Somanta Pharmaceuticals 10QSB 2007 Q3 Quarterly report (small business)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-QSB

(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 31, 2007

OR

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

For the transition period from _______________ to _______________

Commission File No. 000-20297



SOMANTA PHARMACEUTICALS, INC.
(Exact name of Registrant as specified in its charter)

Delaware	20-3559330
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

19200 Von Karman Avenue, Suite 400, Irvine, CA 92612

(Address of Principal Executive Offices)

(949) 477-8090

(Registrant’s telephone number, including area code)

(Registrant’s former name, former address and former fiscal year, if changed since last report)

Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Common Stock, $0.001 par value per share, 100,000,000 shares authorized, 14,292,603 issued and outstanding as of March 16, 2007. Preferred Stock, 20,000,000 shares authorized, $0.001 par value per share, 2,000 of which have been designated Series A Convertible Preferred Stock, 591.6318 issued and outstanding as of March 16, 2007.

Transitional Small Business Disclosure Format: Yes o No x

SOMANTA PHARMACEUTICALS, INC.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION		3

ITEM 1.
	Condensed Consolidated Financial Statements:	3

	Condensed Consolidated Balance Sheets as of January 31, 2007 (unaudited) and April 30, 2006 (audited)	3

	Condensed Consolidated Statements of Operations for the three months and nine months ended January 31, 2007 and 2006 (unaudited) and for the period from Inception (April 19, 2001) to January 31, 2007 (unaudited)	4

	Condensed Consolidated Statement of Stockholders’ Deficit for the period from Inception (April 19, 2001) to January 31, 2007 (unaudited)	5

	Condensed Consolidated Statements of Cash Flows for the nine months ended January 31, 2007 and 2006 (unaudited) and for the period from Inception (April 19, 2001) to January 31, 2007 (unaudited)	7

	Notes to Condensed Consolidated Financial Statements (unaudited)	8

ITEM 2.
	Management’s Discussion and Analysis or Plan of Operations	20

ITEM 3.
	Controls and Procedures	28

PART II. OTHER INFORMATION

ITEM 1.
	Legal Proceedings	28

ITEM 2.
	Unregistered Sales of Equity Securities and Use of Proceeds	28

ITEM 3.
	Defaults upon Senior Securities	29

ITEM 4.
	Submission of Matters to a Vote of Security Holders	29

ITEM 5.
	Other Information	30

ITEM 6.
	Exhibits	30

Signatures		31

Certifications

PART I. FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS AND EXHIBITS

The condensed consolidated unaudited financial statements of registrant for the three months and nine months ended January 31, 2007, follow.

Somanta Pharmaceuticals, Inc.
(Formerly Hibshman Optical Corp.)
(A Development Stage Company)

Condensed Consolidated Balance Sheets

	(Unaudited) January 31, 2007			April 30, 2006

Assets
Current assets:
Cash	$	129,104		$	1,587,751
VAT receivable		—			1,628
Other receivable		537			—
Prepaid expenses		13,157			91,075

Total current assets		142,798			1,680,454
Office equipment, net of accumulated depreciation of $5,405 and $1,532 for the period ended January 31, 2007 and April 30, 2006, respectively		17,906			23,400
Other assets:
Restricted funds		5,027			152,048
Deposits		—			2,700

Total other assets		5,027			154,748

Total assets	$	165,731		$	1,858,602

Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	668,819		$	265,800
Due to related parties		181,552			—
Accrued expenses		563,489			157,584
Accrued research and development expenses		532,821			155,694
Liquidated damages related to Series A preferred stock and warrants		35,200			—
Deferred revenue		7,500			8,572
Warrant liabilities		5,236,750			2,855,726

Total current liabilities		7,226,131			3,443,376
Stockholders’ deficit:
Preferred stock - $0.001 par value, 20,000,000 shares authorized Series A Convertible Preferred Stock, $.001 par value, 2,000 shares designated, 592.6318 issued and outstanding as of January 31, 2007 and April 30, 2006		1			1
Common stock, $.001 par value, 100,000,000 shares authorized, 14,274,534 shares issued and outstanding as of January 31, 2007 and April 30, 2006		14,275			14,275
Additional paid-in capital		6,879,504			6,701,458
Deficit accumulated during development stage		(13,954,180	)		(8,300,508	)

Total stockholders’ deficit		(7,060,400	)		(1,584,774	)

Total liabilities and stockholders’ deficit	$	165,731		$	1,858,602

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

Somanta Pharmaceuticals, Inc.
(Formerly Hibshman Optical Corp.)
(A Development Stage Company)

Condensed Consolidated Statements of Operations
Three Months and Nine Months Ended January 31, 2007 and 2006 and for the Period
from Inception of Operations
(April 19, 2001) to January 31, 2007
(Unaudited)

	Three Months Ended January 31,						Nine Months Ended January 31,						From Inception of Operations (April 19, 2001) to January 31, 2007

	2007			2006			2007			2006

Revenue	$	357		$	357		$	1,072		$	1,071		$	2,500
Operating expenses:
General and administrative		(450,120	)		(652,387	)		(2,150,479	)		(1,706,345	)		(6,174,937	)
Research and development		(214,127	)		(327,634	)		(1,115,479	)		(915,627	)		(2,976,980	)

Loss from operations		(663,890	)		(979,664	)		(3,264,886	)		(2,620,901	)		(9,149,417	)
Other income (expense):
Interest income		2,305			—			30,859			—			43,207
Interest expense		—			(1,001,354	)		—			(1,016,021	)		(1,016,020	)
Liquidated damages		—			—			(35,200	)		—			(35,200	)
Change in fair value of warrant liabilities		(2,775,348	)		—			(2,381,024	)		—			(2,243,481	)
Gain on settlement of debt		—			—			—			5,049			5,049
Currency translation loss		(1,169	)		(98	)		(3,171	)		(29,196	)		(33,412	)

Loss before income taxes		(3,438,102	)		(1,981,116	)		(5,653,422	)		(3,661,069	)		(12,429,274	)
Income taxes		—			—			(250	)		(250	)		(2,589	)

Net loss		(3,438,102	)		(1,981,116	)		(5,653,672	)		(3,661,319	)		(12,431,863	)
Deemed dividends on convertible preferred stock		—			(1,522,317	)		—			(1,522,317	)		(1,522,317	)

Net loss applicable to common shareholders	$	(3,438,102	)	$	(3,503,433	)	$	(5,653,672	)	$	(5,183,636	)	$	(13,954,180	)

Net loss per share-basic and diluted	$	(0.25	)	$	(0.25	)	$	(0.42	)	$	(0.36	)	$	(1.09	)

Weighted average number of shares outstanding—basic and diluted		14,274,534			14,274,534			14,274,534			14,274,252			13,202,903

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

Somanta Pharmaceuticals, Inc.
(Formerly Hibshman Optical Corp.)
(A Development Stage Company)

Condensed Consolidated Statement of Stockholders’ Deficit
For the Period from Inception of Operations (April 19, 2001) to January 31, 2007 (Unaudited)

	Preferred Stock				Common Stock				Additional Paid- in Capital
												Shares to be Issued
	Shares		Amount		Shares		Amount					Shares to be Issued

Balance at April 19, 2001 (Inception)		—	$	—		—	$	—	$	—		$	—
Shares issued for cash at $.0326						4,299,860		4,300		135,680			—
Shares issued for services at $.0139						514,674		515		11,801
Amortization of deferred expense
Comprehensive loss—foreign currency translation adjustment
Net loss for the period from inception to April 30, 2002

Balance at April 30, 2002		—		—		4,814,534		4,815		147,481			—
Shares issued for cash at $1.0677						14,601		15		15,575
Shares issued for services at $.0214						219,010		219		4,472
Amortization of deferred expense
Receipt of cash for subscription receivable
Comprehensive loss—foreign currency translation adjustment
Net loss for the year ended April 30, 2003

Balance at April 30, 2003		—		—		5,048,145		5,049		167,528			—
Shares issued for cash at $1.2479						350,164		350		436,637
Shares issued for services at $1.2587						22,233		22		27,962
Amortization of deferred expense
Exchange for loan payment and compensation										181,371
Comprehensive loss—foreign currency translation adjustment
Net loss for the year ended April 30, 2004

Balance at April 30, 2004		—		—		5,420,541		5,421		813,498			—
Shares issued for cash at $1.3218						374,073		374		494,069
Shares issued for services at $1.2308						21,901		22		26,933
3,650 shares to be issued for service at $1.4973													5,465
Amortization of deferred expense
Receipt of cash for subscription receivable
Options issued for services										257,515
Comprehensive loss—foreign currency translation adjustment
Net loss for the year ended April 30, 2005

Balance at April 30, 2005		—		—		5,816,515		5,817		1,592,015			5,465
Write off foreign currency translation adjustment
Shares issued for cash at $1.5656						12,669		13		19,821
Shares issued for prior service						3650		3		5,462			(5,465	)
Amortization of deferred expense
Options issued for services										300,616
Recapitalization with Bridge Oncology						7,865,000		7,865		(92,335	)
Beneficial conversion feature associated with convertible debt financing										364,721
Convertible Series A Preferred shares issued for cash at $10,000 (net of issuance costs of $544,169)		464		0.464						4,095,830
Convertible Series A Shares issued on conversion of notes payable		128.6318		0.1286						1,286,318
Deemed dividend on account of beneficial conversion feature associated with issuance of Convertible Series A Preferred Shares										1,522,317
Issuance costs on warrants issued to placement agent in connection with the Convertible Series A Preferred stock										(429,757	)
Discount on warrant issued with Convertible Series A Preferred stock										(2,048,531	)
Recapitalization with Hibshman Optical Corp.						576,700		577		(7,708	)
Warrant expense										92,689
Net loss for the year ended April 30, 2006

Balance at April 30 , 2006		592.6318		.5926		14,274,534		14,275		6,701,458			—
Options issued for services										178,046
Net loss for the nine months ended January 31, 2007

Balance at January 31, 2007 (unaudited)		592.6318	$	.5926		14,274,534	$	14,275	$	6,879,504		$	—

Somanta Pharmaceuticals, Inc.
(Formerly Hibshman Optical Corp.)
(A Development Stage Company)

Condensed Consolidated Statement of Stockholders’ Deficit
For the Period from Inception of Operations (April 19, 2001) to January 31, 2007 (Unaudited)

	Subscription Receivable			Deferred Equity- Based Expense			Accumulated Other Comprehensive Loss- Foreign Currency Translation Adjustment			Deficit Accumulated During Development Stage			Total Stockholders’ Equity/(Deficit)

Balance at April 19, 2001 (Inception)	$	—		$	—		$	—		$	—		$	—
Shares issued for cash at $.0326		(97,245	)		—			—			—			42,735
Shares issued for services at $.0139					(11,177	)								1,139
Amortization of deferred expense					521									521
Comprehensive loss—foreign currency translation adjustment								29,905						29,905
Net loss for the period from inception to April 30, 2002											(95,901	)		(95,901	)

