UNITED STATES SECURITIES
AND


EXCHANGE COMMISSION




Washington, D.C.
20549




FORM 10-Q




QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF


THE SECURITIES EXCHANGE ACT OF
1934




For the quarterly period ended March 31,
2010




Commission File
No:0-27848




BIOFIELD
CORP.


(Exact
name of registrant as specified in its charter)




Delaware
            
            13-3703450(State of
      Incorporation)
            
            (IRS
      Employer Identification No.)175
      Strafford Avenue, Suite 1, Wayne, PA
            
            19087(Address
      of principal executive offices)
            
            (Zip
      Code)





(215) 972-1717


(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 30
days:Yes x    No
o




Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit
and post such files). Yes  o    No 
o


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 definition of accelerated filer and
large accelerated filer in Rule 12b-12 of the Exchange Act (Check
one):




Large Accelerated Filer
            
            o
            
            Accelerated Filer
            oNon-Accelerated
      Filer
            
            o
            
            Smaller Reporting Company
            x







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




AS of May 10, 2010, THERE WERE
40,558,699 SHARES OF COMMON STOCK OUTSTANDING AND 12,300,000 SHARES OF VOTING
PREFERRED STOCK OUTSTANDING.










PART
I







ITEM
1.     FINANCIAL STATEMENTS




BIOFIELD
    CORP.(A Development Stage
      Company)BALANCE
    SHEETS
  March 31,
              
              
              December
31,ASSETS
              
              2010
              
              
              2009(UNAUDITED)
              
              
              (AUDITED)CURRENT
    ASSETS
              
              $
              -
              
              
              $
              -PROPERTY AND EQUIPMENT -
      Net
              
              
              3,475
              
              
              
              3,822TOTAL
      ASSETS
              
              $
              3,475
              
              
              $
              3,822LIABILITIES AND STOCKHOLDERS’
      DEFICITCURRENT
      LIABILITIES:Accounts payable and
      accrued expenses
              
              $
              2,310,666
              
              
              $
              3,653,615Due to
      affiliate
              
              
              -
              
              
              
              329,686Advances from
      stockholder
              
              
              -
              
              
              
              2,616,871Notes
      payable
              
              
              -
              
              
              
              2,491,790Line of
      credit
              
              
              -
              
              
              
              418,920Total
      current liabilities
              
              
              2,310,666
              
              
              
              9,510,881Commitments and
      contigenciesSTOCKHOLDERS’
      DEFICIT:Preferred stock, $.001
      par value, 12,300,000 shares authorized,12,300,000
      shares issued and outstanding at March 31, 2010and December 31, 2009,
      respectively
              
              
              12,300
              
              
              
              12,300Common stock, $.01 par value,
      60,000,000 shares authorized, 40,558,699 shares issued at March 31, 2010
      and December 31, 2009  respectively
              
              
              405,587
              
              
              
              405,587Treasury stock -
      3,100,000 shares
              
              
              (3,100
              )
              
              
              (3,100
              )Common Stock
      issuable
              
              
              17,673
              
              
              
              -Stock
      subscriptions
              
              
              3,849
              
              
              
              3,849Additional paid-in
      capital
              
              
              81,737,301
              
              
              
              76,202,559Accumulated deficit
      during development stage
              
              
              (84,480,801
              )
              
              
              (86,128,254
              )Total
      stockholders’ deficit
              
              
              (2,307,191
              )
              
              
              (9,507,059
              )TOTAL LIABILITIES AND
      STOCKHOLDERS' DEFICIT
              
              $
              3,475
              
              
              $
              3,822





See accompanying notes to consolidated
financial statements.







BIOFIELD
    CORP.(A Development Stage
      Company)UNAUDITED STATEMENTS OF
      OPERATIONS
  Period October
      16,Three Months
      Ended
              
              
              1987 (Date
    ofMarch 31,
              
              
              Inception)
      Through2010
              
              
              2009
              
              
              March 31,
    2010REVENUE
              
              $
              -
              
              
              $
              -
              
              
              $
              244,522COST OF
    SALESCost of goods
      sold
              
              
              -
              
              
              
              -
              
              
              
              95,111Loss on write down of
      inventory
              
              
              -
              
              
              
              -
              
              
              
              693,500GROSS
PROFIT
              
              
              -
              
              
              
              -
              
              
              
              (544,089
              )OPERATING
      EXPENSES:Research and
      development
              
              
              -
              
              
              
              -
              
              
              
              40,481,889Selling, general, and
      administrative
              
              
              109,647
              
              
              
              127,578
              
              
              
              43,087,368Impairment of
      intangible assets
              
              
              -
              
              
              
              -
              
              
              
              194,268Gain on disposition of
      fixed assets
              
              
              -
              
              
              
              -
              
              
              
              (8,084
              )Total
      operating expenses
              
              
              109,647
              
              
              
              127,578
              
              
              
              83,755,441OTHER INCOME
      (EXPENSE):Write down of old
      payables and debt
              
              
              1,914,950
              
              
              
              -
              
              
              
              1,914,949Interest
      income
              
              
              -
              
              
              
              -
              
              
              
              2,476,721Interest
      expense
              
              
              (157,850
              )
              
              
              (149,891
              )
              
              
              (4,362,537
              )Amortization of shares issued to
      lendersand
      other finance costs
              
              
              -
              
              
              
              -
              
              
              
              (405,523
              )Royalty income and
      other
              
              
              -
              
              
              
              -
              
              
              
              214,867Net
      other income (expense)
              
              
              1,757,100
              
              
              
              (149,891
              )
              
              
              (161,523
              )INCOME (LOSS)
      BEFORE INCOME TAXES
              
              
              1,647,453
              
              
              
              (277,469
              )
              
              
              (84,461,054
              )PROVISION FOR
      INCOME TAXES
              
              
              -
              
              
              
              -
              
              
              
              (19,749
              )NET INCOME
      (LOSS)
              
              $
              1,647,453
              
              
              $
              (277,469
              )
              
              $
              (85,192,953
              )NET INCOME (LOSS) PER
      SHARE:Basic
      and Diluted
              
              $
              0.04
              
              
              $
              (0.01
              )WEIGHTED-AVERAGE
      SHARESBasic
      and Diluted
              
              
              40,558,699
              
              
              
              25,860,411


See accompanying notes to consolidated
financial statements.







BIOFIELD CORP. ( A DEVELOPMENT
      STAGE COMPANY)UNAUDITED STATEMENTS OF CASH
      FLOWS
  Period October
      16,1987 (Date
    ofThree Months
      Ended
              
              
              Inception)
      ThroughMarch 31,
              
              
              March 31,2010
              
              
              2009
              
              
              2010CASH FLOWS FROM OPERATING
      ACTIVITIES:Net income
      (loss)
              
              $
              1,647,453
              
              
              $
              (277,469
              )
              
              $
              (84,480,801
              )Adjustments to
      reconcile net income (loss) to net cash used in operating
      activities:Depreciation
      and amortization
              
              
              347
              
              
              
              347
              
              
              
              2,764,332Amortization
      of premiums on short-term investments
              
              
              -
              
              
              
              -
              
              
              
              156,692Amortization
      of deferred financing costs
              
              
              -
              
              
              
              -
              
              
              
              2,129,643Loss on
      disposal of property and equipment
              
              
              -
              
              
              
              -
              
              
              
              194,102Loss on
      license and settlement agreements
              
              
              -
              
              
              
              -
              
              
              
              49,026Loss on
      abandonment of patent applications
              
              
              -
              
              
              
              -
              
              
              
              303,234Loss on
      inventory write-down
              
              
              -
              
              
              
              -
              
              
              
              693,500Impairment
      of intangible assets
              
              
              -
              
              
              
              -
              
              
              
              194,268Vendor
      settlements
              
              
              -
              
              
              
              -
              
              
              
              (77,257
              )Noncash
      compensation
              
              
              -
              
              
              
              -
              
              
              
              3,533,451Gain from
      disposition of fixed assets
              
              
              -
              
              
              
              -
              
              
              
              (159,473
              )Interest
      paid in common stock
              
              
              -
              
              
              
