dosages and routes
      of
      administration. To achieve this we may elect to partner with a pharmaceutical
      company to conduct these further clinical trials, in order to attain broad-based
      regulatory approval. **





We
      expect
      that it will take a number of years to receive final approval and registration
      of an IgG preparation for use as an anti-cancer agent. The Company's strategy
      is
      to collaborate with a suitable partner to support late stage (Phase 3) clinical
      development, registration and sales for its IgG based cancer products.





**Long
      Term Business Strategy**





As
      noted
      previously, if our IgG base cancer immunotherapies show significant promise
      through clinical trials, we plan to ultimately seek a strategic commercial
      partner, or partners, with extensive experience in the commercialization and
      marketing of cancer drugs and or other infused therapeutic proteins. It is
      envisioned that the partner, or partners, would be responsible or substantially
      support late stage clinical trials (Phase 3) to ensure regulatory approvals and
      registrations in the appropriate territories in a timely manner. It is further
      envisioned that the partner, or partners, would be responsible for sales and
      marketing of our IgG immunotherapies in certain agreed upon territories. Such
      planned strategic partnership, or partnerships, could provide a marketing and
      sales infrastructure for our products as well as financial and operational
      support for global trials and other regulatory requirements concerning future
      clinical development in the US and elsewhere. Our future strategic partner,
      or
      partners, could also provide capital and expertise that would enable the
      partnership to develop new formulations of IgG cancer immunotherapy suitable
      for
      patients at different stages of disease progression as well as IgG derivatives.
      Under certain circumstances, the Company may decide to develop any of its IgG
      based cancer immunotherapies on its own, either world wide or in select
      territories.





**Other
      Research and Development Plans**





In
      addition to conducting early-stage clinical trials, we plan to conduct
      pre-clinical research to further deepen our understanding of the biology of
      our
      IgG products in cancer, develop alternative delivery systems, to determine
      the
      optimal dosage for different patient groups, to investigate alternative sources
      of immunoglobulin other than human plasma, to develop novel IgG based therapies
      and to develop successor products to our current products. For example, we
      plan
      to conduct research to isolate the fraction of IgG, which is responsible for
      its
      anti-metastatic effects and to develop a potential synthetic version of IgG.
      These formulations will be suitable for:





15


·
            Low-dose,
                preventative therapy for disease-free, high-risk individuals,


·
            Strong
                dose for use in conjunction with surgery and other cancer treatments,
                and


·
            Maintenance
                dose for use to prevent recurrence of cancer
                growth.


·
            Others





Our
      plan
      is to patent any successful inventions resulting from our future research
      activities and to exploit any other means that may exist to protect our future
      IgG anti-cancer therapies in the commercial markets. For example, we may seek
      Orphan Drug Status for future IgG anti-cancer therapies for certain indications
      in certain markets.





**Other
      Strategic Plans**





In
      addition to developing our own IgG based anti-cancer therapies drug portfolio,
      we are considering in-licensing and other means of obtaining additional lead
      molecules of technologies to complement and/or expand our current product
      portfolio. The goal of this is to create a well-balanced product portfolio
      including lead molecules in different stages of development and addressing
      different medical needs.





**Critical
      accounting policies and estimates**





Management's
      discussion and analysis of the financial condition and results of operations
      is
      based upon the consolidated financial statements, which have been prepared
      in
      accordance with accounting principles generally accepted in the United States
      of
      America. The preparation of these financial statements requires us to make
      estimates and judgments that affect the reported amounts of assets and
      liabilities, expenses and related disclosure of contingent assets and
      liabilities. On an on-going basis, we evaluate our estimates and judgments.
      We
      base our estimates on various factors, including historical experience that
      we
      believe to be reasonable under the circumstances, the results of which form
      the
      basis for making judgments about the carrying values of assets and liabilities
      that are not readily apparent from other resources. Actual results may differ
      from these estimates under different assumptions or conditions.





We
      believe the following critical accounting policies affect our more significant
      judgments and estimates used in the preparation of our consolidated financial
      statements.





**Going
      concern assumption**


The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. The Company has net losses for the period
      from
      inception (October 6, 1998) through December 31, 2006 of $4,584,828, as
      well as negative cash flow from operating activities. Presently, the company
      does not have sufficient cash resources to meet its requirements in the twelve
      months following January 1, 2007. These factors raise substantial doubt about
      the company's ability to continue as a going concern.  Management
      is in the process of evaluating various financing alternatives as the Company
      will need to finance future research and development activities and general
      and
      administrative expenses through fund raising ****** in
      the
      public or private equity markets. Although there is no assurance that the
      Company will be successful with those initiatives, management is confident
      that
      it will be able to secure the necessary financing as a result of ongoing
      financing discussions with third party investors and existing
      shareholders.





