**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      DC 20549**

**FORM      10-Q**

**ZIOPHARM      Oncology, Inc.**

| **Delaware**                                                                                      | **84-1475642**                                   |
|---------------------------------------------------------------------------------------------------|--------------------------------------------------|
| (State                or Other Jurisdiction of Incorporation or Organization)                     | (IRS                Employer Identification No.) |
|                                                                                              |                                             |
| **1180                Avenue of the Americas, 19th**  **Floor, New York,                NY** | **10036**                                        |
| (Address                of Principal Executive Offices)                                           | (Zip                Code)                        |

**(646)      214-0700**

| Large accelerated filer o | Accelerated filer x | Non-accelerated                filer   o(Do not check if a smaller reporting company) | Smaller reporting company o  |
|------------------------------------------|-------------------------------|-------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------|

----

**Index**

|                       |                                                                                                                                                                                                                                                        |   | Page   |
|----------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
| **PART                I**  | **FINANCIAL                INFORMATION**                                                                                                                                                                                                                    |   |   |
|                       |                                                                                                                                                                                                                                                        |   |   |
| Item                1.     | Financial                Statements                                                                                                                                                                                                                         |   |   |
|                       |                                                                                                                                                                                                                                                        |   |   |
|                       | Balance                Sheets as of June 30, 2008 (unaudited) and December 31, 2007                (unaudited)                                                                                                                                              |   | 3      |
|                       |                                                                                                                                                                                                                                                        |   |   |
|                       | Statement                of Operations for the three and six months ended June 30, 2008 and                2007                (unaudited) and for the period from inception (September 9, 2003)                to June                30, 2008 (unaudited) |   | 4      |
|                       |                                                                                                                                                                                                                                                        |   |   |
|                       | Statement                of Cash Flows for the six months ended June 30, 2008 and 2007 (unaudited)                and for the period from inception (September 9, 2003) to June 30,                2008                (unaudited)                          |   | 5      |
|                       |                                                                                                                                                                                                                                                        |   |   |
|                       | Statement                of Changes in Convertible Preferred Stock and Stockholders’                Equity/(Deficit) for the period from inception (September 9, 2003)                to June                30, 2008 (unaudited)                     |   | 6      |
|                       |                                                                                                                                                                                                                                                        |   |   |
|                       | Notes                to Unaudited Financial Statements                                                                                                                                                                                                      |   | 7      |
|                       |                                                                                                                                                                                                                                                        |   |   |
| Item                2.     | Management’s                Discussion and Analysis                                                                                                                                                                                                   |   | 12     |
|                       |                                                                                                                                                                                                                                                        |   |   |
| Item                3.     | Quantitative                and Qualitative Disclosure About Market Risk                                                                                                                                                                                    |   | 18     |
|                       |                                                                                                                                                                                                                                                        |   |   |
| Item                4.     | Controls                and Procedures                                                                                                                                                                                                                      |   | 18     |
|                       |                                                                                                                                                                                                                                                        |   |   |
| **PART                II** | **OTHER                INFORMATION**                                                                                                                                                                                                                        |   |   |
|                       |                                                                                                                                                                                                                                                        |   |   |
| Item                1.     | Legal                Proceedings                                                                                                                                                                                                                            |   | 18     |
|                       |                                                                                                                                                                                                                                                        |   |   |
| Item                2.     | Unregistered                Sales of Equity Securities and Use of Proceeds                                                                                                                                                                                  |   | 18     |
|                       |                                                                                                                                                                                                                                                        |   |   |
| Item                3.     | Defaults                Under Senior Securities                                                                                                                                                                                                             |   | 18     |
|                       |                                                                                                                                                                                                                                                        |   |   |
| Item                4.     | Submission                of Matters to a Vote of Security Holders                                                                                                                                                                                          |   | 18     |
|                       |                                                                                                                                                                                                                                                        |   |   |
| Item                5.     | Other                Information                                                                                                                                                                                                                            |   | 18     |
|                       |                                                                                                                                                                                                                                                        |   |   |
| Item                6.     | Exhibits                                                                                                                                                                                                                                                    |   | 19     |
|                       | Signatures                                                                                                                                                                                                                                                  |   | 20     |
|                       | Exhibit                Index                                                                                                                                                                                                                                |   | 21     |