Balance at April 30, 2002		(97,245	)		(10,656	)		29,905			(95,901	)		(21,601	)
Shares issued for cash at $1.0677														15,590
Shares issued for services at $.0214					(3,127	)								1,564
Amortization of deferred expense					3,808									3,808
Receipt of cash for subscription receivable		91,517												91,517
Comprehensive loss—foreign currency translation adjustment								1,534						1,534
Net loss for the year ended April 30, 2003											(111,456	)		(111,456	)

Balance at April 30, 2003		(5,728	)		(9,975	)		31,439			(207,357	)		(19,044	)
Shares issued for cash at $1.2479		(81,464	)											355,523
Shares issued for services at $1.2587					(25,216	)								2,768
Amortization of deferred expense					7,691									7,691
Exchange for loan payment and compensation		2,909												184,280
Comprehensive loss—foreign currency translation adjustment								(51,651	)					(51,651	)
Net loss for the year ended April 30, 2004											(439,453	)		(439,453	)

Balance at April 30, 2004		(84,283	)		(27,500	)		(20,212	)		(646,810	)		40,114
Shares issued for cash at $1.3218														494,443
Shares issued for services at $1.2308														26,955
3,650 shares to be issued for service at $1.4973														5,465
Amortization of deferred expense					26,939									26,939
Receipt of cash for subscription receivable		84,283												84,283
Options issued for services														257,515
Comprehensive loss—foreign currency translation adjustment								(5,719	)					(5,719	)
Net loss for the year ended April 30, 2005											(1,129,290	)		(1,129,290	)

Balance at April 30, 2005		—			(561	)		(25,931	)		(1,776,100	)		(199,295	)
Write off foreign currency translation adjustment								25,931						25,931
Shares issued for cash at $1.5656														19,834
Shares issued for prior service														—
Amortization of deferred expense					561									561
Options issued for services														300,616
Recapitalization with Bridge Oncology														(84,470	)
Beneficial conversion feature associated with convertible debt financing														364,721
Convertible Series A Preferred shares issued for cash at $10,000 (net of issuance costs of $544,169)														4,095,830
Convertible Series A Shares issued on conversion of notes payable														1,286,318
Deemed dividend on account of beneficial conversion feature associated with issuance of Convertible Series A Preferred Shares											(1,522,317	)		—
Issuance costs on warrants issued to placement agent in connection with the Convertible Series A Preferred stock														(429,757	)
Discount on warrant issued with Convertible Series A Preferred stock														(2,048,531	)
Recapitalization with Hibshman Optical Corp.														(7,131	)
Warrant expense														92,689
Net loss for the year ended April 30, 2006											(5,002,091	)		(5,002,091	)

Balance at April 30, 2006		—			—			—			(8,300,508	)		(1,584,774	)
Options issued for services														178,046
Net loss for the nine months ended January 31, 2007											(5,653,672	)		(5,653,672	)

Balance at January 31, 2007 (unaudited)	$	—		$	—		$	—		$	(13,954,180	)	$	(7,060,400	)

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

Somanta Pharmaceuticals, Inc.
(Formerly Hibshman Optical Corp.)
(A Development Stage Company)

Condensed Consolidated Statements of Cash Flows
Nine Months Ended January 31, 2007 and 2006 and for the Period from Inception of Operations
(April 19, 2001) to January 31, 2007
(Unaudited)

							From Inception of Operations (April 19, 2001) to January 31, 2007
	Nine Months Ended January 31,

	2007			2006

Cash flows provided by (used for) operating activities:
Net loss	$	(5,653,672	)	$	(3,661,319	)	$	(12,431,863	)
Adjustments to reconcile net loss to net cash provided by (used for) operating activities:
Depreciation		4,116			775			5,648
Gain on sale of equipment		(622	)		—			(622	)
Amortization of stock based expense		—			562			39,520
Write off foreign currency translation adjustment		—			25,931			25,931,
Change in fair value of warrant liabilities		2,381,024			—			2,243,481
Shares issued for services and compensation		—			—			219,262
Gain on settlement of debts		—			(5,049	)		(5,049	)
Options expense		178,046			233,310			736,177
Warrants expense		—			—			92,689
Interest expense related to beneficial conversion feature on convertible note		—			364,721			364,721
Interest expense related to warrants issued on convertible note		—			514,981			514,981
Changes in assets and liabilities:
(Increase) decrease in assets -
VAT receivable		1,628			61,871			3,444
Other receivable		(537	)		—			(537	)
Restricted funds		147,021			(1,247	)		(5,027	)
Prepaid expenses		77,918			(21,058	)		(12,886	)
Deposits		2,700			—			—
Increase (decrease) in liabilities:
Accounts payable		440,568			566,430			701,069
Accrued liabilities		783,032			349,638			1,084,450
Liquidated damages		35,200			—			35,200
Deferred revenue		(1,072	)		8,929			7,500
Due to related parties		144,003			201,607			6,109

Net cash used for operating activities		(1,460,647	)		(1,359,918	)		(6,375,802	)

Cash flows used for investing activities:
Purchase of equipment		—			(5,601	)		(24,824	)
Proceeds from sale of equipment		2,000			—			2,000

Net cash used for investing activities		2,000			(5,601	)		(22,824	)

Cash flows provided by financing activities:
Loan payable—related party		—			—			79,402
Loan payment-related party		—			—			(7,637	)
Proceeds from convertible note-related party		—			1,250,000			1,250,000
Proceeds from issuance of common stock		—			19,834			928,125
Proceeds from issuance of preferred stock		—			—			4,095,831
Cash received for subscription receivable		—			—			175,801

Net cash provided by financing activities		—			1,269,834			6,521,792

Effect of exchange rate changes on cash		—			—			5,938

Increase (decrease) in cash		(1,458,647	)		(95,684	)		129,104
Cash, beginning of period		1,587,751			102,885			—

Cash, end of period	$	129,104		$	7,201		$	129,104

Supplemental disclosure of cash flow information:
Interest paid	$	—		$	—		$	—

Income tax paid	$	—		$	—		$	—

Supplemental disclosure of non-cash operating and financing activities:
Loan reduction with shares	$	—		$	—		$	2,909

Receivable from issuance of convertible stock	$	—		$	4,640,000		$	—

Issuance of warrants in conjunction with convertible preferred stock	$	—		$	2,478,288		$	2,341,785

Deemed dividends related to convertible preferred stock	$	—		$	1,522,317		$	1,522,317

Conversion of note and accrued interest	$	—		$	1,286,318		$	1,286,318
Accrued issuance costs related to convertible stock	$	—		$	411,605		$	—

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

SOMANTA PHARMACEUTICALS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. ORGANIZATION, BASIS OF PRESENTATION, AND NATURE OF OPERATIONS

Organization

Somanta Pharmaceuticals, Inc. is a Delaware corporation that was formed for the purpose of effecting the reincorporation of Hibshman Optical Corp., a New Jersey corporation, into the State of Delaware and for the purpose of consummating a business combination via a reverse merger of Somanta Incorporated and Hibshman Optical Corp. Pursuant to this reverse merger, Somanta Incorporated became the wholly-owned subsidiary of Somanta Pharmaceuticals, Inc. and the sole operating subsidiary of Somanta Pharmaceuticals, Inc. For financial reporting purposes, this transaction has been reflected in the accompanying financial statements as a recapitalization of Somanta Incorporated and the financial statements of Somanta Pharmaceuticals, Inc. reflect the historical financial information of Somanta Incorporated. References herein to the “Company” or “Somanta” are intended to refer to each of Somanta Pharmaceuticals, Inc. and its wholly owned subsidiary Somanta Incorporated, as well as Somanta Incorporated’s wholly-owned subsidiary Somanta Limited.

Hibshman Optical Corp. was originally incorporated in the State of New Jersey in 1991 under the name PRS Sub I, Inc. The name subsequently changed to Service Lube, Inc., then to Fianza Commercial Corp. and then to Hibshman Optical Corp. The business plan since that time had been to seek to enter into a business combination with an entity that had ongoing operations through a reverse merger or other similar type of transaction.

Somanta Incorporated was incorporated as Somantis Limited under the laws of England and Wales on April 19, 2001. Somantis Limited changed its name to Somanta Limited on March 14, 2005, and performed business as a United Kingdom entity through the fiscal year ended April 30, 2005. On August 22, 2005, Somanta Limited became a wholly owned subsidiary of Bridge Oncology Products, Inc. (“BOPI”), a privately held Delaware corporation, pursuant to a share exchange with BOPI; however, Somanta Limited was deemed the accounting acquirer in this share exchange transaction. On August 24, 2005, the name of BOPI was changed to Somanta Incorporated.

Somanta Pharmaceuticals, Inc. is a development stage biopharmaceutical company engaged in the development of products for the treatment of cancer. The Company has in-licensed four product development candidates from academic and research institutions in the United States and Europe designed for use in anti-cancer therapy in order to advance them along the regulatory and clinical pathways toward commercial approval. The Company intends to obtain approval from the United States Food and Drug Administration (“FDA”) and from the European Medicines Evaluation Agency (“EMEA”) for the products.

Somanta is a development stage enterprise since the Company has not generated revenue from the sale of its products, and its efforts have been principally devoted to identification, licensing and clinical development of its products as well as raising capital through January 31, 2007. Accordingly, the financial statements have been prepared in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 7, “Accounting and Reporting by Development Stage Enterprises.”

Basis of Presentation

The accompanying unaudited condensed interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-QSB and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes for the years ended April 30, 2006 and 2005.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. In the opinion of management, all adjustments (consisting solely of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended January 31, 2007 are not necessarily indicative of the results that may be expected for the full fiscal year ending April 30, 2007.

The Company reported a net loss and net loss applicable to common stockholders of $5,653,672 for the nine month period ended January 31, 2007. The net loss from date of inception, April 19, 2001 to January 31, 2007, totaled $12,431,863 (net loss applicable to common stockholders of $13,954,180). The Company’s operating activities have used cash since its inception. These losses raise substantial doubt about the Company’s ability to continue as a going concern.

Continued operations will depend on whether the Company is able to raise additional funds through various potential sources, such as equity and debt financing. Such additional funds may not become available on acceptable terms, and there can be no assurance that any additional funding that the Company obtains will be sufficient to meet its needs in the long term. Through January 31, 2007, a significant portion of the Company’s financing has been through private sales of capital stock. The Company will continue to fund operations from cash on hand and through the sources of capital previously described. The Company can give no assurance that any additional capital that it is able to obtain will be sufficient to meet future needs.

The Company will not have sufficient cash to fund operations through the fourth quarter of the fiscal year beginning May 1, 2006, given the current and desired pace of clinical development of its product candidates. If cash reserves are not sufficient to sustain operations during that period, management plans to raise additional capital by selling shares of capital stock or other securities. There can be no assurance that such capital will be available on favorable terms or at all.

