News Column

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

August 8, 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 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".

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 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, management believes that there is 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 June 30, 2014, the Company had not yet commenced any revenue-generating operations. All activity through June 30, 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.

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 June 30, 2014, the Company had cash and money market funds aggregating $1,240,382, the result primarily of $1,412,500 raised by the Company in April 2014 by offering a 50% discount to warrant holders as an inducement to exercise their warrants for cash. 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. After completion of the Phase 1 clinical trial of LB-100, subject to the availability of funds, the Company anticipates that 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. 4



Recent Accounting Pronouncements

On June 10, 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-10 (ASU 2014-10), Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation. ASU 2014-10 eliminates the requirement to present inception-to-date information about income statement line items, cash flows, and equity transactions, and clarifies how entities should disclosure the risks and uncertainties related to their activities. ASU 2014-10 also eliminates an exception provided to development stage entities in Consolidations (ASC Topic 810) for determining whether an entity is a variable interest entity on the basis of the amount of investment equity that is at risk. The presentation and disclosure requirements in Topic 915 will no longer be required for interim and annual reporting periods beginning after December 15, 2014, and the revised consolidation standards will take effect in annual periods beginning after December 15, 2015. Early adoption is permitted. The Company adopted the provisions of ASU 2014-10 effective for its financial statements for the interim period ended June 30, 2014, and accordingly, is no longer presenting the inception-to-date financial information and disclosures formerly required. On May 28, 2014, the FASB issued Accounting Standards Update No. 2014-09 (ASU 2014-09), Revenue from Contracts with Customers. ASU 2014-09 will eliminate transaction- and industry-specific revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for reporting periods beginning after December 15, 2016, and early adoption is not permitted. Entities can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. As the Company does not expect to have any operating revenues for the foreseeable future, the Company does not expect the adoption of this guidance to have any impact on the Company's consolidated financial statement presentation or disclosures. In April 2014, the FASB issued Accounting Standards Update No. 2014-08 (ASU 2014-08), Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360). ASU 2014-08 amends the requirements for reporting 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 new accounting guidance is effective for annual periods beginning after December 15, 2014. As the Company is engaged in research and development activities and the Company's planned principal operations have not yet commenced, the Company does not expect the adoption of this guidance to have any impact on the Company's consolidated financial statement presentation or disclosures.



Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future consolidated 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 June 30, 2014 for services paid to Theradex pursuant to this arrangement, which were first incurred in 2013, total $452,381, of which $94,008 and $75,079 were incurred during the three months ended June 30, 2014 and 2013, respectively, or approximately 28% and 30% of research and development costs for the three months ended June 30, 2014 and 2013, respectively. During the six months ended June 30, 2014 and 2013, the Company incurred $173,660 and $123,862 were incurred during the six months ended June 30, 2014 and 2013, respectively, or approximately 35% and 30% of research and development costs for the six months ended June 30, 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. 5

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 regulatory services. Total fees charged to operations for services paid to Theradex pursuant to such engagements were $999 and $-0- for the three months ended June 30, 2014 and 2013, respectively, or approximately -0-% and -0-% of research and development costs for the three months ended June 30, 2014 and 2013, respectively and are included in research and development costs in the Company's condensed consolidated statements of operations. During the six months ended June 30, 2014 and 2013, the Company incurred $6,818 and $7,393, respectively, or approximately 1% and 2% of research and development costs for the six months ended June 30, 2014 and 2013, respectively.



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.

6

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.

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.

7 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.

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 June 30, 2014 for services paid to Theradex pursuant to this arrangement total $452,381, of which $94,008 and $75,079 were incurred during the three months ended June 30, 2014 and 2013, respectively, and $173,660 and $123,862 were incurred during the six months ended June 30, 2014 and 2013, respectively. The Company is currently exploring, through Theradex, adding additional clinical sites to the ongoing Phase 1 clinical trial to maximize the efficiency of patient accrual. The final cost of the clinical trial is variable, depending upon the number of patients needed to be medically screened to determine if they meet the criteria for entry into the study and ultimately upon the total number of patients entered into the study to establish the proper doses of the drug for Phase 2 clinical trials. 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 docetaxel, 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. 9 Results of Operations



The Company had not commenced revenue-generating operations at June 30, 2014.

