**UNITED
      STATES**  **SECURITIES
        AND EXCHANGE COMMISSION**
 **Washington,
        DC 20549**
 
 **FORM
        10-QSB**
 
 x     QUARTERLY
        REPORT UNDER SECTION 13 OR 15(d)
 OF
        THE
        SECURITIES EXCHANGE ACT OF 1934
 For
        the
        quarterly period ended September 30, 2005
 
 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 issuer as specified in its charter)
 
 Delaware
              58-1486040(State
                  or other jurisdiction of incorporation or organization)
              (IRS
                  Employer Identification No.)7
                  Deer Park Drive, Suite E, Monmouth Junction, NJ
              08852(Address
                  of Principal Executive Offices)
              (Zip
                  Code)
 
 (732)
        274-0399
 
 (Issuer’s
        telephone number)
 
 (former
        name, former address and former fiscal year, if changed from last
        report)
 
 Check
        whether the issuer (1) has filed all reports required to be filed by Section
        13
        or 15(d) of the Exchange Act during the past 12 months (or for such shorter
        period that the registrant was required to file such reports), and (2) has
        been
        subject to such filing requirements for the past 90 days. Yes x  No o
 
 Indicate
        by check mark whether the registrant is a shell company (as defined by Rule
        12b-2 of the Exchange Act). Yes o No x
 
 As
        of
        November 14, 2005 there were 46,729,519 shares of the issuer’s common stock,
        $.001 par value, outstanding.
 
 Traditional
        Small Business Disclosure Format (check one): Yes o  No x
  
 Index
 
 Page**PART
                  I**
              **FINANCIAL
                  INFORMATION**Item
                  1.
              Unaudited
                  Condensed Consolidated Financial Statements
              1Item
                  2.
              Management’s
                  Discussion and Analysis
              12or
                  Plan of OperationsItem
                  3.
              Controls
                  and Procedures
              18**PART
                  II**
              **OTHER
                  INFORMATION**Item
                  5.
              Other
                  Information
              19Item
                  6.
              Exhibits
              19Signatures
              20Exhibit
                  Index
              21
 
 **Forward-Looking
        Statements**
 
 This Quarterly Report on Form 10-QSB contains statements that are not
        historical, but are forward-looking in nature, including statements regarding
        the expectations, beliefs, intentions or strategies regarding the future.
        In
        particular, the “Management’s Discussion and Analysis or Plan of Operations”
        section in Part I, Item 2 of this quarterly report includes forward-looking
        statements that reflect our current views with respect to future events and
        financial performance. We use words such as we “expect,”“anticipate,”“believe,”
        and “intend” and similar expressions to identify forward-looking statements. A
        number of important factors could, individually or in the aggregate, cause
        actual results to differ materially from those expressed or implied in any
        forward-looking statements. Such factors include, but are not limited to,
        the
        continued availability of our chief technology officer, our ability to obtain
        additional financing, our ability to develop and maintain customer
        relationships, regulatory developments relating to and the general success
        of
        our and our customers’ products, and our ability to protect our proprietary
        technology. Other risks are described under the section entitled “Risk Factors”
        following Item 1 in Part I of our Annual Report on Form 10-KSB for the year
        ended December 31, 2004.
 
 
 **PART
        I - FINANCIAL INFORMATION**
 
 **Item
        1. Unaudited Condensed Consolidated Financial Statements**
 
 **VIOQUEST
        PHARMACEUTICALS, INC. AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED BALANCE SHEETS**
 **AS
        OF SEPTEMBER 30, 2005 (UNAUDITED) AND DECEMBER 31, 2004**
 
 **September
                  30,
                  2005**
                **(Unaudited)**
              
              **December
                  31, 2004**
                ******(Note
                  1A)****ASSETS****CURRENT
                  ASSETS**Cash and cash equivalents
              
              $
              261,782
              
              $
              3,065,547Accounts
                  receivable, net of allowance for doubtful accounts of$10,000
                  at September 30, 2005 and $0 at December 31, 2004
              
              
              122,392
              
              
              318,585Inventories
              
              
              635,515
              
              
              360,147Prepaid expenses
              
              
              57,457
              
              
              64,377Total Current Assets
              
              
              1,077,146
              
              
              3,808,656**PROPERTY
                  AND EQUIPMENT, NET**
              
              
              834,173
              
              
              493,632**SECURITY
                  DEPOSITS**
              
              
              60,990
              
              
              31,000**INTELLECTUAL
                  PROPERTY RIGHTS, NET**
              
              
              585,610
              
              
              543,453**OTHER
                  ASSETS**
              
              
              55,335
              
              
              —**TOTAL
                  ASSETS**
              
              $
              2,613,254
              
              $
              4,876,741**LIABILITIES
                  AND STOCKHOLDERS' EQUITY****CURRENT
                  LIABILITIES**Accounts payable
              
              $
              1,751,446
              
              $
              303,392Accrued expenses
              
              
              419,995
              
              
              219,715Deferred revenue
              
              
              173,000
              
              
              563,842**TOTAL
                  LIABILITIES**
              
              
              2,344,441
              
              
              1,086,949**COMMITMENTS
                  AND CONTINGENCIES****STOCKHOLDERS'
                  EQUITY**Common
                  stock, $.01 par value, 50,000,000 shares authorized,
                17,827,924
                  shares issued and outstanding at September 30, 2005
                and
                  December 31, 2004
              
              
              178,279
              
              
              178,279Additional
                  paid-in capital
              
              
              11,398,431
              
              
              11,046,276Common
                  stock to be issued for services, 200,000 restricted shares
              
              
              190,000
              
              
              —Accumulated
                  deficit
              
              
              (11,497,897
              )
              
              (7,434,763
              )Total Stockholders' Equity
              
              
              268,813
              
              
              3,789,792**TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY**
              
              $
              2,613,254
              
              $
              4,876,741
  See
        accompanying notes to condensed consolidated financial statements.
  1
 
 **VIOQUEST
        PHARMACEUTICALS, INC. AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF OPERATIONS**
 **FOR
        THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004**
 **(UNAUDITED)**
 
 
 For
                  the Three
                Months
                  Ended September 30,
                2005
              
              For
                  the Three
                Months
                  Ended September 30,
                2004
              
              For
                  the Nine
                Months
                  Ended September 30,
                2005
              
              For
                  the Nine
                Months
                  Ended September 30,
                2004**REVENUE**
              
              $
              536,185
              
              $
              367,265
              
              $
              2,636,124
              
              $
              1,102,388**COST
                  OF GOODS SOLD (Excluding Depreciation and
                  Amortization)**
              
              
              223,397
              
              
              192,349
              
              
              1,678,928
              
              
              569,598**GROSS
                  PROFIT**
              
              
              312,788
              
              
              174,916
              
              
              957,196
              
              
              532,790**OPERATING
                  EXPENSES**Management
                  and consulting fees
              
              
              450,701
              
              
              125,956
              
              
              707,423
              
              
              363,848Research
                  and development
              
              
              535,048
              
              
              422,925
              
              
              1,196,846
              
              
              1,205,802Selling,
                  general and administrative
              
              
              897,359
              
              
              394,487
              
              
              2,958,399
              
              
              1,677,610Depreciation
                  and amortization
              
              
              49,804
              
              
              33,622
              
              
              171,865
              
              
              126,227Total
                  Operating Expenses
              
              
              1,932,912
              
              
              976,990
              
              
              5,034,533
              
              
              3,373,487**LOSS
                  FROM OPERATIONS**
              
              
              (1,620,124
              )
              
              (802,074
              )
              
              (4,077,337
              )
              
              (2,840,697
              )**INTEREST
                  INCOME, NET**
              
              
              2,463
              
              
              11,246
              
              
              14,203
              
              
              27,053**NET
                  LOSS**
              
              $
              (1,617,661
              )
              $
              (790,828
              )
              $
              (4,063,134
              )
              $
              (2,813,644
              )**NET
                  LOSS PER COMMON SHARE - BASIC AND DILUTED**
              
              $
              (.09
              )
              $
              (.04
              )
              $
              (.23
              )
              $
              (.17
              )**WEIGHTED
                  AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED**
              
              
              17,852,100
              
              
              17,827,924
              
              
              17,852,100
              
              
              16,841,403
 
 See
        accompanying notes to condensed consolidated financial
        statements.
  2
 
 
 **VIOQUEST
        PHARMACEUTICALS, INC. AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY**
 **FOR
        THE NINE MONTHS ENDED SEPTEMBER 30, 2005**
 **(UNAUDITED)**
 
