Avantogen Oncology (IOVO) 10QSB 2007 Q1 Quarterly report (small business)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-QSB

Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended: March 31, 2007

Commission File Number: 33-55254-28

AVANTOGEN ONCOLOGY, INC.

(Name of small business issuer as specified in its charter)

NEVADA	87-0438641
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

2121 AVENUE OF THE STARS, SUITE 2550, LOSANGELES, CA 90067

(Address of principal executive offices)

TELEPHONENUMBER: (310) 277-2077

(Issuer’s telephone number)

Securities registered under Section 12(b) of the Exchange Act

None

Securities registered under Section 12(g) of the Exchange Act

None

Check whether the issuer (1) 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  xNo¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

YES  ¨    NO  x

The issuer had no revenue in the most recent fiscal year.

As of August 9, 2007, there were 74,282,472 shares of the issuer’s Common Stock outstanding.

Transitional Small Business Disclosure Format                    Yes  ¨NO  x

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION
Item 1. Financial Statements	3
Item 2. Management’s Discussion and Analysis or Plan of Operation	15
Item 3. Controls and Procedures	17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	18
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	18
Item 3. Defaults upon Senior Securities	18
Item 4. Submission of Matters to a Vote of Security Holders	18
Item 5. Other Information	18
Item 6. Exhibits
Signatures	19

2

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (Unaudited)

Condensed Consolidated Balance Sheet	4
Condensed Consolidated Statements of Operations	5
Condensed Consolidated Statements of Stockholders’ Deficit	6
Condensed Consolidated Statements of Cash Flows	7
Notes to Condensed Consolidated Financial Statements	8

3

AVANTOGEN ONCOLOGY, INC. AND SUBSIDIARIES

(A Development Stage Company)

Condensed Consolidated Balance Sheet

March 31, 2007

	March 31, 2007
	(Unaudited)
ASSETS
Cash	$	2,106
Prepaid assets		49,363
Total current assets		51,469
Total assets	$	51,469
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Accounts payable and accrued expenses	$	1,350,702
Interest payable		77,193
Due to related parties		213,502
Note payable to stockholder		1,000,000
Total current liabilities		2,641,397
Commitments and Contingencies
Stockholders’ Deficit
Preferred stock, par value $.001, 25,000,000 shares authorized, none issued and outstanding		—
Common stock, par value $.001, 125,000,000 shares authorized, 74,282,000 issued and outstanding		59,000
Additional paid in capital		9,049,800
Deficit accumulated during the development stage		(11,698,728	)
Total stockholders’ deficit		(2,589,928	)
Total liabilities and stockholders’ deficit	$	51,469

The accompanying notes are an integral part of these consolidated financial statements.

4

AVANTOGEN ONCOLOGY, INC. AND SUBSIDIARIES

(A Development Stage Company)

Condensed Consolidated Statements of Operations

For the Quarters Ended March 31, 2007 and 2006, and

For the Period from July 21, 2004 (Inception) to March 31, 2007  

	For the Quarters Ended						Period From July 21, 2004 (Inception) to
	March 31, 2007			March 31,2006			March 31,  2007
	(Unaudited)			(Unaudited)			(Unaudited)
Research and development	$	49,128		$	571,179		$	6,943,147
General and administrative		81,420			361,340			4,209,181
Loss from operations		130,548			938,519			11,152,328
Interest income		(11	)		—			(4,383	)
Loss on disposal of assets		51,942						51,942
Interest expense		175,702			49,830			497,301
Loss before provision for income taxes		358,181			982,349			11,697,188
Provision for income taxes		—			—			1,540
Net loss	$	358,181		$	982,349		$	11,698,728
Basic and diluted loss per share	$	(0.01	)	$	(0.05	)
Basic and diluted weighted average shares outstanding		59,000,000			18,178,000

The accompanying notes are an integral part of these consolidated financial statements.

5

AVANTOGEN ONCOLOGY, INC. AND SUBSIDIARIES

(A Development Stage Company)

Condensed Consolidated Statements of Stockholders’ Deficit

From July 21, 2004 (Inception) to December 31, 2006,

and for the Three Months Ended March 31, 2007

	Shares		Common Stock		Additional Paid In Capital			Deficit Accumulated During the Development Stage			Total
Balance, July 21, 2004 (Inception)		1,453,242	$	1,453	$	(1,453	)	$	—		$	—
Shares issued in reorganization		16,500,000		16,500		(16,500	)		—			—
Net loss		—		—		—			(1,120,037	)		(1,120,037	)
Balance, December 31, 2004		17,953,242	$	17,953	$	(17,953	)	$	(1,120,037	)	$	(1,120,037	)
Shares issued to consultant on October 19, 2005 at $3.25 per share		225,000		225		731,025			—			731,250
Net loss		—		—		—			(5,014,506	)		(5,014,506	)
Balance, December 31, 2005		18,178,242	$	18,178	$	713,072		$	(6,134,543	)	$	(5,403,293	)
Shares issued in the May 26, 2006 acquisition		40,821,758		40,822		8,077,287			—			8,118,109
Stock based compensation		—		—		68,236			—			68,236
Warrants issued with note payable to related party		—		—		212,598			—			212,598
Net loss		—		—		—			(5,206,004	)		(5,206,004	)
Balance, December 31, 2006		59,000,000	$	59,000	$	9,071,193		$	(11,340,547	)	$	(2,210,354	)
Forfeiture of Stock Options (unaudited)						(21,393	)					(21,393	)
Net loss (unaudited)									(358,181	)		(358,181	)
Balance, March 31, 2007(unaudited)		59,000,000	$	59,000	$	9,049,800		$	(11,698,728	)	$	(2,589,928	)

The accompanying notes are an integral part of these consolidated financial statements.

