News Column

LIXTE BIOTECHNOLOGY HOLDINGS, INC. - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

May 9, 2014

Overview

Lixte Biotechnology Holdings, Inc., a Delaware corporation, including its wholly-owned Delaware subsidiary, Lixte Biotechnology, Inc. (collectively, the "Company") is engaged in research and development activities with respect to anti-cancer treatments and other common non-malignant diseases. The Company is considered a "development stage company" under current accounting standards, as it has not yet commenced any revenue-generating operations, does not have any cash flows from operations, and is dependent on debt and equity funding to finance its operations.



The Company's common stock is traded on the OTCQB operated by the OTC Markets under the symbol "LIXT".

Recent Developments On January 28, 2014, the Company offered to all of its warrant holders an inducement to exercise early by reducing the exercise price of currently outstanding warrants by 50%, if exercised on a cash basis by April 15, 2014. Effective April 15, 2014, the Company received notices from certain of its warrant holders of the exercise of warrants to purchase an aggregate of 3,900,000 shares of the Company's common stock at exercise prices ranging from $0.25 to $0.375 per share. In connection with such exercises, the Company received aggregate proceeds of $1,412,500. The Company intends to use the proceeds from the exercise of the warrants to fund its ongoing clinical trial, for maintenance of its patient portfolio and for general corporate purposes.



Effective April 16, 2014, Dr. Mel Sorenson resigned from the Company's Board of Directors for personal reasons.

Going Concern The Company's condensed consolidated financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company is in the development stage and has not generated any revenues from operations to date, and does not expect to do so in the foreseeable future. The Company has experienced recurring operating losses and negative operating cash flows since inception, and has financed its working capital requirements during this period primarily through the recurring sale of its equity securities and the exercise of outstanding warrants. As a result, the Company's independent registered public accounting firm, in its report on the Company's 2013 consolidated financial statements, has raised substantial doubt about the Company's ability to continue as a going concern.



The Company's ability to continue as a going concern is dependent upon its ability to raise additional capital and to ultimately achieve sustainable revenues and profitable operations. The Company's condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

At March 31, 2014, the Company had not yet commenced any revenue-generating operations. All activity through March 31, 2014 has been related to the Company's capital raising efforts and research and development activities. As such, the Company has yet to generate any cash flows from operations, and is dependent on debt and equity funding from both related and unrelated parties to finance its operations. Prior to June 30, 2006, the Company's cash requirements were funded by advances from the Company's founder aggregating $92,717. Because the Company is currently engaged in research at an early stage, it will likely take a significant amount of time to develop any product or intellectual property capable of generating revenues. As such, the Company's business is unlikely to generate any sustainable revenues in the next several years, and may never do so. Even if the Company is able to generate revenues in the future through licensing its technologies or through product sales, there can be no assurance that the Company will be able to achieve positive earnings and cash flows from operations.

At March 31, 2014, the Company had cash and money market funds aggregating $121,575 and in April 2014, the Company raised $1,412,500 by offering a 50% discount to warrant holders as an inducement to exercise their warrants for cash through April 15, 2014. The amount and timing of future cash requirements will depend on the pace of the Company's programs, in particular the completion of the Phase 1 clinical trial of LB-100. The Company believes that it has sufficient funds to continue with the Phase 1 clinical trial of LB-100 and to fund its operating plans through June 30, 2015. Accordingly, the Company will need to raise additional capital in 2015, likely in the form of equity. Market conditions present uncertainty as to the Company's ability to secure additional funds. There can be no assurances that the Company will be able to secure additional financing on acceptable terms or at all. If cash resources are insufficient to satisfy the Company's ongoing cash requirements, the Company would be required to scale back or discontinue its technology and product development programs and/or clinical trials, or obtain funds, if available (although there can be no certainty), through strategic alliances that may require the Company to relinquish rights to certain of its products, or to discontinue its operations entirely. 4 After completion of the Phase 1 clinical trial of LB-100, subject to the availability of funds, the Company anticipates that the next step would be to determine the anti-cancer activity of LB-100, in combination with a widely used anti-cancer drug, against a specific type of human cancer in a Phase 2 clinical trial. In addition, subject to the availability of funds, the Company intends to continue the two drug development programs currently in process, and expand its patent portfolio, including the maintenance of its applications for international protection of lead compounds of both the LB-100 and LB-200 series.



