**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-QSB**







**Quarterly
      Report under Section 13 or 15(d) of the Securities Exchange Act of
      1934**




For
      the
      quarterly period ended: March 31, 2007




Commission
      File Number: 33-55254-28




**AVANTOGEN
      ONCOLOGY, INC.**


**(Name
      of small business issuer as specified in its charter)**




**N****EVADA**
            
            **87-0438641****(State
                or other jurisdiction of**
              **incorporation
                or organization)**
            
            **(IRS
                Employer**
              **Identification
                No.)**




**2121** **A** **VENUE
            OF THE** **S** **TARS** **,** **S** **UITE** **2550,** **L** **OS** **** **A** **NGELES** **,
            CA 90067**
 **(Address
          of principal executive offices)**




**T** **ELEPHONE** **** **N** **UMBER** **:
        (310) 277-2077**
 **(Issuer’s
      telephone number)**





Securities
      registered under Section 12(b) of the Exchange Act


None


Securities
      registered under Section 12(g) of the Exchange Act


None





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:




**Y** **ES** x  **No**   ̈




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act):




YES ̈N **O**x




The
      issuer had no revenue in the most recent fiscal year.




As
      of
      August 9, 2007, there were 74,282,472 shares of the issuer’s Common Stock
      outstanding.




Transitional
      Small Business Disclosure
      Format                    Yes  ̈  **N** **O**x















**TABLE
      OF CONTENTS**




PART
                I FINANCIAL INFORMATIONItem 1.
                Financial Statements
            3Item 2.
                Management’s Discussion and Analysis or Plan of Operation
            15Item 3.
                Controls and Procedures
            17PART
                II. OTHER INFORMATIONItem 1.
                Legal Proceedings
            18Item 2.
                Unregistered Sales of Equity Securities and Use of
                Proceeds
            18Item 3.
                Defaults upon Senior Securities
            18Item 4.
                Submission of Matters to a Vote of Security Holders
            18Item
                5. Other Information
            18Item 6.
                ExhibitsSignatures
            19





2


**PART
      I: FINANCIAL INFORMATION**




**ITEM 1.
      FINANCIAL STATEMENTS (Unaudited)**


Condensed
                  Consolidated Balance Sheet
              4Condensed
                  Consolidated Statements of Operations
              5Condensed
                  Consolidated Statements of Stockholders’ Deficit
              6Condensed
                  Consolidated Statements of Cash Flows
              7Notes
                  to Condensed Consolidated Financial Statements
              8




3




**AVANTOGEN
      ONCOLOGY, INC. AND SUBSIDIARIES**


**(A
      Development Stage Company)**


**Condensed
      Consolidated Balance Sheet**


**March
      31, 2007**




**March 31,**
              **2007**(Unaudited)ASSETSCash
            
            $
            2,106Prepaid
                assets
            
            
            49,363Total
                current assets
            
            
            51,469Total
                assets
            
            $
            51,469LIABILITIES
                AND STOCKHOLDERS’ DEFICITAccounts
                payable and accrued expenses
            
            $
            1,350,702Interest
                payable
            
            
            77,193Due
                to related parties
            
            
            213,502Note
                payable to stockholder
            
            
            1,000,000Total
                current liabilities
            
            
            2,641,397Commitments
                and ContingenciesStockholders’
                DeficitPreferred
                stock, par value $.001, 25,000,000 shares authorized, none issued
                and
                outstanding
            
            
            —Common
                stock, par value $.001, 125,000,000 shares authorized, 74,282,000
                issued
                and outstanding
            
            
            59,000Additional
                paid in capital
            
            
            9,049,800Deficit
                accumulated during the development stage
            
            
            (11,698,728
            )Total
                stockholders’ deficit
            
            
            (2,589,928
            )Total
                liabilities and stockholders’ deficit
            
            $
            51,469




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





4


**AVANTOGEN
      ONCOLOGY, INC. AND SUBSIDIARIES**


**(A
      Development Stage Company)**


**Condensed
      Consolidated Statements of Operations**


**For
      the Quarters Ended March 31, 2007 and 2006, and**


**For
      the Period from July 21, 2004 (Inception) to March 31,
      2007**




**For
                the Quarters Ended**
            
            **Period From July**
              **21,
                2004**
              **(Inception)
                to****March
                31, 2007**
            
            **March
                31,****2006**
            
            **March 31, 2007**(Unaudited)
            
            (Unaudited)
            
            (Unaudited)Research
                and development
            
            $
            49,128
            
            $
            571,179
            
            $
            6,943,147General
                and administrative
            
            
            81,420
            
            
            361,340
            
            
            4,209,181Loss
                from operations
            
            
            130,548
            
            
            938,519
            
            
            11,152,328Interest
                income
            
            
            (11
            )
            
            —
            
            
            (4,383
            )Loss
                on disposal of assets
            
            
            51,942
            
            
            
            
            
            51,942Interest
                expense
            
            
            175,702
            
            
            49,830
            
            
            497,301Loss
                before provision for income taxes
            
            
            358,181
            
            
            982,349
            
            
            11,697,188Provision
                for income taxes
            
            
            —
            
            
            —
            
            
            1,540Net
                loss
            
            $
            358,181
            
            $
            982,349
            
            $
            11,698,728Basic
                and diluted loss per share
            
            $
            (0.01
            )
            $
            (0.05
            )Basic
                and diluted weighted average shares outstanding
            
            
            59,000,000
            
            
            18,178,000





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





5


**AVANTOGEN
      ONCOLOGY, INC. AND SUBSIDIARIES**


**(A
      Development Stage Company)**


**Condensed
      Consolidated Statements of Stockholders’ Deficit**


**From
      July 21, 2004 (Inception) to December 31, 2006,**


**and
      for the Three Months Ended March 31, 2007**




**Shares**
            
            **Common**
              **Stock**
            
            **Additional**
              **Paid
                In**
              **Capital**
            
            **Deficit**
              **Accumulated**
              **During
                the**
              **Development**
              **Stage**
            
            **Total**Balance,
                July 21, 2004 (Inception)
            
            
            1,453,242
            
            $
            1,453
            
            $
            (1,453
            )
            $
            —
            
            $
            —Shares
                issued in reorganization
            
            
            16,500,000
            
            
            16,500
            
            
            (16,500
            )
            
            —
            
            
            —Net
                loss
            
            
            —
            
            
            —
            
            
            —
            
            
            (1,120,037
            )
            
            (1,120,037
            )Balance,
                December 31, 2004
            
            
            17,953,242
            
            $
            17,953
            
            $
            (17,953
            )
            $
            (1,120,037
            )
            $
            (1,120,037
            )Shares
                issued to consultant on October 19, 2005 at $3.25 per
                share
            
            
            225,000
            
            
            225
            
            
            731,025
            
            
            —
            
            
            731,250Net
                loss
            
            
            —
            
            
            —
            
            
            —
            
            
            (5,014,506
            )
            
            (5,014,506
            )Balance,
                December 31, 2005
            
            
            18,178,242
            
            $
            18,178
            
            $
            713,072
            
            $
            (6,134,543
            )
            $
            (5,403,293
            )Shares
                issued in the May 26, 2006 acquisition
            
            
            40,821,758
            
            
            40,822
            
            
            8,077,287
            
            
            —
            
            
            8,118,109Stock
                based compensation
            
            
            —
            
            
            —
            
            
            68,236
            
            
            —
            
            
            68,236Warrants
                issued with note payable to related party
            
            
            —
            
            
            —
            
            
            212,598
            
            
            —
            
            
            212,598Net
                loss
            
            
            —
            
            
            —
            
            
            —
            
            
            (5,206,004
            )
            