Three Months Ended June 30, 2014 and 2013

General and Administrative. For the three months ended June 30, 2014, general and administrative costs were $181,557, which consisted of the fair value of stock options issued to directors and consultants of $56,559, consulting and professional fees of $80,662, insurance expense of $9,530, officer's salary and related costs of $16,703, stock transfer fees of $3,987, travel and entertainment costs of $4,381, and other operating costs of $9,735. For the three months ended June 30, 2013, general and administrative costs were $120,013, which consisted of the fair value of stock options issued to directors and consultants of $36,530, consulting and professional fees of $45,448, insurance expense of $9,290, officer's salary and related costs of $16,673, stock transfer fees of $2,526, travel and entertainment costs of $5,717, and other operating costs of $3,829.



General and administrative costs increased by $61,544 or 51.3% in 2014 as compared to 2013, primarily as a result of an increase of $20,029 in stock-based compensation and an increase of $30,928 in legal and other consulting fees.

Research and Development. For the three months ended June 30, 2014, research and development costs were $335,723, 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 $119,571, patent costs of $88,055, and contractor costs of $128,097, including $94,008 to a related party in connection with the Phase

1 clinical trial of LB-100. For the three months ended June 30, 2013, research and development costs were $248,795, which consisted of patent costs of $102,916, contractor costs of $141,712, including $75,079 to a related party in connection with the Phase 1 clinical trial of LB-100, and consulting fees to a related party of $4,167.



Research and development costs increased by $86,928 or 34.9% in 2014 as compared to 2013, primarily as a result of an increase of $119,571 in stock-based compensation, offset by a decrease of $14,861 in patent costs.

Fair Value of Warrant Extensions. During the three months ended June 30, 2014, the Company incurred an expense of $224,074 for the fair value of extending the expiration date of warrants to acquire 2,928,800 shares of the Company's common stock that were purchased by investors as part of private placements that closed in 2009 and 2010.

Net Loss. For the three months ended June 30, 2014, the Company incurred a net loss of $741,326, as compared to a net loss of $368,807 for the three months ended June 30, 2013.



Six Months Ended June 30, 2014 and 2013

General and Administrative. For the six months ended June 30, 2014, general and administrative costs were $734,566, which consisted of the fair value of stock options issued to directors and consultants of $437,187, consulting and professional fees of $183,927, royalties of $30,000, insurance expense of $19,068, officer's salary and related costs of $33,771, stock transfer fees of $7,547, travel and entertainment costs of $7,589, and other operating costs

of $15,477. For the six months ended June 30, 2013, general and administrative costs were $287,655, which consisted of the fair value of stock options issued to directors and consultants of $89,567, consulting and professional fees of $125,816, insurance expense of $18,195, officer's salary and related costs of $33,496, stock transfer fees of $4,521, travel and entertainment costs of $7,231, and other operating costs of $8,829.



General and administrative costs increased by $446,911 or 155.4% in 2014 as compared to 2013, primarily as a result of a increase of $347,620 in stock-based compensation and an increase of $58,111 in legal and other consulting fees.

A significant component of the fair value of stock options issued to directors and consultants of $437,187 for the six months ended June 30, 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. 10

Research and Development. For the six months ended June 30, 2014, research and development costs were $498,493, 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 $122,107, patent costs of $155,799, and contractor costs of $220,587, including $173,660 to a related party in connection with the Phase 1 clinical trial of LB-100.



For the six months ended June 30, 2013, research and development costs were $415,099, which consisted of patent costs of $199,595, contractor costs of $205,087, including $123,862 to a related party in connection with the Phase 1 clinical trial of LB-100, and consulting fees to a related party of $10,467.

Research and development costs increased by $83,394 or 20.0% in 2014 as compared to 2013, primarily as a result of an increase of $122,107 in stock-based compensation, offset by a decrease of $43,796 in patent costs.

Fair Value of Warrant Extensions. During the six months ended June 30, 2014, the Company incurred an expense of $302,691 for the fair value of extending the expiration dates of various warrants, including $78,617 for the extension of expiration dates of warrants to acquire 1,748,800 shares of the Company's common stock to June 30, 2014, and $224,074 for the further extension of those expiration dates to March 31, 2015 for warrants to acquire 2,928,800 shares of the Company's common stock that were purchased by investors as part of private placements that closed in 2009 and 2010, and were to have expired unexercised on June 30, 2014.

