SECURITIES AND EXCHANGE COMMISSION Washington, D.C.  20549  FORM 10-QSB  (Mark One)  X       QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  For quarterly period ended June 30, 2006  ____       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  For the transition period from _____ to _____  PHYTOMEDICAL TECHNOLOGIES, INC.  
AND SUBSIDIARIES (Exact name of registrant as specified in its charter)  Nevada (State or other jurisdiction of incorporation)  000-28790 (Commission File Number)  87-0429962B (I.R.S Employer Identification No.)  1628 West 1st Avenue, Suite 216, Vancouver, British Columbia, V6J 1G1 (Address of principal executive offices)  (604) 659-5004 (Registrants telephone number, including area code)   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. YesxNoo  Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YesoNox  State the number of shares outstanding of each of the Issuers classes of common equity as of the latest practicable date.  As of July 31, 2006, there were 187,854,843 shares of the Issuers Common Stock, $0.00001 par value per share outstanding.  Transitional Small Business Disclosure Format (Check One): Yes [ ]  No [X]     TABLE OF CONTENTS   PHYTOMEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES FORM 10-QSB, QUARTER ENDED JUNE 30, 2006    PART I    FINANCIAL INFORMATION  Interim Unaudited Consolidated Balance Sheet 3  Interim Unaudited Consolidated Statements of Operations 4  Interim Unaudited Consolidated Statement of Stockholders Deficiency 5  Interim Unaudited Consolidated Statements of Cash Flows 7  Notes to Interim Unaudited Financial Statements 8  Item 2.  Management's Discussion and Analysis or Plan of Operation 15  Item 3.  Controls and Procedures 25   PART II   OTHER INFORMATION  Item 1. Legal Proceedings 27  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 27  Item 3. Defaults Upon Senior Securities 27  Item 4. Submission of Matters to a Vote of Security Holders 27  Item 5. Other Information 27  Item 6. Exhibits and Reports on Form 8-K 27  Signatures 29


Item 1. Financial Statements   PHYTOMEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES(Formerly Enterprises Technologies, Inc.)CONSOLIDATED BALANCE SHEETJUNE 30, 2006(Expressed in U.S. Dollars)June 30, 2006(Unaudited)ASSETSCurrent assetsCash$336,094Prepaid expenses5,450Total current assets341,544Property and Equipment, Net14,021Intangible asset - License fee (Note 6)20,000Total assets$375,565LIABILITIESCurrentAccounts payable and accrued liabilities$34,807Accounts payable - related parties (Note 4)142,014Promissory notes - related party (Note 4)1,213,776Total liabilities1,390,597STOCKHOLDERS' DEFICIENCYStockholders' DeficiencyPreferred stock: $0.25 par value; Authorized: 1,000,000Issued and outstanding: nil-Common stock: $0.00001 par value; Authorized: 300,000,000Issued and outstanding: 187,606,2761,876Additional paid-in capital20,004,481Accumulated deficit(21,021,389)Total stockholders' deficiency(1,015,032)Total liabilities and stockholders' deficiency$375,565(The accompanying notes are an integral part of these interim unaudited consolidated financial statements)   3    PHYTOMEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES(Formerly Enterprise Technologies, Inc.)CONSOLIDTED STATEMENTS OF OPERATIONSfor the three months and six months ended June 30, 2006 and 2005(Unaudited)Three months ended June 30,Six months ended June 30,(Expressed in U.S. Dollars)2006200520062005Revenue$-$-$-$-ExpensesManagement fees - related party (Note 4)$-$3,465$6,300$3,465Investor relations36,816346,799840,1241,265,160Other operating expenses259,822107,421366,472155,250Research and development costs (Note 5)156,99029,175294,30645,815Stock based compensation470,455-470,455660,000924,083486,8601,977,6572,129,690Operating loss(924,083)(486,860)(1,977,657)(2,129,690)Other incomeInterest income4,8205898,6941,513Net loss available to common shareholders$(919,263)$(486,271)$(1,968,963)$(2,128,177)Loss per common share -basic and diluted$(0.00)$(0.00)$(0.01)$(0.01)Weighted average number of common sharesoutstanding- basic and diluted187,376,861168,896,165186,761,102168,896,165(The accompanying notes are an integral part of these interim unaudited consolidated financial statements)   4


PHYTOMEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES(Formerly Enterprise Technologies, Inc.)CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCYfor the six months ended June 30, 2006 and year ended December 31, 2005(Unaudited)Accumulated otherTotalCommon StockAdditionalAccumulatedComprehensivecomprehensiveStockholders'(Expressed in U.S. Dollars)SharesAmountpaid-in capitaldeficitlossincomeDeficiencyBalance, December 31, 2004168,541,165$1,685$14,210,010$ (14,795,044)$-$-(583,349)Common stock issued uponexercise of stock options550,0006419,994---420,000Stock based compensation expenses--924,000---924,000Common stock issued uponexercise of warrants, at$0.007 per share14,285,71414399,857---100,000Restricted common stock issuedpursuant to share purchase agreement1,027,39710994,199---994,209Common stock issued for cash733,1367464,995---465,002Loss, year ended December 31, 2005---(4,257,382)(4,257,382)-(4,257,382)$(4,257,382)Balance, December 31, 2005185,137,412$1,851$17,113,055$(19,052,426)--$ (1,937,520)


5


Balance, December 31, 2005185,137,412$1,851$17,113,055$ (19,052,426)--$ (1,937,520)Common stock issued for cashduring January, 2006490,9385455,994---455,999Common stock issued for cashduring February, 2006921,13510903,991---904,001Common stock issued for cashduring March, 2006398,9913401,994---401,997Common stock issued for cashduring April, 2006353,0304403,997---404,001Common stock issued for cashduring May, 2006142,6811139,999---140,000Common stock issued for cashduring June, 2006162,0892114,996---114,998Stock based compensation expenses--470,455---470,455Loss, six months ended June 30, 2006---(1,968,963)(1,968,963)-(1,968,963)$(1,968,963)Balance, June 30, 2006187,606,276$1,876$20,004,481$(21,021,389)$-$(1,015,032)(The accompanying notes are an integral part of these interim unaudited consolidated financial statements)


6


PHYTOMEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES(Formerly Enterprise Technologies, Inc.)CONSOLIDATED STATEMENTS OF CASH FLOWSfor the six months ended June 30, 2006 and 2005(Unaudited)June 30,June 30,(Expressed in U.S. Dollars)20062005Cash flows from (used in) operating activitiesNet loss$(1,968,963)$(2,128,177)Adjustments for items not involving cash:Accrued interest payable to stockholder-51,573Amortization and depreciation5,207-Stock based compensation470,455660,000Change in non-cash working capital items:Increase in prepaid expenses(5,450)-Decrease in accounts payable(139,573)(25,429)(1,638,324)(1,442,033)Cash flows used in investing activitiesAdditions to property and equipment(348)-Additions to intangible asset(20,000)-(20,348)-Cash flows from (used in) financing activitiesLoans from shareholder-900,000Proceeds from issuance of common stock2,420,996-Repayment of loan to stockholder(490,000)(1,000)Promissory note proceeds from a major stockholder-420,0001,930,9961,319,000Increase (decrease) in cash272,324(123,033)Cash, beginning of period63,770337,538Cash, end of period$336,094$214,505Supplemental disclosure of cash flow information:Interest paid in cash$52,360$ -Income tax paid in cash$-$ -(The accompanying notes are an integral part of these interim unaudited consolidated financial statements)   7   PHYTOMEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES (Formerly Enterprise Technologies, Inc.)  NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS June 30, 2006 (Unaudited) (Expressed in US Dollars)  Note 1  - Basis of Presentation  Going Concern Uncertainties  The Company has incurred net operating losses since inception. The Company faces all the risks common to companies that are relatively new, including under capitalization and uncertainty of funding sources, high initial expenditure levels, uncertain revenue streams, and difficulties in managing growth. The Companys recurring losses raise substantial doubt about its ability to continue as a going concern.  The Companys financial statements do not reflect any adjustments that might result from the outcome of this uncertainty. The Company expects to incur losses from its business operations and will require additional funding during 2006. The satisfaction of our cash needs hereafter will depend in large part on the Companys ability to successfully raise capital from external sources to pay for planned expenditures and to fund operations.  To meet these objectives, the Company has arranged a Common Stock Purchase Agreement with Fusion Capital Fund II, LLC to purchase from the Company up to $10,000,000 of the Companys common stock over a twenty-five month period (Note 7). Management believes that its current and future plans enable it to continue as a going concern. The Company's ability to achieve these objectives cannot be determined at this time. These financial statements do not give effect to any adjustments which would be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in the accompanying financial statements.  Principles of Consolidation  The accompanying consolidated financial statements have been prepared on the accrual basis in accordance with accounting principles generally accepted in the United States, and include the accounts of PhytoMedical Technologies, Inc. and its wholly-owned subsidiaries, PhytoMedical Technologies Corp and PolyPhenol Technologies Corp., which both were incorporated under the laws of the State of Nevada.  