 **Common
                  Stock****Shares**
              
              **Amount**
              
              
              **Additional**
                **Paid-In**
                **Capital**
              
              
              **Common
                  Stock**
                **To
                  Be**
                **Issued**
              
              
              **Accumulated**
                **Deficit**
              
              
              **Total**
                **Stockholders’**
                **Equity**Balance,
                  January 1, 2005 (Note 1A)
              
              
              17,827,924
              
              $
              178,279
              
              $
              11,046,276
              
              
              —
              
              $
              (7,434,763
              )
              $
              3,789,792Common
                  stock to be issued
              
              
              —
              
              
              —
              
              
              —
              
              $
              190,000
              
              
              —
              
              
              190,000Impact
                  of variable accounting
              
              
              —
              
              
              —
              
              
              352,155
              
              
              —
              
              
              —
              
              
              352,155Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              (4,063,134
              )
              
              (4,063,134
              )Balance,
                  September 30, 2005
              
              
              17,827,924
              
              $
              178,279
              
              $
              11,398,431
              
              $
              190,000
              
              $
              (11,497,897
              )
              $
              268,813
 
 See
        accompanying notes to condensed consolidated financial statements.
  3
 
 **VIOQUEST
        PHARMACEUTICALS, INC. AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS**
 **FOR
        THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004**
 **(UNAUDITED)**
 
 **For
                  the Nine**
                **Months
                  Ended**
                **September
                  30, 2005**
              
              **For
                  the Nine**
                **Months
                  Ended**
                **September
                  30, 2004****CASH
                  FLOWS FROM OPERATING ACTIVITIES:**Net
                  loss
              
              $
              (4,063,134
              )
              $
              (2,813,644
              )Adjustments
                  to reconcile net loss to net cash used in operating activities:Depreciation and amortization
              
              
              171,865
              
              
              126,227Impact of variable accounting
              
              
              352,155
              
              
              224,144Common
                  stock to be issued for services
              
              
              190,000
              
              
              —Changes
                  in operating assets and liabilities:Accounts receivable
              
              
              196,193
              
              
              (237,173
              )Inventories
              
              
              (275,368
              )
              
              (67,674
              )Prepaid expenses and other assets
              
              
              (48,415
              )
              
              (24,549
              )Security deposits
              
              
              (29,990
              )
              
              (37,700
              )Accounts payable
              
              
              1,448,054
              
              
              185,697Accrued
                  expenses
              
              
              200,280
              
              
              (175,076
              )Deferred revenue
              
              
              (390,842
              )
              
              (162,306
              )Net Cash Used In Operating Activities
              
              
              (2,249,202
              )
              
              (2,982,054
              )**CASH
                  FLOWS FROM INVESTING ACTIVITIES:**Payments
                  for purchased equipment
              
              
              (510,370
              )
              
              (211,762
              )Payments
                  for intellectual property
              
              
              (44,193
              )
              
              (147,383
              )Net Cash Used In Investing Activities
              
              
              (554,563
              )
              
              (359,145
              )**CASH
                  FLOWS FROM FINANCING ACTIVITIES:**Private
                  placement of common stock
              
              
              —
              
              
              6,741,632Net Cash Provided By Financing Activities
              
              
              —
              
              
              6,741,632**NET
                  INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS**
              
              
              (2,803,765
              )
              
              3,400,433**CASH
                  AND CASH EQUIVALENTS - BEGINNING OF PERIOD**
              
              
              3,065,547
              
              
              659,117**CASH
                  AND CASH EQUIVALENTS - END OF PERIOD**
              
              $
              261,782
              
              $
              4,059,550**Supplemental
                  Schedule of Non-Cash Investing and Financing Activities:**Reclassification of deferred financing costs to additional paid-in
                  capital
                  in connection with the private placement
              
              $
              —
              
              $
              50,000
  See
        accompanying notes to condensed consolidated financial statements.
 
 4
 **VIOQUEST
        PHARMACEUTICALS, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2005**
 
 **NOTE
        1**  **SUMMARY
        OF SIGNIFICANT ACCOUNTING POLICIES AND LIQUIDITY**
 
 ***(A)
        Basis of Presentation***
 
 The
        accompanying unaudited condensed consolidated financial statements have been
        prepared in accordance with accounting principles generally accepted in the
        United States of America for interim financial information. The accompanying
        condensed consolidated financial statements reflect the reclassification
        of
        deferred compensation that had been previously reflected as a reduction of
        stockholders’ equity in the condensed consolidated balance sheet to additional
        paid-in capital and certain other reclassifications to conform to the 2005
        presentations. 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, 2005 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 (as amended by Amendment No. 1 on Form 10-KSB/A)
        of
        VioQuest Pharmaceuticals, Inc., as of and for the year ended December 31,
        2004.
        The accompanying condensed consolidated balance sheet as of December 31,
        2004
        has been derived from the audited balance sheet as of that date included
        in the
        form 10-KSB/A. As used herein, the terms the “Company” or “VioQuest” refer to
        VioQuest Pharmaceuticals, Inc. (formerly Chiral Quest, Inc.) together with
        its
        subsidiaries.
 
 ***(B)
        Nature of Operations and Liquidity***
 
 Since
        its
        inception in October 2000, VioQuest has provided pharmaceutical and fine
        chemical companies in all stages of the product lifecycles with innovative
        chiral products and services. Since August 2004, the Company has provided
        such
        products and services through its wholly-owned subsidiary, Chiral Quest,
        Inc.
        (“Chiral Quest”). Chiral Quest develops chemical catalysts used in the synthesis
        of desired isomers of chiral molecules using asymmetrical catalysis technology
        (the “Technology”) owned by the Pennsylvania State University Research
        Foundation (“PSRF”), the technology arm of The Pennsylvania State University
        (“Penn State”). Chiral Quest has a worldwide, exclusive license from PSRF for
        the inventions covered by the license. The original license agreement was
        entered into on November 8, 2000.
 
 In
        August
        2004, the Company formed VioQuest Drug Development, Inc., a wholly-owned
        subsidiary, which focuses on acquiring and bringing to market therapies for
        oncology, metabolic and inflammatory diseases and disorders that are current
        unmet medical needs. As of September 30, 2005, VioQuest Drug Development,
        Inc.
        had not yet acquired any product candidates (see Note 5), has not realized
        any
        revenue and has not incurred any material expenses.
 
 Through
        September 30, 2005, the Company has generated sales revenue but not any net
        profits. Management believes that the Company’s research and development
        (“R&D”) and manufacturing capacity will need to continue to grow through the
        commercialization of our ligands and catalysts, and the development of our
        next
        generation of technological products of building blocks, in order for the
        Company to be able to obtain significant licensing and manufacturing agreements
        with large fine chemical and pharmaceutical companies. Management believes
        that
        the Company’s manufacturing capacity will be enhanced with its expanded office
        and laboratory space located in Monmouth Junction, New Jersey, in addition
        to
        the leased space located in Jiashan, China.
 
 The
        accompanying condensed consolidated financial statements have been prepared
        assuming that the Company will continue as a going concern. Since inception,
        the
        Company has incurred an accumulated deficit of $11,497,897 through September
        30,
        2005. For the three and nine months ended September 30, 2005, the Company
        had
        net losses of $1,617,661 and $4,063,134, respectively. As of September 30
        2005,
        the Company had a working capital deficiency of $1,267,295 and cash and cash
        equivalents of $261,782.
 
 Management
        expects the Company’s losses to increase over the next several years, primarily
        due to the costs related to the development and commercialization of our
        two
        recently-acquired anti-cancer therapeutic compounds, in addition to the
        expansion of our research and development programs, the hiring of additional
        chemists, and the expansion of our manufacturing capabilities. There can
        be no
        assurance that the Company will ever be able to operate profitably.
  5
  **VIOQUEST
        PHARMACEUTICALS, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2005**
 
 On
        October 18, 2005, the Company sold 11,179,975 shares (the “Shares”) of its
        common stock at a price of $0.75 per share resulting in gross proceeds of
        approximately $8.38 million. In addition to the shares of common stock, the
        investors also received 5-year warrants (the “Warrants”) to purchase an
        aggregate of 4,471,975 shares at an exercise price of $1.00 per share.
 
 In
        connection with the private placement, the Company paid an aggregate of
        approximately $587,000 in commissions to Paramount BioCapital, Inc., a related
        party, which served as the placement agent in connection with the offering,
        together with an accountable expense allowance of $50,000, and issued 5-year
        warrants to purchase an aggregate of 1,117,997 shares of common stock at
        a price
        of $1.00 per share. Net proceeds to the Company after deducting placement
        agent
        fees and other expenses relating to the private placement, were approximately
        $7.5 million. The Company believes that the net proceeds received of
        approximately $7.5 million will provide adequate capital at least through
        September 30, 2006, to fund the Company’s general operations, drug development
        activities, and the necessary funds required for the further development
        of the
        Chiral Quest operation.
 
