UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C.  20549





FORM
10-Q





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


EXCHANGE
ACT OF 1934


For the
quarterly period ended March 31, 2009


OR


 ̈ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES


EXCHANGE
ACT OF 1934


For the
transition period from _________to_________





Commission
File No. 0-17119





QUANTRX BIOMEDICAL
CORPORATION


(Exact
Name of Registrant as Specified in Its Charter)





Nevada
              
              33-0202574(State
      or Other Jurisdiction of
              
              (I.R.S.
      EmployerIncorporation
      or Organization)
              
              Identification
      Number)





100 S. Main Street, Suite
300, Doylestown, PA 18901


(Address
of Principal Executive Offices) (Zip Code)





(267)
880-1595


(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 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. x Yes
 ̈
No




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 during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).   ̈ Yes
 ̈
No




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. 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  ̈
              Smaller reporting companyx




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




The
number of shares outstanding of the issuer’s common stock as of May 6, 2008 was
43,067,630.








PART I -FINANCIAL INFORMATIONITEM
      1.
                                          Financial
      StatementsConsolidated
      Balance Sheets as of March 31, 2009 (Unaudited) and December 31,
      2008
                                          4Consolidated
      Statements of Operations (Unaudited) for the three months ended March 31,
      2009 and 2008
                                          5Consolidated
      Statements of Cash Flows (Unaudited) for the three months ended March 31,
      2009 and 2008
                                          6Condensed
      Notes to (Unaudited) Consolidated Financial Statements
                                          7ITEM
      2.
                                          Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                                          30ITEM
      4T.
                                          Controls
      and Procedures
                                          35PART
      II – OTHER INFORMATIONITEM
      1.
                                          Legal
      Proceedings
                                          36ITEM
      2.
                                          Unregistered
      Sales of Equity Securities; and Use of Proceeds
                                          36ITEM
      3.
                                          Defaults
      Upon Senior Securities
                                          36ITEM
      4.
                                          Submission
      of Matters to a Vote of Security Holders
                                          36ITEM
      5.
                                          Other
      Information
                                          37ITEM
      6.
                                          Exhibits
                                          37Signatures
                                          
                                          38


2


PART
I – FINANCIAL INFORMATION




CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING INFORMATION




THIS
QUARTERLY REPORT ON FORM 10-Q, INCLUDING EXHIBITS HERETO, CONTAINS
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED.  THESE FORWARD-LOOKING STATEMENTS ARE TYPICALLY IDENTIFIED
BY THE WORDS “ANTICIPATES,” “BELIEVES,” “EXPECTS,” “INTENDS,” “FORECASTS,”
“PLANS,” “ESTIMATES,” “MAY,” “FUTURE,” “STRATEGY,” OR WORDS OF SIMILAR
MEANING.  VARIOUS FACTORS COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE EXPRESSED IN THE FORWARD-LOOKING STATEMENTS; INCLUDING
THOSE DESCRIBED IN “RISK FACTORS” IN OUR ANNUAL REPORT ON FORM 10-KSB FOR THE
YEAR ENDED DECEMBER 31, 2007.  WE ASSUME NO OBLIGATIONS TO UPDATE
THESE FORWARD-LOOKING STATEMENTS TO REFLECT NEW INFORMATION, ACTUAL RESULTS,
CHANGES IN ASSUMPTIONS, OR CHANGES IN OTHER FACTORS, EXCEPT AS REQUIRED BY
LAW.


3


ITEM
1.             Financial
Statements




QUANTRX
BIOMEDICAL CORPORATION


CONSOLIDATED
BALANCE SHEETS


March
      31,
                          2009
                        
                        
                        December
      31,
                          2008(unaudited)ASSETSCurrent
      Assets:Cash
      and cash equivalents
                        
                        $
                        370,759
                        
                        
                        $
                        66,226Accounts
      receivable
                        
                        
                        66,070
                        
                        
                        
                        45,760Interest
      receivable, net of allowance for bad debt of $14,000
                        
                        
                        -
                        
                        
                        
                        -Interest
      receivable – related party
                        
                        
                        35,689
                        
                        
                        
                        31,689Inventories
                        
                        
                        38,702
                        
                        
                        
                        40,138Prepaid
      expenses
                        
                        
                        165,805
                        
                        
                        
                        189,049Note
      receivable, net of allowance for bad debt of $200,000
                        
                        
                        -
                        
                        
                        
                        -Note
      receivable – related party
                        
                        
                        200,000
                        
                        
                        
                        200,000Deferred
      finance costs, net
                        
                        
                        -
                        
                        
                        
                        8,693Deposits
                        
                        
                        175,000
                        
                        
                        
                        104,146Total
      Current Assets
                        
                        
                        1,052,025
                        
                        
                        
                        685,701Investments
                        
                        
                        200,000
                        
                        
                        
                        200,000Property
      and equipment, net
                        
                        
                        471,320
                        
                        
                        
                        496,206Intangible
      assets, net
                        
                        
                        1,967,195
                        
                        
                        
                        2,012,097Security
      deposits
                        
                        
                        11,093
                        
                        
                        
                        10,667Total
      Assets
                        
                        $
                        3,701,633
                        
                        
                        $
                        3,404,671LIABILITIES
      AND STOCKHOLDERS’ EQUITY (DEFICIT)Current
      Liabilities:Accounts
      payable
                        
                        $
                        2,370,620
                        
                        
                        $
                        2,205,661Accrued
      expenses
                        
                        
                        387,619
                        
                        
                        
                        298,692Deferred
      revenue, current
                        
                        
                        42,115
                        
                        
                        
                        58,781Short-term
      convertible notes payable, net of discount
                        
                        
                        2,936,422
                        
                        
                        
                        2,510,054Short-term
      secured promissory notes payable
                        
                        
                        320,000
                        
                        
                        
                        350,000Short-term
      promissory notes payable, net of discount
                        
                        
                        1,196,237
                        
                        
                        
                        1,061,278Liability
      for subsidiary stock subscriptions
                        
                        
                        350,000
                        
                        
                        
                        -Security
      deposits
                        
                        
                        2,000
                        
                        
                        
                        2,000Loans
      payable, current position
                        
                        
                        2,891
                        
                        
                        
                        5,731Total
      Current Liabilities
                        
                        
                        7,607,904
                        
                        
                        
                        6,492,197Notes
      payable, long-term portion
                        
                        
                        44,000
                        
                        
                        
                        44,000Total
      Liabilities
                        
                        
                        7,651,904
                        
                        
                        
                        6,536,197Commitments
      and ContingenciesStockholders’
      Equity (Deficit):Preferred
      stock; $0.01 par value, 25,000,000 authorized Series A shares; no shares
      issued and outstanding
                        
                        
                        -
                        
                        
                        
                        -Common
      stock; $0.01 par value; 75,000,000 authorized; 43,067,630 and 42,886,380
      shares issued and outstanding
                        
                        
                        430,676
                        
                        
                        
                        428,863Additional
      paid-in capital
                        
                        
                        41,978,570
                        
                        
                        
                        41,549,234Accumulated
      deficit
                        
                        
                        (46,249,749
                        )
                        
                        
                        (45,109,623
                        )Total
      QuantRx Stockholders’ Equity (Deficit)
                        
                        
                        (3,840,503
                        )
                        
                        
                        (3,131,526
                        )Noncontrolling
      Interest Deficit in Subsidiary
                        
                        
                        (109,768
                        )
                        
                        
                        -Total
      Stockholders’ Equity (Deficit)
                        
                        
                        (3,950,271
                        )
                        
                        
                        (3,131,526
                        )Total
      Liabilities and Stockholders’ Equity (Deficit)
                        
                        $
                        3,701,633
                        
                        
                        $
                        3,404,671




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


4


QUANTRX
BIOMEDICAL CORPORATION


CONSOLIDATED
STATEMENTS OF OPERATIONS





Three
      Months Ended March 31,2009
                    
                    
                    2008(unaudited)
                    
                    
                    (unaudited)Revenues
                    
                    $
                    159,488
                    
                    
                    $
                    92,172Costs
      and Operating Expenses:Cost
      of goods sold (excluding depreciation and amortization)
                    
                    
                    1,351
                    
                    
                    
                    3,932Sales
      and marketing
                    
                    
                    159
                    
                    
                    
                    52,627General
      and administrative
                    
                    
                    721,344
                    
                    
                    
                    683,644Professional
      fees
                    
                    
                    95,050
                    
                    
                    
                    323,068Research
      and development
                    
                    
                    235,000
                    
                    
                    
                    477,012Amortization
                    
                    
                    44,901
                    
                    
                    
                    44,742Depreciation
                    
                    
                    24,888
                    
                    
                    
                    26,785Total
      Costs and Operating Expenses
                    
                    
                    1,122,693
                    
                    
                    
                    1,611,810Loss
      from Operations
                    
                    
                    (963,205
                    )
                    
                    
                    (1,519,638
                    )Other
      Income (Expense):Interest
      and dividend income
                    
                    
                    5,134
                    
                    
                    
                    6,645Interest
      expense
                    
                    
                    (178,961
                    )
                    
                    
                    (43,117
                    )Rental
      income
                    
                    
                    5,870
                    
                    
                    
                    6,320Amortization
      of debt discount to interest expense
                    
                    
                    (144,044
                    )
                    
                    
                    (33,938
                    )Amortization
      of deferred financing costs to interest expense
                    
                    
                    (8,693
                    )
                    
                    
                    (28,722
                    )Loss
      on extinguishment of debt
                    
                    
                    -
                    
                    
                    
                    (439,445
                    )Loss
      on disposition of fixed assets
                    
                    
                    -
                    
                    
                    
                    (1,787
                    )Total
      Other Income (Expense), net
                    
                    
                    (320,694
                    )
                    
                    
                    (534,044
                    )Loss
      Before Taxes
                    
                    
                    (1,283,899
                    )
                    
                    
                    (2,053,682
                    )Provision
      for Income Taxes
                    
                    
                    -
                    
                    
                    
                    -Net
      Loss
                    
                    
                    (1,283,899
                    )
                    
                    
                    (2,053,682
                    )Net
      Loss Attributable to Noncontrolling Interest in Subsidiary
                    
                    
                    143,773
                    
                    
                    
                    36,441Net
      Loss Attributable to QuantRx
                    
                    $
                    (1,140,126
                    )
                    
                    $
                    (2,017,241
                    )Basic
      and Diluted Net Loss per Common Share
                    
                    $
                    (0.03
                    )
                    
                    $
                    (0.05
                    )Basic
      and Diluted Weighted Average Shares Used in per Share
      Calculation
                    
                    
                    42,936,519
                    
                    
                    
                    41,699,681





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


5


QUANTRX
BIOMEDICAL CORPORATION


CONSOLIDATED
STATEMENTS OF CASH FLOWS





Three
      Months Ended March 31,2009
                  
                  
                  2008(unaudited)
                  
                  
                  (unaudited)CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
                  
                  $
                  (1,140,126
                  )
                  
                  $
                  (2,017,241
                  )Adjustments
      to reconcile net loss to net cash used by operating
      activities:Depreciation
      and amortization
                  
                  
                  69,789
                  
                  
                  
                  71,527Interest
      expense related to amortization of non-cash discount, non-cash beneficial
      conversion feature and deferred financing costs
                  
                  
                  152,737
                  
                  
                  
                  62,660Expenses
      related to employee stock based compensation
                  
                  
                  293,746
                  
                  
                  
                  158,547Expenses
      related to stock options issued to non-employees
                  
                  
                  12,608
                  
                  
                  
                  1,875Expenses
      related to common stock warrants issued for consulting
                  
                  
                  416
                  
                  
                  
                  20,312Non-cash
      fair value of warrants and options issued for consulting
                  
                  
                  -
                  
                  
                  
                  79,415Non-cash
      incremental fair value of modified warrants issued for
      interest
                  
                  
                  6,250
                  
                  
                  
                  -Non-cash
      fair value of warrants issued for interest
                  
                  
                  39,000
                  
                  
                  
                  -Non-cash
      fair value of common stock issued for interest
                  
                  
                  39,000
                  
                  
                  
                  -Loss
      on extinguishment of debt
                  
                  
                  -
                  
                  
                  
                  439,445Loss
      on disposition of fixed assets
                  
                  
                  -
                  
                  
                  
