**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: June 30, 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** o




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




**Y** **ES o** **N** **O x**




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




As
      of
      October 24, 2007, there were 74,282,472 shares of the issuer’s Common Stock
      outstanding.




Transitional
      Small Business Disclosure
      Format                    Yes o  **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**


**June
      30, 2007**




**June
                30,2007**(Unaudited)ASSETSCash
            
            $
            567,983Prepaid
                assets
            
            
            18,824Total
                current assets
            
            
            586,807Total
                assets
            
            $
            586,807LIABILITIES
                AND STOCKHOLDERS’ DEFICITAccounts
                payable and accrued expenses
            
            $
            80,679Due
                to related parties
            
            
            141,078Total
                current liabilities
            
            
            221,757Commitments
                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, 74,282,472
                issued
                and outstanding
            
            
            74,282Additional
                paid in capital
            
            
            10,680,246Deficit
                accumulated during the development stage
            
            
            (10,389,478
            )Total
                stockholders’ deficit
            
            
            365,050Total
                liabilities and stockholders’ deficit
            
            $
            586,807




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 Three and Six Months Ended June 30, 2007 and 2006, and**


**For
      the Period from July 21, 2004 (Inception) to June 30, 2007**




**Three
                  Months
                  Ended**
              
              
              **Six
                  Months Ended****June 30,**
              
              
              **June 30,**
              
              
              **June 30,**
              
              
              **June 30,****2007**
              
              
              **2006**
              
              
              **2007**
              
              
              **2006**
              
              
              **Period
                    From July****21, 2004****(Inception)
                    toJune 30, 2007****(Unaudited)**
              
              
              **(Unaudited)**
              
              
              **(Unaudited)**
              
              
              **(Unaudited)**
              
              
              **(Unaudited)**Research
                  and development
              
              $
              (51,395
              )
              $
              (544,443
              )
              $
              (100,523
              )
              $
              (1,115,622
              )
              $
              (6,994,542
              )General
                  and administrative
              
              
              (498,915
              )
              
              (229,296
              )
              
              (580,335
              )
              
              (590,636
              )
              
              (4,708,096
              )Loss
                  from operations
              
              
              (550,310
              )
              
              (773,739
              )
              
              (680,858
              )
              
              (1,706,258
              )
              
              (11,702,638
              )Interest
                  income
              
              
              2,515
              
              
              —
              
              
              2,526
              
              
              —
              
              
              6,898Forgiveness
                  of debt
              
              
              50,000
              
              
              
              
              
              50,000
              
              
              
              
              
              50,000Gain
                  on assignment and sale of assets
              
              
              1,914,457
              
              
              —
              
              
              1,914,457
              
              
              —
              
              
              1,914,457Loss
                  on disposition of assets
              
              
              —
              
              
              —
              
              
              (51,942
              )
              
              —
              
              
              (51,942
              )Interest
                  expense
              
              
              (78,441
              )
              
              (4,346
              )
              
              (254,143
              )
              
              (54,176
              )
              
              (575,742
              )Income
                  / (loss) before provision for income taxes
              
              
              1,338,221
              
              
              (778,085
              )
              
              980,040
              
              
              (1,760,434
              )
              
              (10,358,967
              )Provision
                  for income taxes
              
              
              (28,971
              )
              
              —
              
              
              (28,971
              )
              
              —
              
              
              (30,511
              )Net
                  income / (loss)
              
              $
              1,309,250
              
              $
              (778,085
              )
              $
              951,069
              
              $
              (1,760,434
              )
              $
              (10,389,478
              )Net
                  income / (loss) per share - Basic
              
              $
              0.02
              
              $
              (0.02
              )
              $
              0.01
              
              $
              (0.07
              )Net
                  income / (loss) per share - Diluted
              
              $
              0.02
              
              $
              (0.02
              )
              $
              0.01
              
              $
              (0.07
              )Weighted
                  average common and common
                equivalent
                  shares outstanding:Basic
              
              
              69,573,170
              
              
              33,879,000
              
              
              64,315,793
              
              
              26,072,000Diluted
              
              
              69,873,170
              
              
              33,879,000
              
              
              64,615,793
              
              
              26,072,000




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 Six Months Ended June 30, 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
            )Stock
                based compensation (unaudited)
            
