UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

____________________



FORM 10-Q



(Mark One)



XQUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For quarterly period ended June 30, 2009



___        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the transition period from ___________to___________



Commission file number 000-28790





PHYTOMEDICAL TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)



Nevada
     87-0429962(State or other jurisdiction of
     (I.R.S. Employerincorporation or organization)
     Identification No.)100 Overlook Drive, 2nd Floor
     08540Princeton, New Jersey
     (Zip Code)(Address of principal executive offices)




(800) 611-3388

(Registrants telephone number, including area code)



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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.  YesTNoo.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



Large accelerated filer
     
     
     Accelerated filer
     Non-accelerated filer (Do not check if a smaller reporting company)
     
     
     Smaller reporting company
     x




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

Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date: 200,398,290 shares of Common Stock, par value $0.00001, were outstanding on August 1, 2009.






|                                                                      |                                                                 |   
|--------------------------------------------------------------------- | --------------------------------------------------------------- | --
|                                                                      | PHYTOMEDICAL TECHNOLOGIES, INC.                                 |   
|                                                                      | FORM 10-Q                                                       |   
|                                                                      | For the Quarterly Period Ended June 30, 2009                    |   
|                                                                      | Table of Contents                                               |   
|                                                                     
|                                                                      | PART I FINANCIAL INFORMATION                                    |   
|Item 1.                                                               | Consolidated Financial Statements (Unaudited).                  |   
|Consolidated Balance Sheets (Unaudited)                               | 3                                                              
|Consolidated Statements of Operations (Unaudited)                     | 4                                                              
|Consolidated Statements of Stockholders Equity (Deficit) (Unaudited) | 5                                                              
|Consolidated Statements of Cash Flows (Unaudited)                     | 6                                                              
|Notes to Consolidated Financial Statements (Unaudited)                | 7                                                              
|Item 2.                                                               | Management's Discussion and Analysis of Financial Condition and |   
|                                                                      | Results of Operations.                                          | 14
|Item 4T.                                                              | Controls and Procedures.                                        | 21
|                                                                      | PART II OTHER INFORMATION                                       |   
|Item 1.                                                               | Legal Proceedings.                                              | 22
|Item 2.                                                               | Unregistered Sales of Equity Securities and Use of Proceeds.    | 22
|Item 3.                                                               | Defaults Upon Senior Securities.                                | 22
|Item 4.                                                               | Submission of Matters to a Vote of Security Holders.            | 22
|Item 5.                                                               | Other Information.                                              | 22
|Item 6.                                                               | Exhibits.                                                       | 22
|Signatures                                                            |                                                                
|Certifications                                                        |                                                                

---



PART I - FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (Unaudited)

PHYTOMEDICAL TECHNOLOGIES, INC.CONSOLIDATED BALANCE SHEETSJune 30, 2009 and December 31, 2008(Expressed in U.S. Dollars)(Unaudited)June 30,
     
     December 31,2009
     
     2008ASSETSCurrent assetsCash and cash equivalents
     $
     376,564
     $
     665,833Deferred research and development costs
     
     23,960
     
     -Prepaid expenses and other current assets
     
     2,527
     
     2,260Total current assets
     
     403,051
     
     668,093Intangible assets - license fees
     
     15,000
     
     15,000Total assets
     $
     418,051
     $
     683,093LIABILITIES AND STOCKHOLDERS' DEFICITCurrent liabilitiesAccounts payable
     $
     8,427
     $
     23,397Interest payable
     
     275,086
     
     243,473Notes payable
     
     750,000
     
     750,000Total current liabilities
     
     1,033,513
     
     1,016,870Long-term liabilitiesWarrant liability
     
     124,757
     
     -Total long-term liabilities
     
     124,757
     
     -Total liabilities
     
     1,158,270
     
     1,016,870Commitments and ContingenciesStockholders' deficitPreferred stock: $0.25 par value; 1,000,000 authorized, no shares issued and outstanding at June 30, 2009 and December 31, 2008
     
     -
     
     -Common stock: $0.00001 par value; 300,000,000 authorized, 200,398,290 shares issued and outstanding at June 30, 2009 and December 31, 2008
     
     2,004
     
     2,004Additional paid-in capital
     
     25,087,220
     
     26,285,899Accumulated other comprehensive loss
     
     -
     
     (523)Accumulated deficit
     
     (25,829,443)
     
     (26,621,157)Total stockholders' deficit
     
     (740,219)
     
     (333,777)Total liabilities and stockholders' deficit
     $
     418,051
     $
     683,093(The accompanying notes are an integral part of these consolidated financial statements)




3

---



PHYTOMEDICAL TECHNOLOGIES, INC.CONSOLIDATED STATEMENTS OF OPERATIONSFOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008(Expressed in U.S. Dollars)(Unaudited)Three Months Ended
     
     Six Months EndedJune 30,
     
     June 30,2009
     
     2008
     
     2009
     
     2008Revenue
     $
     -
     $
     -
     $
     -
     $
     -Operating expensesDirectors fees - related party
     
     1,500
     
     -
     
     3,200
     
     3,150Investor relations
     
     1,408
     
     63,015
     
     1,408
     
     485,545Wages and benefits
     
     66,776
     
     109,586
     
     134,680
     
     190,107Research and development
     
     14,416
     
     78,699
     
     32,739
     
     227,951Professional fees
     
     28,323
     
     39,942
     
     73,330
     
     62,036Other operating expenses
     
     1,648
     
     20,469
     
     4,715
     
     81,789Total operating expenses
     
     114,071
     
     311,711
     
     250,072
     
     1,050,578Loss from operations
     
     (114,071)
     
     (311,711)
     
     (250,072)
     
     (1,050,578)Other income (expense)Interest income
     
     -
     
     4,751
     
     -
     
     18,152Interest expense
     
     (15,894)
     
     (19,696)
     
     (31,613)
     
     (45,993)Change in fair value of warrant liability
     
     54,507
     
     -
     
     (100,654)
     
     -Loss on dissolution of foreign subsidiary
     
     -
     
     -
     
     (523)
     
     -Foreign exchange loss
     
     -
     
     (2,007)
     
     -
     
     (3,578)Total other income (expense)
     
     38,613
     
     (16,952)
     
     (132,790)
     
     (31,419)Net loss
     $
     (75,458)
     $
     (328,663)
     $
     (382,862)
     $
     (1,081,997)Net loss per common share - basic and diluted
     $
     (0.00)
     $
     (0.00)
     $
     (0.00)
     $
     (0.01)Weighted average number of common sharesoutstanding - basic and diluted
     
     200,398,290
     
     200,398,290
     
     200,398,290
     
     200,398,290




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

4

---



PHYTOMEDICAL TECHNOLOGIES, INC.CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND YEAR ENDED DECEMBER 31, 2008(Expressed in U.S. Dollars)(Unaudited)Accumulated
 Other
     
     
     
     
     
     TotalCommon Stock
     
     Additional
     
     Comprehensive
     
     Accumulated
     
     Comprehensive
     
     Stockholders'Shares
     
     Amount
     
     Paid-in Capital
     
     (Loss) Income
     
     Deficit
     
     Loss
     
     Equity (Deficit)Balance, December 31, 2007
     200,398,290
     
     $                2,004
     
     $                  26,272,275
     
     $                               1
     
     $          (25,060,356)
     