            (5,206,004
            )Balance,
                December 31, 2006
            
            
            59,000,000
            
            $
            59,000
            
            $
            9,071,193
            
            $
            (11,340,547
            )
            $
            (2,210,354
            )Forfeiture
                of Stock Options (unaudited)
            
            
            
            
            
            
            
            
            (21,393
            )
            
            
            
            
            (21,393
            )Net
                loss (unaudited)
            
            
            
            
            
            
            
            
            
            
            
            (358,181
            )
            
            (358,181
            )Balance,
                March 31, 2007(unaudited)
            
            
            59,000,000
            
            $
            59,000
            
            $
            9,049,800
            
            $
            (11,698,728
            )
            $
            (2,589,928
            )




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




6


**AVANTOGEN
      ONCOLOGY, INC. AND SUBSIDIARIES**


**(A
      Development Stage Company)**


**Condensed
      Consolidated Statements of Cash Flows**


**For
      the Quarters Ended March 31, 2007 and 2006 and For the Period**


**from
      July 21, 2004 (Inception) to March 31, 2007**




**March
                31,**
              **2007**
            
            **March 31,**
              **2006**
            
            **Period
                From**
              **July 21,
                2004**
              **(Inception)
                to**
              **March 31, 2007**(Unaudited)
            
            (Unaudited)
            
            (Unaudited)Cash
                flows from operating activities:Net
                loss
            
            $
            (358,181
            )
            $
            (982,349
            )
            $
            (11,698,728
            )Adjustments
                to reconcile net loss to cash used in operating
                activities:Stock
                compensation
            
            
            (21,393
            )
            
            —
            
            
            778,093Accretion
                of debt discount on note payable
            
            
            144,567
            
            
            —
            
            
            1,179,388Purchased
                research and development expensed in the May 26, 2006
                acquisition
            
            
            —
            
            
            —
            
            
            516,141Settlement
                of related party claim
            
            
            (142,665
            )
            
            
            
            
            (142,665
            )Loss
                on disposal of assets
            
            
            51,941
            
            
            —
            
            
            51,941Amortization
                expense
            
            
            —
            
            
            —
            
            
            25,000Depreciation
                expense
            
            
            287
            
            
            —
            
            
            1,147Changes
                in assets and liabilitiesDecrease
                in prepaid assets
            
            
            53,777
            
            
            —
            
            
            51,853(Increase)
                in deposits
            
            
            —
            
            
            —
            
            
            (44,488
            )(Decrease)
                / Increase in accounts payable and accrued expenses
            
            
            198,591
            
            
            (53,787
            )
            
            1,303,964Increase
                in due to related parties
            
            
            30,374
            
            
            580,335
            
            
            356,167Increase
                in interest payable
            
            
            30,544
            
            
            49,830
            
            
            282,354Net
                cash used in operating activities
            
            
            (12,158
            )
            
            (405,971
            )
            
            (7,339,833
            )Cash
                flows from investing activities:Purchase
                of property and equipment
            
            
            —
            
            
            —
            
            
            (8,600
            )Net
                cash used in investing activities
            
            
            —
            
            
            —
            
            
            (8,600
            )Cash
                flows from financing activities:Proceeds
                received from Avantogen Limited in the acquisition
            
            
            —
            
            
            —
            
            
            1,100,000Resistys,
                Inc. cash received in the acquisition
            
            
            —
            
            
            —
            
            
            4,665Proceeds
                from loan from related party & issuance of warrants
            
            
            —
            
            
            405,875
            
            
            1,000,000Proceeds
                from loans from stockholder
            
            
            —
            
            
            —
            
            
            5,245,874Net
                cash provided by financing activities
            
            
            —
            
            
            405,875
            
            
            7,350,539Net
                increase / (decrease) in cash
            
            
            (12,158
            )
            
            (96
            )
            
            2,106Cash,
                beginning of period
            
            
            14,264
            
            
            1,158
            
            
            —Cash,
                end of period
            
            $
            2,106
            
            $
            1,062
            
            $
            2,106Supplemental
                cash flow information:Cash
                paid for interest expense and income taxes
            
            $
            —
            
            $
            —
            
            $
            —Non-cash
                financing transactions:Non-cash
                Resistys, Inc. net assets received in acquisition
            
            $
            —
            
            $
            —
            
            $
            79,477Amount
                due Resistys, Inc. eliminated in acquisition
            
            $
            —
            
            $
            —
            
            $
            825,025Common
                stock issued to Bioaccelerate Holdings, Inc. for assumption of
                liabilities
            
            $
            —
            
            $
            —
            
            $
            5,592,801Warrants
                issued to Chopin Opus One L.P. with Promissory Note
            
            $
            —
            
            $
            —
            
            $
            212,598





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




7


**AVANTOGEN
      ONCOLOGY, INC. and Subsidiaries**


(A
      Development Stage Company)


Notes
      to
      Condensed Consolidated Financial Statements


March
      31,
      2007


(Unaudited)




**1.**  **Organization
      and Significant Accounting Policies**




*Organization*




Avantogen
      Oncology, Inc., formerly Innovate Oncology, Inc., (the “Company” or “Avantogen
      Oncology”) acquires, develops and seeks to commercialize novel compounds to
      treat various types of cancer.




Prior
      to
      the May 26, 2006 Acquisition (see below), the Company had been pursuing
      financing for a relatively broad portfolio of products. The Company then decided
      to focus its resources on three particular product candidates - Chemo-resistance
      Inhibitor (RP101), Capridine beta and oral paclitaxel - rather than proceeding
      with a plan to develop a larger portfolio that would require far more
      substantial commitments. As a result of this change in strategy, the Company
      terminated the agreements intended to assign to the Company the following
      products: INOC-002 Chemotherapy Potentiator, INOC-003 Targeted Ruthenium
      Complex, INOC-010 Polymer-Formulated Camptothecin, INOC-016 HER2 Oncogene
      Inhibito, and INOC-019 Prostate Tumor Suppressor. All rights and remaining
      obligations with respect to those products reverted to the applicable assignor
      of those rights to the Company. In November 2006, after further evaluation
      of
      its existing pipeline, the Company decided to terminate its license agreement
      for oral paclitaxel.




In
      connection with the May 26, 2006 Acquisition, the Company changed its name
      to Avantogen Oncology, Inc. from Innovate Oncology, Inc. (“Innovate”). The
      Company is located in Los Angeles, California.




*The
      2004 Reverse Merger*




Pursuant
      to an acquisition agreement dated August 23, 2004 between Innovate, a
      then-privately held Delaware corporation, and Hampton Berkshire Insurance and
      Financial, Inc., a Nevada corporation (“Hampton”), in exchange for 100% of the
      outstanding shares of Innovate, Hampton canceled 5,026,590 shares of its common
      stock, effected a 3.8-for-1 reverse split of its common stock, which reduced
      its
      pre-acquisition outstanding common stock to 1,453,242, and issued 16,500,000
      shares, including 600,000 shares for consulting services related to the
      acquisition, to Innovate shareholders. As Innovate's management and Board of
      Directors assumed control of the combined entity, the acquisition has been
      treated as a recapitalization of Innovate and accordingly, the accompanying
      consolidated financial statements include the historical operations of Innovate
      and the capital structure of Hampton. Hampton immediately changed its name
      to
      Innovate Oncology, Inc.