The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

Reclassifications

For comparative purposes, prior periods’ consolidated financial statements have been reclassified to conform with report classifications of the current period. The Company has reclassified certain expenses related to the in-licensing of product candidates, milestone and license maintenance payments and patent expense from general and administrative expense to research and development expense.

Share-Based Payments

On December 16, 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment” (SFAS 123R). SFAS 123R eliminates the alternative of applying the intrinsic value measurement provisions of APB 25 to stock compensation awards issued to employees. Rather, the new standard requires enterprises to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost will be recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). On April 14, 2005, the Securities and Exchange Commission announced the adoption of a rule that defers the required effective date of SFAS 123R. The SEC rule provides that SFAS 123R is now effective for registrants as of the beginning of the first fiscal year beginning after June 15, 2005.

Effective May 1, 2006, the Company adopted SFAS 123R and accordingly has adopted the modified prospective application method. Under this method, SFAS 123R is applied to new awards and to awards modified, repurchased, or cancelled after the effective date. Additionally, compensation cost for the portion of awards that are outstanding as of the date of adoption for which the requisite service has not been rendered (such as unvested options) is recognized over a period of time as the remaining requisite services are rendered.

Prior to May 1, 2006, the Company accounted for its employee stock option plan in accordance with the provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” and SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure.”

Fair Value of Financial Instruments

Statement of Financial Accounting Standard No. 107, Disclosures About Fair Value of Financial Instruments, requires that the company disclose estimated fair values of financial instruments. The carrying amounts reported in the balance sheets for current assets and current liabilities qualifying as financial instruments are a reasonable estimate of fair value.

Basic and diluted net loss per share

Net loss per share is calculated in accordance with the Statement of Financial Accounting Standards No. 128 (SFAS No. 128). Basic net loss per share is based upon the weighted average number of common shares outstanding. Diluted net loss per share is based on the assumption that all potential dilutive convertible shares and stock options or warrants were converted or exercised. The calculation of diluted net loss per share excludes potential common stock equivalents if the effect

is anti-dilutive. The Company’s weighted common shares outstanding for basic and dilutive were the same since the effect of common stock equivalents was anti-dilutive.

The Company has the following dilutive convertible shares, stock options and warrants as of January 31, 2007 and 2006 which were excluded from the calculation since the effect is anti-dilutive.

	2007		2006

Convertible preferred stock		9,877,194		9,877,194
Stock options		3,608,332		3,831,849
Warrants		6,952,838		6,802,839

Total		20,438,364		20,511,882

The Company’s undeclared dividends on its Preferred Stock amounting to $119,500 for the three months ended January 31, 2007 and $358,500 for the nine months ended January 31, 2007 are included in the computation of net loss per share for the period ended January 31, 2007 in accordance with SFAS No. 129.

Aggregate undeclared dividends on Preferred Stock amounting to $474,104 are included in the computation of net loss per share for the period from inception (April 19, 2001) to January 31, 2007.

Recent Accounting Pronouncements

In May 2005, the FASB issued FASB Statement No. 154, “Accounting Changes and Error Corrections.” This new standard replaces APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements, and represents another step in the FASB’s goal to converge its standards with those issued by the IASB. Among other changes, Statement 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle, unless it is impracticable to do so. Statement 154 also provides that (1) a change in method of depreciating or amortizing a long-lived nonfinancial asset be accounted for as a change in estimate (prospectively) that was effected by a change in accounting principle, and (2) correction of errors in previously issued financial statements should be termed a “restatement.” The new standard is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. Early adoption of this standard is permitted for accounting changes and correction of errors made in fiscal years beginning after June 1, 2005. Management believes that changes resulting from adoption of the FASB do not have a material effect on the financial statements taken as a whole.

In June 2005, the EITF reached a consensus on Issue 05-6, “Determining the Amortization Period for Leasehold Improvements,” which requires that leasehold improvements acquired in a business combination or purchased subsequent to the inception of a lease be amortized over the lesser of the useful life of the assets or a term that includes renewals that are reasonably assured at the date of the business combination or purchase. EITF 05-6 is effective for periods beginning after June 29, 2005. Earlier application is permitted in periods for which financial statements have not been issued. The adoption of this Issue did not have an impact on the Company’s financial statements.

In February 2006, the FASB issued SFAS 155 “Accounting for Certain Hybrid Financial Instruments,” an amendment of FASB Statements No. 133 and in February 2006, the FASB issued SFAS 155, “Accounting for Certain Hybrid Financial Instruments,” an amendment of FASB Statements No. 133 and 140. This Statement amends FASB Statements No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”. This Statement resolves issues addressed in Statement 133 Implementation Issue No. D1, Application of Statement 133 to Beneficial Interests in Securitized Financial Assets. This Statement:

	a.	Permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation;

	b.	Clarifies which interest-only strips and principal-only strips are not subject to the requirements of Statement 133;

	c.	Establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation;

	d.	Clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and

Amends Statement 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument.

This Statement is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. The fair value election provided for in paragraph 4(c) of this Statement may also be applied upon adoption of this Statement for hybrid financial instruments that had been bifurcated under paragraph 12 of Statement 133 prior to the adoption of this Statement. Earlier adoption is permitted as of the beginning of an entity’s fiscal year, provided the entity has not yet issued financial statements, including financial statements for any interim period for that fiscal year. Provisions of this Statement may be applied to instruments that an entity holds at the date of adoption on an instrument-by-instrument basis. The Company is currently evaluating the impact of SFAS 155.

In March 2006, the FASB issued SFAS No. 156 (“FAS 156”), “Accounting for Servicing of Financial Assets-An Amendment of FASB Statement No. 140.” Among other requirements, FAS 156 requires a company to recognize a servicing asset or servicing liability when it undertakes an obligation to service a financial asset by entering into a servicing contract under certain situations. Under FAS 156 an election can also be made for subsequent fair value measurement of servicing assets and servicing liabilities by class, thus simplifying the accounting and providing for income statement recognition of potential offsetting changes in the fair value of servicing assets, servicing liabilities and related derivative instruments. The Statement will be effective beginning the first fiscal year that begins after September 15, 2006. The Company does not expect the adoption of FAS 156 will have a material impact on the financial position or results of operations.

In June 2006, the FASB issued FASB Interpretation (FIN) No. 48, “Accounting for Uncertainty in Income Taxes,” that provides guidance on the accounting for uncertainty in income taxes recognized in financial statements. The interpretation will be adopted by us on May 1, 2007. The Company is currently evaluating the impact of adopting FIN 48; however, the Company does not expect the adoption of this provision to have a material effect on the financial position, results of operations or cash flows.

In July 2006, the FASB issued FASB Staff Position (FSP) No. FAS 13-2, “Accounting for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction,” that provides guidance on how a change or a potential change in the timing of cash flows relating to income taxes generated by a leveraged lease transaction affects the accounting by a lessor for the lease. This staff position will be adopted by us on May 1, 2007. The Company is currently evaluating the impact of adopting this FSP; however, the Company does not expect the adoption of this provision to have a material effect on the financial position, results of operations or cash flows.

In September 2006, the FASB issued Statement No. 157, “Fair Value Measurements” (SFAS 157). This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. However, for some entities, the application of this Statement will change current practice. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company does not expect the adoption of SFAS No. 157 to have a material impact on the consolidated financial statements.

In September 2006, the FASB issued Statement No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R)” (SFAS 158). This Statement improves financial reporting by requiring an employer to recognize the over funded or under funded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. This Statement also improves financial reporting by requiring an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. This Statement is effective as of the end of the fiscal year ending after December 15, 2006. The Company does not have any defined benefit plans, or other post-retirement plans. Therefore, the Company does not expect SFAS No. 158 to have any impact on the consolidated financial statements.

In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement 109”(“FIN 48”) which clarifies the accounting for uncertainty in income taxes recognized in accordance with SFAS No. 109, “Accounting for Income Taxes.” FIN 48 is a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return. If an income tax position exceeds a more likely than not (greater than 50%) probability of success upon tax audit, the company will recognize an income tax benefit in its financial statements. Additionally, companies are required to accrue interest and related penalties, if applicable, on all tax exposures consistent with jurisdictional tax laws. This interpretation is effective on January 1,2007 and the Company does not expect the adoption of FIN 48 to have a material impact on its consolidated financial position, results of operations or cash flows.

In September 2006, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 108 (“SAB 108”), Financial Statements - Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.” SAB 108 provides guidance on how prior year misstatements should be taken into consideration when quantifying misstatements in current year financial statements for purposes of determining whether the current year's financial statements are materially misstated. SAB 108 provides that once a current year misstatement has been quantified, the guidance in SAB No. 99, Financial Statements - Materiality , should be applied to determine whether the misstatement is material and should result in an adjustment to the financial statements. Under certain circumstances, prior year financial statements will not have to be restated and the effects of initially applying SAB 108 on prior years will be recorded as a cumulative effect adjustment to beginning Retained Earnings on January 1, 2006, with disclosure of the items included in the cumulative effect. The Company does not expect the application of the provisions of SAB 108 to have a material impact, if any, on the consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities”. The objective of this statement is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is expected by the board to expand the use of fair value measurement, which is consistent with the Board's long-term measurement objectives for accounting for financial instruments. This statement is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact of adopting this statement; however, the Company does not expect the adoption of this provision to have a material effect on its financial position, results of operations or cash flows.

2. SIGNIFICANT CONTRACTS AND LICENSES

The School of Pharmacy, University of London (SOP)

In September 2005, The School of Pharmacy formally assigned to the Company the rights to a key patent application and the relevant know-how in the field of the treatment of cancer. The Agreement obligates the Company to pay The School

of Pharmacy certain milestone payments based on the achievement of agreed upon clinical milestones with respect to the prodrug covered by the patent application. If the Company successfully achieves each of these milestones, it would be obligated to pay The School of Pharmacy a total aggregate amount of milestone payments of GBP 275,000, or approximately $539,000 at current exchange rates. The Company is obligated to use its commercial best efforts to achieve these agreed upon clinical milestones. If the Company fails to achieve any of these agreed upon clinical milestones, The School of Pharmacy would have the right to terminate the know-how license under the agreement. In addition, the Company is obligated to pay The School of Pharmacy a royalty on net sales, if any, of products based on the prodrug.

Immunodex

On August 16, 2005, Somanta Incorporated and Immunodex entered into a patent know-how and exclusive sublicense agreement. In August 2005, the Company made a deposit of $150,000 into an escrow account pursuant to this agreement. In December 2005, this $150,000 was released from escrow and paid to Immunodex and recorded as R&D expense, based on the successful completion of the huBrE-3 mAb testing. In February 2006, the Company made a deposit of $150,000 into an escrow account pursuant to the agreement. This amount was presented as restricted funds in the consolidated balance sheet for the period ended October 31, 2006. This amount was released on November 7, 2006.