6

AVANTOGEN ONCOLOGY, INC. AND SUBSIDIARIES

(A Development Stage Company)

Condensed Consolidated Statements of Cash Flows

For the Quarters Ended March 31, 2007 and 2006 and For the Period

from July 21, 2004 (Inception) to March 31, 2007

	March 31, 2007			March 31, 2006			Period From July 21, 2004 (Inception) to March 31, 2007
	(Unaudited)			(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net loss	$	(358,181	)	$	(982,349	)	$	(11,698,728	)
Adjustments to reconcile net loss to cash used in operating activities:
Stock compensation		(21,393	)		—			778,093
Accretion of debt discount on note payable		144,567			—			1,179,388
Purchased research and development expensed in the May 26, 2006 acquisition		—			—			516,141
Settlement of related party claim		(142,665	)					(142,665	)
Loss on disposal of assets		51,941			—			51,941
Amortization expense		—			—			25,000
Depreciation expense		287			—			1,147
Changes in assets and liabilities
Decrease in prepaid assets		53,777			—			51,853
(Increase) in deposits		—			—			(44,488	)
(Decrease) / Increase in accounts payable and accrued expenses		198,591			(53,787	)		1,303,964
Increase in due to related parties		30,374			580,335			356,167
Increase in interest payable		30,544			49,830			282,354
Net cash used in operating activities		(12,158	)		(405,971	)		(7,339,833	)
Cash flows from investing activities:
Purchase of property and equipment		—			—			(8,600	)
Net cash used in investing activities		—			—			(8,600	)
Cash flows from financing activities:
Proceeds received from Avantogen Limited in the acquisition		—			—			1,100,000
Resistys, Inc. cash received in the acquisition		—			—			4,665
Proceeds from loan from related party & issuance of warrants		—			405,875			1,000,000
Proceeds from loans from stockholder		—			—			5,245,874
Net cash provided by financing activities		—			405,875			7,350,539
Net increase / (decrease) in cash		(12,158	)		(96	)		2,106
Cash, beginning of period		14,264			1,158			—
Cash, end of period	$	2,106		$	1,062		$	2,106
Supplemental cash flow information:
Cash paid for interest expense and income taxes	$	—		$	—		$	—
Non-cash financing transactions:
Non-cash Resistys, Inc. net assets received in acquisition	$	—		$	—		$	79,477
Amount due Resistys, Inc. eliminated in acquisition	$	—		$	—		$	825,025
Common stock issued to Bioaccelerate Holdings, Inc. for assumption of liabilities	$	—		$	—		$	5,592,801
Warrants issued to Chopin Opus One L.P. with Promissory Note	$	—		$	—		$	212,598

The accompanying notes are an integral part of these consolidated financial statements.

7

AVANTOGEN ONCOLOGY, INC. and Subsidiaries

(A Development Stage Company)

Notes to Condensed Consolidated Financial Statements

March 31, 2007

(Unaudited)

1.Organization and Significant Accounting Policies

Organization

Avantogen Oncology, Inc., formerly Innovate Oncology, Inc., (the “Company” or “Avantogen Oncology”) acquires, develops and seeks to commercialize novel compounds to treat various types of cancer.

Prior to the May 26, 2006 Acquisition (see below), the Company had been pursuing financing for a relatively broad portfolio of products. The Company then decided to focus its resources on three particular product candidates - Chemo-resistance Inhibitor (RP101), Capridine beta and oral paclitaxel - rather than proceeding with a plan to develop a larger portfolio that would require far more substantial commitments. As a result of this change in strategy, the Company terminated the agreements intended to assign to the Company the following products: INOC-002 Chemotherapy Potentiator, INOC-003 Targeted Ruthenium Complex, INOC-010 Polymer-Formulated Camptothecin, INOC-016 HER2 Oncogene Inhibito, and INOC-019 Prostate Tumor Suppressor. All rights and remaining obligations with respect to those products reverted to the applicable assignor of those rights to the Company. In November 2006, after further evaluation of its existing pipeline, the Company decided to terminate its license agreement for oral paclitaxel.

In connection with the May 26, 2006 Acquisition, the Company changed its name to Avantogen Oncology, Inc. from Innovate Oncology, Inc. (“Innovate”). The Company is located in Los Angeles, California.

The 2004 Reverse Merger

Pursuant to an acquisition agreement dated August 23, 2004 between Innovate, a then-privately held Delaware corporation, and Hampton Berkshire Insurance and Financial, Inc., a Nevada corporation (“Hampton”), in exchange for 100% of the outstanding shares of Innovate, Hampton canceled 5,026,590 shares of its common stock, effected a 3.8-for-1 reverse split of its common stock, which reduced its pre-acquisition outstanding common stock to 1,453,242, and issued 16,500,000 shares, including 600,000 shares for consulting services related to the acquisition, to Innovate shareholders. As Innovate's management and Board of Directors assumed control of the combined entity, the acquisition has been treated as a recapitalization of Innovate and accordingly, the accompanying consolidated financial statements include the historical operations of Innovate and the capital structure of Hampton. Hampton immediately changed its name to Innovate Oncology, Inc.

The Investment in Resistys, Inc.

Avantogen Limited (formerly Australian Cancer Technologies Limited) ("Avantogen Limited") is a biotechnology company focused on oncology products and is traded on the Australian Stock Exchange under the symbol "ACU". Avantogen Limited formed Resistys, Inc. ("Resistys") in August 2004 as a wholly-owned subsidiary and obtained the North American license in September 2004 to develop and market RP101. On October 5, 2004, Bioaccelerate Holdings, Inc. (“Bioaccelerate”), Innovate’s parent company prior to the May 26, 2006 Acquisition (now known as Gardant Pharmaceuticals, Inc.), and Avantogen Limited entered into a joint venture agreement to co-develop RP101 and share license agreement rights with each controlling 50% of Resistys. On January 17, 2005 Bioaccelerate assigned 100% of its shares in Resistys to a wholly-owned subsidiary, Cynat Oncology Limited ("Cynat"). Bioaccelerate transferred 100% of the capital stock of Cynat to Innovate on March 16, 2005. As a result, Innovate controlled 50% of Resistys subsequent to that date up to the May 26, 2006 Acquisition.