All significant intercompany transactions and accounts have been eliminated in consolidation.  Note 2  Presentation of Interim Information  The accompanying unaudited interim consolidated financial statements have been prepared in accordance with Form 10-QSB instructions and in the opinion of management of PhytoMedical Technologies, Inc. and Subsidiaries (the Company), include all adjustments (of a normal recurring nature) considered necessary to present fairly the consolidated financial position as of June 30, 2006 and the consolidated results of operations for the three and six months ended June 30, 2006 and 2005 and cash flows for the six months ended June 30, 2006 and 2005. These results have been determined on the basis of generally accepted accounting principles and practices in the United States and applied consistently with those used in the preparation of the Companys 2005 Annual Report on Form 10-KSB.  Certain information and footnote disclosures normally included in the annual financial statements presented in accordance with generally accepted accounting principles in the United States have been condensed or omitted. It is suggested that the accompanying unaudited interim consolidated financial statements be read in conjunction with the financial statements and notes thereto incorporated by reference in the Companys 2005 Annual Report on Form 10-KSB.  Note 3  Earnings (Loss) Per Share  Basic earnings or loss per share is based on the weighted average number of shares outstanding during the period of the financial statements. Diluted earnings or loss per share are based on the weighted average number of common  8   shares outstanding and dilutive common stock equivalents. All per share and per share information are adjusted retroactively to reflect stock splits and changes in par value, when applicable. All loss per share amounts in the financial statements are basic loss per share because the inclusion of stock options and warrants outstanding would be antidilutive. The computation of basic and diluted loss per share is as follows at June 30, 2006:    Three months endedSix months endedJune 30,June 30,2006200520062005Numerator - net loss available tocommon stockholders$ (919,263)$ (486,271)$(1,968,963)$(2,128,177)Denominator - weighted average numberof common shares outstanding187,376,861168,896,165186,761,102168,896,165Basic and diluted loss per common share$ (0.00)$ (0.00)$ (0.01)$ (0.01)  Note 4  Related Party Transactions  Management Fees:  During the three-month and six-month periods ended June 30, 2006, the Company charged $nil (2005: $3,465) and $6,300 (2005: $3,465) respectively, to operations for director fees incurred for services rendered by Directors.  Notes Payable and Accrued Interest:  Notes Payable totaled $1,213,776 as at June 30, 2006, representing unsecured loans of $140,000 (8.25%), $323,776 (8.50%) and $750,000 (8.50%) due to Mr. Harmel S. Rayat, a Director and majority shareholder of the Company. During the six-month period ended June 30, 2006, the Company repaid $490,000 to the Director and majority shareholder with the accrued interest of $51,785. The entire principal and accrued interest is due and payable on demand.  Accrued and unpaid interest on these notes as of June 30, 2006, amounted to $142,014 (December 31, 2005 - $133,228) and is included in accounts payable  related parties.  Rent: The Companys principal office is located at 1628 West 1st Avenue, Suite 216, Vancouver, British Columbia, Canada, V6J 1G1. These premises are owned by a private corporation controlled by a Director and majority shareholder. The Company pays a monthly rent of C$3,200 effective from April 1, 2006. The Company paid rent of $8,513 (2005: $nil) and $8,513 (2005: $nil) for the three-month and six-month periods ended June 30, 2006, respectively.  Mr. Harmel S. Rayat is an officer, director and majority stockholder of the Company.  He is also an officer, director and majority stockholder of each of HepaLife Technologies, Inc., Entheos Technologies, Inc. and International Energy, Inc.  All related party transactions are recorded at the exchange amount established and agreed to between related parties and are in the normal course of business.  Note 5  Cooperative Agreement  On July 29, 2004, PhytoMedical Technologies Corporation (PTC), a wholly owned subsidiary of the Company, Inc., entered into an exclusive worldwide licensing agreement with New York University (NYU) for certain patented inventions (NYU Patents) related to pharmacologically active elements of a muira puama plant extract and ion channel modulators from natural sources.  In consideration for the grant of the License, PTC agreed to:  (a) reimburse NYU for its patent costs incurred to date;  9   (b) pay to NYU a royalty of 4% of the net sales of all licensed products related to medical, pharmacological, therapeutic, prophylactic, nutritional and research applications of the muira puama extract; (c) pay NYU 20% of the net sales for all other licensed products; (d) pay NYU 10% of all sublicense fees.  In connection with the licensing agreement, PTC granted to each of NYU and Dr. Bruce Cherksey, a NYU scientist and inventor of the NYU Patents, an option to acquire, for a period of two years from July 29, 2004, a number of shares equal to 12.5% of the outstanding common stock of PTC on a fully diluted basis. The option was exercised by Dr. Cherksey on May 30, 2006.  This combined 25% equity position may not be diluted until a total of $1,825,000, after deduction of all related financing costs, has been invested to further develop the technology. Thereafter, NYU and Dr. Cherksey will be diluted pari passu with other equity holders of PTC.  On December 1, 2004, PolyPhenol Technologies Corporation (PolyPhenol), a wholly owned subsidiary of the Company, entered into a three year, three-way Cooperative Research and Development Agreement (CRADA) with the USDA's Agricultural Research Service (ARS) and Iowa State University (ISU). PolyPhenol committed to providing $666,366 in research funding to the ARS and $186,865 to ISU under the following schedule below.  On March 6, 2006, PolyPhenol agreed to extend its CRADA with the USDAs ARS and ISU for an additional two years through October 31, 2009.  The USDAs Agricultural Research Service will receive $1,760,845, or $1,094,479 in additional funds, to support the research work and related administrative costs.  This represents a 164% increase over the prior funding commitment of $666,366.  ARS:  Year 1: $238,300 in 4 installments, the first of which is due to ARS within 30 days of signing of the CRADA, with the following three payments commencing at the hiring of appropriate research personnel  and at three month intervals thereafter;  Year 2: $482,964 in 4 quarterly installments, the first of which is due to ARS 3 months from the previous payment; and  Year 3: $507,114 in 4 quarterly installments, the first of which is due to ARS 3 months from the previous payment.  Year 4: $532,468 in 4 quarterly installments, the first of which is due to ARS 3 months from the previous payment.    As at June 30, 2006, the Company paid in total of $479,782 as per agreement with USDAs ARS.  ISU:  Year 1: $60,000 to ISU in 4 quarterly installments, the first of which is due within 30 days of signing of the CRADA, with the following three payments commencing at the hiring of appropriate research personnel  and at three month intervals thereafter;  Year 2: $62,251 to ISU in 4 quarterly installments, the first of which is due to ISU 3 months from the previous payment; and  Year 3: $70,295 to ISU in 4 quarterly installments, the first of which is due to ISU 3 months from the previous payment.  Year 4: $72,140 to ISU in 4 quarterly installments, the first of which is due to ISU 3 months from the previous payment.  As at June 30, 2006, the Company paid in total of $106,126 as per agreement with ISU.   10   All rights, title, and interest in any subject invention made solely by employee(s) of ARS shall be owned by ARS, solely by the Company are owned by the Company, solely by ISU are owned by ISU, owned jointly by any of three parties if made by any of those parties.  The Agreement or parts thereof, is subject to termination at any time by mutual consent.  Any party may unilaterally terminate the entire agreement at any time by giving the other parties written notice not less than sixty calendar days prior to the desired termination date.  Note 6  License Agreement  On June 12, 2006, the Company, through its wholly owned subsidiary, PolyPhenol Technologies Corporation, entered into an exclusive license agreement with Iowa State University Research Foundation Inc. (ISURF) to develop, market and distribute novel synthesized compounds derived from type A-1 polyphenols, which have been linked to insulin sensitivity by lead researcher, Dr. Richard Anderson of the USDA's Agricultural Research Service.  Under terms of the agreement, the Company has to pay to ISURF license fees of $320,000, of which $20,000 is payable (paid) within 30 days of execution of the agreement, $50,000 is payable upon completion of the first successful Phase 2 clinical trial and the remaining $250,000 is payable upon first approval by the regulatory authority on new drug application. In addition, ISURF will receive royalty payments equal to 5% on the net sales of products, except that 3% will apply on the net sales of pharmaceutical products. The Company will pay a minimum annual royalty of $20,000, $50,000 and $100,000 in calendar year 2010, 2011, 2012 and onwards, respectively. The Company also has to reimburse ISURF the cost incurred for filing, prosecuting and maintaining the licensed patents together with 15% of the said costs, not exceeding $10,000, as the administration fee. The Company will administrate the development, regulatory approval and commercialization of the compounds and pursue future collaborative arrangements.  