Recent Accounting Pronouncements

In April 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360). This guidance amends the requirements for reporting for discontinued operations and requires additional disclosures about discontinued operations. Under the new guidance, only disposals representing a strategic shift in operations or that have a major effect on the Company's operations and financial results should be presented as discontinued operations. This guidance is effective for annual periods beginning after December 15, 2014. The Company does not expect the adoption of this guidance to have a material impact on the Company's consolidated financial statements. On February 26, 2014, the FASB affirmed changes in a November 2013 Exposure Draft, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, and directed the FASB staff to draft a final Accounting Standards Update for vote by the FASB Board. This new accounting guidance is intended to reduce the cost and complexity in financial reporting by eliminating inception-to-date information from the financial statements of development

stage entities.



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

Concentration of Risk The Company periodically contracts with directors, including companies controlled by or associated with directors, to provide consulting services related to the Company's research and development and clinical trial activities. Agreements for these services can be for a specific time period (typically one year) or for a specific project or task, and can include both cash and non-cash compensation. The only such contract that represents 10% or more of general and administrative or research and development costs is described below. On September 21, 2012, the Company entered into a work order agreement with Theradex, the CRO responsible for the clinical development of the Company's lead compound, LB-100, to manage and administer the Phase 1 clinical trial of LB-100. The Phase 1 clinical trial of LB-100, which began during April 2013 with the entry of patients into the clinical trial, is being carried out by nationally recognized comprehensive cancer centers, and is estimated to be completed between March and June 2015. The Phase 1 clinical trial is estimated to cost approximately $2,000,000, with such payments expected to be divided approximately evenly between payments to Theradex for services rendered and payments for pass-through costs for the clinical center's laboratory costs and investigator costs. Total costs charged to operations through March 31, 2014 for services paid to Theradex pursuant to this arrangement, which were first incurred in 2013, total $358,373, of which $79,652 and $48,783 were incurred during the three months ended March 31, 2014 and 2013, respectively, or approximately 49% and 29% of research and development costs for the three months ended March 31, 2014 and 2013, respectively. The costs charged to operations for amounts paid to Theradex for services relating to the Phase 1 clinical trial of LB-100 are expected to represent a larger percentage of total research and development costs during the fiscal years ending December 31, 2014 and 2015 as compared to prior fiscal years. Costs pursuant to this agreement are included in research and development costs in the Company's condensed consolidated statements of operations. On May 2, 2011, Dr. Robert B. Royds, the founder, Chairman of the Board and Medical Director of Theradex, was appointed to the Company's Board of Directors. Dr. Royds died on March 23, 2013. The death of Dr. Royds is not expected to have any impact on the management and administration of the Phase 1 clinical trial of LB-100. In addition to the above described agreement with Theradex, the Company has also from time to time engaged Theradex to assist the Company in bringing LB-100 through the FDA approval process and to provide other services. Total fees charged to operations for services paid to Theradex pursuant to such engagements were $5,819 and $7,393 for the three months ended March 31, 2014 and 2013, respectively, or approximately 4% and 4% of research and development costs for the three months ended March 31, 2014 and 2013, respectively, and are included in research and development costs in the Company's condensed consolidated statements of operations. 5