     $                             -
     
     $            1,213,924Stock based compensation expense
     -
     
     -
     
     13,624
     
     -
     
     -
     
     -
     
     13,624Comprehensive income (loss)Foreign currency translation adjustments
     -
     
     -
     
     -
     
     (524)
     
     -
     
     (524)
     
     (524)Net loss, year ended December 31, 2008
     -
     
     -
     
     -
     
     -
     
     (1,560,801)
     
     (1,560,801)
     
     (1,560,801)Total comprehensive loss
     
     
     
     
     
     
     
     
     
     
     (1,561,325)Balance, December 31, 2008
     200,398,290
     
     2,004
     
     26,285,899
     
     (523)
     
     (26,621,157)
     
     -
     
     (333,777)Cumulative adjustment upon adoption of EITF 07-5
     -
     
     -
     
     (1,198,679)
     
     -
     
     1,174,576
     
     -
     
     (24,103)Comprehensive income (loss)Loss on dissolution of foreign subsidiary
     -
     
     -
     
     -
     
     523
     
     -
     
     523
     
     523Net loss, six months ended June 30, 2009
     -
     
     -
     
     -
     
     -
     
     (382,862)
     
     (382,862)
     
     (382,862)Total comprehensive loss
     
     
     
     
     
     
     
     
     
     
     $                (382,339)Balance, June 30, 2009
     200,398,290
     
     $                2,004
     
     $                  25,087,220
     
     $                                -
     
     $          (25,829,443)
     
     
     
     $              (740,219)(The accompanying notes are an integral part of these consolidated financial statements)




5

---

PHYTOMEDICAL TECHNOLOGIES, INC.CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE SIX MONTHS ENDED JUNE 30, 2009(Expressed in U.S. Dollars)(Unaudited)Six Months EndedJune 30,2009
     
     2008Cash flows from operating activitiesNet loss
     $
     (382,862)
     $
     (1,081,997)Adjustments to reconcile net loss to net cash used in operating activitiesDepreciation
     
     -
     
     2,022Change in fair value of warrant liability
     
     100,654
     
     -Stock based compensation
     
     -
     
     13,624Loss on dissolution of foreign subsidiary
     
     523
     
     -Changes in operating assets and liabilities:Increase in deferred research and development costs
     
     (23,960)
     
     -Increase in prepaid expenses and other current assets
     
     (267)
     
     (1,729)Increase (decrease) in accounts payable
     
     (14,970)
     
     1,881Increase in accrued liabilities
     
     -
     
     7,425Increase (decrease) in interest payable
     
     31,613
     
     (22,232)Net cash used in operating activities
     
     (289,269)
     
     (1,081,006)Cash flows from investing activitiesPurchase of equipment
     
     -
     
     (6,173)Net cash used in investing activities
     
     -
     
     (6,173)Cash flows from financing activitiesRepayment of loan to stockholder
     
     -
     
     (250,000)Net cash used in financing activities
     
     -
     
     (250,000)Effect of foreign exchange rate
     
     -
     
     515Decrease in cash and cash equivalents
     
     (289,269)
     
     (1,336,664)Cash and cash equivalents at beginning of period
     
     665,833
     
     2,434,230Cash and cash equivalents at end of period
     $
     376,564
     $
     1,097,566Supplemental disclosure of cash flow information:Interest paid in cash
     $
     -
     $
     68,226Income tax paid in cash
     $
     -
     $
     -


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

6

---



PHYTOMEDICAL TECHNOLOGIES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



June 30, 2009

(Expressed in U.S. Dollars)

(Unaudited)

Note 1. Organization and Nature of Operations

PhytoMedical Technologies, Inc. was incorporated in the State of Nevada on July 25, 2001; and together with its wholly owned subsidiaries PhytoMedical Technologies Corporation (PhytoMedical Corp.), PolyPhenol Technologies Corporation (PolyPhenal) and PhytoMedical Technologies Ltd. (PhytoMedical Ltd.) is a pharmaceutical company focused on research, development and commercialization of pharmaceutical products. PhytoMedical Corp. was incorporated on March 10, 2004 in the State of Nevada and has no assets and liabilities. PolyPhenal was incorporated on August 24, 2004 in the State of Nevada and has no assets and liabilities. PhytoMedical Ltd. was incorporated on April 11, 2007 in the Province of British Columbia, Canada for providing administrative services to the Companys Canada office. The Company ceased to conduct business in Canada on August 31, 2008 and closed this office. As a result, the Company dissolved PhytoMedical Ltd. and eliminated all intercompany balances, effective January 1, 2009.

PhytoMedical Technologies, Inc., together with its wholly owned subsidiaries, is a pharmaceutical company focused on research, development and commercialization of pharmaceutical products.

Note 2. Going Concern Uncertainties

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has incurred cumulative losses of $25,829,443 through June 30, 2009, does not have positive cash flows from operating activities, and had negative working capital of $630,462 as of June 30, 2009. Additionally, the Company has expended a significant amount of cash in developing its technology. 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. These conditions raise substantial doubt about the Companys ability to continue as a going concern. Management recognizes that in order to meet the Companys capital requirements, and continue to operate, additional financing will be necessary. The Company expects to raise additional funds through private or public equity investments in order to expand the range and scope of its business operations. The Company will seek access to private or public equity but there is no assurance that such additional funds will be available for the Company to finance its operations on acceptable terms, if at all. If the Company is unable to raise additional capital or generate positive cash flow, it is unlikely that the Company will be able to continue as a going concern.

These consolidated financial statements do not give effect to any adjustments which will 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 consolidated financial statements.

Note 3. Presentation of Interim Information

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with Form 10-Q instructions and in the opinion of management of PhytoMedical Technologies, Inc., include all adjustments (of a normal recurring nature) considered necessary to present fairly the financial position of the Company as of June 30, 2009 and December 31, 2008 and the related results of operations, stockholders equity (deficit), and cash flows for the three and six months ended June 30, 2009 and 2008. 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 2008 Annual Report on Form 10-K.

Certain information and footnote disclosures normally included in the quarterly 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 consolidated financial statements and notes thereto incorporated by reference in the Companys 2008 Annual Report on Form 10-K.

Recently Issued Accounting Standards

In June 2009, the Financial Accounting Standards Board (FASB) issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principals (SFAS 168), as the single source of authoritative nongovernmental U.S. generally accepted accounting principles (GAAP). All existing accounting standards documents are superseded as described in SFAS 168 and all other accounting literature not included in SFAS 168 is nonauthoritative. SFAS 168

7

---



is effective for interim and annual periods ending after September 15, 2009. The Company will adopt SFAS 168, effective July 1, 2009, the beginning of its third quarter ended September 30, 2009.

