**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 March 31, 2006
 
 OR
 
 |_|
           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.)180
                  Mount Airy Road, Suite 203, Basking Ridge, New Jersey
              07059(Address
                  of Principal Executive Offices)
              (Zip
                  Code)
 
 (908)
        766-4400
 
 (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
        |_|
 
 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 May
        10, 2006 there were 46,729,519 shares of the issuer’s common stock, $0.001 par
        value, outstanding.
 
 Traditional
        Small Business Disclosure Format (check one): Yes |_| No |X|
  
  **Index**
 
 Page**PART
                  I**
              **FINANCIAL
                  INFORMATION**Item
                  1.
              Unaudited
                  Condensed Consolidated Financial Statements
              1Item
                  2.
              Management’s
                  Discussion and Analysis or
                  Plan of Operations
              11Item
                  3.
              Controls
                  and Procedures
              15**PART
                  II**
              **OTHER
                  INFORMATION**Item
                  5.
              Other
                  Information
              16Item
                  6.
              Exhibits
              16Signatures
              17Exhibit
                  Index
              18
  
 **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, 2005.
  
 
 **PART
        I - FINANCIAL INFORMATION**
 
 **Item
        1. Unaudited Condensed Consolidated Financial Statements**
 
 **VIOQUEST
        PHARMACEUTICALS, INC. AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED BALANCE SHEETS**
 **AS
        OF MARCH 31, 2006 (UNAUDITED) AND DECEMBER 31, 2005**
 
 **March
                  31, 2006**
              
              **December
                  31, 2005****(Unaudited)**
              
              **(Note
                  1A)****ASSETS****CURRENT
                  ASSETS**Cash
                  and cash equivalents
              
              $
              3,281,205
              
              $
              6,021,399Accounts
                  receivable
              
              
              553,879
              
              
              227,695Inventory
              
              
              652,886
              
              
              625,158Other
                  current assets
              
              
              120,606
              
              
              49,184Total Current Assets
              
              
              4,608,576
              
              
              6,923,436**PROPERTY
                  AND EQUIPMENT, NET**
              
              
              699,066
              
              
              757,151**SECURITY
                  DEPOSITS**
              
              
              69,976
              
              
              69,819**INTELLECTUAL
                  PROPERTY RIGHTS, NET**
              
              
              623,215
              
              
              628,897**OTHER
                  ASSETS**
              
              
              37,075
              
              
              -**TOTAL
                  ASSETS**
              
              $
              6,037,908
              
              $
              8,379,303**LIABILITIES
                  AND STOCKHOLDERS'
                  EQUITY****CURRENT
                  LIABILITIES**Accounts
                  payable
              
              $
              698,823
              
              $
              1,135,681Accrued
                  compensation
              
              
              157,020
              
              
              480,000Accrued
                  expenses
              
              
              108,420
              
              
              119,990Note
                  payable - Paramount BioCapital
              
              
              264,623
              
              
              264,623Deferred
                  revenue
              
              
              51,000
              
              
              40,000**TOTAL
                  LIABILITIES**
              
              
              1,279,886
              
              
              2,040,294**COMMITMENTS
                  AND CONTINGENCIES****STOCKHOLDERS'
                  EQUITY**Preferred
                  stock; $0.001 par value: 10,000,000 shares authorized, 0 shares
                  issued and
                  outstanding at March 31, 2006 and December 31, 2005
              
              
              -
              
              
              -Common
                  stock; $0.001 par value: 100,000,000 shares authorized at March
                  31, 2006
                  and December 31, 2005, 46,729,519 shares issued and outstanding
                  at March
                  31, 2006 and December 31, 2005
              
              
              46,729
              
              
              46,729Additional
                  paid-in capital
              
              
              26,842,432
              
              
              26,561,672Accumulated
                  deficit
              
              
              (22,131,139
              )
              
              (20,269,392
              )Total Stockholders' Equity
              
              
              4,758,022
              
              
              6,339,009**TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY**
              
              $
              6,037,908
              
              $
              8,379,303
  See
        accompanying notes to condensed consolidated financial statements.
  1
 
 **VIOQUEST
        PHARMACEUTICALS, INC. AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF OPERATIONS**
 **FOR
        THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005**
 **(UNAUDITED)**
 
 For
                  the Three Months Ended March 31, 2006
              
              For
                  the Three Months Ended March 31, 2005**REVENUE**
              
              $
              598,876
              
              $
              597,768**COST
                  OF GOODS SOLD (Excluding Depreciation and
                  Amortization)**
              
              
              318,149
              
              
              396,760**GROSS
                  PROFIT**
              
              
              280,727
              
              
              201,008**OPERATING
                  EXPENSES**Management
                  and consulting fees
              
              
              52,088
              
              
              117,348Research
                  and development
              
              
              595,037
              
              
              524,013Selling,
                  general and administrative
              
              
              1,464,333
              
              
              810,892Depreciation
                  and amortization
              
              
              78,184
              
              
              53,664Total
                  Operating Expenses
              
              
              2,189,642
              
              
              1,505,917**LOSS
                  FROM OPERATIONS**
              
              
              (1,908,915
              )
              
