10QSB

U.S. Securities and Exchange Commission

Washington, D.C. 20549

———————

Form 10-QSB

———————

(Mark One)

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2007

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to ________________

———————

Power3 Medical Products, Inc.

(Exact name of small business issuer as specified in its charter)

New York	000-24921	65-0565144
(State or other jurisdiction of incorporation or organization)	Commission File No.	(I.R.S. Employer Identification No.)

3400 Research Forest Drive, Suite B2-3

Woodlands, Texas 77381

(Address of principal executive offices)

(281) 466-1600

(Issuer’s telephone number)

———————

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No ý

As of November 14, 2007 there were 103,565,765 shares of voting common stock of the registrant issued and outstanding.

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

Transitional Small Business Disclosure Format (check one): Yes ¨ No ý

INDEX

PART I. FINANCIAL INFORMATION

PART II. OTHER INFORMATION

Signatures

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

POWER3 MEDICAL PRODUCTS, INC.

(A Development Stage Enterprise)

BALANCE SHEETS

September 30, 2007 and December 31, 2006

(unaudited)

ASSETS	September 30, 2007			December 31, 2006
CURRENT ASSETS
Cash and Cash Equivalents	$	184,878		$	40,602
All Other Current Assets		900			—
TOTAL CURRENT ASSETS		185,778			40,602
NON-CURRENT ASSETS
Furniture, Fixtures and Equipment, net of depreciation of $98,528 at September 30, 2007 and $96,796 at December 31, 2006 respectively		5,146			16,374
Intellectual Property		179,788			179,788
Deferred Finance Costs, net of amortization of $137,638 at September 30, 2007 and $50,813 at December 31, 2006 respectively		166,511			253,334
Deposits		19,508			5,900
TOTAL ASSETS	$	556,731		$	495,998
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES
Accounts Payable	$	970,948		$	899,177
Notes Payable – in default, net of amortization of $0 and $89,178 at September 30, 2007 and December 31, 2006 respectively		601,000			777,822
Notes Payable to Related Parties		1,784,816			1,428,346
Convertible Debentures-in default		423,386			360,417
Other Current Liabilities		1,017,744			1,517,808
Derivative Liabilities		3,720,990			1,281,348
TOTAL LIABILITIES	$	8,518,884		$	6,264,918
STOCKHOLDER'S DEFICIT
Preferred Stock - $0.01 par value 50,000,000 shares of preferred stock authorized none issued or outstanding		—			—
Common Stock-$0.001 par value: 150,000,000 shares authorized; 102,742,095 and 71,370,955 shares issued and outstanding as of September 30, 2007 and December 31, 2006 respectively.		102,741			71,370
Additional Paid-In Capital		60,831,214			58,009,358
Deficit Accumulated Before Entering Development Stage		(11,681,500	)		(11,681,500	)
Deficit Accumulated During Development Stage		(57,214,608	)		(52,168,148	)
Total Stockholders’ Deficit		(7,962,153	)		(5,768,920	)
TOTAL LIABILITIES AND STOCKHOLDER’S DEFICIT	$	556,731		$	495,998

The accompanying notes are an integral part of these financial statements

1

POWER3 MEDICAL PRODUCTS, INC.

(A Development Stage Enterprise)

STATEMENTS OF OPERATIONS

(unaudited)

	For the Three Month Period Ended September 30,						For the Nine Month Period Ended September 30,						Period from May 18, 2004 to September 30, 2007
	2007			2006			2007			2006
REVENUES:
Sales	$	—		$	125,000		$	121,724		$	225,000		$	425,724
OPERATING EXPENSES:
Employee compensation and benefits		341,146			318,960			927,709			5,794,668			29,260,204
Professional and consulting fees		169,112			10,145			550,896			367,017			9,168,472
Impairment of goodwill		—			—			—			—			13,371,776
Occupancy and equipment		53,654			32,691			128,036			92,902			518,360
Travel and entertainment		26,797			18,116			87,542			55,014			316,039
Write off lease		—			—			—			—			34,243
Other selling, general and administrative expenses		10,158			15,634			99,881			82,268			387,804
TOTAL OPERATING EXPENSES		600,867		$	395,546			1,794,064			6,391,869			53,056,898
Operating Loss		(600,867	)		(270,546	)		(1,672,340	)		(6,166,869	)		(52,631,174	)
OTHER INCOME AND (EXPENSE):
Derivative gain/(loss)	$	2,169,466		$	16,903		$	(1,639,641	)	$	(127,940	)	$	2,681,178
Interest income		1,533			127			4,645			127			6,911
Mandatory prepayment penalty		230,900			—			230,900			—			(189,100	)
Other income (expense)		531,062			(1,800	)		—			(1,800	)		(196,176	)
Loss on conversion of financial instruments		(442,373	)		—			(840,244	)		—			(840,244	)
Interest expense		(48,244	)		(192,679	)		(1,129,780	)		(1,017,638	)		(2,665,030	)
Total other income(expense)		2,442,344			(177,449	)		(3,374,120	)		(1,147,251	)		(1,202,461	)
NET INCOME (LOSS)	$	1,841,477		$	(477,995	)	$	(5,046,460	)	$	(7,314,120	)	$	(53,833,635	)
NET INCOME (LOSS) PER SHARE BASIC AND DILUTED	$	0.02		$	(0.00	)	$	(0.06	)	$	(0.10	)
Weighted average number of shares outstanding		97,933,533			71,995,230			84,773,848			69,976,611

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

2

POWER3 MEDICAL PRODUCTS, INC.

(A Development Stage Enterprise)

STATEMENT OF STOCKHOLDERS' DEFICIT

FROM INCEPTION TO SEPTEMBER 30, 2007

	Common Stock						Preferred Stock						Additional Paid In Capital			Deferred Compensation Expense			Retained Earnings			Equity
	Shares			Par Value			Shares			Par Value
Balances as of beginning of development stage May 17, 2004		14,407,630		$	14,407			3,870,000		$	3,870		$	14,225,974		$	—		$	(11,681,500	)	$	2,382,751
Issued shares on May 18, 2004 for compensation		27,805,000			27,805									24,996,695			(25,024,500	)
Issued shares on May 18, 2004 for services		4,550,000			4,550									4,090,450									4,095,000
Issued shares on May 18, 2004 for acquisition of equipment		15,000,000			15,000									13,485,000									13,500,000
Issued shares on June 1, 2004 for services		125,000			125									249,875			(250,000	)
Issued shares on June 11, 2004 for services		100,000			100									211,900									212,000
Stock Option Expense														626,100			(626,100	)
Issued shares on July 1, 2004 for compensation		140,000			140									426,860			(427,000	)
Issues shares on July 23, 2004 for services		125,000			125									284,875			(285,000	)
Issued shares on November 10, 2004 for cash		242,167			242									314,575									314,817
Issued shares on November 10, 2004 for services		10,000			10									12,990									13,000
Cancelled shares November 15, 2004 per cancellation of agreement		(160,000	)		(160	)								(71,840	)								(72,000	)
Issued shares on November 17, 2004 to convert Series A Preferred Shares to common shares		1,031,316			1,031			(1,331,280	)		(1,330	)		1,391,246						(1,392,277	)		(1,330	)
Issued shares on November 23, 2004 to convert Series A Preferred shares to common shares		1,969,008			1,970			(2,538,720	)		(2,540	)		1,986,728						(1,988,698	)		(2,540	)
Stock based compensation																	8,311,012						8,311,012
Net reclassification of derivative liabilities														(3,347,077	)								(3,347,077	)
Net Loss (from May 18, 2004 to December 31, 2004)																			(15,236,339	)		(15,056,339	)
Balances, December 31, 2004		65,345,121		$	65,345			—		$	—		$	58,884,351		$	(18,301,588	)	$	(30,298,814	)	$	10,349,294
Cancelled Shares from July 1, 2004 (returned from employee)		(140,000	)		(140	)								(426,860	)								(427,000	)
Issued Shares on September 14, 2005 for compensation		140,000			140									41,860									42,000
Issued Shares on October 31, 2005 for services		300,000			300									65,700									66,000
Issued Shares on November 11, 2005 for services		250,000			250									44,750									45,000
Issued Shares on December 6, 2005 for services		300,000			300									44,700									45,000
Cancelled Shares on December 31, 2005 (returned from employee)		(975,000	)		(975	)								(876,500	)								(877,475	)
Cancelled Shares on December 31, 2005 (returned from employee)		(5,000	)		(5	)								(4,495	)								(4,500	)
Amortize Deferred Comp Expense																	13,222,517						13,222,517
Net Loss For Year																			(27,134,865	)		(27,134,865	)
Balances, December 31, 2005 (restated)		65,215,121		$	65,215			—		$	—		$	57,773,506		$	(5,079,071	)	$	(57,433,679	)	$	(4,674,029	)

3

POWER3 MEDICAL PRODUCTS, INC.

