Exhibit
99.1





QN
Diagnostics, LLC





Index
to Financial Statements





PageReport
      of Independent Registered Public Accounting Firm
              
              1Balance
      Sheet as of December 31, 2009
              
              2Statements
      of Operations for the Period July 30, 2009 (inception) through December
      31, 2009
              
              3Statement
      of Cash Flows for the Period July 30, 2009 (inception) through December
      31, 2009
              
              4Statement
      of Members' Equity for the Period July 30, 2009 (inception) through
      December 31, 2009
              
              5Notes
      to Financial Statements
              
              6







To the
Joint Venture Board and Members
 QN
Diagnostics, LLC
 
 
 REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 We have
audited the accompanying balance sheet of QN Diagnostics, LLC as of December 31,
2009 and the related statements of operations, changes in members’ equity and
cash flows for the period from July 30, 2009, (date of inception) to December
31, 2009. These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosers in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of QN Diagnostics, LLC as of December
31, 2009, and the results of its operations and its cash flows for the for the
period from July 30, 2009, (date of inception) to December 31, 2009, in
conformity with accounting principles generally accepted in the United States of
America.
 
 The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company’s loss from operations and lack of revenues raise
substantial doubt about its ability to continue as a going concern. Management’s
plans regarding the resolution of this issue are also discussed in Note 2. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.


/s/ BehlerMick
PS


BehlerMick
PS
 Spokane,
Washington
 March 26,
2010
 1


QN
DIAGNOSTICS, LLC


BALANCE
SHEET







December 31, 2009ASSETSCurrent
      Assets:Cash
                    
                    $
                    701,662Accounts
      receivable
                    
                    
                    25,216Prepaid
      expenses – related party
                    
                    
                    337,160Total
      Current Assets
                    
                    
                    1,064,038Property
      and equipment, net
                    
                    
                    8,024Intangible
      assets, net
                    
                    
                    5,243,015Total
      Assets
                    
                    $
                    6,315,077LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      Liabilities:Accounts
      payable – related party
                    
                    $
                    84,217Accrued
      expenses
                    
                    
                    12,500Total
      Current Liabilities
                    
                    
                    96,717Commitments
      and ContingenciesMembers’
      Equity
                    
                    
                    6,218,360Total
      Liabilities and Members’ Equity
                    
                    $
                    6,315,077





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


2


QN
DIAGNOSTICS, LLC


STATEMENT
OF OPERATIONS







July
      30, 2009
                    (inception)
      through
                    December
      31, 2009Revenues
                  
                  $
                  125,216Costs
      and Operating Expenses:General
      and administrative
                  
                  
                  18,900Professional
      fees
                  
                  
                  70,146Research
      and development
                  
                  
                  2,065,263Amortization
                  
                  
                  206,985Depreciation
                  
                  
                  699Total
      Operating Expenses
                  
                  
                  2,361,993Loss
      from Operations
                  
                  
                  (2,236,777
                  )Other
      Income:Interest
      income
                  
                  
                  5,137Total
      Other Income
                  
                  
                  5,137Net
      Loss
                  
                  $
                  (2,231,640
                  )





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


3


QN
DIAGNOSTICS, LLC


STATEMENT
OF CASH FLOWS





July 30, 2009
                      (inception) through
                      December 31, 2009CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
                    
                    $
                    (2,231,640
                    )Adjustments
      to reconcile net loss to net cash used by operating
      activities:Depreciation
      and amortization
                    
                    
                    207,684(Increase)
      decrease in:Accounts
      receivable
                    
                    
                    (25,216
                    )Prepaid
      expenses
                    
                    
                    (337,160
                    )Increase
      (decrease) in:Accounts
      payable
                    
                    
                    84,217Accrued
      expenses
                    
                    
                    12,500Net
      Cash Used by Operating Activities
                    
                    
                    (2,289,615
                    )CASH
      FLOWS FROM INVESTING ACTIVITIES:Cash
      paid for purchases of fixed assets
                    
                    
                    (8,723
                    )Net
      Cash Used by Investing Activities
                    
                    
                    (8,723
                    )CASH
      FLOWS FROM FINANCING ACTIVITIES:Contributions
      from members
                    
                    
                    5,000,000Distributions
      to members
                    
                    
                    (2,000,000
                    )Net
      Cash Provided by Financing Activities
                    
                    
                    3,000,000Net
      Increase in Cash
                    
                    
                    701,662Cash,
      Beginning of Period
                    
                    
                    -Cash,
      End of Period
                    
                    $
                    701,662Supplemental
      Cash Flow Disclosures:Interest
      expense paid in cash
                    