As of June 30, 2006, the Company paid in total of $20,000 for the License Fee and $20,340 for reimbursement of the patent costs as per agreement with ISURF.  Note 7  Common Stock  On July 8, 2005, the Company entered into a Common Stock Purchase Agreement (Purchase Agreement) and a Registration Rights Agreement (Registration Agreement) with Fusion Capital Fund II, LLC (Fusion Capital). Pursuant to the terms of the Purchase Agreement, the Company has to issue to Fusion Capital 863,724 shares (issued) of its common stock, which Fusion has agreed to hold for twenty-five months. Fusion Capital has agreed to purchase from the Company up to $10,000,000 of the Companys common stock over a twenty-five month period. Pursuant to the terms of the Registration Agreement, the Company has filed a registration statement (the Registration Statement) with the Securities and Exchange Commission covering shares which may be purchased by Fusion Capital under the Purchase Agreement.  The Registration Statement was declared effective on October 14, 2005. On each trading day during the term of the Purchase Agreement, the Company has the right to sell to Fusion Capital $20,000 of the Companys common stock at a purchase price equal to the lower of the (a) the lowest sale price of the common stock on such trading day and (b) the arithmetic average of the three (3) lowest closing sale prices for the common stock during the twelve (12) consecutive trading days immediately preceding the date of purchase. At the Companys option, Fusion Capital can be required to purchase fewer or greater amounts of common stock each month. The Company has the right to control the timing and the number of shares sold to Fusion Capital.  The Company shall always have the right at any time to decrease the amount of the daily purchase amount by delivering written notice to the buyer which notice shall specify the new daily purchase amount.  The decrease in the daily purchase amount shall become effective one trading day after receipt by the buyer of the daily purchase amount decrease notice. The Company shall have the right (but not the obligation) to increase the amount of the daily purchase amount in accordance with the terms and conditions set forth in this Section 1(c)(iii) by delivering written notice to the buyer stating the new amount of the daily purchase amount. With respect to increases in the daily purchase amount above the original daily purchase amount, as the market price for the Common Stock increases the Company shall have the right from time to time to increase the daily purchase amount as follows.  For every $0.20 increase in threshold price above $1.00 (subject to equitable adjustment for any reorganization,  11   recapitalization, non-cash dividend, stock split or other similar transaction), the Company shall have the right to increase the daily purchase amount by up to an additional $2,000 in excess of the original daily purchase amount.  Threshold price for purposes hereof means the lowest sale price of the Common Stock during the five (5) consecutive trading days immediately prior to the submission to the buyer of a daily purchase amount increase notice (subject to equitable adjustment for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction).  For example, if the threshold trice is $1.20, the Company shall have the right to increase the daily purchase amount to up to $22,000 in the aggregate.  If the threshold price is $2.00, the Company shall have the right to increase the daily purchase amount to up to $30,000 in the aggregate.  During the three-month and six-month periods ended June 30, 2006, Fusion Capital has purchased 657,800 and 2,468,864 shares of the Company for total proceeds of $658,999 and $2,891,451, respectively.  Note 8  Warrants  The movement of share purchase warrants can be summarized as follows:-  Weighted averageNumber of warrantsexercise priceBalance, December 31, 200414,285,714$0.007Exercised(14,285,714)0.007Balance, June 30, 2006 and December 31, 2005-  As of June 30, 2006, there are no outstanding share purchase warrants. Note 9 - Stock Options  On July 12, 2001, the Company approved its 2001 Stock Option Plan, which has 10,000,000 shares reserved for issuance thereunder, all of which were registered under Form S-8 on October 2, 2003. The objective of this plan is to attract and retain the best personnel, providing for additional performance incentives and promoting the success of the Company by providing individuals the opportunity to acquire common stock.  The movement of stock options can be summarized as follows:  Weighted averageNumber of optionsexercise priceBalance, December 31, 20034,750,000$0.24Exercised(175,000)0.24Balance, December 31, 20044,575,0000.24Granted6,700,0000.90Exercised(550,000)0.76Cancelled(1,450,000)0.24Balance, December 31, 20059,275,0000.68Granted2,250,0001.22Balance, June 30, 200611,525,0000.79  No options were cancelled or exercised during the six-month period ended June 30, 2006.  On April 4, 2006, the Company granted 2,250,000 stock options at an exercise price of $1.22 to an employee, expiring on April 4, 2016. The vesting periods for the options are as follows: 250,000 stock options shall vest if and when an IND is filed for any current or future compound; another 250,000 stock options shall vest if and when a phase 1 clinical trial is commenced for any current or future compound; 1,750,000 stock options shall vest if and  12   when the Company acquires any current or future compound or enters into a strategic collaborative agreement for any current or future compound.  As the 2,250,000 stock options will vest based on certain performance conditions, the Company expects that the first 250,000 stock options will vest at around 16 months from the date of grant, the second 250,000 stock options will vest at around 22 months from the date of grant and the remaining 1,750,000 stock options will vest at around 16 months from the date of grant. The fair value of each batch of stock options will be amortized over their expected service periods. The Company will periodically reassess the probability of the performance conditions being met and the estimated service period of each batch of stock options.  The fair value of the 2,250,000 stock options granted in the period ended June 30, 2006 was estimated at $1.15 by using the Black-Scholes Option Pricing Model with the following assumptions: dividend yield of 0%, expected volatility of 91.8%, risk-free interest rates of 4.15%, and expected life of three years.  The weighted average remaining contractual life of the outstanding stock options at June 30, 2006 is 8.6 years.  For the three and six months ended June 30, 2005, the Company was filing APB 25 for stock-based compensation, but followed the disclosure provisions of SFAS 123.  Had compensation expense for the Company's stock-based compensation plans been determined under SFAS No. 123, based on the fair market value at the grant dates, the Company's pro forma net loss and pro forma net loss per stock would have been reflected as follows:  Three monthsSix monthsendedendedJune 30, 2005June 30, 2005Net loss:As reported$ (486,271)$ (2,128,177)Stock-based compensation expenses asdetermined under the fair value method(3,685,000)(3,685,000)Pro-forma net loss$ (4,171,271)$ (5,813,177)Net loss per share - basic and diluted:As reported$ (0.00)$ (0.01)Pro-forma$(0.02)$ (0.03)  The weighted average fair value of the options granted in the period ended March 31, 2005 was estimated at $0.67 by using the Black-Scholes Option Pricing Model with the following weighted average assumptions: dividend yield of 0%, expected volatility of 91%, risk-free interest rates of 3.5%, and expected lives of three years.  Effective from January 1, 2006, the Company has adopted SFAS 123(R) using a modified version of prospective application.  Note 10  Commitment  On April 6, 2006, the Company entered into an employment agreement with its new President and Chief Executive Officer, Mr. Greg Wujek. Pursuant to this agreement, Mr. Wujek: (i) agreed to serve as President and Chief Executive Officer, (ii) will receive an annualized base salary of $225,000, (iii) has been granted options to purchase up to 2,250,000 shares of the Companys common stock at an exercise price of $1.22.  The options vest as follows: (a) 250,000 options shall vest if and when an Investigational New Drug (IND) application is filed for any current or future compounds;  (b) 250,000 options shall vest if and when a phase I clinical trial is commenced for any current or future compounds; and  (c) 1,750,000 options shall vest if and when the Company or a wholly owned subsidiary or any one current or future compound is acquired, in whole or in part, or when either through the Company or a subsidiary, enters into a strategic collaborative agreement for any one current or future compound, provided that the Companys Board of Directors has approved, by written resolution, any such acquisition, sale or agreement.  