*The
      Investment in Resistys, Inc.*




Avantogen
      Limited (formerly Australian Cancer Technologies Limited) ("Avantogen Limited")
      is a biotechnology company focused on oncology products and is traded on the
      Australian Stock Exchange under the symbol "ACU". Avantogen Limited formed
      Resistys, Inc. ("Resistys") in August 2004 as a wholly-owned subsidiary and
      obtained the North American license in September 2004 to develop and market
      RP101. On October 5, 2004, Bioaccelerate Holdings, Inc. (“Bioaccelerate”),
      Innovate’s parent company prior to the May 26, 2006 Acquisition (now known
      as Gardant Pharmaceuticals, Inc.), and Avantogen Limited entered into a joint
      venture agreement to co-develop RP101 and share license agreement rights with
      each controlling 50% of Resistys. On January 17, 2005 Bioaccelerate
      assigned 100% of its shares in Resistys to a wholly-owned subsidiary, Cynat
      Oncology Limited ("Cynat"). Bioaccelerate transferred 100% of the capital stock
      of Cynat to Innovate on March 16, 2005. As a result, Innovate controlled
      50% of Resistys subsequent to that date up to the May 26, 2006 Acquisition.




*The
      May 26, 2006 Acquisition*




On
      May 26, 2006, Avantogen Limited and Bioaccelerate entered into a Share
      Exchange Agreement (the “May 26, 2006 Acquisition”) whereby Avantogen Limited
      transferred to the Company its 50% share in Resistys and $1,100,000 in exchange
      for 32,000,000 shares of common stock (or 54.2%) of Innovate. Bioaccelerate
      terminated its credit line with the Company, and related warrant to acquire
      1,000,000 shares of the Company’s common stock, and forgave all amounts due
      under the line, as well as assumed all Company liabilities, except for $65,000
      due to a related party and $825,025 due to Resistys, as of the acquisition
      date.
      Total liabilities assumed including the amount due to Bioaccelerate under the
      credit line was $5,592,801. In consideration, the Company issued to
      Bioaccelerate 8,721,758 shares of its common stock. The Company also issued
      100,000 shares of common stock for consulting services related to the
      acquisition, which were accounted for as transaction costs. The $825,025
      liability due to Resistys was reclassified to additional paid-in capital as
      result of the Company now owning 100% of Resistys. The remaining net assets
      received from Resistys, Inc. of $59,142 were recorded as additional paid in
      capital. Under the Share Exchange Agreement, Avantogen Limited has the right
      to
      designate three of the five members of Innovate’s Board of Directors.
      Immediately after the acquisition, the Company changed its name to Avantogen
      Oncology, Inc.




8




*Principles
      of Consolidation*




The
      consolidated financial statements include the accounts of Avantogen Oncology,
      Inc. (a Nevada corporation) and its wholly owned subsidiaries, Innovative
      Oncology, Limited (a United Kingdom company), and Cynat Oncology Limited (a
      United Kingdom company), which holds the investment in Resistys. Beginning
      May 26, 2006, the Company consolidated 100% of Resistys’ losses in its
      operating results. Prior to this date, the Company had reported its 50% share
      of
      losses in Resistys under the equity method of accounting.




All
      significant inter-company accounts and transactions have been eliminated. All
      assets and liabilities are recorded at or held in United States dollars (USD).
      Therefore no balance sheet amounts are translated into USD in consolidation.
      Amounts paid in foreign currencies are translated into USD when paid, and if
      previously unrecorded, recorded in the books and records at the translated
      amount, otherwise a gain or loss is recognized in the consolidated statement
      of
      operations as either research and development expense or general and
      administrative expense. Exchange gains and losses recognized in the accompanying
      consolidated statement of operations are immaterial.





All
      adjustments necessary for a fair statement of interim periods have been included
      in these consolidated financial statements.




*Research
      and Development*




Costs
      and
      expenses that can be clearly identified as research and development are charged
      to expense as incurred in accordance with FASB Statement No. 2, "Accounting
      for
      Research and Development Costs."




*Foreign
      Currency Translation*




Assets
      and liabilities recorded in foreign currencies are translated at the exchange
      rate on the balance sheet date. Expenses are translated at average rates of
      exchange prevailing during the year. Translation adjustments, if any, resulting
      from this process are immaterial.




*Use
      of Estimates*




In
      preparing financial statements in conformity with accounting principles
      generally accepted in the United States of America, management is required
      to
      make estimates and assumptions that affect the amounts reported in the
      consolidated financial statements and accompanying notes. Actual results could
      differ from those estimates.




*Property
      and Equipment*




Property
      and equipment are recorded at cost. Leasehold improvements are depreciated
      using
      the straight line method over the lesser of their estimated useful life or
      the
      term of the lease.




*Statement
      of Cash Flows*




The
      Company prepares its statements of cash flows using the indirect method as
      defined under SFAS No. 95, “Statement of Cash Flows.” During the period
      ended March 31, 2007, amounts reported in operating activities as uses of
      cash related to decreases in accounts payable, accrued expenses, and due to
      related parties include those amounts assumed by Bioaccelerate as if
      Bioaccelerate advanced the Company cash under a credit line to settle its
      obligations with vendors and other creditors. Hence, advances to the Company
      from Bioaccelerate under a credit line within financing activities reflect
      a
      corresponding source of cash in the period ended March 31, 2007.




*Loss
      per Share*




In
      accordance with SFAS No. 128, “Earnings per Share”, and SEC Staff
      Accounting Bulletin (“SAB”) No. 98, basic net loss per common share is
      computed by dividing net loss for the period by the weighted average number
      of
      common shares outstanding during the period. Under SFAS No. 128, diluted
      net income/(loss) per share is computed by dividing the net income/(loss) for
      the period by the weighted average number of common and common equivalent
      shares, such as stock options and warrants, outstanding during the period.
      Such
      common equivalent shares have not been included in the computation of net loss
      per share as their effect would be anti-dilutive.




9




As
      of
      March 31, 2007, there were warrants outstanding to acquire (a) 1,000,000
      shares of the Company’s common stock related to the Promissory Note to Chopin
      Opus One and (b) 300,000 shares of the Company’s common stock related to an
      agreement with Chopin Capital Partners, LLC to provide financial advisory
      services. The warrants were excluded from the weighted average number of common
      shares outstanding for purposes of computing earnings per share as they would
      have been anti-dilutive since the Company had reported losses for all periods
      presented.





*Income
      Taxes*





Income
      taxes are recorded in accordance with SFAS No. 109, “Accounting for Income
      Taxes”. This statement requires the recognition of deferred tax assets and
      liabilities to reflect the future tax consequences of events that have been
      recognized in the financial statements or tax returns. Measurement of the
      deferred items is based on enacted tax laws. In the event the future
      consequences of differences between financial reporting bases and tax bases
      of
      the Company's assets and liabilities result in a deferred tax asset, SFAS No.
      109 requires an evaluation of the probability of being able to realize the
      future benefits indicated by such assets. A valuation allowance related to
      a
      deferred tax asset is recorded when it is more likely than not that some portion
      or the entire deferred tax asset will not be realized.





The
      Company has not filed tax returns for 2004, 2005 and 2006. As of March 31,
      2007,
      there were approximately $11.7 million in accumulated losses. When the tax
      returns are completed, these losses will give rise to deferred tax assets,
      a
      significant portion of which are likely to be net operating loss carry forwards.
      Due to the May 26, 2006 Acquisition, these net operating loss deferred tax
      assets will be subject to limitations. Current tax laws limit the amount of
      loss
      available to be offset against future taxable income when a substantial change
      in ownership occurs. Therefore, the amount available to offset future taxable
      income may be limited. Because of these potential limitations and the Company’s
      history of losses, the Company has not recognized any deferred tax asset and
      has
      effectively placed a full valuation allowance on such assets.