            
            231,483
            
            
            231
            
            
            20,602
            
            
            —
            
            
            20,833Shares
                issued in transaction (unaudited)
            
            
            3,333,333
            
            
            3,333
            
            
            496,667
            
            
            —
            
            
            500,000Conversion
                of promissory note and accrued interest (unaudited)
            
            
            11,717,656
            
            
            11,718
            
            
            1,042,871
            
            
            —
            
            
            1,054,589Intrinsic
                value of beneficial conversion associated with conversion of promissory
                note and accrued interest (unaudited)
            
            
            —
            
            
            —
            
            
            70,306
            
            
            —
            
            
            70,306Net
                income (unaudited)
            
            
            —
            
            
            —
            
            
            —
            
            
            951,069
            
            
            951,069Balance,
                June 30, 2007(unaudited)
            
            
            74,282,472
            
            $
            74,282
            
            $
            10,680,246
            
            $
            (10,389,478
            )
            $
            365,050




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 six months Ended June 30, 2007 and 2006 and For the Period**


**from
      July 21, 2004 (Inception) to June 30, 2007**




**June
                  30,**
                **2007**
            
            
            **June
                  30,**
                **2006**
            
            
            **Period
                  From****July
                  21, 2004**
                **(Inception)
                  to**
                **June
                  30, 2007**Cash
                flows from operating activities:(Unaudited)
            
            
            (Unaudited)
            
            
            (Unaudited)Net
                income/(loss)
            
            $
            951,069
            
            $
            (1,760,434
            )
            $
            (10,389,478
            )Adjustments
                to reconcile net income/(loss) to cash used in operating
                activities:Stock-based
                compensation
            
            
            (560
            )
            
            —
            
            
            798,926Accretion
                of debt discount on note payable
            
            
            144,567
            
            
            —
            
            
            1,179,388Amortization
                of interest on convertible note payable
            
            
            70,306
            
            
            —
            
            
            70,306Purchased
                research and development expensed in the May 26, 2006
                acquisition
            
            
            —
            
            
            516,141
            
            
            516,141Settlement
                of related party claim
            
            
            (142,665
            )
            
            —
            
            
            (142,665
            )Gain
                on assignment and sale of assets
            
            
            (1,914,457
            )
            
            —
            
            
            (1,914,457
            )Loss
                on disposal of assets and (forgiveness) of debt
            
            
            1,941
            
            
            —
            
            
            1,941Amortization
                expense
            
            
            —
            
            
            1,042
            
            
            25,000Depreciation
                expense
            
            
            287
            
            
            —
            
            
            1,147Changes
                in assets and liabilitiesDecrease
                in prepaid assets
            
            
            84,316
            
            
            —
            
            
            82,392Increase
                in deposits
            
            
            —
            
            
            (44,488
            )
            
            (44,488
            )(Decrease)/increase
                in accounts payable and accrued expenses
            
            
            (286,975
            )
            
            (753,592
            )
            
            818,398(Decrease)/increase
                in due to related parties
            
            
            (42,050
            )
            
            (190,000
            )
            
            283,743Increase
                in interest payable
            
            
            7,940
            
            
            54,176
            
            
            259,750Net
                cash used in operating activities
            
            
            (1,126,281
            )
            
            (2,177,155
            )
            
            (8,453,956
            )Cash
                flows from investing activities:Purchase
                of property and equipment
            
            
            —
            
            
            (8,600
            )
            
            (8,600
            )Net
                cash used in investing activities
            
            
            —
            
            
            (8,600
            )
            
            (8,600
            )Cash
                flows from financing activities:Proceeds
                received from Avantogen Limited in the acquisition
            
            
            —
            
            
            1,100,000
            
            
            1,100,000Resistys,
                Inc. cash received in the acquisition
            
            
            —
            
            
            4,665
            
            
            4,665Advance
                to related party
            
            
            —
            
            
            (200,000
            )
            
            —Proceeds
                from loan from related party & issuance of warrants
            
            
            —
            
            
            —
            
            
            1,000,000Proceeds
                from loans from stockholder
            
            
            
            
            