On July 10, 2006, the Company entered into a development agreement with Ricerca BioSciences (Ricerca), a world class pharmaceutical development laboratory, to begin developmental work on the Companys BDC-03  13   compound for cachexia, a devastating muscle wasting condition that afflicts 25% of all AIDS patients and upwards of 90% of all advanced cancer patients. BDC-03 has pharmacologically active elements that have been successful in reducing body fat percentage, increasing lean muscle mass and lowering cholesterol in a study of growing animals. Ricercas responsibilities will eventually expand to include the Companys other compounds.  Note 11  Subsequent Events  On August 1, 2006, the Company cancelled 2,250,000 stock options granted to Mr. Greg Wujek on April 6, 2006, while simultaneously granting 2,000,000 stock options.  The 2,000,000 stock options have an exercise price of $0.52 per share, the closing price of the Companys shares on July 31, 2006.  The options vest as follows: (a) 250,000 options shall vest if and when an Investigational New Drug (IND) application is filed for any current or future compounds;  (b) 250,000 options shall vest if and when a phase I clinical trial is commenced for any current or future compounds; and  (c) 1,500,000 options shall vest if and when PhytoMedical or a wholly owned subsidiary or any one current or future compound is acquired, in whole or in part, or when either through PhytoMedical or a subsidiary, enters into a strategic collaborative agreement for any one current or future compound, provided that the Companys Board of Directors has approved, by written resolution, any such acquisition, sale or agreement.  14   Item 2. Management's Discussion and Analysis or Plan of Operations  Cautionary Statement Pursuant to Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995:  Except for the historical information presented in this document, the matters discussed in this Form 10-QSB for the three and six months ending June 30, 2006, and specifically in the items entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations", or otherwise incorporated by reference into this document, contain "forward-looking statements" (as such term is defined in the Private Securities Litigation Reform Act of 1995). These statements are identified by the use of forward-looking terminology such as "believes", "plans", "intend", "scheduled", "potential", "continue", "estimates", "hopes", "goal", "objective", expects", "may", "will", "should" or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. The safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, apply to forward-looking statements made by the Company.  The reader is cautioned that no statements contained in this Form 10-QSB should be construed as a guarantee or assurance of future performance or results. These forward-looking statements involve risks and uncertainties, including those identified within this Form 10-QSB. The actual results that the Company achieves may differ materially from any forward-looking statements due to such risks and uncertainties. These forward-looking statements are based on current expectations, and the Company assumes no obligation to update this information. Readers are urged to carefully review and consider the various disclosures made by the Company in this Form 10-QSB and in the Company's other reports filed with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect the Company's business.  Overview  PhytoMedical Technologies, Inc. (PhytoMedical or the Company), together with its wholly owned subsidiaries, is an early stage research based biopharmaceutical company focused on the identification, acquisition, development and eventual commercialization of innovative plant derived pharmaceutical and nutraceutical compounds targeting cachexia, obesity and diabetes.  An estimated 300 new drugs of world-wide importance, worth over $150 billion, still remain to be discovered amongst the 250,000 species of higher plants found on earth, of which less than 15% have been investigated for bioactive compounds. Presently, twenty of the best selling drugs come from natural sources and 25% of all prescription drugs contain active compounds originally derived from or patterned after compounds derived from plants.  Cachexia  Presently, through contract research organizations, the Company is working to isolate potentially active pharmacological elements in PhytoMedical's first plant derived compound, BDC-03, which has been successful in reducing body fat percentage, increasing lean muscle mass and lowering cholesterol in a study of growing animals.  For obese or overweight individuals, BDC-03s potential capacity to decrease the deposition of fat and lower cholesterol would be a vitally important therapeutic outcome. However, its prospective ability to induce overall weight gain in the form of lean muscle mass may well be the difference between life and death for individuals suffering from cachexia.  Cachexia, which is characterized by dramatic weight loss, not only of fatty tissue, but also muscle tissue and bone, is among the most devastating and life-threatening aspects of AIDS and cancer. Once the body loses 30% of its lean muscle mass, major organs are affected, resulting in death.  Sadly, cachexia afflicts 25% of all AIDS patients and upwards of 90% of all advanced cancer patients. In fact, half of all cancer related deaths are a result of cachexia, not the cancer itself.   15   Diabetes  Additionally, through a Cooperative Research and Development Agreement, PhytoMedical is working towards synthesizing the active components of several polyphenolic compounds found in cinnamon bark and characterizing their beneficial health effects in cell cultures systems, animals and ultimately humans.  These compounds, which increase insulin sensitivity by activating key enzymes that stimulate insulin receptors, while inhibiting the enzymes that deactivate them, have increased sugar metabolism by a factor of 20 in test tube assays using fat cells. Impaired sugar and fat metabolism, present in millions around the world, may lead to Type-2 diabetes and cardiovascular diseases.  Insulin is a hormone made by the pancreas to help the body use glucose (sugar) for energy. In people with Type-2 diabetes, either the pancreas doesn't make enough insulin or the body is unable to use it correctly. Without sufficient insulin, glucose accumulates in the blood and urine, and the cells of the body are starved, a condition known as diabetes - the leading cause of end-stage renal disease, blindness and lower limb amputations.  Diabetes, which results from the bodys inability to produce enough insulin or use it efficiently, affects 18.2 million people in the United States, or 6.3% of the population (American Diabetes Association). The Centers for Disease Control and Prevention expects this number to rise to over 30 million by 2030. As the leading cause of end-stage renal disease, blindness and lower limb amputations, diabetes now costs the health care system over $132 billion each year.  While the causes of diabetes are not entirely clear, it is known that diet plays a key role in the prevention and cure of diabetes.  In fact, research studies have shown that aqueous extracts of cinnamon improves the action of insulin and helps to control risk factors associated with diabetes including, glucose, insulin, cholesterol, triglycerides and related variables.  One study published in Diabetes Care, a journal of the American Diabetes Association, showed that as little as one gram a day of cinnamon  one-fourth of a teaspoon twice a day  can lower blood sugar by an average of 18 to 29 percent, triglycerides (fatty acids in the blood) by 23 to 30 percent, LDL (or bad) cholesterol by 7 to 27 percent and total cholesterol by 12 to 26 percent. Changes in HDL (good) cholesterol were not significant. Amazingly, the study found that the beneficial effects of cinnamon lasted for at least 20 days after people stopped taking it.  At present, the Company does not currently have commercial products intended to diagnose, treat, cure or prevent any disease. The statements contained in this Form 10-QSB regarding our on going research and development and the results attained by us to-date have not been evaluated by the Food and Drug Administration. There can be no assurance that further research and development, and /or whether clinical trial results, if any, will validate and support the results of our preliminary research and studies.  Cooperative and License Agreements  On July 29, 2004, PhytoMedical Technologies Corporation, a wholly owned subsidiary of PhytoMedical Technologies, Inc., entered into an exclusive worldwide licensing agreement with New York University (NYU) for certain patented inventions (NYU Patents) related to pharmacologically active elements of a muira puama plant extract and ion channel modulators from natural sources.  In consideration for the grant of the License, PhytoMedical Technologies Corporation agreed to:  -  reimburse NYU for its patent costs incurred to date; - pay to NYU a royalty of four percent (4%) of the net sales of all licensed products related to medical, pharmacological, therapeutic, prophylactic, nutritional and research applications of the muira puama extract; - pay NYU twenty percent (20%) of the net sales for all other licensed products; - pay NYU ten percent (10%) of all sublicense fees. In connection with the licensing agreement, PhytoMedical Technologies Corporation granted to each of NYU and Dr. Bruce Cherksey, a NYU scientist and inventor of the NYU Patents, an option to acquire, for a period of two years from July 29, 2004, a number of shares equal to 12.5% of the outstanding common stock of PhytoMedical on a fully diluted basis.   