Critical Accounting Policies and Estimates

The Company prepared its condensed 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 consist primarily of fees paid to consultants and outside service providers, patent fees and costs, and other expenses relating to the acquisition, design, development and testing of the Company's treatments and product candidates. Research and development costs are expensed as incurred over the life of the underlying contracts 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. Payments made pursuant to research and development contracts are initially recorded as advances on research and development contract services in the Company's balance sheet and then charged to research and development costs in the Company's statement of operations as those contract services are performed. Expenses incurred under research and development contracts in excess of amounts advanced are recorded as research and development contract liabilities in the Company's balance sheet, with a corresponding charge to research and development costs in the Company's statement of operations. The Company reviews the status of its research and development contracts on a quarterly basis. Patent Costs Due to the significant uncertainty associated with the successful development of one or more commercially viable products based on the Company's research efforts and any related patent applications, all patent costs, including patent-related legal and filing fees, are expensed as incurred. Stock-Based Compensation



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

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

The Company accounts for stock-based payments to consultants by determining the value of the stock compensation based upon the measurement date at either (a) the date at which a performance commitment is reached or (b) at the date at which the necessary performance to earn the equity instruments is complete. Options granted to members of the Company's Scientific Advisory Committee and to outside consultants are revalued each reporting period to determine the amount to be recorded as an expense in the respective period. As the options vest, they are valued on each vesting date and an adjustment is recorded for the difference between the value already recorded and the then current value on the date of vesting. The fair value of stock-based compensation is affected by several variables, the most significant of which are the life of the equity award, the exercise price of the security as compared to the fair market value of the common stock on the grant date, and the estimated volatility of the common stock over the term

of the equity award.



The Company recognizes the fair value of stock-based compensation awards in general and administrative costs and in research and development costs, as appropriate, in the condensed consolidated statement of operations.

6 Income Taxes

The Company accounts for income taxes under an asset and liability approach for financial accounting and reporting for income taxes. Accordingly, the Company recognizes deferred tax assets and liabilities for the expected impact of differences between the financial statements and the tax basis of assets and liabilities.

The Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. In the event the Company was to determine that it would be able to realize its deferred tax assets in the future in excess of its recorded amount, an adjustment to the deferred tax assets would be credited to operations in the period such determination was made. Likewise, should the Company determine that it would not be able to realize all or part of its deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to operations in the period such determination was made. Plan of Operation General Overview of Plans

The Company's original focus was the development of new treatments for the most common and most aggressive type of brain cancer of adults, glioblastoma multiforme ("GBM"), and the most common cancer of children, neuroblastoma. The Company has expanded the scope of its anti-cancer investigational activities to include the most common brain tumor of children, medulloblastoma, and also to several other types of more common cancers. This expansion of activity is based on documentation that each of two distinct types of drugs being developed by the Company has activity against cell lines of breast, colon, lung, prostate, pancreas, ovary, stomach and liver cancer, as well as against the major types of leukemias. LB-100 has now been shown to have activity in animal models of brain tumors of adults and children, and also against melanomas and sarcomas. Studies in animal models of human melanoma, lymphoma, sarcoma, brain tumors, and the rare neuroendocrine cancer, pheochromocytoma, have demonstrated marked potentiation by LB-100 of the anti-tumor activity of the widely used standard chemotherapeutic drugs. These studies confirm that the LB-100 compounds, combined with any of several standard anti-cancer drugs, have broad activity affecting many different cell types of cancer. This is unusual and important because these compounds may be useful for treatment of cancer in general. The research on brain tumors was conducted in collaboration with the National Institute of Neurological Disorders and Stroke ("NINDS") of the National Institutes of Health ("NIH") under a Cooperative Research and Development Agreement ("CRADA") entered into on March 22, 2006. The CRADA was extended through a series of amendments and remained in effect until April 1, 2013. The research at NINDS was led by Dr. Zhengping Zhuang, an internationally recognized investigator in the molecular pathology of cancer who was aided by two senior research technicians supported by the Company as part of the CRADA. The goal of the CRADA was to develop more effective drugs for the treatment of GBM through the processes required to gain allowance from the FDA for clinical trials. The CRADA terminated as scheduled on April 1, 2013.