The May 26, 2006 Acquisition

On May 26, 2006, Avantogen Limited and Bioaccelerate entered into a Share Exchange Agreement (the “May 26, 2006 Acquisition”) whereby Avantogen Limited transferred to the Company its 50% share in Resistys and $1,100,000 in exchange for 32,000,000 shares of common stock (or 54.2%) of Innovate. Bioaccelerate terminated its credit line with the Company, and related warrant to acquire 1,000,000 shares of the Company’s common stock, and forgave all amounts due under the line, as well as assumed all Company liabilities, except for $65,000 due to a related party and $825,025 due to Resistys, as of the acquisition date. Total liabilities assumed including the amount due to Bioaccelerate under the credit line was $5,592,801. In consideration, the Company issued to Bioaccelerate 8,721,758 shares of its common stock. The Company also issued 100,000 shares of common stock for consulting services related to the acquisition, which were accounted for as transaction costs. The $825,025 liability due to Resistys was reclassified to additional paid-in capital as result of the Company now owning 100% of Resistys. The remaining net assets received from Resistys, Inc. of $59,142 were recorded as additional paid in capital. Under the Share Exchange Agreement, Avantogen Limited has the right to designate three of the five members of Innovate’s Board of Directors. Immediately after the acquisition, the Company changed its name to Avantogen Oncology, Inc.

8

Principles of Consolidation

The consolidated financial statements include the accounts of Avantogen Oncology, Inc. (a Nevada corporation) and its wholly owned subsidiaries, Innovative Oncology, Limited (a United Kingdom company), and Cynat Oncology Limited (a United Kingdom company), which holds the investment in Resistys. Beginning May 26, 2006, the Company consolidated 100% of Resistys’ losses in its operating results. Prior to this date, the Company had reported its 50% share of losses in Resistys under the equity method of accounting.

All significant inter-company accounts and transactions have been eliminated. All assets and liabilities are recorded at or held in United States dollars (USD). Therefore no balance sheet amounts are translated into USD in consolidation. Amounts paid in foreign currencies are translated into USD when paid, and if previously unrecorded, recorded in the books and records at the translated amount, otherwise a gain or loss is recognized in the consolidated statement of operations as either research and development expense or general and administrative expense. Exchange gains and losses recognized in the accompanying consolidated statement of operations are immaterial.

All adjustments necessary for a fair statement of interim periods have been included in these consolidated financial statements.

Research and Development

Costs and expenses that can be clearly identified as research and development are charged to expense as incurred in accordance with FASB Statement No. 2, "Accounting for Research and Development Costs."

Foreign Currency Translation

Assets and liabilities recorded in foreign currencies are translated at the exchange rate on the balance sheet date. Expenses are translated at average rates of exchange prevailing during the year. Translation adjustments, if any, resulting from this process are immaterial.

Use of Estimates

In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Property and Equipment

Property and equipment are recorded at cost. Leasehold improvements are depreciated using the straight line method over the lesser of their estimated useful life or the term of the lease.

Statement of Cash Flows

The Company prepares its statements of cash flows using the indirect method as defined under SFAS No. 95, “Statement of Cash Flows.” During the period ended March 31, 2007, amounts reported in operating activities as uses of cash related to decreases in accounts payable, accrued expenses, and due to related parties include those amounts assumed by Bioaccelerate as if Bioaccelerate advanced the Company cash under a credit line to settle its obligations with vendors and other creditors. Hence, advances to the Company from Bioaccelerate under a credit line within financing activities reflect a corresponding source of cash in the period ended March 31, 2007.

Loss per Share

In accordance with SFAS No. 128, “Earnings per Share”, and SEC Staff Accounting Bulletin (“SAB”) No. 98, basic net loss per common share is computed by dividing net loss for the period by the weighted average number of common shares outstanding during the period. Under SFAS No. 128, diluted net income/(loss) per share is computed by dividing the net income/(loss) for the period by the weighted average number of common and common equivalent shares, such as stock options and warrants, outstanding during the period. Such common equivalent shares have not been included in the computation of net loss per share as their effect would be anti-dilutive.

9

As of March 31, 2007, there were warrants outstanding to acquire (a) 1,000,000 shares of the Company’s common stock related to the Promissory Note to Chopin Opus One and (b) 300,000 shares of the Company’s common stock related to an agreement with Chopin Capital Partners, LLC to provide financial advisory services. The warrants were excluded from the weighted average number of common shares outstanding for purposes of computing earnings per share as they would have been anti-dilutive since the Company had reported losses for all periods presented.

Income Taxes

Income taxes are recorded in accordance with SFAS No. 109, “Accounting for Income Taxes”. This statement requires the recognition of deferred tax assets and liabilities to reflect the future tax consequences of events that have been recognized in the financial statements or tax returns. Measurement of the deferred items is based on enacted tax laws. In the event the future consequences of differences between financial reporting bases and tax bases of the Company's assets and liabilities result in a deferred tax asset, SFAS No. 109 requires an evaluation of the probability of being able to realize the future benefits indicated by such assets. A valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some portion or the entire deferred tax asset will not be realized.

The Company has not filed tax returns for 2004, 2005 and 2006. As of March 31, 2007, there were approximately $11.7 million in accumulated losses. When the tax returns are completed, these losses will give rise to deferred tax assets, a significant portion of which are likely to be net operating loss carry forwards. Due to the May 26, 2006 Acquisition, these net operating loss deferred tax assets will be subject to limitations. Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited. Because of these potential limitations and the Company’s history of losses, the Company has not recognized any deferred tax asset and has effectively placed a full valuation allowance on such assets.

Accounting for Uncertainty in Income Taxes (“FIN 48”)

In June 2006, the Financial Accounting Standards Board issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”). This Interpretation clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements and prescribes a recognition threshold of more-likely-than-not to be sustained upon examination. Measurement of the tax uncertainty occurs if the recognition threshold has been met. This Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. In the normal course of business the Company is subject to examination by taxing authorities. At present, there are no ongoing audits or unresolved disputes with the various tax authorities that the Company files with. Given the Company’s substantial net operating loss carryforwards (“NOLs”, which are subject to a full valuation allowance) as well as the historical operating losses, the adoption of FIN 48 on January 1, 2007 did not have any effect on our financial position, results of operations or cash flows as of March 31, 2007.

Stock-Based Compensation

In 2006 the Company made option grants to two employees. During the quarter ended March 31, 2007 all of these options granted to employees were forfeited and the expense recognized in 2006 was reversed.