 The
        Company’s net cash used in operating activities for the nine months ended
        September 30, 2005 was $2,249,202. The Company’s net cash used in operating
        activities primarily resulted from a net loss of $4,063,134. Inventories
        increased as a result of the Company purchasing raw materials to be used
        in the
        production of its commercialized proprietary products of ligands and catalysts.
        A decrease in deferred revenue of $390,842 was attributed to the Company
        receiving cash collections in advance to shipments which occurred during
        2005. A
        decrease in accounts receivable of $196,193 was a result of cash collections
        from prior period revenues, an increase in accounts payable of $1,448,054
        was
        attributed to purchases for inventory, recruiting and operational expenditures,
        and an increase in accrued expenses of $200,280 attributed to the Company
        reserving for future expenditures of its bonus and vacation agreements with
        employees. The Company’s net cash used in operating activities was offset by the
        following non-cash items: depreciation and amortization totaling $171,865,
        which
        was attributed to the purchases of equipment and leasehold improvements in
        our
        laboratories located in Monmouth Junction, New Jersey and Jiashan, China,
        $352,155 for options issued to consultants accounted for under variable
        accounting, and
        a one
        time, non-cash charge to consultant’s expense during the third quarter of 2005,
        for $190,000 related to the issuing of restricted shares of the Company’s common
        stock awarded to a consultant.
 
 The
        Company’s net cash used in investing activities for the nine months ended
        September 30, 2005 totaled $554,563, which resulted from capital expenditures
        of
        $510,370 related to the Chiral Quest, Jiashan, China laboratory expansion,
        and
        purchases of laboratory, computer and office equipment related to the New
        Jersey
        facility. Additionally, payments for intellectual property totaled
        $44,193.
 
 The
        Company’s capital requirements will depend on numerous factors, including:
        acquiring, developing and commercializing therapies for oncology, metabolic
        and
        inflammatory diseases and disorders, competing technological and market
        developments, changes in our existing collaborative relationships, the cost
        of
        filing, prosecuting, defending and enforcing patent claims and other
        intellectual property rights and the outcome if any potentially related
        litigation or other dispute, the purchase of additional capital equipment,
        acquisition of technologies, the establishment and funding of Chiral Quest’s,
        Jiashan, China facility, and the development and regulatory approval progress
        of
        its customers’ product candidates into which the Company’s technology will be
        incorporated, in addition to the costs associated with the drug development
        process related to acquiring, developing and commercializing a drug candidate.
 
 Additional
        capital that may be needed by the Company in the future may not be available
        on
        reasonable terms, or at all (see Note 6). If adequate financing is not
        available, the Company may be required to terminate or significantly curtail
        its
        operations, or enter into arrangements with collaborative partners or others
        that may require the Company to relinquish rights to certain of its
        technologies, or potential markets that the Company would not otherwise
        relinquish.
 
 The
        Company’s ability to achieve profitability depends upon, among other things, its
        ability to discover and develop products (specifically new “ligands”), and to
        develop its products on a commercial scale through a cost effective and
        efficient process. To the extent that the Company is unable to produce, directly
        or indirectly, ligands in quantities required for commercial use, it will
        not
        realize any significant revenues from its technology. Moreover, there can
        be no
        assurance that it will ever achieve significant revenues or profitable
        operations from the sale of any of its products or technologies.
 
 ***(C)
        Stock-Based Compensation***
 
 The
        Company accounts for its employee and director stock option plans using the
        intrinsic value method in accordance with APB Opinion No. 25, “ *Accounting
        For Stock Issued To Employees,* ”
        and
        related interpretations.
  6
  **VIOQUEST
        PHARMACEUTICALS, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2005**
 
 The
        Company measures compensation expense for employee and director stock options
        as
        the aggregate difference between the market value of its common stock and
        exercise prices of the options on the date that both the number of shares
        the
        grantee is entitled to receive and the exercise prices are known. For pro
        forma
        disclosure purposes, the Company values option issuances using the Black-Scholes
        option pricing model and amortizes the value over the vesting period.
 
 If
        the
        Company had elected to recognize compensation cost for all outstanding options
        granted by the Company to employees by applying the fair value recognition
        provisions of SFAS No. 123 *“Accounting
        for Stock Based Compensation, (“SFAS 123”)”* to
        employee stock options, net loss and net loss per share for the three and
        nine
        months ended September 30, 2005 and 2004 would have been increased to the
        pro
        forma amounts indicated below:
 
 For
                  the Three
                Months
                  Ended September 30,
                2005
              
              For
                  the Three
                Months
                  Ended September 30,
                2004
              
              For
                  the Nine
                Months
                  Ended September 30,
                2005
              
              For
                  the Nine
                Months
                  Ended September 30,
                2004Net
                  loss as reported
              
              $
              (1,617,661
              )
              $
              (790,828
              )
              $
              (4,063,134
              )
              $
              (2,813,644
              )Total
                    stock-based employee compensation expenses
                  using
                    the fairvalue
                    based method for all awards,
                  net
                    of related tax effects
              
              
              (142,681
              )
              
              (35,733
              )
              
              (385,804
              )
              
              (83,938
              )Net
                  loss, pro forma
              
              $
              (1,760,342
              )
              $
              (826,561
              )
              $
              (4,448,938
              )
              $
              (2,897,582
              )Basic
                  and diluted net loss per common share:As
                  reported
              
              $
              (.09
              )
              $
              (.04
              )
              $
              (.23
              )
              $
              (.17
              )Pro
                  forma
              
              $
              (.10
              )
              $
              (.05
              )
              $
              (.25
              )
              $
              (.17
              )Black-Scholes
                  option pricing assumptionsRisk-free
                  interest rate
              
              
              4.2
              %
              
              3%-4.5
              %
              
              4.1%-4.4
              %
              
              3.6%-4.5
              %Volatility
              
              
              147%-157
              %
              
              64%-77
              %
              
              108%-157
              %
              
              39%-127
              %Lives
                  in years
              
              
              10
              
              
              10
              
              
              10
              
              
              10Dividend
                  yield
              
              
              0
              %
              
              0
              %
              
              0
              %
              
              0
              %
 
 As
        a
        result of amendments to SFAS 123, the Company will be required to expense
        the
        fair value of employee stock options beginning with the first quarter of
        2006.
 
 In
        addition, options are issued to non-employees such as consultants, scientific
        advisory board members and directors. Any options issued to non-employees
        are
        recorded in the consolidated financial statements as deferred expenses in
        the
        stockholders’ equity section using the fair value method and then amortized to
        expense over the applicable service periods.
 
 ***(D)
        Loss Per Share***
 
 Basic
        net
        loss per share is calculated by dividing net loss by the weighted-average
        number
        of shares outstanding for each period presented. Diluted net loss per share
        is
        the same as basic net loss per share, since potentially dilutive shares from
        the
        assumed exercise of stock options and stock warrants would have had an
        antidilutive effect because the Company incurred a net loss during each period
        presented. The number of potentially dilutive shares excluded from the
        calculation was 6,478,405 at September 30, 2005. There were 5,065,009
        potentially dilutive securities at September 30, 2004.
  7
  **VIOQUEST
        PHARMACEUTICALS, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2005**
 
 **NOTE
        2**  **INVENTORIES**
 
 The
        principal components of inventory are as follows:
 
 September
                  30, 2005(Unaudited)
              
              December
                  31,
                2004****Raw
                  material compounds
              
              $
              508,957
              
              $
              308,456Work
                  in process
              
              
              122,558
              
              
              47,691Finished
                  goods
              
              
              4,000
              
              
              4,000Total
                  Inventory
              
              $
              635,515
              
              $
              360,147
  **NOTE
        3**  **STOCKHOLDERS’
        EQUITY**
 
 On
        February 25, 2004, the Company completed the sale of its securities in a
        private
        placement to accredited investors for gross proceeds of approximately $7.2
        million. Investors in the private placement purchased an aggregate of
        approximately 4.8 million shares of the Company’s common stock at a price per
        share of $1.50. Additionally, investors received one 5-year warrant to purchase
        one share of common stock at $1.65 per share for every two common shares
        purchased in the offering (a total of 2.4 million warrants). ThinkEquity
        Partners LLC, Paramount BioCapital, Inc. and Casimir Capital L.P. acted as
        the
        placement agents for this offering and received fees of approximately $500,000
        of which Paramount BioCapital, Inc., a related party, received $300,000.
        Net
        proceeds to the Company, after deducting placement agent fees and other expenses
        relating to the private placement, were approximately $6.7 million.
 