                    $
                    -Supplemental
      Disclosure of Non-Cash Financing and Investing Activities:Fair
      value of member contribution of intangible assets
                    
                    $
                    5,450,000


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


4


QN
DIAGNOSTICS, LLC


STATEMENT
OF CHANGES IN MEMBERS’ EQUITY







July
      30, 2009 (inception) to
                        December
      31, 2009BALANCE,
      JULY 30, 2009 (inception)
                      
                      $
                      -Member
      cash contribution
                      
                      
                      5,000,000Fair
      value of member contribution of intangible assets
                      
                      
                      5,450,000Distribution
      to member
                      
                      
                      (2,000,000
                      )Net
      loss
                      
                      
                      (2,231,640
                      )BALANCE,
      DECEMBER 31, 2009
                      
                      $
                      6,218,360




The
accompanying notes are an integral part of these financial
statements


5


QN
DIAGNOSTICS, LLC


NOTES
TO FINANCIAL STATEMENTS


1.
              DESCRIPTION
      OF BUSINESS
  QN
Diagnostics, LLC, a Delaware limited liability company, was formed on July 30,
2009 by QuantRx Biomedical Corporation and NuRx Pharmaceuticals, Inc. as a 50/50
joint venture. The purpose of the joint venture is to develop and commercialize
products incorporating lateral flow strip technology and related lateral flow
strip readers. The Company is located at 5920 NE 112th Avenue, Portland,
Oregon. When used in these notes, the terms “QND,” “Company,” “we,” “our,”
“ours,” or “us” mean QN Diagnostics, LLC.
  QND is a
diagnostics company focused on the development and commercialization of
innovative diagnostic products for the Point-of-Care (POC) markets based on its
patented technology for the worldwide healthcare industry. This technology
includes: RapidSense® and Q-ReaderTM point-of-care testing products based on
intellectual property related to lateral flow techniques for the consumer and
healthcare professional markets.
  The joint
venture is managed by a board consisting of two QuantRx designees, two NuRx
designees and an independent designee mutually selected by QuantRx and
NuRx.  Subject to certain exceptions, board decisions are made by
majority vote, provided that QuantRx and NuRx have veto rights with respect to
certain matters.
  2.
              MANAGEMENT
      STATEMENT REGARDING GOING CONCERN
  The
Company has not generated sufficient revenues from operations to meet its
operating expenses. The Company has primarily financed its operations through
cash contributions from its members.
  Management
believes that given the current economic environment and our reliance on our
members to continue to fund our operations, there is doubt about our ability to
continue as a going concern. The Company currently has arrangements with its
members to further fund its operations; however, there can be no assurance that
they will provide us with the cash we need on a timely basis.
  The
Company believes that the successful growth and operation of its business is
dependent upon its ability to do any or all of the following:
  ·
              finalize
      development of and commercialize our
products;
  ·
              manage
      or control working capital requirements by containing operating expenses;
      and
  ·
              develop
      new relationships with product distributors and other points of
      distribution for the Company’s
products.
  There can
be no assurance that the Company will be successful in achieving its long-term
plans as set forth above, or that such plans, if consummated, will enable the
Company to obtain profitable operations or continue in the long-term as a going
concern.
  3.
              SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
  This
summary of significant accounting policies of QN Diagnostics is presented to
assist in understanding the Company’s financial statements. The financial
statements and notes are representations of the Company’s management, which is
responsible for their integrity and objectivity. These accounting policies
conform to accounting principles generally accepted in the United States of
America (GAAP) and have been consistently applied in the preparation of the
financial statements.
  6
  The
Financial Accounting Standards Board (FASB) issued the FASB Accounting Standards
Codification (the Codification or ASC), which is an aggregation of previously
issued authoritative GAAP in one comprehensive set of guidance, effective for
reporting in the third quarter of 2009. In accordance with the Codification,
references to previously issued accounting standards have been replaced by ASC
references. Subsequent revisions to GAAP will be incorporated into the ASC
through Accounting Standards Updates (ASU).
  Accounts Receivable and
Allowance for Bad Debts
  QND
carries its receivables at net realizable value. The Company will provide
reserves against receivables for estimated losses that may result from a
customer’s inability to pay. The amount is determined by analyzing known
uncollectible accounts, economic conditions, historical losses and customer
credit-worthiness. Amounts later determined and specifically identified to be
uncollectible would be charged or written off against the reserve. The Company
has no allowance for bad debts as of December 31, 2009.
  Concentration of
Risks
  Financial