----

**PART        I - FINANCIAL INFORMATION**

***ZIOPHARM        Oncology, Inc.***

***(A        Development Stage Enterprise)***

|                                                                                                                                                                                                                                                            |   | **June 30,** |           | **December 31,** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|----------------|-----------------------|--------|
|                                                                                                                                                                                                                                                            |   | **2008**          |           | **2007**              |   |
|                                                                                                                                                                                                                                                            |   | **(Unaudited)**   |           | **(Unaudited)**       |   |
| **ASSETS**                                                                                                                                                                                                                                                      |   |              |           |                  |   |   |   |
| Current                  assets:                                                                                                                                                                                                                                |   |              |           |                  |   |   |   |
| Cash                  and cash equivalents                                                                                                                                                                                                                      |   | $                 | 21,087,264     |                  | $      | 35,028,798 |   |
| Prepaid                  expenses and other current assets                                                                                                                                                                                                      |   |              | 237,908        |                  |   | 498,864 |   |
| Total                  current assets                                                                                                                                                                                                                           |   |              | **21,325,172** |                  |   | **35,527,662** |   |
|                                                                                                                                                                                                                                                            |   |              |                |                  |   |  |   |
| Property                  and equipment, net                                                                                                                                                                                                                    |   |              | 674,714        |                  |   | 746,421 |   |
|                                                                                                                                                                                                                                                            |   |              |                |                  |   |  |   |
| Deposits                                                                                                                                                                                                                                                        |   |              | 98,897         |                  |   | 95,497 |   |
| Other                  non-current assets                                                                                                                                                                                                                       |   |              | 359,651        |                  |   | 356,881 |   |
| Total                  assets                                                                                                                                                                                                                                   |   | **$**             | **22,458,434** |                  | **$**  | **36,726,461** |   |
|                                                                                                                                                                                                                                                            |   |              |                |                  |   |  |   |
| **LIABILITIES                  AND STOCKHOLDERS' EQUITY**                                                                                                                                                                                                       |   |              |           |                  |   |   |   |
| Current                  liabilities:                                                                                                                                                                                                                           |   |              |                |                  |   |  |   |
| Accounts                  payable                                                                                                                                                                                                                               |   | $                 | 1,900,291      |                  | $      | 2,909,170 |   |
| Accrued                  expenses                                                                                                                                                                                                                               |   |              | 4,281,177      |                  |   | 3,396,480 |   |
| Total                  current liabilities                                                                                                                                                                                                                      |   |              | **6,181,468**  |                  |   | **6,305,650** |   |
|                                                                                                                                                                                                                                                            |   |              |                |                  |   |  |   |
| Deferred                  rent                                                                                                                                                                                                                                  |   |              | **60,430**     |                  |   | **50,988** |   |
| Total                  liabilities                                                                                                                                                                                                                              |   |              | **6,241,898**  |                  |   | **6,356,638** |   |
|                                                                                                                                                                                                                                                            |   |              |                |                  |   |  |   |
| Commitments                  and contingencies                                                                                                                                                                                                                  |   |              |           |                  |   |   |   |
|                                                                                                                                                                                                                                                            |   |              |                |                  |   |  |   |
| Stockholders'                  equity:                                                                                                                                                                                                                          |   |              |           |                  |   |   |   |
| Common                  stock, $.001 par value; 280,000,000 shares authorized; 21,398,964                  and                  21,298,964 shares issued and outstanding at June 30, 2008 and December                  31,                  2007, respectively |   |              | 21,399         |                  |   | 21,299 |   |
|                                                                                                                                                                                                                                                            |   |              |           |                  |   |   |   |
| Preferred                  stock, $0.01 par value; 30,000,000 shares authorized and no shares                  issued                  and outstanding                                                                                                          |   |              | -              |                  |   | - |   |
| Additional                  paid-in capital                                                                                                                                                                                                                     |   |              | 70,644,632     |                  |   |  69,674,151 |   |
| Warrants                  issued                                                                                                                                                                                                                                |   |              | 20,503,894     |                  |   | 20,503,894 |   |
| Deficit                  accumulated during the development stage                                                                                                                                                                                               |   |              | (74,953,389    | )                     |   | (59,829,521 | ) |
| Total                  stockholders' equity                                                                                                                                                                                                                     |   |              | **16,216,536** |                  |   | **30,369,823** |   |
|                                                                                                                                                                                                                                                            |   |              |           |                  |   |   |   |
| Total                  liabilities and stockholders' equity                                                                                                                                                                                                     |   | **$**             | **22,458,434** |                  | **$**  | **36,726,461** |   |

----

***ZIOPHARM        Oncology, Inc.***

***(A        Development Stage Enterprise)***

----

|                                                                                                                                               |   |                    |       |                    |   |                    |   |                    |        | For the Period      |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|------------|-------------------------|--------|-------------------------|--------|-------------------------|-------------|-------------------------------|--------|
|                                                                                                                                               |   | For the three |       | For the three |   | For the six   |   | For the six   |        | from Inception           |   |
|                                                                                                                                               |   | months             |       | months             |   | months             |   | months             |        | (September 9, 2003) |   |
|                                                                                                                                               |   | ended                   |       | ended                   |   | ended                   |   | ended                   |        | through                  |   |
|                                                                                                                                               |   | June 30, 2008 |       | June 30, 2007 |   | June 30, 2008 |   | June 30, 2007 |        | June 30, 2008       |   |
|                                                                                                                                               |   | (unaudited)             |       | (unaudited)             |   | (unaudited)             |   | (unaudited)             |        | (unaudited)                   |   |
| Research contract revenue                                                                                                                |   | $                       | -          |                    | $      | -                       |   | $                       | -           |                          | $      | - |   | $ | - |   |
|                                                                                                                                               |   |                    |       |                    |   |                    |   |                    |        |                          |   |   |   |   |   |   |
| Operating                  expenses and other income:                                                                                              |   |                    |            |                    |   |                         |   |                    |             |                          |   |  |   |   |  |   |
| Research                  and development, including costs of research contracts                                                                   |   |                    | 4,266,059  |                    |   | 4,347,610               |   |                    | 10,340,636  |                          |   | 7,774,123 |   |   | 47,445,030 |   |
| General                  and administrative                                                                                                        |   |                    | 2,349,529  |                    |   | 2,847,973               |   |                    | 5,094,230   |                          |   | 4,837,991 |   |   | 31,328,524 |   |
| Total                  operating expenses                                                                                                          |   |                    | 6,615,588  |                    |   | 7,195,583               |   |                    | 15,434,866  |                          |   | 12,612,114 |   |   | 78,773,554 |   |
|                                                                                                                                               |   |                    |       |                    |   |                    |   |                    |        |                          |   |   |   |   |   |   |
| Loss                  from operations                                                                                                              |   |                    | (6,615,588 | )                       |   | (7,195,583              | )      |                    | (15,434,866 | )                             |   | (12,612,114 | ) |   | (78,773,554 | ) |
|                                                                                                                                               |   |                    |       |                    |   |                    |   |                    |        |                          |   |   |   |   |   |   |
| Interest                  income                                                                                                                   |   |                    | 114,814    |                    |   | 650,382                 |   |                    | 310,998     |                          |   | 1,026,227 |   |   | 3,820,165 |   |
| Net                  loss                                                                                                                          |   | $                       | (6,500,774 | )                       | $      | (6,545,201              | )      | $                       | (15,123,868 | )                             | $      | (11,585,887 | ) | $ | (74,953,389 | ) |
|                                                                                                                                               |   |                    |       |                    |   |                    |   |                    |        |                          |   |   |   |   |   |   |
| Basic                  and diluted net loss per share                                                                                              |   | $                       | (0.31      | )                       | $      | (0.31                   | )      | $                       | (0.71       | )                             | $      | (0.60 | ) |   |  |   |
|                                                                                                                                               |   |                    |       |                    |   |                    |   |                    |        |                          |   |   |   |   |   |   |
| Weighted                  average common shares outstanding used to compute basic and diluted                  net                  loss per share |   |                    | 21,228,964 |                    |   | 21,182,948              |   |                    | 21,228,964  |                          |   | 19,419,729 |   |   |  |   |

