UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C.  20549


____________________





FORM
10-Q





(Mark
One)





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





For
quarterly period ended September 30, 2008





 ̈
            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. AND SUBSIDIARIES


(Exact
name of registrant as specified in its charter)





Nevada
              87-0429962(State
      or other jurisdiction of incorporation or organization)
              (I.R.S.
      Employer Identification Number)100
      Overlook Drive, 2nd
      Floor, Princeton, New Jersey
              08540(Address
      of principal executive offices)
              (Zip
      Code)





(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.  Yes  x  No   ̈.





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 T





Indicate
by check mark whether the registrant is a shell company (as defined in 12b-2 of
the Exchange Act.)  Yes  ̈   No
x.





Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date: 20,398,290 shares of Common Stock, par
value $0.00001, were outstanding on November 1, 2008.













PHYTOMEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES


FORM
10-Q





For
the Quarterly Period Ended September 30, 2008





Table
of Contents














PART
I    FINANCIAL INFORMATION





Item
      1.
                                
                                Financial Statements (Unaudited).Consolidated Balance Sheets (Unaudited)
                                3Consolidated Statements of Operations
      (Unaudited)
                                4Consolidated Statement of Stockholders’ Deficit
      (Unaudited)
                                5Consolidated Statements of Cash Flows
      (Unaudited)
                                6Notes to Consolidated Financial Statements
      (Unaudited)
                                7Item
      2.
                                
                                Management's Discussion and Analysis of Financial Condition
      and Results
      of Operations.
                                14Item
      4T.
                                
                                Controls and Procedures.
                                19PART
      II   OTHER INFORMATIONItem
      1.
                                
                                Legal Proceedings.
                                19Item
      2.
                                
                                Unregistered Sales of Equity Securities and Use of
      Proceeds.
                                19Item
      3.
                                
                                Defaults Upon Senior Securities.
                                19Item
      4.
                                
                                Submission of Matters to a Vote of Security
      Holders.
                                20Item
      5.
                                
                                Other Information.
                                20Item
      6.
                                
                                Exhibits.
                                20SignaturesCertifications





Table of Contents





PART I—FINANCIAL
INFORMATION





Item 1.
Financial Statements (Unaudited)





PHYTOMEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES





CONSOLIDATED
BALANCE SHEETS


September
30, 2008 and December 31, 2007


(Unaudited)








September 30,
                    
                    
                    December 31,(Expressed
      in U.S. Dollars)
                    
                    2008
                    
                    
                    2007ASSETSCurrent
      assetsCash
                    
                    $
                    813,406
                    
                    
                    $
                    2,434,230Prepaid
      expenses
                    
                    
                    720
                    
                    
                    
                    -Total
      current assets
                    
                    
                    814,126
                    
                    
                    
                    2,434,230Equipment, net of accumulated
      depreciation(Note 4)
                    
                    
                    -
                    
                    
                    
                    3,917Intangible assets - license
      fees(Note 7 and Note 10)
                    
                    
                    35,000
                    
                    
                    
                    20,000Total
      assets
                    
                    $
                    849,126
                    
                    
                    $
                    2,458,147LIABILITIES
      AND STOCKHOLDERS' EQUITY (DEFICIT)LIABILITIESCurrent
      liabilitiesAccounts
      payable
                    
                    $
                    3,383
                    
                    
                    $
                    -Accrued
      liabilities
                    
                    
                    469
                    
                    
                    
                    2,970Interest
      payable - related parties (Note 5)
                    
                    
                    238,884
                    
                    
                    
                    241,253Notes
      payable - related party (Note 5)
                    
                    
                    750,000
                    
                    
                    
                    1,000,000Total
      liabilities
                    
                    
                    992,736
                    
                    
                    
                    1,244,223STOCKHOLDERS'
      EQUITY (DEFICIT)Stockholders'
      Equity (Deficit)Preferred
      stock: $0.25 par value; Authorized: 1,000,000 Issued and outstanding:
      nil
                    
                    
                    -
                    
                    
                    
                    -Common
      stock: $0.00001 par value; Authorized: 300,000,000 Issued and outstanding:
      200,398,290 (2007: 200,398,290)
                    
                    
                    2,004
                    
                    
                    
                    2,004Additional
      paid-in capital
                    
                    
                    26,285,899
                    
                    
                    
                    26,272,275Accumulated
      other comprehensive income
                    
                    
                    3,152
                    
                    
                    
                    1Accumulated
      deficit
                    
                    
                    (26,434,665
                    )
                    
                    
                    (25,060,356
                    )Total
      stockholders' equity (deficit)
                    
                    
                    (143,610
                    )
                    
                    
                    1,213,924Total
      liabilities and stockholders' equity (deficit)
                    
                    $
                    849,126
                    
                    
                    $
                    2,458,147








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





3
 Table of Contents





PHYTOMEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES





CONSOLIDATED
STATEMENTS OF OPERATIONS


For
the three and nine months ended September 30, 2008 and 2007


(Unaudited)








Three
      months ended
                        September
      30,
                      
                      
                      Nine
      months ended
                        September
      30,(Expressed
      in U.S. Dollars)
                      
                      2008
                      
                      
                      2007
                      
                      
                      2008
                      
                      
                      2007Revenue
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -Operating
      expensesDirectors
      fees - related party (Note 5)
                      