In May 2009, the FASB issued SFAS No. 165, Subsequent Events (SFAS 165), which defines and establishes the period after the balance sheet date during which management of a reporting entity evaluates transactions and events for potential disclosure in the financial statements in addition to disclosing the date through which such events have been evaluated. SFAS 165 is effective for financial statements issued for fiscal years and interim periods ending after June 15, 2009 and is to be applied prospectively. The adoption of SFAS 165 did not have a material impact on the Companys consolidated financial position, results of operations, or cash flows. In accordance with SFAS 165, the Company has evaluated subsequent events through August 13, 2009, which is the date on which these financial statements were issued.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157), which establishes a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. In February 2008, the FASB issued FASB Staff Position No. 157-2, Effective Date of FASB Statement 157 (FSP 157-2), which allows for the deferral of the adoption date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. The Company adopted SFAS 157 for the assets and liabilities within the scope of FSP 157-2 on January 1, 2009, the beginning of its fiscal year 2009. The adoption of SFAS 157 for non-financial assets and liabilities did not have a material impact on the Companys consolidated financial statements. In October 2008, the FASB issued SFAS Staff Position No. 157-3, Determining the Fair Value of a Financial Asset in a Market That Is Not Active (FSP 157-3), which clarifies the application of SFAS 157 when the market for a financial asset is inactive. The guidance in FSP 157-3 was effective immediately and did not have a material effect on the Companys consolidated financial statements. In April 2009, the FASB issued FASB Staff Position No. 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (FSP 157-4), which provides additional guidance in determining when observable transaction prices or quoted prices in markets that have become less active require significant adjustments to estimate fair value. FSP 157-4 supersedes FSP 157-3 and is to be applied prospectively and is effective for interim and annual periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009. The Company adopted FSP 157-4 on April 1, 2009, the beginning of its second quarter ended June 30, 2009. The application of FSP 157-4 did not have a material effect on the Companys consolidated financial statements.

In April 2009, the FASB issued FSP 107-1 and Accounting Principles Board (APB) 28-1 "Interim Disclosures about Fair Value of Financial Instruments". FSP 107-1 amends SFAS 107 "Disclosures about Fair Value of Financial Instruments" to require an entity to provide disclosures about fair value of financial instruments in interim financial information. FSP 107-1 is to be applied prospectively and is effective for interim and annual periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009. The Company has included the required disclosures pursuant to FSP 107-1 in this Form 10-Q for the quarter ended June 30, 2009.

In June 2008, the FASB ratified EITF Issue No. 07-5, "Determining Whether an Instrument (or an Embedded Feature) Is Indexed to an Entity's Own Stock" (EITF 07-5). EITF 07-5 provides that an entity should use a two step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument's contingent exercise and settlement provisions. It also clarifies the impact of foreign currency denominated strike prices and market-based employee stock option valuation instruments on the evaluation. EITF 07-5 is effective for fiscal years beginning after December 15, 2008. The Company adopted EITF 07-5 on January 1, 2009. See Note 11. Warrants for disclosure of the impact that EITF 07-5 had on the Companys consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an Amendment of Accounting Research Bulletin No 51 (SFAS 160). SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, changes in a parents ownership of a noncontrolling interest, calculation and disclosure of the consolidated net income attributable to the parent and the noncontrolling interest, changes in a parents ownership interest while the parent retains its controlling financial interest and fair value measurement of any retained noncontrolling equity investment. SFAS 160 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. The Company adopted SFAS 160 on January 1, 2009, the beginning of its fiscal year 2009. SFAS 160 did not have a material effect on the Companys consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141R, Business Combinations (SFAS 141R), which establishes principles and requirements for the reporting entity in a business combination, including recognition and measurement in the financial statements of the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period on or after December 15, 2008, and interim periods within those fiscal years. The Company adopted SFAS 160 on January 1, 2009, the beginning of its fiscal year 2009. SFAS 141R did not have a material effect on the Companys consolidated financial statements.

Note 4. Net Loss per Share

8

---



Basic net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing the net loss by the weighted average number of common and dilutive common equivalent shares outstanding during the period. As the Company had a net loss in each of the periods presented, basic and diluted net loss per share are the same.

Excluded from the computation of diluted net loss per share for the three and six months ended June 30, 2009 and 2008, because their effect would be antidilutive, are stock options and warrants to acquire 12,897,081 shares of common stock with a weighted-average exercise price of $0.42 per share.

For purposes of earnings per share computations, shares of common stock that are issuable at the end of a reporting period are included as outstanding.

Following is the computation of basic and diluted net loss per share for the three and six months ended June 30, 2009 and 2008:

Three Months Ended
     
     Six Months EndedJune 30,
     
     June 30,2009
     
     2008
     
     2009
     
     2008Numerator - net loss
     
     $                 (75,458)
     
     $         (328,663)
     
     $               (382,862)
     
     $      (1,081,997)Denominator - weighted average numberof common shares outstanding - basic and diluted
     200,398,290
     
     200,398,290
     
     200,398,290
     
     200,398,290Basic and diluted net loss per common share
     $                     (0.00)
     
     $               (0.00)
     
     $                     (0.00)
     
     $               (0.01)




|Note 5. Iowa State University Sponsored Research AgreementIowa State University Sponsored Research Agreement
|------------------------------------------------------------------------------------------------------------

On February 1, 2007, the Company, through its wholly owned subsidiary, PolyPhenol Technologies Corporation, entered into a Sponsored Research Agreement with Iowa State University (ISU). Under terms of the agreement, the Company continued to undertake its research at ISU for development of the Companys novel, synthesized type A-1 polyphenolic compounds. On January 6, 2009, the Company provided written notice to ISU terminating the Sponsored Research Agreement between the Company and ISU. The termination was effective March 6, 2009.

Contractual Obligations under the ISU Sponsored Research Agreement were as follows:

Year 1: $62,251 (paid as of March 31, 2009) to ISU in 4 quarterly installments, the first of which was due within 30 days of signing of the Sponsored Research Agreement, the second of which was due to ISU 3 months from the previous payment;

Year 2: $70,295 ($52,721 of which was paid as of March 31, 2009) to ISU in 4 quarterly installments, the first of which was due to ISU 3 months from the previous payment; and

Year 3: $72,140 to ISU in 4 quarterly installments, the first of which was due to ISU 3 months from the previous payment.

Upon written notice of termination of the Sponsored Research Agreement to ISU on January 6, 2009, the Company was current with respect to all contractual obligations owed to ISU pursuant to the Sponsored Research Agreement.

As of June 30, 2009, the Company had paid a total of $114,972 pursuant to the terms of the ISU Sponsored Research Agreement. The Company did not incur any research and development expense pursuant to the terms of the ISU Sponsored Research Agreement during the three and six months ended June 30, 2009. During the three and six months ended June 30, 2008 the Company incurred $17,574 and $33,137 pursuant to the terms of the ISU Sponsored Research Agreement. In addition to contractual obligations pursuant to the ISU Sponsored Research Agreement, the Company reimbursed ISU $0 and $414 during the three and six months ended June 30, 2008 for other out-of-pocket costs that are included in research and development expense.

Note 6. Iowa State University Research Foundation License Agreement

9

---



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 the USDA's Agricultural Research Service. On January 6, 2009, the Company gave written notice to ISURF, terminating the License Agreement between the Company and ISURF, effective April 6, 2009.

Under terms of the license agreement, the Company had to pay ISURF license fees, of which $20,000 was payable (paid) within 30 days of execution of the agreement, $50,000 was payable upon completion of the first successful Phase 2 clinical trial and the remaining $250,000 was payable upon first approval by the regulatory authority on new drug application. The Company also had 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.

Upon written notice of termination of the license agreement to ISURF on January 6, 2009, the Company was current with respect to all contractual obligations owed to ISURF pursuant to the license agreement.