Fair Value of Financial Instruments

The carrying amounts of financial instruments, including cash, cash equivalents, accounts receivable, accounts payable, accrued liabilities and short-term borrowings approximates fair value due to the short maturity of these instruments. The carrying amount of long-term debt approximates fair value because the interest rates fluctuate with market interest rates or the fixed rates are based on current rates offered to the Company for debt with similar terms and maturities.

Recent Accounting Pronouncements

In September 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 clarifies the definition of fair value, describes methods used to appropriately measure fair value, and expands fair value disclosure requirements. This statement is effective for fiscal year beginning after November 15, 2007. The Company is currently in the process of assessing the impact that SFAS 157 will have on the consolidated financial statements.

10

In September 2006 the SEC issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements in Current Year financial Statements” (SAB 108), to address diversity in practice in quantifying financial statement misstatements. SAB 108 requires that the Company quantify misstatements based on their impact on each of the financial statements and related disclosures. SAB 108 was effective as of the end of the Company’s 2006 fiscal year, allowing a one-time transitional cumulative effect adjustment to retained earning as of January 1, 2006 for errors that were not previously deemed material, but are material under the guidance in SAB 108. The adoption of the provisions of SAB 108 had no impact on the Company’s consolidated financial statements.

In February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities”. SFAS 159 permits entities to choose to measure financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The decision to elect the fair value option may be applied instrument by instrument, is irrevocable, and is applied to the entire instrument and not to only specified risks, specific cash flows or portions of that instrument. An entity is restricted in choosing the dates to elect the fair value option for an eligible item. Adoption of SFAS 159 is effective for the Company on January 1, 2008. Early adoption is permitted, provided the entity also elects to apply the provisions of SFAS 157, “Fair Value Measurements”. Management of the Company is currently evaluating the potential impact of SFAS 159 on the Company’s financial condition, results of operations, and liquidity.

2. Going Concern

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. As of March 31, 2007, the Company had $2,106 of cash and no other material financial assets, nor did it have an established source of revenues sufficient to cover its operating costs. During the quarters ended March 31, 2007 and 2006, and from July 21, 2004 (Inception) to March 31, 2007, the Company used cash in operations of $12,158, $405,971 and $7,339,833, respectively. From inception through March 31, 2007, shareholders provided funding in the amount of $7,345,874. As of March 31, 2007, the Company had accumulated a net deficit during the development stage of $11,698,728. Subsequent to March 31, 2007 the Company assigned its rights to develop and commercialize its lead drug candidate, RP101, for approximately $1.7 million in upfront fees and success-based regulatory and commercial payments and royalties on future sales of RP101 Product. See footnote 8. The Company is entirely dependent on the payments from this transaction for its capital requirements. The Company's future capital requirements will depend upon numerous factors including, but not limited to, identification of new compounds and product opportunities, progress in developing its products, market penetration and profitable operations from the sale of its products, if successfully developed. These consolidated financial statements do not reflect adjustments that would be necessary if the Company were unable to continue as a going concern.

3.Related Party Transactions

On October 12, 2006 the Company borrowed $1 million from Chopin Opus One L.P. a Cayman Islands limited partnership. The General Partner of Chopin is Chopin Holdings, Ltd., whose Managing Director is Dr. Richard Opara, the former Chairman of the Company’s Board of Directors and former Chairman of Avantogen Limited, the Company’s majority stockholder at December 31, 2006. See footnote 4.  

On October 23, 2006 the Company finalized and entered into a Terms of Financial Advisory Services Agreement with Chopin Capital Partners, LLC related to the service period from July 1, 2006 to June 30, 2007. The managing partner of Chopin Capital Partners, LLC was a Board member of the Company at the time the agreement was signed. As additional compensation the Company agreed to issue warrants to purchase 300,000 shares of the Company’s common stock at an exercise price of $0.60 per share. The warrants have been valued at $93,686 amortization of which was calculated over the term of the agreement. In 2006 $46,843 was recognized as general and administrative expense. In February 2007 the Company provided notice to Chopin Capital Partners, LLC of its intent to cancel the agreement. No additional expense related to this agreement was recognized in the quarter ended March 31, 2007.

As of March 31, 2007 there was $213,502 due to related parties, which was comprised of $77,500 owed to the four non-executive directors for outstanding fees, $100,000 owed to Chopin Capital Partners LLC for services under the Terms of Financial Advisory Services Agreement, $34,365 due to AL Holdings, Inc. and $1,637 due to a director for travel expenses. The amount owed to AL Holdings, Inc. was comprised of $25,165 for December 2006 through February 2007 monthly fees due under a Shared Facilities and Services Agreement administered by AL Holdings, Inc. for rent, professional, administrative and support services and $9,200 as a reimbursement for operating expenses paid for by AL Holdings, Inc. on behalf of the Company. Under the Shared Facilities and Services Agreement the Company accrued $18,340 for rent on office space which was expensed.

11

Effective March 1, 2007 the Company entered a Termination of Agreement and Releases with AL Holdings, Inc. and other parties to the Shared Services Agreement. This agreement released the Company from all future obligations for rent, professional, administrative and support services previously provided under the Shared Services Agreement. As part of the Agreement the Company released its claim for reimbursement of its allocation of the security deposit in the amount of $44,488 and the leasehold improvements in the amount of $7,453, net of depreciation of $1,147 through February 2007 related to the lease of office space. These assets were written off during the quarter ended March 31, 2007.

On March 28, 2007 the Company entered into a Settlement Agreement and Release of Claims with Avantogen Limited regarding the payment of legal fees related to the Share Exchange Agreement dated January 31, 2006. During 2006 the Company paid and recorded an expense of $134,145 for legal services related to this agreement which it claimed was reimbursable by Avantogen Limited. In addition, Avantogen Limited. paid $142,665 for legal fees related to the agreement which it claimed was reimbursable by the Company. The Company recorded these legal fees in 2006. The Company and Avantogen Limited agreed in the Settlement and Release of Claims to cancel their respective claims. The cancellation of the $142,665 liability to Avantogen Limited was recorded in the quarter ended March 31, 2007 as a credit to general and administrative expense.