 The
        table
        below illustrates the number of stock options issued to: employees, scientific
        advisory board members, members of the board of directors and consultants
        which
        were issued for services provided:
 
 For
                  the Nine
                Months
                  Ended
                September30,
                2005Balance,
                  January 1, 2005
              
              
              2,244,877Granted
              
              
              1,341,646Exercised
              
              
              0Expired
              
              
              0Terminated
              
              
              (4,000
              )Balance,
                  September 30, 2005
              
              
              3,582,523
  **NOTE
        4** **** **COMMITMENTS**
 
 On
        June
        30, 2005, the Company entered into a lease agreement for office space, in
        Basking Ridge, New Jersey, for a period of 39 months, at a monthly base rent
        of
        $4,227. As of September 30, 2005, the Company’s lease obligation through
        September 30, 2008 is approximately $152,000.
 
 **NOTE
        5** **** **AGREEMENT
        AND PLAN OF MERGER**
 
 The
        Company entered into an Agreement and Plan of Merger dated July 1, 2005,
        as
        amended August 19, 2005 (the “Merger Agreement”), with Greenwich Therapeutics
        (“Greenwich”), Inc. and VQ Acquisition Corp., a wholly-owned subsidiary of the
        Company. The Merger Agreement provided that VQ Acquisition would merge with
        and
        into Greenwich ,
        with Greenwich remaining as the surviving corporation and a wholly-owned
        subsidiary of the Company (the “Merger”). Greenwich is a
        privately-held biotechnology company with the rights to develop and
        commercialize two novel compounds for use as cancer therapeutics - VQD-001,
        sodium stibogluconate (“SSG”) and VQD-002, triciribine (“API-2”). The Merger was
        completed on October 18, 2005. See Note 6 below.
  8
  **VIOQUEST
        PHARMACEUTICALS, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2005**
 
 **NOTE
        6** **** **SUBSEQUENT
        EVENTS**
 
 ***(A)
        Special Shareholder Meeting; Reincorporation***
 
 At
        a
        Special Meeting of Shareholders held on October 6, 2005, the Company’s
        shareholders considered and approved proposals to reincorporate the Company
        under the laws of the State of Delaware and increase the number of shares
        of
        capital stock that the Company is authorized to issue to 100,000,000 shares
        of
        common stock and 10,000,000 shares of preferred stock. The reincorporation
        was
        completed on October 17, 2005 pursuant to a merger of the Company (as a
        Minnesota corporation) with and into VioQuest Delaware, Inc., a Delaware
        corporation and wholly-owned subsidiary of the Company. In connection with
        this
        merger, each issued and outstanding share of the Company’s common stock, par
        value $.01 per share, converted into one share of common stock, par value
        $.001
        per share, of VioQuest Delaware. In addition, upon completion of the
        reincorporation merger, VioQuest Delaware changed its name to VioQuest
        Pharmaceuticals, Inc. The reincorporation of the Company under Delaware law
        was
        a condition to completing the Merger with Greenwich.
 
 ***(B)
        Completion of Merger***
 
 On
        October 18, 2005, the Company completed the Merger with Greenwich in accordance
        with the terms of the Merger Agreement. In exchange for their shares of
        Greenwich common stock and pursuant to the Merger Agreement, the stockholders
        of
        Greenwich received an aggregate of 17,128,790 shares of the Company’s common
        stock and five-year warrants to purchase an additional 4,000,000 shares of
        the
        Company’s common stock at an exercise price of $1.41 per share. As provided by
        the Merger Agreement and in accordance with the terms of an Escrow Agreement
        among the Company, Greenwich and a representative of the Greenwich stockholders,
        one-half of the shares and warrants issued to Greenwich’s stockholders were
        placed in escrow at the closing of the Merger and will be released incrementally
        upon the achievement of certain milestones relating to the clinical development
        of the two product candidates acquired from Greenwich, as follows:
 
 (i)
              35%
                  of the escrowed securities shall be released upon the conclusion
                  of a
                  Phase I clinical trial pursuant to an investigational new drug
                  application
                  (“IND”) accepted by the U.S. Food and Drug Administration (“FDA”) for
                  SSG;
 
 (ii)
              15%
                  of the escrowed securities shall be released immediately upon conclusion
                  of a Phase II clinical trial for SSG under a VioQuest-sponsored
                  IND;
                  provided that a majority of the members of VioQuest’s then existing
                  medical advisory board conclude that such trial yielded results
                  which, in
                  the opinion of such advisory board, warrant initiation of Phase
                  III
                  trial(s) (provided that this milestone shall be deemed to have
                  been
                  satisfied in the event a new drug application, or NDA, relating
                  to SSG has
                  been accepted for review by the FDA prior to any determination
                  by the
                  medical advisory board to initiate a Phase III
                  trial);
 
 (iii)
              35%
                  of such escrowed securities shall be released immediately upon
                  the
                  conclusion of a Phase I clinical trial pursuant to a VioQuest-sponsored
                  IND application accepted by the FDA for API-2;
                  and
 
 (iv)
                15%
                      of such escrowed securities shall be released immediately upon
                      conclusion
                      of a Phase II clinical trial for API-2 under a VioQuest-sponsored
                      IND;
                      provided that a majority of the members of VioQuest’s then existing
                      medical advisory board conclude that such trial yielded results
                      which, in
                      the opinion of such advisory board, warrant initiation of Phase
                      III
                      trial(s) (provided that this milestone shall be deemed to have
                      been
                      satisfied in the event an NDA relating to API-2 has been accepted
                      for
                      review by the FDA prior to any determination by the medical
                      advisory board
                      to initiate a Phase III trial.
 In
        the
        event the escrowed securities relating to the milestones described above
        have
        not been released to the Greenwich stockholders by June 30, 2008, any escrowed
        securities still remaining in the escrow shall be released and delivered
        to
        VioQuest for cancellation, and the Greenwich stockholders will have no further
        right, title or interest to such escrowed securities.
 
 Additionally,
        as contemplated by the Merger Agreement, on October 18, 2005, the Company
        assumed outstanding indebtedness of Greenwich of approximately $795,000,
        all of
        which is payable to Paramount BioCapital Investments, Inc. (“PBI”) pursuant to a
        promissory note dated October 28, 2004 (the “Note”).
  9
  **VIOQUEST
        PHARMACEUTICALS, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2005**
 
 At
        the
        closing of the Merger, the Note was amended to provide that one-third would
        be
        converted into securities of the Company on the same terms as the Company’s
        October 2005 private placement (see Note 6(C)), one-third of the outstanding
        indebtedness under the Note would be repaid upon the completion by the Company
        of a financing resulting in gross proceeds of at least $5 million, and the
        final
        one-third would be payable upon completion by the Company of one or more
        financings resulting in aggregate gross proceeds of at least $10 million
        (inclusive of the amounts raised in a previous $5 million financing ).
        Accordingly, on October 18, 2005, upon completion of the private placement
        discussed in note 6(C) below, the Company satisfied two-thirds of the total
        indebtedness outstanding under the Note by making a cash payment of $294,623
        and
        by issuing to PBI 392,830 shares of the Company’s common stock. In the event
        that VioQuest does not complete the financing(s) resulting in aggregate gross
        proceeds of at least $10 million, or prior to the notes’ maturity date,
        whichever occurs first, then VioQuest will be required to satisfy the final
        one-third in October 2006.
 
 Dr.
        Lindsay A. Rosenwald and certain trusts established for the benefit of Dr.
        Rosenwald and his family collectively held approximately 48% of Greenwich’s
        capital stock prior to completion of the Merger. Together, Dr. Rosenwald
        and
        such trusts also owned approximately 16% of the Company’s common stock prior to
        the completion of the Merger. In addition to Dr. Rosenwald’s relationship with
        Greenwich, two directors of the Company, Stephen C. Rocamboli and Michael
        Weiser, M.D., Ph.D., owned approximately 3.6% and 7%, respectively, of
        Greenwich’s outstanding common stock. Mr. Rocamboli and Dr. Weiser are also
        employees of Paramount BioCapital, Inc. of which Dr. Rosenwald is the chairman
        and sole stockholder.
 
 The
        acquisition of Greenwich on October 18, 2005 will be accounted for by the
        Company under the purchase method of accounting in accordance with Statement
        of
        Financial Accounting Standards No. 141 “Business Combinations” in the fourth
        quarter of 2005. Under the purchase method, assets acquired and liabilities
        assumed by the Company are recorded at their estimated fair values at the
        date
        of acquisition and the results of operations of the acquired company are
        consolidated with those of the Company from the date of acquisition.
 
