**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 June 30, 2008




OR




o
            TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIESEXCHANGE
                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 Incorporation or Organizatio
                  n)
              
              (I.R.S.
                  Employer 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 o No




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


o
      Yes x No




The
      number of shares outstanding of the issuer’s common stock as of August 6, 2008
      was 42,078,880.




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 o
              Accelerated
                  filer oNon-accelerated
                  filer o
              Smaller
                  reporting company x








**PART
      I -** **FINANCIAL
      INFORMATION**


ITEM
                  1.
              Financial
                  StatementsConsolidated
                  Balance Sheets as of June 30, 2008 (Unaudited) and December 31,
                  2007
              
              4Consolidated
                  Statements of Operations (Unaudited) for the three and six months
                  ended
                  June 30, 2008 and 2007
              
              5Consolidated
                  Statements of Cash Flows (Unaudited) for the three and six months
                  ended
                  June 30, 2008 and 2007
              
              6Condensed
                  Notes to (Unaudited) Consolidated Financial Statements
              
              8ITEM
                  2.
              Management’s
                  Discussion and Analysis of Financial Condition and Results of
                  Operations
              
              26ITEM
                  4T.
              Controls
                  and Procedures
              
              31**PART
                  II - OTHER INFORMATION**ITEM
                  1.
              Legal
                  Proceedings
              
              32ITEM
                  2.
              Unregistered
                  Sales of Equity Securities; and Use of Proceeds
              
              32ITEM
                  3.
              Defaults
                  Upon Senior Securities
              
              32ITEM
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              
              33ITEM
                  5.
              Other
                  Information
              
              33ITEM
                  6.
              Exhibits
              
              33Signatures
              
              34
  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**







June
                30,
              2008
            
            December
                31,
              2007(unaudited)**ASSETS**Current
                Assets:Cash
                and cash equivalents
            
            $
            178,895
            
            $
            213,332Accounts
                receivable
            
            
            62,971
            
            
            80,758Interest
                receivable, net of allowance for bad debt of $14,000
            
            
            —
            
            
            —Interest
                receivable - related party
            
            
            23,688
            
            
            15,650Inventories
            
            
            48,164
            
            
            37,313Prepaid
                expenses
            
            
            153,829
            
            
            227,022Note
                receivable, net of allowance for bad debt of $200,000
            
            
            —
            
            
            —Note
                receivable - related party
            
            
            200,000
            
            
            200,000Deferred
                finance costs, net
            
            
            166,988
            
            
            107,507Deposits
            
            
            43,323
            
            
            4,448Total
                Current Assets
            
            
            877,858
            
            
            886,030Investments
            
            
            200,000
            
            
            200,000Property
                and equipment, net
            
            
            352,642
            
            
            391,720Intangible
                assets, net
            
            
            2,101,897
            
            
            2,162,225Security
                deposits
            
            
            10,667
            
            
            10,667Total
                Assets
            
            $
            3,543,064
            
            $
            3,650,642**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**Current
                Liabilities:Accounts
                payable
            
            $
            1,657,797
            
            $
            720,408Accrued
                expenses
            
            
            251,550
            
            
            233,283Deferred
                revenue, current portion
            
            
            66,667
            
            
            —Short-term
                convertible notes payable, net of discount
            
            
            1,751,797
            
            
            795,476Short-term
                promissory notes payable, net of discount
            
            
            323,025
            
            
            —Security
                deposits
            
            
            2,000
            
            
            2,000Loans
                payable, current portion
            
            
            11,268
            
            
            10,882Total
                Current Liabilities
            
            
            4,064,104
            
            
            1,762,049Deferred
                revenue, long-term portion
            
            
            25,448
            
            
            —Loans
                payable, long-term portion
            
            
            —
            
            
            5,733Notes
                payable
            
            
            44,000
            
            
            44,000Total
                Liabilities
            
            
            4,133,552
            
            
            1,811,782Commitments
                and Contingencies
            
            
            —
            
            
            —Minority
                Interest
            
            
            —
            
            
            —Stockholders’
                Equity:Preferred
                stock - $0.01 par value, 25,000,000 authorized; no shares issued
                and
                outstanding
            
            
            —
            
            
            —Common
                stock - $0.01 par value; 75,000,000 authorized; 42,043,880 and 41,699,681
                shares issued and outstanding
            
            
            420,438
            
            
            416,996Additional
                paid-in capital
            
            
            40,536,024
            
            
            38,810,086Accumulated
                deficit
            
            
            (41,546,950
            )
            
            (37,388,222
            )Total
                Stockholders’ Equity
            
            
            (590,488
            )
            
            1,838,860Total
                Liabilities and Stockholders’ Equity
            
            $
            3,543,064
            
            $
            3,650,642


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




4


**QUANTRX
      BIOMEDICAL CORPORATION**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**





Three
                Months Ended June 30,
            
            Six
                Months Ended June 30,2008
            
            2007
            
            2008
            
            2007(unaudited)
            
            (unaudited)
            
            (unaudited)
            
            (unaudited)Revenues
            
            $
            161,088
            
            $
            108,281
            
            $
            253,260
            
            $
            170,651Costs
                and Operating Expenses:Cost
                of goods sold (excluding depreciation and amortization)
            
            
            19,550
            
            
            —
            
            
            23,482
            
            
            —Sales
                and marketing
            
            
            39,949
            
            
            51,567
            
            
            92,576
            
            
            95,281General
                and administrative
            
            
            801,685
            
            
            593,101
            
            
            1,485,329
            
            
            1,100,528Professional
                fees
            
            
            235,658
            
            
            949,086
            
            
            558,726
            
            
            1,254,996Research
                and development
            
            
            752,477
            
            
            722,878
            
            
            1,229,489
            
            
            1,002,133Amortization
            
            
            44,901
            
            
            41,292
            
            
            89,643
            
            
            44,457Depreciation
            
            
            26,604
            
            
            21,104
            
            
            53,389
            
            
            31,293Total
                Costs and Operating Expenses
            
            
            1,920,824
            
            
            2,379,028
            
            
            3,532,634
            
            
            3,528,688Loss
                from Operations
            
            
            (1,759,736
            )
            