4.Note Payable to Stockholder

On October 12, 2006 the Company borrowed $1 million (the “Loan”) from Chopin Opus One L. P. (“Chopin”). The Loan bears interest at the rate of ten percent (10%) per annum and is due March 31, 2007. The Loan is secured by a first priority security interest on all of the Company’s assets. As an inducement to Chopin to provide the Loan, the Company issued five year warrants to purchase 1,000,000 shares of the Company’s common stock at an exercise price of $0.60 per share. The warrants have been valued at $212,598 and have been recorded as a discount on the Loan and accreted over the term. As of March 31, 2007 the entire balance has been accreted and $144,567 is reflected as interest expense in the quarter ended March 31, 2007. The Company and Chopin entered into an agreement to extend the maturity date of the Note to the date that is thirty (30) days after the Effective Date and to terminate the Security Agreement dated October 12, 2006 between them, thereby terminating Chopin’s security interest in the assets of the Company. See Footnote 8.

5.Commitments and Contingencies

Third Party License Agreements

Prior to the May 26, 2006 Acquisition, Bioaccelerate entered into various drug development and licensing agreements with leading medical research, academic and private pharmaceutical companies. Avantogen Oncology, formerly Innovate Oncology, Inc., as a defined "affiliate" of Bioaccelerate under certain of those agreements, was already a licensee under the terms of certain of those agreements. On March 16, 2005, Bioaccelerate also assigned some of those agreements to the Company in order to pursue a plan to grant rights to various compounds from Bioaccelerate's drug portfolio. The assignments were generally subject to written consent by the other party to the license agreement, which consent cannot be unreasonably withheld, and in one case payment by Bioaccelerate of some additional consideration to the other party to the license agreement.

Resistys had the following commitments, which became the obligation of the Company because of the May 26, 2006 Acquisition.

Resistys is party to a licensing agreement with RESprotect GmbH for the right to exploit RP101. The licensing agreement is for 25 years, subject to certain early termination provisions. Pursuant to the license terms, Resistys shall compensate RESprotect after the achievement of the following milestones:

Initiation of Phase 2 Trial by Resistys in the Territory or outside the Territory	$	1,333,000
Upon filing by Resistys with the U.S. Food and Drug Administration (“FDA”) of a New Drug or abbreviated New Drug Application (“NDA”) for the registration of the Licensed Product and acceptance of such Application by the FDA	$	2,666,000
Upon FDA approval of the Licensed Product	$	6,665,000
Upon achieving cumulative Market Sales of the Licensed Product in the Territory of $100 million	$	3,999,000

Milestone payments are non-refundable and non-recoupable. The milestones are payable in Euros and have been translated into US dollars as of March 31, 2007. The actual payments may be different depending on the exchange rate at the time payment is made. The Company believes that the milestones for the Phase 2 trial will be achieved in late 2007. The milestones for FDA filing and approval are not expected until at least 2010 and 2011, respectively. Additionally, the Company is required to pay royalties ranging from 2% to 4% of net revenues from the sale of RP101 or 8% to 16% if through a third party sub licensee.

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Additionally, Resistys signed a service agreement with Hesperion Ltd. on October 18, 2004. This agreement entrusted Hesperion Ltd. with the execution of a clinical study defined as “Phase 1 study of RP101 in patients with advanced Pancreatic Cancer.” Pursuant to a Change of Scope (“COS”) addendum dated December 6, 2005, Resistys committed to use approximately $360,000 of Hesperion Ltd’s research and development services during 2006, of which approximately $347,000 had been used as of March 31, 2007.

In addition to the former Resistys commitments, on July 18, 2006 the Company engaged a consulting firm in an agreement that required a retainer of $50,000 that the Company has accrued for as of March 31, 2007. The agreement is for twelve months and has the potential for future payments contingent on performance by the consulting company.

On October 18, 2006 the Company signed an agreement with Pharmaceutical Research Associates, Inc. (“PRA”). This agreement entrusts PRA to execute a clinical study defined as a “Randomized, double blind, placebo controlled, Phase 2 study evaluating the efficacy and safety of RP101 in combination with gemcitabine administered as first-line therapy to subjects with metastatic pancreatic cancer”. The total commitment of the contract is approximately $5,400,000 and is expected to be paid out over the next two and a half years.

Other Commitments

In 2005 the Company utilized office space in New York and London on a month to month basis in return for payments to Bioaccelerate Holdings, Inc. amounting to approximately $9,500 per month, in the aggregate. After the May 26, 2006 Acquisition, the Company consolidated its offices in Los Angeles and entered into a Shared Facilities and Services Agreement administered by AL Holdings, Inc. under which it is allocated a portion of the lease payment for the office space depending on the number of parties to the agreement and the proportion of space used by each party. The lease payments are subject to annual adjustments of approximately 3%. At March 31, 2007 the office space was sublet and the Shared Services Agreement was terminated.

6.Share-Based Awards

The Company has a stock option plan, which covers a total of 8,000,000 shares of Common Stock. Options may be awarded during the ten-year term of the 2006 stock option plan to Company employees, directors, consultants and other affiliates.

Stock Options

On October 23, 2006, the Company granted to two employees 5 year options to acquire 1,185,900 shares of common stock at an exercise price of $1.30. The awards vest annually in equal installments over three years. The awards were valued at $0.19 per share, or $221,083. Weighted-average assumptions used to value the awards were as follows: (i) dividend yield of nil, (ii) expected volatility of 90%, risk-free interest rate of 4.84%, and expected life of 3.5 years. As of March 31, 2007 these options were forfeited due to the execution of a Retention Bonus Agreement negotiated with the employees. See footnote 8.

As of March 31, 2007, there were no options to acquire shares of common stock outstanding,

Warrants

During October 2006, the Company granted a related-party consultant a 5 year warrant to acquire 300,000 shares of common stock at an exercise price of $0.60 in connection with a one-year service agreement through June 30, 2007. The award was fully vested when granted. The award was valued at $0.31 per share, or $93,686. Weighted-average assumptions used to value the awards were as follows: (i) dividend yield of nil, (ii) expected volatility of 93%, risk-free interest rate of 4.8%, and expected life of 5 years. During 2006, the Company recognized $46,843 as general and administrative expense. In February 2007 the Company provided notice of its intent to cancel the agreement. No additional expense related to this agreement was recognized in the quarter ended March 31, 2007. See footnote 3.