 The
        preliminary estimated purchase price, which the Company is in the
        process
        of finalizing, will likely be charged to in-process research and development
        and
        is summarized as follows ($000’s):
  Common
                  stock issued, excluding contingent shares*
              
              $
              5,995Liabilities
                  assumed
              
              
              795Estimated
                  transaction costs
              
              
              150Total
                  estimated purchase price
              
              $
              6,940
 
 *
        The
        preliminary estimated purchase price does not include any of the
        achievement-based milestone payments described above.
 
 The
        following unaudited pro forma financial information presents the condensed
        consolidated results of operations of the Company and Greenwich for the three
        and nine months as of September 30, 2005 and 2004 assuming the acquisition
        had
        been consummated at the beginning of each period. The pro forma information
        does
        not necessarily reflect the results of operations that would have occurred
        had
        the entities been a single company during the period ($000's, except per
        share
        information).
  Three
                  months ended September 30,
              
              Nine
                  months ended September 30,2005
              
              2004
              
              2005
              
              2004Net
                  Loss
              
              $
              (1,618
              )
              $
              (791
              )
              $
              (4,788
              )
              $
              (2,814
              )Weighted
                  average number of common shares outstanding
              
              
              17,852
              
              
              17,828
              
              
              35,637
              
              
              16,841Loss
                  per common share - basic and fully diluted
              
              $
              (0.09
              )
              $
              (0.04
              )
              $
              (0.13
              )
              $
              (0.17
              )
  10
  **VIOQUEST
        PHARMACEUTICALS, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2005**
 
 ***(C)
        Private Placement***
 
 On
        October 18, 2005, the Company sold 11,179,975 Shares of its common stock
        at a
        price of $0.75 per share resulting in gross proceeds of approximately $8.38
        million. In addition to the shares of common stock, the investors also received
        5-year Warrants to purchase an aggregate of 4,471,975 shares at an exercise
        price of $1.00 per share. In connection with the private placement, the Company
        paid an aggregate of approximately $587,000 in commissions to Paramount
        BioCapital, Inc., a related party, which served as the placement agent in
        connection with the offering, together with an accountable expense allowance
        of
        $50,000, and issued 5-year warrants to purchase an aggregate of 1,117,997
        shares
        of common stock at a price of $1.00 per share. Net proceeds to the Company
        after
        deducting placement agent fees and other expenses relating to the private
        placement, were approximately $7.5 million.
 
 ***(D)
        Stock Option Plan***
 
 On
        November 8, 2005 the Company amended its 2003 Stock Option Plan to increase
        the
        number of shares of common stock available for issuance thereunder from
        2,500,000 to 6,500,000 as approved by the Board of Directors on August 29,
        2005.
  11
  **Item
                  2.**
              **MANAGEMENT’S
                  DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.**
 
 **Overview**
 
 Since
        our
        inception in October 2000, VioQuest Pharmaceuticals, Inc. (formerly Chiral
        Quest, Inc.) has provided pharmaceutical and fine chemical companies in all
        stages of the product lifecycles with innovative chiral products and services
        (as used herein, the “Company” refers to VioQuest Pharmaceuticals, Inc. or
        VioQuest Pharmaceuticals, Inc. together with its subsidiaries). Since August
        2004, the Company has provided such products and services through its
        wholly-owned subsidiary, Chiral Quest, Inc. Chiral Quest, Inc. develops chemical
        catalysts used in the synthesis of desired isomers of chiral molecules using
        asymmetrical catalysis technology (the “Technology”) owned by the
        Pennsylvania State University Research Foundation (“PSRF”), the technology arm
        of The Pennsylvania State University (“Penn State”). Chiral Quest, Inc. has a
        worldwide, exclusive license from PSRF for the inventions covered by the
        license. The original license agreement was entered into on November 8, 2000.
 
 In
        August
        2004, the Company formed VioQuest Drug Development, Inc., a wholly-owned
        subsidiary, which will focus on acquiring and bringing to market therapies
        for
        oncology, metabolic and inflammatory diseases and disorders that are current
        unmet medical needs. To date, VioQuest Drug Development, Inc. has not yet
        acquired any product candidates, has not realized any revenue and has not
        incurred materially related any expenses.
 
 Through
        September 30, 2005, the Company has generated sales revenue through Chiral
        Quest’s but not any net profits. Management believes that the Company’s research
        and development (“R&D”) and manufacturing capacity will need to continue to
        grow through the commercialization of our ligands and catalysts, and the
        development of our next generation of technological products of building
        blocks,
        in order for the Company to be able to obtain significant licensing and
        manufacturing agreements with large fine chemical and pharmaceutical companies.
        Management believes that Chiral Quest’s manufacturing capacity will be enhanced
        with its expanded office and laboratory space located in Monmouth Junction,
        New
        Jersey that was leased in May 2003, in addition to the leased space located
        in
        Jiashan, China.
 
 The
        accompanying condensed consolidated financial statements have been prepared
        assuming that the Company will continue as a going concern. Since inception,
        the
        Company has incurred an accumulated deficit of $11,497,897 through September
        30,
        2005. For the three and nine months ended September 30, 2005, the Company
        had
        net losses of $1,617,661 and $4,063,134, respectively. As of September 30
        2005,
        the Company had a working capital deficiency of $1,267,295 and cash and cash
        equivalents of $261,782. Management expects the Company’s losses to increase
        over the next several years, primarily due to the costs related to the
        development and commercialization of our two recently-acquired two anti-cancer
        therapeutic compounds, in addition to the expansion of our research and
        development programs, the hiring of additional chemists, and the expansion
        of
        our manufacturing capabilities. There can be no assurance that the Company
        will
        ever be able to operate profitably.
 
 The
        Company’s ability to achieve profitability depends upon, among other things, its
        ability to discover and develop products (specifically new “ligands”), and to
        develop its products on a commercial scale through a cost effective and
        efficient process. To the extent that the Company is unable to produce, directly
        or indirectly, ligands in quantities required for commercial use, it will
        not
        realize any significant revenues from its technology. Moreover, there can
        be no
        assurance that it will ever achieve significant revenues or profitable
        operations from the sale of any of its products or technologies.
 
 On
        October 18, 2005, the Company sold 11,179,975 Shares of its common stock
        at a
        price of $0.75 per share resulting in gross proceeds of approximately $8.38
        million. In addition to the shares of common stock, the investors also received
        5-year Warrants to purchase an aggregate of 4,471,975 shares at an exercise
        price of $1.00 per share. In connection with the private placement, the Company
        paid an aggregate of approximately $587,000 in commissions to Paramount
        BioCapital, Inc., which served as the placement agent in connection with
        the
        offering, together with an accountable expense allowance of $50,000, and
        issued
        5-year warrants to purchase an aggregate of 1,117,997 shares of common stock
        at
        a price of $1.00 per share. Net proceeds to the Company after deducting
        placement agent fees and other expenses relating to the private placement,
        were
        approximately $7.5 million. The Company believes that the net proceeds received
        of approximately $7.5 million will provide adequate capital at least through
        September 30, 2006, to fund the Company’s general operations, drug development
        activities, and the necessary funds required for the further development
        of the
        Chiral Quest operation.
 
 The
        Company’s combined capital requirements will depend on numerous factors,
        including: acquiring, developing and commercializing therapies for oncology,
        metabolic and inflammatory diseases and disorders, competing technological
        and
        market developments, changes in our existing collaborative relationships,
        the
        cost of filing, prosecuting, defending and enforcing patent claims and other
        intellectual property rights and the outcome of any potentially related
        litigation or other dispute, the purchase of additional capital equipment,
        acquisition of technologies, the establishment and funding of the Chiral
        Quest,
        Jiashan, China facility, and the development and regulatory approval progress
        of
        its customers’ product candidates into which the Company’s technology will be
        incorporated, in addition to the costs associated with the drug development
        process related to acquiring, developing and commercializing a drug candidate.
  12
  On
        October 18, 2005, we acquired Greenwich Therapeutics, Inc., a privately-held
        biotechnology company with exclusive license rights to develop and commercialize
        two anti-cancer therapeutic candidates - VQD-001, sodium stibogluconate (“SSG”)
        and VQD-002, triciribine (“API-2”). We acquired Greenwich in furtherance of our
        plan to expand our business into drug development. As a result of this
        acquisition, we will immediately undertake to fund the development of SSG
        and
        API-2, which will significantly increase our expected cash expenditures over
        the
        next 12 months and thereafter. The completion of development of VQD-001 and
        VQD-002, both of which are only in early stages of clinical development,
        is very
        lengthy and expensive process. Until such development is complete and the
        U.S.
        Food and Drug Administration (or the comparable regulatory authorities of
        other
        countries) approve VQD-001 and VQD-002 for sale, we will not be able to sell
        these products until such approval is obtained.
 