              (1,304,909
              )**INTEREST
                  INCOME, NET**
              
              
              47,168
              
              
              6,486**NET
                  LOSS**
              
              $
              (1,861,747
              )
              $
              (1,298,423
              )**NET
                  LOSS PER COMMON SHARE - BASIC AND DILUTED**
              
              $
              (.05
              )
              $
              (.07
              )**WEIGHTED
                  AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED**
              
              
              38,165,124
              
              
              17,827,924
 
 See
        accompanying notes to condensed consolidated financial statements.
  2
 
 **VIOQUEST
        PHARMACEUTICALS, INC. AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY**
 **FOR
        THE THREE MONTHS ENDED MARCH 31, 2006**
 **(UNAUDITED)**
 
 
 ****Common
                  Stock****
              
              **Additional**
                **Paid-In**
                **Capital**
              
              **Accumulated**
                **Deficit**
              
              **Total**
                **Stockholders’**
                **Equity****Shares**
              
              **Amount**Balance,
                  January 1, 2006
              
              
              46,729,519
              
              $
              46,729
              
              $
              26,561,672
              
              $
              (20,269,392
              )
              $
              6,339,009Impact
                  of employee and director stock-based compensation
              
              
              
              
              
              
              
              
              264,538
              
              
              
              
              
              264,538Impact
                  of stock-based compensation to consultants
              
              
              —
              
              
              —
              
              
              16,222
              
              
              —
              
              
              16,222Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              (1,861,747
              )
              
              (1,861,747
              )Balance,
                  March 31, 2006
              
              
              46,729,519
              
              $
              46,729
              
              $
              26,842,432
              
              $
              (22,131,139
              )
              $
              4,758,022
  See
        accompanying notes to condensed consolidated financial statements.
  3
 
 **VIOQUEST
        PHARMACEUTICALS, INC. AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS**
 **FOR
        THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005**
 **(UNAUDITED)**
 
 **For
                  the Three**
                **Months
                  Ended**
                **March
                  31, 2006**
              
              **For
                  the Three**
                **Months
                  Ended**
                **March
                  31, 2005****CASH
                  FLOWS FROM OPERATING ACTIVITIES:**Net
                  loss
              
              $
              (1,861,747
              )
              $
              (1,298,423
              )Adjustments to reconcile net loss to net cash used in operating
                  activities:Depreciation and amortization
              
              
              78,184
              
              
              53,664Impact
                  of employee and director stock-based compensation
              
              
              264,538
              
              
              -Impact of consultant stock-based compensation
              
              
              16,222
              
              
              72,848Changes in operating assets and liabilities:Accounts receivable
              
              
              (326,184
              )
              
              (180,801
              )Inventory
              
              
              (27,728
              )
              
              (71,684
              )Prepaid expenses and other assets
              
              
              (108,497
              )
              
              14,134Security deposits
              
              
              (157
              )
              
              (20,463
              )Accounts payable
              
              
              (436,858
              )
              
              245,471Accrued
                  expenses
              
              
              (334,550
              )
              
              (153,592
              )Deferred revenue
              
              
              11,000
              
              
              11,267Net Cash Used In Operating Activities
              
              
              (2,725,777
              )
              
              (1,327,579
              )**CASH
                  FLOWS FROM INVESTING ACTIVITIES:**Payments
                  for purchased equipment
              
              
              (8,274
              )
              
              (253,888
              )Payments
                  for intellectual property rights
              
              
              (6,143
              )
              
              -Net Cash Used In Investing Activities
              
              
              (14,417
              )
              
              (253,888
              )**NET
                  DECREASE IN CASH AND CASH EQUIVALENTS**
              
              
              (2,740,194
              )
              
              (1,581,467
              )**CASH
                  AND CASH EQUIVALENTS - BEGINNING OF PERIOD**
              
              
              6,021,399
              
              
              3,065,547**CASH
                  AND CASH EQUIVALENTS - END OF PERIOD**
              
              $
              3,281,205
              
              $
              1,484,080
  See
        accompanying notes to condensed consolidated financial statements.
  4
  **VIOQUEST
        PHARMACEUTICALS, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2006 (UNAUDITED)**
 
 **NOTE
        1**  **SUMMARY
        OF SIGNIFICANT ACCOUNTING POLICIES AND LIQUIDITY**
 
 ***(A)
        Basis of Presentation***
 
 The
        accompanying unaudited condensed consolidated financial statements have been
        prepared in accordance with accounting principles generally accepted in the
        United States of America for interim financial information. Accordingly,
        the
        financial statements do not include all information and footnotes required
        by
        accounting principles generally accepted in the United States of America
        for
        complete annual financial statements. In the opinion of management, the
        accompanying unaudited condensed consolidated financial statements reflect
        all
        adjustments, consisting of only normal recurring adjustments, considered
        necessary for a fair presentation. Interim operating results are not necessarily
        indicative of results that may be expected for the year ending December 31,
        2006
        or for any subsequent period. These unaudited condensed consolidated financial
        statements should be read in conjunction with the audited consolidated financial
        statements included in the Annual Report on Form 10-KSB of VioQuest
        Pharmaceuticals, Inc. as of and for the year ended December 31, 2005. The
        accompanying condensed consolidated balance sheet as of December 31, 2005
        has
        been derived from the audited balance sheet as of that date included in the
        Form
        10-KSB. As used herein, the terms the “Company” or “VioQuest” refer to VioQuest
        Pharmaceuticals, Inc. (formerly Chiral Quest, Inc.) together with its
        subsidiaries.
 