(A Development Stage Enterprise)

STATEMENT OF STOCKHOLDERS' DEFICIT (CONTINUED)

FROM INCEPTION TO SEPTEMBER 30, 2007

	Common Stock					Preferred Stock				Additional Paid In Capital			Deferred Compensation Expense			Retained Earnings			Equity
	Shares			Par Value		Shares		Par Value
Balances, December 31, 2005 (restated)		65,215,121		$	65,215		—	$	—	$	57,773,506		$	(5,079,071	)	$	(57,433,679	)	$	(4,674,029	)
Issued Shares on January 6, 2006 for services		50,000			50						5700									5,750
Issued Shares on January 6, 2006 for cash		500000			500						57000									57,500
Issued Shares on January 13, 2006 for services		220,000			220						28,380									28,600
Issued Shares on January 27, 2006 for compensation		451,677			452						49,233									49,685
Issued Shares on February 3, 2006 for compensation		413,234			413						40,910									41,323
Issued Shares on February 3, 2006 for cash		1,114,286			1,114						81,386									82,500
Issued Shares on February 3, 2006 for services		297,843			297						29,488									29,785
Issued Shares on February 14, 2006 for compensation		201,539			202						38,091									38,293
Issued Shares on February  22, 2006 for services		150,000			150						34,350									34,500
Issued Shares on March 8, 2006 for cash		400,000			400						39,600									40,000
Issued Shares on March 9, 2006 for cash		400,000			400						39,600									40,000
Issued Shares on March 23, 2006 for services		300,000			300						80,700									81,000
Issued Shares on March 24, 2006 for compensation		186,648			187						48,529									48,716
Issued Shares on May 9, 2006 for services		60,000			60						9,240									9,300
Issued Shares on May 25, 2006 for services		172,147			172						22,207									22,379
Issued Shares on June 8, 2006 for cash		38,460			38						4,962									5,000
Issued Shares on June 16, 2006 for services		300,000			300						32,700									33,000
Issued Shares on September 15, 2006 for services		400,000			400						39,600									40,000
Issue Shares on October 31, 2006 for services		500,000			500						29,500									30,000
Adoption of 123R											(475,324	)		475,324
Amortize Deferred Comp Expense														4,603,747						4,603,747
Net Loss For Year																(6,415,969	)		(6,415,969	)
Balances, December 31, 2006		71,370,955	$		71,370		—	$	—	$	58,009,358		$	—		$	(63,849,648	)	$	(5,768,920	)

4

POWER3 MEDICAL PRODUCTS, INC.

(A Development Stage Enterprise)

STATEMENT OF STOCKHOLDERS' DEFICIT (CONTINUED)

FROM INCEPTION TO SEPTEMBER 30, 2007

	Common Stock				Preferred Stock				Additional Paid In Capital		Deferred Compensation Expense		Retained Earnings			Equity
	Shares		Par Value		Shares		Par Value
Balances, December 31, 2006		71,370,955	$	71,370		—	$	—	$	58,009,358	$	—	$	(63,849,648	)	$	(5,768,920	)
Issue Shares on January 2, 2007 for services		100,000		100						7,300							7,400
Issue Shares on January 23, 2007 for conversion		1,000,000		1,000						59,000							60,000
Issue Shares on January 30, 2007 for services		500,000		500						42,000							42,500
Issue Shares on March 14, 2007 for conversion		3,000,000		3,000						247,000							250,000
Issue Shares on April 13, 2007 for services		160,000		160						35,040							35,200
Issue Shares on April 13, 2007 for services		300,000		300						65,700							66,000
Issue Shares on April 30, 2007 for conversion		713,708		714						99,286							100,000
Issue Shares on May 11, 2007 for conversion		157,895		158						29,842							30,000
Issued Shares on May 16, 2007 for warrants exercised		833,333		834						66,666							67,500
Issue Shares on May 16, 2007 for conversion		833,333		833						49,167							50,000
Issue Shares on May 16, 2007 for conversion		713,708		714						49,286							50,000
Issue Shares on May 16, 2007 for conversion		4,127,000		4,127						235,873							240,000
Issue Shares on May 16, 2007 for conversion		359,595		360						49,640							50,000
Issue Shares on May 16, 2007 for conversion		178,427		178						24,822							25,000
Issue Shares on May 17, 2007 for conversion		11,970		12						1,665							1,677
Issue Shares on May 17, 2007 for conversion		71,370		71						9,929							10,000
Issue Shares on June 1, 2007 for conversion		200,000		200						11,800							12,000
Issue Shares on June 7, 2007 for conversion		5,900,231		5,900						334,100							340,000
Issue Shares on June 13, 2007 for services		400,000		400						79,600							80,000
Issued Shares on June 13, 2007 for cash		1,750,000		1,750						268,250							270,000
Issued Shares on June 13, 2007 for cash		1,500,000		1,500						320,000							321,500
Stock received from Subsidiary										100							100
Adjust December 31, 2005 canceled shares (returned from employee) Shares were not returned		5,000		5						4,495							4,500
Issue Shares on August 3, 2007 for conversion		3,529,412		3,529						391,374							394,903
Issue Shares on August 3, 2007 for conversion		263,889		264						29,262							29,526
Issue Shares on August 23, 2007 for conversion		174,035		174						10,268							10,442
Issue Shares on August 23, 2007 for conversion		588,235		588						46,738							47,326
Issue Shares on September 7, 2007 for conversion		3,999.999		4,000						253,653							257,653
Net Loss Period Ended September 30, 2007													(5,046,460	)		(5,046,460	)
Balances as of September 30, 2007		102,742,095	$	102,741		—	$	—	$	60,831,214	$	—	$	(68,896,108	)	$	(7,962,153	)

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

5

POWER3 MEDICAL PRODUCTS, INC.

(A Development Stage Enterprise)

STATEMENTS OF CASH FLOWS

(unaudited)

	For the nine Months Ended September 30, 2007			For the nine Months Ended September 30, 2006			Period from May 18, 2004 to September 30, 2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(5,046,460	)	$	(7,314,120	)	$	(53,833,635	)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on conversion of financial instruments		840,244			—			840,244
Prepayment penalty		(230,900	)		—			(230,900	)
Impairment of goodwill		—			—			13,371,776
Loss on previously capitalized lease		—			—			34,243
Amortization of debt discounts and deferred finance cost		817,211			325,379			1,231,665
Change in fair value of derivatives		2,439,642			127,940			(727,277	)
Decrease in deposits		—			20,000			—
Decrease in deferred finance cost		—			22,648			—
Stock issued for services and compensation		235,600			4,810,872			32,602,945
Depreciation expense		13,212			20,463			98,528
Other non cash items		—			—			(34,933	)
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(14,508	)		—			194,274
Accounts payable and accrued expenses		(718,310	)		246,331			1,487,716
CASH USED IN OPERATING ACTIVITIES		(1,664,269	)		(1,740,487	)		(4,965,354	)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures, net		—			(1,400	)		(135,933	)
Cash paid for purchase of fixed assets		(1,984	)		—			(1,984	)
Increase in other assets.		—			(13,188	)		(179,786	)
CASH USED IN INVESTING ACTIVITIES		(1,984	)		(14,588	)		(317,703	)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on debt		905,376			1,388,792			3,058,806
Cash received for the exercise of warrants		325,153			—			325,153
Proceeds from sale of stock		591,500			423,929			1,266,317
Principal payments on notes payable – related parties		(11,500	)		—			(11,500	)
Principal payments on long term debt		—			—			(32,478	)
Proceeds from CD, warrants and rights net of issuance cost		—			—			859,041
CASH PROVIDED BY FINANCING ACTIVITIES		1,810,529			1,812,721			5,465,339
NET INCREASE IN CASH		144,276			57,646			182,282
CASH AT BEGINNING OF YEAR		40,602			1,399			2,596
CASH AT YEAR END	$	184,878		$	59,045		$	184,878

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

6

POWER3 MEDICAL PRODUCTS, INC.

(A Development Stage Enterprise)

STATEMENTS OF CASH FLOWS (Continued)

(unaudited)

	For the nine Months Ended September 30, 2007		For the nine Months Ended September 30, 2006		Period from May 18, 2004 to September 30, 2007
Supplemental disclosures of cash flow information
Cash paid for:
Interest		—		—		59,840
Income taxes		—		—		—
Non-cash transactions:
Common stock issued for:
Conversion of notes payable to amounts due to stockholders	$	—	$	1,181,403	$	6,697
For consulting, contracts and services		—		284,314		—
For compensation, contracts and to employees		—		176,965		—
Warrants in connection with services		—		65,000		—
Warrants in connection with notes payable		—		355,000		—
Exchange of convertible notes for stock		1,119,110		—		2,295,998
Exchange of convertible preferred stock for common stock		—		—		3,380,975
Restatement of notes payable to notes payable related parties		—		—		1,393,346

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

7

POWER3 MEDICAL PRODUCTS, INC.

(A Development Stage Enterprise)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. BASIS OF PRESENTATION

The accompanying financial statements of Power3 Medical Products, Inc. (“Power3”or the “Company”) at September 30, 2007 have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in conformity with generally accepted accounting principles have been omitted or condensed pursuant to such rules and regulations. These statements should be read in conjunction with Power3’s Form 10-KSB for the year ended December 31, 2006. In management’s opinion, these interim financial statements reflect all adjustments (consisting of normal and recurring adjustments) necessary for a fair presentation of the financial position and for the quarter ended September 30, 2007 are not necessarily indicative of the results which can be expected for the entire year.

Net Loss Per Share

Basic and diluted net loss per share calculations are calculated on the basis of the weighted average number of common shares outstanding during the year. The per share amounts include the dilutive effect of common stock equivalents in years with net income. Power3 had losses in September 2007 and 2006. Basic and diluted loss per share is the same as the effect of our potential common stock equivalents would be anti dilutive.

NOTE 2. GOING CONCERN

As shown in the accompanying financial statements, Power3 incurred net losses chargeable to common shareholders of $5,046,460 for the nine months ended September 30, 2007 and has an accumulated deficit of $7,962,153 as of September 30, 2007. These conditions create an uncertainty as to Power3's ability to continue as a going concern.

Management is trying to raise additional capital through various funding arrangements. The financial statements did not include any adjustment that might be necessary if Power3 is unable to continue as a going concern.

