**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 June 30, 2007





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 102, 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
      August 8, 2007 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 oNo x





**Index**





Page**PART
                I**
            **FINANCIAL
                INFORMATION**Item
                1.
            Unaudited
                Condensed Consolidated Financial Statements
            1Item
                2.
            Management’s
                Discussion and Analysis or
                Plan of Operations
            11Item
                3.
            Controls
                and Procedures
            16**PART
                II**
            **OTHER
                INFORMATION**Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            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 LenoctaTM, VQD-002 and XyfidTM, 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 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,
      2006.





**PART
      I – FINANCIAL INFORMATION**





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





**VIOQUEST
      PHARMACEUTICALS, INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


**AS
      OF JUNE 30, 2007 (UNAUDITED) AND DECEMBER 31, 2006**





**June 30, 2007**
              **(Unaudited)**
            
            **December 31, 2006**
              **(Note 1A)****ASSETS****CURRENT
                ASSETS**Cash
                and cash equivalents
            
            $
            2,830,855
            
            $
            2,931,265Prepaid
                clinical research costs
            
            
            227,263
            
            
            273,172Deferred
                financing costs
            
            
            601,875
            
            
            -Other
                current assets
            
            
            104,006
            
            
            168,841Current
                assets associated with discontinued operations
            
            
            1,879,133
            
            
            2,396,435Total
                Current Assets
            
            
            5,643,132
            
            
            5,769,713**PROPERTY
                AND EQUIPMENT, NET**
            
            
            35,976
            
            
            43,378**SECURITY
                DEPOSITS**
            
            
            15,232
            
            
            15,232**TOTAL
                ASSETS**
            
            $
            5,694,340
            
            $
            5,828,323**LIABILITIES
                AND STOCKHOLDERS' EQUITY****CURRENT
                LIABILITIES**Accounts
                payable
            
            $
            2,222,982
            
            $
            1,031,458Accrued
                compensation and related taxes
            
            
            135,224
            
            
            245,475Other
                accrued expenses
            
            
            451,836
            
            
            180,440Note
                payable - Paramount BioSciences, LLC
            
            
            164,623
            
            
            264,623Convertible
                notes, net of unamortized debt discount of $1,180,668
            
            
            1,786,832
            
            
            -****Current
                liabilities associated with discontinued operations
            
            
            871,754
            
            
            1,265,568**TOTAL
                LIABILITIES**
            
            
            5,633,251
            
            
            2,987,564**COMMITMENTS
                AND CONTINGENCIES****STOCKHOLDERS'
                EQUITY**Preferred
                stock; $0.001 par value: 10,000,000 shares authorized, 0 shares issued
                and
                outstanding at June 30, 2007 and December 31, 2006
            
            
            -
            
            
            -Common
                stock; $0.001 par value: 100,000,000 shares authorized at June 30,
                2007
                and December 31, 2006, 54,621,119 shares issued and outstanding at
                June
                30, 2007 and December 31, 2006
            
            
            54,621
            
            
            54,621Additional
                paid-in capital
            
            
            33,537,551
            
            
            31,326,694Accumulated
                deficit
            
            
            (33,531,083
            )
            
            (28,540,556
            )Total
                Stockholders' Equity
            
            
            61,089
            
            
            2,840,759**TOTAL
                LIABILITIES AND STOCKHOLDERS' EQUITY**
            
            $
            5,694,340
            
            $
            5,828,323




See
      accompanying notes to condensed consolidated financial
      statements.


1


**VIOQUEST
      PHARMACEUTICALS, INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**


**FOR
      THE THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006**


**(UNAUDITED)**





**For the Three**
              **Months Ended**
              **June 30, 2007**
            
            **For the Three**
              **Months Ended**
              **J****une 30, 2006**
            
            **For the Six**
              **Months Ended**
              **June 30, 2007**
            
            **For the Six**
              **Months Ended**
              **June 30, 2006****REVENUE**
            
            -
            
            -
            
            -
            
            -**OPERATING
                EXPENSES**Research
                and development
            
            $
            950,844
            
            $
            327,055
            
            $
            2,319,655
            
            $
            616,701Selling,
                general and administrative
            
            
            1,192,399
            
            
            1,082,480
            
            
            2,106,050
            
            
            1,851,835Total
                Operating Expenses
            
            
            2,143,243
            
            
            1,409,535
            
            
            4,425,705
            
            
            2,468,536**LOSS
                FROM OPERATIONS**
            
            
            (2,143,243
            )
            
            (1,409,535
            )
            
            (4,425,705
            )
            
            (2,468,536
            )**INTEREST
                INCOME, NET**
            
            
            6,391
            
            
            2,084
            
            
            32,075
            
            
            49,115**LOSS
                FROM CONTINUING OPERATIONS**
            
            
            (2,136,852
            )
            
            (1,407,451
            )
            
            (4,393,630
            )
            
            (2,419,421
            )**LOSS
                FROM DISCONTINUED OPERATIONS**
            
            
            (335,422
            )
            
            (410,900
            )
            
            (596,897
            )
            
            (1,260,677
            )**NET
                LOSS**
            
            $
            (2,472,274
            )
            $
            (1,818,351
            )
            $
            (4,990,527
            )
            $
            (3,680,098
            )**NET
                LOSS PER COMMON SHARE:****CONTINUING
                OPERATIONS**
            
            $
            (0.04
            )
            $
            (0.04
            )
            $
            (0.10
            )
            $
            (0.06
            )**DISCONTINUED
                OPERATIONS**
            
            
            (0.01
            )
            
            (0.01
            )
            
            (0.01
            )
            
            (0.04
            )**NET
                LOSS PER SHARE – BASIC AND DILUTED**
            
            $
            (0.05
            )
            $
            (0.05
            )
            $
            (0.11
            )
            $
            (0.10
            )**WEIGHTED
                AVERAGE SHARES OUTSTANDING – BASIC AND
                DILUTED**
            
            
            46,056,724
            
            
            38,165,124
            
            
            46,056,724
            
            
            38,165,124





See
      accompanying notes to condensed consolidated financial
      statements.


2


**VIOQUEST
      PHARMACEUTICALS, INC. AND SUBSIDIARIES**


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


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2007**


**(UNAUDITED)**




Common Stock
            
            
            Additional
            
            
            
            
            
            TotalShares
            
            
            Amount
            
            
            Paid-In
              Capital
            
            
            Accumulated
              Deficit
            
            
            Stockholders'
              EquityBalance,
                January 1, 2007
            
            
            54,621,119
            
            $
            54,621
            
            $
            31,326,694
            
            $
            (28,540,556
            )
            $
            2,840,759Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            (4,990,527
            )
            
            (4,990,527
            )Fair
                value of beneficial conversion feature and warrants issued in conjunction
                with convertible notes
            
            
            
            
            
            
            
            
            1,537,093
            
            
            
            
            
            1,537,093Stock-based
                compensation to employees
            
            
            
            
            
            
            
            
            619,295
            
            
            
            
            
            619,295Stock-based
                compensation to consultants and finder
            
            
            
            
            
            
            
            
            54,469
            
            
            
            
            
            54,469Balance,
                June 30, 2007
            
            
            54,621,119
            
            $
            54,621
            
            $
            33,537,551
            
            $
            (33,531,083
            )
            $
            61,089





See
      accompanying notes to condensed consolidated financial
      statements.