                      
                      3,000
                      
                      
                      
                      -
                      
                      
                      
                      6,150
                      
                      
                      
                      3,400Investor
      relations
                      
                      
                      6,815
                      
                      
                      
                      -
                      
                      
                      
                      492,360
                      
                      
                      
                      37,215Wages
      and benefits
                      
                      
                      98,051
                      
                      
                      
                      254,094
                      
                      
                      
                      288,158
                      
                      
                      
                      1,478,097Research
      and development costs (Notes 6, 7, 8, 9 and 10)
                      
                      
                      116,017
                      
                      
                      
                      30,363
                      
                      
                      
                      343,968
                      
                      
                      
                      120,325Other
      operating expenses
                      
                      
                      40,652
                      
                      
                      
                      44,490
                      
                      
                      
                      184,477
                      
                      
                      
                      137,654Total
      operating expenses
                      
                      
                      264,535
                      
                      
                      
                      328,947
                      
                      
                      
                      1,315,113
                      
                      
                      
                      1,776,691Operating
      loss
                      
                      
                      (264,535
                      )
                      
                      
                      (328,947
                      )
                      
                      
                      (1,315,113
                      )
                      
                      
                      (1,776,691
                      )Other
      income (expense)Interest
      income
                      
                      
                      3,546
                      
                      
                      
                      5,855
                      
                      
                      
                      21,698
                      
                      
                      
                      9,028Interest
      expense
                      
                      
                      (19,864
                      )
                      
                      
                      (29,650
                      )
                      
                      
                      (65,857
                      )
                      
                      
                      (81,397
                      )Loss
      on disposal of fixed assets
                      
                      
                      (8,068
                      )
                      
                      
                      -
                      
                      
                      
                      (8,068
                      )
                      
                      
                      -Foreign
      exchange loss
                      
                      
                      (3,391
                      )
                      
                      
                      (352
                      )
                      
                      
                      (6,969
                      )
                      
                      
                      (2,669
                      )Net
      loss available to common shareholders
                      
                      $
                      (292,312
                      )
                      
                      $
                      (353,094
                      )
                      
                      $
                      (1,374,309
                      )
                      
                      $
                      (1,851,729
                      )Loss per common share -basic and diluted
                      
                      $
                      (0.00
                      )
                      
                      $
                      (0.00
                      )
                      
                      $
                      (0.01
                      )
                      
                      $
                      (0.01
                      )Weighted average number of
      common shares outstanding- basic and diluted
                      
                      
                      200,398,290
                      
                      
                      
                      190,411,696
                      
                      
                      
                      200,398,290
                      
                      
                      
                      189,860,919








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





4
 Table of Contents





PHYTOMEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES





CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)


for
the nine months ended September 30, 2008 and year ended December 31,
2007


(Unaudited)








Common
      Stock
                          
                          
                          Additional
                          
                          
                          Accumulated
                          
                          
                          Comprehensive
                          
                          
                          Accumulated
      other
                            comprehensive
                          
                          
                          Total
                            Stockholders'(Expressed
      in U.S. Dollars)
                          
                          Shares
                          
                          
                          Amount
                          
                          
                          paid-in capital
                          
                          
                          deficit
                          
                          
                          loss
                          
                          
                          income
                          
                          
                          DeficiencyBalance,
      December 31, 2006
                          
                          
                          189,181,866
                          
                          
                          $
                          1,892
                          
                          
                          $
                          21,722,319
                          
                          
                          $
                          (22,904,995
                          )
                          
                          
                          
                          
                          
                          -
                          
                          
                          $
                          (1,180,784
                          )Common
      stock issued for cash
                          
                          
                          533,091
                          
                          
                          
                          5
                          
                          
                          
                          229,995
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          230,000Common
      stock issued for cash, net
                          
                          
                          10,683,333
                          
                          
                          
                          107
                          
                          
                          
                          1,910,713
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          1,910,820Issuance
      of warrants on private placement
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          1,175,167
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          1,175,167Issuance
      of warrants to broker as commission
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          23,513
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          23,513Stock
      based compensation expenses
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          1,210,568
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          1,210,568Foreign
      currency translation adjustment
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          1
                          
                          
                          
                          1
                          
                          
                          
                          1Loss,
      year ended December 31, 2007
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (2,155,361
                          )
                          
                          
                          (2,155,361
                          )
                          
                          
                          -
                          
                          
                          
                          (2,155,361
                          )(2,155,360
                          )Balance,
      December 31, 2007
                          
                          
                          200,398,290
                          
                          
                          
                          2,004
                          
                          
                          
                          26,272,275
                          
                          
                          
                          (25,060,356
                          )
                          
                          
                          
                          
                          
                          
                          1
                          
                          
                          
                          1,213,924Stock
      based compensation expenses
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          13,624
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          13,624Foreign
      currency translation adjustment
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          3,151
                          
                          
                          
                          3,151
                          
                          
                          
                          3,151Loss,
      nine months ended September 30, 2008
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          (1,374,309
                          )
                          
                          
                          (1,374,309
                          )
                          
                          
                          
                          
                          
                          
                          (1,374,309
                          )$
                          (1,371,158
                          )Balance,
      September 30, 2008
                          
                          
                          200,398,290
                          
                          
                          $
                          2,004
                          
                          
                          $
                          26,285,899
                          
                          
                          $
                          (26,434,665
                          )
                          