 **Results
        of Operations - For the Three Months Ended September 30, 2005 vs. September
        30,
        2004**
 
 Our
        revenues for the three months ended September 30, 2005 were $536,185 as compared
        to $367,265 for the three months ended September 30, 2004. For the three
        months
        ended September 30, 2005, substantially all of our revenue was derived from
        customized process development services sold to third parties (accounting
        for
        92% of total revenue), sales of our catalysts and ligands (5% of total revenue
        and 3% of total revenue was derived from the amortization of option fee income
        pertaining to the licensing of our intellectual property. The overall increase
        for the three months ended September 30, 2005 compared to the same period
        in
        2004 is attributable primarily from an increase in customized process
        development services.
 
 In
        addition, the increase in 2005 revenues compared to the comparable 2004 period
        is also attributable to our selling and production capabilities having
        transitioned from an academic Research and Development sales volume level,
        to a
        commercial sales volume quantity level for our ligands, catalysts, and
        customized process development services.
 
 For
        the
        three months ended September 30, 2004, approximately 92% of total revenue
        was
        comprised of sales or our ligands and catalysts, feasibility screenings,
        and
        customized process development services sold to third parties and 8% of total
        revenue was derived from the amortization of option fee income. It is
        anticipated that sales of our ligands, molecular building blocks and customized
        chiral services will continue to comprise a greater percentage of our revenues
        in the future as we expand our manufacturing capabilities.
 
 Our
        gross
        profit increased for the three months ended September 30, 2005 as compared
        to
        September 30, 2004, as a result of our 2005 revenues consisting of sales
        our
        commercial quantity ligands, catalysts and process development services versus
        no commercial sales of our ligands, catalysts and process development services
        for the three months ended September 30, 2004. The primary reason gross profit
        increased from approximately 48% for the three months ended September 30,
        2004
        as compared to 58% gross margin for the three months ended September 30,
        2005 is
        a result of the Company selling greater quantities of our process and
        development projects and services, and commercial levels of our ligands and
        catalysts, producing higher margins for the three months ended September
        30,
        2005.
 
 Cost
        of
        goods sold for three months ended September 30, 2005 was $223,397 as compared
        to
        $192,349 during the three months ended September 30, 2004. The increase in
        cost
        of goods sold is attributed to the increased sales, associated manufacturing
        costs for materials used in production for the increased shipments of projects
        during the third quarter ended September 30, 2005, along with the allocation
        of
        direct labor and overhead expenses to cost of sales.
 
 Management
        and consulting fees for the three months ended September 30, 2005 were $450,701
        as compared to $125,956 during the three months ended September 30, 2004.
        Management and consulting fees consist of the consulting agreement with our
        Chief Technology Officer at a rate of $10,000 per month effective May 15,
        2003.
        Management and consulting fees also consists of approximately $156,000 of
        stock
        option charges resulting from the fair value of options issued to consultants,
        and scientific advisory board members granted during the second, third and
        fourth quarters of 2003 accounted for under variable accounting. Additionally,
        management and consulting fees increased $190,000 from the Company awarding
        200,000 restricted shares of its common stock to a consultant.
 
 Our
        R&D expenses for the three months ended September 30, 2005 were $535,048 as
        compared to $422,925 during the three months ended September 30, 2004. R&D
        costs include the sponsoring of four post doctorates at Penn State to develop
        reports on our technological feasibility of our proprietary technology in
        addition to preparing sample batches for analysis in the Monmouth Junction,
        NJ
        office. The primary increase is a result of purchases of laboratory materials
        and supplies such as chemicals, solvents, glassware used as part of the
        facility’s test pilot programs for the formulation and analyzing of our
        proprietary catalysts, ligands, and our next generation technology of building
        blocks to determine their technological feasibility.
 
 Selling,
        general and administrative (“SG&A”) expenses for the three months ended
        September 30, 2005 were $897,359 as compared to $394,487 during the three
        months
        ended September 30, 2004. This increase in SG&A expenses was due in part to
        nonrecurring recruiting fees associated with the hiring of the Company’s Vice
        President of Corporate Business Development in July 2005, in addition to
        recruiting fees for the hiring of a Chief Medical Officer.
  13
  SG&A
        also increased as a result of higher legal and accounting fees associated
        with
        the expenses related to the Company’s drug development due diligence process,
        increased rent expense for the New Jersey facility as a result of the facility’s
        expansions, additional spending on advertising and promotion expenses, increased
        travel expenses for new business development opportunities and higher
        administrative expenses associated with having more employees which include
        the
        President and CEO hired in February 2005, and the Vice President of Corporate
        Business Development hired in July 2005, in addition to other related employee
        costs such as increased insurance and employer payroll taxes.
 
 Depreciation
        and amortization expenses for the three months ended September 30, 2005 were
        $49,804 as compared to $33,622 during the three months ended September 30,
        2004.
        This increase was primarily related to the fixed asset purchases for office
        equipment, computer equipment, laboratory equipment and leasehold improvements
        for the leased facility and recent expansions in New Jersey, in addition
        to the
        equipment and leasehold improvement expenditures related to the newly leased
        Jiashan facility which has become fully operational as of May 2005.
 
 Interest
        income, net for the three months ended September 30, 2005 was $2,463 as compared
        to $11,246 for the three months ended September 30, 2004. The decrease in
        interest income is attributed to having higher cash reserves for the three
        months ended September 30, 2004 as compared to the three months ended September
        30, 2005, as a result of the funds received from the private placement of
        the
        Company’s common stock in February 2004.
 
 Our
        net
        loss for the three months ended September 30, 2005 was $1,617,661 as compared
        to
        $790,828 for the three months ended September 30, 2004. The increased net
        loss
        for the three months ended September 30, 2005 as compared to September 30,
        2004
        was attributable to higher R&D expenses related to the development and
        technological feasibility of our next generation proprietary products, an
        increase management and consulting fees resulting from variable accounting
        charges related to the issuance of stock options issued to consultants, the
        issuance of the Company’s restricted stock to a consultant, in addition to
        increased SG&A as a result of higher legal and accounting fees associated
        with the expenses related to the Company’s drug development due diligence
        process, increased rent expense for the New Jersey facility as a result of
        the
        facility’s expansions, additional spending on advertising and promotion
        expenses, increased travel expenses for new business development opportunities
        and higher administrative expenses associated with having more employees
        such as
        insurance and employer payroll taxes. We expect losses to continue in the
        next
        year from the costs associated with the drug development process related
        to
        acquiring a drug candidate, in addition to continue to expand operations
        in New
        Jersey and in Jiashan.
 
 **Results
        of Operations - For the Nine Months Ended September 30, 2005 vs. September
        30,
        2004**
 
 Our
        revenues for the nine months ended September 30, 2005 were $2,636,124 as
        compared to $1,102,388 for the nine months ended September 30, 2004. For
        the
        nine months ended September 30, 2005, substantially all of our revenue was
        derived from customized process development services sold to third parties
        (accounting for 84% of total revenue), sales of our catalysts and ligands
        (14%
        of total revenue) and feasibility screening reports provided to clients (2%
        of
        total revenue); and 2% of total revenue was derived from the amortization
        of
        option fee income pertaining to the licensing of our intellectual property.
 
 The
        overall increase for the nine months ended September 30, 2005 compared to
        the
        same period in 2004 is attributable primarily from a three fold increase
        in
        customized process development services. In addition, the increase in 2005
        revenues is also attributable to our selling and production capabilities
        having
        transitioned from an academic Research and Development sales volume level,
        to a
        commercial sales volume quantity level for our ligands, catalysts, and
        customized process development services.
 
 For
        the
        nine months ended September 30, 2004 approximately 92% of total revenue was
        derived from sales of our ligands, feasibility screening and customized process
        development services sold to third parties and 8% of total revenue was derived
        from the amortization of option fee income pertaining to the licensing of
        our
        intellectual property. It is anticipated that sales of our ligands, molecular
        building blocks and customized chiral services will continue to comprise
        a
        greater percentage of our revenues in the future as we expand our manufacturing
        capabilities.
 
 Our
        gross
        profit decreased for the nine months ended September 30, 2005 as compared
        to
        September 30, 2004 as a result of our 2005 nine month revenues being
        significantly derived from customized process development services versus
        a
        greater percentage of our revenues derived from sales of our catalysts and
        ligands for the nine months ended September 30, 2004. The primary reason
        gross
        profit decreased from approximately 48% for the nine months ended September
        30,
        2004 as compared to a 36% gross margin for the nine months ended September
        30,
        2005 is a result of a greater proportion of the Company’s sales attributed to
        customized process development services for the nine months ended September
        30,
        2005 versus a greater portion of sales for the nine months ended September
        30,
        2004 which were attributed to license fee income, sales of our ligands and
        catalysts and feasibility screening reports, producing higher
        margins.
  14
  Cost
        of
        goods sold for the nine months ended September 30, 2005 was $1,678,928 as
        compared to $569,598 during the nine months ended September 30, 2004. The
        increase in cost of goods sold is attributed to increased sales, associated
        manufacturing costs for materials used in production for the increased shipments
        of projects during the third quarter ended September 30, 2005, along with
        the
        allocation of direct labor and overhead expenses to cost of sales.
 