                  1,787Issuance
      of convertible notes for accrued interest
                  
                  
                  66,416
                  
                  
                  
                  6,301Noncontrolling
      interest
                  
                  
                  (143,773
                  )
                  
                  
                  (36,441
                  )(Increase)
      decrease in:Accounts
      receivable
                  
                  
                  (20,310
                  )
                  
                  
                  (28,836
                  )Interest
      receivable
                  
                  
                  (4,000
                  )
                  
                  
                  (4,039
                  )Inventories
                  
                  
                  1,436
                  
                  
                  
                  (3,129
                  )Prepaid
      expenses
                  
                  
                  23,244
                  
                  
                  
                  (29,315
                  )Deposits
                  
                  
                  4,146
                  
                  
                  
                  1,228Security
      deposits
                  
                  
                  (426
                  )
                  
                  
                  -Increase
      (decrease) in:Accounts
      payable
                  
                  
                  164,959
                  
                  
                  
                  301,533Accrued
      expenses
                  
                  
                  88,927
                  
                  
                  
                  (36,233
                  )Deferred
      revenue
                  
                  
                  (16,666
                  )
                  
                  
                  -Net
      Cash Used by Operating Activities
                  
                  
                  (362,627
                  )
                  
                  
                  (1,010,604
                  )CASH
      FLOWS FROM INVESTING ACTIVITIES:Cash
      paid for purchases of fixed assets
                  
                  
                  -
                  
                  
                  
                  (4,394
                  )Cash
      paid for deposit on asset acquisition
                  
                  
                  (75,000
                  )
                  
                  
                  -Cash
      paid for licensing agreement
                  
                  
                  -
                  
                  
                  
                  (20,000
                  )Cash
      paid for capitalized website development costs
                  
                  
                  -
                  
                  
                  
                  (600
                  )Net
      Cash Used by Investing Activities
                  
                  
                  (75,000
                  )
                  
                  
                  (24,994
                  )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from issuance of promissory notes
                  
                  
                  115,000
                  
                  
                  
                  -Proceeds
      from issuance of senior secured convertible notes, net of legal fees of $0
      and $7,500
                  
                  
                  325,000
                  
                  
                  
                  992,500Payments
      of senior secured promissory notes
                  
                  
                  (30,000
                  )
                  
                  
                  -Payments
      of promissory notes
                  
                  
                  (15,000
                  )
                  
                  
                  -Payments
      on loan payable used to finance equipment purchase
                  
                  
                  (2,840
                  )
                  
                  
                  (2,650
                  )Cash
      received for subsidiary stock subscriptions
                  
                  
                  350,000
                  
                  
                  
                  -Payment
      of payables related to fixed asset purchases
                  
                  
                  -
                  
                  
                  
                  (10,798
                  )Net
      Cash Provided by Financing Activities
                  
                  
                  742,160
                  
                  
                  
                  979,052Net
      Increase (Decrease) in Cash and Cash Equivalents
                  
                  
                  304,533
                  
                  
                  
                  (56,546
                  )Cash
      and Cash Equivalents, Beginning of Period
                  
                  
                  66,226
                  
                  
                  
                  213,332Cash
      and Cash Equivalents, End of Period
                  
                  $
                  370,759
                  
                  
                  $
                  156,786Supplemental
      Cash Flow Disclosures:Interest
      expense paid in cash
                  
                  $
                  9,135
                  
                  
                  $
                  1,123Income
      tax paid
                  
                  $
                  -
                  
                  
                  $
                  -Supplemental
      Disclosure of Non-Cash Activities Financing and Investing
      Activities:Fair
      value of warrants issued to placement agents for debt financing
      costs
                  
                  $
                  -
                  
                  
                  $
                  55,750Fair
      value of common stock issued with senior secured convertible
      notes
                  
                  
                  29,105
                  
                  
                  
                  -Fair
      value of warrants issued with senior secured convertible
    notes
                  
                  
                  15,649
                  
                  
                  
                  122,036Fair
      value of beneficial conversion feature embedded in senior secured
      convertible notes
                  
                  
                  6,325
                  
                  
                  
                  647,760Fair
      value of warrants issued with promissory notes
                  
                  
                  23,054
                  
                  
                  
                  -Increase
      in payables related to purchase of fixed assets
                  
                  
                  -
                  
                  
                  
                  8,803Increase
      in payables related to license acquisition
                  
                  
                  -
                  
                  
                  
                  8,715Increase
      in payables for debt financing costs
                  
                  
                  -
                  
                  
                  
                  70,000





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


6


QUANTRX
BIOMEDICAL CORPORATION


CONDENSED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


March
31, 2009


Description of Business and
Basis of Presentation




QuantRx
Biomedical Corporation was incorporated on December 5, 1986, in the State of
Nevada. The Company’s principal business office is located at 100 South Main
Street, Suite 300, Doylestown, Pennsylvania. QuantRx also has a research and
development facility in Portland, Oregon.




QuantRx
is a diagnostics company focused on the development and commercialization of
innovative diagnostic products for the Point-of-Care (POC) markets based on its
patented technology platforms for the worldwide healthcare industry. These
platforms include: RapidSense® point-of-care testing products based on QuantRx
core intellectual property related to lateral flow techniques for the consumer
and healthcare professional markets; and PAD technology for the consumer markets
for the treatment of hemorrhoids, minor vaginal infection, urinary incontinence,
and other medical needs. Additionally, the Company has made significant
investments in a company developing Single Nucleotide Polymorphism (SNP) chips,
genome-based diagnostic chips for the next generation of genomic and proteomic
diagnostic markets; and molecular imaging agents for Positron Emission
Tomography (PET) and fluorescence imaging with initial application in
cardiovascular disease, to provide clinical support for the Company’s POC
cardiac diagnostics.




The
Company’s overall growth strategy is to: (i) leverage its broad-based IP and
patent portfolio to develop new and innovative diagnostic products; (ii)
commercialize products through corporate partners and distributors; and (iii)
contract manufacturing to third parties while maintaining control over the
manufacturing process.




The
interim consolidated financial statements are unaudited; however, in the opinion
of management, they include all adjustments (consisting only of normal recurring
adjustments) necessary for a fair statement of financial position and results of
operations for the periods reported.  The interim financial statements
have been prepared pursuant to the rules and regulations of 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 rules
and regulations, although QuantRx believes that the disclosures included herein
are adequate to make the information presented not misleading. Operating results
for the periods presented are not necessarily indicative of future results.
These interim financial statements should be read in conjunction with the
financial statements and notes to financial statements included in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2008.




These
consolidated financial statements include the accounts of the Company and its
majority-owned subsidiary, FluoroPharma, Inc. All significant intercompany
accounts and transactions have been eliminated in consolidation. See Notes 2 and
15 for additional information. When used in these notes, the terms “Company,”
“we,” “our,” “ours,” or “us” mean QuantRx Biomedical Corporation, a Nevada
corporation, and its subsidiary.


7


1.
            Management Statement
      Regarding Going Concern




The
Company has not generated sufficient revenues from operations to meet its
operating expenses. For this reason, the Company has historically financed its
operations primarily through issuances of equity and the proceeds of debt
instruments. In the past, the Company has also provided for its cash needs by
issuing common stock, options and warrants for certain operating costs,
including consulting and professional fees. The Company’s board is contemplating
additional cost reduction efforts to allow additional time to secure required
funding.




Management
believes that given our current cash position, there is substantial doubt about
our ability to continue as a going concern. We are actively pursuing various
funding options, including equity offerings, debt financing, strategic corporate
alliances, and business combinations, to obtain additional financing to continue
the development of our products and bring them to commercial markets. The
Company is currently negotiating several potential transactions; however, there
can be no assurance that we will be successful in our efforts to raise
additional capital. Additionally, certain of our debt instruments contain
certain covenants which could limit our ability to issue additional debt. Should
we be unable to acquire necessary waivers from certain of our existing note
holders or raise adequate financing or generate sufficient revenue in the
future, the Company’s business, results of operations, liquidity and financial
condition would be materially and adversely harmed.




The
Company believes that the successful growth and operation of its business is
dependent upon its ability to do any or all of the following:


·
            obtain
      adequate sources of debt or equity financing to pay operating expenses and
      fund long-term business operations;




·
            manage
      or control working capital requirements by reducing operating
      expenses;




·
            develop
      new and enhance existing relationships with product distributors and other
      points of distribution for the Company’s products;
  and




·
            seek
      potential mergers or acquisitions that could be expected to generate
      positive cash flow for the Company upon consummation, assuming appropriate
      financing structures are available on acceptable terms in order to effect
      such acquisitions.




There can
be no assurance that the Company will be successful in achieving its long-term
plans as set forth above, or that such plans, if consummated, will enable the
Company to obtain profitable operations or continue in the long-term as a going
concern.




2.
            Summary of Significant
      Accounting Policies




Accounting forShare-Based
Payments




QuantRx
follows the provisions of Statement of Financial Accounting Standards (SFAS)
No. 123(R), “Share-Based Payments.”  SFAS No. 123(R) establishes
the accounting for transactions in which an entity exchanges equity securities
for services and requires companies to expense the estimated fair value of these
awards over the requisite service period.  QuantRx uses the
Black-Scholes method in determining fair value.  Accordingly,
compensation cost has been recognized using the fair value method and expected
term accrual requirements as prescribed in SFAS No. 123(R), which resulted in
employee stock-based compensation expense for the three months ended March 31,
2009 and 2008, of $293,746 and $158,547, respectively (including $66,267 and
$6,896 relating to subsidiary options in 2009 and 2008).


8




In the
case of modifications, the Black-Scholes model is used to value the warrant on
the modification date by applying the revised assumptions. The difference
between the fair value of the warrants prior to the modification and after the
modification on the date of modification determines the incremental value. In
2009 and 2008, QuantRx modified warrants in connection with the issuance of
certain notes and note extensions. These modified warrants were originally
issued in connection with previous private placement investments. In the case of
equity issuances, these warrants were originally accounted for as additional
paid-in-capital. In the case of debt issuances, the warrants were accounted for
as original issuance discount based on their relative fair values.




When
modified in connection with a note issuance, QuantRx recognizes the incremental
value as a part of the debt discount calculation, using its relative fair value
in accordance with EITF 00-27, “Application of Issue 98-5 to Certain Convertible
Instruments.” When modified in connection with note extensions, the Company
recognized the incremental value as prepaid interest, which is expensed over the
term of the extension.




The fair
value of each share based payment is estimated on the measurement date using the
Black-Scholes model with the following assumptions, which are determined at the
beginning of each year and utilized in all calculations for that
year:




2009
                  
                  
                  2008Risk-free
      interest rate
                  
                  
                  3.24
                  %
                  
                  
                  5.35
                  %Expected
      volatility
                  
                  
                  70
                  %
                  
                  
                  117
                  %Dividend
      yield
                  
                  
                  0
                  %
                  
                  
                  0
                  %Expected
      term
                  
                  Actual
      term
                  
                  
                  Actual
      term




Cash and Cash
Equivalents




At March
31, 2009, $350,000 in cash and cash equivalents was being held relating to a
stock subscription of QuantRx’s majority-owned subsidiary, FluoroPharma. In
connection with this subscription, a liability for subsidiary stock
subscriptions of $350,000 was reflected. This stock subscription was finalized
in the second quarter of 2009; see Note 15, Subsequent Events.




Earnings per
Share




The
Company computes net income (loss) per common share in accordance with SFAS
No. 128, “Earnings per Share.” Net income (loss) per share is based upon
the weighted average number of outstanding common shares and the dilutive effect
of common stock equivalents, such as options and warrants to purchase common
stock, convertible preferred stock and convertible notes, if applicable, that
are outstanding. Basic and diluted earnings per share were the same at the
reporting dates of the accompanying financial statements, as including common
stock equivalents in the calculation of diluted earnings per share would have
been antidilutive.




As of
March 31, 2009, the Company had common stock options of 2,280,500, common stock
warrants of 9,182,934, and convertible debt subject to conversion into 5,998,791
shares outstanding.  The above options, warrants, and convertible
securities were deemed to be antidilutive for the three months ended March 31,
2009.