                          
                          
                          
                          
                          
                          3,152
                          
                          
                          $
                          (143,610
                          )








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





5
 Table of Contents




PHYTOMEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES





CONSOLIDATED
STATEMENTS OF CASH FLOWS


for
the nine months ended September 30, 2008 and 2007


(Unaudited)








Nine
      months endedSeptember 30,
                        
                        
                        September 30,(Expressed
      in U.S. Dollars)
                        
                        2008
                        
                        
                        2007Cash
      flows from operating activitiesNet
      loss
                        
                        $
                        (1,374,309
                        )
                        
                        $
                        (1,851,729
                        )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Amortization
      and depreciation
                        
                        
                        2,022
                        
                        
                        
                        6,971Stock
      based compensation
                        
                        
                        13,624
                        
                        
                        
                        1,169,697Loss
      on disposal of fixed assets
                        
                        
                        8,068
                        
                        
                        
                        -Change
      in non-cash working capital items:(Increase)
      Decrease in prepaid expenses
                        
                        
                        (720
                        )
                        
                        
                        4,147Increase
      in accounts payable
                        
                        
                        3,383
                        
                        
                        
                        32,069Decrease
      in accrued liabilities
                        
                        
                        (2,501
                        )
                        
                        
                        (171,776
                        )Increase
      (Decrease) in interest payable
                        
                        
                        (2,369
                        )
                        
                        
                        76,692Net
      cash used in operating activities
                        
                        
                        (1,352,802
                        )
                        
                        
                        (733,929
                        )Cash
      flows from investing activitiesAdditions
      to equipment
                        
                        
                        (6,173
                        )
                        
                        
                        -Additions
      to intangible assets - license fees
                        
                        
                        (15,000
                        )
                        
                        
                        -Net
      cash used in investing activities
                        
                        
                        (21,173
                        )
                        
                        
                        -Cash
      flows from financing activitiesProceeds
      from issuance of common stocks and warrants
                        
                        
                        -
                        
                        
                        
                        3,339,500Proceeds
      from loan from stockholder
                        
                        
                        -
                        
                        
                        
                        150,000Repayment
      of loan to stockholder
                        
                        
                        (250,000
                        )
                        
                        
                        (25,000
                        )Net
      cash provided by (used in) financing activities
                        
                        
                        (250,000
                        )
                        
                        
                        3,464,500Effect
      of foreign exchange rate
                        
                        
                        3,151
                        
                        
                        
                        1Increase
      (decrease) in cash
                        
                        
                        (1,620,824
                        )
                        
                        
                        2,730,572Cash, beginning of
      period
                        
                        
                        2,434,230
                        
                        
                        
                        386,457Cash, end of
      period
                        
                        $
                        813,406
                        
                        
                        $
                        3,117,029Supplemental
      disclosure of cash flow information:Interest
      paid in cash
                        
                        $
                        68,226
                        
                        
                        $
                        4,705Income
      tax paid in cash
                        
                        $
                        -
                        
                        
                        $
                        -








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




6
 Table of Contents





PHYTOMEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


September
30, 2008


(Expressed
in US Dollars)





Note
1.  Organization and Going Concern Uncertainties





PhytoMedical
Technologies, Inc. (the “Company”), a Nevada Corporation, has an authorized
capital of 301,000,000 shares of which 300,000,000 shares are $0.00001 par value
common stock and 1,000,000 shares are $0.25 par value preferred stock.





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





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. Although
management believes that the Company has sufficient financial resources and
commitments to sustain its current level of research and development activities
through the end of 2008, any expansion, acceleration or continuation of such
activities (beyond 2008) will require additional capital which may not be
available to the Company, if at all, on terms and conditions that the Company
finds acceptable. The future of the Company 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.





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 September 30, 2008, the Company
had an unsecured promissory note in the amount of $750,000 payable to Mr. Rayat,
which was due on March 8, 2006 and bears an interest rate of 8.50%.  The
entire principal and accrued interest is due and payable on demand.





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 in accordance
with accounting principles generally accepted in the United States, and include
the accounts of PhytoMedical Technologies, Inc., its subsidiaries, PhytoMedical
Technologies Corp. and PolyPhenol Technologies Corp., both of which were
incorporated under the laws of the State of Nevada and PhytoMedical Technologies
Ltd., which was incorporated in British Columbia, Canada on April 11, 2007.
 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-Q instructions and in the opinion of
management of PhytoMedical Technologies, Inc. and Subsidiaries, include all
adjustments (of a normal recurring nature) considered necessary to present
fairly the consolidated financial position as of September 30, 2008 and December
31, 2007 and the consolidated results of operations for the three and nine
months ended September 30, 2008 and 2007 and cash flows for the nine months
ended September 30, 2008 and 2007. 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 2007 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 2007 Annual Report on Form 10-KSB.