            (2,270,747
            )
            
            (3,279,374
            )
            
            (3,358,037
            )Other
                Income (Expense):Interest
                and dividend income
            
            
            5,653
            
            
            28,363
            
            
            12,298
            
            
            54,611Interest
                expense
            
            
            (56,432
            )
            
            (282
            )
            
            (99,549
            )
            
            (735
            )Bad
                debt expense
            
            
            —
            
            
            (214,000
            )
            
            —
            
            
            (214,000
            )Rental
                income
            
            
            5,640
            
            
            5,535
            
            
            11,960
            
            
            8,285Grant
                income
            
            
            —
            
            
            —
            
            
            —
            
            
            14,000Loss
                on equity investee
            
            
            —
            
            
            (267,608
            )
            
            —
            
            
            (267,608
            )Amortization
                of debt discount to interest expense
            
            
            (312,603
            )
            
            —
            
            
            (346,541
            )
            
            —Amortization
                of deferred financing costs to interest expense
            
            
            (50,647
            )
            
            —
            
            
            (79,369
            )
            
            —Loss
                on extinguishment of debt
            
            
            —
            
            
            —
            
            
            (439,445
            )
            
            —Loss
                on disposition of fixed assets
            
            
            —
            
            
            —
            
            
            (1,787
            )
            
            —Total
                Other Income (Expense), Net
            
            
            (408,389
            )
            
            (447,992
            )
            
            (942,433
            )
            
            (405,447
            )Loss
                Before Minority Interest and Taxes
            
            
            (2,168,125
            )
            
            (2,718,739
            )
            
            (4,221,807
            )
            
            (3,763,484
            )Minority
                Interest
            
            
            26,638
            
            
            293,648
            
            
            63,079
            
            
            293,648Provision
                for Income Taxes
            
            
            —
            
            
            —
            
            
            —
            
            
            —Net
                Loss
            
            $
            (2,141,487
            )
            $
            (2,425,091
            )
            $
            (4,158,728
            )
            $
            (3,469,836
            )Basic
                and Diluted Net Loss per Common Share
            
            $
            (0.05
            )
            $
            (0.06
            )
            $
            (0.10
            )
            $
            (0.09
            )Basic
                and Diluted Weighted Average Shares Used in per Share
                Calculation
            
            
            41,929,326
            
            
            40,910,580
            
            
            41,814,503
            
            
            39,759,102


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




5


**QUANTRX
      BIOMEDICAL CORPORATION**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**





Six
                Months Ended June 30,2008
            
            2007(unaudited)
            
            (unaudited)CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                loss
            
            $
            (4,158,728
            )
            $
            (3,469,836
            )Adjustments
                to reconcile net loss to net cash used by operating
                activities:Depreciation
                and amortization
            
            
            143,032
            
            
            75,750Interest
                expense related to amortization of non-cash discount, non-cash beneficial
                conversion feature and deferred financing costs
            
            
            425,910
            
            
            —Bad
                debt expense
            
            
            —
            
            
            214,000Expenses
                related to employee stock options
            
            
            486,167
            
            
            69,485Expenses
                related to stock options issued to non-employees
            
            
            6,167
            
            
            —Expenses
                related to common stock warrants issued
            
            
            30,437
            
            
            91,675Non-cash
                fair value of warrants and options issued for consulting
            
            
            109,657
            
            
            390,887Loss
                on extinguishment of debt
            
            
            439,445
            
            
            —Loss
                on disposition of fixed assets
            
            
            1,787
            
            
            —Issuance
                of convertible notes for accrued interest
            
            
            53,851
            
            
            —Loss
                on equity investee
            
            
            —
            
            
            267,608Minority
                interest
            
            
            (63,079
            )
            
            (293,648
            )(Increase)
                decrease in:Accounts
                receivable
            
            
            17,787
            
            
            (51,887
            )Interest
                receivable
            
            
            (8,038
            )
            
            (12,128
            )Inventories
            
            
            (10,851
            )
            
            —Prepaid
                expenses
            
            
            73,193
            
            
            71,497Deposits
            
            
            (38,876
            )
            
            3,260Increase
                (decrease) in:Accounts
                payable
            
            
            816,769
            
            
            (12,812
            )Accrued
                expenses
            
            
            18,267
            
            
            13,804Security
                deposits
            
            
            —
            
            
            2,000Deferred
                revenue
            
            
            92,115
            
            
            (38,667
            )Net
                Cash Used by Operating Activities
            
            
            (1,564,988
            )
            
            (2,679,012
            )CASH
                FLOWS FROM INVESTING ACTIVITIES:Cash
                paid for purchases of fixed assets
            
            
            (4,394
            )
            
            (228,640
            )Cash
                paid for equity interest in FluoroPharma
            
            
            —
            
            
            (1,536,000
            )Cash
                obtained from equity interest in FluoroPharma
            
            
            —
            
            
            764,223Payment
                on note receivable from FluoroPharma
            
            
            —
            
            
            250,000Issuance
                of note receivable - related party
            
            
            —
            
            
            (300,000
            )Cash
                paid for licensing agreement
            
            
            (20,000
            )
            
            (15,000
            )Cash
                paid for capitalized website development costs
            
            
            (600
            )
            
            (15,480
            )Net
                Cash Used by Investing Activities
            
            
            (24,994
            )
            
            (1,080,897
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:Proceeds
                from sale of common stock and warrants, net of issuance costs of
                $157,504
            
            
            —
            
            
            3,374,996Proceeds
                from exercise of common stock warrants
            
            
            169,189
            
            
            —Proceeds
                from long-term note payable
            
            
            —
            
            
            44,000Payments
                on loan payable used to finance equipment purchase
            
            
            (5,346
            )
            
            —Proceeds
                from issuance of convertible notes, net of legal fees of
                $7,500
            
            
            992,500
            
            
            —Proceeds
                from issuance of short-term promissory notes
            
            
            410,000
            
            
            —Payment
                of payables related to fixed asset purchases
            
            
            (10,798
            )
            
            —Net
                Cash Provided by Financing Activities
            
            
            1,555,545
            
            
            3,418,996




6




Net
                Increase (Decrease) in Cash and Cash Equivalents
            
            
            (34,437
            )
            