 ***(B)
        Nature of Operations***
 
 Since
        its
        inception in October 2000, VioQuest has provided innovative chiral products
        and
        services to pharmaceutical and fine chemical companies in all stages of their
        products’ lifecycles. 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
        (“PSU”). 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 expanded its business plan to also focus on acquiring
        technologies for purposes of development and commercialization of pharmaceutical
        drug candidates for the treatment of oncology and antiviral diseases and
        disorders for which there are unmet medical needs. In accordance with this
        expanded business plan, in October 2005, the Company acquired in a merger
        transaction Greenwich Therapeutics, Inc., a privately-held New York-based
        biotechnology company that held exclusive rights to develop and commercialize
        two oncology drug candidates - VQD-001, Sodium Stibogluconate, also called
        “SSG”, and, VQD-002, Triciribine-Phosphate, or “TCN-P”. The rights to these two
        oncology drug candidates, VQD-001 and VQD-002, are governed by license
        agreements with The Cleveland Clinic Foundation and the University of South
        Florida Research Foundation, respectively. As a result of the Company’s
        acquisition of Greenwich Therapeutics, the Company holds exclusive rights
        to
        develop, manufacture, use, commercialize, lease, sell and/or sublicense VQD-001
        and VQD-002.
 
 From
        the
        Company’s inception through March 31, 2006, it has generated sales but not any
        net profits. With respect to the Company’s Chiral Quest operations, management
        believes that the Company’s sales, marketing, manufacturing capacities will need
        to grow 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 continue to
        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 laboratory
        space leased in December 2004, located in Jiashan, China.
 
 ***(C)
        Liquidity***
 
 Since
        inception, the Company has incurred an accumulated deficit of $22,131,139
        through March 31, 2006. For the quarter ended March 31, 2006 the Company
        had a
        net loss of $1,861,747 and used $2,725,777 of cash in operating activities.
        Management expects the Company’s losses to increase over the next several years,
        primarily due to the expansion of its drug development business, costs
        associated with clinical trial programs, resources allocated to our Chiral
        Quest
        subsidiary for the hiring of business development sales people, the hiring
        of
        additional chemists, marketing and advertising, and the expansion of its
        manufacturing capabilities. There can be no assurance that the Company will
        ever
        be able to operate profitably. These matters raise substantial doubt about
        the
        ability of the Company to continue as a going concern.
  5
  **VIOQUEST
        PHARMACEUTICALS, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2006** **(UNAUDITED)**
 
 The
        accompanying condensed consolidated financial statements have been prepared
        assuming that the Company will continue as a going concern. The Company has
        incurred negative cash flow from operations since we started business. The
        Company has spent, and expects to continue to spend, substantial amounts
        in
        connection with executing our business strategy, including our planned
        development efforts relating to our drug candidates, our clinical trials,
        and
        our research and development efforts.
 
 As
        of
        March 31, 2006, we had working capital of $3,328,690 and cash and cash
        equivalents of $3,281,205. Management anticipates that the Company’s capital
        resources will be adequate to fund its operations through the third quarter
        of
        2006, assuming the Company achieves expected increases in revenue. If the
        Company is unable to increase revenues as expected, however, additional
        financing will be required during 2006 in order to fund operations. The most
        likely source of financing includes the private sale of our equity or debt
        securities or bridge loans to the Company from third party lenders. However,
        changes may occur that would consume available capital resources before that
        time. The Company’s working capital requirements will depend upon numerous
        factors, including, without limitation, the progress of our drug development
        and
        clinical programs, associated costs relating to milestone payments, license
        fees
        and manufacturing costs, regulatory approvals, in addition to the resources
        we
        devote to our Chiral Quest subsidiary’s sales and marketing capabilities,
        manufacturing expansions, progress of our research and development (“R&D”)
        programs’ technological advances, the status of competitors, and our ability to
        establish sales arrangements with new customers. Working capital will also
        be
        affected by the China facility expansion of office and laboratory space lease
        agreements that were entered into during 2004, along with the hiring of
        additional employees. Our management believes that by opening the facility
        in
        China, we will be able to significantly decrease our manufacturing costs
        and
        expenses, which will enable us to cost-effectively produce our ligands,
        catalysts, contract synthesis development projects, and other end user products
        more competitively and even more attractively to current and potential
        customers.
 
 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.
 
 Our
        ability to achieve profitability depends upon, among other things, our ability
        to discover and develop products (specifically new “ligands”), and to sell our
        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, we will not realize any significant
        revenues from our 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.
 
 ***(D)
        Stock-Based Compensation***
 
 In
        December 2004, the Financial Accounting Standards Board issued the Statement
        of
        Financial Accounting Standards No. 123(R) (“FAS 123R”), “Share-Based Payment”,
        revising the Statement of Financial Accounting Standards No. 123 (“FAS 123”)
        requiring that the fair value of all share-based payments to employees be
        recognized in the financial statements over the service period. We adopted
        FAS
        123(R) effective January 1, 2006, using the modified-prospective transition
        method. Under this method, we are required to recognize compensation expense
        for
        the fair value of all awards granted after the date of adoption and for the
        unvested portion of previously granted options that remain outstanding as
        of the
        adoption date.
 