16


The
      financial statements do not include any adjustments that may be necessary should
      the company be unable to continue as a going concern. The Company's continuation
      as a going concern is dependent on its ability to obtain additional financings
      as may be required and ultimately to attain profitability.




**Valuation
      of options and warrants**


The
      Company granted options to purchase common shares of our company to employees
      and consultants and issued warrants in connection with fund
      raising.




Until
      September 30, 2006 the Company accounted for employee stock based compensation
      in accordance with Accounting Principles Board Opinion No. 25 “Accounting for
      Stock Issued to Employees” (“APB 25”) and related interpretations. In accordance
      with FAS 123 - “Accounting for Stock-Based Compensation” (“FAS 123”), the
      Company disclosed pro forma data assuming the Company had accounted for employee
      stock option grants using the fair value-based method defined in FAS
      123.




On
      October 1, 2006 the Company adopted the revised Statement of Financial
      Accounting Standards ("FAS") No. 123, *Share-Based
      Payment (* FAS 123R *)* ,
      which
      addresses the accounting for share-based payment transactions in which the
      Company obtains employee services in exchange for (a) equity instruments of
      the
      Company or (b) liabilities that are based on the fair value of the Company’s
      equity instruments or that may be settled by the issuance of such equity
      instruments. FAS 123R eliminates the ability to account for employee share-based
      payment transactions using APB Opinion No. 25, *Accounting
      for Stock Issued to Employees,* and
      requires instead that such transactions be accounted for using the grant-date
      fair value based method. This Statement is effective as of the beginning of
      the
      first annual reporting period that begins after December 15, 2005, for
      small business issuers, which is October 1, 2006 for the Company.






FASB
      123R
      applies to all awards granted or modified after the Statement’s effective date.
      In addition, compensation cost for the unvested portion of previously granted
      awards that remain outstanding on the Statement’s effective date shall be
      recognized on or after the effective date, as the related services are rendered,
      based on the awards’ grant-date fair value as previously calculated for the
      pro-forma disclosure under FAS 123.




The
      Company applied the modified prospective application transition method, as
      permitted by the Statement. Under such transition method, upon the adoption
      of
      FAS 123R, the Company’s financial statements for periods prior to the effective
      date of the Statement is not restated.




The
      company accounts for equity instruments issued to third party service providers
      (non-employees) in accordance with the fair value based on an option-pricing
      model, pursuant to the guidance in EITF 96-18 “Accounting for Equity Instruments
      That Are Issued to Other Than Employees for Acquiring, or in Conjunction with
      Selling Goods or Services”. The fair value of the options granted is revalued
      over the related service periods and recognized using the accelerated
      method.





17


**Deferred
      income taxes**


Deferred
      taxes are determined utilizing the assets and liabilities method based on the
      estimated future tax effects of differences between the financial accounting
      and
      tax bases of assets and liabilities under the applicable tax laws. Deferred
      tax
      balances are computed using the tax rates expected to be in effect when those
      differences reverse. A valuation allowance in respect of deferred tax assets
      is
      provided if, based upon the weight of available evidence, it is more likely
      than
      not that some or all of the deferred tax assets will not be realized. The
      Company has provided a full valuation allowance with respect to its deferred
      tax
      assets.





Regarding
      the Israeli subsidiary, paragraph 9(f) of FAS 109,"Accounting for Income Taxes”,
      prohibits the recognition of deferred tax liabilities or assets that arise
      from
      differences between the financial reporting and tax bases of assets and
      liabilities that are measured from the local currency into dollars using
      historical exchange rates, and that result from changes in exchange rates or
      indexing for tax purposes. Consequently, the abovementioned differences were
      not
      reflected in the computation of deferred tax assets and liabilities .




**Results
      of Operations**


Three
      months ended December 31, 2006 and 2005





The
      following table summarizes certain statement of operations data for the company
      for the three months period ended December 31, 2006 and 2005 (in
      US$):





Three
                months ended
              December
                31,2006
            
            2005Research
                and development costs
            
            $
            167,972
            
            $
            225,161General
                and administrative expenses
            
            
            637,222
            
            
            212,775Financial
                expenses (income), net
            
            
            2,221
            
            
            (5,022
            )Net
                loss for the period
            
            $
            (807,415
            )
            $
            (432,914
            )





Research
      and development costs.