3


**VIOQUEST
      PHARMACEUTICALS, INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006**


**(UNAUDITED)**





**For the Six**
              **Months Ended**
              **June 30, 2007**
            
            **For the Six**
              **Months Ended**
              **June 30, 2006****CASH
                FLOWS FROM OPERATING ACTIVITIES:**Net
                loss
            
            $
            (4,990,527
            )
            $
            (3,680,098
            )Loss
                from discontinued operations
            
            
            596,897
            
            
            1,260,677Loss
                from continuing operations
            
            
            (4,393,630
            )
            
            (2,419,421
            )Adjustments
                to reconcile net loss from continuing operations to net cash used
                in
                continuing operating activities:Depreciation
            
            
            4,126
            
            
            2,736Stock-based
                compensation to employees
            
            
            534,730
            
            
            474,936Stock-based
                compensation to consultants and finder
            
            
            54,093
            
            
            37,434Changes
                in operating assets and liabilities:Prepaid
                clinical research costs
            
            
            (28,694
            )
            
            (164,011
            )Other
                assets
            
            
            139,438
            
            
            (91,461
            )Accounts
                payable
            
            
            1,191,524
            
            
            276,207Accrued
                expenses
            
            
            161,145
            
            
            132,136Net
                Cash Used in Continuing Operating Activities
            
            
            (2,337,268
            )
            
            (1,751,444
            )Net
                Cash Used in Discontinued Operating Activities
            
            
            (356,217
            )
            
            (1,857,270
            )Net
                Cash Used in Operating Activities
            
            
            (2,693,485
            )
            
            (3,608,714
            )**CASH
                FLOWS FROM INVESTING ACTIVITIES:**Payments
                for purchased equipment
            
            
            (2,277
            )
            
            (5,553
            )Net
                Cash Used in Continuing Investing Activities
            
            
            (2,277
            )
            
            (5,553
            )Net
                Cash Used in Discontinued Investing Activities
            
            
            (26,698
            )
            
            (80,213
            )Net
                Cash Used in Investing Activities
            
            
            (28,975
            )
            
            (85,766
            )**CASH
                FLOWS FROM FINANCING ACTIVITIES:**Debt
                activity:Proceeds
                from issuance of convertible notes with warrants, net of cash costs
                of
                $245,450
            
            
            2,722,050
            
            
            -Repayment
                of note payable
            
            
            (100,000
            )
            
            -Net
                Cash Provided By Continuing Financing Activities
            
            
            2,622,050
            
            
            -**NET
                DECREASE IN CASH AND CASH EQUIVALENTS**
            
            
            (100,410
            )
            
            (3,694,480
            )**CASH
                AND CASH EQUIVALENTS - BEGINNING OF PERIOD**
            
            
            2,931,265
            
            
            6,021,399**CASH
                AND CASH EQUIVALENTS - END OF PERIOD**
            
            $
            2,830,855
            
            $
            2,326,919**Supplemental
                Schedule of Non-Cash Investing and Financing
                Activities:**Value
                of warrants issued to the placement agent in connection with issuances
                of
                convertible notes
            
            $
            356,425
            
            $
            -Value
                of beneficial conversion feature related to convertible
                notes
            
            $
            590,334
            
            $
            -








See
      accompanying notes to condensed consolidated financial
      statements.


4


**VIOQUEST
      PHARMACEUTICALS, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2007 (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,
      2007
      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, 2006. The accompanying
      condensed consolidated balance sheet as of December 31, 2006 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 included a possible sale or other disposition
      of the operating assets of that business. Accordingly, the chiral products
      and
      services operations 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 has only one segment. As a result of these reclassifications, the
      Company no longer provides segment reporting. 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. On July 16,
      2007,
      the Company completed the sale of Chiral Quest, as described in Note
      7.





The
      consolidated balance sheets as of June 30, 2007 and December 31, 2006 and the
      consolidated statements of operations for the three and six months ended June
      30, 2007 and 2006 include reclassifications to reflect discontinued
      operations.




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




Since
      August 2004, the Company has 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. Since October 2005, the Company has held license rights
      to
      develop and commercialize its two oncology drug candidates, LenoctaTM (Sodium
      Stibogluconate), formerly VQD-001, an inhibitor of specific protein tyrosine
      phosphatases, and VQD-002 (Triciribine-Phosphate), an inhibitor of activated
      Akt. The rights to these two oncology drug candidates, LenoctaTM and VQD-002, are
      governed by license agreements with The Cleveland Clinic Foundation and the
      University of South Florida Research Foundation, respectively. In March 2007,
      the Company acquired license rights to develop and commercialize XyfidTM, an
      adjunctive therapy for a common and serious side effect of cancer chemotherapy.
      The Company’s rights to XyfidTM are governed by a license agreement with
      Asymmetric Therapeutics, LLC and Onc Res, Inc., as assigned to the Company
      by
      Fiordland Pharmaceuticals, Inc. See Note 3.




***(C)
      Liquidity***





Since
      inception, the Company has incurred an accumulated deficit of $ 33,531,083 through
      June 30, 2007. For the three and six months ended June 30, 2007, the Company
      had
      losses from continuing operations of $2,136,852 and $4,393,630, respectively,
      and used $2,337,268 of cash in continuing operating activities for the six
      months ended June 30, 2007.


5


**VIOQUEST
      PHARMACEUTICALS, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2007 (UNAUDITED)**





Management
      expects the Company’s losses from continuing operations 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 LenoctaTM,
      VQD-002 and XyfidTM. These matters raise substantial doubt about the ability of
      the Company to continue as a going concern. The
      accompanying condensed consolidated financial statements have been prepared
      assuming that the Company will continue as a going concern. As of June 30,
      2007,
      the Company had working capital of $9,881 and cash and cash equivalents of
      $2,830,855. The Company has incurred negative cash flow from operations since
      its inception. 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 other research and development efforts.





On
      July
      16, 2007 the Company completed the sale of Chiral Quest, which resulted in
      gross
      proceeds to the Company of $1,700,000, as well as the assumption by the
      purchaser of approximately $1,000,000 of liabilities. See Note 7. On June 29,
      2007 and July 3, 2007, the Company also received gross proceeds of $3,700,000
      from the sale of 8% convertible promissory notes. See Note 6. As a result of
      the
      cash proceeds to the Company from those transactions, together with the
      Company’s existing cash, management anticipates that the Company’s capital
      resources will be adequate to fund its operations through the end of the fiscal
      year 2007.





Management
      also expects that additional financing will be required by the first quarter
      of
      2008 to fund continuing operations. The other most likely sources of additional
      financing include the private sale of the Company’s equity or debt securities,
      including 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***





The
      Company issued options
      and warrants to purchase an aggregate of 236,000
      and 4,210,671
      shares of its common
      stock during
      the three and six months ended June 30, 2007, respectively.