Effective November 3, 2006, the Company entered into a Side Amendment to Patent and Know-how Exclusive Sublicense Agreement with Immunodex and the Cancer Research Institute of Contra Costa (“CRICC”) (the “Side Amendment”). Pursuant to the Side Amendment, the Company has agreed with Immunodex and CRICC to reduce the amount of the annual maintenance fee under the License Agreement from $250,000 to $200,000 and to defer the annual maintenance fee that was due in August, 2006 until the earlier of (i) the closing of a fundraising resulting in gross proceeds to us of at least $5,000,000, or (ii) January 31, 2007 (the “2006 Annual Maintenance Fee”). If the Company is unable to timely pay the 2006 Annual Maintenance Fee, the annual maintenance fee due under the License Agreement would revert to $250,000.

In addition, the Company elected to terminate the License Agreement with respect to huBrE-3 mAb product candidate. As a result, the Company has terminated all development activities with respect to huBrE-3 mAb and returned the related cell lines to Immunodex. In connection therewith, the Company has terminated its financial support of the clinical trial currently being conducted at New York University with respect to huBrE-3 mAB (the “huBrE-3 mAb Clinical Trial”). The Company has agreed to pay a total of $31,400 to CRICC for the two patients that were dosed in the huBrE-3 mAb Clinical Trial, which amount shall become due and payable at the time the Company becomes obligated to make the 2006 Annual Maintenance Fee payment. Subject to the timely payment of the 2006 Annual Maintenance Fee, Immunodex has waived any cancellation fee related to the termination of the license with respect to huBrE-3 mAb, and Immunodex and CRICC have waived any further payments under the License Agreement or the Clinical Trial Agreement with respect to the huBrE-3 mAb Clinical Trial.

The Company has retained its rights with respect to huMc-3 mAb and its product candidate Angiolix; however, the Company has agreed to suspend the development of Angiolix until such time as the Company has paid the 2006 Annual Maintenance Fee. In addition, each of the product development milestones with respect to Angiolix set forth in the License Agreement has been reset to begin at such time as we make the 2006 Annual Maintenance Fee payment.

In addition, the Company agreed to reimburse Immunodex for certain out of pocket expenses in the aggregate amount of approximately $21,000, which amount was payable upon the execution of the Side Amendment.

On January 18, 2007 the Company entered into an Amendment to the Side Amendment which defers the amounts due on January 31, 2007, including the 2006 Annual Maintenance Fee, until July 31, 2007. In consideration for the deferral, the Company will pay $12,000 for each month of the deferral. In addition, the Company paid $2,050 of patent annuity payments.

On November 8, 2006, the Company made application to the National Institutes of Health for a non-exclusive license to certain patents held by NIH related to the humanization of Angiolix (huMc-3 mAb). On December 5, 2006 NIH provided the Company with proposed terms for a non-exclusive license. The Company is in discussion with NIH on those proposed terms and conditions.

University of Bradford (“UoB”)

On March 1, 2006, the Company entered into an agreement with the University of Bradford, Leeds, United Kingdom for the Company to fund a two-year research and development project staffed by UoB scientists to evaluate di-N-oxides of chloroethylaminoanthraquinones as a bioreductive prodrug and to evaluate and provide data on chloroethylaminoanthraquinones to support the requirements to initial clinical trials. The Company paid $84,835 and accrued $207,403 for the total project costs based on this agreement in the nine months ended January 31, 2007.

Imperial College of Science, Technology and Medicine (“Imperial College”)

On July 27, 2006, the Company entered into an agreement with Imperial College and a post-graduate student for the Company to fund a three-year pre-clinical research project staffed by Imperial College scientists to evaluate Angiolix (huMc-3 mAb) for anti-vascular cancer therapy. The Company has incurred $61,508 for the project costs in the nine months ended January 31, 2007.

Virium Pharmaceuticals, Inc. (“Virium”)

In February 2005, the Company entered into a Phenylbutyrate Co-development and Sublicense Agreement with Virium Pharmaceuticals, Inc., pursuant to which Virium granted the Company an exclusive, worldwide sublicense to PB, excluding the U.S. and Canada, for the treatment of cancer, autoimmune diseases and other clinical indications. The Company paid Virium a license fee of $50,000. Virium retained all rights with respect to PB inside the U.S. and Canada. The Company’s single largest stockholder, SCO Capital Partners, LLC, is also the single largest stockholder of Virium Pharmaceuticals, Inc.

Virium is also a party to a sublicense agreement with VectraMed, Inc. for the rights to develop and commercialize PB worldwide for the treatment of cancer, autoimmune diseases and other clinical indications. VectraMed obtained its rights to the product under an Exclusive Patent License Agreement dated May 25, 1995 with the U.S. Public Health Service, representing the National Institutes of Health. VectraMed subsequently assigned all its rights to PB to Virium pursuant to a novation agreement dated May 10, 2005.

Pursuant to our agreement with Virium, we are responsible for the conduct of clinical trials and patent prosecution related to PB outside of the U.S. and Canada. The Virium agreement also requires the Company to pay Virium a royalty on the sales of PB products until such time as the patents covering such products expire. These patents expire at various times between 2011 and 2016.

The Company’s agreement with Virium does not fully comply with the sublicensing requirements set forth in Virium’s agreement with the National Institutes of Health because it does not expressly incorporate by reference all of the relevant sections of Virium’s license with NIH. The Company is currently seeking to amend the agreement with Virium to bring it into full compliance with such sublicensing requirements and to permit the Company to become a direct licensee of the NIH should Virium default on its license with the NIH.

On October 20, 2006, NIH conditionally consented to the sublicense to the Company. However, the NIH conditions include an amendment to the Virium license to reflect an updated Virium development plan and milestones, the payment of $216,971 in past due patent expenses and the payment of a $5,000 sublicense royalty. Based on the information provided by NIH, it appears that about $200,000 relates to foreign patent expenses for calendar 2005 which would be the Company’s responsibility under its license agreement with Virium. Of that amount, approximately $12,000 relates to foreign patent maintenance fees and $197,000 largely relates to foreign patent legal expenses. The Company accrued approximately $266,000 as patent legal expense for the nine month period ended January 31, 2007. Virium has not advised the Company that the conditions to the NIH’s approval of the Company’s subl icense have been met.

On December 6, 2006, the Company signed a letter of intent (LOI) pertaining to a license and collaboration agreement with Virium covering all formulations or drug combinations where Phenylbutyrate is an active ingredient. Pursuant to the LOI, in addition to current worldwide rights, excluding North America, involving the current formulation of Phenylbutyrate, Somanta would obtain a participation in any revenue or royalties derived from sales in North America. In return, we would grant Virium a reciprocal participation in Europe. In the rest of the world, Somanta and Virium would share revenues and royalties equally. The LOI’s terms provide that both companies will, among other things, share data and jointly undertake the necessary pre-clinical and clinical studies, seek regulatory approvals and file for patent protection in all territories. It also provides for the formation of a joint development committee to oversee all aspects of the development and commercialization of Phenylbutyrate. Completion of the transaction contemplated by the LOI remains subject to the negotiation and execution of a definitive agreement.

3. PRIVATE PLACEMENT

On January 31, 2006, Somanta Pharmaceuticals, Inc. completed a private placement of 592.6318 shares of its Series A Convertible Preferred Stock (“Series A Preferred”) at a price of $10,000 per share, including six-year warrants to purchase an additional 4,938,598 shares of its common stock. The Series A Preferred shares consisted of 464 shares purchased by investors which are convertible into 7,733,333 shares of common stock and 128.6318 shares that gave effect to the conversion amount of $1,286,318, representing the value of the converted note of $1,250,000 and the associated accrued interest of $36,318. The total 592.6318 preferred shares are convertible into 9,877,197 common shares. Gross proceeds to

Somanta were $4,640,000, including $3,671,209 in cash, payments to various vendors amounting $968,791, which included cash payment of $624,105 to SCO Securities, LLC, its placement agent.

The Series A Preferred is initially convertible into 9,877,197 shares of the Company’s common stock at a conversion price of $0.60 per share. The conversion value is subject to adjustment. The exercise price for the warrants is $0.75 per share and they are immediately exercisable upon issuance. The fair market value of these warrants, as discussed further below, was estimated to be $0.41 per share. The warrants expire on January 31, 2012. None of the warrants have been exercised as of January 31, 2007.

Holders of the Series A Preferred stock are entitled to receive dividends at 8% per annum. Dividends will accrue and will be cumulative from the date of issuance, whether or not earned or declared by the Board of Directors. Dividends can be paid at the Company’s option either in cash or shares of the Company’s common stock on April 30 and October 31 of each year. The holders of the Series A Preferred stock have full voting rights and powers, subject to the Beneficial Ownership Cap, equal to the voting rights and powers of the Common stock holders. The Board of Directors did not declare the dividends as of October 31, 2006. Therefore, a dividend of $115,604 for the year ended April 30, 2006, and $358,500 for the nine months ended January 31, 2007 on the Preferred Stock have not been recorded in the consolidated financial statements, but in accordance with SFAS No. 129, the dividend amount has been included in the calculation of the net loss per share.

The Series A Preferred stockholders have a liquidation preference, in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, senior to the holders of common stock in an amount equal to $10,000 per share of preferred stock plus any accumulated and unpaid dividends on the preferred stock. In the alternative, the holders of the Series A Preferred may elect to receive the amount per share that would be distributed among the holders of the preferred stock and common stock pro rata based on the number of shares of the common stock held by each holder assuming conversion of all preferred stock, if such amount is greater than the amount such holder would receive pursuant to the liquidation preference. A change of control of the Corporation will not be deemed a liquidation.

The Series A Preferred Stock is not redeemable for cash. The holder of any share or shares of Series A Preferred can, at the holder’s option, at any time convert all or any lesser portion of such holder’s shares of Series A Preferred Stock into such number of shares of common stock as is determined by dividing the aggregate liquidation preference of the shares of preferred stock to be converted plus accrued and unpaid dividends thereon by the conversion value then in effect for such Preferred Stock (“Conversion Value”). The Company can, on the occurrence of a conversion triggering event, elect to convert all of the outstanding preferred stock into common stock. A conversion triggering event is (i) a time when the registration statement covering the shares of common stock into which the Series A Preferred is convertible is effective and sales may be made pursuant t hereto or all of the shares of common stock into which the Series A Preferred is convertible may be sold without restriction pursuant to Rule 144(k) promulgated by the SEC and the daily market price of the common stock, after adjusting for stock splits, reverse splits, stock dividends and the like is $5 or more for a period of 30 of the immediately preceding 60 consecutive trading days and the volume of common stock traded on the applicable stock exchange on each such trading day is not less than 100,000 shares, or (ii) a time when the Company consummates a sale of common stock in a firm commitment underwritten public offering in which the offering price before deduction of expenses of the common stock is greater than 200% of the Conversion Value and the aggregate gross proceeds of the offering to the Company are greater than $25 million.

All the outstanding preferred stock will be automatically converted to common stock upon an occurrence of a qualified change of control provided that upon consummation of a qualified change of control the holders of the shares issuable on automatic conversion shall be entitled to receive the same per share consideration as the qualified change of control transaction consideration. The holders of the Series A Preferred may require the Company to redeem the shares upon the Company’s failure or refusal to convert any shares of Preferred Stock in accordance with the terms of issue, or by providing a written notice to that effect.