9




As of
March 31, 2008, the Company had common stock options of 2,344,750, common stock
warrants of 7,463,383, and convertible debt subject to conversion into 4,314,493
shares outstanding.  The above options, warrants, and convertible
securities were deemed to be antidilutive for the three months ended March 31,
2008.




Fair
Value




Effective
January 1, 2009, the Company adopted SFAS No. 157, “Fair Value
Measurements” for nonfinancial assets and liabilities. The adoption of SFAS No.
157 had no impact on the Company’s consolidated results of operations or
financial condition.




The
Company's financial instruments primarily consist of cash and cash equivalents,
prepaid expenses and other deferred charges, short-term accounts and notes
receivable, accounts payable, accrued expenses and other current liabilities.
All instruments are accounted for on an historical cost basis, which, due to the
short maturity of these financial instruments, approximates the fair value at
the reporting dates of these financial statements.




In
determining fair value of our cost method investment, QuantRx estimated fair
value based on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying value of this investment that are
not readily apparent from other sources. QuantRx has determined that the
carrying value for its cost method investment approximates fair
value.




Noncontrolling
Interest




In
December 2007, FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements—an amendment of ARB No. 51”. SFAS No. 160
requires noncontrolling interests to be treated as a separate component of
equity, not as a liability or other item outside of permanent equity. Upon a
loss of control, the interest sold, as well as any interest retained, is
required to be measured at fair value, with any gain or loss recognized in
earnings. SFAS No. 160 requires that the noncontrolling interest continue to be
attributed its share of losses even if that attribution results in a deficit
noncontrolling interest balance; if this would result in a material change to
consolidated net income, pro forma financial information is required.SFAS No. 160 is effective
for QuantRx beginning in the first quarter of 2009. The Company has recast its
financial statements in accordance with this statement and, since allocating the
noncontrolling interest its full share of the subsidiary’s losses did result in
a material change to consolidated net loss, has provided pro forma disclosure;
see Note 3, FluoroPharma. See also Note 15, Subsequent Events.




Recent Accounting
Pronouncements




In April
2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, “Interim Disclosures
about Fair Value of Financial Instruments (FSP 107-1 and APB 28-1),” which
require disclosure in the body or in the accompanying notes of the Company’s
summarized financial information for interim reporting periods and in its
financial statements for annual reporting periods the fair value of all
financial instruments for which it is practicable to estimate that value,
whether recognized or not in the statement of financial position, as required by
Statement 107. FSP FAS 107-1 and APB 28-1 will be effective for interim
reporting periods ending after June 15, 2009. The Company is currently
evaluating the future impact FSP FAS 107-1 and APB 28-1 will have on its
financial statements.


10




In April
2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, “Recognition and
Presentation of Other-Than-Temporary Impairments (FSP 115-2 and FAS 124-2),”
which clarifies the interaction of the factors that should be considered when
determining whether a debt security is other than temporarily impaired. FSP
115-2 and FAS 124-2 will be effective for interim and annual reporting periods
ending after June 15, 2009, with early adoption permitted for periods
ending after March 15, 2009. The Company is currently evaluating the future
impact FSP 115-2 and FAS 124-2 will have on its financial
statements.




In April
2009, the FASB issued FSP No. FAS 157-4, “Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly (FSP 157-4),” which
clarifies the interaction of the factors that should be considered when
evaluating whether there has been a significant decrease in the volume and level
of activity for an asset or liability when compared with normal market activity
for the asset or liability (or similar assets or liabilities). If there has been
a significant decrease in the volume and level of activity for the asset or
liability, further analysis of the transactions or quoted prices is required,
and a significant adjustment to the transactions or quoted prices may be
necessary to estimate fair value. FSP 157-4 will be effective for QuantRx in the
second quarter of 2009. The Company is currently evaluating the future impact
FSP 157-4 will have on its financial statements.




In
May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally
Accepted Accounting Principles”. SFAS 162 is intended to improve financial
reporting by identifying a consistent framework, or hierarchy, for selecting
accounting principles to be used in preparing financial statements that are
presented in conformity with U.S. GAAP for nongovernmental entities. SFAS No.
162 is effective November 15, 2008. The adoption of this statement did not have
a material effect on QuantRx’s consolidated financial statements.




In May
2008, the FASB issued FSP Accounting Principles Board (APB) 14-1, "Accounting
for Convertible Debt Instruments That May Be Settled in Cash upon Conversion
(Including Partial Cash Settlement)". FSP APB 14-1 requires the issuer of
certain convertible debt instruments that may be settled in cash (or other
assets) on conversion to separately account for the liability (debt) and equity
(conversion option) components of the instrument in a manner that reflects the
issuer's non-convertible debt borrowing rate. FSP APB 14-1 is effective
beginning with the first quarter of 2009. Implementation of this standard has
not had a material impact on QuantRx’s consolidated financial
statements.




In April
2008, the FASB issued FSP 142-3, “Determination of the Useful Life of Intangible
Assets”. FSP 142-3 amends the factors that should be considered in developing
renewal or extension assumptions used to determine the useful life of a
recognized intangible asset under SFAS No. 142. FSP 142-3 is effective for
fiscal years beginning after December 15, 2008. The implementation of this
standard did not have a material impact on our consolidated financial position,
results of operations or cash flows.


11




In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities – an amendment of FASB Statement
No. 133”. This statement changes the disclosure requirements for derivative
instruments and hedging activities. Entities are required to provide enhanced
disclosures about (a) how and why an entity uses derivative instruments,
(b) how derivative instruments and related hedged items are accounted for
under SFAS No. 133 and its related interpretations, and (c) how derivative
instruments and related hedged items affect an entity’s financial position,
financial performance and cash flows. SFAS No. 161 is effective for QuantRx
beginning in 2009. Implementation of this standard has not had a material impact
on QuantRx’s consolidated financial statements.




In
December 2007, the FASB issued SFAS No. 141(R), “Business Combinations.” SFAS
No. 141(R) changes the accounting for business combinations. Under SFAS No.
141(R), an acquiring entity is required to recognize all the assets acquired and
liabilities assumed in a transaction at the acquisition-date at fair value with
limited exceptions. SFAS No. 141(R) changes the accounting treatment and
disclosure for certain specific items in a business combination. For QuantRx,
SFAS No. 141(R) applies prospectively to business combinations with acquisition
dates on or after January 1, 2009. Adoption of this statement did not have a
material impact on QuantRx’s consolidated financial statements.




In
November 2007, EITF No. 07-01, “Accounting for Collaborative
Arrangements” was issued. EITF No. 07-01 requires collaborators to present
the results of activities for which they act as the principal on a gross basis
and report any payments received from (made to) other collaborators based on
other applicable GAAP or, in the absence of other applicable GAAP, based on
analogy to authoritative accounting literature or a reasonable, rational, and
consistently applied accounting policy election. Further, EITF 07-01 clarified
that transactions within a collaborative arrangement that are part of a
vendor-customer (or analogous) relationship are subject to Issue 01-9,
“Accounting for Consideration Given by a Vendor to a Customer.” EITF 07-01 is
effective for fiscal years beginning after December 15, 2008. Adoption of
this standard did not have a material impact on the Company’s consolidated
results of operations or financial position.




Reclassifications




Certain
reclassifications have been made in the presentation of the financial statements
for the three months ended March 31, 2008 to conform to the presentation of the
financial statements for the three months ended March 31, 2009. The
reclassifications were to reflect the retrospective adoption of SFAS No.
160.




Revenue
Recognition




The
Company recognizes revenue in accordance with the Securities and Exchange
Commission’s (SEC) Staff Accounting Bulletin Topic 13, “Revenue
Recognition”(Topic 13) and EITF
No. 00-21, “Revenue Arrangements with Multiple Deliverables.” Revenue is
recognized when all of the following criteria are met: (1) persuasive
evidence of an arrangement exists; (2) delivery has occurred or services
have been rendered; (3) the seller’s price to the buyer is fixed and
determinable; and (4) collectibility is reasonably
assured.


12




Revenue
from licensing agreements is recognized based on the performance requirements of
the agreement. Revenue is deferred for fees received before earned.
Nonrefundable upfront fees that are not contingent on any future performance by
us are recognized as revenue when revenue recognition criteria under Topic 13
and EITF 00-21 are met and the license term commences. Nonrefundable upfront
fees, where we have an ongoing involvement or performance obligations, are
recorded as deferred revenue and recognized as revenue over the life of the
contract, the period of the performance obligation or the development period,
whichever is appropriate in light of the circumstances.




Payments
related to substantive, performance-based milestones in an agreement are
recognized as revenue upon the achievement of the milestones as specified in the
underlying agreements when they represent the culmination of the earnings
process. Royalty revenue from licensed products will be recognized when earned
in accordance with the terms of the license agreements.




Use of
Estimates




The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires the use of estimates
and assumptions regarding certain types of assets, liabilities, revenues, and
expenses.  Such estimates primarily relate to unsettled transactions
and events as of the date of the financial statements and fair valuations of
share-based payments.  Actual results may differ from estimated
amounts.




3.
            FluoroPharma




As of
March 31, 2009 and December 31, 2008, QuantRx owned approximately 57.78% of the
issued and outstanding capital stock of FluoroPharma. FluoroPharma’s results of
operations have been included in the accompanying consolidated financial
statements. FluoroPharma, Inc. is a privately held molecular imaging company
based in Boston, Massachusetts, engaged in the discovery, development, and
commercialization of proprietary products for positron emission tomography. The
investment in FluoroPharma is intended to strategically expand QuantRx’s
diagnostic platforms.




Acquired
intangibles primarily consist of licensed patent rights and technology licenses
and are estimated to have a weighted average life of 15
years.  Amortization expense related to these intangibles for the
three months ending March 31, 2009 and 2008, was $34,284 and
$34,284.




Noncontrolling
interest (formerly referred to as minority interests) of $275,288 at April 1,
2007, resulted from the consolidation of FluoroPharma reflecting the interests
held by third parties of FluoroPharma.  Through December 31,
2008, the portion of FluoroPharma’s losses attributable to the noncontrolling
interest have been recorded, reducing the noncontrolling interest to zero.
Beginning January 1, 2009, the Company implemented SFAS No. 160, which required
allocating the noncontrolling interest’s portion of FluoroPharma’s net losses in
their entirety, resulting in losses attributable to noncontrolling interest of
$143,773 and a noncontrolling interest deficit of $109,768.  Had SFAS
No. 160 not been implemented, net loss attributable to noncontrolling interest
would have been $34,005 and noncontrolling interest would have been limited to
zero; QuantRx’s net loss would have been $1,249,894.  See Note 15,
Subsequent Events.




13




4.
            Other Balance Sheet
      Information




Components
of selected captions in the accompanying balance sheets consist of:




March
      31,
                                    2009
                                  
                                  
                                  December
      31,
                                    2008Prepaid expenses:Prepaid
      consulting
                                  
                                  $
                                  67,239
                                  
                                  
                                  $
                                  92,649Prepaid
      consulting – related party
                                  
                                  
                                  667
                                  
                                  
                                  
                                  4,674Prepaid
      insurance
                                  
                                  
                                  35,081
                                  
                                  
                                  
                                  37,473Prepaid
      interest
                                  
                                  
                                  51,538
                                  
                                  
                                  
                                  44,426Prepaid
      rent
                                  
                                  
                                  5,310
                                  
                                  
                                  
                                  5,310Other
                                  
                                  
                                  5,970
                                  
                                  
                                  
                                  4,517Prepaid
      expenses
                                  
                                  $
                                  165,805
                                  
                                  
                                  $
                                  189,049Deferred financing costs:Deferred
      financing costs
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  133,250Less:
      accumulated amortization
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (124,557
                                  )Deferred
      financing costs, net
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  8,693Property and equipment:Computers
      and office furniture, fixtures and equipment
                                  
                                  $
                                  136,690
                                  
                                  
                                  $
                                  136,690Machinery
      and equipment
                                  
                                  
                                  466,338
                                  
                                  
                                  
                                  466,338Leasehold
      improvements
                                  
                                  
                                  92,233
                                  
                                  
                                  
                                  92,233Less:
      accumulated depreciation
                                  
                                  
                                  (223,941
                                  )
                                  
                                  
                                  (199,055
                                  )Property
      and equipment, net
                                  
                                  $
                                  471,320
                                  
                                  
                                  $
                                  496,206Accrued expenses:Payroll
      and related
                                  
                                  $
                                  206,250
                                  
                                  
                                  $
                                  156,750Professional
      fees
                                  
                                  
                                  61,300
                                  
                                  
                                  
                                  43,800Accrued
      interest
                                  
                                  
                                  69,069
                                  
                                  
                                  
                                  41,142Other
                                  
                                  
                                  51,000
                                  
                                  
                                  
                                  57,000Accrued
      expenses
                                  
                                  $
                                  387,619
                                  
                                  
                                  $
                                  298,692





5.
            Notes
      Receivable




Genomics USA,
Inc.