NOTE 3. FINANCING ARRANGEMENTS

Securities Purchase Agreement—Convertible Debentures

The Company entered into a Securities Purchase Agreement, dated October 28, 2004 (the “Agreement”) with certain accredited investors (the “Purchasers”). Pursuant to the Agreement, the Purchasers agreed to purchase convertible debentures due three (3) years from the date of issuance in the aggregate principal amount of $3,000,000. The Agreement also provides warrants to purchase shares of the Company's common stock and additional investment rights to purchase additional convertible debentures. In connection with the Agreement, the Company also entered into a Registration Rights Agreement with the Purchasers that requires the Company to (i) file a registration statement with the SEC registering the resale of the shares of common stock issuable upon conversion of the debentures and the exercise of the warrants, (ii) achieve effectiveness within a stated period and (iii) maintain effectiveness of the registration statement. Failure to meet these requirements will require the Company to incur liquidating damages amounting to 2.0% for each month.

On October 28, 2004, the Company issued the Purchasers the first $1,000,000 in aggregate principal amount of such debentures at the initial closing under the Agreement. Effective January 26, 2005, the Company issued and sold, to a sub-group of the original investors, a second tranche of $400,000 aggregate principal amount of debentures. Subject to the conditions set forth in the Agreement, all purchasers are required to purchase the remaining $1,600,000 in aggregate principal amount of such debentures at the final closing, which is to occur on or before the fifth trading day after the effective date of the registration statement. The Company is currently in default under the Agreement and the previously issued debentures and related registration rights agreement, and therefore the conditions of the Agreement will not be satisfied or otherwise met on a timely basis. Consequently, there are no assurances that the Purchasers will purchase all or any por tion of the remaining $1,600,000 aggregate principal amount of debentures. The $1,400,000 aggregate principal amount of debentures that were issued October 28, 2004 and January 26, 2005 are due and payable in accordance with their original terms in full three years after the date of issuance and bear

8

interest at a default rate of 18%. The debentures are convertible into shares of common stock at the following conversion price, which varies relative to the Company’s trading stock price, as follows: $0.90 per share, provided however if the lesser of (i) 75% of the average of the 5 consecutive Closing Prices immediately prior to the Effective Date, as defined in the Securities Purchase Agreement, and (ii) the Closing Price on the Effective Date (the lesser of (i) and (ii) being referred to as the “Effective Date Price”) is less than the Conversion Price, the Conversion Price shall be reduced to equal the Effective Date Price.

Under the Agreements, the Purchasers also received warrants to purchase an aggregate of up to 2,500,000 and 333,333 shares of common stock for tranche one and two, respectively, and additional investment rights to purchase up to an additional $2,500,000 of convertible debentures. The warrants are exercisable at a price of $1.44 per share, subject to adjustment, including under anti-dilution protection. The additional investment rights are exercisable at a price equal to the principal amount of the debentures to be purchased, for (1) a period of nine months following the effective date of the registration statement to be filed pursuant to the Registration Rights Agreement, or (2) a period of 18 months from the date of issuance of the additional investment rights, whichever is shorter. The rights debentures will have the same terms as the debentures described above, except that the conversion price will be equal to $1.08.

The Company is in default under the provisions of the Agreement, Registration Rights Agreement and previously issued debentures. The aggregate amount payable upon an acceleration by reason of an event of default is equal to the greater of 130% of the principal amount of the debentures to be prepaid or the principal amount of the debentures to be prepaid, divided by the conversion price on the date specified in the debenture, multiplied by the closing price on the date set forth in the debenture. As a result of this default Power3 recorded $420,000 during the 12 month period ended December 31, 2005 in penalties as described above.

As of September 30, 2007, the Company has settled $916,667 out of the $1,400,000 Convertible Debentures mentioned above resulting in a balance of $332,378. As a result of negotiations with the purchasers the default penalty has been reduced to $145,000 as of September 30, 2007.

On April 3, 2007, the Company entered into a joint venture agreement with NeoGenomics to form a Contract Research Organization (CRO) and collaborate on research work in the future. In addition, NeoGenomics agreed to purchase a convertible debenture for $200,000 and acquired options to purchase common stock of the Company during 2007. Under the terms of the Agreement, Power3 agrees to issue, and NeoGenomics agrees to purchase, a convertible debenture in the principal amount of $200,000. The convertible debenture will be convertible into common shares of the Company at $.20 per share; however the conversion price can be reset at any time and from time to time, in accordance with paragraphs 7 and 9 of the Agreement. The debenture shall accrue interest at 6% per annum, payable quarterly, and the principal amount of the debenture shall be due and payable two years after closing.

Further, in consideration of NeoGenomics, Inc.’s commitment to purchase the debenture and form the joint venture, Power3 grants NeoGenomics, Inc. an irrevocable option (the “Second Option”) to purchase, in one or a series of transactions, voting convertible preferred stock that is convertible into such number of shares of common shares of the Company as is necessary to increase NeoGenomics, Inc.’s ownership of the voting common stock of Power3, up to 60% of Power3’s voting common stock, after taking into consideration all outstanding First Option Preferred Stock and Second Option Preferred Stock, on an as-converted basis.

Power 3 has converted several notes and plans to continue doing so. In some instances Power 3 has offered terms of conversion greater than the original agreement including lowering the strike price of warrants attached to these instruments. As a result of this additional consideration, upon conversion the Company has recorded $840,244 of loss on the conversion of notes during the nine month period ended September 30, 2007.

As a result of the above notes, Power3 has determined that the conversion feature of the secured convertible debentures and the warrants issued with the secured convertible debentures are embedded derivative instruments pursuant to SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended. Under the provisions of EITF Issue No. 00−19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock, the accounting treatment of these derivative financial instruments requires that the Company record the derivatives at their fair values as of the inception date of the note agreements and at fair value as of each subsequent balance sheet date as a liability. Any change in fair value is recorded as non-operating, non-cash income or expense at each balance sheet date. The Company estimates fair value of warrants using the

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Black-Scholes option pricing model and the conversion feature of their notes using the binomial lattice model. The estimates inherent within these models directly affect the reported amounts of the derivative instrument liabilities.

Convertible Debentures, Warrants and Additional Investment Rights:

The carrying values of the Company’s convertible debentures amounted to $423,386 and $360,417, at September 30, 2007 and December 31, 2006, respectively.

The following tabular presentation reflects the components of derivative financial instruments on the Company’s balance sheet at September 30, 2007 and December 31, 2006:

Derivative Liabilities:	September 30, 2007		December 31, 2006
Common stock warrants	$	2,564,561	$	875,783
Embedded conversion feature		373,088		186,480
Additional investment rights		434,605		183,056
Other derivative instruments		348,736		36,029
	$	3,720,990	$	1,281,348

The fair values of certain other derivative financial instruments (warrants) that existed at the time of the initial Debenture Financing were re-classed from stockholders’ equity to liabilities when, in connection with the Debenture Financing, the Company no longer controlled its ability to share-settle these instruments.

Other Notes, Preferred Stock and Warrants:

During November and December 2005, the Company issued $300,000 (2 tranches of $150,000) face value, 11% notes and detachable warrants to purchase 2,000,000 shares of common stock to Trinity Financing Investments Corporation. The warrants have eight-year terms and strike prices of $0.25 for 1,000,000 shares and $0.14 for 1,000,000 shares.

The proceeds from the Trinity financing were allocated first to the warrants, based upon their fair values, with the balance of $103,100 allocated to the notes. The allocation of proceeds to the fair value to the warrants was performed because, as discussed in the previous section, share settlement is not within management’s control. Such amount was initially classified as a derivative liability. The resulting note discount is being amortized through periodic charges to interest expense using the effective method over the life of the notes. Amortization of note discount amounted to $68,499 and $60,522 during the year ended December 31, 2006 and nine month period ended September 30, 2007, respectively. The Company did not make its required debt service payments in March and April 2006. The first Trinity note was paid off during 2006 completely; however the second Trinity note is in default and is still outstanding and payable.

The Company is required to accrue interest on the Trinity Financing note at a rate of 24%. The unamortized discount was $0 at September 30, 2007. On October 3, 2007 a settlement agreement was reached with Trinity. The agreement states that Trinity is to retain 1,300,000 shares from which the legend will be removed. The shares are to be sold in payment of the outstanding debt. If the sale of the 1,300,000 shares yields less than $150,000, Power3 is to pay the difference in cash. The value of the shares are in excess of the amount owed, therefore Power3 has not accrued any additional liability.

Other derivative financial instruments consist of various warrants that were issued prior to and subsequent to the debenture financing and were reclassified from stockholders’ equity or initially accounted as liabilities, at fair values, since share-settlement was not within the Company’s control after the debenture financing.

Notes Payable in Default and to Related Parties

During 2005, the Company received bridge loans in the principal amounts of $251,000, $200,000, $150,000, $150,000 and $446,500 from entities outside the Company. These loans were used for working capital purposes during 2005.

In addition, during 2005, certain holders of bridge loans began selling personally-owned shares they had received as collateral for their loans to the Company, from Steve Rash and Ira Goldknopf. The results of these sales were that the Company became indebted to Steven B. Rash, CEO of Power3, in the amount $55,000 during 2005 and to Ira

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Goldknopf, Director of Proteomics of the Company, in the amount of $102,000. In addition, an officer of the Company at the time also loaned the Company $35,000 as a short-term bridge loan. These loans, together, totaled $192,000 from related parties during the year ended December 31, 2005.

