**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      DC 20549**





**FORM
      10-QSB**





x
      QUARTERLY REPORT UNDER
      SECTION 13 OR 15(d)


OF
      THE
      SECURITIES EXCHANGE ACT OF 1934


For
      the
      quarterly period ended September 30, 2006





OR





o
      TRANSITION REPORT UNDER
      SECTION 13 OR 15(d)


OF
      THE
      SECURITIES EXCHANGE ACT OF 1934


For
      the
      transition period from _______ to _______





Commission
      File Number 0-16686





**VIOQUEST
      PHARMACEUTICALS, INC.**





(Exact
      name of small business issuer as specified in its charter)





Delaware
            58-1486040(State
                or other jurisdiction of incorporation or organization)
            (I.R.S.
                Employer Identification No.)





180
      Mount
      Airy Road, Suite 203, Basking Ridge, New Jersey 07920


(Address
      of Principal Executive Offices)





(908)
      766-4400


(Issuer’s
      telephone number, Including area code)





(Former
      name, former address and former fiscal year, if changed from last
      report)





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





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




As
      of
      November 13, 2006 there were 54,621,119 shares of the issuer’s common stock,
      $0.001 par value, outstanding.





Traditional
      Small Business Disclosure Format (check one): Yes o Nox





**Index**





Page**PART
                I**
            **FINANCIAL
                INFORMATION**Item
                1.
            Unaudited
                Condensed Consolidated Financial Statements
            1Item
                2.
            Management’s
                Discussion and Analysisor
                Plan of Operations
            11Item
                3.
            Controls
                and Procedures
            16**PART
                II**
            **OTHER
                INFORMATION**Item
              5.
            Other
              Events
            17Item
                6.
            Exhibits
            17Signatures
            18Index
                To Exhibits Filed With This Report
            19




**Forward-Looking
      Statements**





This
      Quarterly Report on Form 10-QSB contains statements that are not historical,
      but
      are forward-looking in nature, including statements regarding the expectations,
      beliefs, intentions or strategies regarding the future. In particular, the
      “Management’s Discussion and Analysis or Plan of Operations” section in Part I,
      Item 2 of this quarterly report includes forward-looking statements that reflect
      our current views with respect to future events and financial performance.
      We
      use words such as we “expect,” “plan,” “anticipate,” “believe,” “intend” and
      similar expressions to identify forward-looking statements. A number of
      important factors could, individually or in the aggregate, cause actual results
      to differ materially from those expressed or implied in any forward-looking
      statements. Such factors include, but are not limited to, the
      following:





·
            the
                possibility that the results of clinical trials will not be successful;


·
            the
                possibility that our development efforts relating to our product
                candidates, including VQD-001 and VQD-002, will not be successful;


·
            the
                inability to obtain regulatory approval of our product
                candidates;


·
            our
                reliance on third-parties to develop our product
                candidates;


·
            our
                lack of experience in developing and commercializing pharmaceutical
                products;


·
            the
                possibility that our licenses to develop and commercialize our product
                candidates may be terminated;


·
            our
                ability to seek strategic alternatives for our subsidiary Chiral
                Quest,
                which may include a sale;


·
            our
                ability to obtain additional financing;


·
            our
                ability to protect our proprietary technology.





Other
      risks are described under the section entitled “Risk Factors” following Item 1
      in Part I of our Annual Report on Form 10-KSB for the year ended December 31,
      2005.







**PART
      I - FINANCIAL INFORMATION**





**Item
      1. Unaudited Condensed Consolidated Financial Statements.**





**VIOQUEST
      PHARMACEUTICALS, INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


**AS
      OF SEPTEMBER 30, 2006 (UNAUDITED) AND DECEMBER 31,
      2005**




**ASSETS**
            
            
            **September
                30, 2006**
              **(Unaudited)**
            
            
            **December
                31, 2005**
              **(Note
                1A)****CURRENT
                ASSETS**Cash
                and cash equivalents
            
            $
            823,129
            
            $
            6,021,399Prepaid
                clinical research organization costs
            
            
            180,238
            
            
            -Other
                current assets
            
            
            89,054
            
            
            9,945Current
                assets associated with discontinued operations (See Note
                2)
            
            
            1,269,445
            
            
            892,092Total
                Current Assets
            
            
            2,361,866
            
            
            6,923,436**NON-CURRENT
                ASSETS ASSOCIATED WITH DISCONTINUED OPERATIONS (See Note
                2)**
            
            
            1,336,484
            
            
            1,424,883**PROPERTY
                AND EQUIPMENT, NET**
            
            
            31,191
            
            
            21,276**SECURITY
                DEPOSITS**
            
            
            9,708
            
            
            9,708**TOTAL
                ASSETS**
            
            $
            3,739,249
            
            $
            8,379,303**LIABILITIES
                AND STOCKHOLDERS' EQUITY****CURRENT
                LIABILITIES**Accounts
                payable
            
            $
            612,044
            
            $
            275,077Accrued
                compensation
            
            
            213,609
            
            
            346,833Accrued
                expenses
            
            
            267,405
            
            
            48,167Note
                payable - Paramount BioCapital (See Note 4)
            
            
            264,623
            
            
            264,623****Current
                liabilities associated with discontinued operations (See Note
                2)
            
            
            769,669
            
            
            1,105,594**TOTAL
                LIABILITIES**
            
            
            2,127,350
            
            
            2,040,294**COMMITMENTS
                AND CONTINGENCIES****STOCKHOLDERS'
                EQUITY**Preferred
                stock; $0.001 par value: 10,000,000 shares authorized, 0 shares issued
                and
                outstanding at September 30, 2006 and December 31, 2005
            
            
            -
            
            
            -Common
                stock; $0.001 par value: 100,000,000 shares authorized at September
                30,
                2006 and December 31, 2005, 46,729,519 shares issued and outstanding
                at
                September 30, 2006 and December 31, 2005
            
            
            46,729
            
            
            46,729Additional
                paid-in capital
            
            
            27,399,677
            
            
            26,561,672Accumulated
                deficit
            
            
            (25,834,507
            )
            
            (20,269,392
            )Total
                Stockholders' Equity
            
            
            1,611,899
            
            
            6,339,009**TOTAL
                LIABILITIES AND STOCKHOLDERS' EQUITY**
            
            $
            3,739,249
            
            $
            8,379,303




See
      accompanying notes to condensed consolidated financial statements.


1


**VIOQUEST
      PHARMACEUTICALS, INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**


**FOR
      THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005**


**(UNAUDITED)**





**For
                the Three Months Ended September 30, 2006**
            
            **For
                the Three Months Ended September 30, 2005**
            
            **For
                the Nine Months Ended September 30, 2006**
            
            **For
                the Nine**
              **Months
                Ended September 30, 2005****REVENUE**
            
            
            -
            
            
            -
            
            
            -
            
            
            -**COST
                OF GOODS SOLD**
            
            
            -
            
            
            -
            
            
            -
            
            
            -**GROSS
                PROFIT**
            
            
            -
            
            
            -
            
            
            -
            
            
            -**OPERATING
                EXPENSES**Management
                and consulting fees
            
            $
            167,379
            
            $
            212,159
            
            $
            171,707
            
            $
            243,184Research
                and development
            
            
            273,876
            
            
            -
            
            
            933,599
            
            
            -Selling,
                general and administrative
            
            
            504,848
            
            
            564,225
            
            
            2,172,519
            
            
            1,459,607Depreciation
                and amortization
            
            
            1,268
            
            
            525
            
            
            3,804
            
            
            2,149Total
                Operating Expenses
            
            
            947,371
            
            
            776,909
            
            
            3,281,629
            
            
            1,704,940**LOSS
                FROM CONTINUING OPERATIONS**
            
            
            (947,371
            )
            
            (776,909
            )
            
            (3,281,629
            )
            
            (1,704,940
            )**INTEREST
                INCOME, NET**
            
            
            36,246
            
            
            2,463
            
            
            85,361
            
            
            14,203**LOSS
                FROM CONTINUING OPERATIONS**
            
            
            (911,125
            )
            
            (774,446
            )
            
            (3,196,268
            )
            
            (1,690,737
            )**LOSS
                FROM DISCONTINUED OPERATIONS**
            
            
            (973,892
            )
            
            (843,215
            )
            
            (2,368,847
            )
            
            (2,372,397
            )**NET
                LOSS**
            
            $
            (1,885,017
            )
            $
            (1,617,661
            )
            $
            (5,565,115
            )
            $
            (4,063,134
            )**NET
                LOSS PER COMMON SHARE:****CONTINUING
                OPERATIONS**
            
            $
            (0.02
            )
            $
            (0.04
            )
            $
            (0.08
            )
            $
            (0.10
            )**DISCONTINUED
                OPERATIONS**
            
            
            (0.03
            )
            
            (0.05
            )
            
            (0.07
            )
            
            (0.13
            )**BASIC
                LOSS PER SHARE**
            
            $
            (0.05
            )
            $
            (0.09
            )
            $
            (0.15
            )
            $
            (0.23
            )**WEIGHTED
                AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED**
            
            
            38,165,124
            
            
            17,852,100
            
            
            38,165,124
            
            
            17,852,100





See
      accompanying notes to condensed consolidated financial statements.