In
January 2007, QuantRx advanced $200,000 to Genomics USA, Inc. (GUSA) through an
8% promissory note due April 8, 2007. The note is currently convertible at
QuantRx’s discretion into 10% of GUSA’s outstanding capital stock on a fully
diluted and as converted basis. QuantRx continues to explore the possibility of
further investment, and has postponed settlement of the note during this
exploratory period, during which the note shall continue to accrue interest.
QuantRx accrued interest of $4,000 and $16,040 on this note for the three months
ended March 31, 2009 and the year ended December 31, 2008, respectively. GUSA, a
privately held Illinois corporation, is a technology company focused on the
development of Micro-Array Detection for DNA. This technology may strategically
expand QuantRx’s diagnostic platforms. See Note 6 for additional information on
GUSA.


14




Rockland Technimed,
Ltd.




In April
2006, QuantRx advanced $200,000 to Rockland Technimed, Ltd. (Rockland) through a
one-year 7% convertible promissory note.  Rockland, a privately held
Delaware corporation, is a development stage company focused on the research and
development of tissue viability imaging diagnostics using magnetic resonance
imaging (MRI) scanners.  The note is convertible at QuantRx’s
discretion into 20% of Rockland’s outstanding capital stock on a fully diluted
and as converted basis to satisfy the note and accrued interest. QuantRx ceased
accruing interest as of the maturity date and established an allowance for bad
debt in the amount equal to the principal balance and accrued interest,
$214,000, as the Company attempts to resolve this matter.




6.
            Investments




Genomics USA,
Inc.




In May
2006, QuantRx purchased 144,024 shares of GUSA common stock for $200,000. As of
March 31, 2009, QuantRx owned approximately 10% of the issued and outstanding
capital stock of GUSA on a fully diluted and as converted basis.




QuantRx
uses the cost method to account for this investment since QuantRx does not
control nor have the ability to exercise significant influence over operating
and financial policies.  In accordance with the cost method, the
investment is recorded at cost and impairment is considered in accordance with
the Company’s impairment policy.  No impairment was recognized as of
March 31, 2009.




7.
            Intangible
      Assets




Intangible
assets as of the balance sheet dates consisted of the following:




March 31, 2009
                  
                  
                  December 31, 2008Licensed
      patents and patent rights
                  
                  $
                  2,197,020
                  
                  
                  $
                  2,197,020Patents
                  
                  
                  82,008
                  
                  
                  
                  82,008Technology
      license
                  
                  
                  22,517
                  
                  
                  
                  22,517Website
      development
                  
                  
                  49,711
                  
                  
                  
                  49,711Less:
      accumulated amortization
                  
                  
                  (384,061
                  )
                  
                  
                  (339,159
                  )Intangibles,
      net
                  
                  $
                  1,967,195
                  
                  
                  $
                  2,012,097




The
Company’s intangible assets are carried at the legal cost to obtain them.
Intangible assets are amortized using the straight line method over the
estimated useful life. Useful lives are as follows: licensed patents and patent
rights, eight to 15 years; patents, 17 years; technology license, five years;
and website development costs, three years. Amortization expense totaled $44,901
and $44,742 for the three months ended March 31, 2009 and 2008,
respectively.  Impairment will be considered in accordance with the
Company’s impairment policy. No impairment was recognized as of March 31,
2009.


15




8.
            Deferred
      Revenue




On May
19, 2008, QuantRx and CytoCore, Inc. entered into a worldwide distribution and
supply agreement for specified PAD technology of QuantRx. The agreement
specifies monthly license fees during CytoCore’s expected development period and
additional milestone payments based upon CytoCore’s achievement of certain
development and sales milestones.  QuantRx received an up-front,
non-refundable payment of $100,000 upon execution of this agreement, which was
recorded as deferred revenue and is being amortized into revenue over the
expected development period of the agreement, which is estimated as 18 months.
QuantRx recognized revenue of $33,335 in the three months ended March 31, 2009
related to this agreement.




9.
            Portland Development
      Commission




In
February 2007, QuantRx received a $44,000 loan from the Portland Development
Commission.  The loan matures in 20 years and is interest free through
March 1, 2010 and no payments are due until April 1, 2010.  The terms
of the promissory note stipulate that the interest rate will accrue beginning in
March 1, 2010 at an annual rate between 1% and 8.5% based upon the level of
compliance with certain employment milestones beginning in 2008.




10.
            Convertible
      Debt




Notes
payable as of March 31, 2009 and December 31, 2008 were comprised of the
following:




March 31,
                        2009
                      
                      
                      December 31,
                        2008Short-term convertible notes payable,
      net:Senior
      secured convertible notes payable
                      
                      $
                      2,999,396
                      
                      
                      $
                      2,607,979Less:
      discount for common stock, warrants and conversion feature,
      net
                      
                      
                      (62,974
                      )
                      
                      
                      (97,925
                      )Short-term
      convertible notes payable, net
                      
                      $
                      2,936,422
                      
                      
                      $
                      2,510,054Short-term secured promissory notes
      payable:Secured
      promissory notes payable
                      
                      $
                      320,000
                      
                      
                      $
                      350,000Less:
      discount for common stock and warrants, net
                      
                      
                      -
                      
                      
                      
                      -Short-term
      secured promissory notes payable, net
                      
                      $
                      320,000
                      
                      
                      $
                      350,000Short-term promissory notes payable,
      net:Unsecured
      promissory notes payable
                      
                      $
                      1,207,890
                      
                      
                      $
                      1,107,890Less:
      discount for common stock and warrants, net
                      
                      
                      (11,653
                      )
                      
                      
                      (46,612
                      )Short-term
      promissory notes payable, net
                      
                      $
                      1,196,237
                      
                      
                      $
                      1,061,278


16




2007 Convertible Promissory
Notes




On
October 16, 2007, QuantRx completed a private placement of 10% senior secured
convertible notes (the “2007 Notes”) and warrants to purchase shares of
QuantRx’s common stock. In connection with the private placement, QuantRx issued
notes in the aggregate principal amount of $1,000,000 and warrants to purchase
250,000 shares of QuantRx’s common stock at an exercise price of $1.25 (relative
fair value of $134,454). Proceeds of the financing were used for general
corporate purposes. The notes and the warrants were offered only to certain
private accredited investors.




In the
first quarter of 2008, the 2007 Notes were exchanged for 2008 Senior Secured
Convertible Notes (the “2008 Notes”) resulting in a loss on extinguishment, as
described below under “2008 Senior Secured Convertible Notes.”




The 2007
Notes were automatically convertible into shares of QuantRx common stock upon
completion of a “qualified” equity financing with aggregate gross proceeds of at
least $3,000,000. Under the terms of the 2007 Notes, holders would have been
deemed to have tendered 115% of their aggregate outstanding principal balance
and accrued interest for purchase of securities in the qualified equity
financing, entitling the holders to all rights afforded to purchasers in such
financing (“contingent embedded conversion option”). Alternatively, the 2007
Notes allowed the holders to convert their outstanding principal and accrued
interest into common stock at a price of $0.80 per common share (“embedded
conversion option”). Either conversion would have resulted in the satisfaction
of all of QuantRx’s obligations under the 2007 Notes.




In
accordance with APB Opinion No. 14, “Accounting for Convertible Debt and Debt
Issued with Stock Purchase Warrants,” QuantRx allocated $134,454 of the
principal amount of the 2007 Notes to the warrants as original issue discount,
which represented the relative fair value of the warrants at the date of
issuance.




The
conversion option embedded in the 2007 Notes described above was not considered
a derivative instrument and was not required to be bifurcated pursuant to the
scope exception in paragraph 11(a) of SFAS No. 133, “Accounting for Derivative
Instruments and Hedging Activities,” since it was indexed to QuantRx’s stock and
was classified as stockholders’ equity. Equity classification of the embedded
conversion option was met through the requirements of EITF 00-19, “Accounting
for Derivative Financial Instruments to, and Potentially Settled in, a Company’s
Own Stock,” paragraphs 12-32. QuantRx also concluded, pursuant to EITF 00-27,
“Application of Issue 98-5 to Certain Convertible Instruments,” that while the
embedded conversion option was not required to be bifurcated, the instruments
did contain a beneficial conversion feature, as the share prices on the dates of
issuance exceeded the effective conversion price of the embedded conversion
option. QuantRx measured the intrinsic value of the embedded conversion option
($97,164) based upon the effective conversion price, which is defined by EITF
00-27, “Application of Issue 98-5 to Certain Convertible Instruments,” as the
allocated proceeds divided by the number of shares to be received on conversion.
This amount was recorded as original issue discount.




17




The
contingent conversion option embedded in the 2007 Notes qualified as an embedded
contingent conversion option in accordance with EITF 98-5 and 00-27 since
execution was contingent upon a qualified equity financing and was not within
the control of QuantRx. The intrinsic value of the contingent embedded
conversion option was not recognized because the 2007 Notes were exchanged and
satisfied in full.




In
connection with the 2007 Notes, certain warrants that were previously issued to
the holders were modified by reducing their exercise price from $1.50 to $0.75.
The incremental fair value of this modification, accounted for in accordance
with SFAS No. 123(R), was $30,000, while the relative fair value was calculated
to be $25,210 and was recorded as additional original issue discount. The
initial warrants were originally granted in connection with a private placement
of common stock and were accounted for as additional paid-in-capital. In
association with the issuance of the 2007 Notes, QuantRx issued warrants to
purchase 100,000 shares of common stock at $1.10 per share valued at $65,000 to
the placement agent, and also incurred cash commissions of $70,000 in connection
with the private placement resulting in total deferred debt offering cost of
$135,000.




The fair
value of the warrants issued to placement agents and the cash commissions have
been recorded as deferred financing costs. The total original issue discount
related to the warrants issued to the investors, the modified warrants and the
beneficial conversion feature, and the deferred financing costs were being
amortized to interest expense over the original term of the 2007 Notes in
accordance with EITF 00-27, paragraph 19. Interest expense through the date of
extinguishment, including amortization of original issue discount and deferred
financing costs, related to the 2007 Notes was $29,832 for the quarter ended
March 31, 2008. The remaining unamortized debt discount of $189,101 and deferred
financing costs of $99,399 were included in the loss on extinguishment of debt
in the first quarter of 2008 upon the exchange of the 2007 Notes into the 2008
Notes; see below.




The
Black-Scholes option pricing model was used to calculate the fair values of all
of the above warrants. See Note 2, Summary of Significant Accounting Policies,
“Accounting for Share Based Payments.”




2008 Senior Secured
Convertible Notes




In
the first quarter of 2008, the Company issued 10% senior secured convertible
notes (the “2008 Notes”) to certain accredited investors. In connection with the
private placement, QuantRx issued notes in the aggregate principal amount of
$2,157,247 and warrants with a five-year term to purchase 250,000 shares of
QuantRx’s common stock at an exercise price of $1.25. The warrants provide for
full antidilution protection to the holders and allow for cashless
exercise.




The 2008
Notes are automatically convertible into shares of QuantRx common stock upon
completion of a “qualified” equity financing (or financings) with aggregate
gross proceeds of at least $5,660,000 (amount to be reduced by the 2008 Notes,
up to a maximum of $2,250,000). Under the terms of the 2008 Notes, holders will
be deemed to have tendered 115% of their aggregate outstanding principal balance
and accrued and unpaid interest for the purchase of securities in the qualified
equity financing, entitling the holders to all rights afforded to purchasers in
such financing (“contingent embedded conversion option”). Alternatively, the
2008 Notes allow the holders to convert their outstanding principal and accrued
interest into common stock at a price of $0.50 per common share (“embedded
conversion option”). Either conversion would result in the satisfaction of all
of QuantRx’s obligations under the 2008 Notes.