            2,016,427
            
            
            5,245,874Proceeds
                from assignment & sale of assets
            
            
            1,680,000
            
            
            —
            
            
            1,680,000Net
                cash provided by financing activities
            
            
            1,680,000
            
            
            2,921,092
            
            
            9,030,539Net
                increase / (decrease) in cash
            
            
            553,719
            
            
            735,337
            
            
            567,983Cash,
                beginning of period
            
            
            14,264
            
            
            1,158
            
            
            —Cash,
                end of period
            
            $
            567,983
            
            $
            736,495
            
            $
            567,983Supplemental
                cash flow information:Non-cash
                financing transactions:Non-cash
                Resistys, Inc. net assets received in acquisition
            
            $
            —
            
            $
            54,477
            
            $
            79,477Amount
                due Resistys, Inc. eliminated in acquisition
            
            $
            —
            
            $
            825,025
            
            $
            825,025Common
                stock issued to Bioaccelerate Holdings, Inc. for
              assumption
                of liabilities
            
            $
            —
            
            $
            5
                ,592,801
            
            $
            5,592,801Warrants
                issued to Chopin Opus One L.P. with Promissory Note
            
            $
            —
            
            $
            —
            
            $
            212,598Conversion
                of note payable and accrued interest to common stock
            
            $
            1,054,589
            
            $
            —
            
            $
            1,054,589Workforce
                in-place recorded in acquisition
            
            $
            —
            
            $
            25,000
            
            $
            —





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


June
      30,
      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 April 2007, the Company assigned the license and sold
      the assets related to its lead compound RP101 to SciClone Pharmaceuticals.
      In
      May 2007, the Company terminated its rights to INOC-00, Capridine beta.




Since
      divesting itself of its current product portfolio, the Company has been actively
      investigating bringing new technologies and product opportunities in oncology
      and other sectors into the Company.




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
      acquisitions, which were accounted for as transaction costs. The $825,025
      liability due to Resistys was reclassified to additional paid-in capital as
      a
      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




*The
      April 2007 Assignment and Purchase Agreement*




On
      April
      25, 2007 (the “Effective Date”), the Company, its wholly-owned subsidiary,
      Resistys, its majority shareholder, Avantogen Limited (“Avantogen” and, together
      with the Company 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.




*The
      May 2007 Termination of Agreement and Releases*




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.




*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 that date, the Company had reported its 50% share
      of
      losses in Resistys under the equity method of accounting.




9




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.





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.




*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 June 30, 2007, amounts reported in operating activities as uses of
      cash related to decreases in accounts payable, accrued expenses, and due to
      related parties. During the period ended June 30, 2006, the amounts reported
      in
      operating activities as uses of cash 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 June 30, 2006.




*Gain/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.
      In
      the periods for which losses were reported such common equivalent shares have
      not been included in the computation of net loss per share as their effect
      would
      be anti-dilutive.




As
      of
      June 30, 2007, there were warrants outstanding to acquire 300,000 shares of
      the
      Company’s common stock related to an agreement with Chopin Capital Partners, LLC
      to provide financial advisory services.




10





The
      following table sets forth the computation for basic and diluted EPS (in
      millions, except per share information):




**Three Months Ended**
              **June 30,**
            
            
            **Six
                Months Ended**
              **June 30,****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**Income
                / Loss (Numerator):Net
                income / (loss) for basic and diluted EPS
            
            $
            1,309,250
            
            $
            (778,085
            )
            $
            951,069
            
            $
            (1,760,434
            )Shares
                (Denominator):Weighted-average
                shares for basic EPS
            
            
            69,573,170
            
            
            33,879,000
            
            
            64,315,793
            
            
            26,072,000Effect
                of Dilutive Securities
            
            
            300,000
            
            
            0
            
            
            300,000
            
            
            0Weighted-average
                shares for diluted EPS
            
            
            69,873,170
            
            
            33,879,000
            
            
            64,615,793
            
            
            26,072,000Basic
                earnings per share
            
            $
            0.02
            
            $
            (0.02
            )
            $
            0.01
            
            $
            (0.07
            )Diluted
                earnings per share
            
            $
            0.02
            
            $
            (0.02
            )
            $
            0.01
            
            $
            (0.07
            )




*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. Due to the gain
      recognized from the April, 2007 transaction, the Company reversed $0.59 million
      of valuation allowance on its deferred tax assets during the quarter ended
      June
      30, 2007.