2


**VIOQUEST
      PHARMACEUTICALS, INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY**


**FOR
      THE NINE MONTHS ENDED SEPTEMBER 30, 2006**


**(UNAUDITED)**




**Common
                Stock****Shares**
            
            
            **Amount**
            
            
            **Additional**
              **Paid-In**
              **Capital**
            
            
            **Accumulated**
              **Deficit**
            
            
            **Total**
              **Stockholders’**
              **Equity**Balance,
                January 1, 2006
            
            
            46,729,519
            
            $
            46,729
            
            $
            26,561,672
            
            $
            (20,269,392
            )
            $
            6,339,009Employee
                and directorstock-based compensation
            
            
            -
            
            
            -
            
            
            749,680
            
            
            -
            
            
            749,680Stock-based
                compensation to consultants
            
            
            -
            
            
            -
            
            
            88,325
            
            
            -
            
            
            88,325Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            (5,565,115
            )
            
            (5,565,115
            )Balance,
                September 30, 2006
            
            
            46,729,519
            
            $
            46,729
            
            $
            27,399,677
            
            $
            (25,834,507
            )
            $
            1,611,899




See
      accompanying notes to condensed consolidated financial statements.


3


**VIOQUEST
      PHARMACEUTICALS, INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**FOR
      THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005**


**(UNAUDITED)**




**For
                the Nine**
              **Months
                Ended**
              **September
                30, 2006**
            
            
            **For
                the Nine**
              **Months
                Ended**
              **September
                30, 2005****CASH
                FLOWS FROM OPERATING ACTIVITIES:**Net
                loss
            
            $
            (5,565,115
            )
            $
            (4,063,134
            )Loss
                from discontinued operations
            
            
            2,368,847
            
            
            2,372,397Loss
                from continuing operations
            
            
            (3,196,268
            )
            
            (1,690,737
            )Adjustments
                to reconcile net loss from continuing operations to net cash used
                in
                continuing operating activities:Depreciation
                and amortization
            
            
            3,804
            
            
            2,149Impact
                of employee and director stock-based compensation
            
            
            589,673
            
            
            -Impact
                of consultant stock-based compensation
            
            
            33,119
            
            
            190,000Changes
                in operating assets and liabilities:Prepaid
                clinical research organization costs
            
            
            (180,238
            )
            
            -Other
                assets
            
            
            (79,109
            )
            
            (80,041
            )Accounts
                payable
            
            
            336,967
            
            
            437,749Accrued
                compensation
            
            
            (133,224
            )
            
            139,000Accrued
                expenses
            
            
            219,238
            
            
            -Net
                Cash Used in Continuing Operating Activities
            
            
            (2,406,038
            )
            
            (1,001,880
            )Net
                Cash Used in Discontinued Operating Activities
            
            
            (2,633,511
            )
            
            (1,247,322
            )****Net
                Cash Used in Operating Activities
            
            
            (5,039,549
            )
            
            (2,249,202
            )**CASH
                FLOWS FROM INVESTING ACTIVITIES:**Payments
                for purchased equipment
            
            
            (14,987
            )
            
            (18,529
            )Net
                Cash Used in Continuing Investing Activities
            
            
            (14,987
            )
            
            (18,529
            )Net
                Cash Used in Discontinued Investing Activities
            
            
            (143,734
            )
            
            (536,034
            )Net
                Cash Used in Investing Activities
            
            
            (158,721
            )
            
            (554,563
            )**NET
                DECREASE IN CASH AND CASH EQUIVALENTS**
            
            
            (5,198,270
            )
            
            (2,803,765
            )**CASH
                AND CASH EQUIVALENTS - BEGINNING OF PERIOD**
            
            
            6,021,399
            
            
            3,065,547**CASH
                AND CASH EQUIVALENTS - END OF PERIOD**
            
            $
            823,129
            
            $
            261,782




See
      accompanying notes to condensed consolidated financial statements.


4


**VIOQUEST
      PHARMACEUTICALS, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2006 (UNAUDITED)**




**NOTE
      1**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES AND LIQUIDITY**





***(A)
      Basis of Presentation***





The
      accompanying unaudited condensed consolidated financial statements have been
      prepared in accordance with accounting principles generally accepted in the
      United States of America for interim financial information and the rules and
      regulations of the Securities and Exchange Commission. Accordingly, the
      financial statements do not include all information and footnotes required
      by
      accounting principles generally accepted in the United States of America for
      complete annual financial statements. In the opinion of management, the
      accompanying unaudited condensed consolidated financial statements reflect
      all
      adjustments, consisting of only normal recurring adjustments, considered
      necessary for a fair presentation. Interim operating results are not necessarily
      indicative of results that may be expected for the year ending December 31,
      2006
      or for any subsequent period. These unaudited condensed consolidated financial
      statements should be read in conjunction with the audited consolidated financial
      statements included in the Annual Report on Form 10-KSB of VioQuest
      Pharmaceuticals, Inc. for the year ended December 31, 2005. The accompanying
      condensed consolidated balance sheet as of December 31, 2005 has been derived
      from the audited balance sheet as of that date included in the Form 10-KSB.
      As
      used herein, the terms the “Company” or “VioQuest” refer to VioQuest
      Pharmaceuticals, Inc.





The
      accompanying consolidated financial statements include the accounts of VioQuest
      Pharmaceuticals, Inc. and its subsidiaries. All significant intercompany
      accounts and transactions have been eliminated in consolidation. The functional
      currency of Chiral Quest, Ltd., Jiashan, China, a wholly-owned, discontinued
      subsidiary of the Company, is the United States Dollar. As such, all transaction
      gains and losses are recorded in discontinued operations.





On
      September 29, 2006, the Company’s Board of Directors determined to seek
      strategic alternatives with respect to the Company’s Chiral Quest, Inc.
      subsidiary (“Chiral Quest”), which may include a sale or other disposition of
      the operating assets of that business. Accordingly, the chiral products and
      services business and the assets of Chiral Quest are presented in these
      financial statements as discontinued operations. Chiral Quest had accounted
      for
      all sales of the Company from its inception. The Company’s continuing
      operations, which have not generated any revenues, will focus on the remaining
      drug development operations of VioQuest Pharmaceuticals, Inc. and accordingly,
      the Company will have only one segment. No provision has been made to reduce
      the
      carrying amounts of the assets of the discontinued operations as they
      approximate their estimated net realizable values. See Note 2.





The
      balance sheet as of December 31, 2005 and the statements of operations for
      the
      three and nine months ended September 30, 2005 include reclassifications to
      reflect discontinued operations. As a result of these reclassifications, the
      Company no longer provides segment reporting.





***(B)
      Nature of Operations***




Since
      August 2004, the Company focused on acquiring technologies for purposes
      of development and commercialization of pharmaceutical drug candidates for
      the
      treatment of oncology and antiviral diseases and disorders for which there
      are
      unmet medical needs. In accordance with this business plan, in October 2005,
      the
      Company acquired in a merger transaction Greenwich Therapeutics, Inc., a
      privately-held New York-based biotechnology company that held exclusive rights
      to develop and commercialize two oncology drug candidates - Sodium
      Stibogluconate or VQD-001, and Triciribine-Phosphate or VQD-002. The rights
      to
      these two oncology drug candidates, VQD-001 and VQD-002, are governed by license
      agreements with The Cleveland Clinic Foundation and the University of South
      Florida Research Foundation, respectively. As a result of the Company’s
      acquisition of Greenwich Therapeutics, the Company holds exclusive rights to
      develop, manufacture, use, commercialize, lease, sell and/or sublicense VQD-001
      and VQD-002.




***(C)
      Liquidity***





Since
      inception, the Company has incurred an accumulated deficit of $25,834,507,
      through September 30, 2006. For the three and nine months ended September 30,
      2006, the Company had losses from continuing operations of $911,125 and
      $3,196,628 respectively, and used $2,406,038 of cash in continuing operating
      activities for the nine months ended September 30, 2006.





