**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      DC 20549**





**FORM
      10-Q**





x
      QUARTERLY REPORT UNDER
      SECTION 13 OR 15(d)


OF
      THE
      SECURITIES EXCHANGE ACT OF 1934


For
      the
      quarterly period ended June 30, 2008





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 registrant 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


(Registrant’s
      telephone number, including area code)





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





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 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 large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See
      the definitions of “large accelerated filer,” “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act.


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





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





As
      of
      August 18, 2008 there were 5,461,644 shares of the issuer’s common stock, $0.001
      par value, outstanding.





**Index**





Page**PART
                I**
            **FINANCIAL
                INFORMATION**Item
                1.
            Unaudited
                Condensed Consolidated Financial Statements
            1Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            13Item
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            21Item
                4T.
            Controls
                and Procedures
            21**PART
                II**
            **OTHER
                INFORMATION**Item
                1A.
            Risk
                Factors
            22Item
                6.
            Exhibits
            23Signatures
            23Index
                To Exhibits Filed With This Report
            24








**PART
      I – FINANCIAL INFORMATION**





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





**VIOQUEST
      PHARMACEUTICALS, INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


**AS
      OF JUNE 30, 2008 (UNAUDITED) AND DECEMBER 31, 2007**


**June 30, 2008**
                **(Unaudited)**
              
              **December 31, 2007**
                **(Note 1A)****ASSETS****CURRENT
                  ASSETS**Cash
                  and cash equivalents
              
              $
              814,477
              
              $
              694,556Prepaid
                  clinical research costs
              
              
              268,978
              
              
              189,359Deferred
                  financing costs
              
              
              -
              
              
              357,581Other
                  current assets
              
              
              48,509
              
              
              66,836Total
                  Current Assets
              
              
              1,131,964
              
              
              1,308,332**PROPERTY
                  AND EQUIPMENT, NET**
              
              
              30,139
              
              
              34,789**SECURITY
                  DEPOSITS**
              
              
              15,232
              
              
              15,232**TOTAL
                  ASSETS**
              
              $
              1,177,335
              
              $
              1,358,353**LIABILITIES,
                  MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS'
                  DEFICIENCY****CURRENT
                  LIABILITIES**Accounts
                  payable
              
              $
              2,171,150
              
              $
              1,873,500Accrued
                  compensation and related taxes
              
              
              150,574
              
              
              373,460Other
                  accrued expenses
              
              
              371,803
              
              
              665,273Convertible
                  notes, net of unamortized debt discount of $0 and $917,612
              
              
              -
              
              
              2,930,388**TOTAL
                  LIABILITIES**
              
              
              2,693,527
              
              
              5,842,621**MANDATORILY
                  REDEEMABLE CONVERTIBLE PREFERRED STOCK, $0.001 par value; 10,000,000
                  shares authorized**Series
                  A mandatorily redeemable convertible preferred stock; 3,464.5 shares
                  issued and outstanding at June 30, 2008
              
              
              627,390
              
              
              -Series
                  B mandatorily redeemable convertible preferred stock; 3,405.165
                  shares
                  issued and outstanding at June 30, 2008
              
              
              3,405,165
              
              
              -Dividends
                  payable in shares of common stock
              
              
              122,103
              
              
              -**TOTAL
                  MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED
                  STOCK**
              
              
              4,154,658
              
              
              -**COMMITMENTS
                  AND CONTINGENCIES****STOCKHOLDERS'
                  DEFICIENCY**Common
                  stock, $0.001 par value; 200,000,000 shares authorized; 5,461,644
                  and
                  5,462,112 shares issued and outstanding at June 30, 2008 and December
                  31,
                  2007, respectively
              
              
              5,462
              
              
              5,462Additional
                  paid-in capital
              
              
              38,676,402
              
              
              34,942,567Accumulated
                  deficit
              
              
              (44,352,714
              )
              
              (39,432,297
              )Total
                  Stockholders' Deficiency
              
              
              (5,670,850
              )
              
              (4,484,268
              )**TOTAL
                  LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK
                  AND
                  STOCKHOLDERS' DEFICIENCY**
              
              $
              1,177,335
              
              $
              1,358,353





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, 2008 AND 2007**


**(UNAUDITED)**





**For the Three**
              **Months Ended**
              **June 30, 2008**
            
            **For the Three**
              **Months Ended**
              **June 30, 2007**
            
            **For the Six**
              **Months Ended**
              **June 30, 2008**
            
            **For the Six**
              **Months Ended**
              **June 30, 2007****OPERATING
                EXPENSES**Research
                and development
            
            $
            472,801
            
            $
            950,844
            
            $
            1,451,895
            
            $
            2,319,655General
                and administrative
            
            
            554,753
            
            
            1,192,399
            
            
            1,245,092
            
            
            2,106,050Total
                Operating Expenses
            
            
            1,027,554
            
            
            2,143,243
            
            
            2,696,987
            
            
            4,425,705**LOSS
                FROM OPERATIONS**
            
            
            (1,027,554
            )
            
            (2,143,243
            )
            
            (2,696,987
            )
            
            (4,425,705
            )**INTEREST
                (EXPENSE)/INCOME, NET**
            
            
            (103,110
            )
            
            6,391
            
            
            (1,514,658
            )
            
            32,075**LOSS
                FROM CONTINUING OPERATIONS**
            
            
            (1,130,664
            )
            
            (2,136,852
            )
            
            (4,211,645
            )
            
            (4,393,630
            )**LOSS
                FROM DISCONTINUED OPERATIONS**
            
            
            -
            
            
            (335,422
            )
            
            -
            
            
            (596,897
            )**NET
                LOSS**
            
            
            (1,130,664
            )
            
            (2,472,274
            )
            
            (4,211,645
            )
            
            (4,990,527
            )**BENEFICIAL
                CONVERSION FEATURE**
            
            
            (708,772
            )
            
            -
            
            
            (708,772
            )
            
            -**NET
                LOSS APPLICABLE TO COMMON STOCKHOLDERS**
            
            $
            (1,839,436
            )
            $
            (2,472,274
            )
            $
            (4,920,417
            )
            $
            (4,990,527
            )**NET
                LOSS PER SHARE APPLICABLE TO COMMON STOCKHOLDERS:****CONTINUING
                OPERATIONS**
            
            $
            (0.38
            )
            $
            (0.56
            )
            $
            (1.00
            )
            $
            (0.95
            )**DISCONTINUED
                OPERATIONS**
            
            
            -
            
            
            (0.09
            )
            
            -
            
            
            (0.13
            )**NET
                LOSS PER SHARE APPLICABLE TO COMMON STOCKHOLDERS – BASIC AND DILUTED**
            
            $
            (0.38
            )
            $
            (0.65
            )
            $
            (1.00
            )
            $
            (1.08
            )**WEIGHTED
                AVERAGE COMMON SHARES USED IN COMPUTING NET LOSS PER SHARE APPLICABLE
                TO
                COMMON STOCKHOLDERS – BASIC AND DILUTED**
            
            
            4,905,081
            
            
            3,816,512
            
            
            4,905,254
            
            
            4,605,672





See
      accompanying notes to condensed consolidated financial statements.





2




**VIOQUEST
      PHARMACEUTICALS, INC. AND SUBSIDIARIES**


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


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008**


**(UNAUDITED)**





**Additional**
            
            
            
            **Total****Common Stock**
            
            **Paid-In**
            
            **Accumulated**
            
            **Stockholders'****Shares**
            
            **Amount**
            
            **Capital**
            
            **Deficit**
            
            **Deficiency****Balance,
                January 1, 2008**
            
            
            **5,462,112**
            
            **$**
            **5,462**
            
            **$**
            **34,942,567**
            
            **$**
            **(39,432,297**
            **)**
            **$**
            **(4,484,268**
            **)**Net
                loss applicable to common stockholders for the six months ended June
                30, 2008
            
            
            
            
            
            
            
            
            
            
            
            (4,920,417
            )
            
            (4,920,417
            )Proceeds
                from issuance of Series A mandatorily redeemable convertible preferred
                stock, net of financing costs of $233,714
            
            
            
            
            
            
            
            
            2,054,800
            
            
            
            
            
            2,054,800Beneficial
                conversion feature associated with conversion of Series B mandatorily
                redeemable convertible preferred stock into Series A mandatorily
                redeemable convertible preferred stock
            
            
            
            
            
            
            
            
            708,772
            
            
            
            
            
            708,772Value
                of warrants issued to placement agents with March 14, 2008 Series
                A
                mandatorily redeemable convertible preferred stock
            
            
            
            
            
            
            
            
            140,164
            
            
            
            
            
            140,164Value
                of warrants issued to investors and beneficial conversion feature
                embedded
                in Series A mandatorily redeemable convertible preferred
                stock
            
            
            
            
            
            
            
            
            531,286
            
            
            
            
            
            531,286Accretion
                of discount on Series A mandatorily redeemable convertible preferred
                stock
            
            
            
            
            
            
            
            
            (122,390
            )
            
            
            
            
            (122,390
            )Discount
                on convertible notes
            
            
            
            
            
            
            
            
            62,166
            
            
            
            
            
            62,166Fractional
                shares paid out in cash as a result of the 1-for-10 reverse stock
                split
            
            
            (468
            )
            
            
            
            
            (374
            )
            
            
            
            
            (374
            )Stock-based
                compensation to employees
            
            
            
            
            
            
            
            
            360,233
            
            
            
            
            
            360,233Stock-based
                compensation to consultants and finder
            
            
            
            
            
            
            
            
            (822
            )
            
            
            
            
            (822
            )**Balance,
                June 30, 2008**
            
            
            **5,461,644**
            
            **$**
            **5,462**
            
            **$**
            **38,676,402**
            
            **$**
            **(44,352,714**
            **)**
            **$**
            **(5,670,850**
            **)**





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, 2008 AND 2007**


**(UNAUDITED)**





**For the Six**
              **Months Ended**
              **June 30, 2008**
            
            **For the Six**
              **Months Ended**
              **June 30, 2007****CASH
                FLOWS FROM OPERATING ACTIVITIES:**Net
                loss applicable to common stockholders
            
            $
            (4,920,417
            )
            $
            (4,990,527
            )Loss
                from discontinued operations
            
            
            -
            
            
            596,897Loss
                From Continuing Operations
            
            
            (4,920,417
            )
            
            (4,393,630
            )Adjustments
                to reconcile loss from continuing operations to net cash used in
                continuing operating activities:Depreciation
            
            
            4,650
            
            
            4,126Stock-based
                compensation to employees
            
            
            360,233
            
            
            534,730Stock-based
                compensation to consultants and finder
            
            
            (822
            )
            
            54,093Amortization
                of debt discount and deferred financing fees
            
            
            1,399,524
            
            
            -Dividends
                payable on mandatorily redeemable convertible preferred
                stock
            