Based
      on
      the Company’s assessment of all available evidence, the Company has concluded
      that its remaining $4.3 million of deferred tax assets are not more likely
      than
      not to be realized. This conclusion is based primarily on our history of net
      operating losses, annual net operating loss limitations under Internal Revenue
      Code (“IRC”) Section 382, and the need to generate significant amounts of
      taxable income in future periods on a consistent and prolonged basis in order
      to
      utilize the deferred tax assets. Accordingly, the Company has recorded a full
      valuation allowance of $4.3 million on its remaining deferred tax
      assets.




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




The
      Company adopted the provisions of FASB Interpretation No. 48, Accounting for
      Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 (“FIN
      48”), on January 1, 2007. FIN 48 clarifies the accounting for uncertainty in
      income taxes recognized in an enterprise’s financial statements in accordance
      with FASB Statement No. 109, Accounting for Income Taxes, and prescribes a
      recognition threshold and measurement process for financial statement
      recognition and measurement of a tax position taken or expected to be taken
      in a
      tax return. FIN 48 also provides guidance on derecognition, classification,
      interest and penalties, accounting in interim periods, disclosure and
      transition.




As
      a
      result of the implementation of FIN 48, the Company made a comprehensive review
      of its portfolio of uncertain tax positions in accordance with recognition
      standards established by FIN 48. Based on its evaluation, the Company has
      concluded that there are no material uncertain tax positions requiring
      recognition in its financial statements. The Company’s evaluation was performed
      for the tax years ended December 31, 2006, 2005, and 2004, the tax years which
      remain subject to examination by major tax jurisdictions as of June 30, 2007.





*Stock-Based
      Compensation*




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. See footnote 3.





*Fair
      Value of Financial Instruments*




The
      carrying amounts of financial instruments, including cash, accounts payable,
      accrued expenses and short-term borrowings approximates fair value due to the
      short maturity of these instruments.




11





*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 years 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.




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
        June 30, 2007, the Company had $567,983 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 six months ended June 30, 2007 and
        2006, and from July 21, 2004 (Inception) to June 30, 2007, the Company used
        cash in operations of $1,126,281, $2,177,155 and $8,453,956, respectively.
        From
        inception through June 30, 2007, shareholders provided funding in the amount
        of
        $7,345,874. As of June 30, 2007, the Company had accumulated a net deficit
        during the development stage of $10,389,478. During the quarter ended June
        30,
        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. 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 June
      30,
      2007. As of June 30, 2007 the entire principal balance and accrued
      interest were converted to the Company’s common stock. See footnote 4.




On
      October 23, 2006 the Company entered into a Terms of Financial Advisory Services
      Agreement with Chopin Capital Partners, LLC (Chopin Capital”) related to the
      service period from July 1, 2006 to June 30, 2007. The managing partner of
      Chopin Capital 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 of its intent to cancel the agreement. Effective July 1,
      2007
      the Company issued to Chopin Capital a $90,000 Convertible Promissory Note
      in
      full satisfaction of its obligations to Chopin Capital under the agreement
      including any rights to the warrants. See footnote 8.




12




On
      April
      12, 2007 the Company and its then Chief Executive Officer, Christopher Nowers,
      and its Chief Financial Officer, Angela Bronow Davanzo, entered into a Retention
      Bonus Agreement (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. 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.





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.




As
      of
      June 30, 2007 there was $141,078 due to related parties, which was comprised
      of
      $5,000 owed to a non-executive director for outstanding fees, $100,000 owed
      to
      Chopin Capital Partners LLC for services under the Terms of Financial Advisory
      Services Agreement, $19,088 due to Angela Davanzo for consulting services and
      $16,990 due to a director for travel expenses.




**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 was 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 June 30,
      2007 the entire balance has been accreted and $144,567 is reflected as interest
      expense in the period ended June 30, 2007.




On
      the
      Effective Date, the Company entered into an Agreement (the “Chopin Agreement”)
      with 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 Chopin 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 $250,000, the balance of the Note, and $ 1,712 of accrued
      interest. The common stock issued to settle the Chopin Agreement are
      unregistered, and the Company has no obligation to register such shares.


