Commission
file number 000-51476
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SRKP
7, INC.
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||
(Exact
name of small business issuer as
specified in its
charter)
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Delaware
(State
of organization)
|
20-2903526
(IRS
Employer Identification No.)
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|
248
Route 25A No. 2
East
Setauket, New York 11733
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(Address
of principal executive offices)
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(631)
942-7957
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(Issuer’
s telephone number)
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6
Tinker Lane, East Setauket, New York 11733
(Former
Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
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Indicate
by check mark whether the issuer (1) has filed all reports required
to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during
the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes
x No
o
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||
Indicate
by check mark whether the registrant is a shell company (as defined
in
Rule 12b-2 of the Exchange Act).
Yes
o No x
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Number
of shares outstanding of each of the issuer’s classes of common stock, as
of November
14, 2006:
26,582,183
shares of Common Stock.
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Transitional
Small Business Disclosure Format (Check one)
Yes
o No
x
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PART
I - FINANCIAL INFORMATION
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Item
1. Condensed Financial Statements
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1
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||||
Condensed
Consolidated Balance Sheets -
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2
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||||
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|||||
December 31,
2005 and September 30, 2006 (unaudited)
|
2
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||||
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|||||
Condensed
Consolidated Statements of Operations (unaudited) -
|
3
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||||
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|||||
Three
Months Ended September 30, 2006,
Nine
Months Ended September 30, 2006,
August 9,
2005 (Inception) to September 30, 2005
and 2005,
and August 9, 2005 (Inception) to
September
30, 2006 (Cumulative)
|
3
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||||
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|||||
Condensed
Consolidated Statement of Stockholders’ Equity (Deficiency) (unaudited) -
|
4
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||||
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|||||
August 9,
2005 (Inception) to December 31, 2005, and January 1, 2006 to
September 30, 2006
|
4
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||||
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|||||
Condensed
Consolidated Statements of Cash Flows (unaudited) -
|
5
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||||
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|||||
Nine
Months Ended September 30, 2006 ,
August 9, 2005 (Inception) to September 30, 2005,
and
August 9, 2005 (Inception) to September 30, 2006 (Cumulative)
|
5
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||||
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|||||
Notes
to Condensed Consolidated Financial Statements -
|
7
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||||
December 31,
2005 and September 30, 2006 (unaudited)
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|||||
Item
2. Management’s Discussion and Analysis or Plan of
Operation
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14
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||||
Item
3. Controls and Procedures
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19
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PART
II - OTHER INFORMATION
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Item
6. Exhibits
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|||||
Signatures
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|||||
|
|
|
Condensed
Consolidated Balance Sheets -
|
|
|
|
|
|
December 31,
2005 and September 30, 2006 (unaudited)
|
|
|
|
|
|
Condensed
Consolidated Statements of Operations (unaudited) -
|
|
|
|
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|
Three
Months Ended September 30, 2006, Nine Months Ended September 30,
2006,
August 9,
2005
(Inception)
to September 30, 2005,
and August 9, 2005 (Inception) to September 30, 2006 (Cumulative)
|
|
|
|
|
|
Condensed
Consolidated Statement of Stockholders’ Equity (Deficiency) (unaudited) -
|
|
|
|
|
|
August 9,
2005 (Inception) to December 31, 2005, and January 1, 2006 to
September 30, 2006
|
|
|
|
|
|
Condensed
Consolidated Statements of Cash Flows (unaudited) -