            (340,913
            )Cash
                and Cash Equivalents, Beginning of Period
            
            
            213,332
            
            
            1,256,912Cash
                and Cash Equivalents, End of Period
            
            $
            178,895
            
            $
            915,999Supplemental
                Cash Flow Disclosures:Interest
                expense paid in cash
            
            $
            38,397
            
            $
            735Income
                tax paid
            
            $
            —
            
            $
            —Supplemental
                Disclosure of Non-Cash Activities Financing and Investing
                Activities:Fair
                value of warrants issued to placement agents for debt financing
                costs
            
            $
            119,750
            
            $
            —Fair
                value of warrants issued with convertible notes
            
            
            122,036
            
            
            —Fair
                value of beneficial conversion feature embedded in convertible
                notes
            
            
            647,760
            
            
            —Fair
                value of common stock issued with short-term promissory
                notes
            
            
            59,768
            
            
            —Fair
                value of warrants issued with short-term promissory notes
            
            
            41,528
            
            
            —Fair
                value of warrants issued with common stock
            
            
            —
            
            
            1,243,087Fair
                value of warrants issued to placement agents for equity financing
                costs
            
            
            —
            
            
            277,778Increase
                in payables related to purchase of fixed assets
            
            
            11,703
            
            
            —Increase
                in payables related to license acquisition
            
            
            8,715
            
            
            —Increase
                in payables for debt financing costs
            
            
            111,000
            
            
            —Decrease
                in payables related to purchase of fixed assets
            
            
            —
            
            
            31,842Increase
                in payables related to capitalized website development
                costs
            
            
            —
            
            
            14,220




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




7


**QUANTRX
      BIOMEDICAL CORPORATION**


**CONDENSED
      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**


**June
      30, 2008**





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 broad-based diagnostics company focused on the development and
      commercialization of innovative diagnostic products based on its patented
      technology platforms for the worldwide healthcare industry. The Company’s
      strategy is to commercialize its products through partners or distributors,
      contracting the manufacturing to third party partners 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-KSB for the year ended December 31, 2007.




These
      consolidated financial statements include the accounts of the Company and,
      from
      April 1, 2007, its majority-owned subsidiary, FluoroPharma, Inc. All significant
      intercompany accounts and transactions have been eliminated in consolidation.
      See Note 2 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.




1.
            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
      of $327,620 and $486,167 for the three and six months ended June 30, 2008
      (including $120,159 and $127,055 relating to subsidiary options), and $36,972
      and $69,485, (including $4,458 relating to subsidiary options in the second
      quarter of 2007) for the three and six months ended June 30, 2007, respectively.




8




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
      June 30, 2008, the Company had common stock options of 2,344,750, common stock
      warrants of 7,649,184, and convertible debt subject to conversion into 4,409,594
      shares outstanding. The above options, warrants, and convertible securities
      were
      deemed to be antidilutive for the three and six months ended June 30,
      2008.




As
      of
      June 30, 2007, the Company had outstanding common stock options of 1,372,500
      and
      common stock warrants of 7,544,484. The above options and warrants were deemed
      to be antidilutive for the three and six months ended June 30, 2007.




Fair
      Value




Effective
      January 1, 2008, the Company adopted SFAS No. 157, “Fair Value
      Measurements.” In February 2008, the Financial Accounting Standards Board
      (FASB) issued FASB Staff Position (FSP) No. FAS 157-2, “Effective Date of
      FASB Statement No. 157,” which provides a one year deferral of the
      effective date of SFAS No. 157 for non-financial assets and non-financial
      liabilities, except those that are recognized or disclosed in the financial
      statements at fair value at least annually. Therefore, the Company has adopted
      the provisions of FAS 157 with respect to its financial assets and liabilities
      only. The adoption of SFAS No. 157 had no impact on the Company’s consolidated
      results of operations or financial condition.




Effective
      January 1, 2008, the Company adopted SFAS No. 159, “The Fair Value
      Option for Financial Assets and Financial Liabilities.” SFAS No. 159 allows an
      entity the irrevocable option to elect to measure specified financial assets
      and
      liabilities in their entirety at fair value on a contract-by-contract basis.
      If
      an entity elects the fair value option for an eligible item, changes in the
      item’s fair value must be reported as unrealized gains and losses in earnings at
      each subsequent reporting date. In adopting FAS No. 159, we did not elect the
      fair value option for any of our financial assets or financial
      liabilities.




Recent
      Accounting Pronouncements




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 fiscal years and interim periods beginning after
      November 15, 2008, with early application permitted. The Company does not
      expect the implementation of this
      standard to have a material impact on its consolidated financial statements
      at
      this time.




9




In
      June 2007, the FASB ratified the Emerging Issues Task Force (EITF)
      consensus on EITF 07-3, “Accounting for Nonrefundable Advance Payments for
      Goods or Services Received for Use in Future Research and Development
      Activities.” EITF 07-3 provides that nonrefundable advance payments for goods or
      services that will be used or rendered for future research and development
      activities should be capitalized and deferred. Such amounts should be recognized
      as an expense as the related goods are delivered or the related services are
      performed or such time when an entity does not expect the goods to be delivered
      or services to be performed. EITF 07-3 is effective for fiscal periods beginning
      after December 15, 2007. The adoption of EITF 07-3 has not had a material
      impact on the Company’s consolidated results of operations or financial
      position.




Reclassifications




Certain
      amounts from prior periods have been reclassified to conform to the current
      period presentation. This reclassification has resulted in no changes to the
      Company’s accumulated deficit or net losses presented.




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.




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.




10




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.