              -
              
              
              
              575,260Commisions
      and discounts on sale of common stock
              
              
              -
              
              
              
              -
              
              
              
              96,919Write down
      of third party debt to other income
              
              
              (304,851
              )
              
              
              -
              
              
              
              (304,851
              )Loan
      repayment default payable in shares of common stock
              
              
              -
              
              
              
              -
              
              
              
              350,000Consultancy
      fees paid in options
              
              
              -
              
              
              
              -
              
              
              
              242,762Issuances
      of common stock for outstanding stock obligations, services and debt
      conversion
              
              
              -
              
              
              
              -
              
              
              
              10,091,669Changes in
      assets and liabilities:
              
              
              
              
              
              
              
              
              
              
              -Notes
      receivable
              
              
              -
              
              
              
              -
              
              
              
              11,004Inventories
              
              
              -
              
              
              
              -
              
              
              
              (693,500
              )Prepaids
              
              
              -
              
              
              
              -
              
              
              
              (131,816
              )Due
      to affiliate
              
              
              -
              
              
              
              -
              
              
              
              337,921Accounts
      payable and accrued liabilities
              
              
              (1,342,949
              )
              
              
              167,893
              
              
              
              2,701,066Net
      cash used in operating activities
              
              
              -
              
              
              
              (109,229
              )
              
              
              (61,422,849
              )CASH FLOWS FROM INVESTING
      ACTIVITIES:Acquisitions of
      property and equipment
              
              
              -
              
              
              
              -
              
              
              
              (2,610,691
              )Costs incurred for
      patents and patent applications
              
              
              -
              
              
              
              -
              
              
              
              (782,527
              )Proceeds from sale of
      property and equipment
              
              
              -
              
              
              
              -
              
              
              
              294,748Purchases of
      short-term investments
              
              
              -
              
              
              
              -
              
              
              
              (26,476,638
              )Proceeds from sale and
      maturity of short-term investments
              
              
              -
              
              
              
              -
              
              
              
              26,406,378Net
      cash used in investing activities
              
              
              -
              
              
              
              -
              
              
              
              (3,168,730
              )CASH FLOWS FROM FINANCING
      ACTIVITIES:Bank
      overdraft
              
              
              -
              
              
              
              -
              
              
              
              9,912Repayments of
      capitalized lease obligations
              
              
              -
              
              
              
              (771
              )
              
              
              (82,234
              )Proceeds from issuance
      of preferred stock - net
              
              
              -
              
              
              
              -
              
              
              
              22,341,892Proceeds from common
      stock subscription
              
              
              -
              
              
              
              110,000
              
              
              
              35,203,258Proceeds from exercise
      of common stock
              
              
              -
              
              
              
              -
              
              
              
              298,546Proceeds from issuance
      of notes payable
              
              
              -
              
              
              
              -
              
              
              
              1,676,058Proceeds from
      borrowings on line of credit
              
              
              -
              
              
              
              -
              
              
              
              76,740Notes financing
      costs
              
              
              -
              
              
              
              -
              
              
              
              342,916Advances from
      stockholder and related party
              
              
              -
              
              
              
              -
              
              
              
              3,493,156Repayments of advances
      from stockholder
              
              
              -
              
              
              
              -
              
              
              
              (1,874,728
              )Repurchases of common
      stock held in treasury
              
              
              -
              
              
              
              -
              
              
              
              (3,100
              )Proceeds from notes
      payable issued to stockholder and related party
              
              
              -
              
              
              
              -
              
              
              
              2,784,430Net
      cash provided by financing activities
              
              
              -
              
              
              
              109,229
              
              
              
              64,266,846NET
      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
              
              
              -
              
              
              
              -
              
              
              
              100,530EFFECT OF
      EXCHANGE RATE CHANGES
              
              
              -
              
              
              
              -
              
              
              
              (111,497
              )BEGINNING
      OF PERIOD
              
              
              -
              
              
              
              -
              
              
              
              -END OF
      PERIOD
              
              $
              -
              
              
              $
              -
              
              
              $
              (10,967
              )




See accompanying notes to consolidated
financial statements.
  
  BIOFIELD
    CORP.(A Development Stage
      Company)UNAUDITED STATEMENTS OF CASH FLOWS
      (continued)
  Period October
      16,Three Months
      Ended
                
                
                1987 (Date
    ofMarch 31,
                
                
                Inception)
      Through2010
                
                
                2009
                
                
                March 31,
    2010SUPPLEMENTAL DISCLOSURES OF
      CASHFLOW
      INFORMATION:Cash paid for
      interest
                
                $
                -
                
                
                $
                -
                
                
                $
                857,003Cash paid for
      taxes
                
                $
                -
                
                
                $
                -
                
                
                $
                -SUPPLEMENTAL SCHEDULE FOR
      NONCASHINVESTING AND
      FINANCING ACTIVITIES:Common stock shares
      issued for penalty for non-payment of notes payable on
      maturity
                
                $
                -
                
                
                $
                -
                
                
                $
                17,949Repayment of debt by
      shareholders
                
                $
                -
                
                
                $
                -
                
                
                $
                1,200,000Write down of
      old payables and debt to other income
                
                $
                1,914,950
                
                
                $
                -
                
                
                $
                1,914,950Issuance of
      common stock for services, conversion of accrued liabilities and
      debt
                
                $
                3,534,584
                
                
                $
                -
                
                
                $
                14,956,255Capital contributions from
      forgiveness of debt by related parties
                
                $
                2,000,158
                
                
                $
                -
                
                
                $
                2,000,158







BIOFIELD CORP.




(A Development Stage
Company)




NOTES TO FINANCIAL
STATEMENTS




NOTE 1 –
ORGANIZATION




Organization




Biofield
Corp. (the “Company”) has developed a highly proprietary system to assist in
detecting breast cancer. The procedure is non-invasive and radiation- and
compression-free. The procedure produces objective results within 20 minutes
without the need for interpretation by a radiologist.  The Company’s
breast cancer diagnostic device, the Biofield Diagnostic System (“BDS”), employs
single-use sensors to measure and analyze changes in cellular electrical charge
distributions associated with the development of epithelial cancers, such as
breast cancer.  The new prototype of the device is portable and the
size of a laptop computer.  The sensors are similar in size to an EEG/
EKG sensor. The current system is a final complete product and has received CE
mark certification from the European regulatory authorities. The CE mark
certification, which permits companies to market in European
Union member countries, was received in connection with our
former facility in Alpharetta, Georgia.  The Company is considering
other facilities which have already secured CE Mark
certification.  The Company currently operates in the biomedical
device market segment.   Through March 31, 2006, the Company’s focus
and resources were primarily directed towards securing approval of the BDS from
the U.S. Food and Drug Administration (“U.S. FDA”) to distribute in the
U.S.  The Company continued to incur significant losses associated
with these activities and generated little or no sales.  Subsequent to
March 31, 2006, The MacKay Group (“MKG”) took control of the Company’s
management and operations (the “MKG Acquisition”). From April 1, 2006 to
December 31, 2006, the Company’s time, energies, and resources were focused
towards transitioning the Company from prior management to MKG.  This
included the tasks of moving the Company’s facilities, inventory, and operations
from Alpharetta, Georgia to Philadelphia, Pennsylvania and transferring and
reorganizing voluminous amounts of clinical and technological data, and
financial records.  The Company has since completed the move to a
facility in King of Prussia, Pennsylvania.  With the transfer of vital
financial and regulatory records, the Company diligently proceeded during 2007
to bring all of its Securities and Exchange Commission (“SEC”) filings current.
During the transition, MKG successfully reduced approximately $2 million of the
Company’s debt by converting it to stock, and continues to work toward further
debt reduction. Post-MKG Acquisition, the Company changed its primary focus
towards penetrating foreign markets with significant populations of women, where
MKG had significant industry and government contacts and relationships, where
the need for the BDS appeared compelling, and where the regulatory hurdles were
not as burdensome. The Company has secured or is working to secure significant
government, distribution, research and development and manufacture networks in
the People’s Republic of China, India, the Philippines and other parts of Asia,
Mexico, Latin America, the Caribbean, Africa, Europe, and the Middle
East.  The Company will continue its efforts to secure U.S. FDA
approval. The Company believes that the government and industry relationships,
the possible significant clinical data and research and development (especially
as it may pertain to screening and other cancers), and revenues it secures
abroad will facilitate its efforts to secure U.S. FDA approval in the
future.