            
            122,103
            
            
            -Beneficial
                conversion
                feature
            
            
            708,772Changes
                in operating assets and liabilities:Prepaid
                clinical research costs
            
            
            (79,619
            )
            
            (28,694
            )Other
                assets
            
            
            18,326
            
            
            139,438Accounts
                payable
            
            
            297,650
            
            
            1,191,524Accrued
                expenses
            
            
            (516,356
            )
            
            161,145Net
                Cash Used In Continuing Operating Activities
            
            
            (2,605,956
            )
            
            (2,337,268
            )Net
                cash used in discontinued operating activities
            
            
            -
            
            
            (356,217
            )Net
                Cash Used In Operating Activities
            
            
            (2,605,956
            )
            
            (2,693,485
            )**CASH
                FLOWS FROM INVESTING ACTIVITIES:**Payments
                for purchased equipment
            
            
            -
            
            
            (2,277
            )Net
                Cash Used In Continuing Investing Activities
            
            
            -
            
            
            (2,277
            )Net
                cash used in discontinued investing activities
            
            
            -
            
            
            (26,698
            )Net
                Cash Used In Investing Activities
            
            
            -
            
            
            (28,975
            )**CASH
                FLOWS FROM FINANCING ACTIVITIES:**Proceeds
                from issuance of mandatorily redeemable convertible preferred stock
                with
                warrants, net of cash costs of $233,714
            
            
            2,726,251
            
            
            -Payments
                for fractional shares as a result of the 1-for-10 reverse stock
                split
            
            
            (374
            )Proceeds
                from issuance of convertible notes with warrants, net of cash costs
                of
                $245,450
            
            
            -
            
            
            2,722,050Repayment
                of note payable
            
            
            -
            
            
            (100,000
            )Net
                Cash Provided By Continuing Financing Activities
            
            
            2,725,877
            
            
            2,622,050**NET
                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS**
            
            
            119,921
            
            
            (100,410
            )**CASH
                AND CASH EQUIVALENTS – BEGINNING OF PERIOD**
            
            
            694,556
            
            
            2,931,265**CASH
                AND CASH EQUIVALENTS – END OF PERIOD**
            
            $
            814,477
            
            $
            2,830,855**Supplemental
                Schedule of Non-Cash Investing and Financing
                Activities:**Value
                of warrants issued to placement agent in connection with issuances
                of
                mandatorily redeemable convertible Series B
                Preferred stock
            
            $
            505,706
            
            $
            -Value
                of beneficial conversion feature related to mandatorily redeemable
                convertible preferred stock
            
            $
            708,772
            
            $
            -Value
                of warrants issued to placement agent in connection with issuances
                of
                convertible notes
            
            $
            -
            
            $
            356,425Value
                of beneficial conversion feature related to convertible
                notes
            
            $
            -
            
            $
            590,334Conversion
                of convertible notes into mandatorily redeemable convertible series
                B
                preferred stock
            
            $
            3,405,165
            
            $
            -





See
      accompanying notes to condensed consolidated financial statements.




4






**VIOQUEST
      PHARMACEUTICALS, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2008 (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 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, 2008 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, 2007. The accompanying condensed consolidated balance sheet
      as of December 31, 2007 has been derived from the audited balance sheet as
      of
      that date included in the Form 10-KSB.





References
      to the “Company,” the “Registrant,” “we,” “us,” or “our” in this Quarterly
      Report on Form 10-Q refer to VioQuest Pharmaceuticals, Inc., a Delaware
      corporation, and its consolidated subsidiaries, together taken as a whole,
      unless the context indicates otherwise. XyfidTM is our trademark for 1% uracil
      topical cream that we are developing to treat dry skin conditions and to relieve
      and to manage the burning and itching associated with various dermatoses
      including atopic dermatitis, irritant contact dermatitis, radiation dermatitis
      and other dry skin conditions, by maintaining a moist wound and skin
      environment. LenoctaTM, previously referred to as VQD-001, or sodium
      stibogluconate, is our trademark for our oncology product candidate. All other
      trademarks and trade names mentioned in this Form 10-Q are the property of
      their
      respective owners.





The
      accompanying consolidated financial statements include the accounts of VioQuest
      Pharmaceuticals, Inc. and its current and former subsidiaries. All significant
      intercompany accounts and transactions have been eliminated in consolidation.





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. On July 16, 2007, the Company
      completed the sale of Chiral Quest to Chiral Quest Acquisition Corp. (“CQAC”)
      for total cash consideration of approximately $1,700,000. As a result of this
      transaction, the Company reported a gain of $438,444, which is included in
      its
      loss from discontinued operations in the third quarter of 2007. 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 reportable segment. As a result of these
      reclassifications, the Company no longer provides segment reporting. See Note
      2
      for a complete discussion on discontinued operations. One of Chrial Quest’s
      formerly wholly-owned subsidiaries operating in China had a United States Dollar
      functional currency and all of that subsidiary’s transaction gains and losses
      were also recorded in discontinued operations. The consolidated balance sheet
      as
      of December 31, 2007 and the consolidated statements of operations for the
      three
      and six months ended June 30, 2008 and 2007 include reclassifications to reflect
      these discontinued operations.




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




Since
      August 2004, the Company has focused on acquiring technologies for purposes
      of
      the development and commercialization of pharmaceutical drug candidates in
      the
      areas of supportive care products, oncology, and infectious diseases for which
      there are unmet medical needs. Since October 2005, the Company has held license
      rights to develop and commercialize its two therapeutic oncology drug
      candidates, Lenocta (sodium stibogluconate, formerly VQD-001) an inhibitor
      of
      specific protein tyrosine phosphatases, and VQD-002 (triciribine phosphate
      monohydrate), an inhibitor of activated Akt. The rights to these two oncology
      drug candidates, Lenocta 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 Xyfid (1% uracil topical), a supportive care oncology
      product candidate. The Company’s rights to Xyfid are governed by a license
      agreement with Asymmetric Therapeutics, LLC and Onc Res, Inc., as assigned
      to
      the Company by Fiordland Pharmaceuticals, Inc.


5




**VIOQUEST
      PHARMACEUTICALS, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2008 (UNAUDITED)**





***(C)
      Liquidity***





Since
      its
      inception, the Company has incurred an accumulated deficit of $44,352,714
      through June 30, 2008. For the six months ended June 30, 2008 and 2007, the
      Company had losses from continuing operations of $4,211,645 and $4,393,630,
      respectively, and used $2,605,956 and $2,337,268 of cash in continuing operating
      activities for the six months ended June 30, 2008 and 2007, respectively. For
      the six months ended June 30, 2008 and 2007, the Company had a net loss of
      $4,920,417 and $4,990,527 (which included $4,393,630 from continuing
      operations), respectively. As of June 30, 2008, the Company had a working
      capital deficit of $1,561,563 and cash and cash equivalents of $814,477. The
      Company has incurred negative cash flow from operating activities 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. As a result, we have insufficient
      funds to cover our current obligations or future operating expenses. To conserve
      funds, we will continue to complete our current ongoing Phase I study for
      VQD-002 and Phase II study for Lenocta, however we will not initiate any new
      clinical studies unless and until we receive additional funding. Our current
      resources are inadequate to continue to fund operations; therefore, we will
      need
      to raise capital by the end of the third quarter of 2008, if not sooner.
      Furthermore, based upon the amount of capital we are required to raise by the
      end of the third quarter of 2008 to continue operations, we may need to raise
      additional capital before then to continue to fund our operations at our desired
      pace throughout 2008. The 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, or by potentially sublicensing
      our rights to our products. 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 is urgently needed by the Company 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 or cease 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. These matters raise substantial
      doubt about the ability of the Company to continue as a going
      concern.





On
      March
      14 and April 9, 2008, the Company received aggregate gross proceeds of
      $2,959,500 from two transactions involving the sale of Series A Mandatorily
      Redeemable Convertible Preferred Stock (“Series A Preferred”). See Note 4 for
      further discussion. The Company’s cash and cash equivalents at June 30, 2008
      reflect the net cash proceeds to the Company from these
      transactions.





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





The
      Company issued options and warrants to purchase an aggregate of 3,939,499
      shares of its common stock during the six months ended June 30, 2008, comprised
      of 560,000 shares subject to stock options to employees and non-employee
      directors and 3,379,499 shares subject to warrants issued to investors and
      placement agents.





Vesting
      terms for the Company’s stock option plans differ based on the type of grant
      made. Generally, stock options and warrants granted to employees and
      non-employee directors vest as to one-third of the shares on each of the first,
      second and third anniversaries of the grant date. However, vesting has ranged
      in
      length from immediate vesting to vesting periods in accordance with the period
      covered by employment contracts. There were stock options to purchase 15,000
      shares of common stock granted to a non-employee director in the first quarter
      of 2006, of which 7,500 vested immediately and 7,500 vested on the first
      anniversary of the grant date, stock options to purchase 40,000 shares of common
      stock granted to four non-employee directors in the third quarter of 2007,
      of
      which one-third vested immediately and one-third of the shares vest on each
      of
      the first and second anniversaries of the grant date, stock options to purchase
      501,334 shares of common stock granted to the President and Chief Executive
      Officer, which vest as to 25% of the shares on each of the first, second, third
      and fourth anniversaries of the grant date and stock options to purchase 85,644
      shares of common stock granted to the President and Chief Executive Officer,
      which will vest in four equal annual installments commencing on the first
      anniversary of the grant date. However, this option is only exercisable to
      the
      extent that the shares of the Company’s common stock held in an escrow account
      in favor of the former stockholders of Greenwich Therapeutics, Inc. established
      in connection with the Company’s October 2005 acquisition of Greenwich are
      released from escrow. As of June 30, 2008, 35% of the common stock held in
      escrow had been released.





Stock
      options and warrants granted to parties other than employees and non-employee
      directors vest over individually agreed upon terms. The Company issued 3,379,499
      warrants that vested immediately to investors and the placement agents that
      participated in the March 14, 2008 and April 9, 2008 financings relating to
      the
      issuance and sale of Series A preferred stock. See Note 4 for further
      discussion. On June 13, 2008, the Company issued 400,000 shares subject to
      stock
      options to employees and non-employee directors, of which one-third vested
      immediately and one-third of the shares vest on each of the first and second
      anniversaries of the grant date. At the same time, the Board of Directors
      authorized the amendment of previously granted stock options representing
      771,558 shares to reduce the exercise price of each stock option to $0.54 per
      share.


6




**VIOQUEST
      PHARMACEUTICALS, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2008 (UNAUDITED)**





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,
      2008 related to the fair value of employee and non-employee director stock
      option grants of $207,634 and $360,233, 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”). 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 set forth below, the weighted average fair values of the stock
      options granted during the three and six months ended June 30, 2008 were $0.58
      and $0.71, respectively.