 Management
        and consulting fees for the nine months ended September 30, 2005 were $707,423
        as compared to $363,848 during the nine months ended September 30, 2004.
        Management and consulting fees consist of the consulting agreement with our
        Chief Technology Officer at a rate of $10,000 per month effective May 15,
        2003.
        Management and consulting fees also consists of approximately $352,000 of
        stock
        option charges resulting from the fair value of options issued to consultants,
        and scientific advisory board members granted during the second, third and
        fourth quarters of 2003 accounted for under variable accounting. Additionally,
        management and consulting fees increased $190,000 from the Company awarding
        200,000 restricted shares of its common stock to a consultant. This increase
        in
        management and consulting fees is also a result of the Company utilizing
        the
        consulting services of a Ph.D. scientist with expertise in chiral technology,
        located in China providing services for the Chiral Quest Jiashan operation.
        Consulting fees also increased as a result of the Company hiring the services
        of
        a consultant to provide data and analysis pertaining to the Company’s due
        diligence process of acquiring drug compounds. The increased management and
        consulting expenses have been offset by a decrease in management expenses,
        charged by Paramount BioCapital LLC, for administrative services which are
        no
        longer required by the Company.
 
 Our
        R&D expenses for the nine months ended September 30, 2005 were $1,196,846 as
        compared to $1,205,802 during the nine months ended September 30, 2004. R&D
        costs include the purchases of laboratory materials and supplies such as
        chemicals, solvents, glassware used as part of the facility’s test pilot
        programs for the formulation and analyzing of our proprietary catalysts,
        ligands, and building blocks to determine their technological feasibility.
        R&D costs also include the sponsoring of four post doctorates at Penn State
        to develop reports on our technological feasibility of our proprietary
        technology in addition to preparing sample batches for analysis in the Monmouth
        Junction, NJ office. This decrease was primarily caused by a reduction in
        the
        amount of purchases of lab supplies and chemicals used as part of the facility’s
        test pilot programs for the formulation and analyzing of our proprietary
        catalysts, ligands, and building blocks to determine their technological
        feasibility during the nine months ended September 30, 2004 as compared to
        the
        nine months ended September 30, 2005. The agreement with Penn State, which
        had
        been extended to October 14, 2005, provides for the Company to fund services
        of
        four post-doctorate fellows who, under the supervision of the CTO, conduct
        research and provide research quantities of chiral products to the Company.
        The
        future obligation payable by the Company through October 14, 2005 as of the
        end
        of the agreement is approximately $36,000. This amount consists principally
        of
        four post-doctorate salaries, fringe benefits, materials and supplies for
        the
        stated period. The Company is in the process of extending the agreement with
        Penn State for their services.
 
 Selling,
        general and administrative (“SG&A”) expenses for the nine months ended
        September 30, 2005 were $2,958,399 as compared to $1,677,610 during the nine
        months ended September 30, 2004. This increase in SG&A expenses was due in
        part to nonrecurring recruiting fees associated with the hiring of the Company’s
        Vice President of Corporate Business Development in July 2005, in addition
        to
        recruiting fees for the hiring of a Chief Medical Officer. SG&A also
        increased as a result of higher legal and accounting fees associated to the
        expenses related to the Company’s drug development due diligence process,
        increased rent expense for the New Jersey facility as a result of the facility’s
        expansions, additional spending on advertising and promotion expenses, increased
        travel expenses for new business development opportunities and higher
        administrative expenses associated with having more employees which include
        the
        President and CEO hired in February 2005, and the Vice President of Corporate
        Business Development hired in July 2005, in addition to other related employee
        costs such as increased insurance and employer payroll taxes.
 
 Depreciation
        and amortization expenses for the nine months ended September 30, 2005 were
        $171,865 as compared to $126,227 during the nine months ended September 30,
        2004. This increase was primarily related to the fixed asset purchases for
        office equipment, computer equipment, laboratory equipment and leasehold
        improvements for the leased facility and recent expansions in New Jersey,
        in
        addition to the equipment and leasehold improvement expenditures related
        to the
        newly leased Jiashan facility which has become fully operational as of May
        2005.
 
 Interest
        income, net for the nine months ended September 30, 2005 was $14,203 as compared
        to $27,053 for the nine months ended September 30, 2004. The decrease in
        interest income is attributed to having higher cash reserves for the nine
        months
        ended September 30, 2004 as compared to the nine months ended September 30,
        2005, as a result of the funds received from the private placement of the
        Company’s common stock in February 2004.
 
 Our
        net
        loss for the nine months ended September 30, 2005 was $4,063,134 as compared
        to
        $2,813,644 for the nine months ended September 30, 2004. The increased net
        loss
        for the nine months ended September 30, 2005 as compared to September 30,
        2004
        was primarily attributable to an increase management and consulting fees
        resulting from variable accounting charges related to the issuance of stock
        options issued to consultants, including a one-time, non-cash charge for
        the
        issuance of the Company’s restricted stock to a consultant, in addition to
        increased SG&A as a result of higher legal and accounting fees associated to
        the expenses related to
        the
        Company’s drug development due diligence process, increased rent expense for the
        New Jersey facility as a result of the facility’s expansions, additional
        spending on advertising and promotion expenses, increased travel expenses
        for
        new business development opportunities and higher administrative expenses
        associated with having more employees such as insurance and employer payroll
        taxes.
  15
 
 We
        expect
        losses to continue in the next year from the costs associated with the drug
        development process related to acquiring a drug candidate, in addition to
        continue to expand operations in New Jersey and in Jiashan.
 
 **Liquidity
        and Capital Resources**
 
 Since
        inception, we have incurred an accumulated deficit of $11,497,897 through
        September 30, 2005. For the three and nine months ended September 30, 2005,
        we
        had net losses of $1,617,661 and $4,063,134, respectively. As of September
        30,
        2005, we had a working capital deficiency of $1,267,295 and cash and cash
        equivalents of $261,782. We expect losses to increase over the next several
        years, primarily due to the costs related to the Company’s development and
        commercializing of our recently-acquired two anti-cancer therapeutic compounds,
        such as costs associated to clinical trials, regulatory approvals, uses of
        consultants, license milestone payments to the Cleveland Clinic Foundation
        and
        the University of South Florida and patent filing expenses, in addition to
        the
        expansion of our research and development programs, the hiring of additional
        chemists, and the expansion of our manufacturing capabilities. There can
        be no
        assurance that we will ever be able to operate profitably.
 
 On
        October 18, 2005, the Company sold 11,179,975 Shares of its common stock
        at a
        price of $0.75 per share resulting in gross proceeds of approximately $8.38
        million. In addition to the shares of common stock, the investors also received
        5-year Warrants to purchase an aggregate of 4,471,975 shares at an exercise
        price of $1.00 per share. In connection with the private placement, the Company
        paid an aggregate of approximately $587,000 in commissions to Paramount
        BioCapital, Inc., which served as the placement agent in connection with
        the
        offering, together with an accountable expense allowance of $50,000, and
        issued
        5-year warrants to purchase an aggregate of 1,117,997 shares of common stock
        at
        a price of $1.00 per share. Net proceeds to the Company after deducting
        placement agent fees and other expenses relating to the private placement,
        were
        approximately $7.5 million. The Company believes that the net proceeds received
        of approximately $7.5 million will provide adequate capital for a minimum
        of
        twelve months, to fund the Company’s drug development activities, as well as the
        further development for the Chiral Quest operation.
 
 The
        Company’s net cash used in operating activities for the nine months ended
        September 30, 2005 was $2,249,202. The Company’s net cash used in operating
        activities primarily resulted from a net loss of $4,063,134. Inventories
        increased as a result of the Company purchasing raw materials to be used
        in the
        production of its commercialized proprietary products of ligands and catalysts.
        A decrease in deferred revenue of $390,842 was attributed to the Company
        receiving cash collections in advance to shipments which occurred during
        2005. A
        decrease in accounts receivable of $196,193 was a result of cash collections
        from prior period revenues, an increase in accounts payable of $1,448,054
        was
        attributed to purchases for inventory, recruiting and operational expenditures,
        and an increase in accrued expenses of $200,280 attributed to the Company
        reserving for future expenditures of its bonus and vacation agreements with
        employees. The Company’s net cash used in operating activities was offset by the
        following non-cash items: depreciation and amortization totaling $171,865,
        which
        was attributed to the purchases of equipment and leasehold improvements in
        our
        laboratories located in Monmouth Junction, New Jersey and Jiashan, China,
        $352,155 for options issued to consultants accounted for under variable
        accounting, and a charge of $190,000 related to the issuing of 200,000
        restricted shares of the Company’s common stock awarded to a
        consultant.
 