In 2008,
the Company recommitted its efforts to secure CE mark certification for BDS,
recruited a new management team, opened an office in Hong Kong, in conjunction
with the Company’s controlling stockholder, MKG, opened a sales office in
Bangalore, India, moved its US offices from King of Prussia, Pennsylvania to
Philadelphia, Pennsylvania, and embarked on a strategy to assemble a portfolio
of    medical technology products that can be distributed using
the same sales channels the Company intends to use to market the
BDS.




The
Company, as of March 31, 2010, is still considered to be in the development
stage.




The
financial statements are presented on the basis that the Company is a going
concern, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business over a reasonable length of time.
The financial statements do not include any adjustments that might result from
the outcome of these uncertainties.  The Company has incurred
operating losses since its inception. This condition raises substantial doubt as
to the Company’s ability to continue as a going concern as such continuance is
dependent upon the Company’s ability to raise sufficient capital. Management’s
plans regarding these matters, with the objective of improving liquidity and
sustaining profitability in future years encompass the following:










            Move
      from a development stage entity to an operating entity;
            Settling
      legacy outstanding obligations;
            Continued
      review of all expenditures in order to minimize costs;
            Raise
      additional working capital as necessary; and
            Generate
      revenue from foreign markets such as China and India where MKG has
      significant government and industrial
  relationships.


In the
absence of additional financing the Company may be unable to satisfy past due
obligations. Management believes that the actions presently being taken provide
the opportunity to improve liquidity and sustain profitability. However, there
are no assurances that management’s plans will be achieved. The accompanying
financial statements do not include any adjustments that might result from the
outcome of this uncertainty. Ultimately, the Company must achieve profitable
operations if it is to be a viable entity.




The
Company has never declared or paid any cash dividends on capital stock and do
not intend to pay any cash dividends in the foreseeable future.




NOTE 2 - SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES




These financial statements and related
notes are presented in accordance with accounting principles generally accepted
in the United States of America. Significant accounting policies are as
follows:





Interim
Review Reporting





The accompanying unaudited financial
statements of Biofield Corp. (the "Company") have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission (the "SEC).
Certain information and footnote disclosures, normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted pursuant to such
SEC rules and regulations. Nevertheless, the Company believes that the
disclosures are adequate to make the information presented not misleading. These
interim financial statements should be read in conjunction with the audited
financial statements and notes thereto included in the Company's 2009 Annual
Report as filed on Form 10K.




In the opinion of management, all
adjustments, including normal recurring adjustments necessary to present fairly
the financial position of the Company with respect to the interim financial
statements and the results of its operations for the interim period ended March
31, 2010, have been included. The results of operations for interim periods are
not necessarily indicative of the results for a full year.





Basis of
Presentation





The Company has not produced any
significant revenue from its principal business and is a development stage
company as defined by the Accounting Standards Codification (ASC) 915
Development Stage Entities.





Going
Concern





The financial statements for the period
ended March 31, 2010 have been prepared on a going concern basis which
contemplates the realization of assets and settlement of liabilities and
commitments in the normal course of business. The Company has a past history of
recurring losses from operations and has an accumulated deficit of approximately
$84,480,801 and working capital deficiency of approximately $2,310,700 as of
March 31, 2010.  Additionally, the Company will require additional
funding to execute its future strategic business plan. Successful business
operations and its transition to attaining profitability is dependent upon
obtaining additional financing and achieving a level of revenue adequate to
support its cost structure. The accompanying financial statements have been
prepared assuming that the Company will continue as a going concern. This basis
of accounting contemplates the recovery of the Company’s assets and the
satisfaction of liabilities in the normal course of business.
The  financial statements do not include any adjustments to reflect
the possible future effects on the recoverability and classification of assets
or the amounts and classification of liabilities that may result from the
outcome of this uncertainty.










Use of Estimates




The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statement and the reported amounts of revenues and
expenses during the reporting period. Estimates that are critical to the
accompanying financial statements arise from the determination of the fair value
of the Company’s investment. Because such determination involves subjective
judgment, it is at least reasonably possible that the Company’s estimates could
change in the near term with respect to this matter.




Cash and Cash
Equivalents




The
Company considers all highly liquid debt securities purchased with original or
remaining maturities of three months or less to be cash equivalents. The
carrying value of cash equivalents approximates fair value.




Fair Value of Financial
Instruments




Cash and
cash equivalents, prepaid expenses and other current assets, accounts payable
and accrued expenses, as reflected in the financial statements, approximate fair
value because of the short-term maturity of these instruments. Fair value
estimates are made at a specific point in time, based on relevant market
information and information about the financial instrument. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgment and therefore cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.




Property and
Equipment




Property
and equipment are stated at cost, less accumulated depreciation and
amortization.  Depreciation and amortization are computed using
straight-line methods over the estimated useful lives of the assets, principally
three to five years, or the term of the lease, if shorter, for leasehold
improvements.  Repairs and maintenance are expensed as
incurred.




Revenue Recognition




The
Company has adopted and follows the guidance provided in the SEC’s Staff
Accounting Bulletin (“SAB”) No. 104 (“Topic 13 – Revenue Recognition”), which
provides guidance on the recognition, presentation and disclosure of revenue in
the financial statements.




Income
Taxes




The
Company accounts for income taxes in accordance with the liability method. Under
the liability method, deferred assets and liabilities are recognized based upon
anticipated future tax consequences attributable to differences between
financial statement carrying amounts of assets and liabilities and their
respective tax bases. The Company establishes a valuation allowance to the
extent that it is more likely than not that deferred tax assets will not be
utilized against future taxable income.




Uncertain
tax positions




In July
2006, the Financial Accounting Standards Board (“FASB”) issued guidance codified
in Accounting Standards Codification (“ASC”) Topic 740-10-25 “Accounting for
Uncertainty in Income Taxes”. ASC Topic 740-10-25 supersedes guidance codified
in ASC Topic 450, “Accounting for Contingencies”, as it relates to income tax
liabilities and lowers the minimum threshold a tax position is required to meet
before being recognized in the financial statements from “probable” to “more
likely than not” (i.e., a likelihood of occurrence greater than fifty percent).
Under ASC Topic 740-10-25, the recognition threshold is met when an entity
concludes that a tax position, based solely on its technical merits, is more
likely than not to be sustained upon examination by the relevant taxing
authority. Those tax positions failing to qualify for initial recognition are
recognized in the first interim period in which they meet the more likely than
not standard, or are resolved through negotiation or litigation with the taxing
authority, or upon expiration of the statute of limitations. De-recognition of a
tax position that was previously recognized occurs when an entity subsequently
determines that a tax position no longer meets the more likely than not
threshold of being sustained.




The
Company is subject to ongoing tax exposures, examinations and assessments in
various jurisdictions. Accordingly, the Company may incur additional tax expense
based upon the outcomes of such matters. In addition, when applicable, the
Company will adjust tax expense to reflect the Company’s ongoing assessments of
such matters which require judgment and can materially increase or decrease its
effective rate as well as impact operating results.









Under ASC
Topic 740-10-25, only the portion of the liability that is expected to be paid
within one year is classified as a current liability. As a result, liabilities
expected to be resolved without the payment of cash (e.g. resolution due to the
expiration of the statute of limitations) or are not expected to be paid within
one year are not classified as current. The Company has recently adopted a
policy of recording estimated interest and penalties as income tax expense and
tax credits as a reduction in income tax expense.