The
      table
      below sets forth the key assumptions used in the Black-Scholes calculations
      for
      options granted in the three and six months ended June 30, 2008 and
      2007:





Three Months Ended
              June 30,
            
            Six Months Ended
              June 30,2008
            
            2007
            
            2008
            
            2007Term
            
            
            7
                years
            
            
            7
                years
            
            
            7
                years
            
            
            7
                yearsVolatility
            
            
            310-409
            %
            
            238
            %
            
            298-409
            %
            
            232-238
            %Dividend
                yield
            
            
            0.0
            %
            
            0.0
            %
            
            0.0
            %
            
            0.0
            %Risk-free
                interest rate
            
            
            3.0-3.8
            %
            
            4.6-4.9
            %
            
            3.0-3.8
            %
            
            4.6-4.9
            %Forfeiture
                rate
            
            
            0%-26
            %
            
            22
            %
            
            0%-26
            %
            
            22
            %




The
      following table summarizes information about the Company’s stock options as of
      and for the six months ended June 30, 2008:





Number of
              Shares
            
            Weighted
              Average
              Exercise
              Price
            
            Weighted
              Average
              Remaining
              Contractual Life
              (Years)
            
            Aggregate
              Intrinsic ValueBalance,
                January 1, 2008
            
            
            1,013,339
            
            $
            9.86
            (1)Granted
            
            
            560,000
            
            $
            0.71
            (1)Exercised
            
            
            -
            
            
            -Forfeited
                or expired
            
            
            (67,733
            )
            $
            4.38Outstanding
                at June 30, 2008
            
            
            1,505,606
            
            $
            2.05
            
            
            3.05
            
            $
            -Exercisable
                at June 30, 2008
            
            
            525,769
            
            $
            4.78
            
            
            2.88
            
            $
            -





(1)
                      Reflects
                          the impact of the June 13, 2008 repricing of 771,558 shares
                          subject to
                          stock options to $0.54 that had original exercise prices
                          ranging from
                          $19.60 to $1.20.





As
      of
      June 30, 2008, there was $2,114,994 of unrecognized compensation costs related
      to stock options. These costs are expected to be recognized over a weighted
      average period of approximately 3.15 years.





As
      of
      June 30, 2008, an aggregate of 94,394 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 and Mandatorily Redeemable Convertible
      Preferred Stock***





The
      Company accounts for the value of warrants and the intrinsic value of beneficial
      conversion rights arising from the issuance of convertible debt instruments
      and
      mandatorily redeemable convertible preferred stock 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 and an appropriate portion of the proceeds received from
      the
      preferred stock to the preferred stock and warrants based on their relative
      fair
      value.


7




**VIOQUEST
      PHARMACEUTICALS, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2008 (UNAUDITED)**





The
      fair
      value allocated to the warrants issued with convertible debt 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 fair value allocated to the
      warrants issued with mandatorily redeemable convertible preferred stock is
      recorded as additional paid-in capital and as preferred stock discount, which
      is
      accreted through a charge to accumulated deficit through the date of earliest
      conversion.





The
      intrinsic value of the beneficial conversion rights at the commitment date
      may
      also be recorded as additional paid-in capital and debt or preferred stock
      discount as of that date or, if the terms of the debt instrument or preferred
      stock are contingently adjustable, may only be recorded if a triggering event
      occurs and the contingency is resolved.





***(F)
      Net Loss Per Share Applicable to Common
      Stockholders***





Basic
      net
      loss per share applicable to common stockholders is calculated by dividing
      net
      loss applicable to common stockholders by the weighted-average number of common
      shares outstanding for the period, excluding 556,686 common shares held in
      escrow based upon clinical milestones of Lenocta and VQD-002, as a result of
      the
      acquisition of Greenwich Therapeutics. Diluted net loss per share applicable
      to
      common stockholders is the same as basic net loss per share applicable to common
      stockholders, since potentially dilutive securities from the assumed exercise
      of
      stock options and stock warrants would have an antidilutive effect because
      the
      Company incurred a net loss applicable to common stockholders during each period
      presented. The amount of potentially dilutive securities including options
      and
      warrants in the aggregate excluded from the calculation were 14,127,027
      (including the 556,686 common
      shares held in escrow, 5,774,167 common shares issuable upon conversion of
      the
      Series A preferred stock, 896,096 common shares issuable upon conversion of
      the
      Series B preferred stock, 5,394,472 warrants, and 1,505,606 stock options)
      at
      June 30, 2008 and 3,442,946 at June 30, 2007.





***(G)
      Restatement of Net Loss Per Common Share Applicable to Common
      Stockholders***





As
      a
      result of the Company effecting a 1-for-10 reverse stock split on April 25,
      2008, all common shares, warrants and options have been restated as of December
      31, 2007. In accordance with the reverse stock split, each share of the
      Company’s common stock, warrants and options, were reissued and repriced to
      purchase or receive one-tenth times the number of shares of common stock
      immediately theretofore purchasable and the purchase price per is 1,000 percent
      of the purchase price per share.





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





As
      explained in Note 1, the Company determined that it would dispose of Chiral
      Quest on September 29, 2006 and, accordingly, the operations and assets of
      Chiral Quest have been presented in these financial statements as discontinued
      operations. On July 16, 2007, the Company completed the sale of Chiral Quest
      to
      CQAC for total cash consideration of approximately $1,700,000. As a result
      of
      this transaction, the Company reported a gain of $438,444 in the third quarter
      of 2007. Retention bonuses of $106,761 and accrued severance of $90,000 paid
      to
      certain Chiral Quest employees have been offset against the gain on sale.
      Revenues from discontinued operations for the three and six months ended June
      30, 2007 were $680,581 and $1,484,365, respectively. The 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, was $335,422 and $596,897, respectively. No such revenues or
      loss
      from discontinued operations were recorded in the corresponding 2008
      periods.





On
      July
      16, 2007, the Company entered into a sublease agreement with CQAC that expired
      May 30, 2008 to lease its office and laboratory space, which was utilized by
      Chiral Quest before it was sold to CQAC. CQAC, the subtenant, agreed to make
      all
      payments of base rent and additional rent totaling approximately $28,000 per
      month for a total commitment of $56,000 then remaining on the sublease agreement
      payable directly to the landlord. As of June 30, 2008, CQAC fully complied
      with
      the sublease agreement with the Company.


8




**VIOQUEST
      PHARMACEUTICALS, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2008 (UNAUDITED)**





**NOTE
      3** **** **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.
      Investors could have elected, at any time during the term, to convert all unpaid
      principal plus any accrued but unpaid interest thereon on the Bridge Notes
      into
      shares of the Company’s common stock. In the event that the investors had not
      elected to convert the Bridge Notes, all unpaid principal plus any accrued
      interest would have automatically converted into the Company’s common stock upon
      the completion of an equity financing or series of related equity financings
      by
      the Company resulting in aggregate gross cash proceeds to the Company of at
      least $7,000,000. If the Bridge Notes and accrued interest were not converted
      into shares of the Company’s common stock, all unpaid principal plus any accrued
      interest would be due and payable on the first anniversary of the 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 closings, respectively.
      The Company also issued to investors five-year warrants (“Bridge Warrants”) to
      purchase an aggregate of approximately 243,000 (195,000 and 48,000 for the
      June
      29, 2007 and July 3, 2007 closings, respectively) shares of the Company’s common
      stock at an exercise price of $4.00 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 would
      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 closing, and $139,489 for the July 3, 2007 closing, which were attributable
      to an effective conversion price for the Company’s common stock that was less
      than the market values on the dates of issuance. Additional BCF’s are recorded
      as convertible interest is accrued. These amounts were recorded as additional
      debt discount and additional paid-in capital, which reduces the initial carrying
      value of the Bridge Notes. The discount associated with the BCF would 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 120,250 shares of common stock,
      which are exercisable at a price of $4.20 per share. Based on the Black-Scholes
      option pricing model, the warrants had a fair value of $356,425 for the June
      29,
      2007 closing and $73,441 for the July 3, 2007 closing. Additionally, the Company
      incurred commissions of $205,450, a non-accountable expense allowance of $24,271
      to the placement agents and escrow fees of $5,000 for the June 29, 2007 closing
      and commissions of $50,575 for the July 3, 2007 closing. The Company engaged
      Paramount BioCapital, Inc. (“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 45,000 shares of common stock and paid
      commissions of approximately $119,700. The fair value of the warrants,
      commissions and fees totaling $591,146 for the June 29, 2007 closing and
      $124,016 for the July 3, 2007 closing have been recognized as deferred financing
      costs, which would be amortized to interest expense 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
              %


As
      a
      condition to the March 14, 2008 private placement of our Series A Preferred
      stock, the majority of the holders of the June 29, 2007 and July 3, 2007
      convertible promissory notes agreed to convert such notes, together with accrued
      interest, into approximately 3,910 shares of the Company’s newly-designated
      Series B Mandatorily Redeemable Convertible Preferred Stock (“Series B
      Preferred”). See Note 4 for further discussion. The conversion of the Bridge
      Notes to Series B Preferred stock resulted in a loss on the early extinguishment
      of debt of $814,355, which is included in interest expense for the three and
      six
      months ended June 30, 2008. The loss is comprised of non-cash items, such as
      the
      write-off of unamortized debt issuance costs, BCF and deferred financing
      costs.


9




**VIOQUEST
      PHARMACEUTICALS, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2008 (UNAUDITED)**





**NOTE
      4** **** **MANDATORILY
      REDEEMABLE CONVERTIBLE PREFERRED STOCK**





On
      March
      14, 2008, the Company issued 765 shares of Series A Preferred stock at a price
      of $1,000 per share together with five-year warrants to purchase an aggregate
      of
      approximately 637,500 shares of our common stock at an exercise price of $1.00
      per share for an aggregate purchase price of $765,000. The Company received
      approximately $671,000 in net cash proceeds after closing costs.





On
      April
      9, 2008, the Company issued 2,194.5 shares of Series A Preferred stock at a
      price of $1,000 per share together with five-year warrants to purchase an
      aggregate of approximately 1.83 million shares of our common stock at an
      exercise price of $1.00 per share for an aggregate purchase price of $2,195,000.
      The Company received approximately $2,041,000 in net cash proceeds after closing
      costs. In addition, the Company reissued the 765 shares of Series A Preferred
      stock originally sold on March 14, 2008, on the same terms as if the shares
      had
      been purchased on April 9, 2008.





Each
      share of Series A Preferred stock sold is convertible into shares of the
      Company's common stock at $0.60 per share, or approximately 5.77 million shares
      of common stock in the aggregate. A holder of Series A Preferred stock may
      convert the shares of Series A Preferred stock to common stock at any time
      and
      from time to time upon the holder’s election. The Series A Preferred stock shall
      automatically convert into common stock in the event that the closing price
      of
      the common stock is equal to at least $3.80 per share (as adjusted for stock
      splits, combinations and similar events) for 20 consecutive trading days. The
      Series A Preferred stock is subject to mandatory redemption on July 3, 2009.