16   This combined 25% equity position may not be diluted until a total of $1,825,000, after deduction of all related financing costs, has been invested to further develop the technology.  Thereafter, NYU and Dr. Cherksey will be diluted pari passu with other equity holders of PhytoMedical Technologies Corporation.  On December 1, 2004, PolyPhenol Technologies Corporation, a wholly owned subsidiary of PhytoMedical Technologies, Inc., entered into a three year, three-way Cooperative Research and Development Agreement (CRADA) with the USDA's Agricultural Research Service (ARS) and Iowa State University (ISU). PolyPhenol Technologies Corporation committed to providing $666,366 in research funding to the ARS and $186,865 to ISU under the following schedule below.  To fund the Companys operations and financial obligations, the Company intends to seek additional funds from shareholders and third parties.  On March 6, 2006, PolyPhenol Technologies Corporation, a wholly-owned subsidiary of PhytoMedical Technologies, Inc. agreed to extend its Cooperative Research and Development Agreement (CRADA) with the USDAs Agricultural Research Service (ARS) and Iowa State University (ISU) for an additional two years through October 31, 2009.  The USDAs Agricultural Research Service will receive $1,760,845, or $1,094,479 in additional funds, to support the research work and related administrative costs.  This represents a 164% increase over our prior funding commitment of $666,366.  ARS:  Year 1: $238,300 in 4 installments, the first of which is due to ARS within 30 days of signing of the CRADA, with the following three payments commencing at the hiring of appropriate research personnel  and at three month intervals thereafter;  Year 2: $482,964 in 4 quarterly installments, the first of which is due to ARS 3 months from the previous payment; and  Year 3: $507,114 in 4 quarterly installments, the first of which is due to ARS 3 months from the previous payment.  Year 4: $532,468 in 4 quarterly installments, the first of which is due to ARS 3 months from the previous payment.  As at June 30, 2006, the Company paid total of $479,782 as per agreement with USDAs ARS.  ISU:  Year 1: $60,000 to ISU in 4 quarterly installments, the first of which is due within 30 days of signing of the CRADA, with the following three payments commencing at the hiring of appropriate research personnel  and at three month intervals thereafter;  Year 2: $62,251 to ISU in 4 quarterly installments, the first of which is due to ISU 3 months from the previous payment; and  Year 3: $70,295 to ISU in 4 quarterly installments, the first of which is due to ISU 3 months from the previous payment.  Year 4: $72,140 to ISU in 4 quarterly installments, the first of which is due to ISU 3 months from the previous payment.  As at June 30, 2006, the Company paid in total of $106,126, as per agreement with ISU.  All rights, title, and interest in any subject invention made solely by employee(s) of ARS shall be owned by ARS, solely by the Company are owned by the Company, solely by ISU are owned by ISU, owned jointly by any of three parties if made by any of those parties.  The Agreement or parts thereof, is subject to termination at any time by mutual consent.  Any party may unilaterally terminate the entire agreement at any time by giving the other parties written notice not less than sixty calendar days prior to the desired termination date.  17    Plan of Operation  Presently, through contract research organizations, the Company is working to isolate potentially active pharmacological elements in PhytoMedical's first plant derived compound, BDC-03, which has been successful in reducing body fat percentage, increasing lean muscle mass and lowering cholesterol in a study of growing animals.  Additionally, through a Cooperative Research and Development Agreement, PhytoMedical is working towards synthesizing the active components of several polyphenolic compounds found in cinnamon bark and characterizing their beneficial health effects in cell cultures systems, animals and ultimately humans.  The Company anticipates that its major shareholder will contribute sufficient funds to satisfy the cash needs of the Company through calendar year ending December 31, 2006, however, if necessary additional funds maybe provided by debt or equity financings.  Due to the "start up" nature of the Company's business, the Company expects to incur losses as the Company conducts its ongoing research and product development programs. We will require additional funding to continue our research and product development programs, to conduct preclinical studies and clinical trials, for operating expenses, to pursue regulatory approvals for our product candidates, for the costs involved in filing and prosecuting patent applications and enforcing or defending patent claims, if any, for any possible acquisitions or new technologies, and we may require additional funding to establish manufacturing and marketing capabilities in the future. We may seek to access the public or private equity markets whenever conditions are favorable. We may also seek additional funding through strategic alliances and other financing mechanisms. We cannot assure you that adequate funding will be available on terms acceptable to us, if at all. If adequate funds are not available, we may be required to curtail significantly one or more of our research or development programs or obtain funds through arrangements with collaborators or others. This may require us to relinquish rights to certain of our technologies or product candidates. To the extent that we are unable to obtain third-party funding for such expenses, we expect that increased expenses will result in increased losses from operations. We cannot assure you that we will successfully develop our products under development or that our products, if successfully developed, will generate revenues sufficient to enable us to earn a profit.  Liquidity and Capital Resources  As at June 30, 2006, the Company had a cash balance of $336,094. The Company has financed its operations primarily through cash on hand, through loans from shareholders, proceeds from stock option exercises, and through the common stock purchase agreement with Fusion Capital during the six month period ending June 30, 2006.  Net cash flows used in by operating activities was $1,638,324 for the six month period ending June 30, 2006, compared to net cash flows used of $1,442,033 for the same period in 2005, primarily due to an decrease in accounts payable.  The Company intends to seek additional funds from shareholders and third parties to finance the Companys operations.  Net cash provided (used in) by financing activities was $1,930,996 for the six months period ending 
June 30, 2006 compared to $1,319,000 for the same period in 2005. The Company has financed its operations primarily from cash on hand, through loans from shareholders, proceeds from stock option and warrant exercises, and through the common stock purchase agreement with Fusion Capital.  During the three-month and six-month periods ended June 30, 2006, Fusion Capital has purchased 657,800 and 2,468,864 shares of the Company for total proceeds of $658,999 and $2,891,451, respectively.  Related Party Transactions  Management Fees:  During the three-month and six-month periods ended June 30, 2006, the Company charged $nil (2005: $3,465) and $6,300 (2005: $3,465) respectively, to operations for director fees incurred for services rendered by Directors.  Notes Payable and Accrued Interest:  Notes Payable totaled $1,213,776 as at June 30, 2006, representing unsecured loans of $140,000 (8.25%), $323,776 (8.50%) and $750,000 (8.50%) due to Mr. Harmel S. Rayat, a Director and majority shareholder of the Company. During the six-month period ended June 30, 2006, the Company repaid  18   $490,000 to the Director and majority shareholder with the accrued interest of $51,785. The entire principal and accrued interest is due and payable on demand.  Accrued and unpaid interest on these notes as of June 30, 2006, amounted to $142,014 (December 31, 2005 - $133,228) and is included in accounts payable  related parties.  Rent: The Companys principal office is located at 1628 West 1st Avenue, Suite 216, Vancouver, British Columbia, Canada, V6J 1G1. These premises are owned by a private corporation controlled by a Director and majority shareholder. The Company pays a monthly rent of C$3,200 effective from April 1, 2006. The Company paid rent of $8,513 (2005: $nil) and $8,513 (2005: $nil) for the three-month and six-month periods ended June 30, 2006, respectively.  Mr. Harmel S. Rayat is an officer, director and majority stockholder of the Company.  He is also an officer, director and majority stockholder of each of HepaLife Technologies, Inc., Entheos Technologies, Inc. and International Energy, Inc.  All related party transactions are recorded at the exchange amount established and agreed to between related parties and are in the normal course of business.  Off-Balance Sheet Items  Other than those described in Note 5, the Company currently has no off-balance sheet items.  Critical Accounting Policies  Our discussion and analysis or plan of operations is based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.  The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.  On an on-going basis, we evaluate our estimates, including those related to income taxes and contingencies.  We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions or conditions.  Management believes the following critical accounting policies reflect its more significant estimates and assumptions used in the preparation of its financial statements.  