----

***ZIOPHARM        Oncology,        Inc.***

***(A        Development Stage Enterprise)***

----

|                                                                                                                                    |   |                    |        |                    |   | For the period      |   |
|-----------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|-------------|-------------------------|--------|-------------------------------|--------|
|                                                                                                                                    |   | For the       |        | For the       |   | from inception           |   |
|                                                                                                                                    |   | six months         |        | six months         |   | (September 9, 2003) |   |
|                                                                                                                                    |   | ended                   |        | ended                   |   | through                       |   |
|                                                                                                                                    |   | June 30, 2008 |        | June 30, 2007 |   | June 30, 2008       |   |
|                                                                                                                                    |   | (unaudited)             |        | (unaudited)             |   | (unaudited)                   |   |
| Cash flows from operating activities:                                                                               |   |                    |             |                    |   |                               |   |   |  |   |
| Net                  loss                                                                                                               |   | $                       | (15,123,868 | )                       | $      | (11,585,887                   | )      | $ | (74,953,389 | ) |
| Adjustments                    to reconcile net loss to net cash used in operating activities:                                     |   |                    |        |                    |   |                          |   |   |   |   |
| Depreciation                  and amortization                                                                                          |   |                    | 189,425     |                    |   | 182,310                       |   |   | 931,883 |   |
| Non-cash                  stock-based compensation                                                                                      |   |                    | 970,581     |                    |   | 735,751                       |   |   | 6,093,698 |   |
| Loss                  on disposal of fixed assets                                                                                       |   |                    | 302         |                    |   | -                             |   |   | 8,725 |   |
| Change                  in operating assets and liabilities:                                                                            |   |                    |        |                    |   |                          |   |   |   |   |
| (Increase)                  decrease in:                                                                                                |   |                    |             |                    |   |                               |   |   |  |   |
| Prepaid                  expenses and other current assets                                                                              |   |                    | 260,956     |                    |   | (355,025                      | )      |   | (237,908 | ) |
| Other                  noncurrent assets                                                                                                |   |                    | (2,770      | )                       |   | (123,398                      | )      |   | (359,651 | ) |
| Deposits                                                                                                                                |   |                    | (3,400      | )                       |   | (41,412                       | )      |   | (98,897 | ) |
| Increase                  (decrease) in:                                                                                                |   |                    |             |                    |   |                               |   |   |  |   |
| Accounts                  payable                                                                                                       |   |                    | (1,008,879  | )                       |   | 712,687                       |   |   | 1,900,291 |   |
| Accrued                  expenses                                                                                                       |   |                    | 884,697     |                    |   | 172,893                       |   |   | 4,281,177 |   |
| Deferred                  rent                                                                                                          |   |                    | 9,442       |                    |   | 2,547                         |   |   | 60,430 |   |
| Net                  cash used in operating activates                                                                                   |   |                    | (13,823,514 | )                       |   | (10,299,534                   | )      |   | (62,373,641 | ) |
|                                                                                                                                    |   |                    |        |                    |   |                          |   |   |   |   |
| Cash                  flows from investing activities:                                                                                  |   |                    |        |                    |   |                          |   |   |   |   |
| Purchases                  of property and equipment                                                                                    |   |                    | (118,720    | )                       |   | (392,159                      | )      |   | (1,616,022 | ) |
| Proceeds                  from sale of property and equipment                                                                           |   |                    | 700         |                    |   | -                             |   |   | 700 |   |
| Decrease                  in short-term investments                                                                                     |   |                    | -           |                    |   | 1,555,164                     |   |   | - |   |
| Net                  cash provided by (used in) investing activities                                                                    |   |                    | (118,020    | )                       |   | 1,163,005                     |   |   | (1,615,322 | ) |
|                                                                                                                                    |   |                    |        |                    |   |                          |   |   |   |   |
| Cash                  flows from financing activities:                                                                                  |   |                    |        |                    |   |                          |   |   |   |   |
| Proceeds                  from the exercise of stock options                                                                            |   |                    | -           |                    |   | -                             |   |   | 65,596 |   |
| Stockholders'                  capital contribution                                                                                     |   |                    | -           |                    |   | -                             |   |   | 500,000 |   |
| Proceeds                  from issuance of common stock and warrants, net                                                               |   |                    | -           |                    |   | 28,970,915                    |   |   | 67,751,035 |   |
| Proceeds                  from issuance of preferred stock, net                                                                         |   |                    | -           |                    |   | -                             |   |   | 16,759,596 |   |
| Net                  cash provided by financing activities                                                                              |   |                    | -           |                    |   | 28,970,915                    |   |   | 85,076,227 |   |
|                                                                                                                                    |   |                    |        |                    |   |                          |   |   |   |   |
| Net                  increase (decrease) in cash and cash equivalents                                                                   |   |                    | (13,941,534 | )                       |   | 19,834,386                    |   |   | 21,087,264 |   |
|                                                                                                                                    |   |                    |        |                    |   |                          |   |   |   |   |
| Cash                  and cash equivalents, beginning of period                                                                         |   |                    | 35,028,798  |                    |   | 26,855,450                    |   |   | - |   |
|                                                                                                                                    |   |                    |        |                    |   |                          |   |   |   |   |
| Cash                  and cash equivalents, end of period                                                                               |   | $                       | 21,087,264  |                    | $      | 46,689,836                    |   | $ | 21,087,264 |   |
|                                                                                                                                    |   |                    |             |                    |   |                               |   |   |  |   |
| **Supplementary                  disclosure of cash flow information:**                                                                 |   |                    |        |                    |   |                          |   |   |   |   |
| Cash                  paid for interest                                                                                                 |   | $                       | -           |                    | $      | -                             |   | $ | - |   |
|                                                                                                                                    |   |                    |             |                    |   |                               |   |   |  |   |
| Cash                  paid for income taxes                                                                                             |   | $                       | -           |                    | $      | -                             |   | $ | - |   |
|                                                                                                                                    |   |                    |        |                    |   |                          |   |   |   |   |
| **Supplementary                    disclosure of noncash investing and** **financing                    activities:**              |   |                    |        |                    |   |                          |   |   |   |   |
|                                                                                                                                    |   |                    |             |                    |   |                               |   |   |  |   |
| Warrants                    issued to placement agents and investors, in connection with with                    private placement |   | $                       | -           |                    | $      | 5,432,793                     |   | $ | 20,208,217 |   |
|                                                                                                                                    |   |                    |        |                    |   |                          |   |   |   |   |
|                                                                                                                                    |   |                    |             |                    |   |                               |   |   |  |   |
| Preferred                  stock conversion to common stock                                                                             |   | $                       | -           |                    | $      | -                             |   | $ | 16,759,596 |   |
|                                                                                                                                    |   |                    |             |                    |   |                               |   |   |  |   |
| Warrants                  converted to common shares                                                                                    |   | $                       | -           |                    | $      | -                             |   | $ | 17,844 |   |