 The
        Company’s net cash used in investing activities for the nine months ended
        September 30, 2005 totaled $554,563, which resulted from capital expenditures
        of
        $510,370 related to the Chiral Quest, Jiashan, China laboratory expansion,
        and
        purchases of laboratory, computer and office equipment related to the New
        Jersey
        facility. Additionally, payments for intellectual property totaled
        $44,193.
 
 The
        Company’s capital requirements will depend on numerous factors, including: the
        costs related to developing and commercializing our two anti-cancer therapeutic
        compounds, in addition to the expansion of our research and development
        programs, the hiring of additional chemists, and the expansion of our
        manufacturing capabilities, competing technological and market developments,
        changes in our existing collaborative relationships, the cost of filing,
        prosecuting, defending and enforcing patent claims and other intellectual
        property rights and the outcome if any potentially related litigation or
        other
        dispute, the purchase of additional capital equipment, acquisition of
        technologies, the establishment and funding of Chiral Quest’s, Jiashan, China
        facility, and the development and regulatory approval progress of its customers’
        product candidates into which the Company’s technology will be
        incorporated.
 
 Additional
        capital that may be needed by the Company in the future may not be available
        on
        reasonable terms, or at all. If adequate financing is not available, the
        Company
        may be required to terminate or significantly curtail its operations, or
        enter
        into arrangements with collaborative partners or others that may require
        the
        Company to relinquish rights to certain of its technologies, or potential
        markets that the Company would not otherwise relinquish.
  16
  Our
        ability to achieve profitability depends upon, among other things, its ability
        to discover and develop products (specifically new “ligands”), and to develop
        its products on a commercial scale through a cost effective and efficient
        process. To the extent that we are unable to produce, directly or indirectly,
        ligands in quantities required for commercial use, it will not realize any
        significant revenues from its technology. Moreover, there can be no assurance
        that we will ever achieve significant revenues or profitable operations from
        the
        sale of any of our products or technologies.
 
 In
        February 2004, we sold in a private placement 4.8 million shares of our common
        stock plus warrants to purchase an additional 2.4 million shares of common
        stock
        for aggregate gross proceeds of $7.2 million.
 
 In
        October 2005, we sold in a private placement 11.2 million shares of our common
        stock plus warrants to purchase an additional 4.5 million shares of common
        stock
        for aggregate gross proceeds of $8.4 million. Our long term liquidity is
        contingent upon achieving increased sales and/or obtaining additional financing.
 
 We
        have
        formed two China subsidiaries through which we have opened a laboratory facility
        in the People’s Republic of China. We have provided $470,000 of capital to the
        China subsidiary as of September 30, 2005. We believe that by the opening
        of
        this facility in China to produce our proprietary ligands, catalysts, chemical
        building blocks and related compounds, we will be able to significantly decrease
        our manufacturing costs and expenses, enabling us to cost-effectively produce
        our ligands and end products in efforts to make our products substantially
        more
        competitive and even more attractive to current and potential customers.
        The
        China facility’s operations have commenced as of the third quarter 2005.
  17
 
 **Item
        3. Controls and Procedures**
  As
        of the
        end of the fiscal quarter covered by this Quarterly Report on Form 10-QSB
        we
        carried out an evaluation, under the supervision and with the participation
        of
        our Chief Executive Officer and Chief Financial Officer, of the effectiveness
        of
        the design and operation of our disclosure controls and procedures (as defined
        in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934,
        as
        amended). Based upon that evaluation, our Chief Executive Officer and Chief
        Financial Officer concluded that as of the end of the fiscal quarter covered
        by
        this Quarterly Report on Form 10-QSB, our current disclosure controls and
        procedures were not effective because of the material weakness in internal
        control over financial reporting described below. We have taken, and are
        continuing to take, steps to address the weakness as described below. With
        the
        exception of such weakness, however, the Chief Executive Officer and the
        Chief
        Financial Officer believe that our current disclosure of controls and procedures
        are adequate to ensure that information required to be disclosed in the reports
        we file under the Securities Exchange Act is recorded, processed, summarized
        and
        reported on a timely basis.
 
 Material
        Weaknesses and Changes in Internal Controls. During the preparation of this
        Form
        10-QSB for the quarter ended September 30, 2005, our independent registered
        public accounting firm identified a material weakness, as of September 30,
        2005,
        in the review process for the financial statement recording and disclosures
        of
        stock options that we have granted to non-employee consultants in accordance
        with Emerging Issues Task Force (“EITF”) 96-18. As defined by the Public Company
        Accounting Oversight Board Auditing Standard No. 2, a material weakness is
        a
        significant control deficiency or a combination of significant control
        deficiencies, that results in there being more than a remote likelihood that
        a
        material misstatement of the annual or interim financial statements will
        not be
        prevented or detected. This material weakness did not result in the restatement
        of any previously reported financial statements or any other related financial
        disclosure. Stock options that we have granted to non-employee consultants
        should have been accounted for under variable accounting and we have corrected
        the accounting for these stock options as of the third quarter of 2005. The
        changes that would have resulted in the financial statements for all prior
        periods through June 30, 2005 were deemed immaterial. We have instituted
        additional procedures in the review process for the financial statement
        recording and disclosures of options in order to remediate this issue. We
        will
        consult with our advisors, increase our emphasis on continuing education
        for our
        accounting personnel and increase our emphasis on reviewing applicable
        accounting literature, all relating to the selection and application of
        accounting principles pertaining to stock options. We believe these enhancements
        to our system of internal control and our disclosure controls and procedures
        are
        adequate to provide reasonable assurance that our internal control objectives
        will be met. Subsequent to the second quarter of 2005, the Company has valued
        the options issued to non-employee consultants under variable accounting.
  There
        were no changes in internal controls during the most recent fiscal quarter
        covered by this report that materially affected or are likely to materially
        affect internal controls over financial reporting.
  18
 
 **PART
        II - OTHER INFORMATION**
 
 **Item
        5. Other Information**
 
 The
        Company amended its 2003 Stock Option Plan on November 8, 2005 to increase
        the
        number of shares of common stock available for issuance thereunder from
        2,500,000 to 6,500,000.
 
 **Item
        6. Exhibits**
 
 Exhibit
                  No.
              Description2.1
              Agreement
                  and Plan of Merger dated July 1, 2005, among the Company, Greenwich
                  Therapeutics, Inc. and VQ Acquisition, Corp.2.2
              First
                  Amendment dated August 19, 2005 to Agreement and Plan of Merger
                  dated July
                  1, 2005, among the Company, Greenwich Therapeutics, Inc. and VQ
                  Acquisition, Corp.31.1
              Certification
                  of Chief Executive Officer31.2
              Certification
                  of Chief Financial Officer32.1
              Certifications
                  of Chief Executive and Chief Financial Officer pursuant to Section
                  906 of
                  the
                  Sarbanes-Oxley Act of 2002.
  19
  **SIGNATURES**
 
 In
        accordance with the requirements of the Exchange Act of 1934, the registrant
        caused this report to be signed on its behalf by the undersigned, thereunto
        duly
        authorized.
  VIOQUEST
                    PHARMACEUTICALS, INC.Date:
                    November 14, 2005
                By:
                /s/ Daniel
                  GreenleafDaniel
                  GreenleafPresident
                    & Chief Executive Officer
 Date:
                    November 14, 2005
                By:
                /s/ Brian
                  LenzBrian
                  LenzChief
                    Financial Officer
  20
  **EXHIBIT
        INDEX**
 Exhibit
                  No.
              Description2.1
              Agreement
                  and Plan of Merger dated July 1, 2005, among the Company, Greenwich
                  Therapeutics, Inc. and VQ Acquisition, Corp.2.2
              First
                  Amendment dated August 19, 2005 to Agreement and Plan of Merger
                  dated July
                  1, 2005, among the Company, Greenwich Therapeutics, Inc. and VQ
                  Acquisition, Corp.31.1
              Certification
                  of Chief Executive Officer31.2
              Certification
                  of Chief Financial Officer32.1
              Certifications
                  of Chief Executive and Chief Financial Officer pursuant to Section
                  906 of
                  the Sarbanes-Oxley Act of 2002.
  21