Generally,
      stock options and warrants granted to employees and non-employee directors
      during the three and six months ended June 30, 2007 and 2006 vest as to 33%
      of
      the shares on each of the first, second and third anniversaries of the grant
      date. The exception to the vesting of shares over three years for options
      granted to employees and non-employee directors is a stock option to purchase
      150,000 shares of common stock granted to a non-employee director in the first
      quarter of 2006, of which 75,000 vested immediately and 75,000 vested on the
      first anniversary of the grant date.





Stock
      options and warrants granted to parties other than employees and non-employee
      directors vest over individually agreed upon terms. The Company granted
      2,964,671 warrants that vested immediately to investors and placement agents
      that participated in the June 29, 2007 financing relating to the issuance and
      sale of 8% convertible promissory notes. See Note 6.





The
      Company also granted 100,000 warrants that vest immediately to a non-employee
      advisor as partial consideration for a finder’s fee for services relating to the
      Company’s acquisition of rights under a license agreement for XyfidTM, as well as
      certain technical analyses related to XyfidTM. The Company also granted 3,334
      stock options that vest immediately to a non-employee scientific advisory board
      member.




Following
      the vesting periods, options are exercisable until the earlier of 90 days after
      an employee’s employment with the Company terminates or the tenth anniversary of
      the initial grant, subject to adjustment under certain conditions. The
      Company recorded total compensation charges in the three and six months ended
      June 30, 2007 related to the fair value of continuing and discontinued employee
      and non-employee director stock option grants of $324,718 and $619,295,
      respectively.




The
      Company uses the Black-Scholes option pricing model
      to calculate the fair value of options and warrants granted under Statement
      of Financial Accounting Standards (“SFAS”) No. 123R, Share-based Payment
      (“SFAS 123R”),during
      the three and six months ended June 30, 2007. 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 three and six months ended June 30, 2007 were $0.54 and $0.52,
      respectively.


6


**VIOQUEST
      PHARMACEUTICALS, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2007 (UNAUDITED)**





The
      table
      below indicates the key assumptions used in the valuation calculations for
      options granted in the three and six months ended June 30, 2007 and
      2006:





Three Months Ended
              June 30,
            
            Six Months Ended
              June 30,2007
            
            2006
            
            2007
            
            2006Term
            
            
            7
                years
            
            
            7
                years
            
            
            7
                years
            
            
            7
                yearsVolatility
            
            
            238
            %
            
            217
            %
            
            232-238
            %
            
            210-217
            %Dividend
                yield
            
            
            0.0
            %
            
            0.0
            %
            
            0.0
            %
            
            0.0
            %Risk-free
                interest rate
            
            
            4.6-4.9
            %
            
            5.0
            %
            
            4.6-4.9
            %
            
            4.4-5.0
            %Forfeiture
                rate
            
            
            22
            %
            
            23
            %
            
            22
            %
            
            22-23
            %




The
      following table summarizes information about the Company’s stock options as of
      and for the six months ended June 30, 2007:





Number of
              Options
            
            Weighted
              Average
              Exercise Price
            
            Weighted Average
              RemainingContractual
              Life (Years)
            
            Aggregate
              Intrinsic ValueBalance,
                January 1, 2007
            
            
            5,384,807
            
            $
            0.99Granted
            
            
            946,000
            
            $
            0.54Exercised
            
            
            -
            
            
            -Forfeited
                or expired
            
            
            (55,800
            )
            
            -Outstanding
                at June 30, 2007
            
            
            6,275,007
            
            $
            0.92
            
            
            8.2
            
            
            -Exercisable
                at June 30, 2007
            
            
            2,821,743
            
            $
            1.12
            
            
            7.4
            
            
            -





As
      of
      June 30, 2007, there was $1,126,448 of unrecognized compensation costs related
      to stock options. These costs are expected to be recognized over a weighted
      average period of approximately 1.8 years.





As
      of
      June 30, 2007, an aggregate of 1,224,993 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)
      Warrants Issued With Convertible Debt***





The
      Company accounts for the value of warrants and the intrinsic value of beneficial
      conversion rights arising from the issuance of convertible debt instruments
      with
      nondetachable conversion rights that are in-the-money at the commitment date
      pursuant to the consensuses for EITF Issue No. 98-5, EITF Issue No. 00-19 and
      EITF Issue No. 00-27. Such values are determined by allocating an appropriate
      portion of the proceeds received from the debt instruments to the debt and
      warrants based on their relative fair value. The fair value allocated to the
      warrants is recorded as additional paid-in capital and as debt discount, which
      is charged to interest expense over the term of the debt instrument. The
      intrinsic value of the beneficial conversion rights at the commitment date
      may
      also be recorded as additional paid-in capital and debt discount as of that
      date
      or, if the terms of the debt instrument are contingently adjustable, may only
      be
      recorded if a triggering event occurs and the contingency is
      resolved.




*(F)
        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 to be released based upon the achievement of
        clinical milestones of LenoctaTM and VQD-002, as a result of the acquisition of
        Greenwich Therapeutics, Inc. in 2005. 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.
        At
        June 30, 2007, there were 34,429,457 potentially dilutive shares excluded
        from
        the calculation, which was comprised of 19,590,055 warrants, 8,564,395 shares
        held in escrow, and 6,275,007 stock options. At June 30, 2006, there were
        27,128,366 shares excluded.


7


**VIOQUEST
      PHARMACEUTICALS, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2007 (UNAUDITED)**





**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
      included a possible sale or other disposition of the operating assets of that
      business. On April 10, 2007, the Company entered into a definitive agreement
      to
      sell all of the outstanding capital stock of Chiral Quest to Chiral Quest
      Acquisition Corp. (the “Purchaser”). The Company’s stockholders approved the
      sale of Chiral Quest at the annual meeting held on May 24, 2007, and the
      transaction was completed on July 16, 2007. See Note 7. 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 June 30, 2007 and December 31, 2006, the current assets
      of
      discontinued operations totaled $ 1,879,133 and
      $2,396,435 respectively, which consisted of accounts receivable, inventories,
      prepaid expenses, fixed assets, net of accumulated depreciation, patents, net
      of
      accumulated amortization, security deposits and prepaid rent. Current
      liabilities as of June 30, 2007 and December 31, 2006 associated with
      discontinued operations totaled $871,754 and $1,265,568 respectively, which
      consisted of accounts payable, accrued expenses and deferred revenues. Revenues
      from discontinued operations for the three and six months ended June 30, 2007
      totaled $680,581 and $1,484,365, respectively, and revenues for the three and
      six months ended June 30, 2006 totaled $857,320 and $1,456,196, respectively.
      Loss from discontinued operations for the three and six months ended June 30,
      2007, 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 $335,422 and $596,897
      respectively. Loss from discontinued operations for the three and six months
      ended June 30, 2006, totaled $410,900 and $1,260,677, respectively.