instruments that potentially expose the Company to concentrations of credit risk
consist primarily of cash. The Company primarily maintains its cash balances
with financial institutions in federally insured accounts. At December 31, 2009,
QND had funds exceeding the federally insured limits of approximately $452,000.
The Company has not experienced any losses to date resulting from this practice.
There were no cash equivalents at December 31, 2009.
  Fair Value of Financial
Instruments
  The
Company's financial instruments consist of cash, short-term accounts receivable
and accounts payable. All instruments are accounted for on the historical cost
basis, which, due to the short maturity of these financial instruments,
approximates the fair value at the reporting dates of these financial
statements. The Company has not elected the fair value option for any of our
assets or liabilities.
  ASC Topic
820 establishes a fair value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value into three levels as follows:
  Level 1:
Quoted prices for identical instruments in active markets accessible at the
measurement date.
  Level 2:
Quoted prices for similar instruments in active markets; quoted prices for
identical or similar instruments in markets that are not active; and
model-derived valuations whose inputs are observable or whose significant value
drivers are observable.
  Level 3:
Unobservable inputs for the instrument are only used when there is little, if
any, market activity for the instrument at the measurement date. Prices or
valuation techniques that require inputs that are both significant to the fair
value measurement and unobservable (i.e. supported by little or no market
activity).
  Impairments
  The
Company assesses the impairment of long-lived assets, including other intangible
assets, whenever events or changes in circumstances indicate that their carrying
value may not be recoverable in accordance with ASC Topic 360-10-35, “Impairment
or Disposal of Long-Lived Assets.” The determination of related estimated useful
lives and whether or not these assets are impaired involves significant
judgments, related primarily to the future profitability and/or future value of
the assets. The Company records an investment impairment charge if it believes
an asset has experienced a decline in value that is other than
temporary.
  Management
has determined that no impairments were required during the period ended
December 31, 2009.
  7
  Income
Taxes
  The
Company is treated as a partnership for income tax purposes. Partnerships are
"flow-through" entities for United States federal income taxation purposes.
Flow-through taxation means that the entity does not pay taxes on its income.
Instead, the members of the entity pay tax on their distributive share of the
entity's taxable income, even if no funds are distributed by the partnership to
the owners. Accordingly, income taxes are the responsibility of the members and
the financial statements include no provision for income taxes.
  Intangible
Assets
  The
Company’s intangible assets consist primarily of patents related to lateral flow
strip technology and related diagnostic technology and with a contributed
fair value of $5,450,000 on July 30, 2009. At December 31, 2009, accumulated
amortization was $206,985. Intangible assets are amortized using the straight
line method over the estimated useful life. The weighted average estimated
useful life is 11 years. Amortization expense for the period July 30, 2009
(inception) through December 31, 2009, was $206,985. The estimated aggregate
amortization expense for each of the years 2010 through 2014 is
$496,766.
  Property and
Equipment
  Property
and equipment are stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets. The
Company’s property and equipment at December 31, 2009 consisted of computer and
office equipment with estimated useful lives of three
years.  Depreciation expense for the period July 30, 2009 (inception)
through December 31, 2009, was $699.
  Recent Accounting
Pronouncements
  In May
2009, the FASB issued ASC Topic 855, “Subsequent Events”, which establishes
general standards of accounting for and disclosure of events that occur after
the balance sheet date, but before the financial statements are issued or
available to be issued (subsequent events). The statement requires disclosure of
the date through which the entity has evaluated subsequent events and the basis
for that date.  It does not apply to subsequent events or transactions
that are within the scope of other GAAP. The adoption of these provisions did
not have a material effect on our financial statements.
  Management
does not believe that any recently issued, but not yet effective, accounting
standards if currently adopted would have a material effect on the accompanying
financial statements.
  Research and Development
Costs
  Research
and development costs are expensed as incurred. On July 30, 2009, QND and
QuantRx entered into a Development and Services Agreement, pursuant to which QND
pays QuantRx to provide all services related to the development, regulatory
approval and commercialization of lateral flow products. Research and
development costs expensed from this agreement were $2,065,263. As of December
31, 2009, $337,160 in prepaid contract development fees to QuantRx and $31,500
in accounts payable to QuantRx were related to this agreement.
  Revenue
Recognition
  The
Company recognizes revenue when persuasive evidence of an arrangement exists and
delivery or performance has occurred, provided the fee is fixed or determinable
and collection is probable.
  8
  The
Company’s strategy includes entering into collaborative agreements with