7
 Table of Contents





Recently
Issued Accounting Standards





In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (SFAS
157), which defines fair value, establishes a framework for measuring fair
value, and expands disclosures about fair-value measurements required under
other accounting pronouncements. It does not change existing guidance as to
whether or not an instrument is carried at fair value. SFAS 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years. In February 2008, the FASB issued
FASB Staff Position No. FAS 157-1 (FSP FAS 157-1), which excludes SFAS No. 13,
“Accounting for Leases” and certain other accounting pronouncements that address
fair value measurements under SFAS 13, from the scope of SFAS 157. In February
2008, the FASB issued FASB Staff Position No. 157-2 (FSP 157-2), which provides
a one-year delayed application of SFAS 157 for nonfinancial assets and
liabilities, except for items that are recognized or disclosed at fair value in
the financial statements on a recurring basis (at least annually). The Company
is required to adopt SFAS 157 as amended by FSP FAS 157-1 and FSP FAS 157-2 on
January 1, 2009, the beginning of its fiscal year 2009.  The Company
does not expect the application of SFAS No. 157 to have a material effect on the
Company’s consolidated financial statements.





In
October 2008, the FASB issued FASB Staff Position No. FAS 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. Specifically, FSP 157-3 clarifies how (1) management’s
internal assumptions should be considered in measuring fair value when
observable data are not present, (2) observable market information from an
inactive market should be taken into account, and (3) the use of broker quotes
or pricing services should be considered in assessing the relevance of
observable and unobservable data to measure fair value. The guidance in FSP
157-3 is effective immediately and will apply to the Company upon adoption of
SFAS 157.





In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities, Including an Amendment to FASB No.
115” (SFAS 159). Under SFAS 159, entities may elect to measure specified
financial instruments and warranty and insurance contracts at fair value on a
contract-by-contract basis, with changes in fair value recognized in earnings
each reporting period. The election, called the fair value option, will enable
entities to achieve an offset accounting effect for changes in fair value of
certain related assets and liabilities without having to apply more complex
hedge accounting provisions.  SFAS No. 159 is effective for fiscal
years beginning after November 15, 2007.The Company did not
elect the fair value option for any of its existing financial assets or
financial liabilities; therefore, this statement is did not have a material
impact on the Company’s consolidated financial statements.





In June
2008, the FASB issued Staff Position EITF 03-06-1, “Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities” (FSP EITF 03-06-1). FSP EITF 03-06-1 provides that unvested
share-based payment awards that contain nonforfeitable rights to dividends or
dividend equivalents (whether paid or unpaid) are participating securities and
shall be included in the computation of earnings per share pursuant to the
two-class method in SFAS No. 128, “Earnings per Share”.   EITF
03-06-1 did not have any impact 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 must adopt SFAS 160 on January 1, 2009, the beginning of its fiscal year
2009.  The Company does not expect the application of SFAS No. 160 to
have a material effect on the 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 beginning on or after December
15, 2008, and interim periods within those fiscal years. The Company must adopt
SFAS 141R on January 1, 2009, the beginning of its fiscal year
2009.  The Company does not expect the application of SFAS 141R to
have a material effect on the consolidated financial statements.





8
 Table of Contents





Note
3.  Net Loss Per Share





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.  All per share and per share information are adjusted
retroactively to reflect stock splits and changes in par value, when applicable.
 As the Company had a net loss attributable to common stockholders 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 nine months
ended September 30, 2008 and 2007, 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.





Following
is the computation of basic and diluted loss per share for the three and nine
months ended September 30, 2008 and 2007:








Three
      months ended
                                    
                                    
                                    Nine
      months endedSeptember
      30,
                                    
                                    
                                    September
      30,2008
                                    
                                    
                                    2007
                                    
                                    
                                    2008
                                    
                                    
                                    2007Numerator
      - net loss available to common stockholders
                                    
                                    $
                                    (292,312
                                    )
                                    
                                    $
                                    (353,094
                                    )
                                    
                                    $
                                    (1,374,309
                                    )
                                    
                                    $
                                    (1,851,729
                                    )Denominator
      - weighted average number of common shares outstanding
                                    
                                    
                                    200,398,290
                                    
                                    
                                    
                                    190,411,696
                                    
                                    
                                    
                                    200,398,290
                                    
                                    
                                    
                                    189,860,919Basic
      and diluted loss per common share
                                    
                                    $
                                    (0.00
                                    )
                                    
                                    $
                                    (0.00
                                    )
                                    
                                    $
                                    (0.01
                                    )
                                    
                                    $
                                    (0.01
                                    )








Note
4.  Equipment





September
      30,
                            
                            
                            December
      31,2008
                            
                            
                            2007Computer
      equipment
                            
                            $
                            -
                            
                            
                            $
                            6,040Office
      equipment
                            
                            
                            -
                            
                            
                            
                            19,613-
                            
                            
                            
                            25,653Less:
      accumulated depreciation
                            
                            
                            -
                            
                            
                            
                            (21,736
                            )$
                            -
                            
                            
                            $
                            3,917








During
the three months ended September 30, 2008, the Company removed the cost and
related accumulated depreciation from the Company’s financial statements for
equipment that was either no longer in service or deemed
obsolete.  Substantially all of this equipment was located at the
Company’s administrative office in Vancouver, British Columbia, Canada, which,
effective September 1, 2008, was closed.  The Company recorded a loss
on disposal of fixed assets of $8,068 in the consolidated statements of
operations for the three and nine months ended September 30, 2008.





Depreciation
expense was $2,022 and $6,971 for the nine months ended September 30, 2008 and
2007.





9
 Table of Contents





Note
5.  Related Party Transactions





Non-Employee
Directors Fees: During the three and nine months ended September 30, 2008, the
Company incurred $3,000 and $6,150 for non-employee directors
fees.  During the three and nine months ended September 30, 2007, the
Company incurred $nil and $3,400 for non-employee director fees.