In
        accordance with EITF 98-5 “Accounting for Convertible Securities with Beneficial
        Conversion Features or Adjustable Conversion Ratios”, the Company determined the
        fair market value of the shares used in the Chopin Agreement to be $0.096
        per
        share. The fair market value was calculated by using the weighted average
        trading price of the shares traded in the 60 days prior to the conversion.
        The
        Company believes that this is the best representation of fair value given
        the
        sparse trading activity of the stock. The net difference between the fair
        value
        and the agreed conversion price is $0.006 per share resulting in a total
        beneficial conversion feature of $70,306. The total beneficial conversion
        feature has been recorded in additional paid in capital and interest expense
        because the Loan was fully converted as of June 30, 2007.


13




**5.
      Gain on Assignment and Sale of Assets**




On
      April
      25, 2007, the Company, its wholly-owned subsidiary, Resistys, its majority
      shareholder, Avantogen Limited and SciClone entered into the SciClone Agreement.
      Upon execution of the Agreement, SciClone paid Resistys approximately $1.7
      million in upfront fees. In addition, under an Assumption of Liabilities
      Agreement dated April 25, 2007 SciClone assumed certain liabilities totaling
      approximately $0.7 million. In consideration for RESprotect’s Consent, the
      Company issued to RESprotect shares of its common stock with an aggregate value
      of $0.5 million. The aggregate result of these transactions was the recognition
      of a $1.9 million gain during the period ended June 30, 2007. See footnote
      1.




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




*Stock
      Options*




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.




As
      of
      June 30, 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 period ended June 30, 2007.
      Effective July 1, 2007 the Company issued to Chopin Capital a Convertible
      Promissory Note in full satisfaction of Chopin Capital’s claims pursuant to the
      Financial Advisory Services Agreement. See footnotes 3 and 8.




As
      of
      June 30, 2007, there were warrants to acquire 300,000 shares of common stock
      outstanding, with an exercise price of $0.60 per share, all of which are
      exercisable. Effective July 1, 2007, the warrants were cancelled and were no
      longer outstanding.




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




For
      the
      six months ended June 30, 2007, except for approximately $29,000 of alternative
      minimum taxes, the Company did not record any tax expenses after considering
      the
      full year expected results and the likelihood of recovery of deferred tax
      assets. Management will continue to monitor the future recoverability of the
      tax
      assets which have a full valuation allowance as of June 30, 2007.




As
      of
      June 30, 2007, Avantogen Oncology Inc. had total operating loss carry-forwards
      for federal and state income tax purposes of $8.2 million each. Resistys, Inc.
      files standalone federal and state income tax returns. As of June 30, 2007,
      Resistys Inc. had operating loss carry-forwards for federal and state income
      tax
      purposes of $2.55 million each.




Pursuant
      to Internal Revenue Code Sec. 382 and 383, certain changes in the ownership
      structure may partially or fully limit future use of net operating losses and
      tax credits available to offset future taxable income and future tax
      liabilities, respectively. The Company’s net operating loss carryforwards are
      subject to annual limitation due to a change in ownership structure occurring
      prior to June 30, 2007.




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




Effective
      July 1, 2007 the Company issued to Chopin Capital Partners, LLC a $90,000
      Convertible Promissory Note in full satisfaction of its obligations to Chopin
      Capital under the Terms of Financial Advisory Services Agreement entered into
      between the Company and Chopin Capital on October 23, 2006. The principal amount
      of the **** note
      is
      $90,000 which will accrue simple interest at a rate of 8% per annum and will
      mature on June 30, 2009. Provided that no Event of Default (as defined in the
      note) has occurred, the Company may, on the maturity date of the note, issue
      shares of its common stock valued at $0.09 per share in lieu of a cash payment
      of any or all of the principal or interest due on the note. Chopin Capital
      also
      has the right at any time and from time to time prior to the maturity date
      of
      the note to convert all or any part of the outstanding principal balance and
      unpaid accrued interest on the note into shares of common stock of the Company
      at a conversion rate of **** $0.09
      per
      share **.** The
      shares issuable in payment of the note have piggy-back registration rights
      pursuant to a Registration Rights Agreement dated as of August 13, 2007 between
      the Company and Chopin Capital. In connection with the issuance of the note,
      the
      warrants to purchase 300,000 shares of the Company’s common stock which had been
      issued to Chopin Capital have been cancelled and are no longer
      outstanding.