The Series A Preferred has been classified as equity, as the Series A Preferred stock is not redeemable. In accordance with EITF No. 00–27, Application of Issue No. 98–5 to Certain Convertible Instruments, the Company has determined that the Series A Preferred had a beneficial conversion feature of $1,522,317 as of the date of issuance. As such, the Company recorded a non-cash deemed dividend of $1,522,317 resulting from the difference between the conversion price determined after allocation of the full fair value of the warrants of $0.45 and the fair value of common stock of $0.60. The carrying value of the Series A Preferred of $5,926,318 was recorded net of the deemed dividend of $1,522,317 and a discount of $2,048,531 on account of the full fair value of the warrants at the issuance date.

The fair value of the above warrants has been classified as a liability pursuant to EITF 00-19.

4. LIQUIDATED DAMAGES AND WARRANT LIABILITIES

In connection with the additional $250,000 line of credit drawn pursuant to a convertible note which was converted into Series A Preferred on January 31, 2006 (Note 4), the Company issued warrants to purchase a total of 866,534 shares of common stock at an exercise price of $0.01 per share to SCO. The warrants are immediately exercisable upon issuance and expire on November 8, 2012. The fair market value of these warrants, as discussed further below, was estimated to be $0.59 per share. The assumptions used in the Black-Scholes model were risk-free interest rate of 4.5% at the time of issuance, volatility factors of 97.24% calculated as the weighted average of the stock price volatility of ranked comparable public companies, and contractual terms equal to the exercise periods of the respective warrants. The fair value of the common stock as used in this calculation was $.60 per share, as negotiated between the Company and the Series A Convertible Preferred Stock investors. None of these warrants have been exercised as of January 31, 2007.

The holders of the Series A Preferred and warrants have registration rights which obligate the Company to file a registration statement with the Securities and Exchange Commission (“SEC”) covering the resale of the common stock issuable upon conversion of the Series A Preferred and the common stock issuable upon exercise of the warrants (as well as certain other securities of the Company) within 30 days after the closing of the private placement. In the event the registration statement is not filed within such thirty day period or if the registration statement is not effective within 120 days after the date it is filed, or a registration statement, once declared effective ceases to remain effective during the period that the securities covered by the agreement are not sold, the Company will be required to pay, in cash, liquidated damages for such failure, equal to 1% of the holders o f the Series A Preferred investment amount for each thirty day period in which the registration statement is not filed or effective, or maintained effective, as the case may be. This penalty obligation expired on January 31, 2007 since the SEC declared the Registration Statement effective on August 10, 2006.

In accordance with EITF Issue 05-4, The Effect of a Liquidated Damages Clause on a Freestanding Financial Instrument Subject to Issue No. 00-19, the Company believes that the effect of the liquidated damages should be treated under the first view (View A), which states that a registration rights agreement should be treated as a combined unit together with the underlying financial instruments, warrants and derivative debenture and evaluated as a single instrument under EITF Issue 00-19 and FAS 133. The Company concluded that this view is the most appropriate for the transaction. The Registration Rights Agreement and the financial instruments to which it pertains (the warrants and the preferred stock) were considered a combined instrument and accounted for accordingly. The SEC declared the Registration Statement effective on August 10, 2006. As a result, during the quarter ended July 31, 2006, the Company accrued a liability of liquidated damages of $120,502. During the quarter ended October 31, 2006 an agreement was reached with SCO on the liquidated damages matter. The agreement concluded that since the securities owned by SCO Capital Partners, LLC were not registered because SCO voluntarily withdrew them from the Registration because of the resale restrictions required by the SEC, the Company is not obligated for any liquidated damages pertaining specifically to SCO Capital Partners, LLC. Accordingly, the Company reversed out $85,302 of liquidated damages in the prior quarter ended October 31, 2006.

The Company also issued six year warrants to its placement agent to purchase 987,720 common shares at $0.60 per share to SCO Securities LLC, as part of the success fees of 10% of the aggregate value of the transaction at sales price of common stock. These warrants are immediately exercisable upon issuance. The fair value of these warrants at the date of issue was estimated to be $0.44 per share and has been recorded as issuance costs and offset against the proceeds of the Series A Preferred.

The fair value of warrants issued in connection with the issue of convertible debt and convertible preferred stock, including the agent warrants, was estimated at the date of grant and revalued at January 31, 2007 using a Black Scholes option pricing model with the following assumptions: a risk free interest rate of approximately 4.5% at the issuance date and 4.9% on January 31, 2007, no dividend yield, volatility factors of 81.89% to 97.24% at the issuance date and 60.22% to 62.32% at January 31, 2007, contractual terms of 6 and 7 years and expected terms based upon the formula prescribed in SEC Staff Accounting Bulletin 107 of 3 years and 3.5 years. These assumptions use the interest rate prevailing at the time of issuance, volatility factors calculated as the weighted average of the stock price volatility of ranked comparable public companies, and contractual terms equal to the exercise periods of the respective warrants. The fair value of the common stock as used in this calculation was $.60 per share at the issuance date, as negotiated between the Company and unaffiliated third party Series A investors, and $1.10 on January 31, 2007. The change in fair value of the warrants for the three months and nine months ended January 31, 2007 of $2,775,348 and $2,381,024, respectively, was reported in loss and disclosed in the financial statements.

The following table summarizes the activity for warrants issued during the nine month period ended January 31, 2007.

	Number of shares		Weighted Average Exercise Price

Balance—April 30, 2006		6,952,838		0.62
Granted		—		—
Exercised		—		—
Forfeited		—		—
Expired		—		—

Balance— January 31, 2007		6,952,838		0.62

The following table summarizes information about warrants outstanding as of January 31, 2007.

Warrants Outstanding and Exercisable

Exercise prices	Number Outstanding and Exercisable	Weighted Average Remaining Contractual Life (years)

$ 0.01	1,016,534	5.86
0.60	987,720	5.00
0.75	4,938,597	5.00
2.25	9,987	3.32

5. EMPLOYMENT AND CONSULTING AGREEMENTS

In January 2006, the Company entered into employment agreements with the Company’s President and Chief Executive Officer (“CEO”), and with the Company’s Executive Chairman, for one year terms. These agreements were automatically renewed for an additional on year term on January 31, 2007. Under these agreements, the President and Executive Chairman are to be paid annual base salaries of $275,000 and $248,000, respectively. Both officers are eligible to receive annual bonuses and additional stock option grants at the discretion of the Company’s board of directors. In July 2006, the Company’s CEO and Executive Chairman agreed to defer 50% of their base salaries until the completion of the Company’s next fund raising at which time the deferred amounts would be repaid and the deferrals would cease. Effective October 1, 2006, the Company’s CEO and Executive Chairman agreed to defer 100% of their base salaries until the completion of the Company’s next fund raising, or the completion of a merger or other consolidation with another company, at which time the deferred amounts would be repaid and the deferrals would cease. Effective June 30, 2006, our Executive Chairman was appointed by our Board to be our Chief Financial Officer, Secretary and Treasurer.

In January 2006, the Company entered into an employment agreement with the Company’s Chief Financial Officer (“CFO”). Under the agreement, the CFO was to be paid an annual base salary of $215,000 and also entitled to receive an annual bonus and additional stock option grants at the discretion of the Company’s board of directors. In June 2006, the Company’s CFO resigned. The Company is not obligated to pay him any severance or other payments as the result of his departure; however, the board agreed to amend the terms of his stock option agreement to immediately vest him in twenty five percent (25%) of the shares covered by the option, or 101,668 shares, and enable him to exercise such option until June 30, 2007. Based on FAS 123R, no incremental expense was recorded for these options with accelerated vesting as the fair value of the modified options was less than the fair value of the original options calculated immediately before the terms were modified.

In November 2005, the Company entered into two consulting agreements: (i) a Service Provision Agreement with Pharma Consultancy Limited, a UK company controlled by Luiz Porto, one of the Company’s stockholders pursuant to which the Company will pay Dr. Porto approximately $278,000 per year, for services rendered by Dr. Porto to the Company as an independent consultant in connection with the management of the Company’s clinical activities, that will terminate on December 31, 2006 unless extended by a mutual written agreement of the parties and may be terminated, with or without cause, by giving the other party thirty (30) days’ prior written notice; and (ii) a Service Provision Agreement with Gary Bower pursuant to which the Company will pay Mr. Bower approximately $156,000 per year for services rendered by Mr. Bower to the Company as an in dependent consultant in connection with the pre-clinical activities related to the manufacturing of the Company’s product candidates, that will terminate on December 31, 2006 unless extended by a mutual written agreement of the parties and that may be terminated, with or without cause, by giving the other party thirty (30) days’ prior written notice.

The agreement with Mr. Bower was amended in April 2006 to include GTE Consultancy Limited, a company organized under the laws of United Kingdom and owned by Mr. Bower, as the service provider pursuant to the agreement. With the approval of the Company’s board of directors, both Dr. Porto and Mr. Bower may also be granted cash bonuses and stock options in the future. In July 2006, Pharma Consultancy Limited and GTE Consultancy Limited amended their agreements to reduce, effective September 1, 2006, their consulting services to the Company by 33%, which in turn, will reduce the Company’s payments by approximately $91,000 and $51,000, respectively, on an annualized basis. Both agreements expired by there terms on December 31, 2006 and were not renewed.

The Company’s former CFO resigned in August 2005, in connection with the closing of the share exchange agreement with Bridge Oncology. In January 2006, he entered into a consulting arrangement with the Company under which he is paid $5,000 per month retroactive to June 2005. Effective June 1, 2006, the former CFO agreed to modify his consulting arrangement to provide his services for $100 per hour in lieu of a fixed retainer and was granted options to acquire 25,000 of the Company’s common stock at $.60 per share vesting quarterly over twenty four months.

6. STOCK- BASED COMPENSATION

The Board of Directors adopted and the stockholders approved the 2005 Equity Incentive Plan in June 2005. The plan was adopted to recognize the contributions made by the Company’s employees, officers, consultants, and directors, to provide those individuals with additional incentive to devote themselves to its future success, and to improve the Company’s ability to attract, retain and motivate individuals upon whom the Company’s growth and financial success depends. Under the plan, stock options may be granted as approved by the Board of Directors or the Compensation Committee. There are 8,000,000 shares reserved for grants of options under the plan, of which 2,204,701 have been issued as substitutions with the exact same terms for the 2,204,701 previously issued options outstanding as of April 30, 2005. Stock options vest pursuant to individual stock option agreements. No options granted under the plan are exercisable after the expiration of ten years (or less

in the discretion of the Board of Directors or the Compensation Committee) from the date of the grant. The plan will continue in effect until terminated or amended by the Board of Directors or until expiration of the plan on August 31, 2015.