Income Taxes - We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. We have considered future market growth, forecasted earnings, future taxable income, and prudent and feasible tax planning strategies in determining the need for a valuation allowance. We currently have recorded a full valuation allowance against net deferred tax assets as we currently believe it is more likely than not that the deferred tax assets will not be realized  Contingencies - We may be subject to certain asserted and unasserted claims encountered in the normal course of business. It is our belief that the resolution of these matters will not have a material adverse effect on our financial position or results of operations, however, we cannot provide assurance that damages that result in a material adverse effect on our financial position or results of operations will not be imposed in these matters.  We account for contingent liabilities when it is probable that future expenditures will be made and such expenditures can be reasonably estimated.  Recent Accounting Pronouncements  In December 2004, the FASB issued SFAS No. 123(R), Share-Based Payment. SFAS 123(R) establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. This statement focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS 123(R) requires that the fair value of such equity instruments be recognized as expense in the historical financial statements as services are performed. Prior to SFAS 123(R), only certain pro-forma disclosures of fair value were required. SFAS 123(R) was effective for our Company as of the beginning of the first interim or annual reporting period that begins after December 15, 2005.   19   In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections.  SFAS No. 154 replaces APB Opinion No. 20 Accounting Changes and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements.  SFAS No. 154 requires retrospective application to prior periods financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change.  Risk Factors  We have sought to identify what we believe to be the most significant risks to our business.  However, we cannot predict whether, or to what extent, any of such risks may be realized nor can we guarantee that we have identified all possible risks that might arise. Investors should carefully consider all of such risk factors before making an investment decision with respect to our Common Stock. We provide the following cautionary discussion of risks, uncertainties and possible inaccurate assumptions relevant to our business. These are factors that we think could cause our actual results to differ materially from expected results. Other factors besides those listed here could adversely affect us.  Inability to Obtain Funding  The process of developing our products requires significant research and development efforts, including basic research, preclinical and clinical development, as well as FDA regulatory approval. Our ability to achieve profitability depends on our ability, alone or with future potential collaborators, to develop our drug candidates, conduct clinical trials, obtain necessary regulatory approvals, and manufacture, distribute, market and sell our drug products. We cannot assure you that we will be successful at any of these activities or predict when we will ever become profitable.  We may not be able to obtain additional funding when needed, which could limit future expansion and marketing opportunities, as well as result in lower than anticipated revenues. We may require additional financing to pursue relationships with joint venture partners. If the market price of the common stock declines, some potential financiers may either refuse to offer us any financing or will offer financing at unacceptable rates or unfavorable terms. If we are unable to obtain financing on favorable terms, or at all, this unavailability could prevent us from expanding our business, which could materially impact our future potential revenues.  Lack of Operating History  Our business is subject to the risks inherent in the establishment of a new business. In formulating our business plan, we have relied on the judgment of our officers, directors and consultants but have not conducted any formal independent market studies concerning the demand for our products. Because of our limited operating history and lack of past profitability, you may lose your investment if we are unable to successfully market our products and implement our business plan.  We have had limited revenues since inception.  In both 2005 and 2004, and the six months ended June 30, 2006, we had zero revenues. We have not been profitable, experiencing an accumulated loss of $21,021,389 through June 30, 2006. Even if we become profitable in the future, we cannot accurately predict the level of, or our ability to sustain profitability. Because we have not yet been profitable and cannot predict any level of future profitability, you bear the risk of a complete loss of your investment in the event our business plan is unsuccessful.  Continued Control by Existing Management  You may lack an effective vote on corporate matters and management may be able to act contrary to your objectives. As of July 31, 2006, our officers and board members own 69% of the 187,854,843 shares of our outstanding common stock. If management votes together, it could influence the outcome of corporate actions requiring shareholder approval, including the election of directors, mergers and asset sales. As a result, new stockholders may lack an effective vote with respect to the election of directors and other corporate matters. Therefore, it is possible that management may take actions with respect to its ownership interest, which may not be consistent with your objectives or desires.   20   Liquidity of Shares in Market Place  As of July 31, 2006 one of our directors beneficially owns approximately 69% of the Companys outstanding common stock, which could affect the liquidity of the companys shares in the market.  Dividends  We have not paid and do not currently intend to pay dividends, which may limit the current return you may receive on your investment in our common stock.  Since inception, we have paid no dividends to our stockholders. Future dividends on our common stock, if any, will depend on our future earnings, capital requirements, financial condition and other factors. We currently intend to retain earnings, if any, to increase our net worth and reserves. Therefore, we do not anticipate that any holder of common stock will receive any cash, stock or other dividends on his shares of common stock at any time in the near future. You should not expect or rely on the potential payment of dividends as a source of current income.  Dependence on Executive Officers and Technical Personnel  The success of our business plan depends on attracting qualified personnel, and failure to retain the necessary personnel could adversely affect our business. Competition for qualified personnel is intense, and we may need to pay premium wages to attract and retain personnel. Attracting and retaining qualified personnel is critical to our business. Inability to attract and retain the qualified personnel necessary would limit our ability to implement our business plan successfully.  Adverse Effect of Shares Eligible for Future Sale  Future sales of large amounts of common stock could adversely affect the market price of our common stock and our ability to raise capital.  Future sales of our common stock by existing stockholders pursuant to Rule 144 under the Securities Act, or following the exercise of outstanding options and warrants, could adversely affect the market price of our common stock. Substantially all of the outstanding shares of our common stock are freely tradable, without restriction or registration under the Securities Act, other than the sales volume restrictions of Rule 144 applicable to shares held beneficially by persons who may be deemed to be affiliates. Our directors and executive officers and their family members are not under lockup letters or other forms of restriction on the sale of their common stock. The issuance of any or all of these additional shares upon exercise of options or warrants or conversion of preferred stock will dilute the voting power of our current stockholders on corporate matters and, as a result, may cause the market price of our common stock to decrease. Further, sales of a large number of shares of common stock in the public market could adversely affect the market price of the common stock and could materially impair our future ability to generate funds through sales of common stock or other equity securities.  Government Regulation  Regulation by government authorities in the United States and foreign countries is a significant factor in the development, manufacture and marketing of our proposed products and in our ongoing research and product development activities. All of our products will require regulatory approval by government agencies prior to commercialization. In particular, human therapeutic products are subject to rigorous preclinical studies and clinical trials and other approval procedures of the FDA and similar regulatory authorities in foreign countries. Various federal and state statutes and regulations also govern or influence testing, manufacturing, safety, labeling, storage and record-keeping related to such products and their marketing. The process of obtaining these approvals and the subsequent compliance with appropriate federal and state statutes and regulations require the expenditure of substantial time and financial resources.  