The
Company did not file federal and applicable state income tax returns for the
years ended December 31, 2009 and 2008, respectively, and prior. Although the
Company is incurring losses since its inception, the Company is obligated to
file income tax returns for compliance with IRS regulations and that of
applicable state jurisdictions. Management believes that the Company will not
incur significant penalty and interest for non-filing of federal and state
income tax returns, as well as, federal and state income tax liabilities, as
applicable, for quarter ended March 31, 2010 and the years ended December 31,
2009, respectively, and prior considering its loss making history since
inception. The Company is still in the process of determining the amount of net
taxable operating losses eligible to be carried forward for federal and
applicable state income tax purposes for quarter ended March 31, 2010 and the
years ended December 31, 2009, respectively, and prior. The Company has not made
any provision for federal and state income tax liabilities that may result from
this uncertainty as of March 31, 2010 and December 31, 2009, respectively.
Management believes that this will not have a material adverse impact on the
Company’s financial position, its results of operations and its cash
flows.




The
number of years with open tax audits varies depending on the tax jurisdiction.
The Company’s major taxing jurisdictions include the United States (including
applicable states).




Net Income (Loss) Per
Share




Basic and
diluted net losses per common share are presented in accordance with FASB ASC
260, “Earning Per Share,” for all periods presented. Stock subscriptions,
options and warrants have been excluded from the calculation of the diluted
income (loss) per share for the three months ended March 31, 2010 and years
ended December 31, 2009, because all such securities were anti-dilutive. The net
income (loss) per share is calculated by dividing the net income (loss) by the
weighted average number of shares outstanding during the periods.




Reclassification




Certain
amounts in the prior year financial statements have been reclassified for
comparative purposes to conform to the presentation in the current year
financial statements.




Impairment of Long-Lived
Assets




The
Company has adopted FASB ASC 360 relative to “Impairment of Long-Lived Assets”,
which requires that long-lived assets and certain identifiable intangibles held
and used by the Company be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Events relating to recoverability may include significant
unfavorable changes in business conditions, recurring losses, or a forecasted
inability to achieve break-even operating results over an extended
period.  The Company evaluates the recoverability of long-lived assets
based upon forecasted undiscounted cash flows.  Should impairment in
value be indicated, the carrying value of intangible assets will be adjusted,
based on estimates of future discounted cash flows resulting from the use and
ultimate disposition of the asset. FASB ASC 360 also requires that assets to be
disposed of be reported at the lower of the carrying amount or the fair value
less costs to sell.




Research and
Development




The
Company accounts for research and development costs in accordance with the FASB
ASC, “Accounting for Research and Development Costs”. Accordingly, internal
research and development costs are expensed as incurred.  Third-party
research and developments costs are expensed when the contracted work has been
performed or as milestone results have been
achieved.  Company-sponsored research and development costs related to
both present and future products are expensed in the period
incurred.  Total expenditures on research and product development
incurred for the period from October 16, 1987 (date of inception) to March 31,
2010 were $40,481,889.  In 2010 and 2009 there were no additional
expenditures on research and product development.




Accounting Standard
Updates




In June
2009, the Financial Accounting Standards Board (FASB) amended its accounting
guidance on the consolidation of variable interest entities (VIE). Among other
things, the new guidance requires a qualitative rather than a quantitative
assessment to determine the primary beneficiary of a VIE based on whether the
entity (1) has the power to direct matters that most significantly impact
the activities of the VIE and (2) has the obligation to absorb losses or
the right to receive benefits of the VIE that could potentially be significant
to the VIE. In addition, the amended guidance requires an ongoing
reconsideration of the primary beneficiary. The provisions of this new guidance
were effective as of the beginning of our 2010 fiscal year, and the adoption did
not have a material impact on our financial statements.









In
October 2009, the FASB issued updated guidance on multiple-deliverable
revenue arrangements. Specifically, the guidance amends the existing criteria
for separating consideration received in multiple-deliverable arrangements,
eliminates the residual method of allocation and requires that arrangement
consideration be allocated at the inception of the arrangement to all
deliverables using the relative selling price method. The guidance also
establishes a hierarchy for determining the selling price of a deliverable,
which is based on vendor-specific objective evidence; third-party evidence; or
management estimates. Expanded disclosures related to multiple-deliverable
revenue arrangements will also be required. The new guidance is effective for
revenue arrangements entered into or materially modified on and after
January 1, 2011. The Company does not expect the application of this new
standard to have a significant impact on its financial statements.




Consolidations:  In
December 2009, the FASB issued ASU No. 2009-17 (formerly Statement No. 167),
“Consolidations (Topic 810) – Improvements to Financial Reporting for
Enterprises involved with Variable Interest Entities”. ASU 2009-17 amends the
consolidation guidance applicable to variable interest entities. The amendments
to the consolidation guidance affect all entities, as well as qualifying
special-purpose entities (QSPEs) that are currently excluded from previous
consolidation guidance. ASU 2009-17 was effective as of the beginning of the
first annual reporting period that begins after November 15, 2009. ASU 2009-17
did not have an impact on our financial condition, results of operations, or
disclosures.




Accounting
for Transfers of Financial Assets:  In December 2009, the FASB issued
ASU No. 2009-16 (formerly Statement No. 166), “Transfers and Servicing (Topic
860) – Accounting for Transfers of Financial Assets”. ASU 2009-16 amends the
derecognition accounting and disclosure guidance. ASU 2009-16 eliminates the
exemption from consolidation for QSPEs and also requires a transferor to
evaluate all existing QSPEs to determine whether they must be consolidated. ASU
2009-16 was effective as of the beginning of the first annual reporting period
that begins after November 15, 2009. ASU 2009-16 did not have an impact on our
financial condition, results of operations, or disclosures.




In
January 2010, the FASB issued Accounting Standards Update (“ASU”) 2010-06
which is intended to improve disclosures about fair value measurements. The
guidance requires entities to disclose significant transfers in and out of fair
value hierarchy levels, the reasons for the transfers and to present information
about purchases, sales, issuances and settlements separately in the
reconciliation of fair value measurements using significant unobservable inputs
(Level 3). Additionally, the guidance clarifies that a reporting entity should
provide fair value measurements for each class of assets and liabilities and
disclose the inputs and valuation techniques used for fair value measurements
using significant other observable inputs (Level 2) and significant unobservable
inputs (Level 3). The Company has applied the new disclosure requirements as of
January 1, 2010, except for the disclosures about purchases, sales,
issuances and settlements in the Level 3 reconciliation, which will be effective
for interim and annual periods beginning after December 15, 2010. The
adoption of this guidance has not had and is not expected to have a material
impact on the Company’s financial statements.




In
February 2010, the FASB issued ASU 2010-09 which requires that an SEC
filer, as defined, evaluate subsequent events through the date that the
financial statements are issued. The update also removed the requirement for an
SEC filer to disclose the date through which subsequent events have been
evaluated in originally issued and revised financial statements. The adoption of
this guidance on January 1, 2010 did not have a material effect on the
Company’s financial statements.




NOTE 3 – MATERIAL
DEVELOPMENTS




The
March 30, 2006 MKG Acquisition




On March
30, 2006, MKG took control of the Company’s management and operations as a
result of a series of agreements.  The explicit objective of the
agreements was to give MKG control of the Company’s management, board,
operations, and 51% of the Company’s common shares on a fully diluted
basis.  The change of control was effectuated by way of, among other
things, stock acquisitions, debt conversion, and board changes.  As of
the MKG Acquisition, all of the Company’s prior royalty, distribution,
employment, research and development, and consulting agreements had been or were
terminated.




MKG
acquired all of the Company’s common shares (8,747,528 shares) owned by the
Company’s former chairman and chief executive officer, Dr. David Long and his
family and affiliates, pursuant to a Stock Acquisition and Voting Agreement (the
“Long Agreement”) and a Stock Acquisition Agreement between MKG and the David
and Donna Long Family Foundation (the “Long Foundation
Agreement”).  In total, MKG acquired approximately 17.49% of all
common shares of the Company on a fully diluted basis or approximately 20.6% of
all outstanding shares of common stock of the Company issued as of December 31,
2005 and 5,898,495 of those shares were subsequently assigned to James
MacKay as MKG’s designee in accordance with the Long Agreement and Long
Foundation Agreement.