As of June 30, 2009, the Company had paid a total of $20,000 to ISURF for the license fee and $31,223 for reimbursement of patent costs and research expenses as per agreement with ISURF, none of which is included in research and development expense for the three and six months ended June 30, 2009 and 2008.

Note 7. Ricerca Development Agreements

The Company utilizes Ricerca BioSciences LLC (Ricerca) as a research vendor, on an as needed basis, to assist in the development of the Companys technologies. The terms and scope of the work that Ricerca performs is in accordance with formalized statements of work.

During the three and six months ended June 30, 2009 the Company incurred $0 and $5,400 for services provided by Ricerca, which is included in research and development expense. During the three and six months ended June 30, 2008 the Company incurred $48,500 and $89,600 for services provided by Ricerca, which is included in research and development expense.

Note 8. Dartmouth Sponsored Research Agreement

On May 25, 2007, the Company entered into a Sponsored Research Agreement with Dartmouth College (Dartmouth), in the area of cancer research, specifically furthering research and development of anti-tumor bis-acridines. The Sponsored Research Agreement with Dartmouth was amended on October 1, 2008 extending it to September 30, 2009. Dartmouth granted the Company the option of a world-wide, royalty-bearing exclusive license to make, have made, use and sell in the field of oncology, the products embodying or produced through Dartmouths previous and future patents and through any joint-inventions related to the agreement, at reasonable terms and conditions as the parties may agree.

The Company will reimburse Dartmouth for all costs associated with obtaining and maintaining Dartmouths pre-existing patents related to the subject technology.

As of June 30, 2009, the Company has paid a total of $208,510 pursuant to the Sponsored Research Agreement with Dartmouth and $1,253 for reimbursement of expenses, of which $13,003 and $24,753 is included in research and development expense for the three and six months ended June 30, 2009 and $11,375 and $103,550 is included in research and development expense for the three and six months ended June 30, 2008.

Note 9. Dartmouth License Agreement

On September 1, 2008, the Company entered into an exclusive license agreement with the Trustees of Dartmouth College (DC) to develop, market and distribute a novel class of synthesized compounds known as bis-intercalators. These anti-cancer agents which have a cytotoxic or poisonous affinity for cancer cells, and are designed to bind tightly to cancer cell DNA (deoxyribonucleic acid), the blueprint of life for the cancer cell.

Under the terms of the license agreement, the Company has to pay license fees to DC based upon milestones, in addition to an upfront payment of $15,000 (paid) within 30 days of execution of the agreement. In addition, DC will receive royalty payments on the net sales of products. The Company will pay an annual royalty throughout the duration of the agreement. The Company also has to reimburse DC the costs incurred for filing, prosecuting and maintaining the licensed patents. The Company will administer the development, regulatory approval, and commercialization of the compounds and pursue future collaborative arrangements.

The Company submitted a Confidential Treatment (CT) Request with the United States Securities and Exchange Commission (the SEC) on October 22, 2008. On March 9, 2009, the SEC granted the confidential treatment of the Dartmouth License

10

---



Agreement to the Company. Accordingly, the terms of the license agreement do not need to be released to the public until August 5, 2013.

Note 10. Stock Options

On July 12, 2001, the Company approved its 2001 Stock Option Plan (the 2001 Plan), which has 10,000,000 shares reserved for issuance thereunder, all of which were registered under Form S-8 on October 2, 2003. On July 25, 2005, the Company approved its 2005 Stock Option Plan (the 2005 Plan), which has 15,000,000 shares reserved for issuance thereunder. The 2001 Plan and 2005 Plan provides shares available for options granted to employees, directors and others. The options granted to employees under the Companys option plans generally vest over two to five years or as otherwise determined by the plan administrator. Options to purchase shares expire no later than ten years after the date of grant.

A summary of the Companys stock option activity for the six months ended June 30, 2009 and related information follows:

WeightedAverageRemaining
     
     AggregateWeighted Average
     
     Contractual
     
     IntrinsicNumber of Options
     
     Exercise Price
     
     Term
     
     ValueOutstanding at December 31, 2008 and June 30, 2009
     
     2,000,000
     
     $                          0.52
     
     7.09 years
     
     $                    -Exercisable at June 30, 2009
     
     -Available for grant at June 30, 2009
     
     20,250,000


The aggregate intrinsic value in the table above represents the total pretax intrinsic value for all in-the-money options (i.e. the difference between the Companys closing stock price on the last trading day of the period and the exercise price, multiplied by the number of shares) that would have been received by the option holders had all option holders exercised their options on June 30, 2009. The intrinsic value changes based on the fair market value of the Companys common stock.

At June 30, 2009 and December 31, 2008 the Company had unvested stock options to purchase 2,000,000 shares of the Companys common stock at a grant date fair value per share of $0.48.

During the three and six months ended June 30, 2009 no stock-based compensation expense was recognized for stock options previously granted. During the three and six months ended June 30, 2008, stock-based compensation expense of $0 and $13,624 was recognized for options previously granted, which is included in wages and benefits. As of June 30, 2009, the Company had no unrecognized compensation cost related to unvested stock options.

The following table summarizes information about stock options outstanding and exercisable at June 30, 2009:

Stock Options Outstanding
     
     
     
     
     
     Stock Options ExercisableWeighted
     
     
     
     
     
     WeightedAverage
     
     Weighted
     
     
     
     Average
     
     WeightedNumber of
     
     Remaining
     
     Average
     
     Number of
     
     Remaining
     
     AverageOptions
     
     Contractual
     
     Exercise
     
     Options
     
     Contractual
     
     ExerciseExercise Price
     
     Outstanding
     
     Life (Years)
     
     Price
     
     Exercisable
     
     Life (Years)
     
     Price$
     0.52
     
     
     2,000,000
     
     7.09
     $
     0.52
     
     
     
     
     $
     


The Company does not repurchase shares to fulfill the requirements of stock options that are exercised. Further, the Company issues new shares when stock options are exercised.

Note 11. Warrants

On September 25, 2007, PhytoMedical completed a $3,205,000 private placement (the 2007 Private Placement), for which Palladium Capital, LLC (Palladium"), acted as the exclusive placement agent. The 2007 Private Placement consisted of the sale of 10,683,333 units (the "Units") at a price of $0.30 per Unit (the "Unit Issue Price") or $3,205,000 in the aggregate. The Units were offered and sold to 13 accredited investors (the Investors) as defined in Regulation D as promulgated under the Securities

11

---



Act of 1933, as amended. Each Unit consisted of one share of common stock and one Class A warrant (Class A Warrant) at an exercise price of $0.40, expiring September 25, 2010. The Company issued 10,683,331 Class A Warrants pursuant to the terms of the 2007 Private Placement and 213,750 to the agent as commission (under the same terms), for a total of 10,897,081 Class A Warrants.

The terms of the Class A Warrants that were issued pursuant to the 2007 Private Placement contain a provision such that upon subsequent equity sales of common stock or common stock equivalents at an effective price per share (the Base Share Price) less than the $0.40 exercise price per share of the Class A Warrants then the exercise price of the Class A Warrants shall be reduced to the Base Share Price and the number of Class A Warrants shall be increased such that the aggregate exercise price payable, after taking into account the decrease in the exercise price shall be equal to the aggregate exercise price prior to such adjustment (Dilutive Issuance). The potential adjustment to the Class A Warrant exercise price and number of underlying shares of common stock results in a settlement amount that does not equal the difference between the fair value of a fixed number of the Companys common stock and a fixed exercise price. Accordingly, the Class A Warrants fall under the scope of EITF 07-5 pursuant to which the Class A Warrants are not considered indexed to the Companys own stock and do not meet the scope exception in paragraph 11(a) of FASB 133 and therefore need to be accounted for as a derivative, effective January 1, 2009, the beginning of the Companys fiscal year 2009. As of June 30, 2009, the Company has not sold any shares of common stock or common stock equivalents that would result in an adjustment to the exercise price or number of shares of common stock underlying the Class A Warrants.