Preclinical studies generally are conducted in laboratory animals to evaluate the potential safety and the efficacy of a product. Drug developers submit the results of preclinical studies to the FDA as a part of an IND application that must be approved before clinical trials can begin in humans. Typically, clinical evaluation involves a time consuming and costly three-phase process.  Phase I Clinical trials are conducted with a small number of patients to determine the early safety profile, maximum tolerated dose and pharmacological properties of the product in human volunteers.  21    Phase II Clinical trials are conducted with groups of patients afflicted with a specific disease in order to determine preliminary efficacy, optimal dosages and expanded evidence of safety.  Phase III Large-scale, multi-center, comparative clinical trials are conducted with patients afflicted with a specific disease in order to determine safety and efficacy as primary support for regulatory approval by the FDA to market a product candidate for a specific disease.  The FDA closely monitors the progress of each of the three phases of clinical trials that are conducted in the United States and may, at its discretion, reevaluate, alter, suspend or terminate the testing based upon the data accumulated to that point and the FDAs assessment of the risk/benefit ratio to the patient. To date, we have not conducted any clinical trials.  Once Phase III trials are completed, drug developers submit the results of preclinical studies and clinical trials to the FDA in the form of an NDA or a biologics licensing application for approval to commence commercial sales. In response, the FDA may grant marketing approval, request additional information or deny the application if the FDA determines that the application does not meet regulatory approval criteria. FDA approvals may not be granted on a timely basis, or at all. Furthermore, the FDA may prevent a drug developer from marketing a product under a label for its desired indications, which may impair commercialization of the product.  If the FDA approves the NDA, the drug becomes available for physicians to prescribe in the United States. After approval, the drug developer must submit periodic reports to the FDA, including descriptions of any adverse reactions reported. The FDA may request additional studies, known as Phase IV, to evaluate long-term effects.  In addition to studies requested by the FDA after approval, a drug developer may conduct other trials and studies to explore use of the approved compound for treatment of new indications. The purpose of these trials and studies and related publications is to broaden the application and use of the drug and its acceptance in the medical community.  We will also have to complete an approval process similar to that in the United States in virtually every foreign target market for our products in order to commercialize our product candidates in those countries. The approval procedure and the time required for approval vary from country to country and may involve additional testing. Foreign approvals may not be granted on a timely basis, or at all. In addition, regulatory approval of prices is required in most countries other than the United States. We face the risk that the resulting prices would be insufficient to generate an acceptable return to us or our corporate collaborators.  Competition  The biotechnology and pharmaceutical industries are subject to rapid and intense technological change. We face competition from numerous pharmaceutical companies, pharmaceutical divisions of chemical companies, and biotechnology companies of various sizes. Many of these companies have commercial arrangements with other companies in the biotechnology industry to supplement their own research capabilities. Developments by others may render our product candidates or technologies obsolete or noncompetitive.  Compared to us, many of our competitors and potential competitors have substantially greater:  - capital resources; - research and development resources, including personnel and technology; - regulatory experience; - preclinical study and clinical testing experience; - manufacturing and marketing experience; and - production facilities.  Any of these competitive factors could harm our business, prospects, financial condition and results of operations, which could negatively affect our stock price.  Limited Experience  Even if we are able to develop our products and obtain necessary regulatory approvals, we have limited experience or capabilities in marketing or commercializing our products. We currently have no sales, marketing or distribution  22   infrastructure. Accordingly, we are dependent on our ability to find collaborative marketing partners or contract sales companies for commercial sale of any future products. Even if we find a potential marketing partner, we may not be able to negotiate a licensing contract on favorable terms to justify our investment or achieve adequate revenues.  Intellectual Property  The Company relies on a combination of copyright law, trade secret protection, confidentiality agreements and other contractual arrangements with employees, vendors and others to protect its rights to intellectual property. These measures, however, may be inadequate to deter misappropriation of proprietary information. Failure to adequately protect its intellectual property could harm the Company, devalue its proprietary content and affect the Company's ability to compete effectively.  Our success depends in significant part on our ability to obtain important research and invention licenses, obtain patents, protect trade secrets, operate without infringing upon the proprietary rights of others and prevent others from infringing on our proprietary rights.  If we do obtain patents, the claims allowed may not be sufficiently broad to protect our technology. In addition, issued patents that we own or license may be challenged, invalidated or circumvented. Our patents also may not afford us protection against competitors with similar technology. Because patent applications in the United States are maintained in secrecy until patents issue, third parties may have filed or maintained patent applications for technology used by us or covered by our pending patent applications without our being aware of these applications.  We may not hold proprietary rights to all of the patents related to our proposed products. These patents may be owned or controlled by third parties. As a result, we or any future collaborative partners may be required to obtain licenses under third-party patents to market our proposed products. If licenses are not available on acceptable terms, we or any future collaborative partners will not be able to market these products or services.  Research Agreement  We are a party to a Cooperative Research and Development Agreement which grants the Company an option to negotiate an exclusive license to any invention or other intellectual property conceived or reduced to practice under the Agreement which is patentable or otherwise protectable under Title 35 of the United States Code or under the patent laws of a foreign country. There can be no assurance that such a license will be granted to us or that we can obtain a license on terms favorable to us. If we do not obtain an exclusive license, our ability to generate revenue would be adversely affected.  We expect to enter into additional research agreements and licenses in the future that relate to important technologies that may be necessary for the development and commercialization of related and unrelated products. These agreements and licenses may impose various commercialization, indemnification, royalty, insurance and other obligations on us, which, if we fail to comply may result in the termination of these agreements and licenses or make the agreements and licenses non-exclusive, which could affect our ability to exploit important technologies that are required for successful development of our products.  Insurance Coverage  Our products may prove to be unsuccessful if various parties, including government health administration authorities, private healthcare insurers and other healthcare payers, such as health maintenance organizations and self-insured employee plans that determine reimbursement to the consumer, do not accept our products for reimbursement. Sales of therapeutic and other pharmaceutical products depend in significant part on the availability of reimbursement to the consumer from these third party payers. Third party payers are increasingly challenging the prices charged for medical products and services. We cannot assure you that reimbursement will be available, if at all. If we fail to achieve adequate reimbursement levels, patients may not purchase our products and sales of these products will be absent or reduced.  We are considered a penny stock.  The Company's stock differs from many stocks, in that it is a "penny stock." The Securities and Exchange Commission has adopted a number of rules to regulate "penny stocks."  These rules include, but are not limited to,  23   Rules 3a5l-l, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6 and 15g-7 under the Securities and Exchange Act of 1934, as amended.  Because our securities probably constitute "penny stock" within the meaning of the rules, the rules would apply to us and our securities. The rules may further affect the ability of owners of our stock to sell their securities in any market that may develop for them.  