Under the
Long Agreement, MKG agreed to take control of the Company’s management and
operations, fund the Company, help restructure the Company’s debt, and use its
government and industry contacts and relationships in Asia, Europe, and
elsewhere to distribute, manufacture, and develop the BDS in foreign
markets.  Additionally, MKG agreed to give the Longs a royalty equal
to 1% of the Company’s net sales worldwide for three years commencing as of
March 31, 2006.  MKG also entered into a three-year, $60,000 per year
consulting agreement with Dr. David Long or his nominee.




The
Debt Conversion




The Long
Agreement also provided for the reduction of $2 million of the Company’s debt
owed to Dr. David Long and his family and affiliates by way of an assignment of
this debt to MKG and the subsequent conversion of the debt into
stock.




Under the
Long Agreement, the Longs and their affiliates (“LFCG”) assigned approximately
$2 million (comprising principal and accrued interest) of the total debt (over
$4.3 million) owed them by the Company to MKG.  MKG was entitled to
designate which portion of the total LFCG debt to assign.  The
assigned debt was to be converted into stock of the Company at $0.05 per share
(the “Converted Shares”).  Upon conversion, MKG retained a portion of the
Converted Shares so that, together with the shares MKG acquired from LFCG and
the David and Donna Long Family Foundation, MKG would then hold 51% of all the
shares of Common Stock issued and outstanding on a fully-diluted basis.
 Any shares remaining of the Converted Shares not retained by MKG were to
be transferred to LFCG, provided that LFCG agreed to deliver a proxy with
respect to all voting rights associated with those remaining
shares.  In addition, pursuant to the Long Agreement, to the extent
that any other debt owed to LFCG by the Company is converted into shares of
Common Stock, LFCG agreed to transfer 51% of such shares to MKG.




On April
3, 2006 MKG made a demand on the Company to effectuate the debt conversion,
designating certain portions of the total LFCG debt.  Pursuant to the
Long Agreement, $499,728 of the assigned debt was authorized to be converted
into 9,994,550 pre-reverse stock split common shares and $1,230,000 of the
assigned debt into 12,300,000 shares of the voting Preferred stock of the
Company, with such shares to be issued to James MacKay as MKG’s designee.
 Mr. MacKay is the principal of MKG and is Chairman of the Board of the
Company.  All remaining portions of the assigned debt, classified on
the balance sheet as notes payable and not converted (e.g., $270,273), were
retained by MKG and are entitled to be converted at a later time.  On
July 31, 2008, the Board of Directors reviewed all of the Company’s prospective
and contingent obligations to issue Common Stock and approved the issuance of
19,006,840 shares of Common Stock to James MacKay on July 31, 2008 to complete
the debt conversion pursuant to the Long Agreement.  The 19,006,840
shares of Common Stock were believed by the Board of Directors to provide Mr.
Mackay with 51% of the outstanding equity after giving effect to all of the
Company’s prospective and contingent obligations to issue Common
Stock.  As a result, the Long Debt was converted into a total of
19,006,840 shares of Common Stock (split adjusted) and 12,300,000 shares of
voting Preferred Stock, which are convertible into 2,460,000 shares of Common
Stock and carry 2,460,000 votes.  The preferred shares were deemed to
be issued during 2007 and the 9,994,550 pre-reverse stock split common shares
authorized to be converted were considered to be issuable as of December 31,
2007.




On March
4, 2009, The Company issued 3,693,333 shares of common stock upon conversion of
$422,000 of debt.




On March
31, 2010, The Company has 17,672,922 shares of common stock issuable for
conversion of $3,534,584 of debt.




The MKG Master
License




On July
27, 2007, the Company signed a master license agreement (the “Agreement”) with
MKG. Pursuant to the Agreement, the Company granted to MKG an exclusive (even to
the Company), sub licensable, royalty-bearing, worldwide license to make, have
made, use, import, offer for sale, and sell devices, sensors and other products
or services incorporating the Company’s patented and unpatented breast cancer
detection technology, including, but not limited to, the BDS device, the
Biofield Breast Cancer Proliferation Detection System, the Breast Cancer
Diagnostic Device, and the Biofield Breast Examination or BBESM
 (collectively, the “Technology”).  The Company also granted MKG, on a
worldwide basis, the Exclusive Distribution, Manufacturing, Development,
Clinical, and research and development rights (as those terms are defined in the
Agreement) with regard to the Technology. Under the Agreement, MKG assumes from
the Company the sole responsibility and expense to market, manufacture, further
develop (clinically and technically), and otherwise commercialize the
Technology. MKG further assumes from the Company the sole responsibility and
expense to secure additional regulatory approvals and to conduct additional
clinical trials and research and development.









In return
for the exclusive worldwide license, MKG will pay the Company royalties based on
gross receipts received by MKG and its affiliates in connection with the
Technology. MKG must pay minimum royalties. In addition to royalties, MKG will
pay the Company licensing fees based upon certain milestones. The term of the
Agreement is 10 years with automatic renewals for additional 10-year terms
unless terminated by one of the parties pursuant to the terms of the
Agreement.




NOTE4– PROPERTY, PLANT AND
EQUIPMENT




Property, plant and equipment at March
31, 2010 and December 31, 2010 consisted of the following:




March 31,
            
            
            December
31,2010
            
            
            2009Furniture
      and Office equipment
            
            $
            61,686
            
            
            $
            61,686Plant
      and production equipment
            
            
            144,308
            
            
            
            144,308205,994
            
            
            
            205,994Less:  Accumulated
      depreciation
            
            
            202,520
            
            
            
            202,172$
            3,4,74
            
            
            $
            3,822




Depreciation expenses for the three
months ended march 31, 2010 and 2009 was $347, respectively.




NOTE 5 - PATENT AND PATENT APPLICATION
COSTS




In
December 2005, during the Company’s annual review of the carrying values of
patents and trademarks, management determined that, due to increased uncertainty
in obtaining FDA’s approval to sell the Company’s device in the United States,
the recoverability of the carrying values of Patents and Trade Marks was in
doubt. Management was unable to determine and project future undiscounted cash
flows for these assets with reasonable accuracy due to the uncertainties.
Consequently, the Company recorded an impairment charge of $194,268 for the full
carrying value of these assets as a component of operating expenses in the
statement of operations as a separate line item.




There was
no amortization expense for patents for the quarter ended March 31, 2010.
Amortization expense from inception through December 31, 2009, was
$486,860.




NOTE6–ACCOUNTS PAYABLE ANDACCRUED EXPENSES




Accounts payable and accrued expenses at
March 31, 2010 and December 31, 2009 consisted of the
following:




March 31,
            
            
            December
31,2010
            
            
            2009Accounts
      payable
            
            $
            97,959
            
            
            $
            1,439,620Accrued
      interest
            
            
            1,331,885
            
            
            
            1,272,678Accrued
      expenses
            
            
            880,821
            
            
            
            926,658Other
            
            
            -
            
            
            
            14,659$
            2,310,665
            
            
            $
            3,653,615




As of March 31, 2010, management
determined that certain balances in accounts payable and debt were unclaimed for
more than five years and therefore, the Company had written down old payables
and debt in the amount of $1,914,950 as other income considering the fact that
these balances were no longer payable to third parties through a resolution of
the board of directors (see also note 9).




NOTE 7 – DUE TO
AFFILIATE




At March
31, 2010, the company converted debt owed to affiliates to common shares
issuable (see Note 3). As of December 31, 2009 the Company had recorded
$329,686, for amounts due to affiliates.









NOTE 8 – ADVANCES FROM
STOCKHOLDER




At March
31, 2010, the company converted debt owed to affiliates to common shares
issuable (see Note 3). As of December 31, 2009 the Company had recorded
$2,616,871, for advances from stockholder.




The
Company’s operations from 2002 to the March 30, 2006 MKG Acquisition were
primarily funded through advances, among other funding vehicles, by its then
majority shareholder, chairman, and chief executive officer, Dr. David Long, and
his family and affiliates LFCG.  As of December 31, 2005, the
Company’s overall debt to LFCG was approximately $4,425,853, of which $3,488,816
was recorded as advances from stockholder.