Management
      expects the Company’s losses to increase over the next several years, due to the
      expansion of its drug development business, and related costs associated with
      the clinical development programs of VQD-001 and VQD-002. These matters raise
      substantial doubt about the ability of the Company to continue as a going
      concern.





5




**VIOQUEST
        PHARMACEUTICALS, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006 (UNAUDITED)**




The
      accompanying condensed consolidated financial statements have been prepared
      assuming that the Company will continue as a going concern. As of September
      30,
      2006, the Company had working capital of $234,516 and cash and cash equivalents
      of $823,129. The Company has incurred negative cash flow from operations since
      the business was started. The Company has spent, and expects to continue to
      spend, substantial amounts in connection with executing its business strategy,
      including planned development efforts relating to the Company’s drug candidates,
      clinical trials, and research and development efforts.





On
      October 18, 2006, the Company sold 7,891,600 shares of its common stock at
      a
      price of $0.50 per share resulting in gross proceeds of approximately $3.95
      million through a private placement. In addition to the shares of common stock,
      the investors also received 5-year warrants to purchase an aggregate of
      2,762,060 shares at an exercise price of $0.73 per share. See Note 5.





Management
      anticipates that the Company’s capital resources will be adequate to fund its
      operations through the first quarter of 2007. Additional financing will be
      required during 2007 in order to fund operations. On September 29, 2006, the
      Company determined to seek strategic alternatives for its Chiral Quest business
      operations, including the possible sale of that business, which may potentially
      provide the Company with additional net cash proceeds. The other most likely
      sources of additional financing include the private sale of the Company’s equity
      or debt securities, or bridge loans to the Company from third party lenders.
      However, changes may occur that would consume available capital resources before
      that time. The Company’s working capital requirements will depend upon numerous
      factors, which include, the progress of its drug development and clinical
      programs, including associated costs relating to milestone payments, maintenance
      and license fees, manufacturing costs, patent costs, regulatory approvals,
      and
      the hiring of additional employees.





Additional
      capital that may be needed by the Company in the future may not be available
      on
      reasonable terms, or at all. If adequate financing is not available, the Company
      may be required to terminate or significantly curtail its operations, or enter
      into arrangements with collaborative partners or others that may require the
      Company to relinquish rights to certain of its technologies, or potential
      markets that the Company would not otherwise relinquish.





***(D)
      Stock-Based Compensation***





In
      December 2004, the Financial Accounting Standards Board issued the Statement
      of
      Financial Accounting Standards No. 123(R) (“FAS 123R”), “Share-Based Payment”,
      revising the Statement of Financial Accounting Standards No. 123 (“FAS 123”)
      requiring that the fair value of all share-based payments to employees be
      recognized in the financial statements over the service period. The Company
      adopted FAS 123R effective January 1, 2006, using the modified-prospective
      transition method. Under this method, the Company is required to recognize
      compensation expense for the fair value of all awards granted to employees
      after
      the date of adoption and for the unvested portion of previously granted options
      that remain outstanding as of the adoption date.





The
      Company accounts for stock options granted to non-employees on a fair value
      basis using the Black-Scholes option pricing method in accordance with FAS
      123R
      and Emerging Issues Task Force No. 96-18, “Accounting for Equity Instruments
      That are Issued to Other Than Employees for Acquiring, or in Conjunction with
      Selling, Goods or Services.” The initial non-cash charge to operations for
      non-employee options with vesting is subsequently adjusted at the end of each
      reporting period based upon the change in the fair value of the Company’s common
      stock until such options vest.





The
      Company has a stock incentive plan (the “Plan”) under which incentive stock
      options may be granted. In January 2006, the Board approved an amendment to
      the
      Plan, increasing the number of common shares available for grant to
      6,500,000 stock options for the purchase of its $0.001 par value of common
      stock. Grants
      under the Plan may be made to employees (including officers), directors,
      consultants, advisors, or other independent contractors who provide services
      to
      the Company or its subsidiaries.





The
      Company issued options
      to purchase an aggregate of 30,000 and
      1,212,000 shares
      of its common
      stock, $0.001
      par value per
      share, during
      the three and nine months ended September 30, 2006, respectively.





With
      the
      exception of the immediate vesting of 75,000 stock options granted to a
      non-employee director in the first quarter of 2006, 50,000
      performance -based
      stock options granted to a consultant and 40,000 stock options granted to
      Scientific Advisory Board members during the nine months ended September 30,
      2006, options granted to employees and non-employee directors during the three
      and nine months ended September 30, 2006 vest as to 33% of the shares on the
      first, second and third anniversary of the vesting commencement
      date.





6




**VIOQUEST
        PHARMACEUTICALS, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006 (UNAUDITED)**




Following
      the vesting periods, options are exercisable until the earlier of 90 days after
      the employee’s termination with the Company or the ten-year anniversary of the
      initial grant, subject to adjustment under certain conditions.





The
      Company recorded total compensation charges in the three and nine months ended
      September 30, 2006 for employee and director stock options of $235,629 and
      $749,680, respectively.





Prior
      to
      adopting FAS 123R, the Company applied the intrinsic value-based method of
      accounting prescribed in APB Opinion No. 25, “Accounting for Stock Issued to
      Employees,” (“APB 25”) and, accordingly, did not recognize compensation expense
      for stock option grants to employees and directors made at an exercise price
      equal to or in excess of the fair market value of the stock at the date of
      grant.





The
      following table details the pro forma effect on the Company’s net loss and basic
      and diluted net loss per share had compensation expense for stock-based awards
      been recorded in the three and nine months ended September 30, 2005 based on
      the
      fair value method under FAS 123 instead of the intrinsic value method under
      APB
      25:





Three
                Months Ended
              September
                30, 2005
            
            Nine
                Months Ended
              September
                30, 2005Net
                loss from continuing operations
            
            $
            (774,446
            )
            $
            (1,690,737
            )Deduct:
                Stock-based employee compensationexpense
                determined under fair value basedmethod
                for all awards, net of taxes
            
            
            (68,466
            )
            
            (198,769
            )Pro
                forma, net loss from continuing operations
            
            $
            (842,912
            )
            $
            (1,889,506
            )Net
                loss from discontinued operations
            
            
            (843,215
            )
            
            (2,372,397
            )Deduct:
                Stock-based employee compensationexpense
                determined under fair value basedmethod
                for all awards, net of taxes
            
            
            (74,215
            )
            
            (187,035
            )Pro
                forma, net loss from discontinued operations
            
            
            (917,430
            )
            
            (2,559,432
            )Pro
                forma, net loss
            
            $
            (1,760,342
            )
            $
            (4,448,938
            )Basic
                and diluted net loss per share from continuing operations, as
                reported
            
            $
            (0.04
            )
            $
            (0.10
            )Basic
                and diluted net loss per share from continuing operations, pro
                forma
            
            $
            (0.05
            )
            $
            (0.11
            )Basic
                and diluted net loss per share from discontinued operations, as
                reported
            
            $
            (0.05
            )
            $
            (0.13
            )Basic
                and diluted net loss per share from discontinued operations, pro
                forma
            
            $
            (0.05
            )
            $
            (0.14
            )Basic
                and diluted net loss per share, as reported
            
            $
            (0.09
            )
            $
            (0.23
            )Basic
                and diluted net loss per share, pro forma
            
            $
            (0.10
            )
            $
            (0.25
            )





The
      Company used the Black-Scholes option pricing model to calculate the fair value
      of options under FAS 123R and APB 25. The key assumptions for this valuation
      method include the expected term of the option, stock price volatility,
      risk-free interest rate, dividend yield, exercise price, and forfeiture rate.
      Many of these assumptions are judgmental and highly sensitive in the
      determination of compensation expense. Under the assumptions indicated below,
      the weighted average fair values of the stock options issued at the dates of
      grant in the periods ended September 30, 2006 and 2005 were $0.83 and $0.87
      respectively. The table below indicates the key assumptions used in the
      valuation calculations for options granted in the three and nine months ended
      September 30, 2006 and 2005:





Three
                Months Ended
              September
                30,
            
            Nine
                Months Ended
              September
                30,2006
            
            2005
            
            2006
            
            2005Term
            
            
            7
                years
            
            
            10
                years
            
            
            7
                years
            
            
            10
                yearsVolatility
            
            
            217
            %
            
            147%-157
            %
            
            210%-217
            %
            
            108%-157
            %Dividend
                yield
            
            
            0.0
            %
            
            0.0
            %
            
            0.0
            %
            
            0.0
            %Risk-free
                interest rate
            
            
            4.96
            %
            
            4.2
            %
            
            4.37%-4.96
            %
            
            4.1%-4.4
            %Forfeiture
                rate
            
            
            25
            %
            
            
            