The fair value of the Class A Warrants at the grant date as calculated using the Black-Scholes model was $2,724,270. The proceeds from the 2007 Private Placement allocated to the Class A Warrants were $1,198,679.

As of June 30, 2009 there were 10,897,081 Class A Warrants outstanding.

Warrant Liability

On January 1, 2009, the Company adopted EITF 07-5, Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entitys Own Stock. The Company determined that its Class A Warrants contained a Dilutive Issuance provision. As a result, the Company reclassified 10,897,081 of its Class A Warrants to warrant liability, under long-term liabilities, resulting in a cumulative adjustment to accumulated deficit as of January 1, 2009 of $1,174,576.

The Company accounts for its warrant liability in accordance with SFAS 157. SFAS 157 emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, SFAS 157 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entitys own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

The Company has valued its warrant liability at June 30, 2009 using a Black-Scholes model (Level 3 inputs) containing the following assumptions: dividend yield of 0%, expected volatility of 158.21%, risk-free interest rate of 0.56%, and expected term of 1.25 years. The Company recorded a non-cash gain related to the Class A Warrants of $54,507 for the three months ended June 30, 2009 and a non-cash loss of $100,654 for the six months ended June 30, 2009.

The following reconciles the warrant liability for the six months ended June 30, 2009:

Beginning Balance, Janary 1, 2009
     $
     24,103Change in fair value of warrant liability
     
     100,654Ending Balance, June 30, 2009
     $
     124,757




|Note 12. Related Party TransactionsWages and benefits
|-----------------------------------------------------

During the three and six months ended June 30, 2009, the Company incurred $66,776 and $134,680 in cash wages and benefits expense for services rendered by Mr. Greg Wujek, the President, Chief Executive Officer, and Director of the Company. During the three and six months ended June 30, 2008, the Company incurred $66,192 and $133,089 in cash wages and benefits expense for services rendered by Mr. Wujek.

12

---



During the six months ended June 30, 2008, the Company also recorded $13,624 in stock based compensation expense related to the amortization of a stock option previously granted to Mr. Wujek to purchase 2,000,000 shares of the Companys common stock at an exercise price of $0.52 per share, which is included in wages and benefits.

Director fees

During the three and six months ended June 30, 2009, the Company incurred $1,500 and $3,200 in non-employee director fees. During the three and six months ended June 30, 2008, the Company incurred $0 and $3,150 in non-employee director fees.

Notes payable

The Company had arranged with Mr. Harmel S. Rayat, former Chief Financial Officer, Director, and majority shareholder of the Company, a loan amount up to $2,500,000 that may be drawn down on an as needed basis at a rate of prime plus 3%. Effective September 15, 2008, Mr. Rayat and the Company terminated this loan agreement. During the six months ended June 30, 2008, the Company repaid $250,000 to Mr. Rayat with the accrued interest of $67,664. At June 30, 2009, the Company had an unsecured promissory note pursuant to this loan agreement in the amount of $750,000 payable to Mr. Rayat, which was due on March 8, 2006 and bears interest at an annual rate of 8.50%. At June 30, 2009, accrued interest on the $750,000 remaining promissory note was $275,086 and is included in interest payable. The entire principal and accrued interest is due and payable on demand. The carrying value of notes payable and accrued interest approximates fair value at June 30, 2009, based on their liquidity.

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 13. Subsequent Events

In accordance with SFAS 165, the Company has evaluated subsequent events through August 13, 2009, which is the date on which these financial statements were issued.  There have not been any events subsequent to June 30, 2009, other than the agreement with Latitude Pharmaceuticals, Inc. as disclosed in the following paragraph, that would require additional disclosure in the financial statements or that would have a material impact on the Companys consolidated financial position, results of operations, or cash flows for the three and six months ended June 30, 2009 and 2008.

On July 6, 2009, the Company entered into an agreement with Latitude Pharmaceuticals, Inc. (Latitude) in which Latitude will develop an intravenous formulation for D11B for the Company to use in its preclinical toxicology evaluation and possibly early stage human clinical trials.  The total project fee is $46,800 of which 50% is due upon initiation of the project and the remaining 50% upon completion of the project.

13

---



Item 2. Managements discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

Except for the historical information presented in this document, the matters discussed in this Form 10-Q for the three and six months ended June 30, 2009, 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-Q 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-Q. 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-Q 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. was incorporated in the State of Nevada on July 25, 2001; and together with its wholly owned subsidiaries PhytoMedical Technologies Corporation (PhytoMedical Corp.), PolyPhenol Technologies Corporation (PolyPhenal) and PhytoMedical Technologies Ltd. (PhytoMedical Ltd.) is a pharmaceutical company focused on research, development and commercialization of pharmaceutical products. PhytoMedical Corp. was incorporated on March 10, 2004 in the State of Nevada and has no assets and liabilities. PolyPhenal was incorporated on August 24, 2004 in the State of Nevada and has no assets and liabilities. PhytoMedical Ltd. was incorporated on April 11, 2007 in the Province of British Columbia, Canada for providing administrative services to the Companys Canada office. The Company ceased to conduct business in Canada on August 31, 2008 and closed this office. As a result, the Company dissolved PhytoMedical Ltd. and eliminated all intercompany balances, effective January 1, 2009.

PhytoMedical Technologies, Inc., together with its wholly owned subsidiaries, is a pharmaceutical company focused on research, development and commercialization of pharmaceutical products.

Because the Company is a smaller reporting company, certain disclosures otherwise required to be made in a Form 10-Q are not required to be made by the Company.

Cancer Research

Dartmouth Sponsored Research Agreement

Pursuant to the Companys Sponsored Research Agreement with Dartmouth College (Dartmouth), which was amended on October 1, 2008 extending it to September 30, 2009, it is synthesizing and testing a novel class of anti-cancer agents which have a cytotoxic or poisonous affinity for cancer cells, and are designed to bind tightly to cancer cell DNA (deoxyribonucleic acid), the blueprint of life for the cancer cell. Previous studies conducted by Dartmouth using a leukemia mouse cell line, have demonstrated that such binding (or intercalation) should stop the replication of the DNA, and, ultimately, lead to the death of the cancer cell. Following the preparation of starting materials, researchers will design, synthesize and test new examples of compounds known to bind to DNA, called bis-acridines; these bis-acridines will be tethered to the DNA with both flexible and semi-rigid linking chains. If successfully synthesized, the compounds will be submitted for evaluation in human cancer cell lines.

Depending on research outcomes, the Company plans to fund various in vitro (test tube) and in vivo (animal) experiments that will involve the use of several commercially available human cancer cell lines covering key areas of concern such as glioblastoma (tumors related to the central nervous system, including but not limited to the brain, spinal cord and optic nerve), small cell lung, breast, kidney, pancreatic, and liver cancers. The Companys goal, based on the results of both the in vitro and in vivo tests, will involve identification of the key compound(s) that demonstrated the greatest anti-cancer activity per human cancer cell line.