----

***ZIOPHARM        Oncology, Inc.***

***(A        Development Stage Enterprise)***

|                                                                                                                                                                                                                           |   | **Convertible Preferred Stock and Warrants** |       | **Stockholder's Equity (Deficit)** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------|------------|----------------------------------------------|--------|
|                                                                                                                                                                                                                           |   |                                                             |       |                                         |   | **Warrants to Purchase** |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                           |   | **Series A**                                                |       | **Series A Convertible**           |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                           |   | **Convertible Preferred Stock**                        |       | **Preferred Stock**                     |   | **Common Stock** |   |   |   |   |   | **Deficit Accumulated** |   | **Total ** |   |
|                                                                                                                                                                                                                           |   |                                                             |       |                                         |   |   |   |   |   |   |   | **Additional Paid-** |   |   |   | **During The** |   | **Stockholders' Equity/** |   |
|                                                                                                                                                                                                                           |   | **Shares**                                                       |       | **Amount**                                   |   | **Warrants** |   | **Shares ** |   | **Amount** |   | **in Capital** |   | **Warrants** |   | **Development Stage** |   | **(Deficit)** |   |
| Stockholders'                    contribution,  September 9, 2003                                                                                                                                                    |   |                                                             | -          |                                         | $      | - |   | $ | - |   |   | 250,487 |   | $ | 250 |   | $ | 499,750 |   | $ | - |   | **$** | **-** |   | $ | 500,000 |   |
| Net                  loss                                                                                                                                                                                                      |   |                                                             | -          |                                         |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | (160,136 | ) |   | (160,136 | ) |
| Balance                  at December 31, 2003                                                                                                                                                                                  |   |                                                             | -          |                                         |   | - |   |   | - |   |   | 250,487 |   |   | 250 |   |   | 499,750 |   |   | - |   |   | (160,136 | ) |   | 339,864 |   |
| Issuance                  of common stock                                                                                                                                                                                      |   |                                                             | -          |                                         |   | - |   |   | - |   |   | 2,254,389 |   |   | 2,254 |   |   | 4,497,746 |   |   | - |   |   | - |   |   | 4,500,000 |   |
| Issuance                  of common stock for services                                                                                                                                                                         |   |                                                             | -          |                                         |   | - |   |   | - |   |   | 256,749 |   |   | 257 |   |   | 438,582 |   |   | - |   |   | - |   |   | 438,839 |   |
| Fair                    value of options/warrants issued for nonemployee                    services                                                                                                                      |   |                                                             | -          |                                         |   | - |   |   | - |   |   | - |   |   | - |   |   | 13,240 |   |   | 251,037 |   |   | - |   |   | 264,277 |   |
| Net                  loss                                                                                                                                                                                                      |   |                                                             | -          |                                         |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | (5,687,297 | ) |   | (5,687,297 | ) |
|                                                                                                                                                                                                                           |   |                                                             |            |                                         |   |  |   |   |  |   |   |  |   |   |  |   |   |  |   |   |  |   |   |  |   |   |  |   |
| Balance                  at December 31, 2004                                                                                                                                                                                  |   |                                                             | -          |                                         |   | - |   |   | - |   |   | 2,761,625 |   |   | 2,761 |   |   | 5,449,318 |   |   | 251,037 |   |   | (5,847,433 | ) |   | (144,317 | ) |
|                                                                                                                                                                                                                           |   |                                                             |            |                                         |   |  |   |   |  |   |   |  |   |   |  |   |   |  |   |   |  |   |   |  |   |   |  |   |
|  Issuance                  of Series A convertible preferred stock (net of expenses of                  $1,340,263 and warrant cost of $1,682,863)                                                              |   |                                                             | 4,197,946  |                                         |   | 15,076,733 |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |
|                                                                                                                                                                                                                           |   |                                                             |            |                                         |   |  |   |   |  |   |   |  |   |   |  |   |   |  |   |   |  |   |   |  |   |   |  |   |
| Fair                    value of warrants to purchase Series A convertible preferred                    stock                                                                                                             |   |                                                             | -          |                                         |   | - |   |   | 1,682,863 |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |
| Issuance                    of Common stock to EasyWeb Shareholders                                                                                                                                                       |   |                                                             | -          |                                         |   | - |   |   | - |   |   | 189,922 |   |   | 190 |   |   | (190 | ) |   | - |   |   | - |   |   | - |   |
| Conversion                        of Series A convertible preferred stock @ $0.001 into                        $0.001 common stock on September 13, 2005 at an exchange ratio                        of .500974 |   |                                                             | (4,197,946 | )                                            |   | (15,076,733 | ) |   | (1,682,863 | ) |   | 4,197,823 |   |   | 4,198 |   |   | 15,072,535 |   |   | 1,682,863 |   |   | - |   |   | 16,759,596 |   |
| Issuance                  of common stock for options                                                                                                                                                                          |   |                                                             | -          |                                         |   | - |   |   | - |   |   | 98,622 |   |   | 99 |   |   | 4,716 |   |   |  |   |   | - |   |   | 4,815 |   |
| Fair                    value of options/warrants issued for  nonemployee                    services                                                                                                                |   |                                                             | -          |                                         |   | - |   |   | - |   |   | - |   |   | - |   |   | 54,115 |   |   | 44,640 |   |   | - |   |   | 98,755 |   |
| Net                  loss                                                                                                                                                                                                      |   |                                                             | -          |                                         |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | (9,516,923 | ) |   | (9,516,923 | ) |
|                                                                                                                                                                                                                           |   |                                                             |       |                                         |   |   |   |   |  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                  at December 31, 2005                                                                                                                                                                                  |   |                                                             | -          |                                         |   | - |   |   | - |   |   | 7,247,992 |   |   | 7,248 |   |   | 20,580,494 |   |   | 1,978,540 |   |   | (15,364,356 | ) |   | 7,201,926 |   |
|                                                                                                                                                                                                                           |   |                                                             |       |                                         |   |   |   |   |  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance                    of common stock in private placement, net of expenses                    $2,719,395                                                                                                           |   |                                                             | -          |                                         |   | - |   |   | - |   |   | 7,991,256 |   |   | 7,991 |   |   | 21,179,568 |   |   | - |   |   | - |   |   | 21,187,559 |   |
| Issuance                  of warrants                                                                                                                                                                                          |   |                                                             | -          |                                         |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 13,092,561 |   |   | - |   |   | 13,092,561 |   |
| Issuance                    of common stock for services rendered                                                                                                                                                         |   |                                                             | -          |                                         |   | - |   |   | - |   |   | 25,000 |   |   | 25 |   |   | 106,225 |   |   | - |   |   | - |   |   | 106,250 |   |
| Stock                    based compensation for employees                                                                                                                                                                 |   |                                                             | -          |                                         |   | - |   |   | - |   |   | - |   |   | - |   |   | 2,776,408 |   |   | - |   |   | - |   |   | 2,776,408 |   |
| Issuance                    of common stock due to  exercise of stock                    options                                                                                                                     |   |                                                             | -          |                                         |   | - |   |   | - |   |   | 5,845 |   |   | 6 |   |   | 25,186 |   |   | - |   |   | - |   |   | 25,192 |   |
| Issuance                    of common stock due to  exercise of stock                    warrants                                                                                                                    |   |                                                             | -          |                                         |   | - |   |   | - |   |   | 2,806 |   |   | 3 |   |   | (3 | ) |   | - |   |   | - |   |   | - |   |
| Net                  loss                                                                                                                                                                                                      |   |                                                             | -          |                                         |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | (17,856,919 | ) |   | (17,856,919 | ) |
|                                                                                                                                                                                                                           |   |                                                             |       |                                         |   |   |   |   |  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                  at December 31, 2006                                                                                                                                                                                  |   |                                                             | -          |                                         |   | - |   |   | - |   |   | 15,272,899 |   |   | 15,273 |   |   | 44,667,878 |   |   | 15,071,101 |   |   | (33,221,275 | ) |   | 26,532,977 |   |
| Issuance                    of common stock in private placement, net of expenses                    $1,909,090                                                                                                           |   |                                                             | -          |                                         |   | - |   |   | - |   |   | 5,910,049 |   |   | 5,910 |   |   | 23,532,212 |   |   | - |   |   | - |   |   | 23,538,122 |   |
| Issuance                  of warrants                                                                                                                                                                                          |   |                                                             | -          |                                         |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 5,432,793 |   |   | - |   |   | 5,432,793 |   |
| Stock-based                  compensation for employees                                                                                                                                                                        |   |                                                             | -          |                                         |   | - |   |   | - |   |   | - |   |   | - |   |   | 1,318,096 |   |   | - |   |   | - |   |   | 1,318,096 |   |
| Stock-based                  compensation for non-employee                                                                                                                                                                     |   |                                                             | -          |                                         |   | - |   |   | - |   |   | - |   |   | - |   |   | 120,492 |   |   | - |   |   | - |   |   | 120,492 |   |
| Issuance                    of common stock due to  exercise of stock                    options                                                                                                                     |   |                                                             | -          |                                         |   | - |   |   | - |   |   | 46,016 |   |   | 46 |   |   | 35,543 |   |   | - |   |   | - |   |   | 35,589 |   |
| Issuance                  of restricted stock                                                                                                                                                                                  |   |                                                             | -          |                                         |   | - |   |   | - |   |   | 70,000 |   |   | 70 |   |   | (70 | ) |   | - |   |   | - |   |   | - |   |
| Net                  loss                                                                                                                                                                                                      |   |                                                             | -          |                                         |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | (26,608,246 | ) |   | (26,608,246 | ) |
|                                                                                                                                                                                                                           |   |                                                             |       |                                         |   |   |   |   |  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                  at December 31, 2007                                                                                                                                                                                  |   |                                                             | -          |                                         |   | - |   |   | - |   |   | 21,298,964 |   |   | 21,299 |   |   | 69,674,151 |   |   | 20,503,894 |   |   | (59,829,521 | ) |   | 30,369,823 |   |
| Stock-based                  compensation for employees                                                                                                                                                                        |   |                                                             | -          |                                         |   | - |   |   | - |   |   | - |   |   | - |   |   | 970,581 |   |   | - |   |   | - |   |   | 970,581 |   |
| Issuance                  of restricted stock                                                                                                                                                                                  |   |                                                             | -          |                                         |   | - |   |   | - |   |   | 100,000 |   |   | 100 |   |   | (100 | ) |   | - |   |   | - |   |   | - |   |
| Net                  loss                                                                                                                                                                                                      |   |                                                             | -          |                                         |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | (15,123,868 | ) |   | (15,123,868 | ) |
| Balance                  at June 30, 2008                                                                                                                                                                                      |   |                                                             | -          |                                         | $      | - |   | $ | - |   |   | 21,398,964 |   | $ | 21,399 |   | $ | 70,644,632 |   | $ | 20,503,894 |   | $ | (74,953,389 | ) | $ | 16,216,536 |   |