 The
        Company accounts for stock options granted to non-employees on a fair value
        basis using the Black-Scholes option pricing method in accordance with FAS
        123R
        and Emerging Issues Task Force No. 96-18, “Accounting for Equity Instruments
        That are Issued to Other Than Employees for Acquiring, or in Conjunction
        with
        Selling, Goods or Services.” The initial non-cash charge to operations for
        non-employee options with vesting are valued at the end of each reporting
        period
        based upon the change in the fair value of the Company’s common stock until such
        options vest.
 
 The
        Company has a stock incentive plan (the “Plan”) under which incentive stock
        options may be granted. In January 2006, the Board approved an amendment
        to the
        Plan, increasing the number of common shares available for grant to 6,500,000
        shares of its $0.001 par value of common stock. Grants under the Plan may
        be
        made to employees (including officers), directors, consultants, advisors,
        or
        other independent contractors who provide services to the Company or its
        subsidiaries.
 
 The
        Company issued 1,068,000 shares of its $0.001 par value common stock during
        the
        first quarter of 2006. With the exception of 75,000 stock options granted
        to a
        non-employee director which vested immediately in the first quarter of 2006,
        all
        other options granted to employees and non-employee directors during the
        three
        months ended March 31, 2006 vest as to 33% of the shares on the first, second
        and third anniversary of the vesting commencement date.
  6
 
 **VIOQUEST
        PHARMACEUTICALS, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2006** **(UNAUDITED)**
 
 Following
        the vesting periods, options are exercisable until the earlier of 90 days
        after
        the employee’s termination with the Company or the ten-year anniversary of the
        initial grant, subject to adjustment under certain conditions.
 
 We
        recorded compensation expense in the three months ended March 31, 2006 for
        employee and director stock options of $264,538.
 
 Prior
        to
        adopting FAS 123R, we applied the intrinsic value-based method of accounting
        prescribed in APB Opinion No. 25, “Accounting for Stock Issued to Employees,”
(“APB 25”) and, accordingly, did not recognize compensation expense for stock
        option grants to employees and directors made at an exercise price equal
        to or
        in excess of the fair market value of the stock at the date of grant.
 
 The
        following table details the pro forma effect on the Company’s net loss and basic
        and diluted net loss per share had compensation expense for stock-based awards
        been recorded in the three months ended March 31, 2005 based on the fair
        value
        method under FAS 123 instead of the intrinsic value under APB 25:
 
 Three
                  Months Ended
                March
                  31, 2005Net
                  loss, as reported
              
              $
              (1,298,423
              )Deduct:
                      Stock-based employee compensation expense determined under
                      fair value
                      based method for all awards, net of taxes
              
              
              (114,508
              )Pro
                  forma, net loss
              
              $
              (1,412,931
              )Basic
                  and diluted net loss per share, as reported
              
              $
              (0.07
              )Basic
                  and diluted net loss per share, pro forma
              
              $
              (0.08
              )
 
 We
        used
        the Black-Scholes option pricing model to calculate the fair value of options
        under FAS 123R and APB 25. The key assumptions for this valuation method
        include
        the expected term of the option, stock price volatility, risk-free interest
        rate, dividend yield, exercise price, and forfeiture rate. Many of these
        assumptions are judgmental and highly sensitive in the determination of
        compensation expense. Under the assumptions indicated below, the weighted
        average fair values of the stock options issued at the dates of grant in
        the
        periods ended March 31, 2006 and 2005 were $0.80 and $1.24, respectively.
        The
        table below indicates the key assumptions used in the valuation calculations
        for
        options granted in the three months ended March 31, 2006 and 2005:
 
 Three
                  Months Ended
                March
                  31,2006
              
              2005Term
              
              
              7
                  years
              
              
              10
                  yearsVolatility
              
              
              210.14%-213.95
              %
              
              108.01%-114.21
              %Dividend
                  yield
              
              
              0.0
              %
              
              0.0
              %Risk-free
                  interest rate
              
              
              4.37%-4.83
              %
              
              4.07%-4.36
              %Forfeiture
                  rate
              
              
              22
              %
              
              0
              %
 
 The
        following table summarizes information about our stock incentive plans for
        the
        three months ended March 31, 2006.
 
 Number
                  of Options
              
              Weighted
                  Average Exercise Price
              
              Weighted
                  Average Remaining Contractual Life
              
              Aggregate
                  Intrinsic ValueBalance,
                  January 1, 2006
              
              
              4,975,852
              
              $
              1.10Options
                  granted
              
              
              1,068,000
              
              $
              0.82Options
                  exercised
              
              
              -
              
              
              -Options
                  outstanding, March 31, 2006
              
              
              6,043,852
              
              $
              1.05
              
              
              7.8
              
              $
              674,910Options
                  exercisable, March 31, 2006
              
              
              1,772,433
              
              $
              2.18
              
              
              6.4
              
              $
              572,961
 
  7
  **VIOQUEST
        PHARMACEUTICALS, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2006** **(UNAUDITED)**
 
 As
        of
        March 31, 2006, there was $3,764,667 of total unrecognized compensation cost
        related to stock options. These costs are expected to be recognized over
        a
        period of approximately 3 years.
 