On March
30, 2006, to induce MKG to take control of the Company and to effectuate the
transfer to MKG of 51% of the Company’s stock on a fully diluted basis, LFCG
agreed to assign MKG approximately $2 million of the total debt owed to it by
the Company (the “Assigned Debt”). Under the MKG-LFCG Agreement, the Assigned
Debt was to be converted into stock of the Company at a conversion rate
commensurate to $0.05 per common share. On April 3, 2006, MKG made a demand on
the Company to effectuate the debt conversion.




NOTE 9 – NOTES
PAYABLE




Notes
Payable




During
2006, the Company issued notes totaling $110,000 for past due
obligations.  These notes bear interest at 18% through the maximum
amount allowed by law. For the year ended December 31, 2009 and 2008, $23,400 of
interest, respectively, was recorded in accrued interest.  These notes
were due at various dates during 2007 and 2008 and are in default. The Company
continued to work with the holders of these notes to resolve the defaults up
until December 31, 2009. As of March 31, 2010, these notes including accrued
interest has been written down and recorded as other income in the accompanying
statements of operations (see note 6).




Notes
Payable to Stockholder




At March
31, 2010, the company has converted $3,534,584 of debt owed to stockholder to
17,672,922 common shares issuable (see Note 3). As of December 31, 2009 the
Company had a balances in advances from stockholder in the amount
of  $2,616,871 (see note 8).  In 2002, the Company issued a
10% promissory convertible note in the principal amount of $450,000 to a
stockholder. The note, with accrued unpaid interest, has no maturity date and is
convertible at the option of the holder into subscriptions of common stock at a
rate of $0.40 per share. The balance under this note was included in
advances from stockholder of $2,616,871 as described above.




Notes
Payable for Private Placements




Over the
course of time, the Company sold various private placements in various
increments of units of debt and common stock to related and other third parties.
These notes payable, as of March 31, 2010,  were converted to common
shares (see Note 3) or treated as additional paid-in capital pursuant to the
terms of FASB ASC 470-50 (“Debt – Modifications and Extinguishments), as
applicable,  and at December 31, 2009 the debt totaled
$2,491,790.  Interest accrues at either 12% or 18%, depending upon the
date of placement of note and has been recorded in accrued
interest.  The notes for these private placements were due on various
dates and the Company is currently in default. Until the notes issued under the
private placements are repaid, the holders of the notes have the right to
participate in any offering by the Company of its equity securities (including
convertible debt) by using the notes (and accrued interest thereon) to acquire
such equity securities at a 25% discount from the offering price (and if the
offering is of convertible debt to acquire such debt at face with a conversion
feature at a 25% discount).




NOTE 11 – LINE OF
CREDIT




On
January 5, 2007 MKG agreed to advance additional funds to the Company under a
line of credit.  Under the line of credit, monies advanced by MKG
would bear 12% simple annual interest.  There was no maturity
date.  MKG had the option to convert the principal and accrued
interest into stock at a share price equal to the lesser of: (a) the 70% of the
share price at the close of the market as of receipt of funds; or (b) the terms
extended by the Company to a funder making a total equity investment of at least
US $1 million or in connection with a merger/acquisition or change in control.
In 2007, MKG advanced the Company approximately $342,000.  At March
31, 2010 the balance under this line of credit plus accrued
interest  was treated as additional paid-in capital, pursuant to the
terms of FASB ASC 470-50 (“Debt – Modifications and Extinguishments”), by a
board resolution; and at December 31, 2009 the balance of this line of credit
was $418,920.




NOTE 12 – STOCKHOLDERS’
EQUITY




Treasury
Stock




In
December 1998, the Company repurchased 2,246,131 shares of Common Stock for
$100. In June 2000, the Company repurchased 60,000 shares of Common Stock for
$3,000 from an executive who resigned.  The Company holds all of these
shares in its treasury.  There are no changes as of March 31,
2010.









Options
Issued for Consulting Fees




The
Company issued 1.2 million options based upon the fair value of service render
at $47,512 for consulting fees recognized in operating results for the year
ended December 31, 2006. These options have an exercise price of $0.04 per share
and expire on February 23, 2011. During the three months ended March 31, 2010
and fiscal year ended December 31, 2009 there were no options issued or
exercised.




Shares
Due for Interest Accrued on Advances From Stockholder




Interest
on certain advances from stockholder are payable in common stock issuable. At
March 31, 2010, stock issuable of common stock have been reserved for issuance
in payment of the then principal and accrued interest of $3,534,584 was added to
additional paid-in capital and stock issuable, pending the issuance of
17,672,922 shares of common stock.




NOTE 13 - INCOME
TAXES




The Company has not made provision for
income taxes in the years ended December 31, 2009 and prior, since the Company
has the benefit of net operating losses carried forward in these
periods.




Due to uncertainties surrounding the
Company’s ability to generate future taxable income to realize deferred income
tax assets arising as a result of net operating losses carried forward, the
Company has not recorded any deferred income tax asset as of December 31, 2009
and prior to the year 2009.




The Company is subject to taxation in
the United States and certain state jurisdictions. The Company’s tax years for
2002 and forward are subject to examination by the United States and applicable
state tax authorities due to the carry forward of unutilized net operating
losses.





At March
31, 2010, the Company had federal net operating loss carry-forwards totaling
approximately $84 million, which will begin expiring in years 2010 through 2029
subject to its eligibility as
determined by respective tax regulating authorities.. However,
substantial portion of the net operating loss carry forwards are not utilizable,
as a result of the limitations imposed by Section 382 of the Internal Revenue
Code, due to ownership changes in 1992, 1995, 1997, 1999 and 2006.  To
the extent that these losses and general business credits are utilizable, they
may be offset against future U.S. taxable income, if any, during the carry
forward period.




NOTE 14 – COMMITMENTS AND CONTINGENCIES




As of
April 1, 2006, the Company moved its corporate headquarters from Alpharetta,
Georgia to 1615 Walnut Street, 3rd and 4th Floors, Philadelphia,
Pennsylvania.  In June 2007, pursuant to a three-year lease, the
Company relocated all of its operations to a new office in King of Prussia,
Pennsylvania.  The monthly rent for the King of Prussia office is
approximately $4,000, including utilities. As at March 31, 2010 the Company owed
the following:




Rent2010
            
            
            17,920Total
            
            $
            17,920




In light
of the Company's arrangements with a certified medical device manufacturing
facility to help co-manage the Company's U.S. operations, the Company is working
to terminate the King of Prussia office lease with the landlord, which sent a
default notice on March 10, 2008, and which after applying the security deposit
is effectively owed a balance for the Company's occupancy during April
2008.




Pursuant
the Long Agreement, the Company is required to pay LFCG collectively a 1%
royalty with respect to net sales of the Company’s products worldwide for three
years commencing March 30, 2006.




Pursuant
to the March 30, 2006 Consulting Agreement, the Company is required to pay Dr.
David Long or his nominees $60,000 per annum in consulting fees for three years
commencing March 30, 2006.









The
Company is not a party to any pending legal proceeding which is not routine
litigation incidental to our business or which involves a claim for damages
exceeding 10% of our current assets, nor are we aware of any current proceeding
concerning us that a governmental authority may be contemplating for the three
months ended March 31, 2010 and year ended December 31, 2009,
respectively.




The Company has certain lawsuits and
claims arising in the ordinary course of its business. In the opinion of the
Company, although final disposition of some or all of these suits and claims may
impact the Company’s financial statements in a particular period, they should
not, in the aggregate, have a material adverse effect on the Company’s financial
position.




NOTE 15 - ROYALTY
AGREEMENT




As a
condition precedent to MKG’s agreement to take control of the Company and as was
agreed upon and represented by the Company’s prior management and board, all
royalty agreements existing as of March 30, 2006, had either expired or had been
terminated or were since terminated.




As part
of the Long Agreement, LFCG was given a royalty of 1% of the net sales of the
Company’s products worldwide for a three-year period commencing as of March 30,
2006.