*Accounting
      for Uncertainty in Income Taxes* (“FIN
      48”)




In
      June
      2006, the Financial Accounting Standards Board issued Interpretation
      No. 48, *Accounting
      for Uncertainty in Income Taxes* (“FIN
      48”). This Interpretation clarifies the accounting for uncertainty in income
      taxes recognized in an entity’s financial statements and prescribes a
      recognition threshold of more-likely-than-not to be sustained upon examination.
      Measurement of the tax uncertainty occurs if the recognition threshold has
      been
      met. This Interpretation also provides guidance on derecognition,
      classification, interest and penalties, accounting in interim periods,
      disclosure, and transition. In the normal course of business the Company is
      subject to examination by taxing authorities. At present, there are no ongoing
      audits or unresolved disputes with the various tax authorities that the Company
      files with. Given the Company’s substantial net operating loss carryforwards
      (“NOLs”, which are subject to a full valuation allowance) as well as the
      historical operating losses, the adoption of FIN 48 on January 1, 2007 did
      not
      have any effect on our financial position, results of operations or cash flows
      as of March 31, 2007.





*Stock-Based
      Compensation*




In
      2006
      the Company made option grants to two employees. During the quarter ended March
      31, 2007 all of these options granted to employees were forfeited and the
      expense recognized in 2006 was reversed.





*Fair
      Value of Financial Instruments*




The
      carrying amounts of financial instruments, including cash, cash equivalents,
      accounts receivable, accounts payable, accrued liabilities and short-term
      borrowings approximates fair value due to the short maturity of these
      instruments. The carrying amount of long-term debt approximates fair value
      because the interest rates fluctuate with market interest rates or the fixed
      rates are based on current rates offered to the Company for debt with similar
      terms and maturities.




*Recent
      Accounting Pronouncements*




In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 clarifies the
      definition of fair value, describes methods used to appropriately measure fair
      value, and expands fair value disclosure requirements. This statement is
      effective for fiscal year beginning after November 15, 2007. The Company is
      currently in the process of assessing the impact that SFAS 157 will have on
      the
      consolidated financial statements.




10




In
      September 2006 the SEC issued Staff Accounting Bulletin No. 108, *“Considering
      the Effects of Prior Year Misstatements in Current Year financial
      Statements”* (SAB
      108), to address diversity in practice in quantifying financial statement
      misstatements. SAB 108 requires that the Company quantify misstatements based
      on
      their impact on each of the financial statements and related disclosures. SAB
      108 was effective as of the end of the Company’s 2006 fiscal year, allowing a
      one-time transitional cumulative effect adjustment to retained earning as of
      January 1, 2006 for errors that were not previously deemed material, but are
      material under the guidance in SAB 108. The adoption of the provisions of SAB
      108 had no impact on the Company’s consolidated financial statements.




In
      February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial
      Assets and Financial Liabilities”. SFAS 159 permits entities to choose to
      measure financial instruments and certain other items at fair value that are
      not
      currently required to be measured at fair value. The decision to elect the
      fair
      value option may be applied instrument by instrument, is irrevocable, and is
      applied to the entire instrument and not to only specified risks, specific
      cash
      flows or portions of that instrument. An entity is restricted in choosing the
      dates to elect the fair value option for an eligible item. Adoption of SFAS
      159
      is effective for the Company on January 1, 2008. Early adoption is permitted,
      provided the entity also elects to apply the provisions of SFAS 157, “Fair Value
      Measurements”. Management of the Company is currently evaluating the potential
      impact of SFAS 159 on the Company’s financial condition, results of operations,
      and liquidity.




**2.
      Going Concern** **




The
      accompanying consolidated financial statements have been prepared in conformity
      with accounting principles generally accepted in the United States of America,
      which contemplate continuation of the Company as a going concern. As of
      March 31, 2007, the Company had $2,106 of cash and no other material
      financial assets, nor did it have an established source of revenues sufficient
      to cover its operating costs. During the quarters ended March 31, 2007 and
      2006, and from July 21, 2004 (Inception) to March 31, 2007, the
      Company used cash in operations of $12,158, $405,971 and $7,339,833,
      respectively. From inception through March 31, 2007, shareholders provided
      funding in the amount of $7,345,874. As of March 31, 2007, the Company had
      accumulated a net deficit during the development stage of $11,698,728.
      Subsequent to March 31, 2007 the Company assigned its rights to develop and
      commercialize its lead drug candidate, RP101, for approximately $1.7 million
      in
      upfront fees and success-based regulatory and commercial payments and royalties
      on future sales of RP101 Product. See footnote 8. The Company is entirely
      dependent on the payments from this transaction for its capital requirements.
      The Company's future capital requirements will depend upon numerous factors
      including, but not limited to, identification of new compounds and product
      opportunities, progress in developing its products, market penetration and
      profitable operations from the sale of its products, if successfully developed.
      These consolidated financial statements do not reflect adjustments that would
      be
      necessary if the Company were unable to continue as a going concern.




**3.**  **Related
      Party Transactions**




On
      October 12, 2006 the Company borrowed $1 million from Chopin Opus One L.P.
      a
      Cayman Islands limited partnership. The General Partner of Chopin is Chopin
      Holdings, Ltd., whose Managing Director is Dr. Richard Opara, the former
      Chairman of the Company’s Board of Directors and former Chairman of Avantogen
      Limited, the Company’s majority stockholder at December 31, 2006. See footnote
      4.




On
      October 23, 2006 the Company finalized and entered into a Terms of Financial
      Advisory Services Agreement with Chopin Capital Partners, LLC related to the
      service period from July 1, 2006 to June 30, 2007. The managing partner of
      Chopin Capital Partners, LLC was a Board member of the Company at the time
      the
      agreement was signed. As additional compensation the Company agreed to issue
      warrants to purchase 300,000 shares of the Company’s common stock at an exercise
      price of $0.60 per share. The warrants have been valued at $93,686 amortization
      of which was calculated over the term of the agreement. In 2006 $46,843 was
      recognized as general and administrative expense. In February 2007 the Company
      provided notice to Chopin Capital Partners, LLC of its intent to cancel the
      agreement. No additional expense related to this agreement was recognized in
      the
      quarter ended March 31, 2007.




As
      of
      March 31, 2007 there was $213,502 due to related parties, which was comprised
      of
      $77,500 owed to the four non-executive directors for outstanding fees, $100,000
      owed to Chopin Capital Partners LLC for services under the Terms of Financial
      Advisory Services Agreement, $34,365 due to AL Holdings, Inc. and $1,637 due
      to
      a director for travel expenses. The amount owed to AL Holdings, Inc. was
      comprised of $25,165 for December 2006 through February 2007 monthly fees due
      under a Shared Facilities and Services Agreement administered by AL Holdings,
      Inc. for rent, professional, administrative and support services and $9,200
      as a
      reimbursement for operating expenses paid for by AL Holdings, Inc. on behalf
      of
      the Company. Under the Shared Facilities and Services Agreement the Company
      accrued $18,340 for rent on office space which was expensed.




11




Effective
      March 1, 2007 the Company entered a Termination of Agreement and Releases with
      AL Holdings, Inc. and other parties to the Shared Services Agreement. This
      agreement released the Company from all future obligations for rent,
      professional, administrative and support services previously provided under
      the
      Shared Services Agreement. As part of the Agreement the Company released its
      claim for reimbursement of its allocation of the security deposit in the amount
      of $44,488 and the leasehold improvements in the amount of $7,453, net of
      depreciation of $1,147 through February 2007 related to the lease of office
      space. These assets were written off during the quarter ended March 31, 2007.