            
            22%-25
            %
            
            0
            %




7


**VIOQUEST
        PHARMACEUTICALS, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006 (UNAUDITED)**


The
      following table summarizes information about the Company’s stock incentive plan
      for the nine months ended September 30, 2006:





Number
                of Options
            
            Weighted
                Average Exercise Price
            
            Weighted
                Average Remaining Contractual Life
            
            Aggregate
                Intrinsic ValueBalance,
                January 1, 2006
            
            
            4,975,852
            
            $
            1.10Options
                granted
            
            
            1,212,000
            
            $
            0.83Options
                cancelled
            
            
            (386,000
            )
            $
            0.89Options
                outstanding, September 30, 2006
            
            
            5,801,852
            
            $
            1.05
            
            
            7.2
            
            $
            2,523,591Options
                exercisable, September 30, 2006
            
            
            2,108,282
            
            $
            1.28
            
            
            5.8
            
            $
            190,670





As
      of
      September 30, 2006, there was $3,342,306 of unrecognized compensation costs
      related to stock options. These costs are expected to be recognized over a
      period of approximately 3 years.





There
      were no options exercised during the three and nine months ended September
      30,
      2006.





As
      of
      September 30, 2006, an aggregate of 698,148 shares remained available for future
      grants and awards under the Company’s stock incentive plan, which covers stock
      options and restricted stock awards. The Company issues unissued shares to
      satisfy stock option exercises and restricted stock awards.





***(E)
      Loss Per Share***





Basic
      net
      loss per share is calculated by dividing net loss by the weighted-average number
      of common shares outstanding for each period presented excluding 8,564,395
      common shares held in escrow based upon clinical milestones of VQD-001 and
      VQD-002, as a result of the acquisition of Greenwich Therapeutics. Diluted
      net
      loss per share is the same as basic net loss per share, since potentially
      dilutive shares from the assumed exercise of stock options and stock warrants
      would have had an antidilutive effect because the Company incurred a net loss
      during each period presented. The number of potentially dilutive shares excluded
      from the calculation was 26,852,366 (of which 12,486,119 were warrants,
      8,564,395 were common shares held in escrow, and 5,801,852 were stock options)
      at September 30, 2006 and 6,488,405 at September 30, 2005.





**NOTE
      2**  **DISCONTINUED
      OPERATIONS**





On
      September 29, 2006, the Company’s Board of Directors determined to seek
      strategic alternatives for the operations of its Chiral Quest subsidiary which
      may include a sale or other disposition of the operating assets of that
      business. Accordingly, the business and assets of Chiral Quest are presented
      in
      these financial statements as discontinued operations. No provision has been
      made to reduce the carrying amounts of the assets of discontinued operations
      as
      they approximate their net realizable values. At September 30, 2006 and December
      31, 2005, the current assets of discontinued operations totaled $1,269,445
      and
      $892,092 respectively, which consisted of accounts receivable, inventories
      and
      prepaid expenses. At September 30, 2006 and December 31, 2005, the non-current
      assets of discontinued operations totaled $1,336,484 and $1,424,883,
      respectively, which consisted of fixed assets net of depreciation and patents
      net of amortization, security deposits and prepaid rent. Current liabilities
      as
      of September 30, 2006 and December 31, 2005 associated with discontinued
      operations totaled $769,669 and $1,105,594, respectively, which consisted of
      accounts payable, accrued expenses, and deferred revenue. Revenues for the
      three
      and nine months ended September 30, 2006 from discontinued operations totaled
      $513,656 and $1,969,852 respectively, and revenues for the three and nine months
      ended September 30, 2005 totaled $536,185 and $2,636,124 respectively. Loss
      from
      discontinued operations for the three and nine months ended September 30, 2006,
      which consisted of revenues less cost of goods sold, management and consulting
      fees, research and development, selling, general and administrative expenses
      and
      depreciation and amortization, totaled $973,892 and $2,368,847, respectively.
      Loss from discontinued operations for the three and nine months ended September
      30, 2005 consisted of revenues less cost of goods sold, management and
      consulting fees, research and development, selling, general and administrative
      expenses, and depreciation and amortization, totaled $843,215 and $2,372,397,
      respectively.





**NOTE
      3** **** **COMMITMENTS**





In
      August
      2006, the Company entered into a consultancy agreement with Paramount Corporate
      Development, an affiliate of Paramount BioCapital, Inc. (“Paramount”). Dr.
      Lindsay A. Rosenwald is the Chairman, CEO and sole stockholder of Paramount
      and
      a substantial stockholder of the Company. Stephen C. Rocamboli and Michael
      Weiser, directors of the Company, are also employed by Paramount. The
      consultancy agreement is for a total of $90,000, for a period of three months
      for $30,000 per month commencing in August 2006.





8
 
  **VIOQUEST
          PHARMACEUTICALS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
          30, 2006 (UNAUDITED)**


In
      September 2006, the Company amended the original lease agreement for its
      corporate headquarters in Basking Ridge, New Jersey, expanding its space and
      lease commitment term by an additional sixty-two months, from the effective
      date
      of November 20, 2006. The total lease commitment for the sixty-two months is
      approximately $486,000.





**NOTE
      4** **** **MERGER**





On
      October 18, 2005, the Company completed a merger with Greenwich Therapeutics,
      Inc., (“Greenwich”), a New York-based biotechnology company. In exchange for
      their shares of Greenwich common stock and pursuant to the merger agreement,
      the
      stockholders of Greenwich received an aggregate of 17,128,790 shares of the
      Company’s common stock and five-year warrants to purchase an additional
      4,000,000 shares of the Company’s common stock at an exercise price of $1.41 per
      share.





Additionally,
      as contemplated by the merger agreement, on October 18, 2005, the Company
      assumed outstanding indebtedness of Greenwich of $823,869, all of which was
      payable to Paramount BioCapital Investments, LLC, pursuant to a promissory
      note
      dated October 17, 2005, referred to as the (“Note”). As of September 30, 2006,
      approximately $277,000 of principal and accrued interest remained outstanding
      under the Note.





At
      the
      closing of the merger, the Note was amended to provide that one-third would
      be
      converted into securities of the Company on the same terms as the Company’s
      October 2005 private placement, one-third of the outstanding indebtedness under
      the Note would be repaid upon the completion by the Company of a financing
      resulting in gross proceeds of at least $5 million, and the final one-third
      would be payable upon completion by the Company of one or more financings
      resulting in aggregate gross proceeds of at least $10 million (inclusive of
      the
      amounts raised in its previous $8.4 million financing).





Accordingly,
      on October 18, 2005, upon completion of the private placement of common stock
      for $7.5 million, net of expenses, the Company satisfied a portion of the total
      indebtedness outstanding under the Note by making a cash payment of $264,623
      and
      another portion by issuing to Paramount BioCapital Investments, LLC 392,830
      shares valued at the $0.75 per share offering price of the October 2005 private
      placement, the equivalent of $294,623 of the Company’s common stock. In the
      event that the Company does not complete the financing(s) resulting in aggregate
      gross proceeds of at least $10 million prior to the Note’s maturity date of
      October 18, 2006. The Company has not satisfied the outstanding debt of $264,623
      and approximately $13,000 of accrued interest through September 30, 2006. The
      Company plans to satisfy the final portion of debt and accrued interest by
      the
      end of the first quarter of 2007.


The
      acquisition of Greenwich on October 18, 2005 was accounted for under the
      purchase method of accounting and accordingly, the results of operations of
      Greenwich have been have been consolidated with those of the Company only from
      the date of acquisition.





The
      following unaudited pro forma financial information presents the condensed
      consolidated results of operations of the Company and Greenwich for the three
      and nine months ended September 30, 2005 assuming the acquisition had been
      consummated at the beginning of that period. The pro forma information does
      not
      necessarily reflect the results of operations that would have occurred had
      the
      entities been a single company during the period ($000's, except per share
      information). As we have classified the results of our Chiral Quest business
      segment (our only operating segment prior to this acquisition) as discontinued
      operations, our pro forma results of operations are as follows:





Three
                Months Ended
              September
                30, 2005
            
            Nine
                Months Ended
              September
                30, 2005Net
                loss
            
            $
            (939
            )
            $
            (11,924
            )Basic
                and diluted net loss per share, as reported
            
            $
            (0.03
            )
            $
            (0.31
            )Weighted
                average common shares outstanding - basic and diluted
            
            
            37,965
            
            
            37,965





The
      pro-forma net loss for the nine months ended September 30, 2005, includes a
      non-recurring, one-time charge of $7,975, which represents in-process research
      and development.