18




In the
event QuantRx did not complete a qualified financing and holders do not
voluntarily convert, QuantRx was to repay the outstanding principal balance and
accrued and unpaid interest on January 23, 2009. All holders have extended this
maturity date to July 31, 2009. Interest on the outstanding principal amount of
the 2008 Notes is payable quarterly in cash or, at the holders’ option, in
additional 10% senior secured convertible notes with a principal amount equal to
the calculated interest amount. QuantRx has the right to prepay the 2008 Notes
at 106% of face value and 100% of accrued interest by providing ten days notice.
In connection with the financing QuantRx entered into 1) a stock pledge
agreement, pursuant to which QuantRx granted to the holders a continuing and
perfected first priority security interest in certain equity securities owned by
QuantRx of two private companies and specified rights and interests associated
with the pledged shares, as well as 2) a patent, trademark and copyright
security agreement, pursuant to which QuantRx granted to the holders a
continuing and perfected first priority security interest in all of its owned or
acquired patents, trademarks and copyrights and specified intellectual property
and related rights and interests associated therewith. If an event of default
occurs under the 2008 Notes, the holders have agreed not to take any action with
respect to the collateral for 120 days after the holders provide QuantRx with
notice of the holders’ proposed action. The stock pledge agreement and the
patent, trademark and copyright security agreement, and the security interests
created thereby, will terminate upon QuantRx’s satisfaction in full of its
payment obligations under the 2008 Notes. In connection with the 2008 Notes,
QuantRx may not issue any new indebtedness while at least 50% of the original
principal amount of the notes remains outstanding without the consent of holders
of at least 75% of the principal amount of the then outstanding
notes.




In
connection with the financing and in accordance with the terms of the 2007
Notes, the holders representing $1,000,000 face value of QuantRx’s 2007 Notes
exchanged their notes at 115% of the outstanding principal and accrued and
unpaid interest as payment toward the purchase price of the 2008 Notes purchased
by such holders. Accordingly, the Company issued notes in the financing in the
aggregate principal balance of $1,157,247 to the former holders upon their
surrender of the 2007 Notes.  In the aggregate, the Company received
gross cash proceeds of $1,000,000 in connection with the issuance of the 2008
Notes.




QuantRx
used the net proceeds from the offering for product development, working capital
and general corporate purposes.




QuantRx
determined that the terms of the 2008 Notes were “substantially different”, as
described in EITF Issue No. 96-19, “Debtor’s Accounting for a Modification
or Exchange of Debt Instruments”, from the terms of the 2007 Notes based on the
greater than 10% change in the present value of the cash flows associated with
the 2008 Notes and the 2007 Notes. As a result, the Company recorded the 2008
Notes issued in exchange for the 2007 Notes at fair value on the date of
issuance and recorded a loss on extinguishment of $439,445, which includes
$189,101 and $99,399 representing the remaining unamortized debt discount and
deferred finance costs related to the 2007 Notes, respectively. In accordance
with EITF Issue No. 98-5, “Accounting for Convertible Securities with
Beneficial Conversion Features or Contingently Adjustable Conversion Ratios”,
the Company also remeasured the intrinsic value of the beneficial conversion
feature embedded in the 2007 Notes at the time of extinguishment and determined
that it had no value as the closing stock price on the date of extinguishment
was less than the effective conversion price; therefore no allocation of the
reacquisition price for the repurchase of the beneficial conversion feature
embedded in the 2007 Notes was required. Additionally, there were no warrants
issued to the holders of the 2007 Notes related to their exchange of 2007 Notes
for 2008 Notes.




19




The
cash proceeds from the 2008 Notes issued in the first quarter of 2008 of
$1,000,000 were allocated between the notes and the warrants on a relative fair
value basis in accordance with APB Opinion No. 14, “Accounting for Convertible
Debt and Debt Issued with Stock Purchase Warrants.” QuantRx allocated $122,035
of the principal amount of $1,000,000 to the warrants as original issue
discount, which represented the relative fair value of the warrants at the date
of issuance.




Like the
2007 Notes, the conversion option embedded in the 2008 Notes described above is
not considered a derivative instrument and is not required to be bifurcated
pursuant to the scope exception in paragraph 11(a) of SFAS No. 133, “Accounting
for Derivative Instruments and Hedging Activities,” since it is indexed to
QuantRx’s stock and is classified as stockholders’ equity. Equity classification
of the embedded conversion option is met through the requirements of EITF 00-19,
“Accounting for Derivative Financial Instruments to, and Potentially Settled in,
a Company’s Own Stock,” paragraphs 12-32. QuantRx also concluded, pursuant to
EITF 00-27, “Application of Issue 98-5 to Certain Convertible Instruments,” that
while the embedded conversion option is not required to be bifurcated, the
instruments do contain a beneficial conversion feature, as the share prices on
the dates of issuance exceeded the effective conversion price of the embedded
conversion option. QuantRx measured the intrinsic value of the embedded
conversion option ($647,760) based upon the effective conversion price, which is
defined by EITF 00-27, “Application of Issue 98-5 to Certain Convertible
Instruments,” as the allocated proceeds divided by the number of shares to be
received on conversion. This amount was recorded as original issue
discount.




The
contingent conversion option embedded in the 2008 Notes qualifies as an embedded
contingent conversion option in accordance with EITF 98-5 and 00-27 since
execution is contingent upon a qualified equity financing and is not within the
control of QuantRx. The intrinsic value of the contingent embedded conversion
option will not be recognized until and unless such financing occurs (the
triggering event); which will then enable QuantRx to measure the intrinsic value
associated with the automatic conversion feature.




In
association with the issuance of the 2008 Notes, QuantRx issued warrants to
purchase 100,000 shares of common stock at $1.10 per share valued at $55,750 to
the placement agent, and also incurred cash commissions of $70,000 and legal
fees of $7,500 in connection with the private placement, resulting in total
deferred debt financing costs of $133,250.




In the
fourth quarter of 2008 and the first quarter of 2009, the Company issued
additional 2008 Notes maturing July 31, 2009 aggregating $625,000 ($325,000 in
2009 and $300,000 in 2008) with substantially the same terms as the 2008 Notes.
In connection with these note issuances, warrants with a five-year term to
purchase 156,250 shares of common stock at an exercise price of $0.55 and
106,250 shares of common stock were also issued. Additionally, certain warrants
that were previously issued to the holders through previous financing
transactions were modified by reducing their exercise prices to
$0.55.




20




The
accounting for the additional 2008 Notes is consistent with the original 2008
Notes. The cash proceeds from these additional 2008 Notes of $625,000 were
allocated between the notes, common stock, new and modified warrants on a
relative fair value basis. QuantRx allocated the relative fair values of the
common stock ($36,922), new warrants ($34,567), and modified warrants ($30,131)
at the date of issuance to original issue discount. Additionally, a beneficial
conversion feature of $7,752 was accounted for as original issue discount. No
deferred finance costs were incurred on these additional 2008
Notes.




In the
aggregate for all 2008 Notes, the fair value of the warrants issued to placement
agents and the cash commissions and legal fees have been recorded as deferred
financing costs. The total original issue discount related to the warrants
issued to the investors, the beneficial conversion feature, and the deferred
financing costs are being amortized to interest expense over the original term
of each 2008 Note in accordance with EITF 00-27, paragraph 19. Interest expense,
including amortization of original issue discount and deferred financing costs,
related to the 2008 Notes was $163,974 and $74,823 for the quarters ended March
31, 2009 and 2008. At March 31, 2009, the Company issued 10% convertible notes
in the aggregate amount of $66,416 for quarterly interest in the form of
paid-in-kind notes.




2008 Secured Promissory
Notes Payable




In the
second quarter of 2008, the Company commenced a private placement to certain
accredited investors through the issuance of 8% senior secured promissory notes
(the “2008 Secured Promissory Notes”). The private placement closed in the third
quarter of 2008.  In connection with the private placement, QuantRx
issued notes in the aggregate principal amount of $550,000, and an aggregate of
137,500 shares of common stock and warrants with a five-year term to purchase
137,500 shares of common stock warrants at a per share exercise price of
$0.85.  The warrants provide for full antidilution protection to the
holders and allow for cashless exercise. The 2008 Secured Promissory Notes were
originally due on September 15, 2008, along with all accrued and unpaid
interest. QuantRx used the net proceeds from the offering for product
development, working capital and general corporate purposes.




In
connection with the financing QuantRx entered into 1) a stock pledge agreement,
pursuant to which QuantRx granted to the holders a continuing and perfected
first priority security interest in certain equity securities owned by QuantRx
of two private companies and specified rights and interests associated with the
pledged shares, as well as 2) a patent, trademark and copyright security
agreement, pursuant to which QuantRx granted to the holders a continuing and
perfected first priority security interest in all of its owned or acquired
patents, trademarks and copyrights and specified intellectual property and
related rights and interests associated therewith. If an event of default occurs
under the 2008 Secured Promissory Notes, the holders have agreed not to take any
action with respect to the collateral for 120 days after the holders provide
QuantRx with notice of the holders’ proposed action. The stock pledge agreement
and the patent, trademark and copyright security agreement, and the security
interests created thereby, will terminate upon QuantRx’s satisfaction in full of
its payment obligations under the 2008 Secured Promissory Notes.




The
cash proceeds from the 2008 Secured Promissory Notes of $550,000 were allocated
between the notes, common stock and warrants on a relative fair value basis.
QuantRx allocated $79,806 and $58,050 of the principal amount of $550,000 to the
common stock and warrants as original issue discount, which represented the
relative fair values of each at the date of issuance.




21




In
association with the issuance of the 2008 Secured Promissory Notes, QuantRx
issued warrants to purchase 100,000 shares of common stock at $0.85 per share
valued at $64,000 to the placement agent, and also incurred cash commissions of
$55,000 in connection with the private placement resulting in total deferred
finance costs of $119,000.




The fair
value of the warrants issued to placement agents and the cash commissions were
recorded as deferred financing costs. The total original issue discount related
to the common stock and warrants issued to the investors and the deferred
financing costs were amortized to interest expense over the original term of the
2008 Secured Promissory Notes in accordance with EITF 00-27, paragraph
19.




On the
original maturity date, September 15, 2008, one note for $100,000 was settled in
full and the Company negotiated monthly extensions of one to three months on the
remaining notes. At September 15, 2008, QuantRx granted an aggregate of 22,500
shares of common stock (fair value $11,475) and warrants to purchase 22,500
shares of common stock with a five year term and an exercise price of $0.85
(fair value $9,000) which for a one-month extension. The second and third
one-month extensions were executed on October and November 15, 2008, on 2008
Secured Promissory Notes with an aggregate principal of $150,000.  In
consideration for these stages, QuantRx granted an aggregate of 15,000 shares of
common stock (fair value $5,250) and warrants to purchase 15,000 shares of
common stock (fair value $3,900) with a five year term and an exercise price of
$0.85. The consideration for the extensions was recognized as prepaid interest
and was amortized over the extension periods. On December 15, 2008, when these
Notes matured, the holders agreed to extend the maturity date to July 31, 2009.
In consideration for one of these seven and a half month extensions, QuantRx
modified the holder’s warrants to purchase 20,000 shares of common stock by
reducing the exercise price from $0.85 to $0.55. The incremental value of this
modification was $400, which was recorded as prepaid interest and is being
amortized over the term of the extension as interest expense.




On
October 15, 2008, QuantRx executed an eleven-month extension with a holder of a
$100,000 2008 Secured Promissory Note.  In consideration for this
extension, QuantRx granted 75,000 shares of common stock with a fair value of
$22,500, which will be expensed over the term of the extension.




QuantRx
executed an extension with a holder of a $200,000 2008 Secured Promissory Note
as of October 15, 2008, extending the maturity dates as follows: $50,000 and
related accrued interest due October 31, 2008; $50,000 and related accrued
interest due November 30, 2008; $100,000 and related accrued interest due
December 31, 2008. In consideration for this extension, QuantRx granted 20,000
shares of common stock (fair value $6,000) and warrants to purchase 20,000
shares of common stock (fair value $4,400) with a five year term and an exercise
price of $0.85; the fair values of which were expensed over the term of the
extension. As of December 31, 2008, this holder agreed to an extension of the
remaining $100,000 outstanding principal as follows: $10,000 and related accrued
interest due monthly beginning January 31, 2009, with a final payment due June
30, 2009.  In consideration for this further extension, QuantRx
granted a warrant in January 2009 to purchase 100,000 shares of common stock
(fair value $18,000) with a five year term and an exercise price of $0.50 and
modified warrants to purchase an aggregate 80,000 shares of common stock,
reducing the exercise price from $0.85 to $0.55. The fair value of the
consideration will be expensed over the term of the extension.