**NOTE
      3** **** **LICENSE
      AGREEMENT**





On
      March
      29, 2007, the Company acquired exclusive license rights to XyfidTM, a
      pharmaceutical product candidate being developed for the treatment and
      prevention of Hand-Foot Syndrome, or HFS, a common, often dose-limiting and
      potentially life-threatening complication of several chemotherapy drugs. The
      Company’s rights
      to
      XyfidTM are governed by a license agreement with Asymmetric Therapeutics, LLC and
      Onc Res, Inc., as assigned to the Company by Fiordland Pharmaceuticals, Inc.,
      an
      entity affiliated with Dr. Rosenwald, who is a significant stockholder of the
      Company. In
      consideration for the rights under the license agreement, the Company paid
      to
      the licensor an aggregate $300,000 for license related fees, and $37,000 for
      patent prosecution costs. In addition, the Company paid to a third party finder
      a cash fee of $20,000 and a five-year warrant to purchase 300,000 shares of
      the
      Company’s common stock at an exercise price of $0.50 per share. The right to
      purchase the shares under the warrant vests in three equal installments of
      100,000 each, with the first installment being immediately exercisable, and
      the
      remaining two installments vesting upon the achievement of certain clinical
      development and regulatory milestones relating to XyfidTM. The Company recognized
      approximately $50,000 of expense in the first quarter of 2007 when the first
      100,000 warrants vested. In consideration of the license, the Company is
      required to make payments upon the achievement of various clinical development
      and regulatory milestones, which total up to $6.2 million in the aggregate.
      The
      license agreement further requires the Company to make payments of up to an
      additional $12.5 million in the aggregate upon the achievement of various
      commercialization and net sales milestones. The Company will also be obligated
      to pay a royalty on net sales of the licensed product.





**NOTE
      4** **** **EMPLOYMENT
      AGREEMENT**





On
      February 1, 2007 the Company entered into an employment agreement with Edward
      C.
      Bradley, M.D., as its Chief Scientific Officer. The agreement is for an
      indefinite term beginning on February 1, 2007 and provides for an initial base
      salary of $330,000, plus an annual target bonus of up to 20% of base salary
      based upon his personal performance and an additional amount
      of
      up to 10% of base salary based upon Company performance. Pursuant to the
      employment agreement, Dr. Bradley received a stock option to purchase 700,000
      shares of the Company’s common stock. The option vests in three equal annual
      installments, commencing in February 2008 and will be exercisable at a price
      per
      share equal to $0.55. The stock option had an approximate fair value of $363,000
      at the date of grant based on the Black-Scholes option pricing model, which
      is
      being amortized over three years. The employment agreement also entitles Dr.
      Bradley to certain severance benefits. In the event that the Company terminates
      Dr. Bradley’s employment without cause, then Dr. Bradley is entitled to receive
      his then annualized base salary for a period of six months. If Dr. Bradley’s
      employment is terminated without cause, and within a year of a change of
      control, then Dr. Bradley is entitled to receive his then annualized base salary
      for a period of one year, and he is entitled to receive any bonuses he has
      earned at the time of his termination.


8


**VIOQUEST
      PHARMACEUTICALS, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2007 (UNAUDITED)**








**NOTE
      5** **** **NOTE
      PAYABLE**





On
      October 18, 2005, as a result of the Company’s acquisition of Greenwich
      Therapeutics, Inc. (“Greenwich”), a New York-based biotechnology company, the
      Company assumed outstanding indebtedness of Greenwich of $823,869, all of which
      was payable to Paramount BioSciences, LLC, an affiliate of Paramount BioCapital,
      Inc. (“Paramount”), pursuant to a promissory note dated October 17, 2005. Dr.
      Lindsay A. Rosenwald is the Chairman, CEO and sole stockholder of Paramount
      and
      a substantial stockholder of the Company. As of June 30, 2007, approximately
      $165,000 of principal and $21,000 of accrued interest remained outstanding
      under
      the Note. On July 17, 2007, the Company paid the outstanding balance under
      the
      promissory note.





**NOTE
      6** **** **CONVERTIBLE
      NOTES**





On
      June
      29, 2007 and July 3, 2007, the Company issued and sold a series of 8%
      convertible promissory notes (the “Bridge Notes”) in the aggregate principal
      amount of $3,700,000 with a term of one year from the date of final closing.
      The
      face value of the Bridge Notes issued on June 29, 2007 and July 3, 2007, was
      $2,967,500 and $732,500, respectively. The Company incurred commissions and
      related costs in association with the Bridge Notes of $245,450 and $50,750
      (as
      explained below) for the June 29, 2007 and July 3, 2007 financings,
      respectively. The Company also issued to investors five-year warrants (“Bridge
      Warrants”) to purchase an aggregate of approximately 2,430,000 shares of the
      Company’s common stock at an exercise price of $0.40 per share, which had a fair
      value of $736,935 and $172,301 as of June 29, 2007 and July 3, 2007,
      respectively. The Company allocated proceeds from the sale to the Bridge
      Warrants of $590,334 and $139,489 as of June 29, 2007 and July 3, 2007,
      respectively, based on their relative fair values to the fair value of the
      Bridge Notes, which was recorded as a discount to the Bridge Notes. Gross
      proceeds allocated to the Bridge Notes were $2,377,166 for the June 29, 2007
      issuances, and $593,011 for the July 3, 2007 issuances. The discount associated
      with the value of the warrants will be amortized to interest expense over the
      term of the Bridge Notes.





As
      a
      result of the allocation of proceeds to the Bridge Warrants, the Bridge Notes
      contained a Beneficial Conversion Feature (“BCF”) of $590,334 for the June 29,
      2007 financing, and $139,489 for the July 3, 2007 financing, which was
      attributable to an effective conversion price for the Company’s common stock
      that was less than the market value on the date of issuance. This amount was
      recorded as additional debt discount and additional paid-in capital, which
      reduced the initial carrying value of the Bridge Notes to $1,786,832 for the
      June 29, 2007 financing and $453,521 for the July 3, 2007 financing. The
      discount associated with the BCF will also be amortized to interest expense
      over
      the term of the Bridge Notes.





In
      connection with the Bridge Notes, the Company issued five-year warrants to
      placement agents to purchase an aggregate of 1,202,500 shares of common stock,
      which are exercisable at a price of $0.42 per share. Based on the Black-Scholes
      option pricing model, the warrants have a fair value of $356,425 for the June
      29, 2007 financing and $73,441 for the July 3, 2007 financing. Additionally,
      the
      Company incurred commissions of $205,450, a non-accountable expense allowance
      of
      $35,000 to the placement agents and escrow fees of $5,000 for the June 29,
      2007
      financing and commissions of $50,575 for the July 3, 2007 financing. The Company
      engaged Paramount as one of its placements agents. Dr. Lindsay A. Rosenwald
      is
      the Chairman, CEO and sole stockholder of Paramount and a substantial
      stockholder of the Company. Stephen C. Rocamboli, the Company’s chairman, was
      employed by Paramount at the time of the Company’s engagement. Of the total
      consideration provided to the placement agents, the Company issued warrants
      to
      Paramount to purchase 450,000 shares of common stock and paid
      commissions of approximately $119,700. The fair value of the warrants,
      commissions and fees totaling $601,875 for the June 29, 2007 financing have
      been
      recognized as deferred financing fees as of June 30, 2007, which will be
      amortized over the term of the Bridge Notes.