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 nine months ended
September 30, 2008, the Company repaid $250,000 to Mr. Rayat with the
accrued interest of $67,664. At September 30, 2008, 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 September 30, 2008, accrued interest
on the $750,000 remaining promissory note was $238,884 and is included in
interest payable - related parties. The entire principal and accrued
interest is due and payable on demand.





Rent:
Until August 31, 2008, the Company’s administrative office was located at 1628
West 1st Avenue, Suite 216, Vancouver, British Columbia, Canada, V6J 1G1. This
premise is owned by a private corporation controlled by a director and
majority shareholder. Rent expense for this administrative office for the three
and nine months ended September 30, 2008 was $6,283 and
$22,239.  Rent expense for this administrative office for the three
and nine months ended September 30, 2007 was $9,281 and
$26,136.   Effective August 31, 2008, the Company closed its
administrative office in Vancouver, British Columbia, Canada, terminating all of
its employees.





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
6.  Iowa State University Cooperative 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, PhytoMedical will
continue to undertake its research at ISU for development of the Company’s
novel, synthesized type A-1 ‘polyphenolic’ compounds.





Contractual Obligations
under theISUAgreement are
as follows:





Year 1:
$62,251 (paid as of September 30, 2008) 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 ($35,148 of which was paid as of September 30, 2008) 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 is due to ISU 3
months from the previous payment.





All
rights, title, and interest in any subject invention made solely by the Company
are owned by the Company, solely by ISU are owned by ISU, owned jointly by the
two parties if made by any of the 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.





As
of September 30, 2008, the Company has paid a total of $97,399 pursuant to
the terms of the ISU Sponsored Research Agreement of which $66,273 and $31,126
is included in research and development expense for the nine months ended
September 30, 2008 and 2007.  In addition to contractual obligations
pursuant to the ISU Sponsored Research Agreement, the Company reimbursed ISU
$506 and $20,297 during the nine months ended September 30, 2008 and 2007 for
other out-of-pocket costs that are included in research and development
expense.




10
 Table of Contents


Note
7.  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.





Under
terms of the agreement, the Company has to pay to ISURF license fees, of which
$20,000 was 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
September 30, 2008, the Company has 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.  Of the total $31,223 paid to ISURF for
patent and research costs, $nil and $2,304 is included in research and
development expense for the nine months ended September 30, 2008 and
2007.





Note
8.  Ricerca Development Agreements





The
Company announced in July 2006 that it had entered into a development agreement
with Ricerca BioSciences (“Ricerca”), to begin development work on the Company’s
BDC-03 compound for cachexia.   The Company terminated the BDC-03
development in November 2007 and currently utilizes Ricerca as a research vendor
on an as needed basis.





As of
September 30, 2008, the Company paid a total of $216,298 for services provided
by Ricerca, of which $151,103 and $13,500 is included in research and
development expense for the nine months ended September 30, 2008 and
2007.





Note
9.  Dartmouth Sponsored Research Agreement





On May
25, 2007, the Company entered into a Sponsored Research Agreement with Dartmouth
College, in the area of cancer research, specifically furthering research and
development of anti-tumor bis-acridines. 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
September 30, 2008, the Company has paid a total of $161,050 pursuant to the
Sponsored Research Agreement with Dartmouth, of which $103,550 and $16,375 is
included in research and development expense for the nine months ended September
30, 2008 and 2007.





Note
10.  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 agreement, the Company has to pay to DC license fees based upon
milestones in addition to an upfront payment (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 administrate the development, regulatory
approval and commercialization of the compounds and pursue future collaborative
arrangements.





11
 Table of Contents





Note
11.  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.





On
January 1, 2006, the Company adopted the fair value recognition provisions of
SFAS No. 123R Share-Based
Payment (“SFAS 123R”), Prior to January 1, 2006, the Company accounted
for stock-based awards under the recognition and measurement principles of APB
Opinion No. 25, Accounting for
Stock Issued to Employees(“APB 25”), and related Interpretations, as
permitted by SFAS 123. In accordance with APB 25, no compensation expense was
required to be recognized for stock options granted that had an exercise price
equal to or greater than the fair market value of the underlying common stock on
the date of grant.




The
Company adopted SFAS 123R using the modified-prospective application method,
which requires measurement of compensation cost for all stock-based awards at
fair value on the date of grant and recognition of compensation over the
requisite service period. Stock compensation cost related to options that are
fully vested upon grant is recognized immediately.  Stock compensation
cost related to options that have a vesting period is amortized ratably over the
requisite service period.




A summary
of the Company’s year-to-date stock option activity and related information
follows:





Number
      of options
                                            
                                            
                                            Weighted
      average exercise price
                                            
                                            
                                            Remaining
      contractual term (years)
                                            
                                            
                                            Aggregate
      intrinsic valueOutstanding
      at December 31, 2006
                                            
                                            
                                            11,275,000
                                            
                                            
                                            
                                            0.65Cancelled
                                            
                                            
                                            (9,275,000
                                            )
                                            
                                            
                                            0.68Outstanding
      at December 31, 2007 andSeptember 30, 2008
                                            
                                            
                                            2,000,000
                                            
                                            
                                            
                                            0.52
                                            
                                            
                                            
                                            7.84
                                            
                                            
                                            $
                                            -Exercisable
      at September 30, 2008
                                            
                                            
                                            -Available
      for grant at September 30, 2008
                                            
                                            
                                            20,275,000








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
September 30, 2008. This amount changes based on the fair market value of
the Company’s stock.