9


**VIOQUEST
        PHARMACEUTICALS, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006 (UNAUDITED)**




**NOTE
      5** **** **SUBSEQUENT
      EVENTS**





On
      October 1, 2006, Dr. Lawrence Akinsanmi, M.D., Ph.D., joined VioQuest
      Pharamceuticals, Inc. and will assume the responsibilities of Dr. Pamela Harris,
      the Company’s former Chief Medical Officer, who resigned from her employment
      with the Company on October 12, 2006. The Company has entered into a separation
      agreement with Dr. Harris, under which Dr. Harris has released the Company
      from
      all potential claims relating to her employment. In consideration for her
      release, the Company agreed to pay to Dr. Harris the aggregate sum of $62,500,
      to be paid on a semi-monthly basis beginning on November 15, 2006.





On
      October 18, 2006, the Company sold 7,891,600 shares of its common stock at
      a
      price of $0.50 per share resulting in gross proceeds of approximately $3.95
      million through a private placement. In addition to the shares of common stock,
      the investors also received 5-year warrants to purchase an aggregate of
      2,762,060 shares at an exercise price of $0.73 per share. Based
      upon the Black-Scholes option pricing valuation model, the investor warrants
      are
      estimated to be valued at approximately $1,340,000, which is derived from their
      exercise price of $0.73 per share, a fair market value of $0.50 per share as
      of
      October 18, 2006, a 5 year term, with a 4.73% risk free interest rate. The
      Company engaged Paramount as its exclusive placement agent in connection with
      the offering, and Paramount in turn engaged various broker-dealers as sub-agents
      to assist with the offering. Dr.
      Lindsay A. Rosenwald is the Chairman, CEO and sole stockholder of Paramount
      and
      is also a substantial stockholder of the Company. Stephen C.
      Rocamboli and
      Michael Weiser, directors of the Company, are employees of Paramount. In
      consideration for their services, the Company paid an aggregate of approximately
      $276,000 in commissions to the placement agents (including sub-agents) in
      connection with the offering, of which $56,000 was paid to Paramount, plus
      an
      additional $30,000 as reimbursement for expenses. The Company also issued to
      the
      placement agents 5-year warrants to purchase an aggregate of 394,580 shares
      of
      common stock at a price of $0.55 per share. Based
      upon the Black-Scholes option pricing valuation model, the placement agents’
warrants are estimated to be valued at approximately $192,000, which is derived
      from their exercise price of $0.55 per share, a fair market value of $0.50
      per
      share as of October 18, 2006, a 5 year term, with a 4.73% risk free interest
      rate. If the Company fails to file a registration
      statement for the shares and warrants sold through the private placement within
      30 days following the closing date of the offering, or should the registration
      statement not be declared effective within 120 days of the final closing date
      for the offering, the Company will make compensatory payments to such holder
      of
      securities (on a pro-rata basis), as liquidated damages and not as a penalty,
      an
      amount equal to one percent (1%) of the aggregated offering price paid by such
      holder for shares of common stock for each monthly period (or prorated portion
      thereof) that the Company remains in default of such obligations. In no event
      shall the amount of our liability to any holder pursuant to this provision
      exceed ten percent (10%) of the aggregate offering price paid by such holder.




10


**Item
      2.**  **Management’s
      Discussion and Analysis or Plan of Operations.**





**Overview**





Through
      our drug development business, we acquire, develop, and commercialize innovative
      products for the treatment of key unmet medical needs in cancer and
      immunological diseases. Through our acquisition of Greenwich Therapeutics,
      Inc.
      in October 2005, we obtained the rights to develop, manufacture, use,
      commercialize, lease, sell and/or sublicense VQD-001 and VQD-002 through license
      agreements with The Cleveland Clinic Foundation and the University of South
      Florida Research Foundation, respectively. We have initiated three Phase I/IIa
      clinical trials since acquiring the license rights to VQD-001 and
      VQD-002.





**·****
            ***VQD-001
                - Sodium Stibogluconate (SSG).***VQD-001 is a pentavalent antimonial drug that has been used for over
                50
                years in parts of Africa and Asia for the treatment of leishmaniasis
                (a
                protozoan disease). As published by the World Health Organization,
                leishmaniasis currently threatens 350 million men, women, and children
                in
                88 countries around the world. This drug is currently being used
                to treat
                military personnel serving in parts of the world where this disease
                is
                prevalent. In collaboration with the U.S. Army, we are pursuing the
                development of VQD-001 for the treatment of leishmaniasis and intend
                to
                file a new drug application or NDA, with the U.S. Food and Drug
                Administration (FDA) in the first half of 2007. Already, VQD-001
                has been
                designated orphan drug status by the FDA in the first half of 2006
                for the
                treatment of leishmaniasis. In other development, results from several
                preclinical studies, especially those conducted at the Cleveland
                Clinic
                showed that VQD-001 is an inhibitor of multiple protein tyrosine
                phosphatases (PTPases), specifically the SRC homology PTPase (SHP-1
&
                SHP-2). These intracellular enzymes are involved in signaling pathways
                of
                many receptor-linked tyrosine kinases which are involved in growth,
                proliferation and differentiation of cancer cells. Inhibition of
                these
                enzymes with VQD-001 can trigger apoptosis of malignant cells. This
                cytotoxic effect, coupled with its potential ability to enhance the
                body’s
                immune system, through improved cytokine signaling and t-cell formation,
                suggest that VQD-001 has potential as an anti-cancer agent. On August
                14,
                2006, we received an acceptance letter for our investigational new
                drug
                application (IND) for VQD-001 from the FDA. The FDA completed their
                review
                of our IND submission and have concluded that the clinical investigation
                (s) described in the protocol may begin. VQD-001 is currently being
                evaluated in combination with IFNa-2b
                in a 24-patient investigator-sponsored Phase I clinical trial at
                the
                Cleveland Clinic Taussig Cancer Center in refractory solid tumors,
                lymphoma and myeloma. We are also currently evaluating the safety,
                tolerability and activity of VQD-001 in a separate, company-sponsored
                study of up to a 54-patient Phase I/IIa clinical trial at MD Anderson
                Cancer Center in patients with advanced malignancies and solid tumors
                that
                have been non-responsive in previous cytokine therapy.




·
            ***VQD-002
                - Triciribine-Phosphate (TCN-P).***Clinical
                studies of VQD-002, a nucleoside analog, by the National Cancer Institute
                in the 1980s and early 1990s showed compelling anti-cancer activities.
                More recently, investigators at the Moffitt Cancer Center of the
                University of South Florida were able to demonstrate from preclinical
                studies that VQD-002’s mechanism of action inhibits Akt phosphorylation
                (protein kinase - B) , which is found to be over activated and
                over-expressed in various malignancies, including, breast, ovarian,
                colorectal, pancreatic and leukemias. Clinically, the over expression
                of
                phosphorylated Akt is associated with poor prognosis, resistance
                to
                chemotherapy and shortened survival time of cancer patients.On
                April 11, 2006, we received an acceptance letter for our investigational
                new drug application (IND) for VQD-002 from the FDA. The FDA completed
                their review of our IND submission and have concluded that the clinical
                investigations (s) described in the protocol may begin.We
                are currently evaluating the safety, tolerability and safety of VQD-002
                and its impact of its ability to reduce Akt phosphorylation in two
                Phase
                I/IIa clinical trials, including one at the Moffitt Cancer Center
                in up to
                42 patients with hyper-activated, phosphorylated Akt in colorectal,
                pancreatic, breast and ovarian tumors and a second clinical study
                up to a
                40-patient trial at the MD Anderson Cancer Center in hematologic
                tumors,
                particularly, leukemia.




To
      date,
      we have not received approval for the sale of any drug candidates in any market
      and, therefore, have not generated any revenues from our drug candidates. The
      successful development of our product candidates is highly uncertain. Product
      development costs and timelines can vary significantly for each product
      candidate and are difficult to accurately predict. Various laws and regulations
      also govern or influence the manufacturing, safety, labeling, storage, record
      keeping and marketing of each product. The lengthy process of seeking these
      approvals, and the subsequent compliance with applicable statutes and
      regulations, require the expenditure of substantial resources. Any failure
      by us
      to obtain, or any delay in obtaining, regulatory approvals could materially
      adversely affect our business.