The
      following assumptions were used for the Black-Scholes calculations for the
      warrants related to the Bridge Notes:





Term
            
            
            5
                yearsVolatility
            
            
            240
            %Dividend
                yield
            
            
            0.0
            %Risk-free
                interest rate
            
            
            4.9-5.0
            %





**NOTE
      7** **** **SUBSEQUENT
      EVENT**





On
      July
      16, 2007, the Company completed the sale of all of the outstanding stock of
      its
      Chiral Quest, Inc. subsidiary to the Purchaser. The sale was made pursuant
      to a
      Stock Purchase and Sale Agreement dated April 10, 2007, as amended on June
      8,
      2007 (the “Purchase Agreement”), between the Company and Purchaser. In
      accordance with the terms of the Purchase Agreement, the Company received
      $1,700,000 in cash, plus the Purchaser assumed liabilities in the aggregate
      amount of approximately $1,000,000. In addition, the Company agreed to pay
      approximately $197,000 in accrued compensation costs related to a severance
      agreement and retention bonuses payable to certain key employees. The chairman
      and a principal owner of the Purchaser is Dr. Xumu Zhang. Dr. Zhang co-founded
      Chiral Quest and had been a director of the Company from February 2003 to May
      2007.




9


**VIOQUEST
        PHARMACEUTICALS, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
        30, 2007 (UNAUDITED)**


The
      following proforma balance sheet has been prepared under the assumption that
      the
      Company completed both the sale of Chiral Quest and the July 3, 2007 Bridge
      Notes as of June 30, 2007:





**June 30, 2007**
              **(Proforma)****ASSETS****CURRENT
                ASSETS**Cash
                and cash equivalents
            
            $
            5,218,971Prepaid
                clinical research costs
            
            
            227,263Deferred
                financing costs
            
            
            725,891Other
                current assets
            
            
            104,006Current
                assets associated with discontinued operations
            
            
            -Total
                Current Assets
            
            
            6,276,131**PROPERTY
                AND EQUIPMENT, NET**
            
            
            35,976**SECURITY
                DEPOSITS**
            
            
            15,232**TOTAL
                ASSETS**
            
            $
            6,327,339**LIABILITIES
                AND STOCKHOLDERS' EQUITY****CURRENT
                LIABILITIES**Accounts
                payable
            
            $
            2,222,982Accrued
                compensation and related taxes
            
            
            331,985Other
                accrued expenses
            
            
            451,836Note
                payable - Paramount BioSciences, LLC
            
            
            164,623Convertible
                notes, net of unamortized debt discount
            
            
            2,240,354****Current
                liabilities associated with discontinued operations
            
            
            -**TOTAL
                LIABILITIES**
            
            
            5,411,780**STOCKHOLDERS'
                EQUITY**Preferred
                stock
            
            
            -Common
                stock
            
            
            54,621Additional
                paid-in capital
            
            
            33,889,970Accumulated
                deficit
            
            
            (33,029,032
            )Total
                Stockholders' Equity
            
            
            915,559**TOTAL
                LIABILITIES AND STOCKHOLDERS' EQUITY**
            
            $
            6,327,339




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 LenoctaTM (Sodium Stibogluconate)
      and VQD-002 (Triciribine Phosphate) through license agreements with The
      Cleveland Clinic Foundation and the University of South Florida Research
      Foundation, respectively. We have initiated four Phase I/IIa clinical trials
      since acquiring the license rights to LenoctaTM and VQD-002. In March 2007, we
      obtained an exclusive, worldwide license to certain patents relating to XyfidTM
from Fiordland Pharmaceuticals, Inc.





·
            ***LenoctaTM
                (Sodium Stibogluconate).***LenoctaTM is a pentavalent antimonial drug that has been in use for over 50
                years in parts of Africa and Asia for the treatment of leishmaniasis
                (a
                protozoan disease). According to 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
                U.S. military personnel serving in parts of the world where leishmaniasis
                is prevalent. In collaboration with the U.S. Army, we are pursuing
                development of LenoctaTM in the treatment of leishmaniasis and anticipate
                filing a new drug application, or NDA, with the U.S. Food and Drug
                Administration, or FDA, in the second half of 2007. In December 2006,
                LenoctaTM received orphan drug designation by the FDA for the treatment of
                leishmaniasis. In addition to the treatment for leishmaniasis, several
                preclinical studies, especially those conducted at the Cleveland
                Clinic,
                have showed that LenoctaTM is an inhibitor of multiple protein tyrosine
                phosphatases (PTPases), specifically the SRC homology PTPase (SHP-1
&
                SHP-2) and PTB-1B. 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 LenoctaTM can trigger apoptosis, or cell death, of
                cancerous tumors. 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 LenoctaTM has potential as an
                anti-cancer agent. It is well known that one major mechanism of regulating
                the proliferation, growth and apoptosis of cancer cells involves
                activation of cellular pathways, especially protein tyrosine kinase
                pathways; the Jak/Stat pathway is a particularly important protein
                tyrosine kinase pathway. It is also known that interferon and other
                cytokines exert their anti-cancer effects via the Jak/Stat pathway.
                We
                filed with the FDA an IND for LenoctaTM, which the FDA allowed in August
                2006, allowing us to commence clinical trials of LenoctaTM. LenoctaTM 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 LenoctaTM in a separate, company-sponsored
                study of up to a 54-patient Phase I/IIa clinical trial at M.D. Anderson
                Cancer Center in patients with solid tumors. In the second half of
                2007,
                we expect to complete patient enrollment in our Phase I clinical
                trials
                and expect to initiate Phase II clinical
                trials.




·
            ***VQD-002
                (Triciribine-Phosphate).***VQD-002,
                a nucleoside, was previously advanced into clinical trials by the
                National
                Cancer Institute in the 1980s and early 1990s, and showed 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 is the inhibition of Akt
                phosphorylation (protein kinase - B), which is found to be over activated
                and over-expressed in various malignancies including breast, ovarian,
                colorectal, and pancreatic lymphoma and leukemias. Clinically, the
                over
                expression of phosphorylated Akt is associated with poor prognosis,
                resistance to chemotherapy and shortened survival time of cancer
                patients.
                We filed with the FDA an IND relating to VQD-002, which was allowed
                in
                April 2006. Pursuant to this IND, we are currently evaluating the
                safety,
                tolerability and activity of VQD-002 and its ability to reduce Akt
                phosphorylaion 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 trial, with up to 40 patients, at the M.D.
                Anderson
                Cancer Center in hematological tumors, with particular attention
                in
                leukemia. In the second half of 2007, we expect to complete patient
                enrollment in our Phase I clinical trials and expect to initiate
                Phase II
                clinical trials. Additionally, we expect to initiate several combination
                Phase II clinical trials.





·
            ***XyfidTM.*********XyfidTM
                is a topical, adjunctive therapy which has shown early clinical promise
                in
                the treatment and prevention of Hand-Foot Syndrome, or HFS, a common,
                often dose-limiting and potentially life-threatening complication
                of
                several drug regimens, commonly used in the treatment of patients
                with
                breast, colon, and other cancers.  HFS, also known as palmar-plantar
                erythrodysesthesia syndrome, is commonly seen in patients receiving
                capecitabine (XelodaTM) and has been associated with other
                fluoropyrimidines and anthracyclines. In addition, HFS is being seen
                in
                patients receiving some of the newer tyrosine kinase class of therapies
                sorafenib (NexavarTM). Incidence of HFS can be as high as 50% in patients
                receiving initial chemotherapy with higher dose regimens of capecitabine.
                In the second half of 2007, we expect to initiate Phase II clinical
                trials.