On February 3, 2009, PhytoMedical Technologies, Inc. issued a news release to announce results from recent in vivo efficacy and toxicity tests where the Companys patented anti-cancer compound was administered to specimens with difficult-to-treat human

14

---



brain cancer (SF295 glioblastoma xenografts) and, according to researchers, proved to be least toxic and effective in controlling the growth of SF295 human glioblastoma xenografts.

Based on the results, the Company is currently creating an Intra Venous (IV) formulation to be tested in vivo for efficacy and toxicity. Additionally the Company plans on conducting a pharmacologic study on the IV formulation.

Dartmouth granted the Company the option of a world-wide, royalty-bearing exclusive license to make, have made, use and sell in the field of oncology, the products embodying or produced through Dartmouths previous and future patents and through any joint-inventions related to the agreement, at reasonable terms and conditions as the parties may agree.

The Company will reimburse Dartmouth for all costs associated with obtaining and maintaining Dartmouths pre-existing patents related to the subject technology.

As of June 30, 2009, the Company has paid a total of $208,510 pursuant to the Sponsored Research Agreement with Dartmouth and $1,253 for reimbursement of expenses, of which $13,003 and $24,753 is included in research and development expense for the three and six months ended June 30, 2009 and $11,375 and $103,550 is included in research and development expense for the three and six months ended June 30, 2008.

Dartmouth License Agreement

On September 1, 2008, the Company entered into an exclusive license agreement with the Trustees of Dartmouth College (DC) to develop, market and distribute a novel class of synthesized compounds known as bis-intercalators. These anti-cancer agents which have a cytotoxic or poisonous affinity for cancer cells, and are designed to bind tightly to cancer cell DNA (deoxyribonucleic acid), the blueprint of life for the cancer cell.

Under the terms of the license agreement, the Company has to pay license fees to DC based upon milestones, in addition to an upfront payment of $15,000 (paid) within 30 days of execution of the agreement. In addition, DC will receive royalty payments on the net sales of products. The Company will pay an annual royalty throughout the duration of the agreement. The Company also has to reimburse DC the costs incurred for filing, prosecuting and maintaining the licensed patents. The Company will administer the development, regulatory approval, and commercialization of the compounds and pursue future collaborative arrangements.

The Company submitted a Confidential Treatment (CT) Request with the United States Securities and Exchange Commission (the SEC) on October 22, 2008. On March 9, 2009, the SEC granted the confidential treatment of the Dartmouth License Agreement to the Company. Accordingly, the terms of the license agreement do not need to be released to the public until August 5, 2013.

Diabetes Research

Iowa State University Sponsored Research Agreement

On February 1, 2007, the Company, through its wholly owned subsidiary, PolyPhenol Technologies Corporation, entered into a Sponsored Research Agreement with Iowa State University (ISU). Under terms of the agreement, the Company continued to undertake its research at ISU for development of the Companys novel, synthesized type A-1 polyphenolic compounds. On January 6, 2009, the Company provided written notice to ISU terminating the Sponsored Research Agreement between the Company and ISU. The termination was effective March 6, 2009.

Contractual Obligations under the ISU Sponsored Research Agreement were as follows:

Year 1: $62,251 (paid as of March 31, 2009) to ISU in 4 quarterly installments, the first of which was due within 30 days of signing of the Sponsored Research Agreement, the second of which was due to ISU 3 months from the previous payment;

Year 2: $70,295 ($52,721 of which was paid as of March 31, 2009) to ISU in 4 quarterly installments, the first of which was due to ISU 3 months from the previous payment; and

Year 3: $72,140 to ISU in 4 quarterly installments, the first of which was due to ISU 3 months from the previous payment.

Upon written notice of termination of the Sponsored Research Agreement to ISU on January 6, 2009, the Company was current with respect to all contractual obligations owed to ISU pursuant to the Sponsored Research Agreement.

As of June 30, 2009, the Company had paid a total of $114,972 pursuant to the terms of the ISU Sponsored Research Agreement. The Company did not incur any research and development expense pursuant to the terms of the ISU Sponsored Research

15

---



Agreement during the three and six months ended June 30, 2009. During the three and six months ended June 30, 2008 the Company incurred $17,574 and $33,137 pursuant to the terms of the ISU Sponsored Research Agreement. In addition to contractual obligations pursuant to the ISU Sponsored Research Agreement, the Company reimbursed ISU $0 and $414 during the three and six months ended June 30, 2008 for other out-of-pocket costs that are included in research and development expense.

Iowa State University Research Foundation 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 the USDA's Agricultural Research Service. On January 6, 2009, the Company gave written notice to ISURF terminating the License Agreement between the Company and ISURF. The termination is effective April 6, 2009.

Under terms of the license agreement, the Company had to pay to ISURF license fees, of which $20,000 was payable (paid) within 30 days of execution of the agreement, $50,000 was payable upon completion of the first successful Phase 2 clinical trial and the remaining $250,000 was payable upon first approval by the regulatory authority on new drug application. The Company also had 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.

Upon written notice of termination of the license agreement to ISURF on January 6, 2009, the Company was current with respect to all contractual obligations owed to ISURF pursuant to the license agreement.

As of June 30, 2009, the Company had paid a total of $20,000 to ISURF for the license fee and $31,223 for reimbursement of patent costs and research expenses as per agreement with ISURF, none of which is included in research and development expense for the three and six months ended June 30, 2009 and 2008.

Ricerca Development Agreements

The Company utilizes Ricerca BioSciences LLC (Ricerca) as a research vendor, on an as needed basis, to assist in the development of the Companys technologies. The terms and scope of the work that Ricerca performs is in accordance with formalized statements of work.

During the three and six months ended June 30, 2009 the Company incurred $0 and $5,400 for services provided by Ricerca, which is included in research and development expense. During the three and six months ended June 30, 2008 the Company incurred $48,500 and $89,600 for services provided by Ricerca, which is included in research and development expense.

Results of Operations

A summary of the Companys operating expense for the three and six months ended June 30, 2009 and 2008 was as follows:

Three Months Ended
     
     
     
     
     Six Months EndedJune 30,
     
     Percentage
     
     
     June 30,
     
     Percentage2009
     
     2008
     
     Change
     
     
     2009
     
     2008
     
     ChangeOperating expensesDirector fees - related party
     $
     1,500
     $
     -
     
     *
     %
     $
     3,200
     $
     3,150
     
     2
     %Investor relations
     
     1,408
     
     63,015
     
     (98)
     
     
     1,408
     
     485,545
     
     (100)Wages and benefits
     
     66,776
     
     109,586
     
     (39)
     
     
     134,680
     
     190,107
     
     (29)Research and development
     
     14,416
     
     78,699
     
     (82)
     
     
     32,739
     
     227,951
     
     (86)Professional fees
     
     28,323
     
     39,942
     
     (29)
     
     
     73,330
     
     62,036
     
     18Other operating expenses
     
     1,648
     
     20,469
     
     (92)
     
     
     4,715
     
     81,789
     
     (94)Total operating expenses
     $
     114,071
     $
     311,711
     
     (63)
     %
     $
     250,072
     $
     1,050,578
     
     (76)
     %


Director fees  related party

Non-employee directors receive $250 per month for their services as directors plus $100 for each board meeting attended.