2.
            Consolidation
                of FluoroPharma, Inc.




In
      March
      2006, QuantRx purchased 1,096,170 shares of FluoroPharma common stock for a
      total purchase price of $1,566,023. Contemporaneously, QuantRx negotiated the
      purchase of an additional 300,000 shares from private investors for $429,000.
      In
      February 2007, QuantRx purchased an additional 200,000 shares from private
      investors for $286,000. On April 13, 2007, QuantRx and FluoroPharma closed
      the
      transactions contemplated by a “stage 2” investment agreement. Under the
      investment agreement, effective April 1, 2007, QuantRx purchased 627,058 shares
      of common stock of FluoroPharma for $1,250,000, consisting of (i) cash payments
      aggregating $741,178; and (ii) cancellation in full of two promissory notes
      issued by FluoroPharma in favor of QuantRx, in the aggregate principal amount
      of
      $500,000, and with accrued and unpaid interest of $8,822, for a total of
      $508,822. As a result of these equity purchases, QuantRx’s ownership in
      FluoroPharma exceeded 50%, requiring QuantRx to consolidate FluoroPharma.
      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.




As
      of
      June 30, 2008, QuantRx owned approximately 57.78% of the issued and outstanding
      capital stock of FluoroPharma. Effective April 1, 2007, FluoroPharma’s results
      of operations have been included in the accompanying consolidated financial
      statements.




The
      aggregate investment in FluoroPharma of $2,281,023 as of the date of
      consolidation, was accounted for in accordance with the equity method of
      accounting. Since FluoroPharma’s liabilities exceeded assets on the investment
      dates, each investment was recorded as equity method goodwill. In accordance
      with SFAS No. 142, equity method goodwill is not amortized or tested for
      impairment in accordance with this standard. QuantRx reviewed the equity method
      goodwill in accordance with APB Opinion No. 18 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. No impairment was recognized through March 31,
      2007.




QuantRx
      did not account for the acquisition of FluoroPharma’s equity as a business
      combination since FluoroPharma is a development-stage enterprise and did not
      meet the definition of a business in accordance with SFAS No. 141, “Business
      Combinations” and EITF 98-3, “Determining Whether a Nonmonetary Transaction
      Involves Receipt of Productive Assets or of a Business.” As a result of the
      consolidation and pursuant to Accounting Research Bulletin (ARB) No. 51,
“Consolidated Financial Statements,” effective April 1, 2007, QuantRx recognized
      previously unrecognized equity method losses relating to its investment in
      FluoroPharma of $829,648, attributable to 2006, as an adjustment to retained
      earnings, and $267,608, attributable to 2007, in the second quarter of 2007.
      These losses were previously unrecognized since APB No. 18 stipulated that
      the
      entire investment be treated as equity method goodwill with no equity method
      loss recognition.




11




QuantRx’s
      aggregate investment in the equity of FluoroPharma of $3,531,023 was reduced
      at
      April 1, 2007, by the $1,097,256 in previously unrecognized equity method losses
      required to be recorded upon consolidation in accordance with ARB No. 51. The
      remaining investment balance of $2,433,767 at April 1, 2007, has been allocated
      upon consolidation based on fair value estimates as follows:




Cash
            
            $
            764,223Prepaid
                expenses
            
            
            99,980Property
                and equipment
            
            
            62,802Intangible
                assets
            
            
            2,134,783Current
                liabilities
            
            
            (352,733
            )Minority
                interests
            
            
            (275,288
            )$
            2,433,767




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 and six months ending June
      30, 2008, was $34,284 and $68,568, respectively, and was $38,130 for the three
      and six months ended June 30, 2007.




Minority
      interests of $275,288 at April 1, 2007, resulted from the consolidation of
      FluoroPharma reflecting the interests held by third parties of FluoroPharma.
      Since acquisition, and as of June 30, 2008 and December 31, 2007, the portion
      of
      FluoroPharma’s losses attributable to the minority interest have been recorded,
      reducing the minority interest to zero.




In
      the
      first two quarters of 2008 and the third and fourth quarters of 2007, QuantRx
      advanced an aggregate of $900,000 ($300,000 in 2008 and $600,000 in 2007) to
      FluoroPharma through eight short-term convertible promissory notes. These notes
      and accrued interest ($47,067 as of June 30, 2008 and $14,252 as of December
      31,
      2007) were eliminated in consolidation.




Under
      the
      initial investment agreement with FluoroPharma, QuantRx has the option to
      acquire additional shares of FluoroPharma through a series of staged
      investments. Such staged investments will take the form of cash at increasing
      valuations upon FluoroPharma’s achievement of certain milestones with respect to
      the successful completion of Phase I and Phase II FDA trials for certain
      compounds being developed by FluoroPharma. The final staged investment to wholly
      acquire FluoroPharma will be settled in QuantRx’s common stock. Any subsequent
      investment in FluoroPharma by QuantRx will be consummated pursuant to the terms
      and subject to the conditions set forth in separate definitive agreements.




In
      connection with the initial investment, QuantRx received an option to purchase
      an additional 260,000 shares of FluoroPharma common stock at an exercise price
      of $0.75. FluoroPharma has outstanding common stock equivalents which, if
      exercised together with the Company’s option and convertible notes, would reduce
      the Company’s ownership percentage to approximately 52.68 %
      on a
      fully diluted and as converted basis as of June 30, 2008.




12




3.
            Other
                Balance Sheet Information




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




June
                30,
              2008
            
            December
                31, 2007Prepaid
                expenses:Prepaid
                consulting
            
            $
            60,267
            
            $
            159,410Prepaid
                consulting - related party
            
            
            12,866
            
            
            17,377Prepaid
                insurance
            
            
            67,848
            
            
            31,829Prepaid
                rent
            
            
            5,310
            
            
            5,310Other
            
            
            7,538
            
            
            13,096Prepaid
                expenses
            
            $
            153,829
            
            $
            227,022Deferred
                financing costs:Deferred
                financing costs
            
            $
            238,250
            
            $
            135,000Less:
                accumulated amortization
            
            
            (71,262
            )
            
            (27,493
            )Deferred
                financing costs, net
            
            $
            166,988
            
            $
            107,507Property
                and equipment:Computers
                and office furniture, fixtures and equipment
            
            $
            149,205
            
            $
            148,141Machinery
                and equipment
            
            
            265,928
            
            
            252,681Leasehold
                improvements
            
            
            92,233
            
            
            92,233Less:
                accumulated depreciation
            
            
            (154,724
            )
            
            (101,335
            )Property
                and equipment, net
            
            $
            352,642
            
            $
            391,720Accrued
                expenses:Professional
                fees
            