FAS 123(R) requires the use of a valuation model to calculate the fair value of each stock-based award. Since May 1, 2003, the Company has used the Black-Scholes model to estimate the fair value of stock options granted. For the valuation of stock-based awards granted in the nine months ended January 31, 2007, the Company used the following significant assumptions:

Compensation Amortization Period. All stock-based compensation is amortized over the requisite service period of the options, which is generally the same as the vesting period of the options. For all stock options, the Company amortizes the fair value on a straight-line basis over the service periods.

Expected Term or Life. The expected term or life of stock options granted or stock purchase rights issued represents the expected weighted average period of time from the date of grant to the estimated date that the stock option would be fully exercised. To calculate the expected term, the Company used the total of one-half of the option term and one-half of the vesting period.

Expected Volatility. Expected volatility is a measure of the amount by which the Company’s stock price is expected to fluctuate. The Company’s stock is currently traded on the over-the –counter bulletin board under the trading symbol “SMPM”. The Company estimated the expected volatility of the stock options at grant date using the daily stock price of three comparable companies over a recent historical period equal to the Company’s expected term.

Risk-Free Interest Rate. The risk-free interest rate used in determining the fair value of our stock-based awards is based on the implied yield on U.S. Treasury zero-coupon issues with remaining terms equivalent to the expected term of our stock-based awards.

Expected Dividends. The Company has never paid any cash dividends on common stock and does not anticipate paying any cash dividends in the foreseeable future. Consequently, the Company used an expected dividend yield of zero in valuation models.

Expected Forfeitures. As stock-based compensation expense recognized in the Condensed Consolidated Statements of Income for the nine months ended January 31, 2007 is based on awards that are ultimately expected to vest, it should be reduced for estimated forfeitures. FAS 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Pre-vesting forfeitures were estimated to be 0% for stock options granted for the nine months ended January 31, 2007 based upon historical forfeitures.

Summary of Significant Assumptions of the Valuation of Stock-Based Awards. The weighted-average estimated fair value of stock options granted during the nine months ended January 31, 2007 and 2006 was $0.43 and $0.42 per share, respectively. The weighted-average estimated fair value of stock options granted during the three months ended January 31, 2007 and 2006 was $0 since no option was granted in this quarter and $0.51 per share, respectively. The fair value for these stock options was estimated at the date of grant with the following weighted-average assumptions for the three and nine months ended January 31, 2007 and 2006:

Three months ended January 31,

Nine months ended January 31,

2007

2006

2007

2006

Expected volatility

n/a

101.80%

80.17% - 81.38%

101.80%

Weighted-average volatility

n/a

101.80%

80.41%

78.48%

Expected dividend yield

n/a

Expected term in years

n/a

6.0 to 7.0

6.0

6.0 to 7.0

Risk-free interest rate

n/a

4.5% to 4.6%

4.8% to 5.1%

4.1% to 4.7%

During the three months ended January 31, 2007 and 2006, the Company recognized compensation costs related to stock options of $53,670 and $64,817, respectively. During the nine months period ended January 31, 2007 and 2006, the Company recognized compensation costs related to stock options of $178,046 and $233,310, respectively. As of January 31, 2007, there was $497,215 of unrecognized compensation cost related to stock options which is expected to be recognized over a weighted-average period of 5.72 years.

The following table summarizes activity for stock options issued to employees, consultants and directors for the nine month period ended January 31, 2007 (unaudited):

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value

Outstanding at April 30, 2006		3,825,249		$	0.94		7.9	$	-0-
Granted		122,500			0.60
Exercised		—
Forfeited		(339,417	)		0.60
Expired		—

Outstanding at January 31, 2007		3,608,332		$	0.96		6.9	$	512,646

Exercisable at January 31, 2007		2,451,361		$	1.09		5.7	$	-0-

The aggregate intrinsic value represents the difference between the stock price on the last day of the quarter, January 31, 2007, which was $1.10, and the exercise price multiplied by the number of options outstanding. The aggregate intrinsic values for stock options outstanding at April 30, 2006 and for stock options exercisable at January 31, 2007 are negative, and are shown as $-0- in the table above.

The following table summarizes information about non-vested Company stock options as of January 31, 2007 (unaudited):

	Shares			Weighted Average Grant Date Fair Value

Non-vested at April 30, 2006		1,849,128		$	0.43
Granted		122,500		$	0.43
Vested		(475,240	)	$	0.35
Forfeited		(339,417	)	$	0.15

Non-vested at January 31, 2007		1,156,971		$	0.50

7. RELATED PARTY TRANSACTIONS

Due to Related Parties

The Company recorded advisory service fees totaling $37,500 and $142,500 to SCO Financial Group, LLC for the three and nine months ended January 31, 2007, respectively. The Company recorded board of director fees of $12,000 and $56,000 for the three and nine months ended January 31, 2007. Due to related parties at January 31, 2007 consists of $75,000 payable to SCO, and the remainder is payable to members of the board of directors for their fees and reimbursement of expenses.

8. SUBSEQUENT EVENTS

On February 15, 2007, one of the Series A Preferred holders converted one share of Series A Preferred Shares together with all accrued and unpaid dividends attributable to such share into 18,069 shares.

On February 15, 2007, the Company entered into a non-binding letter of intent with Access Pharmaceuticals, Inc. under which Access would issue 1,500,000 of its common shares to acquire all of the outstanding equity securities of the Company. Consummation of the transactions contemplated by the non-binding letter of intent is subject to the due diligence of the parties, as well as the negotiation and execution of one or more definitive agreements and any closing conditions contained therein.

On February 26, 2007, the Company issued, pursuant to the terms of the financial advisory agreement dated March 2005 between Bridge Oncology and SCO Financial Group LLC, which the Company assumed, an annual grant of warrants to purchase 150,000 shares of the Company’s common stock at an exercise price of $0.01 per share and is exercisable for 7 years.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

The following discussion should be read in conjunction with the information contained in the Condensed Consolidated Financial Statements, including the related footnotes.

This report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements appear in a number of places in this report and include all statements that are not historical facts. Some of the forward-looking statements relate to the intent, belief or expectations of the Company and its management regarding the Company’s strategies and plans for operations and growth. Other forward-looking statements relate to trends affecting the Company’s financial condition and results of operations, and the Company’s anticipated capital needs and expenditures. Forward-looking statements can be identified by the use of predictive, future-tense or forward-looking terminology, such as “believes,” “anticipates,” “expects,” “intends,” “estimates,” “plans,” “may,” “will,” or similar terms. These statements appear in a number of places in this Form 10-QSB and include statements regarding the intent, belief or current expectations of the Company, our directors or our officers with respect to, among other things: (i) trends affecting our financial condition or results of operations for our limited history; and (ii) our business and growth strategies.

Investors are cautioned that such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those that are anticipated in the forward-looking statements as a result of our ability to raise capital to finance our growth, our ability to attract and retain key personnel, general economic and business conditions, the impact of technological developments and competition, our expectations and estimates concerning future financial performance and financing plans and the impact of current, pending or future legislation and regulation on the biopharmaceutical industry and other risks disclosed from time to time in our SEC filings. Investors should review the more detailed description of these and other possible risks contained in the Company’s filings with the SEC, including the Company’s most recently filed 10-KSB.

Overview

Background

We are a biopharmaceutical company engaged in the development of drugs primarily for the treatment of cancer. We in-license product development candidates designed for anti-cancer therapy in order to advance them along the regulatory and clinical pathway toward commercial approval. Our licenses are generally worldwide in scope and territory, with the exception of our license for Sodium Phenylbutyrate where our rights exclude the U.S. and Canada. We use our expertise to manage and perform what we believe are the most critical aspects of the product development process which includes the design and conduct of clinical trials, the development and execution of strategies for the protection and maintenance of intellectual property rights and the interaction with drug regulatory authorities internationally. We concentrate on product development and engage in a very limited way in product discovery, avoiding the significant investment of time and financial resources that is generally required before a compound is identified and brought into clinical trials. In addition, we intend to out-source clinical trials, pre-clinical testing and the manufacture of clinical materials to third parties. We currently have engaged two third parties to undertake pre-clinical testing with respect to our product candidates Angiolix, Alchemix and Prodrax. We were formerly known as Bridge Oncology Products, Inc., a Delaware corporation which was formed on February 10, 2005. On August 22, 2005 we entered into a Share Exchange Agreement with Somanta Limited, a company organized under the laws of England, pursuant to which Somanta Limited became a wholly-owned subsidiary of Bridge Oncology Products, Inc., and Bridge Oncology Products, Inc., changed its name to Somanta Incorporated. Somanta Limited was formed on April 19, 2001.

Our current portfolio of development candidates in clinical development includes one anti-cancer agent (a small molecule) targeting four different tumors and/or stages of cancer. We have three additional development candidates (two small molecules and a monoclonal antibody) in pre-clinical development targeting eleven different tumor types.

We intend to license the rights to manufacture and market our product candidates to other pharmaceutical companies in exchange for license fees and royalty payments and to continue to seek other in-licensing opportunities in pursuit of our business strategy. We do not currently intend to manufacture or market products although we may, if the opportunity is available on terms that are considered attractive, or retain co-development rights to specific products.

We have incurred substantial operating losses since our inception due in large part to expenditures for our research and development activities. At January 31, 2007, we had an accumulated deficit of $13,954,180 (unaudited). We expect our

operating losses to increase for at least the next several years as we pursue the clinical development of our lead product candidates and expand our discovery and development pipeline.

Revenues

We have not generated any significant revenues from sales to date, and we do not expect to generate revenues from product sales for at least the next several years, if at all. We expect our revenues for the next several years to consist of payments under certain of our current agreements and any additional collaborations, including upfront payments upon execution of new agreements, research funding and related fees throughout the research term of the agreements and milestone payments contingent upon achievement of agreed-upon objectives. To date, we have received $10,000 in payments under such agreements.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements. We have identified the accounting policies that we believe require application of management’s most subjective judgments, often requiring the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Our actual results may differ substantially from these estimates under different assumptions or conditions. Our significant accounting policies are described in more detail in the notes to consolidated financial statements included elsewhere in this Form 10-QSB. We believe that the following accounting policies require the application of significant judgments and estimates.

Intangible Assets—Patents and Licenses

All patent and license costs are charged to expense when incurred.

Share-Based Payment

Effective May 1, 2006, we adopted SFAS 123R and accordingly have adopted the modified prospective application method. Under this method, SFAS 123R is applied to new awards and to awards modified, repurchased, or cancelled after the effective date. Additionally, compensation cost for the portion of awards that are outstanding as of the date of adoption for which the requisite service has not been rendered (such as unvested options) is recognized over a period of the period of time as the remaining requisite services are rendered.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

On an ongoing basis, we evaluate our estimates, including those related to accruals, valuation of stock options and warrants, and income taxes (including the valuation allowance for deferred taxes). We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may materially differ from these estimates under different assumptions or conditions. Material differences may occur in our results of operations for any period if we made different judgments or utilized different estimates.