During October 2006, the Company granted a related-party a 5 year, fully-vested warrant to acquire 1,000,000 shares of common stock at an exercise price of $0.60 in connection with amounts loaned the Company.

As of March 31, 2007, there were warrants to acquire 1,300,000 shares of common stock outstanding, with an exercise price of $0.60 per share, all of which are exercisable. The remaining contractual life for these warrants is 4.8 years.

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7.Income Taxes

Based on an assessment of the temporary differences and the potential benefit of losses carried forward, the Company has not recognized any deferred tax asset for the three month period ended March 31, 2007 and has effectively placed a full valuation allowance on such assets. Accordingly, no deferred income tax benefit has been recognized in these financial statements since management does not believe the recoverability of the deferred tax assets during the foreseeable future is more likely than not.

For the periods presented in the accompanying consolidated statements of operations, the difference between the expected federal tax benefit on reported pre-tax losses of 34% and that reflected in the accompanying consolidated statement of operations of 0% is (a) additional state tax benefits of approximately 6% offset by (b) increases in the valuation allowance of (40%).

8.Subsequent Events

On January 15, 2007, three non-executive directors including the Chairman of the Board resigned from the Company. During the second quarter the Company negotiated Receipt and Release agreements with all three directors. The terms of the agreement call for a payment of $10,000 to each director in exchange for a release of all claims against the Company.

On April 25, 2007 (the “Effective Date”), the Company, its wholly-owned subsidiary, Resistys, Inc. (“Resistys”), its majority shareholder, Avantogen Limited (“Avantogen” and, together with registrant and Resistys, collectively, the “Seller”) and SciClone Pharmaceuticals, Inc. (“SciClone”) entered into an Assignment and Purchase Agreement (the “Agreement”), pursuant to which Seller sold, transferred, assigned, conveyed and delivered to SciClone all of Seller’s right, title and interest in and to the assets owned or controlled by Seller related to Seller’s program to develop and commercialize its lead drug candidate, RP101, for the treatment of pancreatic cancer (the “SciClone Transaction”). Under the terms of the Agreement, SciClone paid Resistys approximately $1.7 million in upfront fees and agreed to pay Resistys and RESprotect GmbH (“RESprotect”), the owner of the intellectual property rights to RP101, success-based regulatory and commercial payments of up to $23.3 Million and royalties on future sales of RP101 Product (“Net Sales Payments”) through August 30, 2029 or the earlier termination of the License Agreement dated August 30, 2004 among Resistys, Avantogen and RESprotect (the “License Agreement”), which was assigned to SciClone as part of the transactions contemplated by the Agreement. SciClone has the right during certain periods following the completion of each of the Phase II and Phase III Clinical Trials for the first RP101 product to buy out its obligation to make the Net Sales Payments for $12 million during the first buyout period or $20 million during the second buyout period payable, at SciClone’s option, in cash or registered shares of SciClone Common Stock. SciClone’s obligation to make the success-based payments and the Net Sales Payments is secured by a security interest in the RP101 Assets being sold to SciClone, including the License Agreement, as amended from time to time on and after the Effective Date, pursuant to a Security Agreement dated April 25, 2007 between Resistys and SciClone. In addition, under an Assumption of Liabilities Agreement dated April 25, 2007 among SciClone and Seller, SciClone assumed certain liabilities of Seller under the License Agreement, the Supply Agreement for Clinical Trial Material dated September 13, 2004 between Resistys and RESprotect (the “Supply Agreement”), the Services Agreement dated October 18, 2004 between Resistys and Hesperion Ltd. and the Agreement for Clinical Trials Management Services dated August 31, 2006 between the Company and Pharmaceutical Research Associates, Inc.

In consideration for RESprotect’s consent to the assignment of the License Agreement and the Supply Agreement (the “Consent”), the Company issued to RESprotect 3,333,333 shares of its common stock with an aggregate value of $500,000 based on the average closing price of the shares for the thirty (30) day period prior to the Effective Date.

On the Effective Date, the Company entered into an Agreement (the “Chopin Agreement”) with Chopin Opus One, L.P., a Cayman Islands limited partnership (“Chopin”), pursuant to which Chopin agreed to convert seventy-five percent (75%) of the principal, plus accrued interest, of its $1 million loan to the Company into shares of the Company’s common stock at a conversion ratio of $0.09 per share with an option to convert the remaining portion of such loan, plus accrued interest, into shares of the Company’s common stock at the same conversion ratio within thirty (30) days after the Effective Date. Pursuant to the Agreement, Chopin and the Company also agreed to amend the Loan Agreement dated October 12, 2006 between them and the Promissory Note dated October 12, 2006 issued thereunder (the “Note”) to extend the maturity date of the Note to the date that is thirty (30) days after the Effective Date and to terminate the Security Agreement dated October 12, 2006 between them, thereby terminating Chopin’s security interest in the assets of the Company. On the Effective Date the Company issued to Chopin 8,920,856 shares of its common stock in consideration of the conversion of $750,000 of principal and $52,877 of accrued interest under the Note, and on May 18, 2007 the Company issued to Chopin an additional 2,796,800 shares of its common stock in consideration of the conversion of the balance of the Note.

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The Company and its then Chief Executive Officer, Christopher Nowers, and its Chief Financial Officer, Angela Bronow Davanzo, entered into a Retention Bonus Agreement dated as of April 12, 2007 (the “Retention Agreement”). The Retention Agreement replaced the Employment Agreement dated as of May 26, 2006 between the Company and Mr. Nowers and the Employment Agreement dated as of July 17, 2006 between the Company and Ms. Davanzo, which Employment Agreements were deemed terminated and cancelled as of December 16, 2006. Pursuant to the Retention Agreement, Mr. Nowers and Ms. Davanzo agreed to continue to serve as the Company’s Chief Executive Officer and the Company’s Chief Financial Officer and Secretary, respectively, through March 31, 2007 and to accept as payment in full for their services a bonus, for Mr. Nowers, of $125,000 (or $150,000 depending on the terms of a transaction pursuant to which the Company would transfer its rights to RP101) and, for Ms. Davanzo, of $83,334 (or $100,000 depending on the terms of a transaction pursuant to which the Company would transfer its rights to RP101) plus a second bonus, for Mr. Nowers, of $25,000 and, for Ms. Davanzo, of $16,667 in the event the Company completes a sale or other disposition of the Company itself. The Retention Agreement also provided for certain severance payments to Mr. Nowers and Ms. Davanzo in the event that they had not become entitled to and been paid their bonus by December 31, 2007.