----

**Item 1.**
**UNAUDITED      FINANCIAL STATEMENTS**

| **1.** | **BASIS                OF PRESENTATION AND                OPERATIONS** |
|--------|------------------------------------------------------------------------|

| **2.** | **RECENT                ACCOUNTING PRONOUNCEMENTS** |
|--------|-----------------------------------------------------|

*Fair      Value Measurements*

*The      Fair Value Option for Financial Assets and Liabilities, Including an amendment      of FASB Statement No. 115*

*Business      Combinations*
141(R)”).      SFAS 141(R)      expands the definition of a business combination and requires the fair value      of      the purchase price of an acquisition, including the issuance of equity      securities, to be determined on the acquisition date. SFAS141(R) also requires      that all assets, liabilities, contingent considerations, and contingencies      of an      acquired business be recorded at fair value at the acquisition date. In      addition, SFAS 141(R)      requires that acquisition costs generally be expensed as incurred, restructuring      costs generally be expensed in periods subsequent to the acquisition date,      changes in accounting for deferred tax asset valuation allowances be expensed      after the measurement period, and acquired income tax uncertainties be expensed      after the measurement period. SFAS   141(R)      is      effective for fiscal years beginning after December 15, 2008 with early      adoption prohibited. The Company expects that the adoption of this new standard      will not have a material impact on the Company’s financial position, results of      operations or cash flows.