The
      Series A Preferred stock shall be entitled to an annual dividend equal to 6%
      of
      the applicable issuance price per annum, payable semi-annually in cash or shares
      of common stock, at the option of the Company. If the Company chooses to pay
      the
      dividend in shares of common stock, the price per share of common stock to
      be
      issued shall be equal to 90% of the average closing price of the common stock
      for the 20 trading days prior to the date that such dividend becomes payable.
      During the three and six months ended June 30, 2008, the Company accrued $40,736
      and $42,649, respectively, associated with this dividend obligation, which
      was
      recorded as interest expense on the accompanying condensed consolidated
      statements of operations.





The
      Series A Preferred stock will be protected against dilution if the Company
      effects a subdivision or combination of its outstanding common stock or in
      the
      event of a reclassification, stock dividend or other distribution payable in
      securities of the Company and shall have full-ratchet antidilution protection,
      subject to standard exceptions. The holders of Series A Preferred stock will
      vote together with all other holders of the Company’s voting stock on all
      matters submitted to a vote of holders generally, with the holder of each share
      of Series A Preferred stock being entitled to one vote for each share of common
      stock into which such shares of Series A Preferred stock could then be
      converted.





Based
      upon the Black-Scholes option pricing model, the investor warrants were
      estimated to be valued at approximately $2,528,829. The Company allocated the
      consideration received from the sale of the Series A Preferred stock between
      the
      Series A Preferred stock and the warrants on the basis of their relative fair
      values at the date of issuance, resulting in approximately $1,363,033 allocated
      to the warrants. The value of the warrants was recognized as an increase in
      additional paid-in capital and as a discount to the Series A Preferred stock.
      Furthermore, the fair value of the common shares into which the Series A
      Preferred stock is convertible on the date of issuance exceeded the proceeds
      allocated to the Series A Preferred stock, resulting in a beneficial conversion
      feature of approximately $2,726,250 that was recognized as an increase in
      additional paid-in capital and as a discount to the Series A Preferred stock.
      The discounts are being accreted to the redemption value of the Series A
      Preferred stock over the mandatory redemption period, using the effective
      interest method, through a charge to additional paid-in capital.


10




**VIOQUEST
      PHARMACEUTICALS, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2008 (UNAUDITED)**





In
      connection with the offering, the Company engaged Paramount as our placement
      agent. Dr. Lindsay A. Rosenwald is the Chairman, CEO and sole stockholder of
      Paramount and a substantial stockholder of the Company. Dr. Rosenwald
      participated in this financing through a family investment partnership, of
      which
      he is the managing member. The family investment partnership purchased 500
      shares of Series A Preferred stock and received warrants to purchase 416,700
      shares of common stock. Based upon the Black-Scholes option pricing model,
      the
      family investment partnership’s investor warrants were estimated to be valued at
      approximately $458,000. In consideration for the placement agent’s services, the
      Company paid an aggregate of approximately $54,000 in commissions to Paramount
      in connection with the offering. The Company also paid $35,000 to Paramount
      as a
      non-accountable expense allowance. In addition, the Company issued to Paramount
      five-year warrants to purchase an aggregate of approximately 127,500 shares
      of
      common stock, which are exercisable at a price of $0.80 per share. Based upon
      the Black-Scholes option pricing model, the warrants issued to Paramount are
      estimated to be valued at $505,776. The fair value of the warrants, commissions
      and fees totaling approximately $739,026 that was recognized as a discount
      to
      the Series A Preferred stock. The discount is being accreted to Series A
      Preferred stock over the mandatory redemption period, using the effective
      interest method, through a charge to additional paid-in capital. For the three
      and six months ended June 30, 2008, the Company accreted $116,069 and $122,390,
      respectively, of Series A Preferred stock discount.




The
        following assumptions were used for the Black-Scholes calculations for the
        warrants related to the financing:
 
 Term
              5
                  yearsVolatility
              301%
              -
              310%Dividend
                  yield
              0.0%Risk-free
                  interest rate
              2.4%
              -
              2.6%


As
      a
      condition to the March 14, 2008 closing of the private placement, the majority
      of the holders of the June 29, 2007 and July 3, 2007 convertible promissory
      notes agreed to convert such notes, together with accrued interest, into
      approximately 3,910 shares of Series B Preferred stock. The Series B Preferred
      stock contains substantially the same economic terms as the previously
      outstanding senior convertible notes. A holder of Series B Preferred stock
      may
      convert the shares of Series B Preferred stock to common stock at any time
      and
      from time to time upon the holder’s election. The Series B Preferred stock shall
      automatically convert into common stock in the event that the closing price
      of
      the common stock is equal to at least $3.80 per share (as adjusted for stock
      splits, combinations and similar events) for 20 consecutive trading days. The
      Series B Preferred stock is subject to mandatory redemption on July 3,
      2009.





Each
      share of Series B Preferred stock sold is convertible into shares of the
      Company's common stock at $3.80 per share, or approximately 1,029,000 shares
      of
      common stock in the aggregate. The Series B Preferred stock shall be entitled
      to
      an annual dividend equal to 8% of the applicable issuance price per annum,
      payable semi-annually in cash or shares of common stock, at the option of the
      Company. If the Company chooses to pay the dividend in shares of common stock,
      the price per share of common stock to be issued shall be equal to 90% of the
      average closing price of the common stock for the 20 trading days prior to
      the
      date that such dividend becomes payable. During the three and six months ended
      June 30, 2008, the Company accrued $66,420 and $79,454,
      respectively, associated with this dividend obligation, which was recorded
      as interest expense on the accompanying condensed consolidated statements of
      operations.





In
      the
      event of a liquidation, bankruptcy, dissolution or similar proceeding, the
      holders of the Series B Preferred stock shall rank *pari
      passu* with the
      Series A Preferred stock and shall receive an amount equal to 100% of the Series
      B Preferred stock price plus any accrued but unpaid dividends.





Certain
      Series B Preferred stockholders exercised their right to convert Series B
      Preferred stock into Series A Preferred stock by investing new money in the
      April 9, 2008 offering. These holders invested $505,000 of new money in the
      April 9, 2008 offering and earned the right to convert $505,000 of Series B
      Preferred stock, convertible into shares of the Company’s common stock at $3.80
      per share, into Series A Preferred stock, convertible into shares of the
      Company’s common stock at $0.60 per share. The converting stockholders received
      505 shares of Series A Preferred Stock.




In
        accordance with EITF No. 98-5, *Accounting
        for Convertible Securities with Beneficial Conversion Features or Contingently
        Adjustable Conversion Ratios* ,
        and
        EITF No. 00-27, *Application
        of Issue No. 98-5 to Certain Convertible Instruments* ,
        the
        Company recorded a non-cash beneficial conversion charge of $708,772 in April
        2008 in connection with the induced conversion of the Series B Preferred
        stock.




**NOTE
      5** **** **REVERSE
      STOCK SPLIT**





On
      April
      15, 2008, the Company’s Board of Directors authorized an amendment to the
      Company’s certificate of incorporation to provide for the combination of the
      Company’s common stock in the form of a 1-for-10 reverse stock split. In
      accordance with the reverse stock split, each share of the Company’s common
      stock was reissued and repriced for each 10 shares of common stock exchanged
      by
      the holders of record at 12:01 a.m. on April 25, 2008 (the “Effective Time”).
      Further, each option to purchase shares of common stock outstanding as of the
      Effective Time and any other outstanding and unexercised warrants or similar
      rights to purchase or receive shares of common stock outstanding immediately
      prior to the Effective Time provides the right to purchase or receive one-tenth
      times the number of shares of common stock immediately theretofore purchasable
      and the purchase price per share shall be 1,000 percent of the purchase price
      per share immediately theretofore payable. The number of shares reserved for
      issuance under the Company’s 2003 Stock Option Plan shall become one-tenth the
      number of shares reserved for issuance as of the Effective Time. All per share
      amounts have been restated to effect the reverse stock split for all periods
      presented.


11




**VIOQUEST
      PHARMACEUTICALS, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2008 (UNAUDITED)**





**NOTE
      6** **** **EMPLOYEE
      MATTERS**





On
      April
      11, 2008, Edward C. Bradley, M.D., the Company’s Chief Scientific Officer,
      resigned from his part-time position with the Company. In consideration of
      Dr.
      Bradley’s service, the Company accelerated the vesting of Dr. Bradley’s stock
      options to purchase an additional 23,333 shares of the Company’s common stock.
      Furthermore, the exercise period for his vested options is extended until
      December 31, 2008. Incremental compensation cost is incurred when the terms
      of
      his award are modified. Based upon the Black-Scholes option pricing model,
      the
      incremental cost is approximately $15,000, which is measured by comparing the
      fair value of the modified award with the fair value of the award immediately
      before the modification, and is included in stock-based compensation expense
      under Research and Development Expense for the three and six month periods
      ending June 30, 2008.





On
      April
      14, 2008, the Company appointed Vernon L. Alvarez, Ph.D., as Vice President
      of
      Research and Development.





On
      July
      18, 2008, the Company appointed Christopher P. Schnittker as Vice President
      and
      Chief Financial Officer. Pursuant to the terms of an Employment Agreement,
      the
      Company issued to Mr. Schnittker a ten-year option under our 2003 Stock Option
      Plan to purchase 180,000 shares of its common stock at an exercise price equal
      to fair market value on the date of the grant. The options vest in four equal
      annual installments commencing on July 21, 2009. Additionally, pursuant to
      the
      Employment Agreement, the Company issued 180,000 additional stock options (the
      “Merger Option”) on July 21, 2008, at an exercise price equal to fair market
      value on the date of the grant. The merger options vest in four equal annual
      installments commencing on July 21, 2009, however in addition to such vesting,
      the Merger Option is only exercisable to the extent our shares which are held
      in
      escrow in connection with our acquisition of Greenwich Therapeutics, Inc.,
      in
      October 2005, are released.





On
      July
      21, 2008, Brian Lenz, the Company’s prior Chief Financial Officer, resigned his
      position. Mr. Lenz agreed to remain with the Company as an employee until August
      14, 2008 at which time he terminated his employment. During his employment
      as
      the Company’s Chief Financial Officer, Mr. Lenz received stock options to
      purchase an aggregate of 200,000 shares of the Company’s common stock. Pursuant
      to the terms of his stock option grants, on August 14, 2008 Mr. Lenz will have
      vested stock options to purchase 53,334 shares of our common stock. On July
      18,
      2008, the Company agreed to vest on August 14, 2008 an additional 93,333 shares
      subject to Mr. Lenz’s stock options, so that on that date Mr. Lenz shall have a
      vested and exercisable right to purchase an aggregate of 146,667 shares subject
      to his stock option. The Company also extended the exercise period with respect
      to Mr. Lenz’s options until August 14, 2009.