During January and February, 2006, the Company received an aggregate of $89,400 from a consulting firm in the form of short-term bridge loans. The loans were collateralized by pledged stock. The pledged stock was pledged by officers of the Company and later sold by the consulting firm to pay back the short-term bridge loans.

On March 28, 2006, the Company received a bridge loan in the amount of $400,000, which, after discounts and fees, amounted to a net amount of $300,000. This bridge loan was payable on the sooner of June 28, 2006 or the fifth day following the effective date of the Company’s proposed registration statement on Form SB-2. The note was secured by a Stock Pledge Agreement wherein Steven B. Rash, Chairman and CEO of the Company and Dr. Ira Goldknopf, Director of Proteomics of the Company, pledged personally-owned shares of the Company’s stock. This note was paid off during 2006 by sale of pledged shares by the note holder and is no longer due and payable to the lender.

On June 1, 2006, the Company received a bridge loan in the amount of $266,000, which, after discounts and fees, amounted to a net amount of $200,000. This bridge loan was payable on the sooner of August 12, 2006, or the fifth day following the effective date of the Company’s proposed registration statement on Form SB-2. The note was secured by a Stock Pledge Agreement wherein Steven B. Rash, Chairman and CEO of the Company, and Dr. Ira Goldknopf, Director of Proteomics of the Company, pledged personally-owned shares of the Company’s stock. This note was in default as of December 31, 2006. However, in February, 2007, this note was paid off by sale of pledged shares and a transfer of the remaining principal balance to a new note holder.

During 2006, the payoff of Company notes payable from the sale of personally pledged shares, resulted in the Company entering into Notes Payable with Steven B. Rash, Chairman and CEO of the Company and Dr. Ira Goldknopf, Director of Proteomics of the Company, in the amount of $517,166 and $522,949 respectively. At the end of the year 2006, the total Notes Payable due Mr. Rash for all such transactions were $608,342 and the total Notes Payable due Dr. Goldknopf for such transactions were $785,004. These notes, along with the note payable to Mike Rosinski in the amount of $35,000, brings the total Notes Payable to related parties, as of December 31, 2006, to $1,428,346.

As of September 30, 2007, the total notes Payable due Mr. Rash for all such transactions were $924,456 and the total Notes Payable due Dr. Goldknopf for such transactions were $825,360. These notes, along with the note payable to Mike Rosinski in the amount of $35,000, brings the total Notes Payable to related parties, as of September 30, 2007, to $1,784,816 as follows:

	As of September 30, 2007			As of December 31, 2006
Notes payable in default:
Cordillera I	$	251,000		$	251,000
Cordillera II	$	200,000		$	200,000
Trinity	$	155,500		$	155,500
Discount on Trinity Note	$	(25,663	)	$	(94,678	)
Fife				$	266,000
Totals	$	580,837		$	777,822
Notes payable - related parties:
Rash	$	91,176		$	91,176
Goldknopf	$	261,231		$	261,231
Rosinski	$	35,000		$	35,000
Rash	$	499,866		$	517,166
Goldknopf	$	523,773		$	523,773
Rash	$	333,414
Goldknopf	$	40,356
Totals	$	1,784,816		$	1,428,346

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NOTE 4. OTHER SIGNIFICANT EQUITY TRANSACTIONS

Sales of common stock during the nine month period ended September 30, 2007:

On June 13, 2007, 1,750,000 shares of common stock were sold to private investors to raise $300,000. There were no warrants associated with this transaction.

On June 13, 2007, 1,500,000 shares of common stock were sold to private investors to raise $350,000. There were no warrants associated with this transaction.

On June 13, 2007, $58,500 was paid to placement agents in connection with the two sales above. These costs were deducted from the proceeds of this transaction and resulted in a reduction of additional paid in capital.

Shares issued for services during the nine month period ended September 30, 2007:

5,000 shares of common stock issued to an employee for services were added to the books to reflect shares issued but not recorded.

On January 2, 2007 100,000 shares were issued for services. The Company estimated the fair value of this transaction to be $7,400 based upon the closing stock price of the Company’s stock at the measurement date.

On January 30, 2007 500,000 shares were issued for services. The Company estimated the fair value of this transaction to be $42,500 based upon the closing stock price of the Company’s stock at the measurement date.

On April 13, 2007 460,000 shares were issued for services. The Company estimated the fair value of this transaction to be $101,200 based upon the closing stock price of the Company’s stock at the measurement date.

On June 13, 2007 400,000 shares were issued for services. The Company estimated the fair value of this transaction to be $80,000 based upon the closing stock price of the Company’s stock at the measurement date.

Shares issued for conversion of debt during the nine month period ended September 30, 2007:

21,822,808 shares of common stock were issued for the conversion of convertible notes as discussed in Note 3 above resulting in a loss on extinguishment of debt of $840,244.

Shares issued for exercise of warrants during the nine month period ended September 30, 2007:

4,833,332 shares of common stock were issued for the exercise of warrants resulting in cash receipts of $325,153.

NOTE 5. COMMITMENTS AND CONTINGENCES

An equipment vendor filed a complaint, regarding equipment which the Company acquired in its May 18, 2004 transaction with Advanced BioChem, now known as Industrial Enterprises of America, and against Advanced BioChem in April of 2002 in a California court alleging breach of contract and seeking damages. Advanced BioChem reached a settlement agreement in April of 2003 under which Advanced BioChem would pay the vendor $40,000 in installments through August, 2003. At December 31, 2003, Advanced BioChem had a balance remaining of $20,000. In April, 2005, the equipment vendor filed a lawsuit against Advanced BioChem, certain former officers of Advanced BioChem and against Power3 in order to enforce its claim for the remaining balance which is past due and may have been assumed by the Company as part of the settlement of the dispute with Advanced BioChem. Settlement negotiations are ongoing; however no resolution has been achieved thus far.

On September 12, 2005, Focus Partners LLC filed suit against David Zazoff and Power3 alleging that Power3 breached its agreement with Focus Partners in that it failed to issue stock to the Plaintiff according to the terms of their agreement, that the stock in question was issued to Zazoff and that Zazoff later sold the stock in question for $480,000.  On October 3, 2007, this case was dismissed and Power3 settled for zero dollars.

Subsequently, on October 24, 2007, the Company settled an outstanding accounts payable with a vendor. A settlement agreement and release of all claims was agreed upon. The Company’s accounts payable will be reduced by $67,638.90. The settlement agreement and release of all claims can be found as an exhibit to this filing.

On October 28, 2005, Power3 received notice of a Petition to Enforce Foreign Judgment citation filed against the Company by KForce regarding an employment fee adjudicated in December, 2003 in the state of Florida against the

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Company, in the amount of $15,873, together with $4,735 in interest. Power3 does not agree with the Foreign Judgment and is attempting to resolve the issue prior to enforcement. No resolution has been achieved on this issue at this time; however the Company is endeavoring to resolve the petition. This debt is not recorded in accounts payable by the Company because it is the Company’s position that the judgment should never have been entered against Power3, but rather against a different corporate entity, not related to Power3 in any way, at this time.  The Company’s attorney in this matter feels that no loss is probable, nor will the Company be obligated to pay any sums whatsoever on this matter. The Company has pled improper party and expects to be vacated from the suit since it does not apply to the Company.

In November 2004, Chapman Spira & Carson, LLC (“Chapman Spira”), an investment banking firm, filed a lawsuit in the Supreme Court of the State of New York for the County of New York against Advanced BioChem (the Predecessor), Power3 and Steven Rash. The suit alleges that Advanced BioChem and Power3 are liable to Chapman Spira for damages allegedly are resulting from the breach of a letter agreement between Chapman Spira and Advanced BioChem relating to the performance of strategic and investment banking services. Chapman Spira is seeking damages in the amount of $1,522,000 plus interest. The Company has filed an answer in the lawsuit. On March 1, 2007, the Company received notice from its attorney that the action described above has been discontinued without prejudice and without costs to any party.

On February 15, 2006, Bowne of Dallas LP filed suit against Power3 to collect a debt for services in the amount of $17,315. The debt is recorded in accounts payable by Power3 as of December 31, 2006. In February, 2007, this debt, along with an additional $8,000 in fees, was settled and the obligation was removed from the accounts payable of the Company.

In June, 2005, Charles Caudle et al filed a lawsuit in Harris County, Texas, against Advanced BioChem, Power3 and the officers and directors of both companies. The suit alleges that Advanced BioChem, Power3 and the officers and directors of Power3, are liable to Charles Caudle et al for damages resulting from funds loaned to Advanced BioChem and which were subsequently converted into common stock of Advanced BioChem. It is unclear as to the specific dollar amount of the claim. The Company, and its officers and directors, has filed an answer denying all claims in the lawsuit. The Company believes that Charles Caudle’s claims are without merit with regard to Power3; however the Company cannot be assured it will prevail or if the outcome of the action will adversely affect the Company’s financial position or results of operations. A settlement has been reached between Advanced BioChem and Charles Caudle et. al. Power3 and Chares Caudle et. al. have reac hed an agreement and the Company will not incur any loss whatsoever from this action.

NOTE 6. SUBSEQUENT EVENTS

On October 3, 2007 a settlement agreement was reached with Trinity. The agreement states that Trinity is to retain 1,300,000 of their 3,000,000 shares from which the legend will be removed. The shares are to be sold in payment of the outstanding debt. If the sale of the 1,300,000 shares yields less than $150,000, Power3 is to pay the difference in cash. The value of the shares are in excess of the amount owed at September 30, 2007, therefore Power3 has not accrued any additional liability.

The issue of 350,000 of restricted common shares for consulting services in the amount of approximately $52,500 based upon the closing price of the Company’s stock at the grant date was authorized October 29, 2007.