            $
            69,500
            
            $
            72,050Payroll
                and related
            
            
            57,750
            
            
            -Patent
                licensing fees
            
            
            50,000
            
            
            -Clinical
                trials
            
            
            5,000
            
            
            110,833Accrued
                interest
            
            
            7,300
            
            
            -Other
            
            
            62,000
            
            
            50,400Accrued
                expenses
            
            $
            251,550
            
            $
            233,283Short-term
                convertible notes payable, net:Short-term
                convertible notes payable
            
            $
            2,204,797
            
            $
            1,000,000Less:
                discount for warrants and conversion feature, net
            
            
            (453,000
            )
            
            (204,524
            )Short-term
                convertible notes payable, net
            
            $
            1,751,797
            
            $
            795,476Short-term
                promissory notes payable, net:Short-term
                promissory notes payable
            
            $
            410,000
            
            $
            -Less:
                discount for common stock and warrants, net
            
            
            (86,975
            )
            
            -Short-term
                promissory notes payable, net
            
            $
            323,025
            
            $
            -





13




4.
            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 is currently exploring the possibility
      of further investment, and has postponed settlement of the note during this
      exploratory period, during which the note continues to accrue interest. QuantRx
      accrued interest of $8,040 and $15,649 on this note for the six months ended
      June 30, 2008 and the year ended December 31, 2007, 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 5 for additional information on
      GUSA.




Rockland
      Technimed, Ltd.




In
      April
      2006, QuantRx advanced $200,000 to Rockland Technimed, Ltd. (Rockland) through
      a
      7% convertible promissory note due twelve months from the date of issuance.
      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. QuantRx accrued interest of
      $4,083 during the year ended December 31, 2007. 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.




5.
            Investments




Genomics
      USA, Inc.




In
      May
      2006, QuantRx purchased 144,024 shares of GUSA common stock for $200,000. As
      of
      June 30, 2008, QuantRx owned approximately 10% of the issued and outstanding
      capital stock of GUSA.




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 June 30,
      2008.




14




6.
            Intangible
                Assets




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




June
                30, 2008
            
            December
                31, 2007Licensed
                patents and patent rights
            
            $
            2,197,020
            
            $
            2,168,305Patents
            
            
            82,008
            
            
            82,008Technology
                license
            
            
            22,517
            
            
            22,517Website
                development
            
            
            49,711
            
            
            49,111Less:
                accumulated amortization
            
            
            (249,359
            )
            
            (159,716
            )Intangibles,
                net
            
            $
            2,101,897
            
            $
            2,162,225




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 $89,643 for the three and six months ended June 30, 2008 and $41,292 and
      $44,457 for the three and six months ended June 30, 2007, respectively.
      Impairment will be considered in accordance with the Company’s impairment
      policy. No impairment was recognized as of June 30, 2008.




7.
            Deferred
                Revenue




Synova
      Healthcare, Inc.




On
      July
      7, 2006 (the effective date), QuantRx and Synova Healthcare, Inc. (Synova)
      entered into a distribution agreement pursuant to which Synova would act as
      the
      exclusive distributor of specified hemorrhoid products of QuantRx in the United
      States. The initial term of the agreement was to commence on the effective
      date
      and, unless sooner terminated as provided in the agreement, was to continue
      in
      effect for a period of five years following the month in which Synova made
      its
      first shipment of products to its initial customers. Management estimated the
      effective term of the agreement to be six years from the effective date.




QuantRx
      received an up-front, non-refundable payment of $500,000 upon execution of
      the
      distribution agreement, which was recorded as deferred revenue and was amortized
      into revenue over the expected term of the agreement, which was six years.
      QuantRx recognized revenue of $20,834 and $41,667 in the three and six months
      ended June 30, 2007. In December 2007, in accordance with the terms of the
      distribution agreement, QuantRx delivered notice of termination of the agreement
      and recognized the remaining deferred revenue at that time.




CytoCore,
      Inc.




On
      May
      19, 2008, QuantRx and CytoCore, Inc. (CytoCore) 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.




15




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 $13,441 in the second
      quarter of 2008 related to this agreement.




8.
            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.




Additionally,
      QuantRx received a $14,000 grant for qualified expenditures related to its
      research facility. QuantRx satisfied the grant terms and recorded the grant
      as
      other income in the first quarter of 2007.




9.
            Notes
                Payable




2007
      Convertible 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 (or financings) 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.




16




The
      conversion option embedded in the 2007 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 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 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 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.




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 for 2008 through
      the
      date of extinguishment, including amortization of original issue discount and
      deferred financing costs, related to the 2007 Notes was $29,832. 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.




2008
      Senior Secured Convertible Notes




In
      the first quarter of 2008, the Company completed a $2.16 million private
      placement with certain accredited investors through the issuance of 10% senior
      secured convertible notes (the “2008 Notes”) and warrants. 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 anti-dilution protection to the holders and allow for cashless exercise.




17




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.




In
      the
      event QuantRx does not complete a qualified financing and holders do not
      voluntarily convert, QuantRx must repay the outstanding principal balance and
      accrued and unpaid interest on January 23, 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.




18




QuantRx
      has determined that the terms of the 2008 Notes are “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.




The
      new cash proceeds from the 2008 Notes 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 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.




19




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 term of the 2008 Notes in accordance with EITF 00-27,
      paragraph 19. QuantRx recorded $386,460 and $461,283 in interest expense,
      including amortization of original issue discount and deferred financing costs,
      related to the 2008 Notes for the three and six months ended June 30, 2008.
      At
      June 30, 2008 the Company issued a 2008 Note in the amount of $47,551 pursuant
      to one holder’s election to receive the quarterly interest in the form of a
      paid-in-kind note.




2008
      Short-term 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 Promissory Notes”). In connection with the private placement and as
      of June 30, 2008, QuantRx issued notes in the aggregate principal amount of
      $410,000, and an aggregate of 102,500 shares of common stock and warrants with
      a
      five-year term to purchase 102,500 shares of common stock warrants at a per
      share exercise price of $0.85. The warrants provide for full anti-dilution
      protection to the holders and allow for cashless exercise. The 2008 Promissory
      Notes are 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 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 Promissory Notes.