12


**Item
      2.**  **Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations.**





**Company
      Overview**





We
      are a
      biopharmaceutical company focused on the acquisition, development and
      commercialization of clinical stage drug therapies targeting both the molecular
      basis of cancer and side effects of cancer treatment. Our lead compound under
      development is Xyfid (1% uracil topical) for the treatment of dry skin
      conditions and manage the burning and itching associated with various skin
      disorders. We filed a 510(k) Premarket Notification submission with the FDA
      on
      June 30, 2008 for Xyfid to treat various dermatoses. Additionally, we are
      developing VQD-002 (triciribine phosphate monohydrate or TCN-P), a small
      molecule anticancer compound that inhibits activation of protein kinase B
      (“Akt”), a key component of a signaling pathway known to promote cancer cell
      growth and survival as well as resistance to chemotherapy and radiotherapy.
      VQD-002 is currently in Phase I clinical development for both solid tumors
      and
      hematological malignancies. We are also developing Lenocta (sodium
      stibogluconate), which we previously referred to as VQD-001, a selective, small
      molecule inhibitor of certain protein tyrosine phosphatases (“PTPs”), such as
      SHP-1, SHP-2 and PTP1B, with demonstrated anti-tumor activity against a wide
      spectrum of cancers both alone and in combination with other approved immune
      activation agents, including IL-2 and interferons. Lenocta is currently in
      a
      Phase IIa clinical trial as a potential treatment for melanoma, renal cell
      carcinoma, and other solid tumors. In addition to its potential role as a cancer
      therapeutic, sodium stibogluconate has been approved in most of the world for
      first-line treatment of leishmaniasis, an infection typically found in tropic
      and sub-tropic developing countries. Based on historical published data and
      a
      large observational study by the U.S. Army, existing data from approximately
      400
      patients could be utilized to support a New Drug Application (“NDA”) with the
      U.S. Food and Drug Administration (“FDA”). Lenocta has been granted Orphan Drug
      status for leishmaniasis. To date, we have not received approval for the sale
      of
      any of our drug candidates in any market and, therefore, have not generated
      any
      product sales from our drug candidates.





Through
      our acquisition of Greenwich Therapeutics, Inc. in October 2005, we obtained
      the
      rights to develop and commercialize Lenocta and VQD-002. We hold our rights
      to
      Lenocta and VQD-002 pursuant to 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 Xyfid. The Company’s rights to Xyfid are governed by a license
      agreement with Asymmetric Therapeutics, LLC and Onc Res, Inc., as assigned
      to
      the Company by Fiordland Pharmaceuticals, Inc. These licenses give us the right
      to develop, manufacture, use, commercialize, lease, sell and/or sublicense
      Lenocta, VQD-002 and Xyfid.





**Products:**





**XyfidTM
      (1% uracil topical).** During
      March 2008, we engaged Medical Device Consultants, Inc. to assist us in
      obtaining clearance to market Xyfid pursuant to Section 510(k) of the Food,
      Drug
      and Cosmetic Act and, in particular, the “premarket notification” provisions of
      Section 510(k). To qualify for 510(k) premarket notification, a product must
      be
      substantially equivalent to another device that is legally marketed in the
      U.S.
      A device is substantially equivalent if, in comparison to a predicate, it:





·
            has
                the same intended use as the predicate; and


·
            has
                the same technological characteristics as the
                predicate.





A
      claim
      of substantial equivalence does not mean the new and predicate devices must
      be
      identical. Substantial equivalence is established with respect to intended
      use,
      design, energy used or delivered, materials, chemical composition, manufacturing
      process, performance, safety, effectiveness, labeling, biocompatibility,
      standards, and other characteristics, as applicable.





We
      believe that Xyfid may be substantially equivalent to several predicate devices
      designed to improve dry skin conditions and to relieve and to manage the burning
      and itching associated with various dermatoses including atopic dermatitis,
      irritant contact dermatitis, radiation dermatitis and other dry skin conditions,
      by maintaining a moist wound and skin environment. We
      filed
      the 510(k) submission with the Center for Devices and Radiological Health (CDRH)
      of the FDA on June 30, 2008.


Generally,
        the CDRH responds to 510(k) applications within a 90-day period. While the
        majority of products go through the 510(k) process within the 90-day period,
        the
        more difficult 510(k) applications, or those involving more sophisticated
        products or products that have undergone significant changes, often take
        longer.
        Additionally, the FDA may raise questions during the review process. If these
        questions are lengthy or require a significant amount of time to prepare
        a
        response, the FDA may restart the 90-day review clock. The FDA also can treat
        the submission of new information as starting the process over and thereby
        turn
        the clock back to day one. This allows an additional 90 days to review the
        510(k) application. Thus, the actual review period may exceed 90
        days.





**VQD-002
      (triciribine phosphate monohydrate).** VQD-002,
      a tricyclic nucleoside that inhibits the activation of Akt, has demonstrated
      anti-tumor activity against a wide spectrum of cancers in preclinical and
      clinical studies. Amplification, overexpression, or activation, of Akt has
      been
      detected in a number of human malignancies, including prostate, breast, ovarian,
      colorectal, pancreatic, and hematologic cancers. Activation of Akt is associated
      with cell survival, malignant transformation, tumor invasiveness, and
      chemo-resistance, while inhibition of Akt activity has been shown to cause
      cell
      death. These attributes make Akt an attractive target for cancer
      therapy.


13


VQD-002
      was first synthesized in 1971 and originally identified as an antineoplastic
      agent. Phase I clinical trials on VQD-002 proved that its safety and side
      effects were dose dependent. However, as a single drug in Phase II trials,
      VQD-002 failed to show efficacy against advanced breast, colon, and lung cancer
      even at very high doses.





More
      recently, researchers at Moffitt Cancer Center found that VQD-002 inhibits
      Akt
      activation and has antitumor activity as a single agent against tumors with
      activated Akt. Inhibition of Akt activation plays a key role in VQD-002’s
      antitumor activity. Thus, Phase I trials of VQD-002 have been initiated for
      tumors with activated Akt using a modified dose and schedule of VQD-002 than
      those previously used that caused toxicity.





We
      filed
      an IND with the FDA relating to VQD-002, which was accepted in April 2006.
      Pursuant to this IND, we are currently evaluating the safety, tolerability
      and
      activity of VQD-002 in two Phase 1 clinical trials, including one at the Moffitt
      Cancer Center in up to 42 patients with hyper-activated, phosphorylated Akt
      in
      solid tumors and a second clinical trial, with up to 40 patients, at the M.D.
      Anderson Cancer Center and the Moffitt Cancer Center in hematological tumors,
      with particular attention in leukemias. We expect to complete our Phase 1
      studies in 2008. During 2008, the FDA granted orphan drug designation to VQD-002
      for the treatment of multiple myeloma.





During
      October 2007, preclinical study results were published demonstrating that
      combining VQD-002 with trastuzumab (Herceptin® by Genentech) may be a clinically
      applicable strategy to overcome trastuzumab resistance, particularly that caused
      by loss of PTEN, a tumor suppressor protein. Trastuzumab resistance is a
      clinically devastating problem and this study suggests a rational improvement
      to
      trastuzumab-based therapy, which could directly affect the clinical management
      of breast cancer patients in general and particularly those with PTEN-deficient
      tumors.





During
      January 2008, preclinical study results were published demonstrating that
      VQD-002 disrupts a specific signaling pathway associated with chemoresistance
      and cancer cell survival in ovarian cancer. The preclinical study results
      indicate that VQD-002 could play a role in reversing drug resistance in ovarian
      cancer for patients treated with chemotherapy in the years ahead.





In
      our
      Phase I solid tumor study, VQD-002 was administered intravenously over a 28-day
      cycle on days 1, 8, and 15. Cohorts of 3 patients received escalating doses
      of
      VQD-002 at 15, 25, 35, and 45 mg/m2. Patients had progressive disease despite
      receiving a median of 3 prior treatment regimens (range 1-4). Preliminary Phase
      I data from this solid tumor study demonstrated that VQD-002 could modulate
      Akt
      activity *in
      vivo* and was
      well tolerated; one melanoma subject had stable disease for 8
      months.





In
      our
      Phase I hematological malignancy study, VQD-002 was administered intravenously
      over a 28-day cycle on days 1, 8, and 15. Cohorts of 3 patients received
      escalating doses of VQD-002 at 15, 25, 35, 45, 55 and 65 mg/m2. Patients had
      progressive disease despite receiving a median of 3 prior treatment regimens
      (range 1-4). Interim results of the Phase I trial in hematologic malignancy
      presented at the 2007 American Society of Hematology (“ASH”) annual meeting
      demonstrated that VQD-002 is well-tolerated and shows signs of clinical activity
      in patients with advanced leukemias. The Phase I trial is designed to assess
      the
      safety, tolerability and pharmacokinetics of VQD-002 and to establish a
      recommended Phase II dose for further studies among patients. In results
      presented to date, a total of 38 patients have been enrolled at two clinical
      sites. Twenty-nine patients are evaluable for toxicity and response, six
      patients are evaluable for toxicity only, and three patients are not
      evaluable.





Preliminary
      results from this trial show that patients with relapsed, refractory acute
      myeloid leukemia, or AML, experienced a decrease in peripheral blood
      myeloblasts, a measure of clinical activity. In particular, four patients
      treated at the 25 mg/m2 or 35 mg/m2 dose level of VQD-002 experienced up to
      50
      percent reductions in peripheral blast cells. Additional hematological
      improvements included six patients achieving major improvements in platelet
      count lasting up to 36 days and seven patients achieving major improvements
      in
      neutrophil count lasting up to 40 days while on therapy. VQD-002 was
      well-tolerated at the doses studied.





**LenoctaTM
      (sodium stibogluconate).** Lenocta
      is a selective, small molecule inhibitor of certain protein tyrosine
      phosphatases (“PTPs”), such as SHP-1, SHP-2 and PTP1B, with demonstrated
      anti-tumor activity against a wide spectrum of cancers both alone and in
      combination with other approved immune activation agents, including IL-2 and
      interferons. PTPs are a family of proteins that regulate signal transduction
      pathways in cells and have been implicated in a number of diseases including
      cancer, diabetes, and neurodegeneration.





Lenocta
      has been shown to have anti-proliferative activity against a broad number of
      tumor cell lines, including melanoma and renal cell lines. Pre-clinical work
      in
      nude mice with cancer xenografts has shown that Lenocta can control malignancies
      in vivo as well. These effects were seen whether used as part of a combination
      therapy with existing treatments, including interferon and interleukin-2, or
      alone. In addition, preclinical data also suggests that monotherapy with Lenocta
      may be useful to treat certain other tumor types, including prostate
      cancer.





