QUANTRX BIOMEDICAL CORP - Quarter Report: 2013 June (Form 10-Q)

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QUANTRX BIOMEDICAL CORPORATION

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

	10190 SW 90th Avenue, Tualatin, Oregon 97123
	(Address of Principal Executive Offices) (Zip Code)
	503-575-9385
	(Registrant's Telephone Number, Including Area Code)

Large accelerated filer	[   ]	Accelerated filer	[   ]
Non-accelerated filer	[   ]	Smaller reporting company	[X]

The number of shares outstanding of the issuer’s common stock as of August 14, 2013 was 52,528,644.

 

PART I - FINANCIAL INFORMATION
		PAGE
ITEM 1.	Financial Statements	2
	Balance Sheets as of June 30, 2013 (Unaudited) and December 31, 2012	2
	Statement of Operations (unaudited) for the three and six months ended June 30, 2013 and 2012	3
	Statements of Cash Flows (Unaudited) for the six months ended June 30, 2013 and 2012	4
	Condensed Notes to (Unaudited) Financial Statements	5
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
ITEM 4.	Controls and Procedures	18
PART II - OTHER INFORMATION
ITEM 1.	Legal Proceedings	18
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	18
ITEM 3.	Defaults Upon Senior Securities	18
ITEM 4.	Reserved	18
ITEM 5.	Other Information	18
ITEM 6.	Exhibits	19
Signatures

 

 

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-K FOR THE YEAR ENDED DECEMBER 31, 2012.  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.

		June 30, 2013 (unaudited)				December 31, 2012
ASSETS
Current Assets:
Cash and cash equivalents		$	2,420			$	9,989
Accounts receivable			598				2,334
Inventories			2,306				2,564
Prepaid expenses			7,751				22,779
Note receivable			180,000				200,000
Total Current Assets			193,075				237,666
Investments			200,000				200,000
Property and equipment, net			3,833				4,380
Intangible assets, net			41,475				31,981
Total Assets		$	438,383			$	474,027
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Accounts payable		$	358,453			$	375,040
Accrued expenses			2,362				16,978
Notes payable and accrued interest, net of discounts			513,801				417,548
Total Current Liabilities			874,616				809,566
Notes payable, long-term			44,000				44,000
Total Liabilities			918,616				853,566
Commitments and Contingencies			-				-
Stockholders’ Equity (Deficit):
Series B Convertible Preferred Stock; $0.01 par value, 20,500,000 authorized shares, 20,416,228 shares issued and outstanding			204,162				204,162
Common Stock; $0.01 par value; 150,000,000 authorized; 52,528,644  shares issued and outstanding, respectively			525,286				525,286
Common Stock to be issued			121,500				82,500
Additional paid-in capital			48,130,044				48,130,044
Accumulated deficit			(49,461,225	)			(49,321,531	)
Total Stockholders’ Equity (Deficit)			(480,233	)			(379,539	)
Total Liabilities and Stockholders’ Equity (Deficit)		$	438,383			$	474,027

	Three Months Ended June 30,								Six Months Ended June 30,
		2013				2012				2013				2012
Revenue:
Revenue		$	965			$	2,304			$	4,306			$	6,819
Total Revenue			965				2,304				4,306				6,819
Costs and Operating Expenses:
Cost of goods sold (excluding depreciation and amortization)			178				21				258				219
Sales, general and administrative			53,990				51,462				70,912				70,142
Professional fees			32,944				121,965				61,045				239,868
Research and development			1,864				6,779				3,211				7,140
Amortization			1,853				1,853				3,706				3,706
Depreciation			274				4,098				548				10,027
Total Costs and Operating Expenses			91,103				186,178				139,680				331,102
Loss from Operations			(90,138)				(183,874)				(135,374)				(324,283)
Other Income (Expense):
Interest and dividend income			4,000				4,000				8,000				8,000
Interest expense			(13,437)				(4,642)				(31,963)				(9,006)
Gain on exchange of equity investment			10,908				-				40,953				-
Other financing costs			(22,961)				-				(27,753)				-
Amortization of debt discount to interest expense			-				(33,626)				(2,407)				(99,485)
Gain on settlement of accounts payable			16,850				-				16,850				17,515
Loss on Impairment			(4,000)				-				(8,000	)			-
Total Other Income (Expense), net			(8,640)				(34,268)				(4,320)				(82,976)
Loss Before Taxes			(98,778)				(218,142	)			(139,694)				(407,259	)
Provision for Income Taxes			-				-				-				-
Net Loss		$	(98,778)			$	(218,142)			$	(139,694)			$	(407,259)
Basic and Diluted Net Loss per Common Share		$	(0.00)			$	(0.00)			$	(0.00)			$	(0.01)
Basic and Diluted Weighted Average Shares Used in per Share Calculation			52,528,644				49,297,423				52,528,644				48,804,484