Fair Value of Financial Instruments

Statement of Financial Accounting Standard No. 107, “Disclosures about fair value of financial instruments,” requires that we disclose estimated fair values of financial instruments. The carrying amounts reported in the statements of financial position for current assets and current liabilities qualifying as financial instruments are a reasonable estimate of fair value of such financial instruments.

Research and Development

All research and development costs consist of expenditures for royalty payments, licensing fees, patent fees and contract research conducted by third parties.

Results of Operations

Fluctuations in Operating Results

Our results of operations are likely to fluctuate from period to period. We anticipate that our quarterly and annual results of operations will be impacted for the foreseeable future by several factors, including the timing and amount of payments received pursuant to our current and future collaborations, and the progress and timing of expenditures related to our discovery and development efforts. Due to these fluctuations, we believe that the period-to-period comparisons of our operating results are not a good indication of our future performance.

Three Months Ended January 31, 2007 Compared With Three Months Ended January 31, 2006

For the three months ended January 31, 2007 and 2006, we recognized revenue in the amount of $357 (unaudited) and $357 (unaudited), respectively, related to an upfront license fee paid by Advanced Cardiovascular Devices, LLC, for an exclusive license to Alchemix for use in stents and devices in the field of vascular disorders.

Our net loss applicable to common stockholders was $3,438,102 (unaudited) for the three months ended January 31, 2007 versus $3,503,433 (unaudited) for the three months ended January 31, 2006, a decrease of $65,331, the causes of which are discussed below.

Operating Expenses were $664,247 (unaudited) for the three months ended January 31, 2007, versus $980,021 (unaudited) for the three months ended January 31, 2006, a decrease of $315,774. This decrease is primarily due to our reduced spending necessitated by our liquidity issues and need to conserve cash until we raise additional funds.

We incurred no interest expense for the three months ended January 31, 2007 because we had no debt outstanding during the period. Interest expense was $1,001,354 for the three months ended January 31, 2006, and included the following items related to our secured convertible note issued to SCO:

	•	$514,981, representing the non-cash expense required by Statement of Financial Accounting Standards 123 for the fair value of the warrants issued in connection with the note.

	•	$364,721, representing the non-cash expense required by EITF No. 00-27 for the non-cash value of the beneficial conversion feature associated with the note.

	•	$100,000, reflecting the fee paid to SCO for issuing the note.

	•	$21,652, reflecting the interest due as of January 31, 2006 on the note, which interest was converted into Series A Preferred in connection with the Company’s private placement of the stock (see Note 3, Private Placement).

The change in fair value of warrant liabilities of $2,775,348 for the three months ended January 31, 2007 is recorded as an expense. There was no such transaction during the three months ended January 31, 2006.

The deemed dividend of $1,522,317 on Series A preferred stock issued on January 31, 2006 (see Note 3, Private Placement, above), and was recorded during the three months then ended. The dividend reflects the non-cash expense required by EITF No. 00-27 for the non-cash value of the beneficial conversion feature associated with the Series A preferred stock.

Nine Months Ended January 31, 2007 Compared With Nine Months Ended January 31, 2006

For the nine months ended January 31, 2007 and 2006, the Company recognized revenue in the amount of $1,072 (unaudited) and $1,071 (unaudited), respectively, related to an upfront license fee paid by Advanced Cardiovascular Devices, LLC, for an exclusive license to Alchemix for use in stents and devices in the field of vascular disorders.

The Company’s net loss applicable to common stockholders was $5,653,672 (unaudited) for the nine months ended January 31, 2007 versus $5,183,636 (unaudited) for the nine months ended January 31, 2006, an increase of $470,036, the causes of which are discussed below.

Operating expenses were $3,265,958 for the nine months ended January 31, 2007, versus $2,621,972 for the nine months ended January 31, 2006, an increase of $643,986. This increase is due to an increase in both G&A expenses and R&D expenses.

G&A expenses were $2,150,479 for the nine months ended January 31, 2007, versus $1,706,345 for the nine months ended January 31, 2006, an increase of $444,134. This increase reflects primarily:

	•	an increase in patent legal expense principally related to the sublicense with Virium of $282,764;

	•	an increase in listing fees and public reporting expenses of $87,068 related to our registration statement and related to the requirements of doing business as a US publicly-listed entity;

	•	an increase in payroll related expenses of $209,662 for the compensation of newly-hired officers who were not on our payroll for the entirety of the period ended January 31, 2006;

	•	an increase in insurance expenses of $123,647 related to the establishment of a comprehensive insurance program;

	•	a decrease in corporate legal expenses of $319,230 and in audit and accounting expense of $46,549, principally related to the timing of costs of filing registration statements in the prior period;

	•	an increase of $31,813 in our fees to the members of our board of directors;

	•	an increase of $44,598 in our outside consulting fees related primarily to the SCO monthly consulting fee being in effect more months in the current period; and

	•	an increase of $42,862 related to the establishment of an investor relation program.

R&D expenses were $1,115,479 for the nine month period ended January 31, 2007, versus $915,627 for the nine month period ended January 31, 2006, an increase of $199,852. This net increase reflects primarily:

	•	an increase in pre-clinical costs of $181,633, related to the costs the pre-clinical efforts related to Alchemix, Prodrax and Angiolix;

	•	an increase in consulting expense of $64,727, related to the costs of monthly retainers as two principal consultants were contracted on annual terms to oversee all of our pre-clinical and clinical development;

	•	a $31,944 expense for an investigator fee, related to the investigator clinical trial of Phoenix; and

	•	a decrease in licensing fees of $31,538.

We incurred no interest expense for the nine months ended January 31, 2007 because we had no debt outstanding during the period. Interest expense was $1,016,021 for the nine months ended January 31, 2006 and included the following items related to our convertible note issued to SCO.

	•	$514,981, representing the non-cash expense required by Statement of Financial Accounting Standards 123 for the fair value of the warrants issued in connection with the note.

	•	$364,721, representing the non-cash expense required by EITF No. 00-27 for the non-cash value of the beneficial conversion feature associated with the note.

	•	$100,000, reflecting the agent fee paid to SCO for issuing the note.

	•	$36,319, reflecting the interest due as of January 31, 2006 on the note, which interest was converted into Series A Preferred in connection with the Company’s private placement of the stock (see Note 5, Private Placement).

The change in fair value of warrant liabilities of $2,381,024 for the nine months ended January 31, 2007 is recorded as an expense. There was no such transaction during the nine months ended January 31, 2006.

The deemed dividend of $1,522,317 on Series A preferred stock issued on January 31, 2006 (see Note 3, Private Placement, above) was recorded during the nine months ended January 31, 2006. The dividend reflects the non-cash expense required by EITF No. 00-27 for the non-cash value of the beneficial conversion feature associated with the Series A preferred stock.

Related Party Transactions

Liquidity and Capital Resources

Since inception, we have funded our operations primarily through sales of our equity and debt securities. As of January 31, 2007, we had received $5,199,757 (unaudited) in net proceeds from sales of our equity securities and $1,329,402 (unaudited) in debt financing. A portion of the debt financing was repaid in prior fiscal years. The balance was repaid at the beginning of February 2006.

As of January 31, 2007, we had $129,104 (unaudited) in cash compared to $1,587,751 at April 30, 2006, the end of our most recent fiscal year.

Net cash used in operating activities for the nine months ended January 31, 2007, totaled $1,460,647 (unaudited) and was used to fund our net losses in the period which were partly offset by increases in liabilities and non-cash expenses. In liabilities, our accounts payable and accrued liabilities increased $1,223,600 (unaudited) and due to related parties increased $144,003 (unaudited). Our non-cash expense includes $2,381,024 (unaudited) related to the change in fair value of our warrant liabilities and $178,046 (unaudited) for compensation related to stock options.

For the nine months ended January 31, 2007, our investing activities consisted of the receipt of $2,000 (unaudited) for the sale of computer equipment. For the nine months ended January 31, 2006, our investing activities consisted of the purchase of equipment of $5,601 (unaudited).

For the nine months ended January 31, 2007, we had no financing activities. For the nine months ended January 31, 2006, we completed a private placement of 592.6318 shares of our Series A Convertible Preferred Stock (“Series A Preferred”) at a price of $10,000 per share. The Series A Preferred shares consisted of 464 shares purchased by investors which are convertible into 7,733,333 shares of common stock and 128.6318 shares that gave effect to the conversion amount of $1,286,318, representing the value of the converted note of $1,250,000 and the associated accrued interest of $36,318. The total 592.6318 preferred shares are convertible into 9,877,197 common shares. Gross proceeds to the Company were $4,640,000, including $3,671,209 in cash, payments to various vendors amounting $968,791, which included cash payment of $624,105 to SCO Securities, LLC, its placement agent.

We have invested a substantial portion of our available cash in investment securities consisting of high quality, marketable debt instruments of corporations and financial institutions. We have adopted an investment policy and established guidelines relating to diversification and maturities of our investments to preserve principal and maintain liquidity.

We have consumed substantial amounts of capital since our inception. We do not believe our existing cash resources, including the net proceeds from our private placement in January 2006 will be sufficient to fund our anticipated cash requirements beyond the fourth quarter of the fiscal year beginning May 1, 2006. We will require significant additional financing in the future to fund our operations. Our future capital requirements will depend on, and could increase significantly as a result of, many factors, including:

	•	progress in, and the costs of, our pre-clinical studies and clinical trials and other research and development programs;

	•	the scope, prioritization and number of research and development programs;

	•	the ability of our collaborators and us to reach the milestones, and other events or developments, under our future collaboration agreements;

	•	the costs involved in filing, prosecuting, enforcing and defending patent claims and other intellectual property rights;

	•	the costs of securing manufacturing arrangements for clinical or commercial production of product candidates; and

	•	the costs of establishing, or contracting for, sales and marketing capabilities if we obtain regulatory clearances to market our product candidates.

Until we can generate significant continuing revenues, we expect to satisfy our future cash needs through strategic collaborations, private or public sales of our securities, debt financings or by licensing all or a portion of our product candidates or technology to third parties. We cannot be certain that additional funding will be available to us on acceptable terms, or at all. If funds are not available, we may be required to delay, reduce the scope of, or eliminate one or more of our research or development programs or our commercialization efforts.

To date, we have not had any relationships with unconsolidated entities or financial partnerships, such as entities referred to as structured finance or special purpose entities, which are established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Recently Issued Accounting Standards

In May 2005, the FASB issued FASB Statement No. 154, “Accounting Changes and Error Corrections.” This new standard replaces APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements, and represents another step in the FASB’s goal to converge its standards with those issued by the IASB. Among other changes, Statement 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle, unless it is impracticable to do so. Statement 154 also provides that (1) a change in method of depreciating or amortizing a long-lived nonfinancial asset be accounted for as a change in estimate (prospectively) that was effected by a change in accounting principle, and (2) correction of errors in previously issued financial statements should be termed a “restatement.” The new standard is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. Early adoption of this standard is permitted for accounting changes and correction of errors made in fiscal years beginning after June 1, 2005. Management believes that changes resulting from adoption of the FASB will not have a material effect on the financial statements taken as a whole.