Research
      and development expenses are the costs incurred in the process of our
      pre-clinical and our clinical trials. Clinical trial and pre-clinical expenses
      include regulatory consultants and fees, research expenses, purchase of plasma,
      the cost of manufacturing IgG and payments to medical centers for patient
      recruitment and treatment.





During
      the three months ended December 31, 2006 and December 31, 2005 the research
      and
      development expenses included, among others, the clinical trial and pre-clinical
      trial expenses, the consultants compensation, costs related to the registered
      patents as well as salaries and related expenses.





During
      the three months ended December 31, 2006 the research and development expenses
      totaled $167,972, compared to $225,161 during the three months ended December
      31, 2005. The decrease in cost is attributable to the final stages of the Phase
      2 clinical trial we are currently conducting.





General
      and administrative expenses


The
      general and administrative expense includes the salaries and related expenses
      of
      the company's management, consulting, legal and professional fees, traveling,
      business development costs as well as insurance expenses.





18


For
      the
      three months ending December 31, 2006 the General and administrative expenses
      totaled $637,222 compared to $212,775 for the three months ended December 31,
      2005. Costs incurred related to general and administrative activities in the
      three months ended December 31, 2006 reflect an increase in the number of
      employees as compared to the three months period ending December 31, 2005.
      During the three months ended December 31, 2006 the company incurred $348,751
      of
      costs due to the implementation of FAS 123R related to stock options granted
      to
      employees, $329,542 of these costs were classified to the General and
      administrative expenses. The company did not incur similar costs in the three
      months ended December 31, 2005.





Financial
      income/expense, net


During
      the three months ending December 31, 2006 and December 31, 2005, the company
      generated interest income on available cash and cash equivalents balance and
      incurred interest expenses related to its issued convertible promissory note.





**Liquidity
      and Capital Recourses**


**Financing
      activities**





Through
      December 31, 2006, the Company has incurred losses in an aggregate amount of
      $4,584,828. We have financed our operation from private placement of common
      stock and loans received. Through December 31, 2006 we raised a total of
      $3,652,829, net of transaction cost, through private placements and received
      a
      total of $350,000 in loans and we anticipate that additional financing will
      be
      through similar sources. Our financing activates for the three months period
      ending December 31, 2006 include the following:





On
      November 20, 2006 the Company issued a convertible promissory note, aggregate
      principal amount of $350,000, which bears interest at 8% payable on maturity
      of
      the note and matures on November 20, 2007.





**Employee's
      stock options plan**





On
      October 12, 2006 we granted options to purchase up to 50,000 common shares
      of
      our company at an exercise price of $0.65 to a new member of our Scientific
      Advisory Board.




On
      November 13, 2006 we granted options to purchase up to 150,000 common shares
      of
      our company at an exercise price of $0.45 to each of Steven Katz and Albert
      Passner, its two new Board members. Total options granted to purchase 300,000
      common shares were granted.





On
      December 5, 2006 we granted options to purchase up to 50,000 common shares
      of
      our company at an exercise price of $0.50 to a new member of our Scientific
      Advisory Board.




19


**Planned
      Expenditures**


The
      estimated expenses referenced herein are in accordance with our business plan.
      As the technology is still in the development stage, it can be expected that
      there will be changes in some budgetary items. Our planned expenditures for
      the
      next 12 months include:





**Category**
            
            **Amount**Research
                &Development
            
            
            4,045,000General
                & Administrative Expenses
            
            
            2,078,000Finance
                income, net
            
            
            (49,000
            )**Total**
            
            
            **6,074,000**





As
      previously indicated we are in the process of applying for an IND with the
      US
      FDA for VitiGam, GammaCan’s second generation IgG based product and
      first-in-class anti-cancer immunotherapy. VitiGam is slated to enter the clinic
      trial phase pursuant to a US IND. VitiGam is designed to target metastatic
      melanoma patients with stage III and IV melanoma. Our ability to proceed with
      the IND application as well as the commencement of the required clinical trial
      is dependent on several major factors one of which is the ability to attract
      sufficient financing on acceptable terms.