At
September 30, 2008 and December 31, 2007, the Company had unvested stock options
to purchase 2,000,000 shares of the Company’s common stock at a fair value per
share of $0.48.





During
the three and nine months ended September 30, 2008, stock-based compensation
expense of $nil and $13,624 was recognized for options previously granted.
During the three and nine months ended September 30, 2007, stock-based
compensation expense of $190,455 and $1,169,697 was recognized for options
previously granted. As of September 30, 2008, the Company had no unrecognized
compensation cost related to unvested stock options.








The
options outstanding and exercisable as of September 30, 2008 can be summarized
as follows:





12
 Table of Contents




Outstanding
                                                              
                                                              
                                                              ExercisableRange
      of Exercise Prices
                                                              
                                                              Number
      Outstanding at September 30, 2008
                                                              
                                                              
                                                              Weighted
      Average Remaining Contractual Life (Years)
                                                              
                                                              
                                                              Weighted
      Average Exercise Price
                                                              
                                                              
                                                              Number
      Exercisable at September 30, 2008
                                                              
                                                              
                                                              Weighted
      Average Exercise Price
                                                              
                                                              
                                                              Weighted
      Average Remaining Contractual Life (Years)$
                                                              0.52
                                                              
                                                              
                                                              2,000,000
                                                              
                                                              
                                                              
                                                              7.84
                                                              
                                                              
                                                              $
                                                              0.52
                                                              
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              $
                                                              -
                                                              
                                                              
                                                              
                                                              N/A








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





Note
12.  Warrants





As of
September 30, 2008, there were 10,897,081 warrants outstanding. Each warrant
entitles the holder to purchase one share of the common stock of the Company at
an exercise price of $0.40 per share until September 25, 2010.




13
 Table of Contents





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 nine months ended September 30, 2008, this
report contains forward-looking statements. Such forward-looking statements
include statements regarding, among other things, (a) our projected sales and
profitability, (b) our growth strategies, (c) anticipated trends in our
industry, (d) our future financing plans, and (e) our anticipated needs for
working capital.  Forward-looking statements, which involve
assumptions and describe our future plans, strategies, and expectations, are
generally identifiable by use of the words “may,” “will,” “should,” “expect,”
“anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of
these words or other variations on these words or comparable
terminology.  This information may involve known and unknown risks,
uncertainties, and other factors that may cause our actual results, performance,
or achievements to be materially different from the future results, performance,
or achievements expressed or implied by any forward-looking
statements.  These statements may be found under “Management's
Discussion and Analysis of Financial Condition and Results of Operations,” as
well as in this report generally.  Actual events or results may differ
materially from those discussed in forward-looking statements.  In
light of these risks and uncertainties, there can be no assurance that the
forward-looking statements contained in this filing will in fact
occur.





Overview





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





Cancer
Research





Pursuant
to PhytoMedical’s Sponsored Research Agreement with Dartmouth College
(“Dartmouth”), we are 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, our plans are 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.  Our 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.





Diabetes
Research





Through a
Sponsored Research Agreement with Iowa State University (“ISU”), we are working
to synthesize certain insulin enhancing (or mimetic) compounds isolated and
characterized from cinnamon bark over a ten year period by a team of United
States Department of Agriculture (“USDA”) Agricultural Research Service (“ARS”)
scientists.  These compounds increase insulin sensitivity by
activating key enzymes that stimulate insulin receptors while inhibiting the
enzymes that deactivate them.





The
primary objectives of our research are to synthesize the active compounds found
in cinnamon and characterize their beneficial health effects in cell cultures
systems, animals, and ultimately humans. Once active compounds have been
synthesized, characterized and tested, we intend to apply for patents for the
synthesis and use of such synthetic compounds. Our goal is to develop a
pharmacologically approved product that could be ingested orally.





14
 Table of Contents





General and Administrative
Expenses





Our
general and administrative expenses consist primarily of personnel related
costs, legal costs, including intellectual property, investor relations costs,
stock based compensation costs, accounting costs, and other professional and
administrative costs.





Research and Development
Costs





Research
and development costs represent costs incurred to develop our technology
incurred pursuant to our sponsored research agreements with ISU and Dartmouth
College. The agreements include salaries and benefits for research and
development personnel, allocated overhead and facility occupancy costs, contract
services and other costs. We charge all research and development expenses to
operations as they are incurred except for prepayments which are capitalized and
amortized over the applicable period. We do not track research and development
expenses by project. In addition, costs for third party laboratory work might
occur.





Cooperative and License
Agreements





Iowa State University
Cooperative 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, PhytoMedical will
continue to undertake its research at ISU for development of the Company’s
novel, synthesized type A-1 ‘polyphenolic’ compounds.





Contractual Obligations
under theISUAgreement are
as follows:





Year 1:
$62,251 (paid as of September 30, 2008) 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 ($35,148 of which was paid as of September 30, 2008) 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 is due to ISU 3
months from the previous payment.





All
rights, title, and interest in any subject invention made solely by the Company
are owned by the Company, solely by ISU are owned by ISU, owned jointly by the
two parties if made by any of the 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.