The
      cash proceeds from the 2008 Promissory Notes of $410,000 were allocated between
      the notes, common stock and warrants on a relative fair value basis. QuantRx
      allocated $59,768 and $41,528 of the principal amount of $410,000 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 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 $41,000
      in
      connection with the private placement resulting in total deferred debt offering
      cost of $105,000 as of June 30, 2008.




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 common stock and warrants issued to the investors
      and the deferred financing costs are being amortized to interest expense over
      the term of the 2008 Promissory Notes in accordance with EITF 00-27, paragraph
      19. QuantRx recorded $31,642 in interest expense, including amortization of
      original issue discount and deferred financing costs, related to the 2008
      Promissory Notes for the three and six months ended June 30, 2008.




20




10.
            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 June
      30, 2008 or December 31, 2007.




11.
            Common
                Stock, Options and Warrants




In
      the
      second quarter of 2008, QuantRx commenced 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, as of June 30, 2008, QuantRx had
      issued 102,500 shares of common stock along with warrants with a five-year
      term
      to purchase 102,500 shares of QuantRx’s common stock at an exercise price of
      $0.85. The notes, common stock and 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 $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. An aggregate of 241,699 common stock warrants were exercised and
      exchanged for 241,699 shares of our common stock for total proceeds of $169,189.




On
      April
      16, 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 $25,000 in the second quarter
      of
      2008.




On
      April
      16, 2008, the Company issued common stock 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 $3,384 in the second quarter of
      2008.




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.




21




On
      October 16, 2007, QuantRx completed a private placement of 10% 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 $65,000.




Throughout
      2007, the Company issued an aggregate of 14,000 common stock warrants with
      five-year terms and exercise prices equal to the market price on the dates
      of
      grant (varying between $0.61 to $1.15). These warrants were in consideration
      of
      business development consulting services. The fair value of these warrants
      was
      calculated to be $11,160, which was expensed in 2007.




In
      the
      third quarter of 2007, QuantRx initiated a limited warrant exercise inducement
      targeting certain large warrant holders. The inducement was a reduction in
      the
      exercise price from $1.50 to $0.75 to a limited number of accredited investors
      holding warrants acquired in conjunction with prior common stock purchases.
      As a
      result of this inducement, 751,001 common stock warrants were exercised and
      exchanged for 751,001 shares of our common stock for aggregate gross proceeds
      of
      $563,251. In connection with the exercise of these warrants, QuantRx paid cash
      commissions to Legend Merchant, Inc. of $16,429.




In
      the
      third quarter of 2007, 38,100 common stock warrants were exercised and exchanged
      for 38,100 shares of our common stock resulting in proceeds to the Company
      of
      $20,955. The exercise price for these warrants was $0.55.




On
      April
      30, 2007, the Company issued a warrant in consideration of financial advisory
      and public relations consulting services performed through April 30, 2007.
      The
      warrant has a term of five years and represents the right to purchase 30,000
      shares of common stock at an exercise price of $1.20. The fair value of this
      warrant was calculated to be $31,800 and was expensed in 2007.




On
      April
      16, 2007, the Company issued a warrant in consideration of a financial advisory
      and investor relations consulting services agreement with an initial one year
      term. The original agreement was modified June 20, 2007. The original warrant
      had a term of five years and represented the right to purchase 350,000 shares
      of
      common stock at an exercise price of $1.35 and vested ratably each month over
      the initial one year term. The fair value of the original warrant was calculated
      to be $420,000. On June 20, 2007, the agreement was modified and the original
      warrant was cancelled. The warrant issued upon modification of the agreement
      has
      the same terms as the originally issued warrant other than it represents the
      right to purchase 150,000 shares of common stock at an exercise price of $0.95,
      which was the closing price on the modification date. The fair value of the
      modified warrant was calculated to be $126,000 on the modification date, and
      shall be remeasured during the vesting term as required. The final remeasurement
      of the fair value of these warrants on April 15, 2008 resulted in a reduction
      to
      previously recorded consulting expense of $14,875 in the second quarter of
      2008.
      Consulting expense related to these warrants was $5,437 for the six months
      ended
      June 30, 2008.




22




On
      April
      16, 2007, the Company issued common stock warrants with a five year term to
      purchase 50,000 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
      $60,000, and was expensed over the initial year of the agreement. Consulting
      expense related to these warrants was $ 2,459
      and
      $17,377 in the three and six months ended June 30, 2008, and $12,459 in the
      quarter ended June 30, 2007.




On
      March
      1, 2007, QuantRx completed a private placement of 3,532,500 shares of common
      stock and warrants with a five-year term valued at $1,243,087 to purchase an
      aggregate of 1,059,750 shares of common stock at $1.50 per share to accredited
      investors for gross proceeds of $3,532,500 in cash. The Company issued warrants
      with a seven-year term to purchase 194,250 shares of common stock at $1.00
      per
      share valued at $277,778, and paid cash commissions of $155,400 in connection
      with the private placement to Legend Merchant Inc., and an additional $2,104
      for
      related legal services.




In
      the
      first quarter of 2007, QuantRx issued 200,000 common stock warrants with a
      five-year term to purchase 200,000 shares of common stock at an exercise price
      of $1.50. The warrants were issued pursuant to a financial advisory services
      agreement, and the fair value of $250,000 for
      these
      warrants was expensed over the
      expected service term of four months.




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
      $207,461 and $32,513 for the three months ended June 30, 2008 and 2007,
      respectively, and $359,112 and $65,027 for the six months ended June 30, 2008
      and 2007, respectively. Compensation cost related to QuantRx’s non-employee
      options was $4,292 and $6,167 for the three and six months ended June 30, 2008.
      No options were granted in the six months ended June 30, 2007.




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.




In
      the
      fourth quarter of 2007, 6,250 non-qualified common stock options were granted
      to
      a member of the board of directors and issued from the Company’s Incentive and
      Non-Qualified Stock Option Plan. The options were issued with an exercise price
      of $0.69, have a term of five years and vested immediately. The fair value
      of
      these options is $3,813.