Developing
      pharmaceutical products is a lengthy and very expensive process. Assuming we
      do
      not encounter any unforeseen safety issues during the course of developing
      our
      product candidates, we do not expect to complete the development of a product
      candidate until approximately 2007 for the treatment of leishmaniasis, and
      2009
      for oncology indications of VQD-002 and then VQD-001 if ever. In addition,
      as we
      continue the development of our product candidates, our research and development
      expenses will further increase. To the extent we are successful in acquiring
      additional product candidates for our development pipeline, our need to finance
      further research and development will continue increasing. Accordingly, our
      success depends not only on the safety and efficacy of our product candidates,
      but also on our ability to finance the development of these product candidates.
      Our major sources of working capital have been proceeds from various private
      financings, primarily private sales of our common stock and other equity
      securities.





11


Research
      and development expenses consist primarily of salaries and related personnel
      costs, fees paid to consultants and outside service providers for laboratory
      development, legal expenses resulting from intellectual property protection,
      business development and organizational affairs and other expenses relating
      to
      the acquiring, design, development, testing, and enhancement of our product
      candidates, including milestone payments for licensed technology. We expense
      our
      research and development costs as they are incurred.




**Results
      of Operations - For the Three Months Ended September 30, 2006 vs. September
      30,
      2005**





**Continuing
      Operations:**





The
      Company has had no revenues from its continuing operations through September
      30,
      2006.





Management
      and consulting fees for the three months ended September 30, 2006 were $167,379
      as compared to $212,159 during the three months ended September 30, 2005. The
      decrease in management and consulting fees is primarily attributed to a
      non-recurring charge of $190,000 from the issuance of 200,000 shares of our
      common stock to an outside consultant in the third quarter 2005, offset by
      the
      management and consulting fees for the third quarter of 2006, which consist
      of
      Board of Directors’ annual and committee meetings fees of approximately $81,000,
      and fees for consulting services provided by Paramount BioCapital Corporate
      Development, an affiliate of Paramount BioCapital, Inc., to provide assistance
      with our organizational infrastructure, and research and development efforts
      of
      $60,000. Dr. Lindsay A. Rosenwald is the Chairman, CEO and sole stockholder
      of
      Paramount BioCapital, Inc. and is a substantial stockholder of our company.
      Stephen C. Rocamboli and Michael Weiser, directors of our company, are employed
      by Paramount BioCapital, Inc. Management and consulting fees also consist of
      services provided by our consultants and scientific advisory board members
      of
      approximately $14,000 and approximately $12,000 of stock option charges
      resulting from changes in the fair value of options issued to scientific
      advisory board consultants for the three months ended September 30, 2006.





Our
      research and development (“R&D”) expenses for the three months ended
      September 30, 2006 were $273,876 as compared to $0 during the three months
      ended
      September 30, 2005. R&D is attributed to clinical development costs,
      milestone license fees, maintenance fees paid to our licensing institutions,
      outside manufacturing costs, outside clinical research organization costs,
      in
      addition to regulatory and patent filing costs associated to our two oncology
      compounds VQD-001 and VQD-002 currently in clinical trials. The increase in
      R&D for the three months ended September 30, 2006 is a result of our
      discontinued operations contributing to all of our R&D expenses for the
      three months ended September 30, 2005, in addition to having no R&D costs
      from our two oncology compounds during the three months ended September 30,
      2005, as a result of acquiring them in October 2005. Additionally, R&D
      increases consist of outside regulatory and legal fees of approximately
      $159,000, employee costs of approximately $76,000, outside clinical research
      organization costs of approximately $29,000 and outside manufacturing costs
      of
      approximately $10,000. For the remainder of the year, and going forward, we
      expect R&D spending related to our existing product candidates VQD-001 and
      VQD-002 to increase as we expand our clinical trials.





Selling,
      general and administrative (“SG&A”) expenses for the three months ended
      September 30, 2006 were $504,848 as compared to $564,225 during the three months
      ended September 30, 2005. This decrease in SG&A expenses was due in part to
      recruiting fees paid during the three months ended September 30, 2005 for our
      Vice President of Corporate Business Development offset by the impact of
      expensing employee and director stock options in accordance with FAS 123R of
      approximately $165,000, additional spending on conference expenses, increased
      travel expenses for new business development opportunities and higher
      administrative expenses associated with having more employees including our
      President and CEO hired in February 2005, our Vice President of Corporate
      Business Development hired in July 2005, and our Chief Medical Officer hired
      in
      March 2006, in addition to other related employee costs such as increased
      insurance, and employer payroll taxes and increased rent expense as a result
      of
      our newly leased corporate headquarters facility in Basking Ridge, New Jersey
      in
      September 2005.





Depreciation
      expenses for the three months ended September 30, 2006 were $1,268 as compared
      to $525 during the three months ended September 30, 2005. This increase was
      primarily related to the fixed asset purchases for office and computer equipment
      for our newly leased corporate headquarters facility, in Basking Ridge, New
      Jersey.





Interest
      income, net of interest expense for the three months ended September 30, 2006
      was $36,246 as compared to $2,463 for the three months ended September 30,
      2005.
      Interest income received during the three months ended September 30, 2006 was
      approximately $21,000, which was offset by interest expense for the repayment
      of
      the final one third amount of debt owed, of approximately $264,000 to Paramount
      BioCapital Investments, LLC, which was assumed as part of the October 2005
      acquisition of Greenwich Therapeutics.





Our
      loss
      from continuing operations for the three months ended September 30, 2006 was
      $911,125 as compared to $774,446 for the three months ended September 30, 2005.
      The increased loss from continuing operations for the three months ended
      September 30, 2006 as compared to the three months ended September 30, 2005
      was
      attributable to higher SG&A expenses, due in part to the impact of expensing
      employee and director stock options of approximately $165,000 in accordance
      with
      FAS 123R, additional spending on conference expenses, increased travel expenses
      for new business development opportunities and higher administrative expenses
      associated with having more employees which include the President and CEO hired
      in February 2005, the Vice President of Corporate Business Development hired
      in
      July 2005, and the Chief Medical Officer hired in March 2006, in addition to
      other related employee costs such as increased insurance, and employer payroll
      taxes and increased rent expense for the newly leased corporate headquarter
      facility in Basking Ridge, New Jersey. Increased R&D expenses also
      contributed to the higher loss from continuing operations for the three months
      ended September 30, 2006
      as
      compared to the three months ended September 30, 2005,
      which were related to our drug development costs, including, outside clinical
      research organization and manufacturing costs, maintenance and licensing fees
      provided to the institutions we licensed VQD-001 and VQD-002 from, in addition
      to other clinical development costs for the VQD-001 and VQD-002 programs. We
      expect losses to continue in the next year from the costs associated with the
      drug development process related to developing our drug candidates.





12




**Discontinued
      Operations:**





Our
      loss
      from discontinued operations for the three months ended September 30, 2006
      was
      $973,892 as compared to $843,215 for the three months ended September 30, 2005.
      The increased loss from discontinued operations for the three months ended
      September 30, 2006 as compared to September 30, 2005 was primarily attributable
      to the impact of expensing employee stock options of approximately $70,000,
      in
      addition to a decrease in revenues of approximately $24,000 from the prior
      three
      months, and increased expenditures from our China operations.





**Results
      of Operations - For the Nine Months Ended September 30, 2006 vs. September
      30,
      2005**





**Continuing
      Operations:**





Management
      and consulting expenses for the nine months ended September 30, 2006 were
      $171,707 as compared to $243,184 during the nine months ended September 30,
      2005. The decrease in management and consulting fees is primarily attributed
      to
      a non-recurring charge of $190,000 from the issuance of 200,000 shares of our
      common stock to an outside consultant in the third quarter 2005, offset by
      management and consulting fees for the third quarter of 2006 consisting of
      Board
      of Directors’ annual and committee meetings fees of approximately $81,000, and
      $60,000 of fees for consulting services provided by Paramount BioCapital
      Corporate Development, an affiliate of Paramount BioCapital, Inc. Dr. Lindsay
      A.
      Rosenwald is the Chairman, CEO and sole stockholder of Paramount BioCapital,
      Inc. and a substantial stockholder of our company. Stephen C. Rocamboli and
      Michael Weiser, directors of our company, are employed by Paramount BioCapital,
      Inc. Management and consulting fees also consist of approximately $31,000 of
      stock option charges resulting from changes in the fair value of options issued
      to scientific advisory board consultants for the nine months ended September
      30,
      2006.