On
      March
      28, 2007 the Company entered into a Settlement Agreement and Release of Claims
      with Avantogen Limited regarding the payment of legal fees related to the Share
      Exchange Agreement dated January 31, 2006. During 2006 the Company paid and
      recorded an expense of $134,145 for legal services related to this agreement
      which it claimed was reimbursable by Avantogen Limited. In addition, Avantogen
      Limited. paid $142,665 for legal fees related to the agreement which it claimed
      was reimbursable by the Company. The Company recorded these legal fees in 2006.
      The Company and Avantogen Limited agreed in the Settlement and Release of Claims
      to cancel their respective claims. The cancellation of the $142,665 liability
      to
      Avantogen Limited was recorded in the quarter ended March 31, 2007 as a credit
      to general and administrative expense.




**4.**  **Note
      Payable to Stockholder**




On
      October 12, 2006 the Company borrowed $1 million (the “Loan”) from Chopin
      Opus One L. P. (“Chopin”). The Loan bears interest at the rate of ten percent
      (10%) per annum and is due March 31, 2007. The Loan is secured by a
      first priority security interest on all of the Company’s assets. As an
      inducement to Chopin to provide the Loan, the Company issued five year warrants
      to purchase 1,000,000 shares of the Company’s common stock at an exercise price
      of $0.60 per share. The warrants have been valued at $212,598 and have been
      recorded as a discount on the Loan and accreted over the term. As of March
      31,
      2007 the entire balance has been accreted and $144,567 is reflected as interest
      expense in the quarter ended March 31, 2007. The Company and Chopin entered
      into
      an agreement to extend the maturity date of the Note to the date that is thirty
      (30) days after the Effective Date and to terminate the Security Agreement
      dated
      October 12, 2006 between them, thereby terminating Chopin’s security interest in
      the assets of the Company. See Footnote 8.




**5.**  **Commitments
      and Contingencies**




*Third
      Party License Agreements*




Prior
      to
      the May 26, 2006 Acquisition, Bioaccelerate entered into various drug
      development and licensing agreements with leading medical research, academic
      and
      private pharmaceutical companies. Avantogen Oncology, formerly Innovate
      Oncology, Inc., as a defined "affiliate" of Bioaccelerate under certain of
      those
      agreements, was already a licensee under the terms of certain of those
      agreements. On March 16, 2005, Bioaccelerate also assigned some of those
      agreements to the Company in order to pursue a plan to grant rights to various
      compounds from Bioaccelerate's drug portfolio. The assignments were generally
      subject to written consent by the other party to the license agreement, which
      consent cannot be unreasonably withheld, and in one case payment by
      Bioaccelerate of some additional consideration to the other party to the license
      agreement.




Resistys
      had the following commitments, which became the obligation of the Company
      because of the May 26, 2006 Acquisition.




Resistys
      is party to a licensing agreement with RESprotect GmbH for the right to exploit
      RP101. The licensing agreement is for 25 years, subject to certain early
      termination provisions. Pursuant to the license terms, Resistys shall compensate
      RESprotect after the achievement of the following milestones:




Initiation
                of Phase 2 Trial by Resistys in the Territory or outside the
                Territory
            
            $
            1,333,000Upon
                filing by Resistys with the U.S. Food and Drug Administration (“FDA”) of a
                New Drug or abbreviated New Drug Application (“NDA”) for the registration
                of the Licensed Product and acceptance of such Application by the
                FDA
            
            $
            2,666,000Upon
                FDA approval of the Licensed Product
            
            $
            6,665,000Upon
                achieving cumulative Market Sales of the Licensed Product in the
                Territory
                of $100 million
            
            $
            3,999,000




Milestone
      payments are non-refundable and non-recoupable. The milestones are payable
      in
      Euros and have been translated into US dollars as of March 31, 2007. The actual
      payments may be different depending on the exchange rate at the time payment
      is
      made. The Company believes that the milestones for the Phase 2 trial will be
      achieved in late 2007. The milestones for FDA filing and approval are not
      expected until at least 2010 and 2011, respectively. Additionally, the Company
      is required to pay royalties ranging from 2% to 4% of net revenues from the
      sale
      of RP101 or 8% to 16% if through a third party sub licensee.


12


Additionally,
      Resistys signed a service agreement with Hesperion Ltd. on October 18,
      2004. This agreement entrusted Hesperion Ltd. with the execution of a clinical
      study defined as “Phase 1 study of RP101 in patients with advanced Pancreatic
      Cancer.” Pursuant to a Change of Scope (“COS”) addendum dated December 6,
      2005, Resistys committed to use approximately $360,000 of Hesperion Ltd’s
      research and development services during 2006, of which approximately $347,000
      had been used as of March 31, 2007.




In
      addition to the former Resistys commitments, on July 18, 2006 the Company
      engaged a consulting firm in an agreement that required a retainer of $50,000
      that the Company has accrued for as of March 31, 2007. The agreement is for
      twelve months and has the potential for future payments contingent on
      performance by the consulting company.




On
      October 18, 2006 the Company signed an agreement with Pharmaceutical
      Research Associates, Inc. (“PRA”). This agreement entrusts PRA to execute a
      clinical study defined as a “Randomized, double blind, placebo controlled, Phase
      2 study evaluating the efficacy and safety of RP101 in combination with
      gemcitabine administered as first-line therapy to subjects with metastatic
      pancreatic cancer”. The total commitment of the contract is approximately
      $5,400,000 and is expected to be paid out over the next two and a half years.





*Other
      Commitments*




In
      2005
      the Company utilized office space in New York and London on a month to month
      basis in return for payments to Bioaccelerate Holdings, Inc. amounting to
      approximately $9,500 per month, in the aggregate. After the May 26, 2006
      Acquisition, the Company consolidated its offices in Los Angeles and entered
      into a Shared Facilities and Services Agreement administered by AL Holdings,
      Inc. under which it is allocated a portion of the lease payment for the office
      space depending on the number of parties to the agreement and the proportion
      of
      space used by each party. The lease payments are subject to annual adjustments
      of approximately 3%. At March 31, 2007 the office space was sublet and the
      Shared Services Agreement was terminated.




**6.**  **Share-Based
      Awards**




The
      Company has a stock option plan, which covers a total of 8,000,000 shares of
      Common Stock. Options may be awarded during the ten-year term of the 2006 stock
      option plan to Company employees, directors, consultants and other
      affiliates.




*Stock
      Options*




On
      October 23, 2006, the Company granted to two employees 5 year options to acquire
      1,185,900 shares of common stock at an exercise price of $1.30. The awards
      vest
      annually in equal installments over three years. The awards were valued at
      $0.19
      per share, or $221,083. Weighted-average assumptions used to value the awards
      were as follows: (i) dividend yield of nil, (ii) expected volatility of 90%,
      risk-free interest rate of 4.84%, and expected life of 3.5 years. As of March
      31, 2007 these options were forfeited due to the execution of a Retention Bonus
      Agreement negotiated with the employees. See footnote 8.





As
      of
      March 31, 2007, there were no options to acquire shares of common stock
      outstanding,





*Warrants*




During
      October 2006, the Company granted a related-party consultant a 5 year warrant
      to
      acquire 300,000 shares of common stock at an exercise price of $0.60 in
      connection with a one-year service agreement through June 30, 2007. The award
      was fully vested when granted. The award was valued at $0.31 per share, or
      $93,686. Weighted-average assumptions used to value the awards were as follows:
      (i) dividend yield of nil, (ii) expected volatility of 93%, risk-free interest
      rate of 4.8%, and expected life of 5 years. During 2006, the Company recognized
      $46,843 as general and administrative expense. In February 2007 the Company
      provided notice of its intent to cancel the agreement. No additional expense
      related to this agreement was recognized in the quarter ended March 31, 2007.
      See footnote 3.