22




In the
aggregate, QuantRx recorded $23,528 in interest expense, including amortization
of original issue discount, deferred financing costs and prepaid interest,
related to the 2008 Secured Promissory Notes for the quarter ended March 31,
2009.




The
Black-Scholes option pricing model was used to calculate the fair values of all
of the above warrants. See Note 2, Summary of Significant Accounting Policies,
“Accounting for Share Based Payments.”




2008 Unsecured Promissory
Notes Payable




In August
2008, the Company completed a private placement to certain accredited investors
through the issuance of 8% promissory notes (the “2008 Promissory Notes”). In
connection with the private placement, QuantRx issued notes in the aggregate
principal amount of $1,000,000, and an aggregate of 250,000 shares of common
stock and warrants with a five-year term to purchase 250,000 shares of common
stock at an exercise price of $0.85.  The warrants provide for full
antidilution protection to the holders and allow for cashless exercise. The 2008
Promissory Notes were due on October 31, 2008, along with all accrued and unpaid
interest. QuantRx used the net proceeds from the offering for product
development, working capital and general corporate purposes.




The
net cash proceeds from the 2008 Promissory Notes were $942,500. QuantRx
allocated $132,827 and $108,159 of the principal amount of $1,000,000 to the
common stock and warrants as original issue discount, which represented the
relative fair values of each at the date of issuance.




In
association with the issuance of the 2008 Promissory Notes, QuantRx incurred
cash commissions and legal fees of $57,500, which were recorded as deferred
financing costs and expensed over the original term.




As of
October 31, 2008, QuantRx settled a $500,000 2008 Promissory Note with the
issuance of a $607,890 8% unsecured promissory note which included additional
principal of $100,000 and accrued interest of $7,890.  The maturity
date is April 30, 2009.  In connection with the issuance of this note,
QuantRx granted 200,000 shares of common stock (fair value of $80,000; relative
fair value of $70,696); the relative fair value of the common stock was recorded
as debt discount and is being amortized over the term of the new
note.




QuantRx
executed an extension with a holder of a $500,000 2008 Promissory Note as of
October 31, 2008, extending the maturity date to January 31, 2009.  In
consideration for this extension, QuantRx granted 200,000 shares of common stock
with a fair value of $80,000 and revised the interest rate on the original 8%
note to 10% effective as of the origination date, which was expensed over the
term of the extension.  QuantRx executed a further extension with this
holder as of January 31, 2009, extending the maturity date to May 31,
2009.  In consideration for this extension, QuantRx granted 100,000
shares of common stock (fair value $39,000) and warrants to purchase 100,000
shares of common stock with a five year term and an exercise price of $0.55
(fair value $21,000).  Additionally, warrants to purchase 125,000
shares of common stock were modified, reducing the exercise price from $0.85 to
$0.55 (incremental fair value $3,750).  The fair value of the
consideration will be expensed over the term of the extension.




23




In the
first quarter of 2009, the Company issued additional 8% Promissory Notes
originally maturing March 31, 2009, in the aggregate principal amount of
$115,000, and warrants to purchase an aggregate of 115,000 shares of common
stock with a five year term and an exercise price of $0.55 (fair value
$28,850).  As of March 31, 2009, the holders agreed to extend the
maturity date to June 30, 2009. In consideration for this extension, in April
2009, QuantRx granted warrants to purchase an aggregate of 80,500 shares of
common stock with a five year term and an exercise price of $0.55 (aggregate
fair value $12,075). The fair value of the consideration will be expensed over
the term of the extension.




The total
original issue discount related to the common stock and warrants issued to the
investors and the deferred financing costs are being amortized to interest
expense over the original terms of the 2008 Promissory Notes in accordance with
EITF 00-27, paragraph 19. In the aggregate, QuantRx recorded $141,921 in
interest expense, including amortization of original issue discount and deferred
financing costs, related to the 2008 Promissory Notes for the quarter ended
March 31, 2009.




The
Black-Scholes option pricing model was used to calculate the fair values of all
of the above warrants. See Note 2, Summary of Significant Accounting Policies,
“Accounting for Share Based Payments.”




11.
            Preferred
      Stock




The
Company has authorized 25,000,000 shares of preferred stock, of which 9,750,000
are designated Series A convertible preferred stock, $0.01 par value. The
remaining 15,250,000 authorized preferred shares have not yet been designated by
the Company. The Company had no issued and outstanding preferred stock at March
31, 2009 or December 31, 2008.




12.
            Common Stock, Options
      and Warrants




In the
first quarter of 2009, in connection with the issuance of 10% senior secured
convertible promissory notes, the Company issued an aggregate of 81,250 shares
of common stock (fair value $33,813) and warrants to purchase 81,250 shares of
common stock with a five year term and an exercise price of $0.55 (fair value
$18,188).




In the
first quarter of 2009, in connection with an extension of a 2008 Promissory
Note, QuantRx granted 100,000 shares of common stock with a fair value of
$39,000 and warrants to purchase 100,000 shares of common stock with a five year
term and an exercise price of $0.55 (fair value
$21,000).  Additionally, warrants to purchase 125,000 shares of common
stock were modified, reducing the exercise price from $0.85 to
$0.55.  The fair value of the consideration will be expensed over the
term of the extension.




In the
first quarter of 2009, the Company issued additional 8% Promissory Notes
originally maturing March 31, 2009, in the aggregate principal amount of
$115,000, and warrants to purchase an aggregate of 115,000 shares of common
stock with a five year term and an exercise price of $0.55 (fair value
$28,850).




24




In the
first quarter of 2009, warrants to purchase an aggregate of 810,000 shares of
common stock were granted to employees and warrants to purchase an aggregate of
50,000 shares of common stock were granted to certain consultants. The warrants
were issued with an exercise price of $0.31, have a term of five years and vest
immediately. The fair value of these options is $163,400.




In
January 2009, in connection with an extension of a maturity date on a 2008
Secured Promissory Note, QuantRx granted a warrant to purchase 100,000 shares of
common stock with a five year term and an exercise price of $0.50 (fair value
$18,000) and modified warrants to purchase an aggregate 80,000 shares of common
stock, reducing the exercise price from $0.85 to $0.55. The fair value will be
expensed over the term of the extension.




In
December 2008, QuantRx issued 25,000 shares of common stock (fair value $9,250)
and warrants to purchase 25,000 shares of common stock (fair value $7,375) in
connection with the issuance of two 2008 Notes. Additionally, warrants issued to
these investors in connection with previous debt financings were modified,
reducing their exercise prices to $0.55.  The aggregate incremental
fair value of these modifications was $1,650; the relative fair value was
$1,390, which was recorded as debt discount and is being amortized over the term
of each Note.




On
December 15, 2008, QuantRx negotiated extensions on each of the then-maturing
2008 Secured Promissory Notes. In consideration for one of these seven and a
half month extensions, QuantRx modified the holder’s warrants to purchase 20,000
shares of common stock by reducing the exercise price from $0.85 to $0.55. The
incremental value of this modification was $400, which was recorded as prepaid
interest and is being amortized over the term of the extension as interest
expense.




On
September, October and November 15, 2008, QuantRx negotiated extensions on each
of the outstanding 2008 Secured Promissory Notes. In consideration for these one
to eleven month extensions, QuantRx granted an aggregate of 132,500 shares of
common stock (fair value $45,225) and warrants to purchase 57,500 shares of
common stock with a five year term and an exercise price of $0.85 (fair value
$17,300).




On
October 31, 2008, in connection with the issuance of a $200,000 2008 Note, the
holder was issued warrants for the purchase of 50,000 shares of common stock
(fair value $16,000) with a term of five years and an exercise price of $0.55.
Additionally, in connection with the issuance, the exercise price on previously
issued warrants to purchase 437,500 shares of common stock was revised from
$1.25 to $0.55, and previously issued warrants to purchase 375,000 shares of
common stock was revised to $0.75 to $0.55.




On
October 31, 2008, QuantRx issued 200,000 shares of common stock (fair value
$80,000) in connection with the issuance of a 2008 Promissory Note.




On
October 31, 2008, QuantRx negotiated an extension on one of the 2008 Promissory
Notes. In consideration for this extension, QuantRx issued 200,000 shares of
common stock (fair value $80,000).




25




In August
2008, QuantRx completed a private placement of 8% promissory notes, common
stock, and warrants to purchase shares of QuantRx’s common stock. In connection
with the private placement, QuantRx issued 250,000 shares of common stock (with
a relative fair value of $132,827) and warrants with a five-year term to
purchase 250,000 shares of QuantRx’s common stock at an exercise price of $0.85
(with a relative fair value of $108,159). The notes, common stock and warrants
were offered only to certain private accredited investors.




On August
18, 2008, the Company issued a warrant in consideration of a three month
consulting and investor relations services agreement. The warrant has a term of
five years and represents the right to purchase 40,000 shares of common stock at
an exercise price of $1.25. The fair value of this warrant was calculated to be
$22,400 and was expensed over the term of the agreement.




In the
second and third quarters of 2008, QuantRx conducted a private placement of 8%
promissory notes, common stock and warrants to purchase shares of QuantRx’s
common stock. In connection with the private placement, QuantRx issued 137,500
shares of common stock (with a relative fair value of $79,806) along with
warrants with a five-year term to purchase 137,500 shares of QuantRx’s common
stock at an exercise price of $0.85 (with a relative fair value of $58,050). The
notes, common stock and warrants were offered only to certain private accredited
investors. At the commencement of the financing, in June 2008, QuantRx issued
warrants for services to purchase 100,000 shares of common stock at $0.85 per
share valued at $64,000.




In April
2008, QuantRx completed a limited warrant exercise inducement targeting large
warrant holders who have expressed an interest to participate. The inducement
was a reduction in the exercise price from $1.50 to $0.70 to a limited number of
warrant holders who acquired the warrants in conjunction with prior common stock
purchases. Warrants to purchase an aggregate of 241,699 shares of common stock
were exercised and exchanged for our common stock for total proceeds of
$169,189.




In April
2008, the Company issued common stock warrants with a five year term in
consideration of a financial advisory and investor relations consulting services
agreement. The warrant represents the right to purchase 200,000 shares of common
stock at an exercise price of $0.89 and vests ratably each month over a one year
term. The fair value of the warrant was calculated to be $148,000 on grant date,
and shall be remeasured during the vesting term as required. Consulting expense
related to the issuance of these warrants was $34,000 for the year ended
December 31, 2008.




In April
2008, the Company issued warrants with a five year term to purchase 25,000
shares of common stock at an exercise price of $1.35. The warrants were issued
as payment for technical advisory services related to medical diagnostics. The
fair value of these warrants was calculated to be $16,250, and will be expensed
over a one year term. Consulting expense related to the issuance of these
warrants was $11,576 for the year ended December 31, 2008.




26




In the
first quarter of 2008, QuantRx completed a private placement of 10% senior
secured convertible notes and warrants to purchase shares of QuantRx’s common
stock. In connection with the private placement, QuantRx issued warrants with a
five-year term to purchase 250,000 shares of QuantRx’s common stock at an
exercise price of $1.25. The notes and the warrants were offered only to certain
private accredited investors. In association with the issuance of these
convertible notes, QuantRx issued warrants for services to purchase 100,000
shares of common stock at $1.10 per share valued at $55,750.




2007 Incentive and
Non-Qualified Stock Option Plan




Pursuant
to SFAS 123(R), the fair value of options granted under the Company’s 2007
Incentive and Non-Qualified Stock Option Plan is recorded as compensation
expense over the vesting period, or, for performance based awards, the expected
service term.  Total compensation cost related to QuantRx’s employee
options was $73,579 and $151,651 for the three months ended March 31, 2009 and
2008, respectively.