----

| **2.** | **RECENT                ACCOUNTING                PRONOUNCEMENTS...CONTINUED** |
|--------|------------------------------------------------------------------------------------|

*Noncontrolling      Interests in Consolidated Financial Statements—an amendment of Accounting      Research Bulletin No. 51*

| **3.** | **STOCK-BASED                COMPENSATION AND STOCK OPTION                PLAN** |
|--------|----------------------------------------------------------------------------------|

** **

*Stock-based      Compensation Expense*

*Accounting      for Stock Issued to Employee*

|                                                                           |   | **Three months**                  |    | **Three months**                  |   | **Six months**                    |   | **Six months**                    |    |
|--------------------------------------------------------------------------------|--------|----------------------------------------|---------|----------------------------------------|--------|----------------------------------------|--------|----------------------------------------|---------|
|                                                                           |   | **ended June 30, 2008** |    | **ended June 30, 2007** |   | **ended June 30, 2008** |   | **ended June 30, 2007** |    |
|                                                                           |   |                                   |    |                                   |   |                                   |   |                                   |    |
| Research                and development, including costs of research contracts |   | $                                      | 204,857 |                                   | $      | 229,048                                |   | $                                      | 384,968 |   | $ | 372,258 |   |
| General                and administrative                                      |   |                                   | 298,168 |                                   |   | 183,009                                |   |                                   | 585,613 |   |   | 363,493 |   |
| Share                based compensation expense before tax                     |   |                                   | 503,025 |                                   |   | 412,057                                |   |                                   | 970,581 |   |   | 735,751 |   |
| Income                tax benefit                                              |   |                                   | -       |                                   |   | -                                      |   |                                   | -       |   |   | - |   |
| Net                compensation expense                                        |   | $                                      | 503,025 |                                   | $      | 412,057                                |   | $                                      | 970,581 |   | $ | 735,751 |   |

----

| **3.** | **STOCK-BASED                  COMPENSATION AND STOCK OPTION                  PLAN...CONTINUED** |
|--------|------------------------------------------------------------------------------------------------------|

*Stock      Option Plan*

*Stock      Options*

|                                              |   | **Number                of****Shares** |      | **Weighted-****Average****Exercise Price** |   | **Weighted-****Average****Remaining                Contractual****Term                (Years)** |   | **Aggregate****Intrinsic****Value** |   |
|---------------------------------------------------|--------|----------------------------------------|-----------|-------------------------------------------------|--------|-------------------------------------------------------------------------------------------------|--------|-------------------------------------|--------|
| Outstanding,                January 1, 2008       |   |                                   | 2,797,000 |                                            | $      | 3.81                                                                                            |   |                                |   |   |   |   |   |
| Granted                                           |   |                                   | 161,000   |                                            |   | 2.72                                                                                            |   |                                |   |   |   |   |   |
| Exercised                                         |   |                                   | —   |                                            |   | —                                                                                         |   |                                |   |   |   |   |   |
| Canceled                                          |   |                                   | 77,500    |                                            |   | 4.77                                                                                            |   |                                |   |   |   |   |   |
| Outstanding,                June 30, 2008         |   |                                   | 2,880,500 |                                            | $      | 3.73                                                                                            |   |                                | 8.08   |   | $ | 624,963 |   |
| Options                exercisable, June 30, 2008 |   |                                   | 1,544,083 |                                            | $      | 3.70                                                                                            |   |                                | 7.17   |   | $ | 624,363 |   |

----

| **3.** | **STOCK-BASED                    COMPENSATION AND STOCK OPTION                    PLAN...CONTINUED** |
|--------|----------------------------------------------------------------------------------------------------------|

*Restricted      Stock*

|                                         |   | **Restricted****Stock** |    | **Weighted-****Average ** **Grant****Date Fair Value** |   |
|----------------------------------------------|--------|-------------------------|---------|----------------------------------------------------------------------------|--------|
| Non-vested                at January 1, 2008 |   |                    | 70,000  |                                                                       | $      | 2.73 |   |
| Granted                                      |   |                    | 100,000 |                                                                       |   | 3.25 |   |
| Vested                                       |   |                    | — |                                                                       |   | — |   |
| Canceled                                     |   |                    | — |                                                                       |   | — |   |
| Non-vested                at June 30, 2008   |   |                    | 170,000 |                                                                       | $      | 3.04 |   |

----

| **4.** | **INCOME                TAXES** |
|--------|---------------------------------|

----

**Item      2.**
**MANAGEMENT’S      DISCUSSION AND ANALYSIS**

**Note      Regarding Forward-Looking Statements**

**Overview:**

|   | · | Darinaparsin                is an organic arsenic compound covered by issued patents and pending                patent applications in the U.S. and in foreign countries. A form                of                commercially available inorganic arsenic (arsenic trioxide [Trisenox                ®];                “ATO”) has been approved in the United States and the European Union for                the treatment of acute promyelocytic leukemia (“APL”), a precancerous                condition. ATO is on the compendia listing for the therapy of multiple                myeloma, and has been studied for the treatment of various other                cancers.                Nevertheless, ATO has been shown to be toxic to the heart, liver,                and                brain, which limits its use as an anti-cancer agent. Inorganic arsenic                has                also been shown to cause cancer of the skin and lung in humans. The                toxicity of arsenic is generally correlated to its accumulation in                organs                and tissues. Our preclinical and clinical studies to date have                demonstrated that darinaparsin is considerably less toxic than inorganic                arsenic, particularly with regard to cardiac toxicity. *In                vitro*                testing of darinaparsin using the National Cancer Institute’s human cancer                cell panel detected activity against lung, colon, brain, melanoma,                ovarian, and kidney cancer. Moderate activity was detected against                breast                and prostate cancer. In addition to solid tumors, *in                vitro*                testing in both the National Cancer Institute’s cancer cell panel and                *in                vivo*                testing in a leukemia animal model demonstrated substantial activity                against hematological cancers (cancers of the blood and blood-forming                tissues) such as leukemia, lymphoma, myelodysplastic syndromes, and                multiple myeloma. Preclinical studies have also established                anti-angiogenic properties of darinaparsin, provided support for                the                development of an oral form of the drug, and established synergy                of                darinaparsin in combination with other approved anti-cancer                agents. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Overview...Continued**