 There
        were no options exercised during the period ended March 31, 2006.
 
 As
        of
        March 31, 2006, an aggregate of 456,148 shares remained available for future
        grants and awards under our stock incentive plans, which cover stock options
        and
        restricted stock awards. We issue unissued shares to satisfy stock option
        exercises and restricted stock awards.
 
 ***(E)
        Loss Per Share***
 
 Basic
        net
        loss per share is calculated by dividing net loss by the weighted-average
        number
        of common shares outstanding for each period presented. 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 27,094,367 at March 31, 2006 and 6,300,405 at March 31, 2005.
 
 **NOTE
        2**  **INVENTORY**
 
 The
        principal components of inventory are as follows:
 
 March
                  31, 2006
                (Unaudited)
              
              December
                  31,
                2005****Raw
                  material compounds
              
              $
              424,738
              
              $
              410,912Work
                  in process
              
              
              24,623
              
              
              11,868Finished
                  goods
              
              
              203,525
              
              
              202,378Total
                  Inventory
              
              $
              652,886
              
              $
              625,158
 
 **NOTE
        3** **** **COMMITMENTS**
 
 In
        January 2006, the Company amended its lease agreement to extend its lease
        term
        to May 31, 2009 for its laboratory and office space located in Monmouth
        Junction, New Jersey. Effective June 1, 2006, the Company’s base rent for the
        remainder of the term is $19,439 per month.
 
 Upon
        six
        months prior written notice to the landlord, the Company will have a one
        time
        option, without penalty, to terminate this lease effective as of May 31,
        2008.
        As of March 31, 2006, the Company’s total remaining lease commitment was
        approximately $1,045,000 for rent, utilities and maintenance fees. Due to
        the
        escalation clause in the lease, the Company is straight-lining the expense
        of
        the lease over the term of the lease. The Company also issued the landlord
        options to purchase 20,000 shares of common stock. The fair value of the
        options
        issued to the landlord of $9,845 is being amortized on a straight-line basis
        over the term of the option agreement and included in rent expense.
 
 On
        February 14, 2006, the Company entered into an employment agreement with
        Pamela
        Harris, M.D., F.A.C.P., our newly-appointed Chief Medical Officer. The agreement
        is for an indefinite term beginning on March 15, 2006 and provides for an
        initial base salary of $250,000, plus an annual target bonus of up to 20%
        of
        base salary based upon personal performance and an additional amount of up
        to
        10% of base salary based upon Company performance. The agreement provides
        that
        for fiscal year 2006, Dr. Harris will be guaranteed at least 50% of the target
        bonus. The employment agreement also provides that Dr. Harris is entitled
        to
        receive options to purchase 200,000 shares of our common stock. The options
        will
        vest in three equal annual installments, commencing in March 15, 2007 and
        will
        be exercisable at $0.84 a price per share with an approximate fair value
        of
        $159,000 being amortized over three years. In addition, Dr. Harris shall
        be
        entitled, based on performance, to receive options to purchase an additional
        200,000 shares of the Company’s common stock. These performance based options
        will be divided in to three separate grants and are expected to vest in annual
        installments over a 3-year period. Entitlement to the performance based options
        and the exact vesting schedule has not yet been determined. These performance
        based options criteria will be established after consideration of the
        development timelines relating to the Company’s two product candidates.
  8
  **VIOQUEST
        PHARMACEUTICALS, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2006** **(UNAUDITED)**
 
 All
        terms
        of the options will be issued pursuant to the Company’s 2003 Stock Option Plan
        and will be exercisable by Dr. Harris as long as she remains employed by
        the
        Company; provided, however, if a “change of control” (as defined in the 2003
        Plan) occurs during Dr. Harris’ employment, the vesting of the stock options
        shall accelerate and be deemed vested. Pursuant to the terms of the employment
        agreement, Dr. Harris is entitled to a housing allowance of up to $10,000
        and
        relocation assistance for up to an additional $10,000. In the event that
        the
        Company terminates Dr. Harris’ employment without cause, Dr. Harris is entitled
        to receive her then annualized base salary for a period of six months from
        such
        termination.
 