		Six Months Ended
		June 30, 2013				June 30, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(139,694	)		$	(407,259	)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization			4,253				13,733
Interest expense related to amortization of non-cash discount, non-cash beneficial conversion feature and deferred financing costs			30,160				48,987
Non-cash gain on exchange of equity investment			(40,953)
Non-cash expenses related to common stock warrants issued for consulting			-				74,122
Non-cash fair value of common stock issued as compensation			30,000				27,000
Non-cash fair value of common stock issued with notes payable			-				72,753
Net Gain on settlement of accounts payable			(16,850	)			(18,690	)
(Increase) Decrease in:
Accounts receivable			1,736				1,858
Escrow receivable			-				(5,375	)
Interest receivable			(8,000)				(8,000	)
Loss on impairment			8,000				-
Inventories			258				219
Prepaid expenses			15,028				12,777
Increase (decrease) in:
Accounts payable			9,264				61,324
Accrued interest and expenses			15,229				(14,388	)
Net Cash Used by Operating Activities			(91,569	)			(140,939	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for capital equipment			-				(5,475	)
Payments received on note receivable			20,000				-
Net Cash Provided (Used) by Investing Activities			20,000				(5,475	)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash provided by Notes Payable			64,000				140,000
Net Cash Provided from financing activities			64,000				140,000
Net Increase (Decrease) in Cash and Cash Equivalents			(7,569)				(6,414	)
Cash and Cash Equivalents, Beginning of Period			9,989				7,565
Cash and Cash Equivalents, End of Period		$	2,420			$	1,150
Supplemental Cash Flow Disclosures:
Interest expense paid in cash		$	-			$	-
Income tax paid		$	-			$	-
NON CASH INVESTING & FINANCING ACTIVITIES:
Shares issued for accounts payable		$	9,000			$	-
Fair value of warrants issued as compensation		$	-

Settlement of GUSA Note Receivable and Litigation.  On May 24, 2013, the Company and Genomics USA, Inc. ("GUSA") settled the Company’s complaint filed against GUSA seeking to recover all amounts due the Company under the terms of a promissory note in the principal amount of $200,000 (the "GUSA Note").  The Complaint was filed in the Supreme Court of the State of New York, and sought repayment of all amounts due under the terms of the GUSA Note, and accrued interest thereon, plus attorney's fees.   The settlement agreement entered into by the parties provides for the payment to the Company of $200,000, of which $20,000 was paid on June 7, 2013, and $10,000 per month shall be paid on the 7th day of each consecutive month thereafter for a total of 18 months.

 

 

 

		Warrants Held			Recognized Gain/(Loss)
Balance as of December 31, 2012			373,917		115,752
Warrants issued in connection with notes payable during the six months ended June 30, 2013			64,000		27,753
Balance as of June 30, 2013			309,917		143,505

 

		June 30, 2013				December 31, 2012
Licensed patents and patent rights		$	63,200			$	50,000
Patents			41,004				41,004
Less: accumulated amortization			(62,730)				(59,024	)
Intangibles, net		$	41,474			$	31,980

 

 

Prepaid expenses:		June 30, 2013				December 31, 2012
Prepaid insurance		$	7,751			$	22,779
Prepaid expenses		$	7,751			$	22,779
Property and equipment:
Computers and office furniture, fixtures and equipment		$	28,031			$	28,031
Machinery and equipment			5,475				5,475
Less: accumulated depreciation			(29,673	)			(29,127	)
Property and equipment, net		$	3,833			$	4,380
Accrued expenses:
Professional fees		$	2,362				16,978
Accrued expenses		$	2,362				16,978

The Company has authorized 25,000,000 shares of preferred stock, of which 20,500,000 is designated as Series B Convertible Preferred Stock, $0.01 par value, with a stated value of approximately $204,000 (“Series B Preferred”).  The remaining 4,500,000 authorized preferred shares have not been designated by the Company as of June 30, 2013.

 

 

 

 

	●	obtain adequate sources of funding to pay operating expenses and fund long-term business operations;
	●	enter into a licensing or other relationship that allows the Company to commercialize its products;
	●	manage or control working capital requirements by reducing operating expenses; and
	●	develop new and enhance existing relationships with product distributors and other points of distribution for the Company’s products.

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.

 

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 3 of the attached financial statements.

 

We recognize deferred tax assets and liabilities based on differences between the financial statement carrying amounts and tax bases of assets and liabilities, which requires management to perform estimates of future transactions and their respective valuations. We review our deferred tax assets for recoverability and establish a valuation allowance if it is more likely than not that the Company will not realize the benefit of the net deferred tax asset. At December 31, 2012 and 2011, a valuation allowance has been established. The likelihood of a material change in the valuation allowance depends on our ability to generate sufficient future taxable income. In the future, if management determines that the likelihood exists to utilize the Company’s deferred tax assets, a reduction of the valuation allowance could materially increase the Company’s net deferred tax asset.

 

 

Exhibit		Description
31		Certification of Chief Executive Officer and Principal Financial and Accounting Officer required under Rule 13a-14(a) or Rule 15d-14(a) of the Securities and Exchange Act of 1934, as amended.
32*		Certification of Chief Executive Officer and Principal Financial and Accounting 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.
101.INS**		XBRL Instance Document
101.SCH**		XBRL Taxonomy Extension Schema
101.CAL**		XBRL Taxonomy Extension Calculation Linkbase
101.DEF**		XBRL Taxonomy Extension Definition Linkbase
101.LAB**		XBRL Taxonomy Extension Label Linkbase
101.PRE**		XBRL Taxonomy Extension Presentation Linkbase

 

Date:  August 14, 2013	/s/ Shalom Hirschman
	Shalom Hirschman Principal Executive, Financial and Accounting Officer