The issue of 437,500 of restricted common shares for the exercise of warrants in the amount of $35,000 was authorized October 31, 2007.

The issue of 442,416 of restricted common shares for a note payable in the amount of $25,000 plus $1,545 in interest was authorized November 9, 2007.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS

Forward Looking Statements

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our financial statements and related notes included elsewhere in this report. This discussion contains certain forward-looking statements of the intentions, hopes, beliefs, expectations, strategies, and predictions of Power3 Medical Products, Inc. (“Power3” or the “Company”) or its management with respect to future activities or other future events or conditions 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 statements are usually identified by the use of words such as “believes,” “will,” “anticipates,” “estimates,” “expects,” “projects,” “plans,” “intends,” “should,” “could,” or similar expressions. These stat ements are based on certain assumptions and analyses made by the Company’s management in light of its experience and its perception of historical trends, current conditions, expected future developments and other factors believed appropriate. Readers are cautioned that these forward-looking statements are only predictions and that the Company’s business is subject to significant risks and uncertainties, including, without limitation:

·

The Company’s history of operating losses;

·

The Company’s need and ability to raise significant capital and obtain adequate financing for its development efforts;

·

The Company’s ability to successfully develop and complete validation studies for its products;

·

The Company’s dependence upon and the uncertainties associated with obtaining and enforcing patents and intellectual property rights important to its business;

·

The uncertainties associated with the lengthy regulatory approval process, including uncertainties associated with the United States Food and Drug Administration (“FDA”) decisions and timing of product development or approval;

·

Development by competitors of new or competitive products or services;

·

The Company’s ability to retain management, implement its business strategy, assimilate and integrate any acquisitions;

·

The Company’s lack of operating experience and present commercial production capabilities; and

·

The increasing emphasis on controlling healthcare costs and potential legislation or regulation of healthcare pricing.

Although the Company believes that the assumptions underlying the forward-looking statements contained in this report are reasonable, any of the assumptions could be inaccurate, and, therefore, there can be no assurance that the forward-looking statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included in this report, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved. Except for its ongoing obligation to disclose material information as required by the federal securities laws, the Company undertakes no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events. Accordingly, the reader should not rely on forw ard-looking statements, because they are subject to known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from those contemplated by the forward-looking statements.

Overview

Power3 incorporated in the State of Florida on May 15, 1992 and merged into a New York Corporation in 1994, under the name of Sheffield Acres, Inc. Power3 and its wholly owned subsidiaries, C5 Health, Inc. (“C5”), which was officially dissolved in the State of Delaware and in the State of Florida effective December 31, 2003 and Power3 Medical, Inc., a Nevada Corporation, were engaged in sales, distribution and services for the healthcare industry. On September 12, 2003 Surgical Safety Products, Inc. amended its Certificate of Incorporation to

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(a) declare a 1:50 reverse split of its common stock; (b) increase its authorized capital to 150,000,000 shares of common stock and 50,000,000 shares of preferred stock; and (c) change its name to Power3 Medical Products, Inc.

The Company transitioned to the development stage, from previously being an operating company, as of the Company’s asset purchase transaction with Advanced BioChem on May 18, 2004. As a development stage company, Power3 is primarily engaged in commercializing its intellectual properties in the area of diagnosis and treatment of breast cancer, ALS, Alzheimer’s disease and Parkinson’s disease.

On June 20, 2007, Power3, pursuant to Rule 477 under the Securities Act of 1933, as amended, was given consent to the withdrawal by the Company of its Registration Statement on Form SB-2 filed initially with the commission on January 21, 2005 and subsequently amended on October 6, 2005 (File No. 333-122227) (the “Registration Statement”). No securities were offered or sold pursuant to the Registration Statement. The Company requested the withdrawal because it elected not to pursue the registration of the securities.

On September 6, 2007, Power3 announced that its common stock began trading on the Over-the-Counter (OTC) Bulletin Board under the symbol PWRM.OB. Previously, Power3's common stock traded through the Pink Sheets.  Moving to the OTC Bulletin Board will benefit Power3 and Power3’s shareholders by increasing the visibility and liquidity of Power3’s common stock.

Series B Preferred Stock

Pursuant to two employment agreements with two officers, the Company has agreed to issue to such officers an aggregate of 3,000,000 shares of Series B Preferred Stock. On September 6, 2007, the Company filed the Certificate of Amendment necessary to designate the Series B Preferred Stock and the powers, designations and relative rights of the Series B Preferred Stock and has not issued the shares of the Series B Preferred Stock. The Company intends to issue such shares of the Series B Preferred Stock to the two officers in the near future.

Scientific Developments

On March 31, 2007, Power3 received a certification to begin offering CLIA-compliant high complexity medical testing services. CLIA (Clinical Laboratory Improvement Amendments) was passed by the U.S. Congress in 1988 to establish quality standards for all laboratory testing, and to ensure accuracy, reliability and timeliness of patient test results regardless of where the test was performed. Power3 earned its two-year license to offer high complexity tests after meeting standards for knowledge, training and experience, reagents and materials preparation, characteristics of operational steps, calibration, quality control and proficiency testing materials, test system troubleshooting and equipment maintenance, and interpretation and judgment. With the CLIA certification, Power3 has now begun offering the BC-SeraPro™ blood-based breast cancer testing services to physicians, hospitals and clinics, with analysis of samples performed by the company in its centralized laboratory.

Power3’s scientific team is currently headed by its CLIA Laboratory Director and Director of Biochemistry, Dr. Essam A. Sheta. Dr. Sheta is a pioneer in the science of protein chemistry and cancer cell signaling and in so doing made significant biochemical discoveries. The team has leveraged these significant insights and has made progress in the discovery of unique disease protein footprints of biomarkers in breast cancer, neurodegenerative disease, and drug resistance to chemotherapeutic agents.

On April 4, 2007 Power3 announced a collaboration agreement with NeoGenomics, Inc. (NGNM) of Fort Myers, Florida, to form a joint venture Contract Research Organization (CRO), whose mission will be commercialization of Power3's portfolio of Intellectual Property. The efforts will center on blood-based tests using the 534 biomarkers Power3 has discovered from a broad range of diseases including breast cancer, Alzheimer's, Parkinson's and ALS, and the further development of diagnostic tests and other services. In addition, NeoGenomics agreed to purchase a convertible debenture for $200,000 and acquired options to purchase common stock of the Company during 2007. Under the terms of the Agreement, Power3 agrees to issue, and NeoGenomics agrees to purchase, a convertible debenture in the principal amount of $200,000. The convertible debenture will be convertible into common shares of the Company at $.20 per share; however the conversion price can be reset at a ny time and from time to time, in accordance with paragraphs 7 and 9 of the Agreement. The debenture shall accrue interest at 6% per annum, payable quarterly, and the principal amount of the debenture shall be due and payable two years after closing.

In addition, in consideration of NeoGenomics, Inc.’s commitment to purchase the debenture and form the joint venture, Power3 grants, to Neogenomics, Inc., an irrevocable option (the “First Option”) to purchase, in one or a

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series of transactions, voting convertible preferred stock that is convertible into such number of shares of common stock of Power3, after taking into account, all outstanding First Option Preferred Stock, on an as-converted basis.

Further, in consideration of NeoGenomics, Inc.’s commitment to purchase the debenture and form the joint venture, Power3 grants NeoGenomics, Inc. an irrevocable option (the “Second Option”) to purchase, in one or a series of transactions, voting convertible preferred stock that is convertible into such number of shares of common shares of the Company as is necessary to increase NeoGenomics, Inc.’s ownership of the voting common stock of Power3, up to 60% of Power3’s voting common stock, after taking into consideration all outstanding First Option Preferred Stock and Second Option Preferred Stock, on an as-converted basis.

Product Candidates

The Company plans to target the protein-based diagnostic and drug targeting markets utilizing the Company’s portfolio of proprietary disease biomarkers. In the area of neurodegenerative diseases and breast cancer, the Company has completed clinical validation studies involving over 2000 patient samples and is utilizing biostatistics to monitor appropriate panels of biomarkers for diagnostic sensitivity, specificity, positive predictive value, and negative predictive value. By testing patient body fluids and tissues, such as serum, nipple aspirate fluid, and bone marrow aspirate, the Company has discovered unique snapshots of protein patterns in over 2000 samples that cover a broad range of diseases including:

·

cancers such as breast, leukemia, bladder, stomach, and esophageal; and

·

Neurodegenerative diseases such as Alzheimer’s, ALS, and Parkinson’s disease.

The Company’s discovery platform uses proprietary methodologies, trade secrets, and accepted proteomic technologies that are optimized and validated for reproducible discovery of disease specific biomarkers in clinical patient samples. Following sample preparation, a 2D Gel system is used for the separation of proteins. The gels are stained, digitally scanned and imaged, and analyzed with unprecedented reproducibility and sensitivity for quantitative differences in the disease vs. control samples. The significance of these differences is evaluated using advanced biostatistics to generate statistical models for the disease and control sample groups. This model is then applied to new samples to predict their diagnosis. Proteins of interest are removed from the gel matrix and analyzed by fingerprinting on a liquid chromatograph - tandem mass spectrometer. This information is then cross-referenced on a worldwide database to identify the protein of origin. Thi s process requires a great deal of proteomics experience and expertise to make the correct accurate identification. In addition, all of the procedures are scaleable. The Company’s proteomics platform delivers significant discoveries exhibiting validated, reproducible, and reliable biomarkers over a broad quantitative range and linearity of proteomic assays.