|
|
|
|
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|
Nine
Months Ended June 30, 2006, August 9,
2005 (Inception) to September 30, 2005,
and
August 9, 2005 (Inception) to September 30, 2006 (Cumulative)
|
|
|
|
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|
Notes
to Condensed Consolidated Financial Statements -
|
|
|
|
|
|
December 31,
2005 and September 30, 2006 (unaudited)
|
|
|
December 31,
2005
|
September
30,
2006
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|||||
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|
(Unaudited)
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|||||
ASSETS
|
|
|
|||||
Current
assets:
|
|
|
|||||
Cash
and cash equivalents
|
$
|
4,946
|
$
|
723,737
|
|||
Advances
on research and development contract services,
net
|
---
|
100,000
|
|||||
Prepaid
insurance
|
---
|
27,552
|
|||||
Total
current assets
|
4,946
|
851,289
|
|||||
Office
equipment,
net of accumulated depreciation of $113 at December 31, 2005
and
$457 at September 30, 2006
|
1,026
|
920
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|||||
Total
assets
|
$
|
5,972
|
$
|
852,209
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|||
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|||||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY (DEFICIENCY)
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable and accrued expenses
|
$
|
14,650
|
$
|
17,229
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|||
Due
to stockholder
|
5,946
|
92,717
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|||||
Total
current liabilities
|
20,596
|
109,946
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|||||
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|||||||
Commitments
and contingencies
|
|||||||
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|||||||
Stockholders’
equity (deficiency):
|
|||||||
Preferred
stock, $0.0001 par value;
authorized
- 10,000,000 shares; issued - none
|
---
|
---
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|||||
Common
stock, $0.0001 par value;
authorized
- 100,000,000 shares; issued and outstanding - 19,021,786 shares
at
December 31, 2005 and 26,582,183 shares at September 30,
2006
|
1,902
|
2,658
|
|||||
Additional
paid-in capital
|
(402
|
)
|
1,100,689
|
||||
Deficit
accumulated during the development stage
|
(16,124
|
)
|
(361,084
|
)
|
|||
Total
stockholders’ equity (deficiency)
|
(14,624
|
)
|
742,263
|
||||
Total
liabilities and stockholders’ equity (deficiency)
|
$
|
5,972
|
$
|
852,209
|
|
Three
Months
Ended
September
30,
2006
|
|
Nine
Months
Ended
September
30,
2006
|
Period from
August 9,
2005
(Inception)
to
September 30,
2005
|
|
Period from
August 9,
2005
(Inception)
to
September 30,
2006
(Cumulative)
|
|
||||||||
Revenues
|
$
|
---
|
$
|
---
|
$
|
---
|
$
|
---
|
|||||||
Costs
and expenses:
|
|||||||||||||||
General
and administrative (including
stock-based
compensation to director
of
$8,917 and $88,483 during the
three
months and nine months ended
September
30, 2006, respectively)
|
65,251
|
201,104
|
333
|
217,115
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|||||||||||
Depreciation
|
115
|
344
|
---
|
457
|
|||||||||||
Research
and development costs
|
50,100
|
100,100
|
---
|
100,100
|
|||||||||||
Reverse
merger costs
|
|
|
---
|
|
50,000
|
|
---
|
|
50,000
|
||||||
Interest
income
|
(6,588
|
)
|
(6,588
|
)
|
---
|
(6,588
|
)
|
||||||||
Total
costs and expenses
|
108,878
|
344,960
|
333
|
361,084
|
|||||||||||
Net
loss
|
$
|
(108,878
|
)
|
$
|
(344,960
|
)
|
$
|
(333
|
)
|
$
|
(361,084
|
)
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Net
loss per common share -
basic
and diluted
|
$
|
(0.00
|
)
|
$
|
(0.02
|
)
|
$
|
(0.00
|
)
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||||||
Weighted
average number of common
shares
outstanding -
basic
and diluted
|
|
26,152,469
|
|
21,458,613
|
|
|
19,021,786
|
|
|
|
|
Additional
|
Deficit
Accumulated
During
the
|
Total
Stockholders’
|
||||||||||||
|
Common
Stock
|
Paid-in
|
Development
|
Equity
|
||||||||||||
|
Shares
|
Amount
|
Capital
|
Stage
|
(Deficiency)
|
|||||||||||
|
|
|
|
|
|
|||||||||||
Balance,
August 9, 2005 (inception)
|
---
|
$
|
---
|
$
|
---
|
$
|
---
|
$
|
---
|
|||||||
Shares
issued to founding stockholder
|
19,021,786
|
1,902
|
(402
|
)
|
---
|
1,500
|
||||||||||
Net
loss
|
---
|
---
|
---
|
(16,124
|
)
|
(16,124
|
)
|
|||||||||
|
||||||||||||||||
Balance,
December 31, 2005
|
19,021,786
|
1,902
|
(402
|
)
|
(16,124
|
)
|
(14,624
|
)
|
||||||||
Shares
issued in connection with reverse
merger
transaction
|
4,005,177
|
401
|
62,099
|
---
|
62,500
|
|||||||||||
Shares
issued in private placement, net of
offering
costs of $233,025
|
3,555,220
|
355
|
950,509
|
---
|
950,864
|
|||||||||||
Stock-based
compensation
|
---
|
---
|
88,483
|
---
|
88,483
|
|||||||||||
Net
loss
|
---
|
---
|
---
|
(344,960
|
)
|
(344,960
|
)
|
|||||||||
|
||||||||||||||||
Balance,
September 30, 2006
|
26,582,183
|
$
|
2,658
|
$
|
1,100,689
|
$
|
(361,084
|
)
|
$
|
742,263
|
Nine
Months
Ended
September
30,
2006
|
Period from
August 9,
2005
(Inception)
to
September 30,
2005
|
Period from
August 9,
2005
(Inception)