At the same time, the Company entered into a Consulting Services Agreement dated as of April 12, 2007 with each of Mr. Nowers and Ms. Davanzo pursuant to which each of Mr. Nowers and Ms. Davanzo agreed to continue to serve as the Company’s Chief Executive Officer and the Company’s Chief Financial Officer and Secretary through April 30, 2007 and May 31, 2007, respectively, and to be compensated on an hourly basis for the general management services performed for the Company during the term of each agreement. Ms. Davanzo’s Consulting Agreement has been further extended through June 30, 2007. Subsequent to June 30, 2007 Ms. Davanzo has provided consulting services to the new officers of the Company to assist in the transition.

On June 4, 2007 the Company issued 138,889 and 92,594 shares of common stock to Mr. Nowers and Ms. Davanzo, respectively, in partial payment of amounts becoming due under their Retention Agreements.

On May 24, 2007, the Company and Prostagenics LLC (“Prostagenics”), the company from which the Company obtained the patent rights to INOC-00, Capridine beta, entered into a Termination of Agreement and Releases dated as of May 18, 2007 (the “Prostagenics Agreement”). The Prostagenics Agreement terminated as of April 5, 2007 the Assignment and Assumption Agreement effective March 31, 2005 between Prostagenics, the Company and Gardant Pharmaceuticals, Inc. (the “Assignment Agreement”) pursuant to which Prostagenics assigned to the Company all of its rights and obligations in and under the NYMC License (as defined in the Assignment Agreement) granting Prostagenics an exclusive license to INOC-005 Capridine beta. Under the Prostagenics Agreement, the parties also exchanged mutual general releases. The agreement to terminate the License was the result of the Company’s determination that it would not be able to adequately fund the development and commercialization of INOC-005 Capridine beta, a new chemical entity to treat prostate cancer that was the subject of the Assignment Agreement. As a result of the termination of the License, all rights to this formulation reverted back to Prostagenics, and the Company was relieved of all further obligations under the License, both operational and financial, without any early termination penalties to the Company.

ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

FORWARD LOOKING STATEMENTS: NO ASSURANCES INTENDED

This Form 10-QSB contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. This filing includes statements regarding our plans, goals, strategies, intent, beliefs or current expectations. These statements are expressed in good faith and based upon a reasonable basis when made, but there can be no assurance that these expectations will be achieved or accomplished. Sentences in this document containing verbs such as “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or future-tense or conditional constructions (“will,” “may,” “could,” “should,” etc.) constitute forward-looking statements that involve risks and uncertainties. Items contemplating or making assumptions about, actual or potential future sales, market size, collaborations, trends or operating results also constitute such forward-looking statements.

Although forward-looking statements in this Report on Form 10-QSB reflect the good faith judgment of management, such statements can only be based on facts and factors currently known by management. Consequently, forward-looking statements are inherently subject to risks and uncertainties, and actual results and outcomes may differ materially from the results and outcomes discussed in, or anticipated by, the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes, include without limitation, those discussed in our Annual Report on Form 10-KSB for the year ended December 31, 2006. Readers are urged not to place undue reliance on these forward- looking statements, which speak only as of the date of this Report. We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Report. Readers are urged to carefully review and consider the various disclosures made by us in our Annual Report on Form 10-KSB for the year ended December 31, 2006, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operation and cash flows.

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The following discussion should be read along with the Consolidated Financial Statements and Notes to our audited financial statements for the fiscal year ended December 31, 2006.

Critical Accounting Policies and Estimates

The preparation of the Company's consolidated financial statements requires management to make certain critical accounting estimates that impact the stated amount of assets and liabilities at a financial statement date and the reported amount of income and expenses during a reporting period. These accounting estimates are based on management's judgment and are considered to be critical because of their significance to the consolidated financial statements and the possibility that future events may differ from current judgments, or that the use of different assumptions could result in materially different estimates. The critical accounting policies and estimates have not changed from, and should be read in conjunction with, the Company's Annual Report filed on Form 10-KSB for the year ended December 31, 2006. The Company's estimates are reviewed continuously to ensure reasonableness. However, the amounts the Company may ultimately realize could differ from such estimated amounts.

The Company acquires, develops and seeks to commercialize novel compounds to treat patients with various types of cancer.

In early 2006, our drug pipeline consisted of three drug candidates, spearheaded by our lead compound RP101 which represented a novel therapeutic approach to prevent the development of chemoresistance and subsequently augment chemotherapeutic effect. Our portfolio also contained two pre-clinical compounds: (i) Capridine beta, a novel nitroacridine derivative, which has to date been evaluated in a pre-clinical model of prostate cancer and (ii) an oral formulation of paclitaxel, which has the potential to be taken forward and evaluated in multiple tumor settings.

On November 6, 2006, the Company, Gardant and SPI entered into a Termination of Agreement and Releases, pursuant to which (a) the License and Co-Marketing Agreement between SPI and Bioaccelerate, Inc. (which had been assigned by Bioaccelerate, Inc., a subsidiary of Gardant, to the Company) for an oral paclitaxel formulation (the “License Agreement”) was terminated and (b) the parties exchanged mutual general releases. The agreement to terminate the License Agreement was the result of the Company’s decision to focus its efforts and resources on its principal product candidate, RP101, and its determination that it would not be able to adequately fund the development and commercialization of the oral paclitaxel formulation that was the subject of the License Agreement. As a result of the termination of the License Agreement, all rights to this formulation reverted back to SPI, and the Company was relieved of all further obligations under the License Agreement, both operational and financial, without any early termination penalties to the Company.

On April 25, 2007 the Company entered into an Assignment and Purchase Agreement (the “Agreement”), pursuant to which the Company transferred to SciClone Pharmaceuticals, Inc. all of its right, title and interest in and to the assets owned or controlled by the Company related to the Company’s program to develop and commercialize its lead drug candidate, RP101, for the treatment of pancreatic cancer. Under the terms of the Agreement, the Company received upfront fees and will receive success-based regulatory and commercial payments and royalties on future sales of RP101 Product.