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.


11





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 2008 for the treatment of leishmaniasis, 2009
      for XyfidTM, and 2010
      for oncology indications of VQD-002 and then 2011for oncology indications of LenoctaTM, if ever.
      In addition, as we continue the development of our product candidates, our
      research and development expenses will significantly 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
      to
      increase. 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.





Research
      and development expenses consist primarily of salaries and related personnel
      costs, fees paid to consultants and outside service providers for clinical
      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 June 30, 2007 vs. June 30, 2006**





**Continuing
      Operations:**





The
      Company has had no revenues from its continuing operations through June 30,
      2007.





Research
      and development, or R&D, expenses for the three months ended June 30, 2007
      were $950,844 as compared to $327,055 during the three months ended June 30,
      2006. R&D expense consists of clinical development costs, milestone license
      fees, maintenance fees paid to our licensing institutions, outside manufacturing
      costs, outside clinical research organization costs, regulatory and patent
      filing costs associated with our two oncology compounds, LenoctaTM and
      VQD-002, currently in clinical trials, in addition to the license acquisition
      costs of XyfidTM
in
      March 2007 .
      The
      increase in R&D expenses for the three months ended June 30, 2007 is
      primarily attributable to the increased clinical development costs related
      to
      our oncology drug candidates: VQD-002, Lenocta TM and
      Xyfid TM of
      approximately $497,000, $427,000 and $27,000, respectively. Our R&D expense
      increase for the second quarter 2007 is also attributable to increased outside
      regulatory and legal fees of approximately $178,000, employee costs of
      approximately $212,000 and outside clinical research organization costs of
      approximately $171,000, which have been allocated to each of our three
      pharmaceutical product candidates. For the remainder of the year, and going
      forward, we expect R&D spending related to our existing product candidates LenoctaTM, VQD-002
      and XyfidTM to continue increasing as we expand our clinical trials.





Selling,
      general and administrative, or SG&A, expenses for the three months ended
      June 30, 2007 were $1,192,399 as compared to $1,082,480 during the three months
      ended June 30, 2006. This increase in SG&A expenses was primarily due to an
      increase in employee and non-employee director stock option expense in
      accordance with SFAS 123R, additional spending on conference expenses, increased
      travel expenses for new business development opportunities and higher
      administrative expenses associated with having more employees including our
      Chief Scientific Officer hired in February 2007, our Vice President of Clinical
      Operations and Regulatory Affairs hired in October 2006, in addition to other
      related employee costs such as increased insurance, and employer payroll taxes
      and increased rent expense as a result of expanding our leased corporate
      headquarters facility in Basking Ridge, New Jersey in November
      2006.





Interest
      income, net of interest expense for the three months ended June 30, 2007 was
      $6,391 as compared to $2,084 for the three months ended June 30, 2006. Interest
      income received during the three months ended June 30, 2007 was approximately
      $8,000, which was offset by interest expense of approximately $2,000 for the
      repayment of the final one third amount of debt owed, of approximately $165,000,
      to Paramount BioSciences, LLC, which was assumed as part of our October 2005
      acquisition of Greenwich Therapeutics.





Our
      loss
      from continuing operations for the three months ended June 30, 2007 was
      $2,136,852 as compared to $1,407,451 for the three months ended June 30, 2006.
      The increased loss from continuing operations for the three months ended June
      30, 2007 as compared to the three months ended June 30, 2006 was attributable
      primarily to increased R&D expenses, which were related to our drug
      development costs, including increased patient enrollment compared to the three
      months ended June 30, 2006, increased outside clinical research organization
      and
      manufacturing costs, maintenance and licensing fees provided to the institutions
      we licensedLenoctaTMand
      VQD-002 from, in addition to other clinical development costs for theLenoctaTMand
      VQD-002 programs. Additionally, R&D expense increased as a result of
      acquiring the worldwide license to certain patents forXyfidTMin March
      2007. SG&A expenses also contributed to the increased net loss for the three
      months ended June 30, 2007 as compared to the three months ended June 30, 2006,
      primarily due to an increase in employee and non-employee director stock option
      expense in accordance with SFAS 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 Chief Scientific Officer hired in February 2007, the Vice President
      of Clinical Operations and Regulatory Affairs hired in October 2006, in addition
      to other related employee costs such as increased insurance, and employer
      payroll taxes and increased rent expense for the expansion of space for our
      leased corporate headquarter facility in Basking Ridge, New Jersey. 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 June 30, 2007 was
      $335,422, as compared to $410,900 for the three months ended June 30, 2006.
      The
      decreased loss from discontinued operations for the three months ended June
      30,
      2007 as compared to the three months ended June 30, 2006 was primarily
      attributable to lower cost of sales, yielding higher gross margins through
      the
      increased utilization of our China operations for the manufacturing of our
      products, in addition to lower employee costs as a result of reductions in
      headcount in our Monmouth Junction, New Jersey facility in the fourth quarter
      of
      2006.





**Results
      of Operations – For the Six Months Ended June 30, 2007 vs. June 30, 2006**





**Continuing
      Operations:**





The
      Company has had no revenues from its continuing operations through June 30,
      2007.





R&D
      expenses for the six months ended June 30, 2007 were $2,319,655 as compared
      to
      $616,701 during the six months ended June 30, 2006. R&D expense consists of
      clinical development costs, milestone license fees, maintenance fees paid to
      our
      licensing institutions, outside manufacturing costs, outside clinical research
      organization costs, regulatory and patent filing costs associated to our two
      oncology compounds LenoctaTM and
      VQD-002 currently in clinical trials, in addition to the license acquisition
      costs of XyfidTM
in
      March 2007 .
      The
      Company incurred clinical development costs for its oncology drug candidates
      VQD-002 of approximately $974,000, LenoctaTM
      of approximately $883,000 and XyfidTM of approximately $462,000 .
      The
      increase in R&D expenses for the six months ended June 30, 2007 is primarily
      attributable to the increased clinical development costs related to our clinical
      trials and the license acquisition costs for XyfidTM of approximately $435,000,
      which consists of license fees, patent costs, stock options issued as part
      of a
      finder’s fee, and diligence analysis costs. Additionally, the increased R&D
      expense for the six months ended June 30, 2007 is attributable to outside
      regulatory and legal fees of approximately $315,000, employee costs of
      approximately $366,000, outside clinical research organization costs of
      approximately $557,000 and outside manufacturing costs of approximately $17,000,
      which have been allocated to each of our three pharmaceutical product
      candidates. For the remainder of the year, and going forward, we expect R&D
      spending related to our existing product candidates LenoctaTM, VQD-002
      and XyfidTM to continue increasing as we expand our clinical trials.