to
September
30,
2006
(Cumulative)
|
||||||||
Cash
flows from operating
activities
|
||||||||||
Net
loss
|
$
|
(344,960
|
)
|
$
|
(333
|
)
|
$
|
(361,084
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||
Depreciation
|
344
|
---
|
457
|
|||||||
Stock-based
compensation
|
88,483
|
---
|
88,483
|
|||||||
Changes
in operating assets and liabilities:
|
||||||||||
Decrease
in -
|
||||||||||
Advances
on research and development contract services
|
(100,000
|
)
|
---
|
(100,000
|
)
|
|||||
Prepaid
insurance
|
(27,552
|
)
|
---
|
(27,552
|
)
|
|||||
Increase
in -
|
||||||||||
Accounts
payable and accrued expenses
|
2,579
|
---
|
17,229
|
|||||||
Net
cash used in operating activities
|
(381,106
|
)
|
(333
|
)
|
(382,467
|
)
|
||||
|
||||||||||
Cash
flows from investing activities
|
||||||||||
Purchase
of office equipment
|
(238
|
)
|
(649
|
)
|
(1,377
|
)
|
||||
Net
cash used in investing activities
|
(238
|
)
|
(649
|
)
|
(1,377
|
)
|
||||
Cash
flows from financing activities
|
||||||||||
Proceeds
from sale of common stock to founder
|
---
|
---
|
1,500
|
|||||||
Cash
acquired in reverse merger transaction
|
62,500
|
---
|
62,500
|
|||||||
Gross
proceeds from sale of common stock
|
1,183,889
|
---
|
1,183,889
|
|||||||
Payment
of private placement offering costs
|
(233,025
|
)
|
---
|
(233,025
|
)
|
|||||
Advances
from stockholder
|
86,771
|
982
|
92,717
|
|||||||
Net
cash provided by financing activities
|
1,100,135
|
982
|
1,107,581
|
|||||||
|
||||||||||
Net
increase in cash
|
718,791
|
---
|
723,737
|
|||||||
Cash at
beginning of period
|
4,946
|
---
|
---
|
|||||||
Cash
at
end of period
|
$
|
723,737
|
$
|
---
|
$
|
723,737
|
||||
Nine
Months
Ended
September
30,
2006
|
Period from
August 9,
2005
(Inception)
to
September 30,
2005
|
Period from
August 9,
2005
(Inception)
to
September
30,
2006
(Cumulative)
|
||||||||
Supplemental
disclosures of cash flow information:
|
||||||||||
Cash
paid for -
|
||||||||||
Interest
|
$
|
---
|
$
|
---
|
$
|
---
|
||||
Income
taxes
|
$
|
---
|
$
|
---
|
$
|
---
|
Number
of
Shares
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Life
(Years)
|
||||||||
Options
and warrants outstanding at December 31, 2005
|
---
|
$---
|
---
|
|||||||
Granted
|
916,626
|
0.333
|
5.00
|
|||||||
Exercised
|
---
|
---
|
---
|
|||||||
Cancelled
|
---
|
---
|
---
|
|||||||
Options
and warrants outstanding at September 30, 2006
|
916,626
|
$
|
0.333
|
4.77
|
||||||
Options
and warrants exercisable at September 30, 2006
|
683,292
|
$
|
0.333
|
4.77
|
3.
CONTROLS AND PROCEDURES
|
(a)
|
Evaluation
of Disclosure Controls and Procedures
|
Disclosure
Controls and procedures are designed to ensure that information required
to be disclosed in the reports filed or submitted under the Exchange
Act
is recorded, processed, summarized and reported, within the time
periods
specified in the SEC’s rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to
ensure
that information required to be disclosed in the reports filed under
the
Exchange Act is accumulated and communicated to
management.
|
|
As
of September 30, 2006, our chief executive officer and chief financial
officer (who is the same individual) evaluated the effectiveness
of the
design and operation of the Company’s disclosure controls and procedures.
Based upon and as of the date of that evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that the Company’s
disclosure controls and procedures are effective to ensure that the
information required to be disclosed in the reports the Company files
and
submits under the exchange act is recorded, processed, summarized,
and
reported as and when required.
|
|
(b)
|
Changes
in Internal Controls
|
There
were no changes in the Company’s internal controls or in other factors
that could have significantly affected those controls during the
quarter
ended September 30, 2006.
|
2.1 |
Share
Exchange Agreement dated as of June 8, 2006 among the Company, John
S.
Kovach and Lixte Biotechnology, Inc.1
|
2.2 | Securities Purchase Agreement among the Company and the investors with respect to the sale of the Company's Common Stock3 |
2.3 | Registration Rights Agreement among the Company and the investors with respect to the sale of the Company's Common Stock3 |
3.1 |
Certificate
of Incorporation, as filed with the Delaware Secretary of State on
May 24,
20052
|
3.2 |
Bylaws2
|
31 | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32 | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
1
|
Filed
as an Exhibit to the Company’s Current Report on Form 8-K as filed with
the Securities and Exchange Commission on July 7, 2006, and incorporated
herein by reference.
|
2
|
Filed
as an Exhibit to the Company’s Registration Statement on Form 10-SB, as
filed with the Securities and Exchange Commission on August 3, 2005
and
incorporated herein by reference.
|
3
|
Filed as an Exhibit to the Company's Registration Statement on Form S-1 as filed with the Securities and Exchange Commission on September 8, 2006 |
SRKP
7, INC.
|
||
Date:
November 14, 2006
|
By: |
/s/
John S.
Kovach
John
S. Kovach
Chief
Executive Officer and Chief Financial Officer
(principal
financial and accounting officer)
|