|   |   | Phase                I testing of the intravenous form of darinaparsin in solid tumors                and                hematological cancers has been completed. The Company has reported                clinical activity and, importantly, a safety profile from these studies                as                predicted by preclinical results. The Company is nearing completion                of                Phase II studies in advanced myeloma, in certain other hematological                cancers, and primary liver cancer. In addition, the Company has recently                initiated two Phase I studies with an oral form of darinaparsin.                Preliminary favorable results from the trial with IV-administered                darinaparsin in hematologic cancers have been reported. Initial study                results indicate efficacy and a favorable safety profile in various                types                of blood cancers. This ongoing Phase II trial, as well as one of                the two                trials with orally administered drug, will now be focused on non-Hodgkin's                lymphoma. The Company is actively seeking a partner or partners to                progress the program.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | · | Several                proprietary forms of palifosfamide, or isophosphoramide mustard (“IPM”),                the active metabolite of ifosfamide that is also chemically related                to the                active metabolite of cyclophosphamide, have been developed. Patent                applications for pharmaceutical composition and method of use have                been                filed in the U.S. and internationally. Like cyclophosphamide and                ifosfamide, palifosfamide is an alkylating agent. The Company believes                that cyclophosphamide is the most widely used alkylating agent in                cancer                therapy, with significant use in the treatment of breast cancer and                non-Hodgkin’s lymphoma. Ifosfamide has been shown to be effective at high                doses in the treatment of sarcoma and lymphoma, either by itself                or in                combination with other anticancer agents. Unlike cyclophosphamide,                ifosfamide is approved by the U.S. Food and Drug Administration                ("FDA") only as a treatment for testicular cancer. Although                ifosfamide-based treatment generally represents the standard of care                for                sarcoma, it is not licensed for this indication by the FDA. Preclinical                studies have shown that palifosfamide has activity against leukemia                and                solid tumors. These studies also indicate that palifosfamide may                have a                better safety profile than ifosfamide or cyclophosphamide because                it does                not appear to produce known toxic metabolites, such as acrolein and                chloroacetaldehyde. Acrolein, which is toxic to the kidneys and bladder,                can mandate the administration of a protective agent called mesna,                which                is inconvenient and expensive. Chloroacetaldehyde is toxic to the                central                nervous system, causing “fuzzy brain” syndrome for which there is                currently no protective measure. Similar toxicity concerns pertain                to                high-dose cyclophosphamide, which is widely used in bone marrow and                blood                cell transplantation. Palifosfamide has evidenced activity against                ifosfamide- and/or cyclophosphamide-resistant cancer cell lines.                Also in                preclinical cancer models, encouraging results have been obtained                with                palifosfamide in combination with doxorubicin, an agent approved                to                treat sarcoma. |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |   | Phase                II testing of the intravenous form of palifosfamide as a single agent                to                treat advanced sarcoma has been completed. In both Phase I and Phase                II                testing, palifosfamide has been administered without the “uroprotectant”                mesna, and the toxicities associated with acrolein and chloroacetaldehyde                have not been observed. Kidney toxicity, however, in the form of                Fanconi’s                Syndrome has been identified as the dose limiting toxicity. The Company                has reported clinical activity in the single agent Phase II study.                Following review of the preclinical combination studies, clinical                data,                and discussion with sarcoma experts, the Company has initiated a                Phase I                study of palifosfamide in combination with doxorubicin in patients                with                soft tissue sarcoma. The Company is now preparing a Phase II                randomized study designed to compare doxorubicin plus palifosfamide                to                doxorubicin alone in patients with front and second-line soft                tissue sarcoma to be initiated in the third quarter of 2008. The                Company is developing an oral form of palifosfamide to be studied                clinically following completion of additional preclinical studies                and with                further data from the IV trials.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

----

**Overview...Continued**

|   | · | Indibulin                is a novel, orally available small molecular-weight inhibitor of                tubulin polymerization that was acquired from Baxter Healthcare.                The                microtubule component, tubulin, is one of the more well-established                drug                targets in cancer. Microtubule inhibitors interfere with the dynamics                of                tubulin polymerization, resulting in inhibition of chromosome segregation                during mitosis and consequently inhibition of cell division. A number                of                marketed IV anticancer drugs target tubulin, such as the taxane family                members, paclitaxel (Taxol ®,                Abraxane®),                docetaxel (Taxotere ®)                ,                and the *Vinca*                alkaloid family members, vincristine and vinorelbine. This class                of agents                is typically the mainstay of therapy in a wide variety of indications.                In                spite of their effectiveness, the use of these drugs is associated                with                significant toxicities, notably peripheral neurotoxicity. Preclinical                studies with indibulin demonstrate significant and broad antitumor                activity, including activity against taxane-refractory cell lines.                The                cytotoxic activity of indibulin was demonstrated in several rodent                and                human tumor cell lines derived from prostate, brain, breast, pancreas,                lung, ovary, and cervical tumor tissues and in rodent tumor and human                tumor xenograft models. In addition, indibulin was effective against                multidrug resistant tumor cell lines (breast, lung, and leukemia)                both *in                vitro*                and *in                vivo*.                Indibulin is potentially safer than other tubulin inhibitors. No                neurotoxicity has been observed at therapeutic doses in rodents and                in the                ongoing Phase I trials. Indibulin has also demonstrated synergy with                approved anti-cancer agents in preclinical studies. The availability                of an                oral formulation of indibulin creates significant commercial opportunity                because no oral formulations of paclitaxel or related compounds are                currently on the market in the United States. There                are three ongoing Phase I studies, which are nearing completion,                in                patients with advanced solid tumors. The Company has reported signs                of                clinical activity at well-tolerated doses using a continuous dosing                scheme                without the development of clinically relevant peripheral neuropathy.                Following encouraging results obtained with indibulin in combination                with                erlotinib, and 5-FU in preclinical models, two Phase I/II                combination studies have been initiated. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Plan      of Operation**

|  | · | Clinical                  trial expenses, including the costs incurred with respect to the                  conduct                  of clinical trials for darinaparsin, palifosfamide and                  indibulin; |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | Fees                and milestone payments required under the license agreements relating                to                our existing product candidates; |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | Costs                related to the scale-up of palifosfamide and the manufacture of all                three                product candidates; |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | Rent                for our facilities; and |
|--|--------|---------------------------------------------|

|  | · | General                corporate and working capital, including general and administrative                expenses. |
|--|--------|---------------------------------------------------------------------------------------------------------------------|