Our
      R&D expenses for the nine months ended September 30, 2006 were $933,599 as
      compared to $0 during the nine months ended September 30, 2005. R&D is
      attributed to clinical development costs, milestone license fees, maintenance
      fees provided to the institutions we licensed VQD-001 and VQD-002, outside
      manufacturing costs, outside clinical research organization costs, in addition
      to regulatory and patent filing costs associated to our two oncology compounds
      VQD-001 and VQD-002 currently in clinical trials. The increase in R&D for
      the nine months ended September 30, 2006 is a result of our discontinued
      operations contributing to all of our R&D expenses for the nine months ended
      September 30, 2005, in addition to having no R&D costs from our two oncology
      compounds during the nine months ended September 30, 2005, as a result of
      acquiring them in October 2005. Additionally, R&D increases for the nine
      months ended September 30, 2006 consists of milestone license fees incurred
      in
      connection with receiving acceptance of our investigational new drug application
      filing for VQD-002 in April 2006 of $100,000, maintenance fees provided to
      the
      institutions we licensed VQD-001 and VQD-002 from of approximately $25,000
      and
      $35,000 respectively, outside regulatory and legal fees of $383,000, employee
      costs of $188,000, outside clinical research organization costs of $71,000
      and
      outside manufacturing costs of approximately $132,000. For the remainder of
      the
      year, we expect R&D spending related to our existing product candidates to
      increase as we expand our clinical trials.





SG&A
      expenses for the nine months ended September 30, 2006 were $2,172,519 as
      compared to $1,459,607 during the nine months ended September 30, 2005. This
      increase in SG&A expenses was due in part to the impact of expensing
      employee and director stock options in accordance with FAS 123R of approximately
      $590,000, , additional spending on conference expenses, increased travel
      expenses for new business development opportunities and higher administrative
      expenses associated with having more employees which include the President
      and
      CEO hired in February 2005, the Vice President of Corporate Business Development
      hired in July 2005, and the Chief Medical Officer hired in March 2006, in
      addition to other related employee costs such as increased insurance, and
      employer payroll taxes and increased rent expense for the newly leased corporate
      headquarters facility in Basking Ridge, New Jersey.





Depreciation
      and amortization expenses for the nine months ended September 30, 2006 were
      $3,804 as compared to $2,149 during the nine months ended September 30, 2005.
      This increase was primarily related to the fixed asset purchases for office
      equipment, and computer equipment, for our newly leased corporate headquarters
      facility in Basking Ridge, New Jersey.





13




Interest
      income, net of interest expense for the nine months ended September 30, 2006
      was
      $85,361 as compared to $14,203 for the nine months ended September 30, 2005.
      Interest income received during the nine months ended September 30, 2006 was
      approximately $98,000, which was offset by interest expense of approximately
      $13,000, for the repayment of the final one third amount of debt owed, of
      approximately $264,000, to Paramount BioCapital Investments, LLC, which was
      assumed as part of the October 2005 acquisition of Greenwich
      Therapeutics.





Our
      loss
      from continuing operations for the nine months ended September 30, 2006 was
      $3,196,268 as compared to $1,690,737 for the nine months ended September 30,
      2005. The increased loss from continuing operations for the nine months ended
      September 30, 2006 as compared to September 30, 2005 was primarily due to the
      to
      higher SG&A expenses due in part to the impact of expensing employee and
      director stock options of approximately $590,000 in accordance with FAS 123R,
      ,
      additional spending on conference expenses, increased travel expenses for new
      business development opportunities and higher administrative expenses associated
      with having more employees which include the President and CEO hired in February
      2005, the Vice President of Corporate Business Development hired in July 2005,
      and the Chief Medical Officer hired in March 2006, in addition to other related
      employee costs such as increased insurance, and employer payroll taxes and
      increased rent expense for the newly leased corporate headquarter facility
      in
      Basking Ridge, New Jersey. Increased R&D expenses also contributed to the
      higher loss from continuing operations for the nine months ended September
      30,
      2006 as compared to the nine months ended September 30, 2005, which were related
      to our drug development costs, including, outside clinical research organization
      and manufacturing costs, maintenance and licensing fees provided to the
      institutions we licensed VQD-001 and VQD-002 from, in addition to other clinical
      development costs for the VQD-001 and VQD-002 clinical programs. We expect
      losses to continue for the next several years from the costs associated with
      the
      drug development process related to developing our drug candidates.





**Discontinued
      Operations:**





Our
      loss
      from discontinued operations for the nine months ended September 30, 2006 was
      $2,368,847 as compared to $2,372,397 for the nine months ended September 30,
      2005. The decreased loss from discontinued operations for the nine months ended
      September 30, 2006 as compared to September 30, 2005 was primarily attributable
      to having lower overhead expenses resulting from a reduced number of employees
      located in our New Jersey facility, lower R&D expenditures as a result of
      focusing on commercializing our proprietary technology, offset by the impact
      of
      expensing employee stock options.





**Liquidity
      and Capital Resources**





In
      August
      2004, we decided to focus on acquiring technologies for purposes
      of development and commercialization of pharmaceutical drug candidates for
      the
      treatment of oncology and antiviral diseases and disorders for which there
      are
      unmet medical needs. In accordance with this business plan, in October 2005,
      we
      acquired in a merger transaction Greenwich Therapeutics, Inc., a privately-held
      New York-based biotechnology company that held exclusive rights to develop
      and
      commercialize two oncology drug candidates - VQD-001, and VQD-002. The rights
      to
      these two oncology drug candidates, VQD-001 and VQD-002, are governed by license
      agreements with The Cleveland Clinic Foundation and the University of South
      Florida Research Foundation, respectively. As a result of the Company’s
      acquisition of Greenwich Therapeutics, we hold exclusive rights to develop,
      manufacture, use, commercialize, lease, sell and/or sublicense VQD-001 and
      VQD-002.





As
      a
      result of this acquisition, we immediately undertook funding development of
      VQD-001 and VQD-002, which has significantly increased our expected cash
      expenditures and will continue to increase our expenditures over the next 12
      months and thereafter. The completion of development of VQD-001 and VQD-002,
      both of which are only in early stages of clinical development, is very lengthy
      and expensive process. Until such development is complete and the FDA (or the
      comparable regulatory authorities of other countries) approves VQD-001 and
      VQD-002 for sale, we will not be able to sell these products.





Since
      inception, we have incurred an accumulated deficit of $25,834,507 through
      September 30, 2006. For the three and nine months ended September 30, 2006,
      we
      had losses from continuing operations of $911,125 and $ 3,196,268 ,
      respectively, and used $2,406,038 in cash from continuing operating activities
      for the nine months ended September 30, 2006.
      As
      of September 30, 2006, we had working capital of $34,516 and cash and cash
      equivalents of $823,129.





Management
      expects our losses to increase over the next several years, due to the expansion
      of its drug development business, costs associated with the clinical development
      of VQD-001 and VQD-002. These matters raise substantial doubt about our ability
      to continue as a going concern.





On
      October 18, 2006, we sold 7,891,600 shares of its common stock at a price of
      $0.50 per share resulting in gross proceeds of approximately $3.95 million.
      In
      addition to the shares of common stock, we also issued to the investors 5-year
      warrants to purchase an aggregate of 2,762,060 shares at an exercise price
      of
      $0.73 per share. In connection with the private placement, the Company engaged
      Paramount BioCapital, Inc., (“Paramount”) as its exclusive placement agent, and
      Paramount in turn engaged various broker-dealers as sub-agents to assist with
      the offering. Dr. Lindsay A. Rosenwald is the Chairman, CEO and sole stockholder
      of Paramount and a substantial stockholder of the Company. Stephen C. Rocamboli
      and Michael Weiser, directors of the Company, are also employed by Paramount.
      In
      consideration for their services, we paid an aggregate of approximately $276,000
      in commissions to the placement agents (including sub-agents) in connection
      with
      the offering, of which $56,000 was paid to Paramount, plus an additional $30,000
      as reimbursement for expenses. We also issued to the placement agents 5-year
      warrants to purchase an aggregate of 394,580 shares of common stock at a price
      of $0.55 per share. Based upon the Black- Scholes option pricing valuation
      model, the investor warrants are estimated to be valued at approximately
      $1,340,000, which is derived from their exercise price of $0.73 per share,
      a
      fair market value of $0.50 per share as of October 18, 2006, a 5 year term,
      with
      a 4.73% risk free interest rate. In consideration for their services, the
      Company paid an aggregate of approximately $276,000 in commissions to the
      placement agents (including sub-agents) in connection with the offering, of
      which $56,000 was paid to Paramount, plus an additional $30,000 as reimbursement
      for expenses. The Company also issued to the placement agents 5-year warrants
      to
      purchase an aggregate of 394,580 shares of common stock at a price of $0.55
      per
      share. Based upon the Black-Scholes option pricing valuation model, the
      placement agents’ warrants are estimated to be valued at approximately $192,000,
      which is derived from their exercise price of $0.55 per share, a fair market
      value of $0.50 per share as of October 18, 2006, a 5 year term, with a 4.73%
      risk free interest rate. If the Company fails to file a registration statement
      for the shares and warrants sold through the private placement within 30 days
      following the closing date of the offering, or should the registration statement
      not be declared effective within 120 days of the final closing date for the
      offering, the Company will make compensatory payments to such holder of
      securities (on a pro-rata basis), as liquidated damages and not as a penalty,
      an
      amount equal to one percent (1%) of the aggregated offering price paid by such
      holder for shares of common stock for each monthly period (or prorated portion
      thereof) that the Company remains in default of such obligations. In no event
      shall the amount of our liability to any holder pursuant to this provision
      exceed ten percent (10%) of the aggregate offering price paid by such holder.