The
      preclinical data suggests that Lenocta utilizes multiple modes of action,
      including having a direct effect on cancer cells, as well as generally enhancing
      the body’s immune system. These multiple modes of action, along with Lenocta’s
      known historical toxicity profile, demonstrate that Lenocta is a potentially
      attractive drug candidate to evaluate as an anti-cancer agent.


14





Phase
      I
      data from our combination trial of Lenocta and alpha interferon (“IFN a -2b”)
      presented during an oral session at the 2008 American Society of Clinical
      Oncology (ASCO) annual meeting demonstrated pharmacodynamic activity in some
      solid tumors as demonstrated by increases in the activities of natural killer
      cells, CD8 and type II dendritic cells, and two patients with ocular melanoma
      (1) and adenocystic carcinoma (1) have remained stable by Response Evaluation
      Criteria in Solid Tumors, or RECIST, on first assessment. There have been
      seventeen subjects evaluable for response.





A
      complete treatment cycle is for six weeks, with week 1 the patient is
      intravenously dosed with Lenocta for five days as a monotherapy, week 2 the
      patient is dosed with Lenocta and IFN a -2b,
      week
      3 is a rest period, weeks 4 and 5 the patient is dosed with Lenocta and IFN a -2b,
      and
      then there is a week rest before a subsequent cycle is initiated. Patients
      have
      been given five different dose cohorts: 400 mg/m2, 600 mg/m2, 900 mg/m2, 1350
      mg/m2 and a dose reduced cohort of 1125 mg/m2. Lenocta with IFN a -2b
      has
      been well tolerated at doses up to 900 mg/m2. We plan to initiate an expansion
      phase for 20 patients to have twelve subjects evaluable for response at a dose
      of 900 mg/m2.





*Additional
      Potential Indication of Lenocta*





As
      we
      continue to develop Lenocta for indications primarily used for an oncology
      drug
      candidate, we are also in the process of evaluating its potential development
      as
      a treatment for leishmaniasis. According to the World Health Organization,
      leishmaniasis currently threatens 350 million men, women and children in 88
      countries around the world. The leishmaniases are parasitic diseases with a
      wide
      range of clinical symptoms, including skin ulcers, partial or total destruction
      of the mucus membrane, and irregular bouts of fever, substantial weight loss,
      swelling of the spleen and liver, and anemia (occasionally serious). In
      collaboration with the U.S. Army, through an executed Cooperative Research
      and
      Development Agreement, we are evaluating the potential development of Lenocta
      in
      the treatment of leishmaniasis. Lenocta was granted orphan drug designation
      by
      the FDA in the second half of 2006 for the treatment of leishmaniasis. The
      Company has also convened an advisory board to evaluate the potential submission
      of an NDA to the FDA for Lenocta for the treatment of leishmaniasis in
      2008.





With
      regard to leishmaniasis, Congress has created a new incentive for companies
      to
      invest in new drugs and vaccines for neglected tropical diseases. A provision
      of
      the Food and Drug Administration Amendments Act (HR 3580) awards a transferable
      “priority review voucher” to any company that obtains approval for a treatment
      for a neglected tropical disease. This provision adds to the market-based
      incentives available for the development of new medicines for developing world
      diseases such as leishmaniasis, tuberculosis and African sleeping sickness.
      The
      bill was signed into law on September 27, 2007.





The
      statute authorizes the FDA to award a priority review voucher to the sponsor
      of
      a newly approved drug or biologic that targets a neglected tropical disease.
      The
      voucher, which is transferable and can be sold, entitles the bearer to a
      priority review for another product. Under current Prescription Drug User Fee
      Act (“PDUFA”) targets, the FDA aims to complete and act upon reviews of priority
      drugs within 6 months instead of the standard 10 month review period. Actual
      FDA
      review timelines, however, can be longer than the target PDUFA review periods,
      particularly for new products that haven’t previously been
      approved.





To
      qualify to receive a priority review voucher, a product must satisfy five
      criteria:





(1)
            The
                application must be to treat or prevent a “neglected tropical disease” as
                defined by the law and regulation;


(2)
            The
                drug or biologic must be a new molecular
                entity;


(3)
            The
                application must have been submitted after enactment of the Food
&
                Drug Administration Amendments Act (September 25,
                2007);


(4)
            It
                must qualify for priority review under existing FDA procedures;
                and


(5)
            It
                must be approved by the agency.





Economists
      at Duke University, who published on this concept in 2006, estimated that
      priority review can cut the FDA
      review process from an average of 18 months down to six months, shortening
      by as
      much as a full year the time it takes for the company’s drug to reach the
      market. For a company with a top selling drug with a net present value close
      to
      $3 billion, the Duke researchers calculated the accelerated approval could
      be
      worth over $300 million.





Based
      in
      part on a third party analysis, we believe that FDA approval of an NDA
      submission for Lenocta for the treatment of leishmaniasis could result in the
      award of a priority review voucher. Accordingly, we are currently soliciting
      preliminary, good faith, but non-binding indications of interest to partner
      or
      license the priority review voucher that VioQuest expects to
      receive.


15




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





Developing
      pharmaceutical products is a lengthy and very expensive process. Assuming we
      do
      not encounter any unforeseen safety issues during the course of developing
      our
      product candidates, we do not expect to complete the development of a product
      candidate until approximately 2008 for the treatment of leishmaniasis, 2008
      for
      Xyfid through a 510(k) submission, and 2013 for oncology indications of VQD-002
      and then 2013 for oncology indications of Lenocta, 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, 2008 vs. June 30,
      2007**





**Continuing
      Operations:**





The
      Company has had no revenues from its continuing operations through June 30,
      2008.





Research
      and development, or R&D, expenses for the three months ended June 30, 2008
      were $472,801 as compared to $950,844 during the three months ended June 30,
      2007. 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 three oncology compounds: Lenocta, VQD-002
      and
      Xyfid.


The
          following table sets forth the research and development expenses per compound
          for the periods presented.


Three Months Ended June 30,2008
              
              2007
              
              Cumulative
                amounts during
                developmentLenocta
              
              $
              68,376
              
              $
              426,683
              
              $
              3,233,700VQD-002
              
              
              286,928
              
              
              259,663
              
              
              3,713,518Xyfid
              
              
              117,497
              
              
              264,498
              
              
              1,312,558Total
              
              $
              472,801
              
              $
              950,844
              
              $
              8,259,776





The
      following table sets forth the research and development expenses for the three
      months ended June 30, 2008 by expense category for our three oncology
      compounds.


Drug CandidateLenocta
              
              VQD-002
              
              Xyfid
              
              Three Months
                Ended June 30,
                2008Clinical
                  Research Costs
              
              $
              7,208
              
              $
              142,565
              
              $
              25,283
              
              $
              175,056Labor
                  Costs
              
              
              29,842
              
              
              77,588
              
              
              11,936
              
              
              119,366Regulatory
                  / Legal Fees
              
              
              22,576
              
              
              58,698
              
              
              24,031
              
              
              105,305Licensing
                  / Milestone Fees
              
              
              8,750
              
              
              6,250
              
              
              -
              
              
              15,000Other
              
              
              -
              
              
              1,827
              
              
              56,247
              
              
              58,074Total
              
              $
              68,376
              
              $
              286,928
              
              $
              117,497
              
              $
              472,801


16


The
      following table sets forth the research and development expenses for the three
      months ended June 30, 2007 by expense category for our three oncology
      compounds.


Drug CandidateLenocta
              
              VQD-002
              
              Xyfid
              
              Three Months
                Ended June 30,
                2007Clinical
                  Research Costs
              
              $
              62,606
              
              $
              100,691
              
              $
              27,454
              
              $
              190,751Labor
                  Costs
              
              
              165,814
              
              
              105,815
              
              
              -
              
              
              271,629Regulatory
                  / Legal Fees
              
              
              161,161
              
              
              16,791
              
              
              -
              
              
              177,952Licensing
                  Fees
              
              
              8,750
              
              
              6,250
              
              
              -
              
              
              15,000Other
              
              
              28,352
              
              
              30,116
              
              
              237,044
              
              
              295,512Total
              
              $
              426,683
              
              $
              259,663
              
              $
              264,498
              
              $
              950,844





The
      decrease in R&D expenses was primarily attributable to fees incurred
      during 2007 to acquire the worldwide license to certain patents for Xyfid.
      In
      addition, there was a reduction in clinical research costs, offset by increased
      labor costs and regulatory and legal fees related to our oncology drug
      candidates. Our R&D expense for the three months ended June 30, 2008 is
      primarily composed of outside clinical research organization costs (37%),
      employee costs (25%) and outside regulatory and legal fees (22%), which have
      been allocated to each of our three pharmaceutical product candidates. To
      conserve funds, we will continue to complete our current ongoing Phase I and
      Phase II studies for VQD-002 and Lenocta, respectively, however we will not
      initiate any new clinical studies unless and until we receive additional
      funding. We expect R&D spending to increase over the remainder of the year
      as we continue our existing clinical development programs and incur costs
      related to license fees, manufacturing of our products, regulatory costs, and
      the hiring of additional people in the clinical development area, pending
      available resources.





General
      and administrative, or G&A, expenses for the three months ended June 30,
      2008 were $554,753 as compared to $1,192,399 during the three months ended
      June
      30, 2007. This decrease in G&A expenses was primarily due to headcount
      reductions which resulted in reduced employee and non-employee director stock
      option expense in accordance with SFAS 123R as a result of forfeitures, a
      reduction of bonus expense, and the lack of recruitment expenses and employment
      agency fees.





Interest
      expense, net of interest income, for the three months ended June 30, 2008 was
      $103,110 as compared to interest income, net of interest expense, for the three
      months ended June 30, 2007 of $6,391. Interest expense for the three months
      ended June 30, 2008 was primarily composed of dividends payable on mandatorily
      redeemable convertible preferred stock of $107,156, which was offset by interest
      income earned on cash and cash equivalents of $4,046.





Our
      loss
      from continuing operations for the three months ended June 30, 2008 was
      $1,130,664 as compared to $2,136,852 for the three months ended June 30, 2007.
      The decreased loss from continuing operations in 2008 was attributable primarily
      to planned reductions in R&D and G&A spending, as noted above.




We
        recorded a non-cash beneficial conversion charge of $708,772 in April 2008
        in
        connection with the induced conversion of the Series B Preferred stock into
        Series A Preferred Stock.





**Results
      of Operations – For the Six Months Ended June 30, 2008 vs. June 30,
      2007**





**Continuing
      Operations:**





The
      Company has had no revenues from its continuing operations through June 30,
      2008.