The Company has successfully identified more than 543 protein biomarkers that are differentially expressed in response to disease by employing proprietary technologies gained from over 60 years of combined experience in protein biochemistry.

Power3 is transitioning from a company focused only on research and development to one that is demonstrating “proof of concept” of its technology as it enters the commercialization stage for its technology, products and services. The Company is engaged in the process of developing a portfolio of products including BC-SeraPro™ biomarkers and blood serum tests (for early detection of breast cancer); NuroPro® biomarkers and blood serum tests (for neurodegenerative diseases including Alzheimer’s, Parkinson’s and ALS diseases) and drug targets for drug resistance to chemotherapeutics.

Breast Cancer Screening Test (BC-SeraPro™)

Breast cancer is the second leading cause of cancer deaths in women and results in 40,000 deaths annually, with over $7 billion spent on breast cancer diagnosis annually. An important factor in surviving cancer is early detection and treatment. According to the American Cancer Society Surveillance Research, when breast cancer is confined to the breast, the five-year survival rate for early stages is close to 100%. Due to the limitations of the current diagnostic techniques of mammograms and self-examination, diagnosis of cancer is often missed or inconclusive. The limitations and lack of accuracy of the current diagnostic tests highlight the need for a test that can detect the presence of breast cancer much earlier and more accurately.

Currently, Power3 continues its blood serum breast cancer biomarker discovery program using blood serum samples collected from clinical validation sites, in collaboration with Dr. Alan Hollingsworth at the Mercy Woman’s Center.

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The Company believes that there are many advantages to a simple blood test over other types of samples taken from patients, not the least of which is the ready acceptance by patients to having blood drawn.

The Company’s proteomic discovery platform covered by pending patent applications and trade secrets was initially able to identify a panel of 12 blood serum based biomarkers and most recently identified an additional 10 biomarkers. These proteins have the potential to serve as an early detection tool to identify breast cancer long before it becomes detectable by conventional screening methods, greatly improving an individual’s chance for survival. Preliminary testing results demonstrated that this proteomic diagnostic tool is able to correctly identify individuals who are cancer-free or have benign disease from patients that have cancer with great sensitivity and specificity. These discoveries establish the basis of a very sensitive, minimally invasive, early detection breast cancer screening test. Therefore, Power3 has decided to focus development efforts for its early-detection tests for breast cancer on blood serum. Similarly, the Company has succ essfully used blood serum as the platform for its NuroPro® neurodegenerative tests and believes that blood serum as a single platform is the best medium for the development and commercialization of proteomics diagnostic tests.

Power3 has completed the development program of BC-SeraPro™ and is moving forward with a strategy of providing a test that is utilitarian, accurate, and inexpensive. Detection of a patient's protein biomarker profile can now be employed to detect abnormal and pathological states reflected in the serum proteome. Application of this test will have a future impact on how disease will be diagnosed, monitored, and managed.

On October 1, 2007, Power3 entered into a Distributor Agreement (the “Agreement”) with Financial Advisory House (“FAH”) to launch BC-SeraPro^™ in twelve Middle East countries. The agreement with FAH’s Medical Equipment Suppliers division, a Bahrain-based medical instrument distribution company, allows for the marketing and distribution of the BC-SeraPro™ breast cancer diagnostic test for resale to clinics and physicians in Saudi Arabia, Oman, Qatar, Kuwait, Syria, Jordan, Lebanon, Iraq, Bahrain, Yemen, Egypt and the United Arab Emirates before the end of 2007. The test will be analyzed in Power3’s Houston based, CLIA (Clinical Laboratory Improvement Amendment) certified proteomic laboratory.

The agreement with Financial Advisory House is an important milestone in Power3’s development and transition from a research and development company to a diagnostic company with commercially viable products. Power3 selected the Middle East as its initial market because the healthcare systems in these particular countries are open to providing a test that offers new and innovative technologies for earlier detection of breast cancer. These markets also have a particular need for additional methods of early detection due to their high incidence rates of breast cancer. Power3 expects that the launch of the BC-SeraPro™ diagnostic test will be a major catalyst in making 2008 a significant year for the Company. Power3 is seeking other distributors for BC-SeraPro™ and is currently in discussions with several international and domestic partners as the Company implements its strategic plan to expand its geographical distribution of the test and other di agnostic tests currently in the pipeline.

During the third quarter, in conjunction with the Middle East BC-SeraPro™ product launch, the Company has initiated a 100 patient prospective blinded validation study with Dr. Alan Hollingsworth, MD and the Mercy Women’s Center in Oklahoma City, OK. The results of this study are expected to be completed and published in the first quarter of 2008. The publishing of the results will precede the US launch of BC-SeraPro™. The Company received two shipments of samples in October for the validation study that is currently being analyzed in the Company’s CLIA certified laboratory.

Neurodegenerative Screening Test (NuroPro®)

Early detection of neurodegenerative disease generally results in better patient outcomes. Three neurodegenerative diseases of particular interest are Alzheimer’s disease, Parkinson’s disease and ALS (Amyotrophic Lateral Sclerosis). The Alzheimer’s Association reports that Alzheimer’s disease is the most common form of dementia affecting over 5.1 million Americans, of which 4.9 millions are 65 or older. Every 72 seconds, someone in America develops Alzheimer’s disease and by mid-century someone will develop Alzheimer’s every 33 seconds. People as young as 30 years old can contract the disease and one in ten people age 65 and over have Alzheimer’s disease. In addition, the American Parkinson’s Disease Association reports that more than 1.5 million people in the U.S. have Parkinson’s disease, affecting about 1 in 100 Americans over the age of 60 and a new case of Parkinson’s disease is diagnosed ever y 9 minutes. On a smaller scale, the ALS Association reports that an average of approximately 30,000 Americans are afflicted with ALS, with 5,000 new cases diagnosed annually.

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The members of the Company’s scientific team have developed a method for the differential diagnosis of neurodegenerative diseases utilizing blood serum, which was co-developed with neurologist, Dr. Stan Appel, now Chair of Neurology and Co-Director of Methodist Neurological Institute in Houston. With this test, which involves monitoring the concentration of 59 differentially expressed proteins, the Company has identified groups of unique markers that appear to distinguish normal patients from those with motor neuron, cognitive, and other neurological disorders.

Currently, selected panels of biomarkers are being employed in development of the NuroPro^® blood serum-based tests for four disease diagnostics including neurological diseases of motor control such as Parkinson’s disease, ALS and similarly presenting like disorders; ALS specific tests for ALS vs. ALS-like disorders; Alzheimer’s disease specific tests; and a Parkinson’s disease-specific test. Pre-IDE applications for the first two diagnostic tests have been filed with the U.S. Food and Drug Administration (FDA).

Power3 has discovered 59 biomarkers which are being used in a panel to demonstrate Power3’s ability to identify Parkinson’s disease in its early stages through blood serum-based testing, as well as differentiate between Parkinson’s and Parkinson’s-like diseases. In accordance with the research agreement between the University of Thessaly, School of Medicine in Larissa, Greece and Power3, 37 Parkinson’s disease patient samples as well as age and gender matched control samples have been received and analyzed with greater than expected sensitivity and specificity. The blood serum samples that were collected from the patients in Greece utilized Power3’s rigid standards and protocols and were shipped to our CLIA certified laboratory in Texas, where the analysis was performed. The consistency in the sample results from both the US and Greece, points to how robust this test is in diverse populations. The better than expected Parkinson's te st results and the numerous validation studies that are underway for Alzheimer's disease, ALS, and similar neurological disorders, confirm Power3’s commitment to bringing these tests to market in 2008.

On April 24, 2007, Power3’s NuroPro logo became a registered trademark with the United States Patent and Trademark Office.

On July 2007, Chief Executive Officer, Steven Rash, participated in a Podcast sponsored by “Future Pharmaceuticals Magazine” alongside other biotechnology industry executives. The Podcast will be available for download on Power3 Medical’s website (www.power3medical.com) and on Future Pharmaceuticals website (www.futurepharmaus.com) in August 2007.

The Podcast, titled “Drug Discovery & Development: Biomarker Discovery & Research Executive Panel Discussion,” was moderated by David Lester, New York Site Head, Pfizer Human Health Technologies, Global Clinical Technology, PGRD. During the Podcast, Mr. Rash and the other members of the panel discussed the importance of biomarkers and the role they play in the drug research and development process. Power3 has identified 534 biomarkers that can be used for the early detection of breast cancer and neurodegenerative diseases. The Company is in the final stages of development and is preparing for the commercialization of the diagnostic tests for these diseases.

On August 20, 2007, Power3 presented at Noble Financials Small Cap Conference / Micro Cap Symposium held at the Charleston Place Hotel in Charleston, South Carolina. Steven Rash, Power3's Chief Executive Officer provided an update on the Company's developments and business strategy. The presentation with streaming video and PowerPoint presentation was webcast live and archived on Noble Financials conference website at www.two-007.net.

On October 12, 2007, Power3 appointed Dr. Marwan N. Sabbagh to the Company's Scientific Advisory Board. Dr. Sabbagh, a national leader in neurodegenerative disease, will collaborate with Power3 Medical in a validation study of blood serum patient samples using Power3's NuroPro® diagnostic screening test.

Dr. Sabbagh is currently the Director of Clinical Research at the Cleo Roberts Center of Clinical Research at the Sun Health Research Institute located in Sun City, Arizona. Power3 has a Clinical Trial Agreement pending with the Sun Health. Dr. Sabbagh has been published in seventy reviews, and has written original research articles on Alzheimer's disease and dementia. Additionally, he has written a soon to be published book on Alzheimer's prevention. Dr. Sabbagh received his medical degree from the University of Arizona in Tucson and completed his residency in Neurology at Baylor College of Medicine in Houston, and his fellowship at the University of California, San Diego School of Medicine. He also serves as the staff physician at Sun Health Boswell Hospital where he practices general neurology and specializes in the diagnosis and treatment of Alzheimer's disease. Dr. Sabbagh is a Clinical Instructor in Neurology and provides both clinical and didactic ex pertise for the geriatric fellowship program.