 **NOTE
        4** **SEGMENT
        REPORTING**
 
 The
        Company has two business segments -Drug Development and Chiral Products and
        Services. The Company’s drug development business focuses on acquiring,
        developing and eventually commercializing human therapeutics in the areas
        of
        oncology, and antiviral diseases and disorders for which there are current
        unmet
        medical needs. The Company has the exclusive rights to develop and commercialize
        two oncology drug candidates. The Company’s chiral business, which we operate
        through our wholly-owned subsidiary, Chiral Quest, Inc., provides innovative
        chiral products, technology and custom synthesis development services to
        pharmaceutical and fine chemical companies in all stages of a product lifecycle.
        For the quarter ended March 31, 2006, the Company’s drug development business
        expenses primarily consisted of manufacturing, licensing, regulatory, and
        clinical development costs, administrative and rent expenses, totaling
        approximately $700,000 or approximately 38% of the Company’s overall net loss.
        The Company’s chiral business in the United States and China contributed to the
        majority of the Company’s other operating expenses during the first quarter of
        2006 and primarily all of the expenses in the first quarter of 2005 and
        substantially all revenue, property and equipment. Of the Company’s total
        assets, approximately 7% are held in its Chiral Quest, Ltd. Jiashan, China
        facility as of March 31, 2006. The Company’s Chiral Quest, Ltd., Jiashan, China
        subsidiary contributed to approximately 3% of the Company’s overall net loss for
        the quarter ended March 31, 2006.
 
 **NOTE
        5** **MERGER**
 
 On
        October 18, 2005, the Company completed a merger with Greenwich Therapeutics,
        Inc., (“Greenwich”), a New York based biotechnology company. In exchange for
        their shares of Greenwich common stock and pursuant to the merger agreement,
        the
        stockholders of Greenwich received an aggregate of 17,128,790 shares of the
        Company’s common stock and five-year warrants to purchase an additional
        4,000,000 shares of the Company’s common stock at an exercise price of $1.41 per
        share.
 
 Additionally,
        as contemplated by the merger agreement, on October 18, 2005, the Company
        assumed outstanding indebtedness of Greenwich of $823,869, all of which is
        payable to Paramount BioCapital Investments, Inc., pursuant to a promissory
        note
        dated October 17, 2005, referred to as the (“Note”).
 
 At
        the
        closing of the merger, the Note was amended to provide that one-third would
        be
        converted into securities of the Company on the same terms as the Company’s
        October 2005 private placement, one-third of the outstanding indebtedness
        under
        the Note would be repaid upon the completion by the Company of a financing
        resulting in gross proceeds of at least $5 million, and the final one-third
        would be payable upon completion by the Company of one or more financings
        resulting in aggregate gross proceeds of at least $10 million (inclusive
        of the
        amounts raised in its previous $8.4 million financing ).
 
 Accordingly,
        on October 18, 2005, upon completion of the private placement, the Company
        satisfied a portion of the total indebtedness outstanding under the
        Note by making a cash payment of $264,623 and another portion by issuing
        to Paramount BioCapital Investments, Inc. 392,830 shares valued at the $.75
        offering price of the October 2005 private placement, the equivalent of $294,623
        of the Company’s common stock. In the event that the Company does not complete
        the financing(s) resulting in aggregate gross proceeds of at least $10 million
        prior to the Note’s maturity date, the Company will be required to satisfy
        the final portion of $264,623 at maturity in October 2006.
 
 The
        acquisition of Greenwich on October 18, 2005 was accounted for under the
        purchase method of accounting and accordingly, the results of operations
        of
        Greenwich have been consolidated with those of the Company only from the
        date of acquisition.
  9
  **VIOQUEST
        PHARMACEUTICALS, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2006** **(UNAUDITED)**
 
 The
        following unaudited pro forma financial information presents the condensed
        consolidated results of operations of the Company and Greenwich for the three
        months ended March 31, 2005 assuming the acquisition had been consummated
        at the
        beginning of that period. The pro forma information does not necessarily
        reflect
        the results of operations that would have occurred had the entities been
        a
        single company during the period ($000's, except per share
        information).
 
 Three
                  months ended March 31,2005Net
                  Loss
              
              $
              (1,898
              )Basic
                  and diluted loss per common share
              
              $
              (0.05
              )Weighted
                  average common shares outstanding - basic and diluted
              
              
              37,965
  10
  **Item
                  2.**
              **MANAGEMENT’S
                  DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.**
 
 **Overview**
 
 Since
        its
        inception in October 2000, VioQuest has provided innovative chiral products
        and
        services to pharmaceutical and fine chemical companies in all stages of their
        products’
        lifecycles. 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
        (“PSU”). 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 expanded its business plan to also focus on acquiring
        technologies for purposes of development and commercialization of pharmaceutical
        drug candidates for the treatment in oncology and antiviral diseases and
        disorders for which there are unmet medical needs. In accordance with this
        expanded business plan, in October 2005, the Company acquired in a merger
        transaction Greenwich Therapeutics, Inc., a privately-held New York-based
        biotechnology company that held exclusive rights to develop and commercialize
        two oncology drug candidates - Sodium Stibogluconate, also called “SSG”
(VQD-001), and, Triciribine-Phosphate, or “TCN-P” (VQD-002). The rights to these
        two oncology drug candidates, VQD-001 and VQD-002, are governed by license
        agreements with The Cleveland Clinic Foundation and the University of South
        Florida Research Foundation, respectively. As a result of the Company’s
        acquisition of Greenwich Therapeutics, the Company holds exclusive rights
        to
        develop, manufacture, use, commercialize, lease, sell and/or sublicense VQD-001
        and VQD-002.
 
 On
        April
        11, 2006, the Company received an acceptance letter for its Investigational
        New
        Drug Application (IND) for VQD-002 from the Food and Drug Administration
        (“FDA”). The FDA completed their review of the Company’s IND submission and have
        concluded that the clinical investigations (s) described in the protocol
        may
        begin.
 