16

---



Director fees of $1,500 earned for the three months ended June 30, 2008 were not recognized for financial reporting purposes until the subsequent quarter ended September 30, 2008. Director fees for the six months ended June 30, 2008 includes $850 for a former director who resigned in September 2007 but his director fees were recognized for financial reporting purposes in January 2008 for services rendered as a non-employee director during fiscal year 2007. In addition, director fees for the six months ended June 30, 2008 includes $750 for director fees that were earned during the quarter ended December 31, 2007. The total $1,600 that was recorded during the six months ended June 30, 2008 but was earned during the fiscal year ended December 31, 2007 was not deemed significant to the consolidated financial statements taken as a whole.

Investor relations

Investor relations costs represent fees paid to publicize the Companys technology within the investor community with the purpose of increasing company recognition and branding, and to facilitate the efforts to raise funds in equity or debt financings.

During the six months ended June 30, 2008, the Company ramped up its production of newsletters, analyst coverage, and information distribution to the investor community as a result of technological advances made pursuant to the Sponsored Research Agreement with Dartmouth at the end of the fiscal year 2007 and the beginning of the fiscal year 2008, resulting in significant investor relations expense during the six months ended June 30, 2008 compared to the six months ended June 30, 2009.

Wages and benefits

During the three and six months ended June 30, 2009, the Company incurred $66,776 and $134,680 in cash wages and benefits expense for services rendered by Mr. Greg Wujek, the President, Chief Executive Officer, and Director of the Company. During the three and six months ended June 30, 2008, the Company incurred $66,192 and $133,089 in cash wages and benefits expense for services rendered by Mr. Wujek.

During the six months ended June 30, 2008, the Company also recorded $13,624 in stock based compensation expense related to the amortization of a stock option previously granted to Mr. Wujek to purchase 2,000,000 shares of the Companys common stock at an exercise price of $0.52 per share, which is included in wages and benefits.

Research and development

Research and development costs represent costs incurred to develop the Companys technologies and are incurred pursuant to the Companys sponsored research agreements with Dartmouth, ISU, Ricerca, and other third party contract research organizations. The sponsored research agreements include salaries and benefits for research and development personnel, allocated overhead and facility occupancy costs, contract services and other costs. The Company charges all research and development expenses to operations as they are incurred, except for prepayments which are capitalized and amortized over the applicable period.

Following is a summary of research and development expense incurred for the three and six months ended June 30, 2009 and 2008:

Three Months Ended
     
     
     
     Six Months EndedJune 30,
     
     Increase/
     
     June 30,
     
     Increase/2009
     
     2008
     
     (Decrease)
     
     2009
     
     2008
     
     (Decrease)Research and development expenseISU Sponsored Research Agreement
     $
     -
     $
     17,574
     $
     (17,574)
     $
     -
     $
     33,551
     $
     (33,551)Dartmouth Sponsored Research Agreement
     
     13,003
     
     11,375
     
     1,628
     
     24,753
     
     103,550
     
     (78,797)Ricerca
     
     
     -
     
     48,500
     
     (48,500)
     
     5,400
     
     89,600
     
     (84,200)Other research and development expense
     
     1,413
     
     1,250
     
     163
     
     2,586
     
     1,250
     
     1,336Total research and development expense
     $
     14,416
     $
     78,699
     $
     (64,283)
     $
     32,739
     $
     227,951
     $
     (195,212)


Professional fees

Professional fees substantially consist of accounting fees, audit and tax fees, legal fees, and SEC related filing costs.

Professional fees decreased $11,619 during the three months ended June 30, 2009 compared to the same period in 2008 substantially due to a decrease in legal fees of approximately $15,500. During the prior year period, the Company utilized legal counsel to facilitate the preparation of responses to inquiries made by the Securities and Exchange Commission.

17

---



Professional fees increased $11,294 during the six months ended June 30, 2009 compared to the same period in 2008 primarily as a result of an increase in accounting fees. This increase is partially the result of the Company closing its administrative office in Vancouver, British Columbia, Canada, effective August 31, 2008, terminating all of the employees in Vancouver, Canada. Due to this downsizing, as of September 1, 2008, the Company began outsourcing its accounting function to third parties resulting in an increase in accounting fees.

Other operating expenses

Other operating expenses include travel and entertainment, rent, office supplies, printing and mailing, information technology related fees and other administrative costs.

Other operating expenses decreased $18,821 during the three months ended June 30, 2009 compared to the same period in 2008 primarily due to decreases in travel and entertainment of approximately $1,900, office supplies, printing and mailing of $3,000, and rent of $8,700 as a result of the Company closing its administrative office in Vancouver, Canada, effective August 31, 2008.

Other operating expenses decreased $77,074 during the six months ended June 30, 2009 compared to the same period in 2008 substantially due to decreases in travel and entertainment of approximately $28,300, office supplies, printing and mailing of $15,800, rent of $14,000, and office repair and maintenance of $6,700, as a result of the Company closing its administrative office in Vancouver, Canada, effective August 31, 2008.

Other income (expense)

A summary of the Companys other income (expense) for the three and six months ended June 30, 2009 and 2008 was as follows:

Three Months Ended
     
     
     
     
     Six Months EndedJune 30,
     
     Percentage
     
     
     June 30,
     
     Percentage2009
     
     2008
     
     Change
     
     
     2009
     
     2008
     
     ChangeOther income (expense)Interest income
     
     $
     -
     $
     4,751
     
     (100)
     %
     $
     -
     $
     18,152
     
     (100)
     %Interest expense
     
     
     (15,894)
     
     (19,696)
     
     (19)
     
     
     (31,613)
     
     (45,993)
     
     (31)Change in fair value of warrant liability
     
     54,507
     
     -
     
     *
     
     
     (100,654)
     
     -
     
     *Loss on dissolution of foreign subsidiary
     
     -
     
     -
     
     *
     
     
     (523)
     
     -
     
     *Foreign exchange loss
     
     -
     
     (2,007)
     
     (100)
     
     
     -
     
     (3,578)
     
     (100)Total other income (expense)
     $
     38,613
     $
     (16,952)
     
     (328)
     %
     $
     (132,790)
     $
     (31,419)
     
     323
     %




|* Not meaningfulInterest income
|-------------------------------

As a result of the Company closing its administrative office in Vancouver, Canada, effective August 31, 2008 and the dissolution of PhytoMedical Technologies Ltd., the Company closed its interest bearing bank account on December 31, 2008.

Interest expense

The Company had arranged with Mr. Harmel S. Rayat, former Chief Financial Officer, Director, and majority shareholder of the Company, a loan amount up to $2,500,000 that may be drawn down on an as needed basis at a rate of prime plus 3%. Effective September 15, 2008, Mr. Rayat and the Company terminated this loan agreement. At January 1, 2008, the outstanding principal balance of the note payable was $1,000,000. In February 2008, the Company repaid $250,000 of the principal balance of the note payable. The remaining $750,000 note payable to Mr. Rayat, which was due on March 8, 2006, bears interest at an annual rate of 8.50% and is payable on demand.

Change in fair value of warrant liability

On January 1, 2009, the Company adopted EITF 07-5, Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entitys Own Stock. The Company determined that its Class A Warrants contained a Dilutive Issuance provision.