SG&A
      expenses for the six months ended June 30, 2007 were $2,106,050 as compared
      to
      $ 1,851,835 during
      the six months ended June 30, 2006. This increase in SG&A expenses was due
      in part to an increase in recruiting fees for business development and finance
      positions of approximately $130,000, additional spending on investor relations
      expenses and higher administrative expenses associated with having more
      employees, in addition to other related employee costs such as increased
      insurance and employer payroll taxes and increased rent expense as a result
      of
      expanding our leased corporate headquarters facility in Basking Ridge, New
      Jersey in November 2006.





Interest
      income, net of interest expense for the six months ended June 30, 2007 was
      $32,075 as compared to $49,115 for the six months ended June 30, 2006. Interest
      income received during the six months ended June 30, 2007 was approximately
      $37,000, which was offset by interest expense of approximately $5,000 for the
      debt owed of approximately $165,000 to Paramount BioSciences, LLC, which was
      assumed as part of our October 2005 acquisition of Greenwich
      Therapeutics.





Our
      loss
      from continuing operations for the six months ended June 30, 2007 was $4,393,630
      as compared to $2,419,421 for the six months ended June 30, 2006. The increased
      loss from continuing operations for the six months ended June 30, 2007 as
      compared to the six months ended June 30, 2006 was attributable to higher
      R&D costs related to our drug development efforts, including outside
      clinical research organization and manufacturing costs, maintenance and
      licensing fees provided to the institutions we licensed LenoctaTM and
      VQD-002 from and acquiring the worldwide license to certain patents for XyfidTM in March
      2007, in addition to other clinical development costs for the LenoctaTM, VQD-002
      and Xyfid TM programs. Additionally, SG&A expense increased as a result of additional
      recruiting fees of approximately $130,000, additional spending on investor
      relations expenses and higher administrative expenses associated with having
      more employees.


13





**Discontinued
      Operations:**





Our
      loss
      from discontinued operations for the six months ended June 30, 2007 was $596,897
      as compared to $1,260,677 for the six months ended June 30, 2006. The decreased
      loss from discontinued operations for the six months ended June 30, 2007 as
      compared to June 30, 2006 was primarily attributable to increased revenues,
      lower cost of sales yielding higher margins attributed to the increased
      utilization of our China operations for the manufacturing of our products,
      in
      addition to lower employee costs as a result of reductions in headcount in
      our
      Monmouth Junction, New Jersey facility in the fourth quarter of
      2006.




**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 Greenwich Therapeutics, Inc., a privately-held New York-based
      biotechnology company that held exclusive rights to develop and commercialize
      two oncology drug candidates: LenoctaTM and
      VQD-002. The rights to these two oncology drug candidates are governed by
      license agreements with The Cleveland Clinic Foundation and the University
      of
      South Florida Research Foundation, respectively. As a result of our acquisition
      of Greenwich Therapeutics, we hold exclusive rights to develop, manufacture,
      use, commercialize, lease, sell and/or sublicense LenoctaTM and
      VQD-002. In March 2007, we acquired license rights to develop and commercialize XyfidTM
an
      adjunctive therapy for a common and serious side effect of cancer chemotherapy.
      Our rights to XyfidTM are governed by a license agreement with Asymmetric
      Therapeutics, LLC and Onc Res, Inc., as assigned to us by Fiordland
      Pharmaceuticals, Inc., an entity affiliated with Dr. Rosenwald, who is a
      significant stockholder of our Company.





As
      a
      result of acquiring the license rights to LenoctaTM ,
      VQD-002
      and XyfidTM, we
      immediately undertook funding their development, 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 LenoctaTM, VQD-002
      and XyfidTM ,
      all of
      which are only in early stages of clinical development, is a very lengthy and
      expensive process. Until such development is complete and the FDA (or the
      comparable regulatory authorities of other countries) approves LenoctaTM, VQD-002,
      or XyfidTM for
      sale, we will not be able to sell these products.





Since
      inception, we have incurred an accumulated deficit of $33,531,083 through June
      30, 2007. For the three and six months ended June 30, 2007, we had losses from
      continuing operations of $2,136,852 and $4,393,630, respectively, and used
      $2,337,268 in cash from continuing operating activities. As of June 30, 2007,
      we
      had working capital of $9,881 and cash and cash equivalents of $2,830,855.
      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 LenoctaTM, VQD-002
      and XyfidTM .
      These
      matters raise substantial doubt about our ability to continue as a going
      concern.





We
      anticipate that our capital resources will be adequate to fund our operations
      through the end of the fiscal year 2007. Additional financing will be required
      within the first quarter of 2008 in order to continue to fund continuing
      operations. The other most likely sources of additional financing include the
      private sale of our equity or debt securities. 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
      our 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.





Our
      net
      cash used in continuing operating activities for the six months ended June
      30,
      2007 was $2,337,268. Our net cash used in operating activities primarily
      resulted from a net loss of $4,990,527 offset by a loss from discontinued
      operations of $596,897, non-cash items consisting of the impact of expensing
      employee and director stock options in accordance with SFAS 123R of $534,730,
      the impact of expensing scientific advisory board member consultants’ options
      and non-employee finder’s fee options related to the license acquisition of XyfidTM in
      accordance with Emerging Issues Task Force (“EITF”) 96-18 for $54,093, and
      depreciation of $4,126. Other uses of cash in continuing operating activities
      include a an increase in prepaid clinical research organization costs of $28,694
      attributed to our three oncology compounds’ development, offset by an increase
      in other assets of $139,438. Additional increases in cash from continuing
      operations included an increase in accounts payable of $1,191,524 and accrued
      expenses of $161,145, which was attributed to clinical development costs, legal,
      accounting fees, in addition to accrued compensation.





Our
      net
      cash used in continuing investing activities for the six months ended June
      30,
      2007 totaled $2,277, which resulted from capital expenditures which were
      attributable to the purchases of computer and office equipment for the Basking
      Ridge, New Jersey facility.





Our
      net
      cash provided by continuing financing activities for the six months ended June
      30, 2007 was $2,622,050, which was primarily attributed to a series of notes
      issued to investors for approximately $2,700,000, net of placement agents’
commissions and other related costs associated with issuing the such notes,
      in addition to a partial repayment of debt for $100,000 owed to Paramount
      BioSciences, LLC, with an outstanding debt balance of $164,623, and accrued
      interest of approximately $21,000, was paid in full during July 2007, which
      was
      attributable to the acquisition of Greenwich Therapeutics, Inc. in
      2005.


14




As
      part
      of our plan for additional employees, we anticipate hiring additional full-time
      employees in the medical, clinical and business development 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 products' development, manufacturing, clinical and preclinical development,
      and regulatory and quality assurance functions.





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 $13.6 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, pre-clinical and laboratory studies),
      approximately $130,000 on facilities, rent and other facilities costs, and
      approximately $2.9 million on general corporate and working capital.
      Additionally, as of June 30, 2007, we had an outstanding
      debt balance due to Paramount BioSciences, LLC of $164,623 and approximately
      $21,000 of accrued interest through July 18, 2007, which has been subsequently
      paid in full.