In February 2006, the FASB issued SFAS 155 “Accounting for Certain Hybrid Financial Instruments,” an amendment of FASB Statements No. 133 and in February 2006, the FASB issued SFAS 155 “Accounting for Certain Hybrid Financial Instruments,” an amendment of FASB Statements No. 133 and 140. This Statement amends FASB Statements No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” This Statement resolves issues addressed in Statement 133 Implementation Issue No. D1, Application of Statement 133 to Beneficial Interests in Securitized Financial Assets. This Statement:

	•	Permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation;

	•	Clarifies which interest-only strips and principal-only strips are not subject to the requirements of Statement 133;

	•	Establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation;

	•	Clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and

	•	Amends Statement 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument.

This Statement is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. The fair value election provided for in paragraph 4(c) of this Statement may also be applied upon adoption of this Statement for hybrid financial instruments that had been bifurcated under paragraph 12 of Statement 133 prior to the adoption of this Statement. Earlier adoption is permitted as of the beginning of an entity’s fiscal year, provided the entity has not yet issued financial statements, including financial statements for any interim period for that fiscal year. Provisions of this Statement may be applied to instruments that an entity holds at the date of adoption on an instrument-by-instrument basis. Management believes that changes resulting from adoption of the SFAS 155 will not have a material effect on the financial statements.

In March 2006, the FASB issued SFAS No. 156 (“FAS 156”), “Accounting for Servicing of Financial Assets-An Amendment of FASB Statement No. 140.” Among other requirements, FAS 156 requires a company to recognize a servicing asset or servicing liability when it undertakes an obligation to service a financial asset by entering into a servicing contract under certain situations. Under FAS 156 an election can also be made for subsequent fair value measurement of servicing assets and servicing liabilities by class, thus simplifying the accounting and provide for income statement recognition of potential offsetting changes in the fair value of servicing assets, servicing liabilities and related derivative instruments. The Statement will be effective beginning the first fiscal year that begins after September 15, 2006. The Company does not expect the adoption of FAS 156 will have a material impact on our financial position or results of operations.

In July 2006, the FASB issued FASB Staff Position (FSP) No. FAS 13-2, “Accounting for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction,” that provides guidance on how a change or a potential change in the timing of cash flows relating to income taxes generated by a leveraged lease transaction affects the accounting by a lessor for the lease. This staff position will be adopted by us on May 1, 2007. We are currently evaluating the impact of adopting this FSP; however, we do not expect the adoption of this provision to have a material effect on our financial position, results of operations or cash flows.

In September 2006, the FASB issued Statement No. 157, “Fair Value Measurements” (SFAS 157). This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. However, for some entities, the application of this Statement will change current practice. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We do not expect the adoption of SFAS No. 157 to have a material impact on our consolidated financial statements.

In September 2006, the FASB issued Statement No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R)” (SFAS 158). This Statement improves financial reporting by requiring an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. This Statement also improves financial reporting by requiring an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. This Statement is effective as of the end of the fiscal year ending after December 15, 2006. We do not have any defined benefit plans, or other post-retirement plans, and, therefore, this Statement does not apply to us. We do not expect SFAS No. 158 to have any impact on our consolidated financial statements.

Competition

The biopharmaceutical industry is intensely competitive. Many companies, including other biopharmaceutical companies and biotechnology companies, are actively engaged in activities similar to ours, including research and development of products for the treatment of cancer. More specifically, competitors for the development of new therapeutic products to treat cancer also focus on mAb-based cancer therapeutics, small molecule discovery and development. A 2005 survey by the Pharmaceutical Research and Manufacturers of America listed nearly 400 new treatments for cancer that are currently being tested by researchers.

To our knowledge, other companies that are involved in the development of monoclonal antibody cancer therapeutics directly related to our efforts include Abgenix/Amgen, Antisoma, Genmab, ImClone/Bristol-Myers Squibb, ImmunoGen, Schering AG, Biogen Idec, Roche, Genentech and Merck.

In addition, a number of other companies are involved in the development of chemotherapeutic products directly related to our efforts including Bristol-Myers Squibb, Pfizer, GlaxoSmithKline, Novartis, Eli Lilly, Wyeth and Roche.

We expect to encounter significant competition for the pharmaceutical products we are developing and plan to develop in the future. Many of our competitors have substantially greater financial and other resources, larger research and development capabilities and more extensive marketing and manufacturing organizations than we do.

In addition, some such companies have considerable experience in pre-clinical testing, clinical trials and other regulatory approval procedures. There are also academic institutions, governmental agencies and other research organizations which are conducting research in areas in which we are working and they may also market commercial products, either on their own or through collaborative efforts. If any of these competitors were to complete clinical trials, obtain required regulatory approvals and commence commercial sales of their products before we do, they may achieve a significant competitive advantage.

Historical Expenditures

Prior to May 1, 2006, we have historically accounted for costs by company rather than by product.

Patent and license expenditures are expenditures that we have not allocated to particular products. General and administrative expenses include salaries of the Chief Executive Officer, finance and administrative staff, rent and occupancy, telephone and office, corporate legal and audit, and investor relations. These expenses are not separated by product but are set forth on our Consolidated Statements of Operations and Deficit under “Expenses—general and administrative.”

Total licensing and product development expenses for the last two years are set forth on our Consolidated Statements of Operations under “Operating Expenses—research and development.” This line item includes third-party development, patent and license expenditures, but not allocated by product.

Expenditures to Completion

Our business strategy is to in-license rights to promising product candidates, further develop those products by progressing the products toward regulatory approval by conducting and managing clinical trials, and finally to out-license rights to manufacture and/or market resulting product candidates to other pharmaceutical firms in exchange for royalties and license fees. The path to commercialization is varied and uncertain such that we cannot anticipate the path to be taken for any particular product. It is not possible for us to predict or even estimate the nature, timing, or future costs, project completion dates, or when material net cash flows might be realized on any particular project. However, we do expect that our costs will increase as we continue to develop each of the licensed products and move each licensed product closer to commercialization. Our expectations could change quickly in the event that we are able to out-license any product.

Our business strategy is to use our product development capabilities to bridge discoveries and research from scientific/academic institutions or other biopharmaceutical companies, on the one hand, with commercial manufacturing and marketing of biopharmaceutical products, on the other hand. Out-license opportunities could occur at any time. Licensees would be expected, to the extent necessary, to: participate in the remaining clinical development required to obtain final regulatory approval for the product; relieve us of some or all of the costs to finalize development; and/or pay us upfront and milestone payments. To date, we have out-licensed Alchemix to Advanced Cardiovascular Devices, LLC, for the development and commercialization of products for use in vascular disease applications worldwide.

Trend Information

It is important to note that historical patterns of expenditures cannot be taken as an indication of future expenditures. The amount and timing of expenditures and therefore liquidity and capital resources vary substantially from period to period depending on the pre-clinical and clinical studies being undertaken at any one time and the availability of funding from investors and prospective commercial partners.

For example, we intend to enter into agreements with other biopharmaceutical companies for the continued clinical development and marketing of our product development candidates. Generally, we intend to enter into these agreements when we have successfully completed the Phase II clinical trials and when human clinical data shows the safety and efficacy of our product development candidates.

Consistent with the industry, business, and intellectual property risks disclosed in our filings with the SEC, our revenue trend in the foreseeable future is highly uncertain. Even if we are able to obtain sufficient funding to conduct all current programs of our business, we would not expect to achieve additional revenues in the next fiscal year according to the schedules of revenues in our current agreements with other companies for pre-clinical and clinical development.

To achieve these goals we will need to expand our pre-clinical testing, our manufacturing that is compliant with current good manufacturing practices and the initiation of human clinical trials. This will mean that the level of expenditures will accelerate from those reported historically and will require that we fund these expenditures principally from the sale of our equity securities. Specifically, we are currently obligated to pay license fees of $200,000, milestone payments of $46,000 and research fees of $372,000, for a total of $618,000 all in the current fiscal year ending April 30, 2007.

Other than as discussed above, we are not aware of any material trends related to our business of product development, patents and licensing.

ITEM 3.

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (the “CEO”) and our Executive Chairman and Chief Financial Officer (“CFO”), of the effectiveness of our disclosure controls and procedures. Based upon that evaluation, the CEO and CFO concluded that as of January 31, 2007 our disclosure controls and procedures were effective in timely alerting them to the material information relating to us (or to our consolidated subsidiaries) required to be included in our periodic filings with the SEC such that the information relating to us required to be disclosed in SEC reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Internal Controls Over Financial Reporting

There were no significant changes made in our internal controls over financial reporting during the quarter ended January 31, 2007 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

On February 8, 2007, our United Kingdom subsidiary, Somanta Limited, had a creditor, Cornel Associates Limited, institute a collection action against it in the Northampton County Court in the United Kingdom in the amount of GBP 6,201 Our subsidiary has disputed a portion of the claim. On February 23, 2007, the creditor threatened to initiate liquidation proceedings against our United Kingdom subsidiary in the High Court of Justice, Chancery Division, Companies Court in the United Kingdom.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On February 26, 2007, pursuant to the terms of the financial advisory agreement dated March 2005 between Bridge Oncology and SCO Financial Group LLC, which we assumed, we issued a warrant to purchase 150,000 shares of common stock to a financial advisor. The warrants are immediately exercisable at an exercise price of $0.01 per share, subject to certain adjustments, and have a term of seven (7) years.

The offers, sales and issuances of these securities were deemed to be exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act and/or Regulation D and/or Regulation S promulgated thereunder as transactions by the issuer not involving a public offering. The recipients of the securities in each such transaction represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the share certificates issued in such transactions. Furthermore, all recipients had adequate access to information about the registrant.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

Not applicable

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

ITEM 5.

OTHER INFORMATION

None

ITEM 6.

EXHIBITS

(a) Exhibits

Exhibit Number		Title of Document

10.34		Second Side Amendment to Patent and Know-how Exclusive Sublicense Agreement dated January 12, 2007 by and among the registrant and Immunodex, Inc.

31.1		Certification of our Chief Executive Officer, pursuant to Securities Exchange Act rule 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002.

31.2		Certification of our Chief Financial Officer, pursuant to Securities Exchange Act rule 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002.

32.1		Statement of our Chief Executive Officer under Section 906 of the Sarbanes Oxley Act of 2002. (18 U.S.C. Section 1350).

32.2		Statement of our Chief Financial Officer under Section 906 of the Sarbanes Oxley Act of 2002. (18 U.S.C. Section 1350).

SIGNATURES

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

	Somanta Pharmaceuticals, Inc.
	(Registrant)


Date: March 16, 2007	By:	/s/ Terrance J. Bruggeman

		Terrance J. Bruggeman
		Executive Chairman, Chief Financial Officer, Secretary and Treasurer

Somanta Pharmaceuticals (SMPM) Inactive 10QSB2007 Q3 Quarterly report (small business)