15
 Table of Contents





As
of September 30, 2008, the Company has paid a total of $97,399 pursuant to
the terms of the ISU Sponsored Research Agreement of which $66,273 and $31,126
is included in research and development expense for the nine months ended
September 30, 2008 and 2007.  In addition to contractual obligations
pursuant to the ISU Sponsored Research Agreement, the Company reimbursed ISU
$506 and $20,297 during the nine months ended September 30, 2008 and 2007 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.





Under
terms of the agreement, the Company has to pay to ISURF license fees, of which
$20,000 was 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
September 30, 2008, the Company has 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.  Of the total $31,223 paid to ISURF for
patent and research costs, $nil and $2,304 is included in research and
development expense for the nine months ended September 30, 2008 and
2007.





Ricerca Development
Agreements





The
Company announced in July 2006 that it had entered into a development agreement
with Ricerca BioSciences (“Ricerca”), to begin development work on the Company’s
BDC-03 compound for cachexia.   The Company terminated the BDC-03
development in November 2007 and currently utilizes Ricerca as a research vendor
on an as needed basis.





As of
September 30, 2008, the Company paid a total of $216,298 for services provided
by Ricerca, of which $151,103 and $13,500 is included in research and
development expense for the nine months ended September 30, 2008 and
2007.





Dartmouth Sponsored Research
Agreement





On May
25, 2007, we entered into a Sponsored Research Agreement with Dartmouth College,
pursuant to which we are 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.  The compounds will be submitted for evaluation in human
cancer cell lines.





Depending
on research outcomes, our plans are 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.  Our 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.





16
 Table of Contents





Dartmouth
granted us 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.





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





As of
September 30, 2008, the Company has paid a total of $161,050 pursuant to the
Sponsored Research Agreement with Dartmouth, of which $103,550 and $16,375 is
included in research and development expense for the nine months ended September
30, 2008 and 2007.





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 agreement, the Company has to pay to DC license fees based upon
milestones in addition to an upfront payment (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.   We also have to
reimburse DC the costs incurred for filing, prosecuting and maintaining the
licensed patents. We will administrate the development, regulatory approval and
commercialization of the compounds and pursue future collaborative
arrangements.





Results of
Operations





The
Company has yet to establish any history of profitable
operations.  The Company has incurred operating losses of $292,312 and
$353,094 for the three months ended September 30, 2008 and 2007 and $1,374,309
and $1,851,729 for the nine months ended September 30, 2008 and 2007. As a
result, at September 30, 2008, the Company has an accumulated deficit of
$26,434,665.





We expect
that our future revenues will not be sufficient to sustain our operations for
the foreseeable future. Our profitability will require the successful completion
of our research and development programs, and the subsequent commercialization
of the results or of products derived from such research and development
efforts.  No assurances can be given when this will occur or that we
will ever be profitable.





Three and Nine Months Ended
September 30, 2008 and 2007





The
Company had no revenues during the three and nine months ended September 30,
2008 and 2007.





Operating
expenses were $264,535 during the three months ended September 30, 2008, a
decrease of $64,412 or 20%, from $328,947 during the same period in 2007. The
decrease was substantially due to the Company recording $190,455 of stock based
compensation expense during the three months ended September 30, 2007 compared
to $nil during the three months ended September 30, 2008 related
to stock options previously granted. On August 1, 2006, the Company cancelled
2,250,000 stock options granted to an employee on April 6, 2006, while
simultaneously granting 2,000,000 stock options. The fair value of the 2,000,000
stock options was $2,667,500 which was amortized over the expected service
periods, expected to be completed during the quarter ended March 31,
2008.  This decrease was offset by an increase in research and
development expense of $85,654 primarily as a result of the increase in amounts
paid to Ricerca under the Sponsored Research Agreement.





Operating
expenses were $1,315,113 during the nine months ended September 30, 2008, a
decrease of $461,578 or 26%, from $1,776,691 during the same period in
2007.  The decrease was substantially due to the Company recording
$1,169,697 of stock based compensation expense during the nine months ended
September 30, 2007 compared to $13,624 during the nine months ended September
30, 2008.  This decrease was offset by increases in investor relations
expense of $455,145 and research and development expense of $223,643 during the
nine months ended September 30, 2008 compared to 2007. Investor
relations expense represents fees paid to a firm to promote 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. The increase in research and development expense is
primarily due to the payments made pursuant to the Ricerca Development
Agreements and the Dartmouth Sponsored Research Agreement.





Interest
income was $3,546 and $5,855 for the three months ended September 30, 2008 and
2007.  Interest income was $21,698 for the nine months ended September
30, 2008, an increase of $12,670 or 140%, from $9,028 during the same period in
2007.  This increase reflects the higher average cash balance
maintained during most of the first three quarterly periods in 2008 compared to
2007 as a result of the private placement completed by the Company in September
2007, raising net proceeds of $3,109,500.





17
 Table of Contents





Interest
expense was $19,864 for the three months ended September 30, 2008, a decrease of
$9,786 or 33%, from $29,650 during the same period in 2007.  The
decrease is the result of a decrease in the principal balance of the 8.5%
interest bearing Note Payable – Related Party.  The principal balance
was $750,000 during the third quarter of 2008 compared to $1,338,776 during the
third quarter of 2007.