14





On
      July
      11, 2007, Dr. William Ardrey, the Company’s President and Chief Executive
      Officer, and Michael Hillmeyer, the Company’s Secretary, Treasurer and Chief
      Financial Officer, entered into Employment Agreements dated as of July 1, 2007
      with the Company (the “Employment Agreements”). Pursuant to the Employment
      Agreements, each of Dr. Ardrey and Mr. Hillmeyer agreed to serve in those
      capacities on an interim and part-time basis and to accept as payment in full
      for their services a base salary of $2,000 per month for each individual.


Also
        on
        July 11, 2007, the Board approved stock option grants under the Company's
        2006
        Stock Incentive Plan of 1 Million shares for William Ardrey and 750,000 shares
        for each of Lee Cole and Michael Hillmeyer, each of whom is a director of
        the
        Company. Vesting will occur quarterly in arrears in eight equal installments
        over a two-year period commencing on such date as the Company completes a
        capital raise of $1 million or more. Such options will be exercisable at
        $0.09
        per share, being the fair market value of a share of the Company's stock
        as of
        July 11, 2007.


**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.




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.




15




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




In
      early
      2006, the drug pipeline consisted of three drug candidates, spearheaded by
      the
      lead compound RP101 which represented a novel therapeutic approach to prevent
      the development of chemoresistance and subsequently augment chemotherapeutic
      effect. The 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 and other sectors 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.




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 and other sectors.




16




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
      June 30, 2007, the Company had $567,983 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 June 30, 2007 and 2006, and from
      July 21, 2004 (Inception) to June 30, 2007, the Company used cash in
      operations of $1,126,281, $2,177,155 and $8,453,956, respectively. From
      inception through June 30, 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 June 30, 2007,
      the Company had accumulated a net deficit during the development stage of
      $10,389,478.




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. The Company’s current resources
      are sufficient to satisfy the Company’s cash requirements only through the end
      of the first quarter of fiscal 2008 and the Company does not have sufficient
      resources to support its operations for the next 12 months. The Company is
      currently exploring several opportunities to acquire one or more new
      technologies or products which will then enable the Company to attempt to raise
      additional equity financing through a private placement or PIPE.




**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 June 30, 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**




On
      May
      18, 2007, the Company issued to Chopin Opus One L.P. 2,796,800 shares of its
      Common Stock in consideration of the conversion of the $250,000 principal
      balance of registrant's Note to Chopin and $1,712 of accrued interest under
      the Note.  On June 4, 2007, registrant issued 138,889 and 92,954 shares of
      its Common Stock respectively to Christopher Nowers, its former Chief Executive
      Officer, and Angela Bronow Davanzo, its former Chief Financial Officer, in
      partial payment of amounts becoming due under their Retention Agreements with
      the Company. The
      shares were issued pursuant to the exemption from registration afforded by
      Section 4(2) of the Securities Act of 1933 as a transaction by an issuer not
      involving any public offering. The Company has no obligation to register such
      shares.




**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.




10.1
            Employment
                Agreement dated as of July 1, 2007 between registrant and William
                Ardrey
                (Incorporated by reference from the Company's Current Report on Form8-K
                filed on July 17, 2007).10.2
            Employment
                Agreement dated as of July 1, 2007 between registrant and Michael
                Hillmeyer (Incorporated by reference from the Company's Current Report
                on
                Form 8-K filed on July 17, 2007).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 October 26, 2007**AVANTOGEN
                ONCOLOGY, INC.**By:
            /s/
                William ArdreyWilliam
                Ardrey
                Chief
                  Executive Officer




By:
            /s/
                Michael HillmeyerMichael
                Hillmeyer
                Chief
                  Financial Officer




19




**EXHIBIT
      INDEX**




10.1
              Employment
                  Agreement dated as of July 1, 2007 between registrant and William
                  Ardrey
                  (Incorporated by reference from the Company's Current Report on
                  Form8-K
                  filed on July 17, 2007).10.2
              Employment
                  Agreement dated as of July 1, 2007 between registrant and Michael
                  Hillmeyer (Incorporated by reference from the Company's Current
                  Report on
                  Form 8-K filed on July 17, 2007).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