On May 24, 2007, the Company and Prostagenics the company from which the Company obtained the patent rights to INOC-005 Capridine beta, entered into a Termination of Agreement and Releases dated as of May 18, 2007 (the “Prostagenics Agreement”). The Prostagenics Agreement terminated as of April 5, 2007 the Assignment and Assumption Agreement effective March 31, 2005 between Prostagenics, the Company and Gardant. (the “Assignment Agreement”) pursuant to which Prostagenics assigned to the Company all of its rights and obligations in and under the NYMC License (as defined in the Assignment Agreement) granting Prostagenics an exclusive license to INOC-005 Capridine beta. Under the Prostagenics Agreement, the parties also exchanged mutual general releases. The agreement to terminate the License was the result of the Company’s determination that it would not be able to adequately fund the development and commercialization of INOC-005 Capridine beta, a new chemical entity to treat prostate cancer that was the subject of the Assignment Agreement. As a result of the termination of the License, all rights to this formulation reverted back to Prostagenics, and the Company was relieved of all further obligations under the License, both operational and financial, without any early termination penalties to the Company.

Since divesting itself of its current product portfolio, the Company has been actively investigating bringing new technologies and product opportunities in the oncology sector into the Company. The Company’s intention is to utilize the initial proceeds of the sale to SciClone Pharmaceuticals, Inc. of RP101 to fund its current strategy of seeking new product candidates utilizing the licensing and biotechnology expertise of its current management and Board of Directors. Upon receipt, and to the extent, of the success-based regulatory and commercial payments and royalties on future product sales expected from the RP101 sale, the Company will be in a position to expand its business activities and further develop its overall business strategy.

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Business Strategy

The Company’s focus is to be an oncology drug development and licensing company, which earns revenue through identification of key and promising compounds, adding value through both further clinical development and via commercial licensing revenue outcomes, and also holding in portfolio assets that will likely grow in attractiveness within the oncology sector.

Large pharmaceutical companies need additional drugs of substantial market potential to fill depleted development pipelines, particularly since many of their products will soon be losing patent protection and internal development may fail to keep up with commercial demand for innovation. Increasingly, those companies seek to fill that gap by in-licensing drugs at the middle to late stages of development rather than acquiring compounds at an earlier stage. In-licensed Phase III products accounted for more 30% of the in-licensing agreements made by large pharmaceutical companies in 2002, according to Reuters Business Insight.

The Company uses a network of relationships it has forged in academia, medical research centers and industry to in-license or acquire promising early-stage compounds and existing compounds that can be reformulated, used for new indications or used with new dosing regimens. The Company relies upon these relationships and a product development network to accelerate the time it takes for new compounds to reach the critical Phase III clinical trial level when a drug is most attractive to large pharmaceutical companies.

The Company enters into development, marketing and partnership agreements with contract research laboratories, industry experts and pharmaceutical companies to develop, test and seek regulatory approval for its drug candidates. By relying primarily upon contracts with third parties for research, clinical development and project management rather than doing that work in-house, the Company is able to maintain a limited and less costly infrastructure, particularly as compared with large pharmaceutical companies. The Company’s management believes that this streamlined operating strategy has created an efficient and cost-effective route from early-stage clinical development to a commercial product.

Liquidity and Capital Resources

As of March 31, 2007, the Company had $2,106 of cash and no other material assets, nor did it have an established source of revenues sufficient to cover its operating costs. During the quarters ended March 31, 2007 and 2006, and from July 21, 2004 (Inception) to March 31, 2007, the Company used cash in operations of $12,158, $405,971 and $7,339,833, respectively. From inception through March 31, 2007, shareholders provided funding in the amount of $7,345,874. Shareholder provided funding includes the $1.1 million consideration recently paid by Avantogen Limited in the May 26, 2006 Acquisition in exchange for 32 million shares of common stock. As of March 31, 2007, the Company had accumulated a net deficit during the development stage of $11,698,728.

As of April 25, 2007 the Company assigned its rights to develop and commercialize its lead drug candidate, RP101, to SciClone Pharmaceuticals, Inc. for approximately $1.7 million in upfront fees and success-based regulatory and commercial payments and royalties on future sales of RP101 products. The Company is entirely dependent on the initial upfront payment from this transaction for its current capital requirements. The Company's future capital requirements will depend upon numerous factors including, but not limited to, the receipt of future payments from the RP101 transaction, identification of new compounds, technologies and product opportunities to bring into the Company, progress in developing its products, market penetration and profitable operations from the sale of its products, if successfully developed. Unless the Company identifies and brings into the Company new product candidates, the Company’s current resources are sufficient to satisfy the Company’s cash requirements for the next 12 months.

ITEM 3 - CONTROLS AND PROCEDURES

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and the Company's Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rules 15d-15(e) under the Securities Exchange Act of 1934, as amended) to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. This process includes ensuring information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of March 31, 2007, our disclosure controls and procedures were effective at the reasonable assurance level.

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PART II: OTHER INFORMATION

ITEM 1- LEGAL PROCEEDINGS

None

ITEM 2- UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3- DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5 - OTHER INFORMATION

None

ITEM 6 - EXHIBITS

The following exhibits are filed with this report.

31.1	Written Statement of Chief Executive Officer with respect to compliance with Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Written Statement of Chief Financial Officer with respect to compliance with Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Written Statement of Chief Executive Officer with respect to compliance with Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Written Statement of Chief Financial Officer with respect to compliance with Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

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

	Date August 9, 2007
AVANTOGEN ONCOLOGY, INC.
By:	/s/ William Ardrey
	William Ardrey
	Chief Executive Officer

By:	/s/ Michael Hillmeyer
	Michael Hillmeyer
	Chief Financial Officer

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EXHIBIT INDEX

31.1Written Statement of Chief Executive Officer with respect to compliance with Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002.

31.2Written Statement of Chief Financial Officer with respect to compliance with Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002.

32.1Written Statement of Chief Executive Officer with respect to compliance with Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2Written Statement of Chief Financial Officer with respect to compliance with Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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