***Product      Candidate Development and Clinical Trials***

*Intravenous      darinaparsin*

*Intravenous      palifosfamide*

*Indibulin*

----

**Results      of Operations for the three and six months ended June 30, 2008 versus June      30,      2007**

*Revenues.*

*Research      and development expenses.*

*General      and administrative expenses.*

*Other      income (expense)*

*Net      income (loss).*

**Liquidity      and Capital Resources**

|   | · | Changes                in the focus and direction of our research and development programs,                including the acquisition and pursuit of development of new product                candidates; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Competitive                and technical advances; |
|--------|--------|----------------------------------------------------|

|   | · | Costs                of commercializing any of the product candidates;                and |
|--------|--------|-------------------------------------------------------------------------------------------|

|   | · | Costs                of filing, prosecuting, defending and enforcing any patent claims                and any                other intellectual property  rights, or other                developments. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                              |   | **Payments due by Period** |      |
|---------------------------------------------|--------|-------------------------------------------|-----------|
|                              |   | **Total**                                 |      | **2009** |   | **2010** |   | **2011** |   | **2012** |   | **2013 and ****thereafter**   |   |
| Operating                leases   |   | $                                         | 1,347,464 |   | $ | 508,018 |   | $ | 431,633 |   | $ | 184,500 |   | $ | 191,250 |   |   | 32,063 |   |

**Critical      Accounting Policies and Significant Estimates**

**Research      and Development**

**Stock-based      compensation**

*Accounting      for Stock Issued to Employees*

**Off-Balance      Sheet Arrangements**

----

**Item        3. **
**QUANTITATIVE        AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK**

**Item        4.**
**CONTROLS        AND PROCEDURES**
** **

**PART        II - OTHER INFORMATION**

**tem        1. Legal Proceedings**

**Item        2. Unregistered Sales of Equity Securities and Use of        Proceeds**

No        response required.

**Item        3. Defaults Upon Senior Securities.**

----

**Item        4. Submission of Matters to a Vote of Security Holders**

*Proposal          1*

|                                               | **Affirmative                    Votes** | **Authority                    Withheld** | **Abstained** |
|----------------------------------------------------|------------------------------------------|-------------------------------------------|---------------|
| Jonathan                    Lewis, M.D., Ph.D.     | 11,663,482                               | 838,557                                   | 0             |
| Richard                    E. Bagley               | 11,662,382                               | 839,657                                   | 0             |
| Murray                    Brennan, M.D.            | 12,457,603                               | 44,436                                    | 0             |
| James                    Cannon                    | 12,457,603                               | 44,436                                    | 0             |
| Senator                    Wyche Fowler, Jr., J.D. | 12,457,103                               | 44,936                                    | 0             |
| Gary                    S. Fragin                  | 12,458,203                               | 43,836                                    | 0             |
| Timothy                    McInerney               | 12,460,596                               | 41,443                                    | 0             |
| Michael                    Weiser, M.D., Ph.D.     | 12,437,385                               | 64,654                                    | 0             |

*Proposal          2*

| **Affirmative                    Votes** | **Votes                    Against** | **Abstentions** |
|------------------------------------------|--------------------------------------|-----------------|
| 12,462,217                               | 17,313                               | 22,509          |

**Item          5. Other Information**

----

**Item        6. EXHIBITS**

| **Exhibit                  No.** |   | **Description**                                                                                                                                                                                                                                 |
|----------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.1                  (*)        |   | Employment                  Agreement dated as of June 25, 2008 between ZIOPHARM Oncology,                  Inc. and                  Richard E. Bagley.                                                                                        |
|                             |   |                                                                                                                                                                                                                                            |
| 31.1                             |   | Certification                  of Chief Executive Officer pursuant to Securities Exchange Act                  Rule                  13a-15(e)/15d-15(e) as adopted pursuant to Section 302 of the                  Sarbanes-Oxley Act of 2002. |
|                             |   |                                                                                                                                                                                                                                            |
| 31.2                             |   | Certification                  of Chief Financial Officer pursuant to Securities Exchange Act                  Rule                  13a-15(e)/15d-15(e) as adopted pursuant to Section 302 of the                  Sarbanes-Oxley Act of 2002. |
|                             |   |                                                                                                                                                                                                                                            |
| 32.1                             |   | Certification                  of Chief Executive Officer pursuant to 18 U.S.C. Section 1350,                  as adopted                  pursuant to Section 906 of the Sarbanes-Oxley Act of                  2002.                          |
|                             |   |                                                                                                                                                                                                                                            |
| 32.2                             |   | Certification                  of Chief Financial Officer pursuant to 18 U.S.C. Section 1350,                  as adopted                  pursuant to Section 906 of the Sarbanes-Oxley Act of                  2002.                          |

----

| (*) |   | Compensatory                  plan or arrangement. |
|-----|--------|----------------------------------------------------|

----

**SIGNATURES**

|                                      | **ZIOPHARM                  ONCOLOGY, INC.** |
|-------------------------------------------|----------------------------------------------|
|                                      |                                         |   |
| Date: July                  30, 2008 | By:                                | /s/ Jonathan                  Lewis |
|                                      |                                         | Jonathan                  Lewis, M.D., Ph.D.Chief                  Executive Officer(Principal                  Executive Officer) |

| Date:                  July 30, 2008 | By:   | /s/ Richard                  Bagley                                                                                                              |
|--------------------------------------|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                 |            | Richard                  BagleyChief                  Financial Officer(Principal                  Financial and Accounting                  Officer) |

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**EXHIBIT        INDEX**

| **Exhibit                  No.** |   | **Description**                                                                                                                                                                                                                                 |
|----------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.1                  (*)        |   | Employment                    Agreement dated as of June 25, 2008 between ZIOPHARM Oncology,                    Inc. and                    Richard E. Bagley.                                                              |
|                             |   |                                                                                                                                                                                                                                            |
| 31.1                             |   | Certification                  of Chief Executive Officer pursuant to Securities Exchange Act                  Rule                  13a-15(e)/15d-15(e) as adopted pursuant to Section 302 of the                  Sarbanes-Oxley Act of 2002. |
|                             |   |                                                                                                                                                                                                                                            |
| 31.2                             |   | Certification                  of Chief Financial Officer pursuant to Securities Exchange Act                  Rule                  13a-15(e)/15d-15(e) as adopted pursuant to Section 302 of the                  Sarbanes-Oxley Act of 2002. |
|                             |   |                                                                                                                                                                                                                                            |
| 32.1                             |   | Certification                  of Chief Executive Officer pursuant to 18 U.S.C. Section 1350,                  as adopted                  pursuant to Section 906 of the Sarbanes-Oxley Act of                  2002.                          |
|                             |   |                                                                                                                                                                                                                                            |
| 32.2                             |   | Certification                  of Chief Financial Officer pursuant to 18 U.S.C. Section 1350,                  as adopted                  pursuant to Section 906 of the Sarbanes-Oxley Act of                  2002.                          |

----

| (*) |   | Compensatory                  plan or arrangement. |
|-----|--------|----------------------------------------------------|

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