R&D
      expenses for the six months ended June 30, 2008 were $1,451,895 as compared
      to
      $2,319,655 during the six months ended June 30, 2007. 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 three oncology compounds, Lenocta, VQD-002 and Xyfid.





The
      following table sets forth the research and development expenses per compound
      for the periods presented.


Six Months Ended June 30,2008
              
              2007
              
              Cumulative
                amounts during
                developmentLenocta
              
              $
              353,706
              
              $
              883,209
              
              $
              3,233,700VQD-002
              
              
              817,541
              
              
              737,287
              
              
              3,713,518Xyfid
              
              
              280,648
              
              
              699,159
              
              
              1,312,558Total
              
              $
              1,451,895
              
              $
              2,319,655
              
              $
              8,259,776
  17




The
      following table sets forth the research and development expenses for the six
      months ended June 30, 2008 by expense category for our three oncology
      compounds.





Drug
                CandidateLenocta
            
            VQD-002
            
            Xyfid
            
            Six Months
              Ended June 30,
              2008Clinical
                Research Costs
            
            $
            167,967
            
            $
            317,957
            
            $
            44,252
            
            $
            530,176Labor
                Costs
            
            
            94,245
            
            
            245,036
            
            
            37,698
            
            
            376,979Regulatory
                / Legal Fees
            
            
            73,694
            
            
            191,605
            
            
            44,478
            
            
            309,777Licensing
                / Milestone Fees
            
            
            17,500
            
            
            12,500
            
            
            -
            
            
            30,000Other
            
            
            300
            
            
            50,443
            
            
            154,220
            
            
            204,963Total
            
            $
            353,706
            
            $
            817,541
            
            $
            280,648
            
            $
            1,451,895





The
      following table sets forth the research and development expenses for the six
      months ended June 30, 2007 by expense category for our three oncology
      compounds.





Drug
                CandidateLenocta
            
            VQD-002
            
            Xyfid
            
            Six Months
              Ended June 30,
              2007Clinical
                Research Costs
            
            $
            245,103
            
            $
            394,779
            
            $
            27,454
            
            $
            667,336Labor
                Costs
            
            
            303,042
            
            
            183,041
            
            
            -
            
            
            486,083Regulatory
                / Legal Fees
            
            
            238,025
            
            
            76,839
            
            
            37,490
            
            
            352,354Licensing
                Fees
            
            
            17,502
            
            
            12,500
            
            
            369,588
            
            
            399,590Other
            
            
            79,537
            
            
            70,128
            
            
            264,627
            
            
            414,292Total
            
            $
            883,209
            
            $
            737,287
            
            $
            699,159
            
            $
            2,319,655





The
      decrease in R&D expenses for the six months ended June 30, 2008 as compared
      to the six months ended June 30, 2007 is primarily attributable to nonrecurring
      fees incurred during 2007 to acquire the worldwide license to certain patents
      for Xyfid. In addition, there was a reduction in clinical research costs, offset
      by increased labor costs and regulatory and legal fees related to our oncology
      drug candidates. Our R&D expense for the six months ended June 30, 2008 is
      primarily composed of outside clinical research organization costs (37%),
      employee costs of (26%) and outside regulatory and legal fees (21%), which
      have
      been allocated to each of our three pharmaceutical product candidates. To
      conserve funds, we will continue to complete our current ongoing Phase I and
      Phase II studies for VQD-002 and Lenocta, respectively, however we will not
      initiate any new clinical studies unless and until we receive additional
      funding. We expect R&D spending to increase over the remainder of the year
      as we continue our existing clinical development programs and incur costs
      related to license fees, manufacturing of our products, regulatory costs, and
      the hiring of additional people in the clinical development area, pending
      available resources.





G&A
      expenses for the six months ended June 30, 2008 were $1,245,092 as compared
      to
      $2,106,050 for the six months ended June 30, 2007. This decrease in G&A
      expenses in 2008 was primarily due to headcount reductions which resulted in
      reduced employee and non-employee director stock option expense in accordance
      with SFAS 123R as a result of forfeitures, a reduction of bonus expense, and
      the
      lack of recruitment expenses and employment agency fees.





Interest
      expense, net of interest income, for the six months ended June 30, 2008 was
      $1,514,658 as compared to interest income, net of interest expense, for the
      six
      months ended June 30, 2007 of $32,075. Interest expense for the six months
      ended
      June 30, 2008 was primarily composed of interest expenses recorded upon the
      extinguishment of the Bridge Notes of $1,399,524 and dividends payable on
      mandatorily redeemable convertible preferred stock of $122,103, which was offset
      by interest income earned on cash and cash equivalents of $6,969.





Our
      loss
      from continuing operations for the six months ended June 30, 2008 was $4,211,645
      as compared to $4,393,630 for the six months ended June 30, 2007. The decreased
      loss from continuing operations in 2008 was attributable primarily to interest
      expenses recorded upon the extinguishment of the Bridge Notes, offset by planned
      reductions in R&D and G&A spending, as noted above.




We
        recorded a non-cash beneficial conversion charge of $708,772 in April 2008
        in
        connection with the induced conversion of the Series B Preferred stock into
        Series A Preferred Stock.





**Discontinued
      Operations:**





Our
      loss
      from discontinued operations for the three and six months ended June 30, 2007
      was $335,422 and $596,897, respectively. There were no discontinued operations
      for the three or six months ended June 30, 2008 due to the completion of the
      sale of Chiral Quest to CQAC during the third quarter of 2007.





18





**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: Lenocta 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 Lenocta and VQD-002. In March 2007, we acquired license rights to
      develop and commercialize Xyfid an adjunctive therapy for a common and serious
      side effect of cancer chemotherapy. Our rights to Xyfid 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 Lenocta, VQD-002 and Xyfid, we
      immediately undertook funding their development, which has significantly
      increased our expected cash expenditures and will continue to increase our
      expected cash expenditures over the next 12 months and thereafter. The
      completion of development of Lenocta, VQD-002 and Xyfid, 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 Lenocta, VQD-002, or Xyfid
      for sale, we will not be able to sell these products and generate
      revenues.





Since
      inception, we have incurred an accumulated deficit of $44,352,714 through June
      30, 2008. For the six months ended June 30, 2008 we had losses from continuing
      operations of $4,211,645 and used $2,605,956 in cash from continuing operating
      activities. As of June 30, 2008, we had a working capital deficit of $1,561,563
      and cash and cash equivalents of $814,477. As a result, we have insufficient
      funds to cover our current obligations or future operating expenses. To conserve
      funds, we will continue to complete our current ongoing Phase I and Phase II
      studies for VQD-002 and Lenocta, respectively, however we will not initiate
      any
      new clinical studies unless and until we receive additional funding. We expect
      our operating losses to increase over the next several years, due to the
      expansion of our drug development business, and related costs associated with
      the clinical development programs of Lenocta, VQD-002 and Xyfid, in addition
      to
      costs related to license fees, manufacturing of our products, regulatory costs,
      and the hiring of additional people in the clinical development area, pending
      available resources. 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
      into the third quarter of 2008. Additional financing will be required during
      the
      third quarter of 2008 in order to continue to fund continuing operations. The
      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, or by potentially sublicensing our rights to our products.
      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,
      2008 was $2,605,956. Our net cash used in continuing operating activities
      primarily resulted from a net loss applicable to common stockholders of
      $4,920,417 offset partially by noncash items consisting primarily of the impact
      of expensing employee and director stock options in accordance with SFAS 123R
      of
      $360,233, amortization of the discount on our bridge note of $1,399,524,
      dividends payable on mandatorily redeemable convertible preferred stock of
      $122,103, the value of a beneficial conversion feature of $708,772, and
      depreciation of $4,650. Other uses of cash in continuing operating activities
      include an increase in prepaid clinical research organization costs of $79,619
      and accrued expenses of $516,356 (largely comprised of clinical development
      costs, professional fees and compensation), offset by an increase in other
      assets of $18,326 and accounts payable of $297,650 in an effort to conserve
      cash.





We
      did
      not use or provide cash from continuing investing activities for the six months
      ended June 30, 2008.





Our
      net
      cash provided by continuing financing activities for the six months ended June
      30, 2008 was $2,725,877, which was attributed to the issuance of preferred
      stock
      to investors for gross proceeds of approximately $3.0 million.





We
      currently have three full-time employees and two consultants. We anticipate
      hiring additional full-time employees in the medical and clinical functions,
      pending available resources. 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.




19




At
      our
      current and desired pace of clinical development of our three products,
      currently in Phase I/IIa clinical trials, over the next twelve months we expect
      to spend approximately $5.0 million on clinical trials and research and
      development (including milestone payments that we expect to be triggered under
      the license agreements relating to our product candidates, maintenance fees
      payments that we are obligated to pay to the institutions from which we licensed
      our two oncology compounds, salaries and consulting fees, pre-clinical work
      and
      laboratory studies), approximately $200,000 on facilities, rent and other
      facilities costs, and approximately $1.4 million on general corporate and
      working capital.





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 243,000
      shares of the Company’s common stock at an exercise price of $4.00 per share.
      Based upon the Black-Scholes option pricing model, the investor warrants were
      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 approximately $24,000 as a non-accountable expense allowance. In
      addition, we issued placement agents five-year warrants to purchase an aggregate
      of approximately 120,000 shares of common stock, of which 45,000 shares of
      common stock were issued to Paramount, which are exercisable at a price of
      $4.20
      per share. Based upon the Black-Scholes option pricing model, the placement
      agents’ warrants were estimated to be valued at approximately
      $430,000.





On
      July
      16, 2007, we completed the sale of our discontinued operations Chiral Quest
      and
      received $1.7 million in 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 $807,000 pursuant to the
      purchase agreement.





On
      March
      14, 2008, we issued 765 shares of Series A Preferred stock at a price of $1,000
      per share resulting in aggregate gross proceeds of $765,000. Each share of
      Series A Preferred stock sold is convertible into shares of the Company's common
      stock at $0.60 per share, or approximately 1.275 million shares of common stock
      in the aggregate. We also issued to investors five-year warrants to purchase
      an
      aggregate of approximately 640,000 shares of our common stock at an exercise
      price of $1.00 per share. Based upon the Black-Scholes option pricing model,
      the
      investor warrants are estimated to be valued at approximately $701,000. In
      connection with the offering, we engaged Paramount as our placement agent.
      Dr.
      Lindsay A. Rosenwald is the Chairman, CEO and sole stockholder of Paramount
      and
      a substantial stockholder of the Company. Dr. Rosenwald participated in this
      financing, through a family investment partnership, of which he is the managing
      member. The family investment partnership purchased 500 shares of Series A
      Preferred stock and received warrants to purchase 416,700 shares of common
      stock. In consideration for the placement agent’s services, we paid an aggregate
      of approximately $54,000 in commissions to Paramount in connection with the
      offering. We also paid $35,000 to Paramount as a non-accountable expense
      allowance. In addition, we issued five-year warrants to purchase an aggregate
      of
      approximately 127,500 shares of common stock to Paramount, which are exercisable
      at a price of $0.80 per share. Based upon the Black-Scholes option pricing
      model, the warrants issued to Paramount were estimated to be valued at
      approximately $140,000. The Series A Preferred stock shall be entitled to an
      annual dividend equal to 6% of the applicable issuance price per annum, payable
      semi-annually in cash or shares of common stock, at the option of the Company.
      If the Company chooses to pay the dividend in shares of common stock, the price
      per share of common stock to be issued shall be equal to 90% of the average
      closing price of the common stock for the 20 trading days prior to the date
      that
      such dividend becomes payable. As a condition to the initial closing of the
      private placement, the majority of the holders of the June 29, 2007 and July
      3,
      2007 convertible promissory notes agreed to convert such notes, together with
      accrued interest, into approximately 3,910 shares of the Company’s
      newly-designated Series B Preferred stock. The Series B Preferred stock contains
      substantially the same economic terms as the previously outstanding senior
      convertible notes.