Interest
expense was $65,857 for the nine months ended September 30, 2008, a decrease of
15,540 or 19%, from $81,397 during the same period in 2007 as a result of a
lower weighted average principal outstanding balance on the Note Payable –
Related Party note during the nine months ended September 30, 2008.





The
Company recorded a loss on disposal of fixed assets of $8,068 during the three
months ended September 30, 2008 as a result of the removal of  the
cost and related accumulated depreciation from the Company’s financial
statements for equipment that was either no longer in service or deemed
obsolete.  Substantially all of this equipment was located at the
Company’s administrative office in Vancouver, British Columbia, Canada, which,
effective September 1, 2008, was closed.





The
Company incurred a net loss of $292,312 and $353,094 during the three months
ended September 30, 2008 and 2007.  The Company incurred a net loss of
$1,374,309 and $1,851,729 for the nine months ended September 30, 2008 and
2007.





Liquidity and Capital
Resources





The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern.  The Company incurred cumulative losses
of $26,434,665 through September 30, 2008.  Additionally, the Company
has expended a significant amount of cash in developing its
technology.  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 is evaluating alternative sources of financing to improve its cash
position and is undertaking efforts to raise capital.  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.





At
September 30, 2008, the Company had a cash balance of $813,406. The Company has
financed its operations primarily from funds received pursuant to a private
placement completed by the Company in September 2007, raising net proceeds of
$3,109,500.





Net cash
used in operating activities was $1,352,802 for the nine months ended September
30, 2008, compared to net cash used of $733,929 for the same period in
2007.  The increase in cash used was substantially due to increases in
investor relations expense of $455,145 and research and development expense of
$223,643 during the nine months ended September 30, 2008 compared to
2007.





Net cash
used in investing activities was $21,173 for the nine months ended September 30,
2008, compared to $nil during the same period in 2007.  During the
nine months ended September 30, 2008, the Company purchased $6,173 of equipment
and paid $15,000 to Dartmouth College for a license fee.





Net cash
used in financing activities was $250,000 for the nine months ended September
30, 2008 compared to net cash flows provided by financing activities of
$3,464,500 for the same period in 2007.  During the nine months ended
September 30, 2008, the Company repaid $250,000 of the outstanding principal
balance on the Notes Payable- Related Party.  During the nine months
ended September 30, 2007, the Company received net proceeds of $3,109,500
pursuant to a private placement.





Related Party
Transactions





Non-Employee
Directors Fees: During the three and nine months ended September 30, 2008, the
Company incurred $3,000 and $6,150 for non-employee directors
fees.  During the three and nine months ended September 30, 2007, the
Company incurred $nil and $3,400 for non-employee director fees.





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 nine months ended
September 30, 2008, the Company repaid $250,000 to Mr. Rayat with the
accrued interest of $67,664. At September 30, 2008, 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 September 30, 2008, accrued interest
on the $750,000 remaining promissory note was $238,884 and is included in
interest payable - related parties. The entire principal and accrued
interest is due and payable on demand.





18
 Table of Contents





Rent:
Until August 31, 2008, the Company’s administrative office was located at 1628
West 1st Avenue, Suite 216, Vancouver, British Columbia, Canada, V6J 1G1. This
premise is owned by a private corporation controlled by a director and majority
shareholder. Rent expense for this administrative office for the three and nine
months ended September 30, 2008 was $6,283 and $22,239.  Rent expense
for this administrative office for the three and nine months ended September 30,
2007 was $9,281 and $26,136.   Effective August 31, 2008, the
Company closed its administrative office in Vancouver, British Columbia, Canada,
terminating all of its employees.





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





The
Company does not have any contractual obligations other than the Cooperative and
License Agreements, Notes Payable and Accrued Interest and operating lease with
the related party as discussed above.





Off Balance Sheet
Arrangements





The
Company has no off-balance sheet arrangements.





Recently Issued Accounting
Standards





See Note
2 to the Consolidated Financial Statements in this Form 10-Q.





Item
4T.   Controls and Procedures





(a)
Evaluation of Disclosure Controls and Procedures





The
Company’s management, with the participation of its Chief Executive Officer and
Chief Financial Officer, has evaluated the effectiveness of the Company’s
disclosure controls and procedures (as defined in 13a-15(e) and 15d-15(e) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end
of the period covered by this report.  Based on that evaluation, the
Company’s Chief Executive Officer and Chief Financial Officer concluded that the
Company’s disclosure controls and procedures are effective to provide reasonable
assurance that information required to be disclosed in the Company’s periodic
filings under the Exchange Act is accumulated and communicated to the Company’s
management, including the Chief Executive Officer and Chief Financial Officer,
to allow timely decisions regarding required disclosure.





(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.








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





19
 Table of Contents





Item 4.   Submissionof Matters to a Vote of
Security Holders





None





Item 5.  Other Information





None





Item 6.   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
  200232.2
                
                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





20
 Table of Contents





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.








PhytoMedical Technologies,
    Inc.(Registrant)








Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons  on  behalf of the
registrant and in capacities and on the dates indicated.








Date
                    Signature
                    TitleNovember
      6, 2008
                    /s/ Greg Wujek
                    Director,  President,
      CEOGreg
      WujekNovember
      6, 2008
                    /s/ Gary Branning
                    Director,
      Secretary, Treasurer,Gary
      Branning
                    Chief
      Financial
Officer





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