On
      June
      29, 2007 and July 3, 2007 we issued a series of convertible promissory notes
      resulting in aggregate gross proceeds of $3.7 million. We also issued to
      investors five-year warrants to purchase an aggregate of approximately 2.43
      million shares of the Company’s common stock at an exercise price of $0.40 per
      share. Based upon the Black-Scholes option pricing model, the investor warrants
      are estimated to be valued at approximately $909,000. In connection with the
      offering, we engaged Paramount as one of our placements agents. Dr. Lindsay
      A.
      Rosenwald is the Chairman, CEO and sole stockholder of Paramount and a
      substantial stockholder of the Company. Stephen C. Rocamboli, a director of
      the
      Company, was employed by Paramount at the time of the Company’s engagement. In
      consideration for the placement agents’ services, we paid an aggregate of
      approximately $256,000 in commissions to the placement agents in connection
      with
      the offering, of which $119,700 was paid to Paramount. We also paid to placement
      agents $35,000 as a non-accountable expense allowance. In addition, we issued
      placement agents five-year warrants to purchase an aggregate of approximately
      1.2 million shares of common stock, of which 450,000 shares of common stock
      were
      issued to Paramount, which are exercisable at a price of $0.42 per share. Based
      upon the Black-Scholes option pricing model, the placement agents’ warrants are
      estimated to be valued at approximately $430,000.





On
      July
      16, 2007, we completed the sale of our discontinued operation Chiral Quest,
      Inc., and received $1.7 million gross proceeds, of which we recognized $197,000
      in accrued compensation costs related to a severance agreement and retention
      bonuses payable to certain key employees. Additionally, the Purchaser assumed
      liabilities in the aggregate amount of approximately $1 million as part of
      the
      purchase price consideration.





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.


15


**Item
      3. Controls and Procedures.**





As
      of
      June 30, 2007, 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 June 30, 2007, 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
      4. Submission of Matters to a Vote of Security Holders.**





The
      Company held its Annual Meeting of Stockholders at the Somerset Hills Hotel,
      200
      Liberty Corner Road in Warren, New Jersey on May 24, 2007. The stockholders
      took
      the following actions:




(i)
      The
      stockholders elected five directors to serve until the next Annual Meeting
      of
      Stockholders. The stockholders present in person or by proxy cast the following
      numbers of votes in connection with the election of directors, resulting in
      the
      election of all nominees:




**Nominee**
            
            **Votes
                For**
            
            **Votes
                Withheld**Vincent
                M. Aita
            
            
            33,604,785
            
            
            359,764Daniel
                Greenleaf
            
            
            33,602,585
            
            
            361,964Johnson
                Y.N. Lau
            
            
            33,453,845
            
            
            510,704Stephen
                C. Rocamboli
            
            
            33,241,208
            
            
            723,341Michael
                Weiser
            
            
            33,604,785
            
            
            359,764




(ii)
      The
      stockholders approved the Company’s sale of its Chiral Quest, Inc. subsidiary.
      There were 28,628,942 shares cast for the proposal; 178,240 shares cast against
      the proposal; 77,619 shares abstained; and there were 5,079,748 broker
      non-votes.





(iii)
      The
      stockholders approved a proposal to authorize an amendment to the Company’s
      certificate of incorporation to effect a combination of the Company’s common
      stock in the ratio of up to 1-for-10, in the discretion of the Company’s board
      of directors. There were 32,889,348 votes cast for the proposal; 1,069,778
      votes
      were cast against the proposal; 5,423 votes abstained; and there were 0 broker
      non-votes.





(iv)
      The
      stockholders ratified and approved an amendment to the Company’s 2003 Stock
      Option Plan increasing the number of shares of common stock authorized for
      issuance thereunder to 7,500,000. There were 27,859,098 votes cast for the
      proposal; 1,016,420 votes were cast against the proposal; 9,283 votes abstained;
      and there were 5,079,748 broker non-votes.




(v)
      The
      stockholders ratified the appointment of J.H. Cohn LLP as the Company’s
      independent registered public accounting firm for 2007. There were 33,500,172
      votes cast for the proposal; 379,415 votes were cast against the proposal;
      84,962 votes abstained; and there were 0 broker non-votes.





**Item
      6. Exhibits**





Exhibit
                No.
            
            Description4.1
            
            Form
                ofsenior
                convertible promissory note issued by VioQuest Pharmaceuticals, Inc.
                on
                June 29, 2007 and July 3, 2007 (incorporated by reference to Exhibit
                4.1
                of the Company’s Form 8-K filed with the SEC on July 6,
                2007).4.2
            
            Form
                of warrant issued to investors by VioQuest Pharmaceuticals, Inc.
                on June
                29, 2007 and July 3, 2007 (incorporated by reference to Exhibit 4.2
                of the
                Company’s Form 8-K filed with the SEC on July 6, 2007).10.1
            
            Stock
                Purchase and Sale Agreement dated April 10, 2007, between VioQuest
                Pharmaceuticals, Inc. and Chiral Quest Acquisition Corp. (incorporated
                by
                reference to Appendix A to the Company’s Definitive Proxy Statement on
                Schedule 14A filed with the SEC on April 25, 2007)10.2
            
            Amendment
                No. 1 dated June 8, 2007 to Stock Purchase and Sale Agreement between
                VioQuest Pharmaceuticals, Inc. and Chiral Quest Acquisition Corp.
                (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed
                June 12, 2007).10.3
            
            Form
                of Note and Warrant Purchase Agreement between VioQuest Pharmaceuticals
                and various investors accepted as of June 29, 2007 and July 3, 2007
                (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed
                with the SEC on July 6, 2007).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:
                August 8, 2007
            By:
            /s/
                Daniel GreenleafDaniel
                Greenleaf
              President
                & Chief Executive OfficerDate:
                August 8, 2007
            By:
            /s/
                Brian LenzBrian
                Lenz
              Chief
                Financial Officer




18


**INDEX
      TO EXHIBITS FILED WITH THIS REPORT**





Exhibit
                No.
            
            Description4.1
            
            Form
                ofsenior
                convertible promissory note issued by VioQuest Pharmaceuticals, Inc.
                on
                June 29, 2007 and July 3, 2007 (incorporated by reference to Exhibit
                4.1
                of the Company’s Form 8-K filed with the SEC on July 6,
                2007).4.2
            
            Form
                of warrant issued to investors by VioQuest Pharmaceuticals, Inc.
                on June
                29, 2007 and July 3, 2007 (incorporated by reference to Exhibit 4.2
                of the
                Company’s Form 8-K filed with the SEC on July 6, 2007).10.1
            
            Stock
                Purchase and Sale Agreement dated April 10, 2007, between VioQuest
                Pharmaceuticals, Inc. and Chiral Quest Acquisition Corp. (incorporated
                by
                reference to Appendix A to the Company’s Definitive Proxy Statement on
                Schedule 14A filed with the SEC on April 25, 2007)10.2
            
            Amendment
                No. 1 dated June 8, 2007 to Stock Purchase and Sale Agreement between
                VioQuest Pharmaceuticals, Inc. and Chiral Quest Acquisition Corp.
                (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed
                June 12, 2007).10.3
            
            Form
                of Note and Warrant Purchase Agreement between VioQuest Pharmaceuticals
                and various investors accepted as of June 29, 2007 and July 3, 2007
                (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed
                with the SEC on July 6, 2007).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.




19