14




On
      October 18, 2005, we sold 11,179,975 shares of our common stock at a price
      of
      $0.75 per share resulting in gross proceeds of approximately $8.38 million.
      In
      addition to the shares of our common stock, investors also received 5-year
      warrants to purchase an aggregate of 4,471,975 shares of our common stock at
      an
      exercise price of $1.00 per share. In connection with the private placement,
      the
      Company engaged Paramount as its exclusive placement agent. We paid an aggregate
      of approximately $587,000 in commissions to Paramount in connection with the
      offering, together with an accountable expense allowance of $50,000, and issued
      5-year warrants to purchase an aggregate of 1,117,997 shares of common stock
      at
      a price of $1.00 per share. Our
      net
      proceeds, after deducting placement agent fees and other expenses relating
      to
      the private placement, were approximately $7.5 million.





Management
      anticipates that our capital resources will be adequate to fund our operations
      through the first quarter of 2007. Additional financing will be required during
      2007 in order to fund operations. We have determined to seek strategic
      alternatives for our Chiral Quest business operations on September 29, 2006,
      which may include the possible sale of that business. If we are able to sell
      our
      Chiral Quest business we may receive cash proceeds from the sale, which we
      would
      utilize to further the development of our two anti-cancer drug candidates.
      The
      most likely source of financing includes the private sale of our equity or
      debt
      securities, or bridge loans to us from third party lenders. However, changes
      may
      occur that would consume available capital resources before that time. Our
      working capital requirements will depend upon numerous factors, which include,
      the progress of its drug development and clinical programs, including associated
      costs relating to milestone payments, license fees, manufacturing costs,
      regulatory approvals, and the hiring of additional employees.





Our
      net
      cash used in continuing operating activities for the nine months ended September
      30, 2006 was $2,406,038. Our net cash used in operating activities primarily
      resulted from a net loss of $3,196,268 offset by non-cash items consisting
      of
      the impact of expensing employee and director stock options in accordance with
      FAS 123R of $589,673, the impact of expensing scientific advisory board member
      consultants’ options in accordance with EITF 96-18 for $33,119, and depreciation
      of $3,804, Other uses of cash in continuing operating activities include an
      increase of prepaid clinical research organization costs of $180,238 attributed
      to our two oncology compounds development sites, and prepaid expenses and other
      assets of $79,109. Additionally, an increase in accounts payable of $336,967
      and
      accrued expenses of $86,014 attributed to clinical development costs, legal,
      accounting fees, in addition to accrued compensation, consultant and Board
      of
      Director fees.





Our
      net
      cash used in continuing investing activities for the nine months ended September
      30, 2006 totaled $14,987, which resulted from capital expenditures were
      attributed to the purchases of computer and office equipment for the Basking
      Ridge, New Jersey facility.





We
      had no
      financing activities in the nine months ended September 30, 2006 and 2005.





As
      part
      of our plan for additional employees, we anticipate hiring additional full-time
      employees in the medical, clinical and finance functions. In addition, we intend
      to and will continue to use senior advisors, consultants, clinical research
      organizations and third parties to perform certain aspects of our product’s
      development, manufacturing, clinical and preclinical development, and regulatory
      and quality assurance functions.





15




At
      our
      current and desired pace of clinical development of our two products, currently
      in Phase I/IIa clinical trials, over the next 12 months we expect to spend
      approximately $6.0 million on clinical trials and research and development
      (including milestone payments that we expect to be triggered under the license
      agreements relating to our product candidates, maintenance fees payments that
      we
      are obligated to pay to the institutions we licensed our two oncology compounds
      from, salaries and consulting fees and pre-clinical and laboratory studies),
      approximately $130,000 on facilities, rent and other facilities costs; and
      approximately $2.7 million on general corporate expenses and working capital.
      Additionally, we have an outstanding
      debt balance of $264,623 and approximately $13,000 of accrued interest through
      September 30, 2006, payable to Paramount. The Company plans to satisfy the
      final
      portion of debt and accrued interest by the end of the first quarter of 2007.





Our
      working capital requirements will depend upon numerous factors. For example,
      with respect to our drug development business, our working capital requirements
      will depend on, among other factors, the progress of our drug development and
      clinical programs, including associated costs relating to milestone payments,
      license fees, manufacturing costs, regulatory approvals, and the hiring of
      additional employees.





Additional
      capital that we may need in the future may not be available on reasonable terms,
      or at all. If adequate financing is not available, we may be required to
      terminate or significantly curtail our operations, or enter into arrangements
      with collaborative partners or others that may require us to relinquish rights
      to certain of our technologies, or potential markets that we would not otherwise
      relinquish.





**Item
      3. Controls and Procedures.**





As
      of
      September 30, 2006, the Company carried out an evaluation, under the supervision
      and with the participation of the Company’s Chief Executive Officer and Chief
      Financial Officer, of the effectiveness of the design and operation of our
      disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
      of the Securities Exchange Act of 1934, as amended). Based upon that evaluation,
      the Chief Executive Officer and Chief Financial Officer concluded that as of
      that date the Company’s disclosure controls and procedures were effective in
      alerting them on a timely basis to material information required to be disclosed
      in the Company’s periodic reports to the Securities and Exchange Commission.
      During the three months ended September 30, 2006, there was no change in the
      Company’s internal control over financial reporting that materially affected, or
      is reasonably likely to materially affect, the Company’s internal control over
      financial reporting.


16


**PART
      II - OTHER INFORMATION**


Item
        5.Other
        Events.
 
 On
        September 15, 2006, the Company entered into a First Amendment to Lease
        Agreement with Airy Associates, LLC, as landlord. A copy of this agreement
        is
        attached hereto as Exhibit 10.2 to this report and incorporated herein by
        reference. Pursuant to this Agreement, the Company extended its lease for
        its
        Basking Ridge, New Jersey offices. The lease now covers 3,889 square feet
        of
        office space and has a term of 62 months. For the first two months of the
        term,
        the Company is not required to make any rent payments; the annual rent for
        each
        of the three years thereafter is approximately $91,400; and the annual rent
        during the last two years is approximately $96,250.




**Item
      6. Exhibits**





Exhibit
                No.
            
            Description10.1
            
            Letter
                Agreement between the Company and Lawrence Akinsanmi effective October
                1,
                2006 (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K
                filed October 6, 2006).10.2
            
            First
              Amendment to Lease dated September 15, 2006 between the Company and
              Mount
              Airy Associates, LLC.31.1
            
            Certification
                of Chief Executive Officer31.2
            
            Certification
                of Chief Financial Officer32.1
            
            Certifications
                of Chief Executive and Chief Financial Officer pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002.




17





**SIGNATURES**





In
      accordance with the requirements of the Exchange Act of 1934, the registrant
      caused this report to be signed on its behalf by the undersigned, thereunto
      duly
      authorized.





VIOQUEST
                PHARMACEUTICALS, INC.Date:
                November 14, 2006
            By:
            /s/
                Daniel GreenleafDaniel
                Greenleaf
              President
                & Chief Executive OfficerDate:
                November 14, 2006
            By:
            /s/
                Brian LenzBrian
                Lenz
              Chief
                Financial Officer




18


**INDEX
      TO EXHIBITS FILED WITH THIS REPORT**





Exhibit
                No.
            
            Description10.2
            
            First
              Amendment to Lease dated September 15, 2006 between the Company and
              Mount
              Airy Associates, LLC31.1
            
            Certification
                of Chief Executive Officer31.2
            
            Certification
                of Chief Financial Officer32.1
            
            Certifications
                of Chief Executive and Chief Financial Officer pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002.




19