 From
        the
        Company’s inception through March 31, 2006, it has generated sales but not any
        net profits. With respect to the Company’s Chiral Quest operations, management
        believes that the Company’s sales, marketing, manufacturing capacities will need
        to grow 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 continue to
        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 laboratory
        space leased in December 2004, located in Jiashan, China.
 
 The
        Company’s ability to achieve profitability depends upon, among other things, its
        ability to discover and develop products (specifically new “ligands”), and to
        sell 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.
 
 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 $22,131,139 through March
        31,
        2006. For the three months ended March 31, 2006, the Company had a net loss
        of
        $1,861,747. 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. These matters raise doubt about its ability to
        continue as a going concern. There can be no assurance that the Company 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. As of March 31, 2006, we had working capital
        of
        $3,328,690 and cash and cash equivalents of $3,281,205.
 
 Management
        anticipates that the Company’s capital resources as of March 31, 2006 will be
        adequate to fund its operations through the third quarter of 2006, assuming
        the
        Company achieves expected increases in revenue.
  11
  If
        the
        Company is unable to increase revenues as expected, however, additional
        financing will be required during 2006 in order to fund operations.
 
 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;
        the
        establishment and funding of the Chiral Quest, Jiashan, China facility; the
        development and regulatory approval progress of its customers’ product
        candidates into which the Company’s technology will be incorporated; and the
        costs associated with the drug development process related to acquiring,
        developing and commercializing a drug candidate.
 
 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)
        and
        VQD-002 (triciribine). 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 funding development of VQD-001 and VQD-002, which
        has
        significantly increased our expected cash expenditures and will continue
        to
        increase 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 March 31, 2006 vs. March 31, 2005**
 
 Our
        revenues for the three months ended March 31, 2006 were $598,876 as compared
        to
        $597,768 for the three months ended March 31, 2005. For the three months
        ended
        March 31, 2006, substantially all of our revenue was derived from customized
        process development services sold to third parties (accounting for 80% of
        total
        revenue), sales of our catalysts and ligands (11% of total revenue) and 9%
        of
        total revenue was derived from feasibility screening services and additional
        contract services.
 
 Cost
        of
        goods sold for the three months ended March 31, 2006 was $318,149 as compared
        to
        $396,760 during the three months ended March 31, 2005. The decrease in cost
        of
        goods sold is attributed to the Company having lower costs of materials and
        direct labor used in the production of its commercial quantity ligands,
        catalysts and process development services, resulting from the Company utilizing
        a greater percentage of its China facility and outside contractors during
        the
        first quarter 2006.
 
 Our
        gross
        profit percentage increased to approximately 47% for the three months ended
        March 31, 2006 as compared to 34% for the period ended March 31, 2005. The
        primary reason the gross profit percentage increased is attributed to the
        Company having lower costs of material and direct labor used in the production
        of its commercial quantity ligands, catalysts and process development services,
        resulting from the Company utilizing a greater percentage of its China facility
        and outside contractors during the first quarter 2006.
 
 Management
        and consulting fees for the three months ended March 31, 2006 were $52,088
        as
        compared to $117,348 during the three months ended March 31, 2005. Management
        and consulting fees consist of the consulting agreement with our Chief
        Technology Officer (“CTO”), at a rate of $10,000 per month effective May 15,
        2003. Management and consulting fees also consist of approximately $16,000
        of
        stock option charges resulting from the fair value of options issued to
        consultants, and scientific advisory board members granted during 2003 accounted
        for under variable accounting. The primary reason for the decrease in management
        and consulting fees in 2006 compared to 2005 is a result of the Company’s
        amortization for deferred consulting expenses for the CTO and PSRF ending
        in the
        third quarter 2005, in addition to lower expenses resulting from the issuance
        of
        stock options to consultants, and scientific advisory board members during
        the
        first quarter 2006.
 
 Our
        R&D expenses for the three months ended March 31, 2006 were $595,037 as
        compared to $524,013 during the three months ended March 31, 2005. R&D
        primarily includes costs associated to the clinical development, manufacturing,
        licensing and regulatory costs of VQD-001 and VQD-002, in addition to 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 and also costs
        for
        sponsoring two post doctorates at PSU to develop reports on our technological
        feasibility of our proprietary technology through preparing sample batches
        for
        analysis in the Monmouth Junction, New Jersey office. The primary increase
        is a
        result of our drug development costs associated with VQD-001 and VQD-002,
        which
        commenced in October 2005 through the acquisition of Greenwich Therapeutics.
  12
  Selling,
        general and administrative (“SG&A”) expenses for the three months ended
        March 31, 2006 were $1,464,333 as compared to $810,892 during the three months
        ended March 31, 2005. This increase in SG&A expenses was due in part to the
        impact of expensing employee and director stock options of approximately
        $265,000 in accordance with FAS 123R, increased rent expense for the New
        Jersey
        facilities as a result of the Company’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, the Vice President of Corporate Business Development hired in July
        2005,
        and the Chief Medical Officer hired in March 2006, in addition to other related
        employee costs such as increased insurance, and employer payroll taxes.
 