The
Company entered into a master license agreement with MKG giving MKG an exclusive
(even to the Company), sub licensable, royalty-bearing license to make, have
made, use, import, offer for sale, and sell devices, sensors, and other products
or services incorporating the Company’s technology.  In return, MKG
agreed to pay the Company royalties based upon a gross receipts step scale. MKG
was further subject to a minimum royalty payment requirement. MKG also agreed to
pay the Company a licensing fee in accordance with certain milestone
requirements. The term of the Master License Agreement is 10 years, with
automatic renewals for additional 10-year terms, unless properly terminated in
accordance with the terms and conditions of the Agreement. No changes have been
noted in the terms of this agreement as of March 31, 2010.




NOTE 16 - SUBSEQUENT
EVENTS




On May
21, 2010 the Company has entered into negotiations with Mark Faupel, Ph.D for
the assignment of the Intellectual Properties (“IP”) rights relating to the
Breast Diagnostic System (“BDS”) Device. In addition, the Company is negotiating
with Guided Therapeutics, Inc. (“GT”), of which Dr. Faupel is CEO and President,
for the re-engineering and obtaining the CE Mark for the technology. The Company
is also negotiating with GT for the manufacturing of 100 BDS Devices with the
new technology. The Company is optimistic that the process involving the
re-engineering and initial manufacturing can be completed within a nine-month
time frame.









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




The
following discussion and analysis should be read in conjunction with our
Financial Statements and Notes thereto appearing elsewhere in this
document.




Certain
statements contained in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere in this report are
forward-looking statements that involve risks and
uncertainties.  These statements relate to future events or our future
financial performance.  In some cases, forward-looking statements can
be identified by terminology such as "may," "will",
"should",  "expect", "anticipate", "intend", "plan", "believe",
"estimate", "potential", or "continue", the negative of these terms or other
comparable terminology.   These statements involve a number of
risks and uncertainties.   Actual events or results may differ
materially from any forward-looking statement as a result of various factors,
including those described above and in the Company’s last Form 10-K for 2009
under "Risk Factors".  We have no obligation to release publicly the
result of any revisions to any of our "forward-looking statements" to reflect
events or circumstances that occur after the date of this Report or to reflect
the occurrence of other unanticipated events.




Overview




Biofield
Corp. is a development-stage medical technology company which has developed an
advanced medical device and associated diagnostic system (the Biofield
Diagnostic System or “BDS”) to assist in detecting breast cancer, has secured
exclusive marketing rights to products for treatment of oral and genital herpes
and a diagnostic test for cervical cancer, and seeks to secure marketing rights
for other complimentary products.




In March
of 2006, MacKay Group Limited (“MKG”) acquired control of the
Company.  Prior to the date MKG acquired control of the Company, the
Company was focused on securing approval of the BDS from the U.S. Food and Drug
Administration (“U.S. FDA”).  These efforts were unsuccessful and led
to MKG’s acquisition of control of the Company.  Under MKG, the
Company has focused on developing markets outside the United States with
significant populations of women, where MKG has significant industry and
government relationships, where the need for the BDS appears compelling, and
where the regulatory hurdles are not as burdensome.  These markets
include China (including Hong Kong and Macau), India, the Philippines,
Indonesia, Malaysia, and other parts of Asia.  The Company also
intends to develop markets in Mexico, Latin America, the Caribbean, Africa,
Europe, and the Middle East.  As the Company’s resources permit, the
Company will seek U.S. FDA approval of the BDS. The Company believes its
strategy of developing foreign markets will provide additional clinical data and
research and development (including as it may pertain to screening and other
cancers) which will facilitate its efforts to secure U.S. FDA
approval.




Most of
2006 was consumed in connection with the series of transactions which resulted
in acquiring control of the Company.  Unless indicated otherwise
below, any material events in 2006 related to events, which predated 2006 and
the MKG acquisition, and which were reported in detail in the Company’s prior
SEC’s filings including its Form 10-KSB for fiscal year ending December 31, 2005
filed May 30, 2006




In 2007,
the Company moved its facilities, inventory and operations from Alpharetta,
Georgia to King of Prussia, Pennsylvania and transferred and reorganized
voluminous amounts of clinical and technological data and financial records,
resumed filing annual and quarterly reports with the Securities and Exchange
Commission (“SEC”) and brought all of its filings current, converted
approximately $2 million of the Company’s debt to equity stock, and began a
number of foreign market initiatives which are discussed in Item 6 of the
Company’s Form 10-KSB for fiscal year ending December 31, 2007 filed April 15,
2008.




In 2008,
the Company recommitted its efforts to secure CE mark certification for BDS,
recruited a new management team, opened an office in Hong Kong, in conjunction
with the Company’s controlling stockholder, MKG, opened a sales office in
Bangalore, India, moved its US offices from King of Prussia, Pennsylvania to
Philadelphia, Pennsylvania, and embarked on a strategy to assemble a portfolio
of  medical technology products that can be distributed using the same
sales channels the Company intends to use to market the BDS.




In
furtherance of its strategy to develop revenue while pursuing the CE mark for
BDS, the Company obtained exclusive, worldwide distribution rights from NeuroMed
Devices, Inc. for NeuroMed’s OraCalm device, for oral herpes, and Vira Calm
device, for genital herpes.  In early 2009, the Company obtained
exclusive, worldwide distribution rights (excluding Belgium) from Valibio, SA
for ValiRx plc’s Human Papilloma Virus (HPV) diagnostic test for cervical
cancer, ValioRx’s HypergenomicsTM and NucleosomicsTM cancer diagnostics products,
and any other cancer diagnostic products developed during the term of the
Distribution Agreement The Company expects to begin marketing the OraCalm
device, for oral herpes, via direct web based/internet marketing, retail,
wholesale and through physicians and hospitals in 2009.










LIQUIDITY
AND CAPITAL RESOURCES




We have
financed our operations since inception almost entirely by the issuance of our
securities, interest income on the then unutilized proceeds from these issuances
and with loans made directly, or guaranteed and collateralized, by Dr. David
Long and certain of his affiliates (until the MKG Acquisition) and by MKG (after
the MKG Acquisition).




At March
31, 2010, we had a working capital deficiency of $2,310,665 and accumulated
deficit of $84,480,801, respectively.




Our
assets totaled $3,474 at March 31, 2010. There were no cash and cash equivalents
at March 31, 2010.




Operating
Activities




During
the three months ended March 31, 2010, we had a net income of $1.6 million,
compared to $277,469 for the three months ended March 31, 2009, an increase of
$1.9 million or 684.8%. This increase was mainly attributable to write down of
old payables and the third parties debt in the amount of approximately $1.9
million during the three months ended March 31, 2010. During the three months
ended March 31, 2010, there were no cash utilized in used in operating
activities, compared to $109,229 for the three months ended March 31, 2009, a
decrease of $109,229 or 100%. The decrease in 2010 was primarily due to a
decrease in accounts payable and accrued liabilities of approximately $1.3
million as compared to an increase of $167,893 for the same period in 2009,
and   write down of third parties debt in the amount
of  $304,851as other income in 2010.




During
the three months ended March 31, 2010 and 2009, we had depreciation and
amortization in connection with operating activities of $347,
respectively.




Investing
Activities




There
were no investing activities in the three months ended March 31, 2010 and
2009.




Financing
Activities




There
were no financing activities in the three months ended March 31, 2010. During
the three months ended March 31, 2009, we had net cash provided by financing
activities of $109,229, primarily from proceeds from issuance of common stock of
$110,000 partially offset by a repayment of capitalized lease obligation of
$771.




While we
have raised capital to meet our working capital and financing needs in the past,
additional financing is required in order to meet our current and projected cash
flow deficits from operations and development. We are seeking financing in the
form of equity in order to provide the necessary working capital.  We
are currently working on commitments for financing.  There is no
guarantee that we will be successful in raising the funds required.




By
adjusting its operations and development to the level of capitalization,
management believes it has sufficient capital resources to meet projected cash
flow deficits through the next twelve months. However, if we are not successful
in generating sufficient liquidity from operations or in raising sufficient
capital resources, on terms acceptable to us, this could have a material adverse
effect on our business, results of operations, liquidity and financial
condition.