The Company accounts for its warrant liability in accordance with SFAS 157. SFAS 157 emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, SFAS 157 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that

18

---



are classified within Levels 1 and 2 of the hierarchy) and the reporting entitys own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

The Company values its warrant liability at the end of each reporting period using a Black-Scholes model (Level 3 inputs), recording the change in the fair value from the prior period as a non-cash gain or loss.

Loss on dissolution of foreign subsidiary

PhytoMedical Technologies Ltd. (PhytoMedical Ltd.) provided administrative services to the Companys Canadian office. The Company ceased to conduct business in Canada, effective August 31, 2008 and closed this office. As a result, the Company dissolved PhytoMedical Ltd. and eliminated all intercompany balances, effective January 1, 2009. In accordance with SFAS No. 52, Foreign Currency Translation, the Company recorded a loss on its investment in PhytoMedical Ltd. equal to the accumulated other comprehensive income at the time of the dissolution.

Liquidity and Capital Resources

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has incurred cumulative losses of $25,829,443 through June 30, 2009, does not have positive cash flows from operating activities, and had negative working capital of $630,462 as of June 30, 2009. Additionally, the Company has expended a significant amount of cash in developing its technology. 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. These conditions raise substantial doubt about the Companys ability to continue as a going concern. Management recognizes that in order to meet the Companys capital requirements, and continue to operate, additional financing will be necessary. The Company expects to raise additional funds through private or public equity investments in order to expand the range and scope of its business operations. The Company will seek access to private or public equity but there is no assurance that such additional funds will be available for the Company to finance its operations on acceptable terms, if at all. If the Company is unable to raise additional capital or generate positive cash flow, it is unlikely that the Company will be able to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Company's principal source of liquidity is cash in the bank. At June 30, 2009, the Company had cash and cash equivalents of $376,564. The Company has financed its operations primarily from funds received pursuant to the 2007 Private Placement completed by the Company in September 2007, raising net proceeds of $3,109,500.

Net cash used in operating activities was $289,269 for the six months ended June 30, 2009 compared to $1,081,006 for the same period in 2008. The decrease of $791,737 in cash used was substantially due to decreases in investor relations expense of $484,137, research and development expense of $195,212, wages and benefits of $55,427, and other operating expenses of $77,074 during the six months ended June 30, 2009 compared to 2008. See Results of Operations above for further discussion regarding the decrease in these expenses.

Net cash used in investing activities was $0 for the six months ended June 30, 2009 compared to $6,173 during the same period in 2008. During the six months ended June 30, 2008, the Company purchased $6,173 of equipment.

Net cash used in financing activities was $0 for the six months ended June 30, 2009 compared to $250,000 for the same period in 2008. During the six months ended June 30, 2008, the Company repaid $250,000 of the outstanding principal balance on its notes payable.

Related Party Transactions

Wages and benefits

During the three and six months ended June 30, 2009, the Company incurred $66,776 and $134,680 in cash wages and benefits expense for services rendered by Mr. Greg Wujek, the President, Chief Executive Officer, and Director of the Company. During the three and six months ended June 30, 2008, the Company incurred $66,192 and $133,089 in cash wages and benefits expense for services rendered by Mr. Wujek.

During the six months ended June 30, 2008, the Company also recorded $13,624 in stock based compensation expense related to the amortization of a stock option previously granted to Mr. Wujek to purchase 2,000,000 shares of the Companys common stock at an exercise price of $0.52 per share, which is included in wages and benefits.

Director fees

During the three and six months ended June 30, 2009, the Company incurred $1,500 and $3,200 in non-employee director fees. During the three and six months ended June 30, 2008, the Company incurred $0 and $3,150 in non-employee director fees.

19

---



Notes payable

The Company had arranged with Mr. Harmel S. Rayat, former Chief Financial Officer, Director, and majority shareholder of the Company, a loan amount up to $2,500,000 that may be drawn down on an as needed basis at a rate of prime plus 3%. Effective September 15, 2008, Mr. Rayat and the Company terminated this loan agreement. During the six months ended June 30, 2008, the Company repaid $250,000 to Mr. Rayat with the accrued interest of $67,664. At June 30, 2009, the Company had an unsecured promissory note pursuant to this loan agreement in the amount of $750,000 payable to Mr. Rayat, which was due on March 8, 2006 and bears interest at an annual rate of 8.50%. At June 30, 2009, accrued interest on the $750,000 remaining promissory note was $275,086 and is included in interest payable. The entire principal and accrued interest is due and payable on demand. The carrying value of notes payable and accrued interest approximates fair value at June 30, 2009, based on their liquidity.

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.

Other Contractual Obligations

As of the balance sheet date, the Company does not have any contractual obligations other than the Sponsored Research and License Agreements, Notes Payable and Accrued Interest, as discussed above.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.

Recently Issued Accounting Pronouncements

See Note 3. Presentation of Interim Information to the Consolidated Financial Statements in this Form 10-Q.

20

---





|Item 4T. Controls and Procedures(a) Evaluation of Disclosure Controls and Procedures
|------------------------------------------------------------------------------------

Under the supervision and with the participation of the Companys management, including its Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Exchange Act), as of the end of the period covered by this quarterly report. Based on this evaluation, the Companys Chief Executive Officer and Chief Financial Officer concluded as of June 30, 2009 that the Companys disclosure controls and procedures were effective such that the information required to be disclosed in the Companys United States Securities and Exchange Commission (the SEC) reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to the Companys management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Subsequent to filing its Form 10-Q for the quarter ended March 31, 2009, the Company determined that its Class A Warrants contained a Dilutive Issuance provision, resulting in a material adjustment that was required to appropriately account for its warrant liability. As a result, the Company filed an amended Form 10-Q for the quarter ended March 31, 2009 with the SEC on July 30, 2009. The Company believes that it has revised and effectively implemented its internal controls over financial reporting in order to identify, evaluate and adopt applicable accounting guidance in a timely manner.

(b) Changes in Internal Control over Financial Reporting

There were no changes in the Companys internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.

21

---



PART II  OTHER INFORMATION



Item 1.   Legal Proceedings.



The Company is not aware of any legal proceedings contemplated by any governmental authority or any other party involving the Company or its properties. As of the date of this report, no director, officer or affiliate is a party adverse to the Company in any legal proceeding or has an adverse interest to the Company in any legal proceedings. The Company is not aware of any other legal proceedings pending or that have been threatened against the Company or its properties.



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.



31.1Certification of Principal Executive Officer Pursuant to Rule 13(a)-14 of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *



31.2Certification of Principal Financial Officer Pursuant to Rule 13(a)-14 of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *



32.1        Certification of Principal Executive Officer Pursuant to 18 USC. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *



32.2        Certification of Principal Financial Officer Pursuant to 18 USC. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *



____________________



*Filed herewith.



22

---





|SIGNATURES
|----------

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|PhytoMedical Technologies, Inc.(Registrant)
|-------------------------------------------

|                | PhytoMedical Technologies, Inc.(Registrant)                              
|--------------- | -------------------------------------------------------------------------
|August 13, 2009 | By: /s/ Greg Wujek
Greg WujekPresident, Chief Executive Officer, Director
|               
|               
|August 13, 2009 | /s/ Raymond KraussChief Financial Officer, Secretary, Treasurer, Director
|               

23

---