During
      October 2006, the Company granted a related-party a 5 year, fully-vested warrant
      to acquire 1,000,000 shares of common stock at an exercise price of $0.60 in
      connection with amounts loaned the Company.




As
      of
      March 31, 2007, there were warrants to acquire 1,300,000 shares of common stock
      outstanding, with an exercise price of $0.60 per share, all of which are
      exercisable. The remaining contractual life for these warrants is 4.8
      years.





13




**7.**  **Income
      Taxes**




Based
      on
      an assessment of the temporary differences and the potential benefit of losses
      carried forward, the Company has not recognized any deferred tax asset for
      the
      three month period ended March 31, 2007 and has effectively placed a full
      valuation allowance on such assets. Accordingly, no deferred income tax benefit
      has been recognized in these financial statements since management does not
      believe the recoverability of the deferred tax assets during the foreseeable
      future is more likely than not.




For
      the
      periods presented in the accompanying consolidated statements of operations,
      the
      difference between the expected federal tax benefit on reported pre-tax losses
      of 34% and that reflected in the accompanying consolidated statement of
      operations of 0% is (a) additional state tax benefits of approximately 6% offset
      by (b) increases in the valuation allowance of (40%).




**8.**  **Subsequent
      Events**




On
      January 15, 2007, three non-executive directors including the Chairman of the
      Board resigned from the Company. During the second quarter the Company
      negotiated Receipt and Release agreements with all three directors. The terms
      of
      the agreement call for a payment of $10,000 to each director in exchange for
      a
      release of all claims against the Company.





On
      April
      25, 2007 (the “Effective Date”), the Company, its wholly-owned subsidiary,
      Resistys, Inc. (“Resistys”), its majority shareholder, Avantogen Limited
      (“Avantogen” and, together with registrant and Resistys, collectively, the
“Seller”) and SciClone Pharmaceuticals, Inc. (“SciClone”) entered into an
      Assignment and Purchase Agreement (the “Agreement”), pursuant to which Seller
      sold, transferred, assigned, conveyed and delivered to SciClone all of Seller’s
      right, title and interest in and to the assets owned or controlled by Seller
      related to Seller’s program to develop and commercialize its lead drug
      candidate, RP101, for the treatment of pancreatic cancer (the “SciClone
      Transaction”). Under the terms of the Agreement, SciClone paid Resistys
      approximately $1.7 million in upfront fees and agreed to pay Resistys and
      RESprotect GmbH (“RESprotect”), the owner of the intellectual property rights to
      RP101, success-based regulatory and commercial payments of up to $23.3 Million
      and royalties on future sales of RP101 Product (“Net Sales Payments”) through
      August 30, 2029 or the earlier termination of the License Agreement dated August
      30, 2004 among Resistys, Avantogen and RESprotect (the “License Agreement”),
      which was assigned to SciClone as part of the transactions contemplated by
      the
      Agreement. SciClone has the right during certain periods following the
      completion of each of the Phase II and Phase III Clinical Trials for the first
      RP101 product to buy out its obligation to make the Net Sales Payments for
      $12
      million during the first buyout period or $20 million during the second buyout
      period payable, at SciClone’s option, in cash or registered shares of SciClone
      Common Stock. SciClone’s obligation to make the success-based payments and the
      Net Sales Payments is secured by a security interest in the RP101 Assets being
      sold to SciClone, including the License Agreement, as amended from time to
      time
      on and after the Effective Date, pursuant to a Security Agreement dated April
      25, 2007 between Resistys and SciClone. In addition, under an Assumption of
      Liabilities Agreement dated April 25, 2007 among SciClone and Seller, SciClone
      assumed certain liabilities of Seller under the License Agreement, the Supply
      Agreement for Clinical Trial Material dated September 13, 2004 between Resistys
      and RESprotect (the “Supply Agreement”), the Services Agreement dated October
      18, 2004 between Resistys and Hesperion Ltd. and the Agreement for Clinical
      Trials Management Services dated August 31, 2006 between the Company and
      Pharmaceutical Research Associates, Inc.





In
      consideration for RESprotect’s consent to the assignment of the License
      Agreement and the Supply Agreement (the “Consent”), the Company issued to
      RESprotect 3,333,333 shares of its common stock with an aggregate value of
      $500,000 based on the average closing price of the shares for the thirty (30)
      day period prior to the Effective Date.





On
      the
      Effective Date, the Company entered into an Agreement (the “Chopin Agreement”)
      with Chopin Opus One, L.P., a Cayman Islands limited partnership (“Chopin”),
      pursuant to which Chopin agreed to convert seventy-five percent (75%) of the
      principal, plus accrued interest, of its $1 million loan to the Company into
      shares of the Company’s common stock at a conversion ratio of $0.09 per share
      with an option to convert the remaining portion of such loan, plus accrued
      interest, into shares of the Company’s common stock at the same conversion ratio
      within thirty (30) days after the Effective Date. Pursuant to the Agreement,
      Chopin and the Company also agreed to amend the Loan Agreement dated October
      12,
      2006 between them and the Promissory Note dated October 12, 2006 issued
      thereunder (the “Note”) to extend the maturity date of the Note to the date that
      is thirty (30) days after the Effective Date and to terminate the Security
      Agreement dated October 12, 2006 between them, thereby terminating Chopin’s
      security interest in the assets of the Company. On the Effective Date the
      Company issued to Chopin 8,920,856 shares of its common stock in consideration
      of the conversion of $750,000 of principal and $52,877 of accrued interest
      under
      the Note, and on May 18, 2007 the Company issued to Chopin an additional
      2,796,800 shares of its common stock in consideration of the conversion of
      the
      balance of the Note.




14





The
      Company and its then Chief Executive Officer, Christopher Nowers, and its Chief
      Financial Officer, Angela Bronow Davanzo, entered into a Retention Bonus
      Agreement dated as of April 12, 2007 (the “Retention Agreement”). The Retention
      Agreement replaced the Employment Agreement dated as of May 26, 2006 between
      the
      Company and Mr. Nowers and the Employment Agreement dated as of July 17, 2006
      between the Company and Ms. Davanzo, which Employment Agreements were deemed
      terminated and cancelled as of December 16, 2006. Pursuant to the Retention
      Agreement, Mr. Nowers and Ms. Davanzo agreed to continue to serve as the
      Company’s Chief Executive Officer and the Company’s Chief Financial Officer and
      Secretary, respectively, through March 31, 2007 and to accept as payment in
      full
      for their services a bonus, for Mr. Nowers, of $125,000 (or $150,000 depending
      on the terms of a transaction pursuant to which the Company would transfer
      its
      rights to RP101) and, for Ms. Davanzo, of $83,334 (or $100,000 depending on
      the
      terms of a transaction pursuant to which the Company would transfer its rights
      to RP101) plus a second bonus, for Mr. Nowers, of $25,000 and, for Ms. Davanzo,
      of $16,667 in the event the Company completes a sale or other disposition of
      the
      Company itself. The Retention Agreement also provided for certain severance
      payments to Mr. Nowers and Ms. Davanzo in the event that they had not become
      entitled to and been paid their bonus by December 31, 2007.