Fair Value of Warrant Discount. During the six months ended June 30, 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 six months ended June 30, 2014, the Company incurred a net loss of $1,670,141, as compared to a net loss of $702,753 for the six months ended June 30, 2013.



Liquidity and Capital Resources - June 30, 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, management believes that there is substantial doubt about the Company's ability to continue as a going concern (see "Going Concern" above"). At June 30, 2014, the Company had working capital of $975,030, as compared to working capital of $236,266 at December 31, 2013, an increase in working capital of $738,764 for the six months ended June 30, 2014. At June 30, 2014, the Company had cash and money market funds aggregating $1,240,382, as compared to $481,154 at December 31, 2013, an increase of $759,228 for the six months ended June 30, 2014. The increase in working capital, cash and money market funds during the six months ended June 30, 2014 was the result of $1,412,500 raised by the Company in April 2014 by offering a 50% discount to warrant holders as an inducement to exercise their warrants for cash. 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 June 30, 2014 for services paid to Theradex pursuant to this arrangement total $452,381, of which $94,008 and $75,079 were incurred during the three months ended June 30, 2014 and 2013, respectively, and $173,660 and $123,862 were incurred during the six months ended June 30, 2014 and 2013, respectively, which have been included in research and development expenses in the condensed consolidated statement of operations. 11 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 six months ended June 30, 2014, operating activities utilized cash of $653,272, as compared to utilizing cash of $579,708 for the six months ended June 30, 2013, to support the Company's ongoing research and development activities.

Investing Activities. For the six months ended June 30, 2014, investing activities consisted of an increase in money market funds of $1,187,528 due primarily as a result of proceeds received from the exercise of warrants in April 2014. For the six months ended June 30, 2013, investing activities consisted of a $1 increase in money market funds from interest earned during the period.

Financing Activities. For the six months ended June 30, 2014, financing activities consisted of $1,412,500 in proceeds received from the exercise of warrants for the purchase of 3,900,000 shares of the Company's common stock in April 2014. There were no financing activities during the six months ended

June 30, 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 on that date and is included in accounts payable and accrued expenses in the accompanying condensed consolidated balance sheet at June 30, 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. 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 June 30, 2014 for services paid to Theradex pursuant to this arrangement, which were first incurred in 2013, total $452,381, of which $94,008 and $75,079 were incurred during the three months ended June 30, 2014 and 2013, respectively, and $173,660 and $123,862 were incurred during the six months ended June 30, 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. The Company is currently exploring, through Theradex, adding additional clinical sites to the ongoing Phase 1 clinical trial to maximize the efficiency of patient accrual. The final cost of the clinical trial is variable, depending upon the number of patients needed to be medically screened to determine if they meet the criteria for entry into the study and ultimately upon the total number of patients entered into the study to establish the proper doses of the drug for Phase 2 clinical trials. 12 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. Consulting and advisory fees charged to operations pursuant to this agreement were $4,000 and $8,000 during the three months and six months ended June 30, 2014. On March 1, 2014, the Company entered into an agreement with Pro-Active Capital Resources LLC for various strategic, investor and public relations services. The agreement is for a term of six months, which may be cancelled by either party upon a thirty day notice, and requires a payment of $1,500 per month. The following table sets forth the Company's principal cash obligations and commitments for the next five fiscal years as of June 30, 2014 aggregating $2,205,003, of which $232,090 is included in current liabilities in the condensed consolidated balance sheet at June 30, 2014. Amounts included in the 2014 column represent amounts due at June 30, 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 $ 43,054$ 43,054 $ - $ - $ - $ - Theradex work order agreement 1,568,945 1,168,945 400,000 - - - Patent license agreement 150,000 30,000

30,000 30,000 30,000 30,000 Operating leases 5,250 5,250 - - - - Consulting agreements 12,500 12,500 - - - - Liquidated damages payable under registration rights agreement 74,000 74,000 - - - - Due to stockholder 92,717 92,717 - - - - Total $ 1,946,466$ 1,426,466$ 430,000$ 30,000$ 30,000$ 30,000



Off-Balance Sheet Arrangements

At June 30, 2014, the Company did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.

13


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Source: Edgar Glimpses


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