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

The Company's immediate focus is to determine the safety and appropriate dose of LB-100 when used alone and when used in combination with a widely used anti-cancer drug in its Phase 1 clinical trial. The Company believes the potent activity of these drugs, in combination with standard non-specific chemotherapeutic drugs against a diverse array of common and uncommon cancers of adults and children, merits bringing this treatment to patients as rapidly as possible. If favorable treatment responses are also noted in the Phase 1 clinical trial, the Company would expect there to be increased interest by potential investors and by large pharmaceutical companies looking to add an entirely new approach to their anti-cancer drug portfolios. However, clinical benefit often is not apparent until a new compound advances to a Phase 2 clinical trial, which, if warranted, would be anticipated to follow the Phase 1 clinical trial.



The Company's longer-term objective is to secure one or more strategic partnerships with pharmaceutical companies with major programs in cancer, anti-fungal treatments, and/or neuroprotective measures.

7 The significant diversity of the potential therapeutic value of the Company's Series 2 compounds (LB-201 and homologs) stems from the fact that these agents modify critical pathways in cancer cells and in microorganisms such as fungi and appear to ameliorate pathologic processes that lead to brain injury caused by trauma or toxins or through as yet unknown mechanisms that underlie the major chronic neurologic diseases, including Alzheimer's disease, Parkinson's disease, and Amyotrophic Lateral Sclerosis (ALS, or Lou Gehrig's disease). Operating Plans

The Company's primary focus is developing new treatments for human cancers for which better therapies are urgently needed. The scope of potential applications of the Company's products has expanded to other common non-malignant diseases, including vascular diseases (heart attacks and stroke, diabetes, and genetic diseases, such as Gaucher's disease) in which errors in normal cellular processing lead to loss of functions important to normal cell function. This has occurred because the targets selected by the Company have multiple functions in the cell, which when altered result in different disorders that may benefit by treatment from the Company's products. The Company's drug discovery process is based on discerning clues to potential new targets for disease treatments reported in the increasingly large body of literature identifying the molecular variants, which characterize human cancers and other non-cancer disorders. In the past decade, there has been an unprecedented expansion in knowledge of biochemical defects in the cancer cell. The Company designs drugs for which there are existing data suggesting that they may affect the altered pathways of the cancer cell and may be given safely to humans. The Company seeks to rapidly arrive at patentable structures through analysis of the literature rather than screening of thousands of structures for activity against a particular biochemical pathway. This approach has led to the development of two classes of drugs for the treatment of cancer, protein phosphatase inhibitors (PTase-i), designated by the Company as the LB-100 series of compounds, and histone deacetylase inhibitors (HDACi), designated by the Company as the LB-200 series of compounds. Compounds of both types also have potential use in the prevention and treatment of neurodegenerative diseases. The LB-100 series consists of novel structures, which have the potential to be first in their class, and may be useful in the treatment of not only several types of cancer but also vascular and metabolic diseases. The LB-200 series contains compounds which have the potential to be the most effective in its class and may be useful for the treatment of chronic hereditary diseases, such as Gaucher's disease, in addition to cancer and neurodegenerative diseases. . On August 16, 2011, the United States Patent and Trademark Office (the "PTO") awarded a patent to the Company for its lead compound, LB-100, as well as for a number of structurally related compounds. On November 15, 2011, the PTO awarded a patent to the Company for a lead compound in the LB-200 series and a compound in the LB-100 series as neuroprotective agents for the prevention and treatment of neurodegenerative diseases. On March 27, 2012, the PTO awarded a patent to the Company for its lead compound, LB-201, as well as for a number of structurally related compounds. Patent applications on these compounds and