At
      the
      same time, the Company entered into a Consulting Services Agreement dated as
      of
      April 12, 2007 with each of Mr. Nowers and Ms. Davanzo pursuant to which each
      of
      Mr. Nowers and Ms. Davanzo agreed to continue to serve as the Company’s Chief
      Executive Officer and the Company’s Chief Financial Officer and Secretary
      through April 30, 2007 and May 31, 2007, respectively, and to be compensated
      on
      an hourly basis for the general management services performed for the Company
      during the term of each agreement. Ms. Davanzo’s Consulting Agreement has been
      further extended through June 30, 2007. Subsequent to June 30, 2007 Ms. Davanzo
      has provided consulting services to the new officers of the Company to assist
      in
      the transition.





On
      June
      4, 2007 the Company issued 138,889 and 92,594 shares of common stock to Mr.
      Nowers and Ms. Davanzo, respectively, in partial payment of amounts becoming
      due
      under their Retention Agreements.




On
      May
      24, 2007, the Company and Prostagenics LLC (“Prostagenics”), the company from
      which the Company obtained the patent rights to INOC-00, Capridine beta, entered
      into a Termination of Agreement and Releases dated as of May 18, 2007 (the
      “Prostagenics Agreement”). The Prostagenics Agreement terminated as of April 5,
      2007 the Assignment and Assumption Agreement effective March 31, 2005
      between Prostagenics, the Company and Gardant Pharmaceuticals, Inc. (the
“Assignment Agreement”) pursuant to which Prostagenics assigned to the Company
      all of its rights and obligations in and under the NYMC License (as defined
      in
      the Assignment Agreement) granting Prostagenics an exclusive license to INOC-005
      Capridine beta. Under the Prostagenics Agreement, the parties also exchanged
      mutual general releases. The agreement to terminate the License was the result
      of the Company’s determination that it would not be able to adequately fund the
      development and commercialization of INOC-005 Capridine beta, a new chemical
      entity to treat prostate cancer that was the subject of the Assignment
      Agreement. As a result of the termination of the License, all rights to this
      formulation reverted back to Prostagenics, and the Company was relieved of
      all
      further obligations under the License, both operational and financial, without
      any early termination penalties to the Company.




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




FORWARD
      LOOKING STATEMENTS: NO ASSURANCES INTENDED




This
      Form
      10-QSB contains forward-looking statements within the meaning of
      Section 27A of the Securities Act of 1933 and Section 21E of the
      Securities Exchange Act of 1934. This filing includes statements regarding
      our
      plans, goals, strategies, intent, beliefs or current expectations. These
      statements are expressed in good faith and based upon a reasonable basis when
      made, but there can be no assurance that these expectations will be achieved
      or
      accomplished. Sentences in this document containing verbs such as “believe,”
“plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like,
      and/or future-tense or conditional constructions (“will,” “may,” “could,”
“should,” etc.) constitute forward-looking statements that involve risks and
      uncertainties. Items contemplating or making assumptions about, actual or
      potential future sales, market size, collaborations, trends or operating results
      also constitute such forward-looking statements.




Although
      forward-looking statements in this Report on Form 10-QSB reflect the good faith
      judgment of management, such statements can only be based on facts and factors
      currently known by management. Consequently, forward-looking statements are
      inherently subject to risks and uncertainties, and actual results and outcomes
      may differ materially from the results and outcomes discussed in, or anticipated
      by, the forward-looking statements. Factors that could cause or contribute
      to
      such differences in results and outcomes, include without limitation, those
      discussed in our Annual Report on Form 10-KSB for the year ended
      December 31, 2006. Readers are urged not to place undue reliance on these
      forward- looking statements, which speak only as of the date of this Report.
      We
      undertake no obligation to revise or update any forward-looking statements
      in
      order to reflect any event or circumstance that may arise after the date of
      this
      Report. Readers are urged to carefully review and consider the various
      disclosures made by us in our Annual Report on Form 10-KSB for the year ended
      December 31, 2006, which attempt to advise interested parties of the risks
      and factors that may affect our business, financial condition, results of
      operation and cash flows.




15




The
      following discussion should be read along with the Consolidated Financial
      Statements and Notes to our audited financial statements for the fiscal year
      ended December 31, 2006.




Critical
      Accounting Policies and Estimates




The
      preparation of the Company's consolidated financial statements requires
      management to make certain critical accounting estimates that impact the stated
      amount of assets and liabilities at a financial statement date and the reported
      amount of income and expenses during a reporting period. These accounting
      estimates are based on management's judgment and are considered to be critical
      because of their significance to the consolidated financial statements and
      the
      possibility that future events may differ from current judgments, or that the
      use of different assumptions could result in materially different estimates.
      The
      critical accounting policies and estimates have not changed from, and should
      be
      read in conjunction with, the Company's Annual Report filed on Form 10-KSB
      for
      the year ended December 31, 2006. The Company's estimates are reviewed
      continuously to ensure reasonableness. However, the amounts the Company may
      ultimately realize could differ from such estimated amounts.




The
      Company acquires, develops and seeks to commercialize novel compounds to treat
      patients with various types of cancer.




In
      early
      2006, our drug pipeline consisted of three drug candidates, spearheaded by
      our
      lead compound RP101 which represented a novel therapeutic approach to prevent
      the development of chemoresistance and subsequently augment chemotherapeutic
      effect. Our portfolio also contained two pre-clinical compounds:
      (i) Capridine beta, a novel nitroacridine derivative, which has to date
      been evaluated in a pre-clinical model of prostate cancer and (ii) an oral
      formulation of paclitaxel, which has the potential to be taken forward and
      evaluated in multiple tumor settings.




On
      November 6, 2006, the Company, Gardant and SPI entered into a Termination of
      Agreement and Releases, pursuant to which (a) the License and Co-Marketing
      Agreement between SPI and Bioaccelerate, Inc. (which had been assigned by
      Bioaccelerate, Inc., a subsidiary of Gardant, to the Company) for an oral
      paclitaxel formulation (the “License Agreement”) was terminated and (b) the
      parties exchanged mutual general releases. The agreement to terminate the
      License Agreement was the result of the Company’s decision to focus its efforts
      and resources on its principal product candidate, RP101, and its determination
      that it would not be able to adequately fund the development and
      commercialization of the oral paclitaxel formulation that was the subject of
      the
      License Agreement. As a result of the termination of the License Agreement,
      all
      rights to this formulation reverted back to SPI, and the Company was relieved
      of
      all further obligations under the License Agreement, both operational and
      financial, without any early termination penalties to the Company.




On
      April
      25, 2007 the Company entered into an Assignment and Purchase Agreement (the
      “Agreement”), pursuant to which the Company transferred to SciClone
      Pharmaceuticals, Inc. all of its right, title and interest in and to the assets
      owned or controlled by the Company related to the Company’s program to develop
      and commercialize its lead drug candidate, RP101, for the treatment of
      pancreatic cancer. Under the terms of the Agreement, the Company received
      upfront fees and will receive success-based regulatory and commercial payments
      and royalties on future sales of RP101 Product.




On
      May
      24, 2007, the Company and Prostagenics the company from which the Company
      obtained the patent rights to INOC-005 Capridine beta, entered into a
      Termination of Agreement and Releases dated as of May 18, 2007 (the
“Prostagenics Agreement”). The Prostagenics Agreement terminated as of April 5,
      2007 the Assignment and Assumption Agreement effective March 31, 2005 between
      Prostagenics, the Company and Gardant. (the “Assignment Agreement”) pursuant to
      which Prostagenics assigned to the Company all of its rights and obligations
      in
      and under the NYMC License (as defined in the Assignment Agreement) granting
      Prostagenics an exclusive license to INOC-005 Capridine beta. Under the
      Prostagenics Agreement, the parties also exchanged mutual general releases.
      The
      agreement to terminate the License was the result of the Company’s determination
      that it would not be able to adequately fund the development and
      commercialization of INOC-005 Capridine beta, a new chemical entity to treat
      prostate cancer that was the subject of the Assignment Agreement. As a result
      of
      the termination of the License, all rights to this formulation reverted back
      to
      Prostagenics, and the Company was relieved of all further obligations under
      the
      License, both operational and financial, without any early termination penalties
      to the Company.