In the
first quarter of 2009, an aggregate of 130,000 qualified common stock options
were granted to employees and issued from the Company’s 2007 Incentive and
Non-Qualified Stock Option Plan. The options were issued with an exercise price
of $0.31, and have a term of five years. The options vest monthly over one year.
The fair value of these options is $24,700.




In the
fourth quarter of 2008, 6,250 non-qualified common stock options were granted to
a member of the board of directors and issued from the Company’s 2007 Incentive
and Non-Qualified Stock Option Plan. The options were issued with an exercise
price of $0.35, have a term of five years and vested immediately. The fair value
of these options is $1,813.




In the
first quarter of 2008, an aggregate of 528,000 qualified common stock options
were granted to employees and 25,000 non-qualified stock options were granted to
certain consultants and issued from the Company’s 2007 Incentive and
Non-Qualified Stock Option Plan. The options were issued with an exercise price
of $0.80, and have a term of ten years. The options vest monthly over one year.
The fair value of these options is $420,280.




13.
            Related Party
      Transactions




In August
2008, in connection with a debt financing, QuantRx incurred cash commissions of
$50,000 to Burnham Hill Partners, of which a beneficial owner of more than 5% of
QuantRx common stock is a managing member. Burnham Hill Partners was the
placement agent for the debt financing. These commissions are outstanding as of
March 31, 2009.




On June
16, 2008, in connection with a debt financing, QuantRx issued warrants with a
five-year term valued at $64,000 to purchase an aggregate of 100,000 shares of
common stock at an exercise price of $0.85 to Burnham Hill Partners. Burnham
Hill Partners was the placement agent for the debt financing. Additionally, cash
commissions of $55,000 are due to Burnham Hill Partners for its role as
placement agent in the transaction as of March 31, 2009.




27




In the
first quarter of 2008, in connection with a debt financing, QuantRx issued
warrants with a five-year term valued at $55,750 to purchase an aggregate of
100,000 shares of common stock at an exercise price of $1.10 to Burnham Hill
Partners, of which a beneficial owner of more than 5% of QuantRx common stock is
a managing member. Burnham Hill Partners was the placement agent for the debt
financing. Additionally, cash commissions of $70,000 are due to Burnham Hill
Partners for its role as placement agent in the transaction.




At March
31, 2009, cash commissions of $20,000 were due to Burnham Hill Partners for its
role as placement agent in a debt financing transaction in October
2007.




An
executive officer of our majority-owned subsidiary, who is also a beneficial
owner of approximately 25% of the subsidiary’s outstanding shares, was due
$40,000 for licensing fees related to patent license agreements, $177,679 for
advances to fund general operating expenses and $172,500 for accrued payroll as
of March 31, 2009, of which $217,679 was included in accounts payable and
$172,500 was included in accrued expenses. At December 31, 2008, $160,191 was
included in accounts payable, of which $40,000 related to licensing fees, and
$142,500 was included in accrued expenses.




A member
of the Company’s board of directors served as a consultant to the Company on
various business, strategic, and technical issues. His contract expired May 31,
2008. Fees paid and expensed for these services by the Company during the three
months ended March 31, 2008 were $12,000.




14.
            Commitments and
      Contingencies




Operating
Leases




QuantRx
leases office space and research and development lab space under operating
leases that expire at various times through 2011.  Some of these
leases contain cancellation clauses, subject to a termination fee, and include
allocations for common expenses subject to future adjustment.  Rent
expense related to operating leases was approximately $43,857 and $42,123 for
the three months ended March 31, 2009 and 2008, respectively. In connection with
some of these facility leases, the Company has made security deposits totaling
$10,310, which are included in long-term assets in the balance sheet. Future
minimum lease obligations, inclusive of potential termination fees, for
operating leases as of March 31, 2009 are estimated as follows:




Remainder
      of 2009
                
                $
                70,2092010
                
                
                57,2402011
                
                
                43,875Total
      minimum payments
                
                $
                171,324




In
February 2007, the Company began subleasing research and development lab space
under the noncancellable operating leases. The sublease can be terminated upon
ninety days notice by either party, and a $2,000 security deposit is being held
by QuantRx pursuant to the terms of the lease. Sublease income for the three
months ended March 31, 2009 and 2008, was $5,870 and $6,320, respectively, and
is recorded in other income.




28




Executive Employment
Contracts




The
Company has an employment contract with a key Company executive that provides
for the continuation of salary to the executive if terminated for reasons other
than cause, as defined in those agreements. At March 31, 2009, the future
employment contract commitment for such key executive based on this termination
clause was approximately $240,000.




15.
            Subsequent
      Events




In the
second quarter of 2009, the Company issued $50,000 8% Promissory Notes maturing
May 31, 2009 and $65,000 8% Promissory Notes maturing June 30, 2009, and
warrants to purchase an aggregate of 115,000 shares of common stock with a five
year term and an exercise price of $0.55 (aggregate fair value
$17,100).  See Note 10, under the heading “2008 Unsecured Promissory
Notes Payable” for details on these notes and warrants and their
accounting.




On May 5,
2009, QuantRx and FluoroPharma, reorganized their relationship by terminating
their investment agreements. The termination of these investment agreements,
which were originally executed on March 10, 2006, allowed FluoroPharma to close
an equity financing with third party investors.  In conjunction with
the termination of the investment agreements and the additional investment in
FluoroPharma, QuantRx agreed to convert all outstanding receivables from
FluoroPharma, in the aggregate $1,568,567, into 1,148,275 shares of common
stock. As a result of these transactions and the third party investment,
QuantRx’ ownership interest in FluoroPharma’s issued and outstanding capital
stock was reduced to approximately 45%, a noncontrolling interest, which will
result in deconsolidation in the second quarter of 2009. As of March 31, 2009,
FluoroPharma had received $350,000 relating to third party investments, which
was recorded as stock subscription liability.




29


ITEM
2.              Management's
Discussion and Analysis of Financial Condition and Results of
Operations




The
following discussion of our financial condition should be read in conjunction
with the financial statements and notes to financial statements included
elsewhere in this filing.  The following discussion (as well as
statements in Item 1 above and elsewhere) contains forward-looking statements
within the meaning of the Private Securities Litigation Act of 1995 that involve
risks and uncertainties.  Some or all of the results anticipated by
these forward-looking statements may not occur. Forward-looking statements
involve known and unknown risks and uncertainties including, but not limited to,
trends in the biotechnology, healthcare, and pharmaceutical sectors of the
economy; competitive pressures and technological developments from domestic and
foreign genetic research and development organizations which may affect the
nature and potential viability of our business strategy; and private or public
sector demand for products and services similar to what we plan to
commercialize.  We disclaim any intention or obligation to publicly
announce the results of any revisions to any of the forward-looking statements
contained herein to reflect future events or developments.




Unless
otherwise indicated or the context otherwise requires, all references in this
report to “we,” “our,” “ours,” “us,” the “Company” or similar terms refer to
QuantRx Biomedical Corporation, a Nevada corporation.




Overview




QuantRx
Biomedical Corporation was incorporated on December 5, 1986 in the State of
Nevada. The Company’s principal business office is located at 100 South Main
Street, Suite 300, Doylestown, Pennsylvania. QuantRx also has a research and
development facility in Portland, Oregon.




QuantRx
is a diagnostics company focused on the development and commercialization of
innovative diagnostic products for the Point-of-Care (POC) markets based on its
patented technology platforms for the worldwide healthcare industry. These
platforms include: RapidSense® point-of-care testing products based on QuantRx
core intellectual property related to lateral flow techniques for the consumer
and healthcare professional markets; and PAD technology for the consumer markets
for the treatment of hemorrhoids, minor vaginal infection, urinary incontinence,
and other medical needs. Additionally, the Company has made significant
investments in a company developing Single Nucleotide Polymorphism (SNP) chips,
genome-based diagnostic chips for the next generation of genomic and proteomic
diagnostic markets; and molecular imaging agents for Positron Emission
Tomography (PET) and fluorescence imaging with initial application in
cardiovascular disease, to provide clinical support for the Company’s POC
cardiac diagnostics.




The
Company’s overall growth strategy is to: (i) leverage its broad-based IP and
patent portfolio to develop new and innovative diagnostic products; (ii)
commercialize products through corporate partners and distributors; and (iii)
contract manufacturing to third parties while maintaining control over the
manufacturing process.




QuantRx
is developing a hand-held optical imaging device which, when coupled with our
RapidSense technology, will enable highly sensitive, quantitative, positive
read, diagnostic testing to be performed economically at the point of
care.




30




On May 5,
2009, QuantRx and FluoroPharma, reorganized their relationship by terminating
their investment agreements. The termination of these investment agreements,
which were originally executed on March 10, 2006, allowed FluoroPharma to close
an equity financing with third party investors.  In conjunction with
the termination of the investment agreements and the third party investment in
FluoroPharma, QuantRx agreed to convert all outstanding receivables from
FluoroPharma, in the aggregate $1,568,567, into 1,148,275 shares of common
stock. As a result of these transactions and the third party investment,
QuantRx’ ownership interest in FluoroPharma’s issued and outstanding capital
stock was reduced to approximately 45%, a noncontrolling interest, which will
result in deconsolidation in the second quarter of 2009.




Consolidated
Results of Operations




Net
operating revenues for the three months ended March 31, 2009 and 2008 were
$159,488 and $92,172, respectively. The increase in revenues of $67,316 is due
primarily to revenues of $33,335 related to short-term research and development
agreements and $16,536 in royalty income.




General
and administrative expense for the three months ended March 31, 2009
and 2008 was $721,344 and $683,644, respectively. The increase of $37,700
primarily reflects an increase in personnel related expenses of $153,060,
primarily due to stock based compensation, offset by cost containment efforts,
particularly in travel and related expenses.




Professional
fees for the three months ended March 31, 2009 and 2008, were $95,050 and
$323,068, respectively.  Professional fees include the costs of legal,
consulting and auditing services provided to us. The decrease of $228,018
primarily reflects decreased legal fees of $127,443; decreased FDA regulatory
consulting of $40,966; and decreased investor and public relation consulting of
$29,467.




Research
and development expense for the three months ended March 31, 2009 and 2008, was
$235,000 and $477,012, respectively. The decrease of $242,012 is due
primarily to a decrease in contract research and development of $90,279,
decreased personnel and related expenses of $85,857 and decreased materials and
supplies of $30,335.




The
Company’s net loss for the three months ended March 31, 2009 and 2008
was $1,140,126 and $2,017,241, respectively. The decreased net loss is
primarily due to a $439,445 loss on extinguishment of convertible notes in the
first quarter of 2008 and increased cost containment efforts. These decreases
were offset by an increase of $225,921 in interest expense, including
amortization of debt discount and deferred finance costs, resulting from our
increased debt financing activity.




Liquidity
and Capital Resources




As of
March 31, 2009, QuantRx had cash and cash equivalents of $370,759, as compared
to cash and cash equivalents of $66,226 as of December 31, 2008. The net
increase in cash of $304,533 for the three months ended March 31, 2009, is
primarily attributed to $440,000 in net proceeds from the issuance of 10% senior
secured convertible notes and 8% promissory notes in the first quarter of 2009
(see Note 10 to the financial statements) and $350,000 paid for stock
subscriptions related to FluoroPharma, offset by net cash used for operating
activities of $362,627. In addition, QuantRx has invested $75,000 in deposits
for an asset acquisition. QuantRx has used its financing proceeds as well as its
revenues to fund current operating expenses and investments intended to
strategically expand our platforms and technologies.




31




The Company has not generated
sufficient revenues from operations to meet its operating expenses. For this
reason, the Company has historically financed its operations primarily through
issuances of equity and the proceeds of debt instruments. In the past, the
Company has also provided for its cash needs by issuing common stock, options
and warrants for certain operating costs, including consulting and professional
fees. The Company’s board
is contemplating additional cost reduction efforts to allow additional time to
secure required funding.




Management
believes that given our current cash position, there is substantial doubt about
our ability to continue as a going concern. We are actively pursuing various
funding options, including equity offerings, debt financing, strategic corporate
alliances, and business combinations, to obtain additional financing to continue
the development of our products and bring them to commercial markets. The
Company is currently negotiating several potential transactions; however, there
can be no assurance that we will be successful in our efforts to raise
additional capital. Additionally, certain of our debt instruments contain
certain covenants which could limit our ability to issue additional debt. Should
we be unable to acquire necessary waivers from certain of our existing note
holders or raise adequate financing or generate sufficient revenue in the
future, the Company’s business, results of operations, liquidity and financial
condition would be materially and adversely harmed.