their use are pending world-wide. The Company has demonstrated that lead compounds of both series of drugs are active against a broad spectrum of human cancers in cell culture and against several types of human cancers in animal models. The research on new drug treatment was initiated in 2006 with the NINDS, NIH under a CRADA effective March 22, 2006. The initial focus of the CRADA was on GBM, the most common and uniformly fatal brain tumor of adults. The work at NIH was then extended to the most common brain tumor of children, medulloblastoma, and to the most common extracranial solid tumor of children, neuroblastoma. The CRADA was extended through a series of amendments and remained in effect until April 1, 2013, when it terminated as scheduled. Effective treatment of brain tumors depends upon the ability of compounds to penetrate a physiological barrier known as the "blood-brain barrier", which protects the brain from exposure to potentially toxic substances in the blood. Because there is no certainty that the Company's compounds will be active against tumors confined to the brain, the LB-100 compounds have been studied against a variety of common and rare cancer types and have been shown to potentiate the activity of standard anti-cancer drugs in animal models of breast and pancreatic cancer, melanoma, pheochromcytomas and sarcomas. Because the LB-100 compounds appear to exert their ability to improve the effectiveness of different forms of chemotherapy and radiation therapy by inhibiting a process upon which most, if not all, cancer cell types depend on to survive treatment, the Company believes the LB-100 series of compounds may be useful against most, if not all, cancer types. 8

The second class of drugs under development by the Company, referred to as LB-200, is the histone deacetylase inhibitors. Many pharmaceutical companies are also developing drugs of this type, and at least two companies have HDACi approved for clinical use, in both cases for the treatment of a type of lymphoma. Despite this significant competition, the Company has demonstrated that its HDACi has broad activity against many cancer types, has neuroprotective activity, and has anti-fungal activity. In addition, these compounds have low toxicity, making them attractive candidates for development. It appears that one type of molecule has diverse effects, affecting biochemical processes that are fundamental to the life of the cell, whether they are cancer cells, nerve cells, or even fungal cells. The neuroprotective activity of the Company's HDACi has been demonstrated in the test tube in model systems that mimic injury to brain cells, such as occurs in stroke and Alzheimer's disease. This type of protective activity may have potential application to a broad spectrum of other chronic neurodegenerative diseases, including Parkinson's disease and Amytrophic Lateral Sclerosis (ALS, or Lou Gehrig's disease). The Company's primary objective has been to bring one lead compound of the LB-100 series to clinical trial. In 2012, the Company completed the pre-clinical studies needed to prepare an IND application to the FDA to conduct a Phase 1 clinical trial of LB-100, and engaged the CRO responsible for the clinical development of the Company's lead compound, LB-100, to prepare an IND application for filing with the FDA. This task included preparing the detailed clinical protocol known as the "Investigator's Brochure", a document containing a detailed summary of all that is known about LB-100, and development of the formal IND application for submission to the FDA. The CRO also established the procedures for assuring appropriate collection and reporting of data generated during the clinical trial of LB-100 to the FDA. The Company filed an IND application with the FDA on April 30, 2012, and on July 24, 2012, the FDA notified the Company that it would allow initiation of a Phase 1 clinical trial of LB-100. The purpose of the clinical trial is to demonstrate that LB-100 can be administered safely to human beings at a dose and at a frequency that achieves the desired pharmacologic effect; in this case, inhibition of a specific enzyme, without being associated with toxicities considered unacceptable. The Phase 1 clinical trial of LB-100 is designed to determine the maximum tolerable dose of LB-100 given alone and then in combination with a standard widely use anti-cancer drug. As a prelude to determining the therapeutic effectiveness of LB-100 in a subsequent Phase 2 clinical trial of common cancers, a key goal of the initial portion of the Phase 1 clinical trial will be to demonstrate that the target enzyme of LB-100, protein phosphatase 2A (PP2A), can be inhibited in humans with readily tolerable toxicity. As an anti-cancer drug, LB-100 is likely to be used at maximum tolerable doses, but for the potential treatment of non-malignant diseases, such as acute vascular diseases and metabolic diseases, lower doses may achieve therapeutic benefit by inhibition of the target enzyme, PP2A, thus opening up the possibility of a host of therapeutic applications for LB-100 and related proprietary compounds. The Company estimates that the Phase 1 clinical trial will be completed between March and June 2015 and will cost a total of approximately $2,000,000, which will be paid to or through Theradex, the CRO responsible for the clinical development of LB-100. Total costs charged to operations through March 31, 2014 for services paid to Theradex pursuant to this arrangement, which were first incurred in 2013, total $358,373, of which $79,652 and $48,783 were incurred during the three months ended March 31, 2014 and