 Depreciation
        and amortization expenses for the three months ended March 31, 2006 were
        $78,184
        as compared to $53,664 during the three months ended March 31, 2005. This
        increase was primarily related to the fixed asset purchases for office
        equipment, computer equipment, laboratory equipment and leasehold improvements
        for the leased facilities 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 March 31, 2006 was $47,168 as compared
        to
        $6,486 for the three months ended March 31, 2005. The increase in interest
        income is attributed to having higher cash reserves for the three months
        ended
        March 31, 2006 as compared to the three months ended March 31, 2005, as a
        result
        of the funds received from the private placement of the Company’s common stock
        in October 2005.
 
 Our
        net
        loss for the three months ended March 31, 2006 was $1,861,747 as compared
        to
        $1,298,423 for the three months ended March 31, 2005. The increased net loss
        for
        the three months ended March 31, 2006 as compared to March 31, 2005 was
        attributable to higher SG&A expenses due in part to the impact of expensing
        employee and director stock options of approximately $265,000 in accordance
        with
        FAS 123R, increased rent expense for the New Jersey facilities as a result
        of
        the Company’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, the Vice President
        of
        Corporate Business Development hired in July 2005, and the Chief Medical
        Officer
        hired in March 2006, in addition to other related employee costs such as
        increased insurance, and employer payroll taxes in addition to R&D expenses
        related to the Company’s drug development costs, including, manufacturing,
        licensing, clinical development costs. We expect losses to continue in the
        next
        year from the costs associated with the drug development process related
        to
        developing our drug candidates, in addition to continue to expand operations
        in
        New Jersey and in Jiashan.
 
 **Liquidity
        and Capital Resources**
 
 Since
        inception, the Company has incurred an accumulated deficit of $22,131,139
        through March 31, 2006. For the three months ended March 31, 2006, the Company
        had a net loss of $1,861,747. As of March 31, 2006, the Company had working
        capital of $3,328,690 and cash and cash equivalents of $3,281,205. However,
        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 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. Management anticipates that the Company’s capital
        resources will be adequate to fund its operations through the third quarter
        of
        2006, assuming the Company achieves expected increases in revenue. If the
        Company is unable to increase revenues as expected, however, additional
        financing will be required during 2006 in order to fund operations. These
        matters raise substantial doubt about the Company’s ability to continue as a
        going concern.
 
 The
        Company’s net cash used in operating activities for the three months ended March
        31, 2006 was $2,725,777. The Company’s net cash used in operating activities
        primarily resulted from a net loss of $1,861,747 offset by non-cash items
        consisting of depreciation and amortization of $78,184, the impact of expensing
        employee, director and consultant stock options in accordance with FAS 123R
        of
        $264,538, and the impact of expensing consultants’ options in accordance with
        EITF 96-18 under variable accounting for $16,222. An increase in accounts
        receivable of $326,184 was a result of higher sales in the fourth quarter
        2005
        and first quarter 2006 compared to prior periods. A decrease in accounts
        payable
        and accrued expenses is the result of operational expenditures of $436,858
        and
        $334,550 which were remitted during the first quarter 2006,
        respectively.
 
 The
        Company’s net cash used in investing activities for the three months ended March
        31, 2006 totaled $14,417, which resulted from capital expenditures of $8,274
        were attributed to the purchases of laboratory, computer and office equipment
        for the New Jersey and China facilities. Additionally, payments for intellectual
        property totaled $6,143 were attributed to patent defense and filing
        costs.
  13
  The
        Company had no financing activities in the first quarter of 2006 and 2005.
        However, 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’s combined 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.
 
 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.
 
 We
        have
        formed two China subsidiaries through which we have opened a laboratory facility
        in the People’s Republic of China. We have provided approximately $655,000 of
        capital to the China subsidiary as of March 31, 2006. 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 commenced in the third quarter of
        2005.
  14
  **Item
        3. Controls and Procedures**
 
 As
        of
        March 31, 2006, 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 our disclosure
        controls and procedures are effective in alerting them on a timely basis
        to
        material information required to be disclosed in our periodic reports to
        the
        Securities and Exchange Commission. During the fiscal three months ended
        March
        31, 2006, there was no change in the Company’s internal control over financial
        reporting that materially affected, or is reasonably likely to materially
        affect, the Company’s internal control over financial reporting.
  15
  **PART
        II - OTHER INFORMATION**
 
 **Item
        6. Exhibits**
 
 (a)
            Exhibits
 
 
 Exhibit
                  No.
              
              Description10.1
              
              Letter
                  agreement between the Company and Pamela Harris dated February
                  15, 2006
                  (incorporated by reference to Exhibit 10.8 of the Company’s Annual Report
                  on Form 10-KSB for the year ended December 31, 2005).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.
  16
 
 **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:
                  May 12, 2006
              By:
              /s/
                  Daniel
                  GreenleafDaniel
                  Greenleaf
                President
                  & Chief Executive OfficerDate:
                  May 12, 2006
              By:
              /s/
                  Brian
                  LenzBrian
                  Lenz
                Chief
                  Financial Officer
  17
  **EXHIBIT
        INDEX**
 
 Exhibit
                  No.
              
              Description31.1
              
              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.
  18