On
      April
      9, 2008, we issued 2,194.5 shares of Series A Preferred stock at a price of
      $1,000 per share resulting in aggregate gross proceeds of $2,195,000. Each
      share
      of Series A Preferred stock sold is convertible into shares of the Company's
      common stock at $0.60 per share, or approximately 3.66 million shares of common
      stock in the aggregate. In addition, we issued 505 shares of Series A Preferred
      stock to two investors that converted their Series B Preferred stock into Series
      A Preferred stock on a dollar-for-dollar basis. We also issued to investors
      five-year warrants to purchase an aggregate of approximately 1.83 million shares
      of our common stock at an exercise price of $1.00 per share. Based upon the
      Black-Scholes option pricing model, the investor warrants are estimated to
      be
      valued at approximately $1,828,000. In connection with the offering, we engaged
      Paramount as our placement agent. In consideration for the placement agent’s
      services, the Company paid an aggregate of approximately $153,000 in commissions
      to Paramount in connection with the offering. In addition, the Company issued
      to
      Paramount five-year warrants to purchase an aggregate of approximately 366,000
      shares of common stock, which are exercisable at a price of $0.80 per share.
      Based upon the Black-Scholes option pricing model, the warrants issued to
      Paramount were estimated to be valued at approximately $366,000. The Series
      A
      Preferred stock shall be entitled to an annual dividend equal to 6% of the
      applicable issuance price per annum, payable semi-annually in cash or shares
      of
      common stock, at the option of the Company. If the Company chooses to pay the
      dividend in shares of common stock, the price per share of common stock to
      be
      issued shall be equal to 90% of the average closing price of the common stock
      for the 20 trading days prior to the date that such dividend becomes payable.




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.




20




**Item
      3. Quantitative and Qualitative Disclosures About Market
      Risk**





We
      have
      no material exposures relating to our debt, as our debt bears interest at fixed
      rates.





*Forward-looking
      Information*





An
      investment in our securities involves a high degree of risk. Prior to making
      an
      investment, prospective investors should carefully consider the following
      factors, among others, and seek professional advice. In addition, this Form
      10-Q
      contains certain “forward-looking statements” within the meaning of Section 27A
      of the Securities Act and Section 21E of the Exchange Act. Such forward-looking
      statements, which are often identified by words such as “believes”,
“anticipates”, “expects”, “estimates”, “should”, “may”, “will” and similar
      expressions, represent our expectations or beliefs concerning future events.
      Numerous assumptions, risks, and uncertainties could cause actual results to
      differ materially from the results discussed in the forward-looking statements.
      Prospective purchasers of our securities should carefully consider the
      information contained herein or in the documents incorporated herein by
      reference.





This
      Form
      10-Q contains certain estimates, predictions, projections and other
      forward-looking statements (within the meaning of Section 27A of the Securities
      Act of 1933 and Section 21E of the Securities Exchange Act of 1934) that involve
      various risks and uncertainties. While these forward-looking statements, and
      any
      assumptions upon which they are based, are made in good faith and reflect
      management’s current judgment regarding the direction of the business, actual
      results will almost always vary, sometimes materially, from any estimates,
      predictions, projections, or other future performance suggested
      herein .
      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 Lenocta, VQD-002 and Xyfid, 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;
                and


·
            our
                ability to protect our proprietary
                technology.





Any
      forward-looking statement speaks only as of the date on which it is made. For
      further details and a discussion of these and other risks and uncertainties,
      investors and security holders are cautioned to review the VioQuest 2007 Annual
      Report on Form 10-KSB, including the Forward-Looking Statement section therein,
      and other subsequent filings with the U.S. Securities and Exchange Commission
      including Current Reports on Form 8-K. The Company undertakes no obligation
      to
      publicly release the result of any revisions to any such forward-looking
      statements that may be made to reflect events or circumstances after the date
      hereof or to reflect the occurrence of unanticipated events.





**Item
      4T. Controls and Procedures.**





Under
      the
      supervision and with the participation of our management, including the Chief
      Executive Officer and Chief Financial Officer, we have evaluated the
      effectiveness of our disclosure controls and procedures as required by Exchange
      Act Rule 13a-15(b) as of the end of the period covered by this report. Based
      on
      that evaluation, the Chief Executive Officer and Chief Financial Officer have
      concluded that these disclosure controls and procedures were not effective
      due
      to a lack of segregation of duties in our accounting and financial functions.Due
      to our lack of sufficient capital, management has concluded that with certain
      oversight controls that are in place, the risks associated with the lack of
      segregation of duties are not sufficient to justify the costs of potential
      benefits to be gained by adding additional employees at this time. Management
      will periodically reevaluate this situation. If we secure sufficient capital
      it
      is our intention to increase staffing to mitigate the current lack of
      segregation of duties within the accounting and financial functions.





*Report
      of Management on Internal Control over Financial Reporting*





Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting for the Company. Internal control over
      financial reporting is a process to provide reasonable assurance regarding
      the
      reliability of our financial reporting for external purposes in accordance
      with
      accounting principles generally accepted in the United States of America.
      Internal control over financial reporting includes maintaining records that
      in
      reasonable detail accurately and fairly reflect our transactions; providing
      reasonable assurance that transactions are recorded as necessary for preparation
      of our consolidated financial statements; providing reasonable assurance that
      receipts and expenditures of company assets are made in accordance with
      management authorization; and providing reasonable assurance that unauthorized
      acquisition, use or disposition of company assets that could have a material
      effect on our consolidated financial statements would be prevented or detected
      on a timely basis. Because of its inherent limitations, internal control over
      financial reporting is not intended to provide absolute assurance that a
      misstatement of our consolidated financial statements would be prevented or
      detected.




Management
        conducted an evaluation of the effectiveness of our internal control over
        financial reporting based on the framework in Internal Control—Integrated
        Framework issued by the Committee of Sponsoring Organizations of the Treadway
        Commission. Based on this evaluation, management concluded that the Company’s
        internal control over financial reporting was effective as of June 30, 2008.
 
 There
        were no changes in our internal control over financial reporting during
        the three months ended June 30, 2008 that have materially affected, or are
        reasonably likely to materially affect, our internal control over financial
        reporting.


21




**PART
      II – OTHER INFORMATION**





**Item
      1A. Risk Factors**





There
      have been no material changes to our risk factors and uncertainties during
      the
      six months ended June 30, 2008. For a discussion of the Risk Factors, refer
      to
      the “Risk Factors” section of Item 1 in the Company's Annual Report on Form
      10-KSB for the period ended December 31, 2007.




22





**Item
      6. Exhibits**





Exhibit
                No.
            
            Description10.1
            
            Form
                of Stock Option Agreement dated June 13, 2008 between VioQuest
                Pharmaceuticals, Inc. and Michael Becker (incorporated by reference
                to
                Exhibit 10.2 of the Company’s Form 8-K filed on June 19,
                2008)10.2
            
            Form
                of Stock Option Agreement dated June 13, 2008 between VioQuest
                Pharmaceuticals, Inc. and Brian Lenz (incorporated by reference to
                Exhibit
                10.3 of the Company’s Form 8-K filed on June 19, 2008)10.3
            
            Form
                of Director Stock Option Agreement dated June 13, 2008 (incorporated
                by
                reference to Exhibit 10.4 of the Company’s Form 8-K filed on June 19,
                2008)10.4
            
            Form
                of Amendment to Stock Option Agreement dated June 13, 2008 (incorporated
                by reference to Exhibit 10.5 of the Company’s Form 8-K filed on June 19,
                2008)10.5
            
            List
                of Stock Option Agreements to be amended by the Form attached hereto
                as
                Exhibit 10.3 (incorporated by reference to Exhibit 10.6 of the Company’s
                Form 8-K filed on June 19, 2008)10.6
            
            Amendment
                dated June 13, 2008 to Stock Option Agreement dated November 21,
                2007
                between VioQuest Pharmaceuticals, Inc. and Michael Becker for 501,334
                shares (incorporated by reference to Exhibit 10.7 of the Company’s Form
                8-K filed on June 19, 2008)10.7
            
            Amendment
                dated June 13, 2008 to Stock Option Agreement dated November 21,
                2007
                between VioQuest Pharmaceuticals, Inc. and Michael Becker for 29,974
                shares (incorporated by reference to Exhibit 10.8 of the Company’s Form
                8-K filed on June 19, 2008)10.8
            
            Employment
                Amendment dated July 18, 2008 between VioQuest Pharmaceuticals, Inc.
                and
                Christopher P. Schnittker (incorporated by reference to Exhibit 10.1
                of
                the Company’s Form 8-K filed on July 24, 2008)10.9
            
            2003
                Stock Option Plan, as amended (incorporated by reference to Exhibit
                10.2
                of the Company’s Form 8-K filed on July 24, 2008)31.1
            
            Certification
                of Chief Executive Officer31.2
            
            Certification
                of Chief Financial Officer32.1
            
            Certification
                of Chief Executive Officer and Chief Financial Officer pursuant to
                Section
                906 of the Sarbanes-Oxley Act of 2002





**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 19, 2008
            By:
            /s/ Michael D. BeckerMichael D. Becker
              President & Chief Executive OfficerDate: August 19, 2008
            By:
            /s/ Christopher P. SchnittkerChristopher P. Schnittker
              Vice President & Chief Financial Officer




23




**INDEX
      TO EXHIBITS FILED WITH THIS REPORT**





Exhibit
                No.
            
            Description31.1
            
            Certification
                of Chief Executive Officer31.2
            
            Certification
                of Chief Financial Officer32.1
            
            Certification
                of Chief Executive Officer and Chief Financial Officer pursuant to
                Section
                906 of the Sarbanes-Oxley Act of 2002




24