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Sun Health Research Institute is a leader, nationally and internationally, in the effort to find answers to disorders related to aging, and Dr. Sabbagh's vast experience and commitment in the field of neurodegenerative research is a tremendous asset to Power3's Scientific Advisory Board. The Cleo Roberts Center of Clinical Research has shown remarkable dedication to finding an early detection test and treatment for neurodegenerative diseases under Dr. Sabbagh's guidance.

For twenty-one years, Sun Health Research Institute has been a leader nationally and internationally in the effort to find answers to disorders of aging including Alzheimer's disease, Parkinson's disease, arthritis, and prostate cancer. The institute, together with its Arizona Alzheimer's Consortium partners, has been designated by the National Institutes of Health as one of just twenty-nine Alzheimer's Disease Centers in the nation. The institute's Cleo Roberts Center for Clinical Research takes laboratory discoveries to clinical trials that foster hope for new treatments. Sun Health Research Institute is affiliated with the Sun Health non-profit community healthcare network.

Intellectual Property

During the quarter ending September 30, 2007, Power3 filed two Utility Patent Applications with the U.S. Patent and Trademark Office. The two patents are for a number of the Company's identified blood serum protein biomarkers, part of Power3's clinically validated biomarker panel for early detection and differential diagnosis of Parkinson's disease. The biomarkers involved in these patent applications have demonstrated unique specificities for Parkinson's disease. When used in combination with other Parkinson's biomarkers in our diagnostic panel, they increase the accuracy of diagnostic specificity to distinguish Parkinson's patients from other similar neurological disorders.

We continue to move forward in our commercialization efforts as well as strengthening our intellectual property portfolio, which currently includes fifteen patents pending and numerous other patent applications in the pipeline.

The number of pending patent applications as of quarter ending September 30, 2007, is 15.

Power3 filed two patents for quarter ending September 30, 2007, as follows:

Name of Patent	Application Date	Type of Patent
A Complement Factor H Protein as a Biomarker of Parkinson’s Disease	8/29/07	US Utility
An Apolipoprotein E3 Protein as a Biomarker of Parkinson’s Disease	9/5/07	US Utility

Investor Relations/Public Relations

On June 29, 2007, Power3 Medical Products, Inc. (the “Company”) entered into a service agreement with The Investor Relations Group (“IRG”) for services related to the Company’s communications program, for corporate promotional materials and for communications with media, investors and industry personnel.

As Power3 transitions from a research and development organization to commercialization, the Company feels it is in the best interest of the Company and its shareholders to retain the services of The Investor Relations Group in order to fully communicate our message to the investing public. With such important milestones pending in the development of commercial applications for our proprietary technologies, the Company believes a strategic relationship with the right investor relations firm is pivotal in accomplishing the Company’s goals.

IRG will strive to increase investor and industry awareness of Power3 within the capital markets by introducing the Company and its management to pre-qualified fund managers, industry analysts and the media-at-large.

As compensation to IRG for services rendered, the Company shall pay to IRG a maintenance fee of $13,500 per month for a renewable term of 12 months, beginning July 1, 2007. Additionally, the Company agreed to issue to IRG personnel a total of 400,000 restricted shares of common stock.

Liquidity and Capital Resources

The Company’s liquidity and capital needs relate primarily to working capital, development and other general corporate requirements. The Company has not received any cash from operations, other than from the sale of blood serum samples previously gathered. The Companyhas an immediate need for capital to continue its current operations, and in addition, is seeking additional capital from research grants, collaboration agreements, and other strategic alliances.

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Net cash used in operating activities amounted to $1,664,269 for the nine months ended September 30 2007, compared to $1,740,487 for the nine months ended September 30, 2006. The change in net cash used in operating activities during 2007 was primarily due to higher overhead and legal and consulting fees, as compared to the same nine months of 2006.  

Net cash provided by financing activities was $1,810,529 for the nine months ended September 30, 2007, as compared to $1,812,721 for the nine months ended September 30, 2006.

As of September 30, 2007, the Company’s principal source of liquidity was $184,878 in cash.

Plan of Operation and Cash Requirements

The Company currently does not have significant operating revenues from product sales or the performance of services and it continues to experience net operating losses. The Company is actively pursuing third party licensing agreements, collaboration agreements, distribution agreements and similar business arrangements in order to establish a revenue base utilizing its capabilities in disease diagnosis based on protein and biomarker identification, and drug resistance in the areas of cancers, neurodegenerative and neuromuscular diseases. The Company has undertaken clinical validation studies to demonstrate the diagnostic capabilities of its technologies. However, there can be no assurances that revenue-generating agreements will be in place in the next twelve months.

Absent a source of revenues, the Company will require funding in order to carry out its business plan until such time as it is able to generate sustained revenues. The Company’s current cash requirements are approximately $150,000 per month and the Company anticipates that it will require approximately $1,800,000 for the twelve months ended September 30, 2008, to continue its development activities, undertake and perform clinical validation studies, continue its marketing efforts and maintain its administrative infrastructure, as follows:

Estimated Expenditures Required
During Next Twelve Months

General and Administrative	$	1,800,000
Patent filings and intellectual property		100,000
Capital Expenditures and research agreements		150,000
Total	$	2,050,000

The foregoing is based upon the Company’s current estimated cash requirements. The Company has no significant capital expenditure requirements and does not plan to increase its monthly expenditure rate absent an increase in revenues or additional funding.

The Company will continue to require additional debt or equity financing for its operations, which may not be readily available. The Company’s ability to continue as a going concern is subject to its ability to generate a profit or obtain necessary funding from outside sources.

Off-Balance Sheet Arrangements

At September 30, 2007, the only off balance sheet agreements in place for the Company were a lease in effect for its office space, leases in effect for phone equipment, leases in effect for lab equipment and employment agreements entered with its three principal officers.

Critical Accounting Policies

Accounting for Derivative Instruments

Statement of Financial Accounting Standard (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended, requires all derivatives to be recorded on the balance sheet at fair value. These derivatives, including embedded derivatives in the Power3's structured borrowings, are separately valued and accounted for on the Power3's balance sheet. Fair values for exchange traded securities and derivatives are based on quoted market prices. Where market prices are not readily available, fair values are determined using market based pricing models incorporating readily observable market data and requiring judgment and estimates.

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Lattice Valuation Model

Power3 valued the conversion features in their convertible notes using a lattice valuation model, with the assistance of a valuation consultant. The lattice model values the embedded derivatives based on a probability weighted discounted cash flow model. This model is based on future projections of the five primary alternatives possible for settlement of the features included within the embedded derivative, including: (1) payments are made in cash, (2) payments are made in stock, (3) the holder exercises its right to convert the debentures, (4) Power3 exercises its right to convert the debentures and (5) Power3 defaults on the debentures. Power3 uses the model to analyze (a) the underlying economic factors that influence which of these events will occur, (b) when they are likely to occur, and (c) the common stock price and specific terms of the debentures such as interest rate and conversion price that will be in effect when they occur. Based on the analysis of these factors, Power3 uses the model to develop a set of potential scenarios. Probabilities of each scenario occurring during the remaining term of the debentures are determined based on management's projections. These probabilities are used to create a cash flow projection over the term of the debentures and determine the probability that the projected cash flow would be achieved. A discounted weighted average cash flow for each scenario is then calculated and compared to the discounted cash flow of the debentures without the compound embedded derivative in order to determine a value for the compound embedded derivative.

Black−Scholes Valuation Model

Power3 used the Black−Scholes pricing model to determine the fair values of its warrants. The model uses market sourced inputs such as interest rates, stock prices, and option volatilities, the selection of which requires management's judgment, and which may impact net income or loss. In particular, Power3 uses volatility rates based upon the closing stock price of Power3’s common stock. Power3 uses a risk free interest rate which is the U. S.Treasury bill rate for a security with a maturity that approximates the estimated expected life of the derivative or security.

ITEM 3. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Based on an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”) as of the end of the period covered by this report, and because of the errors and corrections identified by management with respect to the complex rules for accounting for share-based compensation and derivatives, our Chief Executive Officer and Chief Accounting Officer concluded that our disclosure controls and procedures were not effective as of September 30, 2007 to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Additional effort is needed to fully remedy our identified deficiencies as discussed below and we are continuing our efforts to improve and strengthen our control processes and procedures. Our management intends to continue to work with our auditors and other outside advisors, as appropriate, to develop and then apply our controls and procedures with the goal of achieving adequate and effective disclosure controls. We believe that with a properly planned, designed and implemented system of internal controls over financial reporting, our disclosure controls and procedures are expected to become effective.

There have been no significant changes in internal controls, or in factors that could significantly affect internal controls, subsequent to the date the Chief Executive Officer and Chief Accounting Officer completed their evaluation.

Material Weaknesses in Internal Control over Financial Reporting

Our management made an assessment of the effectiveness of our internal control over financial reporting as of September 30, 2007 and identified deficiencies related to expense recognition and disclosure control deficiencies related to transactions involving equity issuances and derivatives. The adjustment to expense and the footnote disclosure deficiencies were detected by our independent auditors during the review process and are appropriately corrected, recorded and disclosed in this quarterly reported on Form 10-QSB for the three and nine month period ended September 30, 2007. Following a review of these deficiencies, management determined that we had incorrectly accounted for equity issuances and derivative valuations during such period. As a result, management

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concluded that our disclosure controls and procedures were not effective. Management concluded that the following three deficiencies were identified in our control process as of September 30, 2007:

·

We did not have adequate transaction controls over the accounting, review and processing of certain unusual or complex accounting transactions.