2013, respectively. After completion of the Phase 1 clinical trial of LB-100, the Company anticipates that the next step in the clinical development of LB-100 will be to determine its anti-cancer activity in combination with docetaxal, a standard anti-cancer drug currently on the market, against a specific type of human cancer in a Phase 2 clinical trial. Subject to the availability of funds, the Company intends to conduct a randomized clinical trial of docetaxel +/- LB-100 against a common cancer type for which single agent docetaxel is indicated, and to determine the appropriate dose of LB-100 in combination with a second cytotoxic drug for evaluation subsequently in a Phase 2 clinical trial. As a compound moves through the FDA approval process, it becomes an increasingly valuable property, but at a cost of additional investment at each stage. The Company's approach has been to operate with a minimum of overhead, moving compounds forward as efficiently and inexpensively as possible, and to raise funds to support each of these stages as certain milestones are reached. The commencement of a Phase 1 clinical trial is a milestone in the Company's goal of developing a successful product platform. Results of Operations



The Company is a development stage company and had not commenced revenue-generating operations at March 31, 2014.

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Three Months Ended March 31, 2014 and 2013

General and Administrative. For the three months ended March 31, 2014, general and administrative costs were $553,008, which consisted of the fair value of stock options issued to directors and consultants of $380,628, consulting and professional fees of $103,265, royalties of $30,000, insurance expense of $9,538, officer's salary and related costs of $17,069, stock transfer fees of $3,560, travel and entertainment costs of $3,208, and other operating costs

of $5,740.

For the three months ended March 31, 2013, general and administrative costs were $167,642, which consisted of the fair value of stock options issued to directors and consultants of $53,037, consulting and professional fees of $80,369, insurance expense of $8,904, officer's salary and related costs of $16,823, stock transfer fees of $1,995, travel and entertainment costs of $1,514, and other operating costs of $5,000.



General and administrative costs increased by $385,366 or 229.9% in 2014 as compared to 2013, primarily as a result of a increase of $327,591 in stock-based compensation .

A significant component of the fair value of stock options issued to directors and consultants of $380,628 for the three months ended March 31, 2014 was the $366,009 expense for the fair value of stock options to acquire 4,000,000 shares of the Company's common stock that were issued to Gil Schwartzberg on January 28, 2014 for his continuing contributions to the Company's financial strategy. Research and Development. For the three months ended March 31, 2014, research and development costs were $162,771, which consisted of the vested portion of the fair value of stock options issued to a member of the Company's Scientific Advisory Committee of $2,536, patent costs of $67,743, and contractor costs of $92,492, including $79,652 to a related party in connection with the Phase

1 clinical trial of LB-100. For the three months ended March 31, 2013, research and development costs were $166,305, which consisted of patent costs of $96,679, contractor costs of $63,376, including $48,783 to a related party in connection with the Phase 1 clinical trial of LB-100, and consulting fees to a related party of $6,250. Research and development costs decreased by $3,534 or 2.1% in 2014 as compared to 2013, primarily as a result of a decrease of $28,936 in patent costs, offset by an increase of $29,116 in contractor costs. Fair Value of Warrant Extensions. During the three months ended March 31, 2014, the Company incurred an expense of $78,617 for the fair value of extending the expiration date of warrants to acquire 1,748,800 shares of the Company's common stock that were purchased by investors as part of private placements that closed in 2009. Fair Value of Warrant Discount. During the three months ended March 31, 2014, the Company incurred an expense of $134,420 for the fair value of discounts offered to warrant holders as an inducement for the early exercise of warrants to acquire 3,900,000 shares of the Company's common stock. The discounts ranged from $0.25 to $0.375 per share. The exercise of the warrants generated net proceeds to the Company of $1,412,500 in April 2014. Net Loss. For the three months ended March 31, 2014, the Company incurred a net loss of $928,815, as compared to a net loss of $333,946 for the three months ended March 31, 2013.