In
      the
      fourth quarter of 2007, a total of 413,000 qualified common stock options were
      granted to employees and issued from the Company’s Incentive and Non-Qualified
      Stock Option Plan. The options were issued with an exercise price of $0.85,
      and
      have a term of ten years. The options vest monthly over one year. The fair
      value
      of these options is $342,790.




23




12.
            Related
                Party Transactions




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 $0.85 per share 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 $41,000 are due to Burnham Hill Partners for its role as
      placement agent in the transaction as of June 30, 2008.




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 $1.10 per share 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.




In
      October 2007, in connection with a debt financing, QuantRx issued warrants
      with
      a five-year term valued at $65,000 to purchase an aggregate of 100,000 shares
      of
      common stock at $1.10 per share to Burnham Hill Partners. 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.




On
      March
      9, 2007, the Company issued 200,000 common stock warrants with a five year
      term
      to purchase 200,000 shares of common stock at an exercise price of $1.50. The
      warrants were issued as payment pursuant to a financial advisory services
      agreement with Burnham Hill Partners. The fair value of these warrants was
      calculated to be $250,000 and was expensed over the four month service term.
      Additionally, cash compensation of $200,000 was paid pursuant to the terms
      of
      the agreement and was also expensed over the four month service term.




A
      member
      of the Company’s board of directors serves as a consultant to the Company on
      various business, strategic, and technical issues. Fees paid and expensed for
      these services by the Company during the three and six months ended June 30,
      2008 were $8,000 and $20,000 and the three and six months ended June 30, 2007
      were $12,000 and $24,000, respectively.




24




13.
            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 $30,117 and $60,234 for the three and six months ended June
      30, 2008, and $29,749 and $59,094 for the three and six months ended June 30,
      2007, 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 June 30, 2008 are estimated as follows:




Remainder
                of 2008
            
            $
            62,0312009
            
            
            101,5632010
            
            
            57,2402011
            
            
            43,875Total
                minimum payments
            
            $
            264,709




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 was $5,640 and
      $11,960 for the three and six months ended June 30, 2008 and $5,535 and $8,285
      for the three and six months ended June 30, 2007, respectively, and is recorded
      in other income.




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 June 30, 2008, the future
      employment contract commitment for such key executive based on this termination
      clause was approximately $240,000.




14.
            Subsequent
                Event




In
      the
      third quarter of 2008, the Company issued additional
      8% senior secured promissory notes (the “2008 Promissory Notes”) in the
      aggregate principal amount of $140,000, and an aggregate of 35,000 shares of
      common stock and warrants to purchase 35,000 shares of common stock. See Note
      9,
      under the heading “2008 Short-term Promissory Notes Payable” for
      details.




25




**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 and its
      subsidiary.




**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 broad-based diagnostics company focused on the development and
      commercialization of innovative diagnostic products based on its patented
      technology platforms for the worldwide healthcare industry. The Company’s
      strategy is to commercialize its products through partners or distributors,
      contracting the manufacturing to third-party partners while maintaining control
      over the manufacturing process.




The
      Company's platforms include: (1) POC testing products based on QuantRx core
      intellectual property related to lateral flow techniques; (2) through
      FluoroPharma, molecular imaging agents for positron emission tomography (PET);
      (3) through our affiliate, Genomics USA, Inc., genome-based diagnostic chips;
      and (4) PAD miniform technology.




In
      April
      2007, QuantRx increased its ownership in FluoroPharma, Inc., a development-stage
      molecular imaging company, to 57.78% of outstanding capital stock, resulting
      in
      its consolidation effective April 1, 2007. The investment in FluoroPharma is
      intended to strategically expand QuantRx’s diagnostic platforms.




**Consolidated
      Results of Operations**




Net
      operating revenues for the three months ended June 30, 2008 and 2007 were
      $161,088 and $108,281, respectively. Net operating revenues for the six months
      ended June 30, 2008 and 2007 were $253,260 and $170,651, respectively. The
      increase in revenues of $52,807 and $82,609 for the three and six months ended
      June 30, 2008 compared to the three and six months ended June 30, 2007 is
      primarily due to increased revenues related to short-term research and
      development agreements. These additional revenues were offset by the absence
      of
      $20,833 and $41,666 of deferred revenue accretion recorded in the first two
      quarters of 2007 related to a distribution agreement.




26




Sales
      and
      marketing expense for the three months ended June 30, 2008 and 2007 was $39,949
      and $51,567, respectively, and for the six months ended June 30, 2008 and 2007,
      was $92,576 and $95,281, respectively. The decrease of $11,618 and $2,705 for
      the three and six months ended June 30, 2008 compared to the three and six
      months ended June 30, 2007 primarily relates to decreased travel related
      expenses.




General
      and administrative expense for the three months ended June 30, 2008 and 2007
      was
      $801,685 and $593,101 respectively, and for the six months ended June 30, 2008
      and 2007, was $1,485,329 and $1,100,528, respectively. The increase of $208,584
      for the three months ended June 30, 2008 as compared to the three months ended
      June 30, 2007 reflects an increase in personnel related expenses of $295,095,
      primarily due to increased stock based compensation expenses; partially offset
      by the absence of a minimum royalty payment of $50,000 related to a licensing
      agreement and reduced travel related expenses. The increase of $384,801 for
      the
      six months ended June 30, 2008 as compared to the six months ended June 30,
      2007
      reflects an increase in personnel related expenses of $358,766, primarily due
      to
      increased stock based compensation costs and the inclusion of our subsidiary’s
      personnel costs, and additional general and administrative expenses related
      to
      the consolidation of our subsidiary effective April 1, 2007.




Professional
      fees for the three months ended June 30, 2008 and 2007, were $235,658 and
      $949,086, respectively, and for the six months ended June 30, 2008 and 2007,
      were $558,726 and $1,254,996, respectively. Professional
      fees include the costs of legal, consulting and auditing services provided
      to
      us. The decrease of $713,428 for the three months ended June 30, 2008 as
      compared to the three months ended June 30, 2007 is primarily attributed to
      a
      decrease in consulting fees related to financial advisory and investor relations
      services of $530,470 and a decrease in legal fees of $130,907. The decrease
      of
      $696,270 for the six months ended June 30, 2008 as compared to the six months
      ended June 30, 2007 is primarily attributed to a decrease in consulting fees
      related to financial advisory and investor relations services of $646,096 and
      a
      decrease in legal fees of $103,600.