**Related
      party transactions**


Mr.
      Yair
      Aloni, a director of our company, and Professor Yehuda Shoenfeld, M.D., the
      Chief Scientist of our subsidiary, GammaCan, Ltd., are authorized signatories
      of
      ARP Biomed Ltd. for the Intellectual Property Purchase and Sale Agreement we
      entered into with ARP Biomed Ltd. on June 11, 2004. Mr. Aloni is the Chief
      Executive Officer of ARP and Mr. Shoenfeld is an advisor to ARP.





On
      June
      6, 2005, the Company and GammaCan, Ltd. appointed Vered Caplan as acting Chief
      Executive Officer of both companies, effective July 2, 2005. Vered Caplan will
      devote approximately 70% of her business time to the affairs of GammaCan, Ltd.
      and the Company. Vered Caplan shall receive a salary of $6,475 per month. On
      April 15, 2006 Vered Caplan has resigned form her position as the acting Chief
      Executive Officer of the company. Vered Caplan will remain as the Chief
      Executive Officer of GammaCan, Ltd.





On
      April
      16, 2006, the Company entered into an employment agreement (the "Agreement")
      with Patrick Schnegelsberg pursuant to which Mr. Schnegelsberg will serve as
      Chief Executive Officer of the Company, effective April 15, 2006. Mr.
      Schnegelsberg shall receive a salary of $200,000 and an annual bonus of up
      to
      $200,000 upon achieving certain objectives. Pursuant to a separate agreement
      between the Company and Mr. Schnegelsberg, the Company agreed to indemnify
      Mr.
      Schnegelsberg for substantially all liabilities he may incur as a result of
      his
      employment by or service to the Company. Mr. Schnegelsberg was granted 1,400,000
      stock options of the Corporation, pursuant to the Corporation's 2004 Stock
      Option Plan, adopted by the Board on August 17, 2004. Options are exercisable
      at
      an exercise price of $1.29 per share. 350,000 of the Options shall vest on
      the
      first anniversary from their date of grant, and the remaining Options shall
      vest
      in 36 equal monthly instalments thereafter.





20


**ITEM
      3. CONTROLS AND PROCEDURES**





Evaluation
      of Disclosure Controls and Procedures. As of December 31, 2006, the Company’s
      management carried out an evaluation, under the supervision of the Company’s
      Chief Executive Officer and the Chief Financial Officer, of the effectiveness
      of
      the design and operation of the Company’s system of disclosure controls and
      procedures (as defined by Rule 13a-15(e) and 15d-15(e) under the Security and
      Exchange Act of 1934, as amended (“the Exchange Act”).  Based upon that
      evaluation, the Chief Executive Officer and Chief Financial Officer concluded
      that the Company’s disclosure controls and procedures were effective, as of the
      date of their evaluation, for the purposes of recording, processing, summarizing
      and timely reporting material information required to be disclosed in reports
      filed by the Company under the Exchange Act.





Changes
      in internal controls. There were no changes in the Company’s internal controls
      over financial reporting, that occurred during the period covered by this report
      that have materially affected, or are reasonably likely to materially effect,
      the Company’s internal control over financial reporting.


21


**PART
      II**





**ITEM
      1**  **LEGAL
      PROCEEDINGS**





From
      time
      to time the Company is subject to litigation incidental to its business. Such
      claims, if successful, could exceed applicable insurance coverage. The Company
      is not currently a party to any material legal proceedings.





**ITEM
      2**  **UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**





On
      October 18, 2006 the Company entered into a Strategic Alliance Agreement with
      UTEK Corporation (“UTEK”), pursuant to which UTEK would assist the Corporation
      in identifying technology acquisition opportunities. As consideration for the
      services being provided to the Corporation by UTEK, the Corporation has agreed
      to issue UTEK an aggregate of 171,432 shares of common stock, par value $0.0001
      per share, of the Corporation, which will vest in 12 equal monthly instalments
      of 14,286 shares.





**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. ****





22


**ITEM
      6**  **EXHIBITS**





31.1
      -
      Certification of Principal Financial Officer pursuant to Rule 13a-14 and Rule
      15d-14(a), promulgated under the Securities and Exchange Act of 1934, as
      amended




31.2
      -
      Certification of Principal Executive Officer pursuant to Rule 13a-14 and Rule
      15d 14(a), promulgated under the Securities and Exchange Act of 1934, as
      amended





32.1
      -
      Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
      906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer)





32.2
      -
      Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
      906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer)








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











**GAMMACAN
                INTERNATIONAL, INC.**February
                9, 2007
            
            /s/*CHAIME
                ORLEV*Chaime
                Orlev,Chief
                Financial Officer





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