Liquidity and Capital Resources - March 31, 2014

The Company's condensed consolidated financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company is in the development stage and has not generated any revenues from operations to date, and does not expect to do so in the foreseeable future. The Company has experienced recurring operating losses and negative operating cash flows since inception, and has financed its working capital requirements through the recurring sale of its equity securities. As a result, the Company's independent registered public accounting firm, in its report on the Company's 2013 consolidated financial statements, has raised substantial doubt about the Company's ability to continue as a going concern (see "Going Concern" above"). At March 31, 2014, the Company had a working capital deficit of $96,348, as compared to working capital surplus of $236,266 at December 31, 2013, a decrease in working capital of $332,614 for the three months ended March 31, 2014. At March 31, 2014, the Company had cash and money market funds aggregating $121,575, as compared to $481,154 at December 31, 2013, a decrease of $359,579 for the three months ended March 31, 2014. The decrease in working capital and cash during the year ended three months 31, 2014 was the result of cash utilized by the Company in its operating activities. 10

The Company filed an IND application with the FDA on April 30, 2012, and on July 24, 2012, the FDA notified the Company that it would allow initiation of a Phase 1 clinical trial of LB-100. The purpose of the clinical trial is to demonstrate that LB-100 can be administered safely to human beings at a dose and at a frequency that achieves the desired pharmacologic effect; in this case, inhibition of a specific enzyme, without being associated with toxicities considered unacceptable. The Phase 1 clinical trial of LB-100 began in April 2013 with the entry of patients into the clinical trial, and is being carried out by a nationally recognized comprehensive cancer center. The Company estimates that the Phase 1 clinical trial will be completed between March and June 2015 and will cost a total of approximately $2,000,000, which will be paid to or through Theradex, the CRO responsible for the clinical development of LB-100. Total costs charged to operations through March 31, 2014 for services paid to Theradex pursuant to this arrangement, which were first incurred in 2013, total $358,373, of which $79,652 and $48,783 were incurred during the three months ended March 31, 2014 and 2013, respectively, which have been included in research and development expenses in the statement of operations. As a result of the exercise of warrants in April 2014, the Company believes that it has sufficient funds to continue with the Phase 1 clinical trial of LB-100 and to fund its operating plans through June 30, 2015. The amount and timing of future cash requirements will depend on the pace of the Company's programs, in particular the completion of the Phase 1 clinical trial of LB-100. Accordingly, the Company will need to raise additional capital in 2015, likely in the form of equity. Market conditions present uncertainty as to the Company's ability to secure additional funds. There can be no assurances that the Company will be able to secure additional financing on acceptable terms or at all. If cash resources are insufficient to satisfy the Company's ongoing cash requirements, the Company would be required to scale back or discontinue its technology and product development programs and/or clinical trials, or obtain funds, if available (although there can be no certainty), through strategic alliances that may require the Company to relinquish rights to certain of its products, or to discontinue its operations entirely.



Operating Activities. For the three months ended March 31, 2014, operating activities utilized cash of $359,579, as compared to utilizing cash of $280,540 for the three months ended March 31, 2013, to support the Company's ongoing research and development activities.

Investing Activities. There were no investing activities during the three months ended March 31, 2014. For the three months ended March 31, 2013, investing activities consisted of a $1 increase in money market funds from interest earned during the period.



Financing Activities. There were no financing activities during the three months ended March 31, 2014 and 2013.