Since
      divesting itself of its current product portfolio, the Company has been actively
      investigating bringing new technologies and product opportunities in the
      oncology sector into the Company. The Company’s intention is to utilize the
      initial proceeds of the sale to SciClone Pharmaceuticals, Inc. of RP101 to
      fund
      its current strategy of seeking new product candidates utilizing the licensing
      and biotechnology expertise of its current management and Board of Directors.
      Upon receipt, and to the extent, of the success-based regulatory and commercial
      payments and royalties on future product sales expected from the RP101 sale,
      the
      Company will be in a position to expand its business activities and further
      develop its overall business strategy.




16




Business
      Strategy




The
      Company’s focus is to be an oncology drug development and licensing company,
      which earns revenue through identification of key and promising compounds,
      adding value through both further clinical development and via commercial
      licensing revenue outcomes, and also holding in portfolio assets that will
      likely grow in attractiveness within the oncology sector.




Large
      pharmaceutical companies need additional drugs of substantial market potential
      to fill depleted development pipelines, particularly since many of their
      products will soon be losing patent protection and internal development may
      fail
      to keep up with commercial demand for innovation. Increasingly, those companies
      seek to fill that gap by in-licensing drugs at the middle to late stages of
      development rather than acquiring compounds at an earlier stage. In-licensed
      Phase III products accounted for more 30% of the in-licensing agreements made
      by
      large pharmaceutical companies in 2002, according to Reuters Business
      Insight.




The
      Company uses a network of relationships it has forged in academia, medical
      research centers and industry to in-license or acquire promising early-stage
      compounds and existing compounds that can be reformulated, used for new
      indications or used with new dosing regimens. The Company relies upon these
      relationships and a product development network to accelerate the time it takes
      for new compounds to reach the critical Phase III clinical trial level when
      a
      drug is most attractive to large pharmaceutical companies.




The
      Company enters into development, marketing and partnership agreements with
      contract research laboratories, industry experts and pharmaceutical companies
      to
      develop, test and seek regulatory approval for its drug candidates. By relying
      primarily upon contracts with third parties for research, clinical development
      and project management rather than doing that work in-house, the Company is
      able
      to maintain a limited and less costly infrastructure, particularly as compared
      with large pharmaceutical companies. The Company’s management believes that this
      streamlined operating strategy has created an efficient and cost-effective
      route
      from early-stage clinical development to a commercial product.




Liquidity
      and Capital Resources




As
      of
      March 31, 2007, the Company had $2,106 of cash and no other material assets,
      nor
      did it have an established source of revenues sufficient to cover its operating
      costs. During the quarters ended March 31, 2007 and 2006, and from
      July 21, 2004 (Inception) to March 31, 2007, the Company used cash in
      operations of $12,158, $405,971 and $7,339,833, respectively. From inception
      through March 31, 2007, shareholders provided funding in the amount of
      $7,345,874. Shareholder provided funding includes the $1.1 million consideration
      recently paid by Avantogen Limited in the May 26, 2006 Acquisition in
      exchange for 32 million shares of common stock. As of March 31, 2007,
      the Company had accumulated a net deficit during the development stage of
      $11,698,728.




As
      of
      April 25, 2007 the Company assigned its rights to develop and commercialize
      its
      lead drug candidate, RP101, to SciClone Pharmaceuticals, Inc. for approximately
      $1.7 million in upfront fees and success-based regulatory and commercial
      payments and royalties on future sales of RP101 products. The Company is
      entirely dependent on the initial upfront payment from this transaction for
      its
      current capital requirements. The Company's future capital requirements will
      depend upon numerous factors including, but not limited to, the receipt of
      future payments from the RP101 transaction, identification of new compounds,
      technologies and product opportunities to bring into the Company, progress
      in
      developing its products, market penetration and profitable operations from
      the
      sale of its products, if successfully developed. Unless the Company identifies
      and brings into the Company new product candidates, the Company’s current
      resources are sufficient to satisfy the Company’s cash requirements for the next
      12 months.




**ITEM 3
      - CONTROLS AND PROCEDURES**




As
      of the
      end of the period covered by this report, the Company carried out an evaluation,
      under the supervision and with the participation of the Company's management,
      including the Company's Chief Executive Officer and the Company's Chief
      Financial Officer, of the effectiveness of the design and operation of the
      Company's disclosure controls and procedures (as defined in Rules 15d-15(e)
      under the Securities Exchange Act of 1934, as amended) to ensure that
      information required to be disclosed by us in the reports filed or submitted
      by
      us under the Exchange Act is recorded, processed, summarized and reported,
      within the time periods specified in the Securities and Exchange Commission's
      rules and forms. This process includes ensuring information required to be
      disclosed by us in the reports filed or submitted by us under the Exchange
      Act
      is accumulated and communicated to our management, our principal executive
      and
      principal financial officers, or persons performing similar functions, as
      appropriate to allow timely decisions regarding required disclosure. Based
      on
      that evaluation, our Chief Executive Officer and Chief Financial Officer have
      concluded that as of March 31, 2007, our disclosure controls and procedures
      were
      effective at the reasonable assurance level.




17




**PART
      II: OTHER INFORMATION**




**ITEM 1-
      LEGAL PROCEEDINGS**




None




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




None




**ITEM 3-
      DEFAULTS UPON SENIOR SECURITIES**




None




**ITEM 4
      - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**




None




**ITEM 5
      - OTHER INFORMATION**




None




**ITEM 6
      - EXHIBITS**




The
      following exhibits are filed with this report.




31.1
            Written
                Statement of Chief Executive Officer with respect to compliance with
                Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and
                Section
                302 of the Sarbanes-Oxley Act of 2002.31.2
            Written
                Statement of Chief Financial Officer with respect to compliance with
                Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and
                Section
                302 of the Sarbanes-Oxley Act of 2002.32.1
            Written
                Statement of Chief Executive Officer with respect to compliance with
                Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and
                pursuant
                to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002.32.2
            Written
                Statement of Chief Financial Officer with respect to compliance with
                Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and
                pursuant
                to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002.




18




SIGNATURES




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




Date
                August 9, 2007**AVANTOGEN
                ONCOLOGY, INC.**By:
            /s/
                William ArdreyWilliam
                ArdreyChief
                Executive Officer




By:
            /s/
                Michael HillmeyerMichael
                HillmeyerChief
                Financial Officer




19




**EXHIBIT
      INDEX**




31.1  Written
      Statement of Chief Executive Officer with respect to compliance with Section
      13(a) or 15(d) of the Securities Exchange Act of 1934 and Section 302 of the
      Sarbanes-Oxley Act of 2002.




31.2  Written
      Statement of Chief Financial Officer with respect to compliance with Section
      13(a) or 15(d) of the Securities Exchange Act of 1934 and Section 302 of the
      Sarbanes-Oxley Act of 2002.




32.1  Written
      Statement of Chief Executive Officer with respect to compliance with Section
      13(a) or 15(d) of the Securities Exchange Act of 1934 and pursuant to 18 U.S.C.
      1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.




32.2  Written
      Statement of Chief Financial Officer with respect to compliance with Section
      13(a) or 15(d) of the Securities Exchange Act of 1934 and pursuant to 18 U.S.C.
      1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.




20