The
Company believes that the successful growth and operation of its business is
dependent upon its ability to do any or all of the following:




·
            obtain
      adequate sources of debt or equity financing to pay operating expenses and
      fund long-term business operations;




·
            manage
      or control working capital requirements by reducing operating
      expenses;




·
            develop
      new and enhance existing relationships with product distributors and other
      points of distribution for the Company’s products;
  and




·
            seek
      potential mergers or acquisitions that could be expected to generate
      positive cash flow for the Company upon consummation, assuming appropriate
      financing structures are available on acceptable terms in order to effect
      such acquisitions.




There can
be no assurance that the Company will be successful in achieving its long-term
plans as set forth above, or that such plans, if consummated, will enable the
Company to obtain profitable operations or continue in the long-term as a going
concern.




Off-Balance
Sheet Arrangements




We have
not entered into any transactions with unconsolidated entities in which we have
financial guarantees, subordinated retained interests, derivative instruments or
other contingent arrangements that expose us to material continuing risks,
contingent liabilities or any other obligations under a variable interest in an
unconsolidated entity that provides us with financing, liquidity, market risk or
credit risk support.




32




Critical
Accounting Policies




Revenue
Recognition




The
Company recognizes revenue in accordance with SEC Staff Accounting Bulletin
Topic 13 when persuasive evidence of an arrangement exists and delivery has
occurred, provided the fee is fixed or determinable and collection is probable.
The Company assesses whether the fee is fixed and determinable based on the
payment terms associated with the transaction. If a fee is based upon a variable
such as acceptance by the customer, the Company accounts for the fee as not
being fixed and determinable. In these cases, the Company defers revenue and
recognizes it when it becomes due and payable. Up-front engagement fees are
recorded as deferred revenue and amortized to income on a straight-line basis
over the term of the agreement, although the fee is due and payable at the time
the agreement is signed or upon annual renewal. Payments related to substantive,
performance-based milestones in an agreement are recognized as revenue upon the
achievement of the milestones as specified in the underlying agreement when they
represent the culmination of the earnings process.




The
Company assesses the probability of collection based on a number of factors,
including past transaction history with the customer and the current financial
condition of the customer. If the Company determines that collection of a fee is
not reasonably assured, revenue is deferred until the time collection becomes
reasonably assured. Significant management judgment and estimates must be made
and used in connection with the revenue recognized in any accounting period.
Material differences may result in the amount and timing of our revenue for any
period if our management made different judgments or utilized different
estimates.




The
Company recognizes revenue from nonrefundable minimum royalty agreements from
distributors or resellers upon delivery of product to the distributor or
reseller, provided no significant obligations remain outstanding, the fee is
fixed and determinable, and collection is probable. Once minimum royalties have
been received, additional royalties are recognized as revenue when earned based
on the distributor’s contractual reporting obligations. QuantRx is able to
recognize minimum royalty payments on an accrual basis, as they are specified in
the contract. However, since the Company cannot forecast product sales by
licensees, royalty payments that are based on product sales by the licensees are
not determinable until the licensee has completed their computation of the
royalties due and/or remitted their cash payment to us. Should information on
licensee product sales become available so as to enable QuantRx to recognize
royalty revenue on an accrual basis, materially different revenues and results
of operations could occur.




Our
strategy includes entering into collaborative agreements with strategic partners
for the development, commercialization and distribution of our product
candidates. Such collaboration agreements may have multiple deliverables. We
evaluate multiple deliverable arrangements pursuant to Emerging Issues Task
Force (EITF) 00-21, “Revenue Arrangements with Multiple Deliverables.” Pursuant
to EITF 00-21, in arrangements with multiple deliverables where we have
continuing performance obligations, contract, milestone and license fees are
recognized as revenue together with any up-front payments over the term of the
arrangement as performance obligations are completed, unless the deliverable has
stand-alone value and there is objective, reliable evidence of fair value of the
undelivered element in the arrangement. In the case of an arrangement where it
is determined there is a single unit of accounting, all cash flows from the
arrangement are considered in the determination of all revenue to be recognized.
Cash received in advance of revenue recognition is recorded as deferred
revenue.




33




Use
of Estimates




The
preparation of financial statements and related disclosures 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, revenues and expenses and related disclosures of
contingent assets and liabilities in the financial statements and accompanying
notes. The accounting policies discussed below are considered by management to
be the most important to the Company’s financial condition and results of
operations, and require management to make its most difficult and subjective
judgments due to the inherent uncertainty associated with these matters. All
significant estimates and assumptions are developed based on the best
information available to us at the time made and are regularly reviewed and
adjusted when necessary. We believe that our estimates and assumptions are
reasonable under the circumstances; however, actual results may vary from these
estimates and assumptions. Additional information on significant accounting
principles is provided in Note 1 of the attached financial
statements.




Impairment
of Assets




We assess
the impairment of long-lived assets, including our other intangible assets,
whenever events or changes in circumstances indicate that their carrying value
may not be recoverable in accordance with Statement of Financial Accounting
Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of
Long-Lived Assets.” The determination of related estimated useful lives and
whether or not these assets are impaired involves significant judgments, related
primarily to the future profitability and/or future value of the assets. Changes
in our strategic plan and/or market conditions could significantly impact these
judgments and could require adjustments to recorded asset balances. We hold
investments in companies having operations or technologies in areas which are
within or adjacent to our strategic focus when acquired, all of which are
privately held and whose values are difficult to determine. We record an
investment impairment charge if we believe an investment has experienced a
decline in value that is other than temporary. Future changes in our strategic
direction, adverse changes in market conditions or poor operating results of
underlying investments could result in losses or an inability to recover the
carrying value of the investments that may not be reflected in an investment’s
current carrying value, thereby possibly requiring an impairment charge in the
future.




We
performed annual impairment tests of our equity method goodwill in accordance
with SFAS No. 142, “Goodwill and Other Intangible Assets.” Under SFAS
No. 142, equity method goodwill is not amortized but is subject to
impairment tests in accordance with Accounting Principles Board Opinion No. 18,
“The Equity Method of Accounting for Investments in Common Stock,” under which
QuantRx would have recognized an impairment loss had there been a loss in the
value of the equity method goodwill which was deemed to be other than a
temporary decline.




In
determining fair value of assets, QuantRx bases estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about carrying values of assets that are not readily apparent from
other sources. Actual fair value may differ from management estimates resulting
in potential impairments causing material changes to certain assets and results
of operations.




34




Share-based
Payments




We grant
options to purchase our common stock to our employees and directors under our
stock option plan subject to the provisions of SFAS No. 123(R), “Share-Based
Payments.”




We
estimate the value of stock option awards on the date of grant using a
Black-Scholes pricing model (Black-Scholes model). The determination of the fair
value of share-based payment awards on the date of grant using the Black-Scholes
model is affected by our stock price as well as assumptions regarding a number
of complex and subjective variables. These variables include, but are not
limited to, our expected stock price volatility over the term of the awards,
actual and projected employee stock option exercise behaviors, and risk-free
interest rate. If factors change and we employ different assumptions in the
application of SFAS No. 123(R) in future periods, the compensation expense
that we record under SFAS No. 123(R) may differ significantly from what we
have recorded in the current period.




We
account for share-based compensation awards granted to non-employees in
accordance with EITF No. 96-18, “Accounting for Equity Instruments That Are
Issued to Other Than Employees for Acquiring, or in Conjunction with Selling,
Goods or Services.” Under EITF 96-18, we determine the fair value of the
share-based compensation awards granted as either the fair value of the
consideration received or the fair value of the equity instruments issued,
whichever is more reliably measurable. If the fair value of the equity
instruments issued is used, it is measured using the stock price and other
measurement assumptions as of the earlier of either of (1) the date at
which a commitment for performance by the counterparty to earn the equity
instruments is reached or (2) the date at which the counterparty’s
performance is complete.




Estimates
of share-based compensation expenses are significant to our financial
statements, but these expenses are based on option valuation models and will
never result in the payment of cash by us.




The above
listing is not intended to be a comprehensive list of all of our accounting
policies. In most cases, the accounting treatment of a particular transaction is
specifically dictated by accounting principles generally accepted in the
U.S.




ITEM
      4T.
            Controls
      and Procedures




(a)           Evaluation
of Disclosure Controls and Procedures




The
Company maintains disclosure controls and procedures that are designed to ensure
that information required to be disclosed in our SEC reports is recorded,
processed, summarized and reported within the time periods specified in the
SEC’s rules and forms, and that such information is communicated to our
management including our Chief Executive Officer and Chief Financial Officer as
appropriate. With the supervision and with the participation of our management,
including the Chief Executive Officer and Chief Financial Officer, we have
evaluated the effectiveness of our disclosure controls and procedures (as
defined under Exchange Act Rules 13a-15(e) and 15(d)-15(e)), as of the end
of the period covered by this report. Based on that evaluation, our Chief
Executive Officer and Chief Financial Officer have concluded that these
disclosure controls and procedures were effective as of March 31,
2009.




35




(b)          Changes
in Internal Control over Financial Reporting




During
the period covered by this Quarterly Report on Form 10-Q, there were no changes
in our internal control over financial reporting that have materially affected,
or are reasonably likely to affect, our internal control over financial
reporting.




Given the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that misstatements due to error or fraud will not
occur or that all control issues and instances of fraud, if any, will 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. Further, the design of a control system must reflect the fact
that there are resource constraints, and that the benefits of a control system
must be considered relative to its cost. The design of any system of controls is
also based in part on certain assumptions regarding 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.




PART
II - OTHER INFORMATION




ITEM
      1.
            Legal
      Proceedings.




As of the
date hereof, the Company has no pending or threatened litigation.




ITEM
      2.
            Unregistered
      Sales of Equity Securities, and Use of
Proceeds




In the
second quarter of 2009, the Company issued warrants to purchase an aggregate of
15,000 shares of common stock with a five year term and an exercise price of
$0.55 in connection with the issuance of certain 8% promissory notes to
accredited investors.  See Note 15, Subsequent Events.




There
were no additional sales of unregistered securities other than as reported in
prior reports on Forms 10-K, 10-Q or 8-K.




The
issuances of the above securities were deemed to be exempt from registration
under the Securities Act of 1933, as amended (the “Securities Act”), in reliance
on Section 4(2) of the Securities Act or Regulation D promulgated under the
Securities Act, as transactions by an issuer not involving a public
offering.




ITEM 3.
            Defaults
      Upon Senior Securities




None.




ITEM 4.
            Submission
      of Matters to a Vote of Security
Holders




None.




36


ITEM 5.
            Other
      Information




None.




ITEM 6.
            Exhibits




Exhibit
                    
                    Description31.1
                    
                    Certification
      of Chief Executive Officer required under Rule 13a-14(a) or Rule 15d-14(a)
      of the Securities and Exchange Act of 1934, as amended.31.2
                    
                    Certification
      of Chief Financial Officer required under Rule 13a-14(a) or Rule 15d-14(a)
      of the Securities and Exchange Act of 1934, as amended.32.1*
                    
                    Certification
      of Chief Executive Officer required under Rule 13a-14(a) or Rule 15d-14(a)
      of the Securities and Exchange Act of 1934, as amended, and 18 U.S.C.
      Section 1350.32.2*
                    
                    Certification
      of Chief Financial Officer required under Rule 13a-14(a) or Rule 15d-14(a)
      of the Securities and Exchange Act of 1934, as amended, and 18 U.S.C.
      Section
1350.





*The
certifications attached as Exhibits 32.1 and 32.2 accompany this Quarterly
Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
and shall not be deemed “filed” by QuantRx Biomedical Corporation for purposes
of Section 18 of the Exchange Act.


37


SIGNATURES





Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.




QuantRx
      Biomedical CorporationDate:  
      May 15, 2009
                  
                  By:
                  /s/
      Walter WitoshkinWalter
      WitoshkinChairman
      & CEODate:  
      May 15, 2009
                  
                  By:
                  /s/
      Sasha AfanassievSasha
      AfanassievCFO,
      Treasurer & VP of
Finance


38