Principal Commitments Effective September 19, 2008, the Company entered into a Patent License Agreement (the "PLA") with the NIH providing the Company with an exclusive license for all patents submitted jointly with the NIH under the CRADA. The PLA provided for an initial payment of $25,000 to the NIH within 60 days of September 19, 2008, and for a minimum annual royalty of $30,000 on January 1 of each calendar year following the year in which the CRADA is terminated. The PLA also provided for the Company to pay (i) specified royalties based on net sales by the Company and its sub-licensees, reduced by the amount of the minimum annual royalty for that year, (ii) certain benchmark royalties upon the achievement of certain clinical benchmarks, and (iii) sublicensing royalties for the granting of sublicenses, with respect to joint patents. The Company paid the initial $25,000 obligation on November 10, 2008, which was charged to general and administrative costs. Due to the termination of the CRADA on April 1, 2013, the Company became obligated for a minimum annual royalty of $30,000 to the NIH beginning in 2014 and each year thereafter. As of January 31, 2014, a minimum royalty of $30,000 was due pursuant to the PLA, which was charged to general and administrative costs during the three months ended March 31, 2014 and is included in accounts payable and accrued expenses in the accompanying condensed consolidated balance sheet at March 31, 2014. During April 2014, the Company advised the NIH of its intent to terminate this license. Effective October 18, 2013, the Company entered into a Materials Cooperative Research and Development Agreement (M-CRADA) with the National Institute of Neurological Disorders and Stroke of the National Institutes of Health (NINDS, NIH) for a term of four years. The Surgical Neurology Branch of NINDS, NIH will conduct research characterizing a variety of compounds proprietary to the Company, and will examine the compounds' potential for anti-cancer activity, reducing neurological deficit due to ischemia and brain injury, and stabilizing catalytic function of misfolded proteins for inborn brain diseases. Under an M-CRADA, a party provides research material, in this case proprietary compounds from the Company's pipeline, for study by scientists at NIH. The exchange of material is for research only and implies no endorsement of the material on the part of either party. Under the M-CRADA the NIH grants a collaborator an exclusive option to elect an exclusive or non-exclusive commercialization license. The M-CRADA does not generate any incremental cost to the Company.

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On September 21, 2012, the Company entered into a work order agreement with Theradex to manage and administer the Phase 1 clinical trial of LB-100. The Phase 1 clinical trial of LB-100, which began during April 2013 with the entry of patients into the clinical trial, is being carried out by nationally recognized comprehensive cancer centers, and is estimated to be completed between March and June 2015. The Phase 1 clinical trial is estimated to cost a total of approximately $2,000,000, with such payments expected to be divided approximately evenly between payments to Theradex for services rendered and payments for pass-through costs for the clinical center's laboratory costs and investigator costs. Total costs charged to operations through March 31, 2014 for services paid to Theradex pursuant to this arrangement, which were first incurred in 2013, total $358,373, of which $79,652 and $48,783 were incurred during the three months ended March 31, 2014 and 2013, respectively. Costs pursuant to this agreement are included in research and development costs in the Company's condensed consolidated statements of operations. On December 24, 2013, the Company entered into an agreement with NDA Consulting Corp. ("NDA") for consultation and advice in the field of oncology research and drug development. As part of the agreement, NDA agreed to cause its president, Dr. Daniel D. Von Hoff, M.D., to become a member of the Company's Scientific Advisory Committee. The term of the agreement is for one year and provides for a quarterly cash fee of $4,000. The first such quarterly cash payment was made on January 12, 2014. Consulting and advisory fees charged to operations pursuant to this agreement totaled $4,000 during the three months ended March 31, 2014. The following table sets forth the Company's principal cash obligations and commitments for the next five fiscal years as of March 31, 2014 aggregating $2,205,003, of which $232,090 is included in current liabilities in the condensed consolidated balance sheet at March 31, 2014. Amounts included in the 2014 column represent amounts due at March 31, 2014 for the remainder of the 2014 fiscal year ending December 31, 2014. Payments Due By Year Total 2014 2015 2016 2017 2018

Research and development contracts $ 39,110$ 39,110 $ - $ - $ - $ - Theradex work order agreement 1,657,176 1,257,176 400,000 - - - Patent license agreement 150,000 30,000 30,000 30,000 30,000 30,000 Consulting agreement 12,000 12,000 - - - - Liquidated damages payable under registration rights agreement 74,000 74,000 - - - - Due to stockholder 92,717 92,717 - - - - Total $ 2,025,003$ 1,505,003$ 430,000$ 30,000$ 30,000$ 30,000



Off-Balance Sheet Arrangements

At March 31, 2014, the Company did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.

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Source: Edgar Glimpses


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