strategic partners for the development, commercialization and distribution of
its product candidates. Such collaboration agreements may have multiple
deliverables. The Company evaluates multiple deliverable arrangements pursuant
to ASC Topic 605-25, “Revenue Recognition: Multiple-Element
Arrangements.” Pursuant to this Topic, in arrangements with multiple
deliverables where the Company has continuing performance obligations, any
contract, milestone and license fees are recognized together with up-front
payments over the term of the arrangement as performance obligations are
completed, unless the deliverable has standalone value and there is objective,
reliable evidence of fair value of the undelivered element in the arrangement.
In the case of an arrangement where it is determined there is a single unit of
accounting, all cash flows from the arrangement are considered in the
determination of all revenue to be recognized. Cash received in advance of
revenue recognition is recorded as deferred revenue.
  QND
recognized revenues of approximately $125,000 on a development agreement,
administered by its member QuantRx, related to rapid test POC products in oral
care. The agreement is month-to-month with 45 day termination rights. The
agreement grants certain manufacturing rights for the developed products which
would survive any potential termination of the development
agreement.
  Use of
Estimates
  The
accompanying financial statements are prepared in conformity with accounting
principles generally accepted in the United States of America, and include
certain estimates and assumptions which affect the reported amounts of assets
and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Accordingly,
actual results may differ from those estimates.
  4.
              COMMITMENTS
      AND CONTINGENCIES
  PRIA
Diagnostics
  Under the
terms of the contribution agreements with QuantRx and related to patents
purchased from PRIA Diagnostics which were contributed to QND, additional
contingent payments to PRIA of cash and common stock are required upon the
achievement of certain milestone events. QND is responsible for contingent cash
payments aggregating $750,000, while QuantRx will issue common stock with an
aggregate fair value of $750,000 to PRIA upon achievement of the milestones. As
of December 31, 2009, these milestones have not been achieved. In addition, QND
will be required to pay royalties to PRIA on a quarterly basis upon the
commercialization of a product utilizing the acquired technologies for five
years from the initial sales date of the first such product sold.
  Legal
Contingencies
  We may
occasionally become subject to legal proceedings and claims that arise in the
ordinary course of our business.  It is impossible for us to predict
with any certainty the outcome of any disputes that may arise, and we cannot
predict whether any liability arising from claims and litigation will be
material in relation to our financial position or results of operations. As of
December 31, 2009, there are no known liabilities arising from claims or
litigation.
  5.
              MEMBERS’
      EQUITY
  On July
30, 2009, QuantRx and NuRx entered into agreements to form QND. Pursuant to the
agreements, QuantRx contributed certain intellectual property and other assets
related to its lateral flow strip technology and related diagnostic
technology with a fair value of $5,450,000, and NuRx contributed $5,000,000
in cash to QND.  Following the respective contributions by NuRx and
QuantRx to the joint venture, NuRx and QuantRx each own a 50% interest in
QND.
  Under the
terms of the agreements, QND made a $2,000,000 cash distribution to QuantRx.
QuantRx is committed to further capital contributions aggregating $1.55 million,
comprised of: payment of milestone payments with PRIA Diagnostics (see Note 4)
in QuantRx common stock (fair value of $750,000); transfer of fixed assets with
a fair value of $100,000 at QND’s discretion; and a $700,000 sustaining capital
contribution as required by QND. Subsequent sustaining capital contributions
will be made by QuantRx and NuRx on an equal basis.
  9
  6.
              RELATED
      PARTY TRANSACTIONS
  On July
30, 2009, QND and QuantRx entered into a Development and Services Agreement,
pursuant to which QND pays QuantRx to provide all services related to the
development, regulatory approval and commercialization of lateral flow products.
Research and development costs recognized under this agreement were $2,065,263.
As of December 31, 2009, $337,160 in prepaid service fees to QuantRx and $31,500
in accounts payable to QuantRx were related to this agreement.
  As of
December 31, 2009, there was approximately $52,700 in accounts payable to NuRx
related to payments made by NuRx  on behalf of QND to certain business
and marketing consultants.
  A former
member of the Company’s board of managers served as a consultant to the Company
on various business, strategic, and technical issues. The total expensed under
this arrangement during 2009 was approximately $28,200.
  7.
              SUBSEQUENT
      EVENTS
  On
January 29, 2010, QuantRx entered into an Agreement and Plan of Merger with NuRx
and NP Acquisition Corporation, a wholly-owned subsidiary of QuantRx. The Merger
Agreement provides that NP Acquisition Corp. will be merged with and into NuRx,
with NuRx continuing as the surviving corporation and a wholly-owned subsidiary
of QuantRx. At the conclusion of these transactions, QND will be wholly owned by
QuantRx.
  The
Company evaluated subsequent events that occurred from January 1, 2010 through
March 26, 2010, the date the Company’s financial statements were issued. The
evaluation resulted in no other impact to the financial
statements.
  10