Research
      and development expense for the three
      months ended
      June 30, 2008 and 2007, was $752,477 and $722,878, respectively, and for the
      six
      months ended June 30, 2008 and 2007, was $1,229,489 and $1,002,133,
      respectively. The increase of $227,356 for the six months ended June 30, 2008
      as
      compared to the six months ended June 30, 2007 is attributed to subsidiary
      research and
      development expenses included as of April 1, 2007, the effective date of the
      consolidation.




The
      Company’s net loss for the three
      months ended
      June 30, 2008 and 2007 was $2,141,487 and $2,425,091, respectively, and for
      the
      six months ended June 30, 2008 and 2007, was $4,158,728 and $3,469,836,
      respectively. The decrease in net loss of $283,604 for the three months ended
      June 30, 2008 as compared to the three months ended June 30, 2007 is primarily
      due to decreased operating expenses of $477,754 as described above and the
      absence of a bad debt expense of $214,000, offset by an increase in interest
      expense, including amortization of debt discount and deferred finance costs,
      of
      $419,400. The increase in net loss of $688,892 for the six months ended June
      30,
      2008 as compared to the six months ended June 30, 2007 is primarily due to
      a
      $439,445 loss on extinguishment of convertible notes in the first quarter of
      2008 (see Note 9 to the financial statements); and the inclusion of additional
      expenses related to the consolidation of our subsidiary effective April 1,
      2007,
      as well as all the factors previously discussed.




27




**Liquidity
      and Capital Resources**




As
      of
      June 30, 2008, QuantRx had cash and cash equivalents of $178,895, as compared
      to
      cash and cash equivalents of $213,332 as of December 31, 2007. The net decrease
      in cash of $34,437 for the six months ended June 30, 2008, is primarily
      attributed to net cash used for operating activities of $1,564,988, offset
      by
      $992,500 in net proceeds from the issuance of 10% senior secured convertible
      notes in the first quarter of 2008, proceeds of $410,000 from the issuance
      of 8%
      senior secured promissory notes (see Note 9 to the financial statements), and
      proceeds of $169,189 from the exercise of common stock warrants. 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.




In
      the
      past, QuantRx has not generated sufficient revenues from operations to meet
      its
      operating expenses, but has been able to meet its cash needs through issuances
      of equity and the proceeds of debt instruments. While management is currently
      negotiating additional funding through a credit facility, and has been
      successful obtaining funding in the past, it is not known whether the Company
      will be successful in its current funding efforts. Additionally, the Company
      is
      limited in its ability to issue additional debt instruments, due to certain
      limitations contained in the senior secured convertible notes and related
      agreements. If the Company is unable to raise sufficient capital resources
      on
      acceptable terms, the Company’s business, results of operation, liquidity and
      financial condition would be materially and adversely harmed.




Management
      plans include funding in the third quarter of 2008 through a credit facility
      currently being negotiated, and the simultaneous settlement of all outstanding
      notes in accordance with the original terms of these agreements. Management
      is
      also focused on opportunities to increase revenues, including the consideration
      of licensing opportunities, and managing costs aggressively.




**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.




**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.




28




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.




***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.




29




*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.




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.




*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.




30




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 June 30,
      2008.




(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.




31




**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
      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. An aggregate of 241,699 common stock warrants were exercised and
      exchanged for 241,699 shares of our common stock.




On
      April
      16, 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.




On
      April
      16, 2008, the Company issued common stock 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.




At
      June
      30, 2008 the Company issued a 10% senior secured convertible note in the amount
      of $47,551 pursuant to one holder’s election to receive quarterly interest in
      the form of a paid-in-kind note. The note is currently convertible into 95,102
      shares of common stock.




In
      the
      second and third quarters of 2008, the Company issued to
      certain accredited investors an aggregate of 137,500 shares of common stock
      and
      warrants with a five-year term to purchase 137,500 shares of common stock at
      a
      per share exercise price of $0.85, in connection with the issuance of $550,000
      in 8% senior secured promissory notes. In association with these issuances,
      QuantRx issued warrants to purchase 100,000 shares of common stock at $0.85
      per
      share to the placement agent. These issuances are described in part in the
      Company’s Current Report on Form 8-K that was filed with the SEC on July 28,
      2008.




There
      were no additional sales of unregistered securities other than as reported
      in
      prior reports on Forms 10-KSB, 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
      on Senior Securities**




None.




32




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




None.




**ITEM
      5.**  **Other
      Information**




None.




**ITEM
      6.**  **Exhibits**




Exhibit
            
            Description4.1
            
            Form
                of Senior Secured Bridge Note, dated June 2008 and maturing September
                15,
                2008, issued by QuantRx in favor of lender(incorporated
                by reference to Exhibit 4.1 filed with Form 8-K on July 28,
                2008).4.2
            
            Form
                of Warrant to Purchase Shares of Common Stock of QuantRx, dated June
                2008,
                issued by QuantRx in favor of lender(incorporated
                by reference to Exhibit 4.2 filed with Form 8-K on July 28,
                2008).10.1
            
            Form
                of Bridge Letter Loan Agreement, dated June 2008, between QuantRx
                and
                lender(incorporated
                by reference to Exhibit 10.1 filed with Form 8-K on July 28,
                2008).10.2
            
            Form
                of Stock Pledge Agreement, dated June 2008, between QuantRx and lender(incorporated
                by reference to Exhibit 10.2 filed with Form 8-K on July 28,
                2008).10.3
            
            Form
                of Patent, Trademark and Copyright Security Agreement, dated June
                2008,
                between QuantRx and lender(incorporated
                by reference to Exhibit 10.3 filed with Form 8-K on July 28,
                2008).31.1
            
            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.*




33


**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:  
                August 14, 2008
            By:
            /s/
                Walter WitoshkinWalter
                WitoshkinChairman
                & CEO




Date:  
                August 14, 2008
            By:
            /s/
                Sasha AfanassievSasha
                AfanassievCFO,
                Treasurer & VP of Finance




34