The
independent auditors report, on our December 31, 2009 financial statements,
states that our recurring losses raise substantial doubts about our ability to
continue as a going concern.




RESULTS
OF OPERATIONS




Comparison
of the three month period ended March 31, 2010 with the three month period ended
March 31, 2009.




In the
fiscal quarter ended March 31, 2010 and 2009, there were no sales and we did not
incur any cost of sales.




The total
operating expenses for the three months ended March 31, 2010 and March 31, 2009
were $109,647 and 127,578 respectively, thus representing a decrease of $17,931
or 14.1%. This decrease is due primarily to less travel expenses in the three
months ended March 31, 2010.









We did
not incur any research and development expenses in the fiscal quarters ending
March 31, 2010 and 2009.




Interest
expense for the three months ended March 31, 2010 and March 31, 2009, were
$157,850 and $149,891, respectively; representing an increase of $7,959 or 5.3%.
The increase is a direct result of increased debt in the first quarter of 2010.
However, this expense will reduce from the second quarter of 2010 due to
substantial conversion of debt from stockholders, and their affiliates and
related parties in to equity during the first quarter of 2010.




For the
three months ended March 31, 2010 there were write downs of old payables and
third parties debt of $1,914,950, included in the statements of operations as
other income. There were no write down of payables in the same period in
2009.




As a
result of the foregoing, we incurred a net income of $1,647,453 for the three
months ended March 31, 2010 compared to a loss of $277,469 for the three months
ended March 31, 2009, an increase of $1,924,922, or 693.74%.




OFF-BALANCE
SHEET ARRANGEMENTS




None.




ITEM
3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK




Not
Applicable.




ITEM 4T.   CONTROLS AND
PROCEDURES




Our chief
executive officer and chief financial officer (the “Certifying Officers”) are
responsible for establishing and maintaining disclosure controls and procedures
for our company and our subsidiary. Such officers have concluded (based upon his
evaluation of these controls and procedures as of the end of the period covered
by this report) that our disclosure controls and procedures are effective to
ensure that information required to be disclosed by us in this report is
accumulated and communicated to management, including our principal executive
officers as appropriate, to allow timely decisions regarding required
disclosure.




The
Certifying Officers have also indicated that there were no significant changes
in our internal controls or other factors that could significantly affect such
controls subsequent to the date of his evaluation, and there were no corrective
actions with regard to significant deficiencies and material
weaknesses.




Our
management, including the Certifying Officers, does not expect that our
disclosure controls or our internal controls will prevent all error and all
fraud. A control system, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the control
system are met. In addition, the design of a control system must reflect the
fact that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within a company have been
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people or by management
override of the control. The design of any systems of controls also is based in
part upon certain assumptions about the likelihood of future events, and there
can be no assurance that any design will succeed in achieving its stated goals
under all potential future conditions. Because of these inherent limitations in
a cost-effective control system, misstatements due to error or fraud may occur
and not be detected.




CHANGES
IN INTERNAL CONTROL OVER FINANCIAL REPORTING




As
required by Rule 13a-15(d), the Company's Chief Executive Officer and Chief
Accounting Officer, also conducted an evaluation of Biofield's internal controls
over financial reporting to determine whether any changes occurred during the
first quarter that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial reporting.
During the preparation of the Company's financial statements as of and for the
year ended December 31, 2009, the Company concluded that the then current system
of disclosure controls and procedures needed improvement, partly due to the
transition to new management, facilities, and auditors. As a result of this
conclusion, the Company initiated changes in internal control. It should be
noted that any system of controls, however well designed and operated, can
provide only reasonable, and not absolute, assurance that the objectives of the
system will be met. In addition, the design of any control system is based in
part upon certain assumptions about the likelihood of future
events.









Lack
of Adequate Accounting Staff




Due to
limitations in financial and management resources, the Company does not have
adequate accounting staff.  As a result, the Company took steps to
address its understaffed finance and accounting team to correct this material
weakness.  The Company engaged an independent contractor with
extensive CFO-level management and SEC reporting experience in public
companies.  The Company feels this addition to the Company's finance
and accounting team will improve the quality of future period financial
reporting.




PART
II.                      OTHER
INFORMATION




Item
1.                          Legal
Proceedings




As result
of the Company’s arrangement with third party to help manage the Company’s
operations and development of the BDS, the Company has forwarded much of what
was in its King of Prussia office to the third party’s certified manufacturing
and regulatory facilities near Atlanta, Georgia, and seeks to vacate the King of
Prussia office.  The landlord of the Company’s King of Prussia office
has subsequently filed for and obtained a judgment in
confession.  Counsel, for both sides, is in discussions to work out a
settlement terminating the lease.  The monthly rent is approximately
$3,500 and it is a 3 year lease. As of April 10, 2009, the Company had worked
out all remaining issues with the Landlord and final payment on the lease has
been made.




The
Company was also advised that a judgment in the amount of $16,228 has been
entered against it and its former officer, Michael Yom.  The Company’s
counsel was advised of this matter only after judgment was entered and is
considering appropriate relief.  The Complaint only states that this
company sued for the price of goods sold and/or services provided on a book
account, although the Company’s present management is unaware of what goods
and/or services were allegedly provided to this company.




The
Company filed an action seeking a declaratory judgment and injunctive relief
against William R. Dunavant in the Eastern District of
Pennsylvania.  The Company is seeking a determination that Company has
no obligation to pay the remuneration contemplated by the consulting agreement
with Mr. Dunavant and injunctive relief to prevent Mr. Dunavant from continuing
to violate the confidentiality and restrictive covenants in the consulting
agreement.




We are
not a party to any other pending legal proceeding which is not routine
litigation incidental to our business or which involves a claim for damages
exceeding 10% of our current assets, nor are we aware of any current proceeding
concerning us that a governmental authority may be contemplating.




Item
1A.   RISK FACTORS




In
addition to other information set forth in this Report, you should carefully
consider the risk factors previously disclosed in “Item 1A to Part 1” of our
Annual Report on Form 10-K for the year ended December 31,
2009.  There were no material changes from the risk factors during the
three months ended March 31, 2010.




Item
2.                          Unregistered
Sale of Equity Securities and Use of Proceeds




None.




Item
3.     Defaults Upon Senior Securities




None.




Item
4.




Reserved




Item
5.                          Other
information




On March
15, 2009, Mr. Shepard Bentley, Mr. Steve Waszak and Dr. Shiva Sharareh advised
the Company’s board of directors of their intention to resign. Notwithstanding,
no signed resignations were submitted by either of the aforementioned
officers.




Subsequently,
Messrs. Bentley and Waszak continued to assist the Company with regards to its
SEC filings and certain other matters. The Company believes that such persons
intended to finalize their resignations following the filing of the Company’s
quarterly report on Form 10-Q for the period ended March 31, 2009 as filed with
the Securities and Exchange Commission on May 15, 2009.









However,
to date no such signed resignations have been received by the Company despite
requests for same. Accordingly, on August 18, 2009, the Board of Directors of
the Company took action removing Mr. Shepard Bentley, Mr. Steve Waszak and Dr.
Shiva Sharareh from their respective positions with the Company effective May
16, 2009, and appointed David Bruce Hong as the Company’s Chief Executive
Officer and Chief Financial Officer, effective May 16, 2009, and ratified all
actions taken by the prior offices of which the Board of Directors was aware
of.




Item
6.                          Exhibits
and Reports on Form 8-K




Exhibits







31.           Rule
13a-14(a)/15d-14(a) Certifications







*31.1
Certification of David Bruce Hong Chief Executive Officer





*31.2
Certification of David Bruce Hong Chief Financial Officer







32.           Section
1350 Certifications







*32.1
Certification of Bruce Hong Chief Executive Officer





*32.2
Certification of Bruce Hong Chief Financial Officer










SIGNATURES




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




BIOFIELD
      CORP.Date:  May
      24, 2010
              By:
              /s/ David
      Bruce HongDavid
      Bruce HongChief
      Executive Officer/s/ David
      Bruce HongDavid
      Bruce Hong Chief Accounting Officer