There may be a limited market for penny stocks, due to the regulatory burdens on broker-dealers.  The market among dealers may not be active. Investors in penny stock often are unable to sell stock back to the dealer that sold them the stock.  The mark-ups or commissions charged by the broker-dealers may be greater than any profit a seller may make. Because of large dealer spreads, investors may be unable to sell the stock immediately back to the dealer at the same price the dealer sold the stock to the investor. In some cases, the stock may fall quickly in value.  Investors may be unable to reap any profit from any sale of the stock, if they can sell it at all.  Stockholders should be aware that, according to the Securities and Exchange Commission Release No. 34- 29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. These patterns include:  - Control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;  - Manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;  - "Boiler room" practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons;  - Excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and  - The wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.  Furthermore, the "penny stock" designation may adversely affect the development of any public market for the Company's shares of common stock or, if such a market develops, its continuation.  Broker-dealers are required to personally determine whether an investment in "penny stock" is suitable for customers.  Penny stocks are  securities (i) with a price of less than five dollars per share; (ii) that are not traded on a "recognized" national exchange; (iii) whose prices are not quoted on the NASDAQ automated  quotation  system  (NASDAQ-listed stocks must still meet  requirement  (i)  above);  or (iv) of an issuer with net tangible  assets  less than  $2,000,000  (if the issuer  has been in  continuous operation  for at least three years) or $5,000,000  (if in continuous  operation for less  than  three  years),  or with  average  annual  revenues  of less than $6,000,000 for the last three years.  Section 15(g) of the Exchange Act, and Rule 15g-2 of the Commission require broker-dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document before effecting any transaction in a penny stock for the investor's account.  Potential investors in the Company's common stock are urged to obtain and read such disclosure carefully before purchasing any shares that are deemed to be "penny stock."  Rule 15g-9 of the  Commission  requires  broker-dealers  in penny stocks to approve the  account of any  investor  for  transactions  in such stocks  before selling  any  penny  stock  to  that  investor.   This  procedure  requires  the broker-dealer to (i) obtain from the investor information  concerning his or her financial  situation,  investment  experience  and investment  objectives;  (ii) reasonably  determine,  based on that  information,  that  transactions in penny stocks are  suitable  for the  investor  and that the  investor  has  sufficient knowledge and experience as to be reasonably  capable of evaluating the risks of penny stock  transactions;  (iii) provide the investor with a written  statement setting forth the basis on which the  broker-dealer  made the  determination  in (ii) above;  and (iv) receive a signed and dated copy of such statement from the investor,  confirming  that it  accurately  reflects  the  investor's  financial situation,  investment  experience and investment  objectives.  Compliance with these requirements may make it more difficult for the Company's stockholders to resell their shares to third parties or to otherwise dispose of them.   24   Stock Price Fluctuations  The market price of our common stock could be subject to significant fluctuations. Among the factors that could affect our stock price are:  - negative results from our research efforts, future clinical or pre-clinical studies or adverse FDA decisions related to our product candidates; - speculation in the press or investment community; - strategic actions by us or our competitors, such as acquisitions or restructurings; - low average daily trading volumes; - general market conditions, and - numerous other factors unrelated to our performance.  The stock markets in general and the markets for biotechnology stocks in particular, have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock.  Independent Directors  We cannot guarantee our Board of Directors will have a majority of independent directors in the future. In the absence of a majority of independent directors, our executive officers, who are also principal stockholders and directors, could establish policies and enter into transactions without independent review and approval thereof. This could present the potential for a conflict of interest between the Company and its stockholders generally and the controlling officers, stockholders or directors.  Environmental Matters  The Company believes it conducts its business in compliance with all environmental laws presently applicable to its facilities. To date, there have been no expenses incurred by the Company related to environmental issues.  ITEM 3.   Controls and Procedures  Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.  An evaluation was performed under the supervision of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures (as defined in Securities Exchange Act of 1934 (the Exchange Act) Rules 13a-15(e) and 15d-15(e) as of the end of the period covered by this report. Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.  Notwithstanding the foregoing, there can be no assurance that our disclosure controls and procedures will detect or uncover all failures of persons associated with us to disclose material information otherwise required to be set forth in our periodic reports. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Because of its inherent limitations, internal control over financial reporting may not prevent or detect  25   misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Accordingly, even effective disclosure controls and procedures can only provide reasonable, not absolute, assurance of achieving their control objectives.  There have been no significant changes in internal controls, or in factors that could significantly affect internal controls, subsequent to the date that management, including the Chief Executive Officer and the Chief Financial Officer, completed their evaluation  26   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 and Reports on Form 8-K  (a) Exhibits  31.1 Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)  31.2 Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)  32.1 Certification by the Chief Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  32.2 Certification by the Chief Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  (b) Reports on Form 8-K  April 7, 2006:On April 3, 2006, the Company announced the appointment of Mr. Greg Wujek as Director, President and Chief Executive Officer. On April 6, 2006, the Company entered into an employment agreement with its President and Chief Executive Officer, Mr. Greg Wujek.  April 21, 2006: On April 18, 2006, PhytoMedical Technologies, Inc. issued a news release to announce that a new study presented at Experimental Biology 2006 provided further new evidence of the beneficial effects and biochemical actions of certain compounds in cinnamon that improve insulin function, lower blood sugar levels and triglycerides (fatty acids in blood), and also act as anti-inflammatory agents, which may be useful in preventing or mitigating arthritis, allergies as well as other inflammatory diseases such as cardiovascular diseases.  April 27, 2006:On April 25, 2006, PhytoMedical Technologies, Inc. issued a news release to announce its research into novel, insulin enhancing treatments will actively focus on the development of a new class of specific polyphenolic compounds which possess unique antioxidant and insulin enhancing qualities, distinct from existing classes of drugs for diabetes.  May 19, 2006: On May 16, 2006, PhytoMedical Technologies, Inc. issued a news release to announce that research and development of the Companys proprietary BDC-03 compound has been expanded to include investigations of High Density Lipoproteins (HDL), shown in a study to be favorably elevated by BDC-03.   27   June 7, 2006:  On May 30, 2006, PhytoMedical Technologies, Inc. issued a news release to announce that Dr. Bruce D. Cherksey has exercised his option to acquire a 12.50 percent equity stake in the Companys wholly-owned subsidiary, PhytoMedical Technologies Corporation, pursuant to an exclusive, worldwide licensing agreement.  June 16, 2006:PhytoMedical Technologies, Inc., through its wholly owned subsidiary, PolyPhenol Technologies Corporation has entered into an exclusive license agreement with Iowa State University Research Foundation Inc.  (ISURF) to develop, market and distribute novel synthesized compounds derived from type A-1 polyphenols.   28   SIGNATURES  Pursuant to the requirements of Sections 13 or 15 (d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned,  thereunto duly  authorized on this 31st day of July, 2006.    PhytoMedical Technologies, Inc. (Registrant)   Date Signature Title  July 31, 2006 /s/ Greg Wujek Director,  President, CEO Greg Wujek   July 31, 2006 /s/ Harmel S. Rayat Director , Chief Financial Officer Harmel S. Rayat Principal Financial Officer  29