·

We did not have a systematic and documented program of internal controls and procedures over our accounting and financial reporting process to ensure that unusual or complex transactions are recorded, processed, summarized and reported on a timely basis in our financial disclosures.

·

There is a need for the improved supervision and training of our accounting staff.

Corrective Action

None.

Changes in Independent Auditors and Internal Control Over Financial Reporting

On August 10, 2007, Malone & Bailey, P.C. was dismissed as the independent auditor for Power3 Medical Products, Inc. Malone & Bailey, P.C. has served as the independent auditor of the Power3's annual financial statements since the audit of the calendar year ended December 31, 2005 for the Power3’s financial statements. From the date on which Malone & Bailey, P.C. was engaged until the date they were dismissed, there were no disagreements with Malone & Bailey, P.C. on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Malone & Bailey, P.C., would have caused Malone & Bailey, P.C. to make reference to the subject matter of the disagreements in connection with any reports it would have issued, and there were no "reportable events" as that term is defined in Item 304(a) (1) (iv) of Regulation  ;S-B.

Power3 provided Malone & Bailey, P.C. with a copy of the foregoing disclosure, and requested that Malone & Bailey, P.C. furnish Power3 with a letter addressed to the Securities and Exchange Commission stating whether or not it agreed with such disclosure. Power3 filed as an Exhibit to the Form 8-K, a copy of the letter from Malone & Bailey, P.C. as required by Item 304 of Regulation S-B. On August 28, 2007, Malone & Bailey, P.C. provided a letter agreeing with the foregoing disclosure in Power3’s Form 8K-A filing.

On August 10, 2007, Power3 executed an engagement letter with McElravy, Kinchen & Associates, P.C. ("MKA") to assume the role of its new certifying accountant. MKA has been asked to perform the quarterly reviews of Power3 for the quarters ended September 30, 2007 and June 30, 2007.

During the periods ended December 31, 2005 through 2006 and the subsequent interim period ended March 31, 2007, and through the date of the firm's engagement, Power3 did not consult with MKA with regard to:

(i)

the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on Power3's financial statements; or

(ii)

any matter that was either the subject of a disagreement or a reportable event (as described in Item 304(a) (1) (iv) of Regulation S-B.

The engagement of the new principal auditor was recommended and approved by the Board of Directors of Power3.

Other than the changes described above, there were no changes in the Company’s internal control over financial reporting that occurred during the Company’s fiscal quarter ended September 30, 2007 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

An equipment vendor filed a complaint, regarding equipment which the Company acquired in its May 18, 2004 transaction with Advanced BioChem, now known as Industrial Enterprises of America, and against Advanced BioChem in April of 2002 in a California court alleging breach of contract and seeking damages. Advanced BioChem reached a settlement agreement in April of 2003 under which Advanced BioChem would pay the vendor $40,000 in installments through August, 2003. At December 31, 2003, Advanced BioChem had a balance remaining of $20,000. In April 2005, the equipment vendor filed a lawsuit against Advanced BioChem, certain former officers of Advanced BioChem and against Power3 in order to enforce its claim for the remaining balance which is past due and may have been assumed by the Company as part of the settlement of the dispute with Advanced BioChem. Settlement negotiations are ongoing; however no resolution has been achieved thus far.

On September 12, 2005, Focus Partners LLC filed suit against David Zazoff and Power3 alleging that Power3 breached its agreement with Focus Partners in that it failed to issue stock to the Plaintiff according to the terms of their agreement, that the stock in question was issued to Zazoff and that Zazoff later sold the stock in question for $480,000. On October 3, 2007, this case was dismissed and Power3 settled for zero dollars.

Subsequently, on October 24, 2007, the Company settled an outstanding accounts payable with a vendor. A settlement agreement and release of all claims was agreed upon. The Company’s accounts payable will be reduced by $67,638.90. The settlement agreement and release of all claims can be found as an exhibit to this filing.

On October 28, 2005, Power3 received notice of a Petition to Enforce Foreign Judgment citation filed against the Company by KForce regarding an employment fee adjudicated in December, 2003 in the state of Florida against the Company, in the amount of $15,873, together with $4,735 in interest. Power3 does not agree with the Foreign Judgment and is attempting to resolve the issue prior to enforcement. No resolution has been achieved on this issue at this time; however the Company is endeavoring to resolve the petition. This debt is not recorded in accounts payable by the Company because it is the Company’s position that the judgment should never have been entered against Power3, but rather against a different corporate entity, not related to Power3 in any way, at this time.  The Company’s attorney in this matter feels that no loss is probable, nor will the Company be obligated to pay any sums whatsoever on this matter. The Company has pled im proper party and expects to be vacated from the suit since it does not apply to the Company.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the quarter ended September 31, 2007, the Company did not issue any unregistered shares of common stock.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

The Company is in default under the provisions of its October, 2004 Securities Purchase Agreement, and accompanying registration rights agreement and debentures. The default stems from the Company’s inability to obtain effectiveness of the registration statement on Form SB-2, as amended (File No. 333-122227) filed pursuant to the registration rights agreement. The registration statement was withdrawn on June 20, 2007. During the quarter ended September 30, 2007, the Company has settled with a number of its Convertible Debenture Holders as previously mentioned above.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to the security holders for a vote during the quarter ended September 30, 2007.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

EXHIBIT NO.	DESCRIPTION
3.1	Certificate of Amendment to the Certificate of Incorporation*
10.1	Securities Purchase Agreement dated October 28, 2004 among the Company and each purchaser identified therein (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on November 3, 2004).
10.2	Amendment to Securities Purchase Agreement dated January 19, 2005, between the Company and each purchaser identified therein (incorporated by reference to Exhibit 10.8 of the Company’s Registration Statement on Form SB-2 (File No. 122227).
10.3	Settlement Agreement and Release between the Company and Crestview Capital Master, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Form 8k filed August 10, 2007).
10.4	Settlement Agreement and Release between the Company and DKR Soundshore Oasis Holding Fund, Ltd. (incorporated by reference to Exhibit 10.1 to the Company’s Form 8k filed August 27, 2007).
10.5	Promissory Note, dated November 30, 2006, executed by Power3 and Jeffrey Hyde, in the amount of $10,000.00(incorporated by reference to Exhibit 10.30 to the Company’s Form 10Qsb filed May 21, 2007).
10.6	Warrant Agreement with Roger Kazanowski, dated October 27, 2006, for warrants to purchase 2,500,000 shares of common stock (incorporated by reference to Exhibit 10.36 to the Company’s Form 10Qsb filed May 21, 2007).
10.7	Consulting Agreement signed with Noble Investments, dated March 1, 2007 (incorporated by reference to Exhibit 10.43 to the Company’s Form 10Qsb filed May 21, 2007).
10.8	Agreement signed with Neogenomics (incorporated by reference to Exhibit 10.1 in the Form 8-K filed by the Company on April 3, 2007).
10.9	Letter of Agreement between the Company and The Investor Relations Group, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Form 8k filed July 3, 2007).
10.10	Distributor Agreement and Release between Power3 Medical Products, Inc. and Financial Advisory House*
10.11	Settlement Agreement and Release of All Claims between Accounts Payable Vendor and Power3 Medical Products, Inc.*+
10.12	Statement of Company Policy and Policy Regarding Confidentiality and Securities Trades by Company Personnel*
16.1	Letter from Malone & Bailey, PC (incorporated by reference to Exhibit 10.1 to the Company’s Form 8k-A filed August 28, 2007).
31.1	Certification of Steven B. Rash, Chief Executive Officer*
31.2	Certification of Marion J. McCormick, Chief Accounting Officer*
32.1	Certification Pursuant to Section 906 of Steven B. Rash, Chief Executive Officer*
32.2	Certification Pursuant to Section 906 of Marion J. McCormick, Chief Accounting Officer*
99.1	Press Release dated September 6, 2007 (incorporated by reference to Exhibit 99.1 to the Company’s Form 8K filed September 10, 2007).
99.2	Press Release dated October 15, 2007 (incorporated by reference to Exhibit 99.1 to the Company’s Form 8k filed October 16, 2007).
——————— *Furnished with this report. +Portions of this exhibit have been omitted and separately filed with the Securities and Exchange Commission with a request for confidential treatment.

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SIGNATURES

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

Signature	Title	Date
/s/ STEVEN B. RASH	Chairman and Chief Executive Officer	November 14, 2007
Steven B. Rash
/s/ MARION J. MCCORMICK	Chief Accounting Officer	November 14, 2007
Marion J. McCormick

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EX-3.1

EXHIBIT 3.1

CERTIFICATE OF AMENDMENT OF
THE CERTIFICATE OF INCORPORATION
OF
POWER 3 MEDICAL PRODUCTS, INC.

UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW

Article 1. The name of the Corporation is Power 3 Medical Products, Inc. (the "Corporation").

Article 2. The Certificate of Incorporation of the Corporation was filed with the Department of State of the State of New York on May 7, 1993.

Article 3. This Certificate of Amendment of the Certificate of Incorporation of the Corporation is filed for the purpose of amending the Certificate of Incorporation to establish and create the relative rights of the Series B Convertible Preferred Stock as set forth herein.  Such powers, designations and relative rights are as follows:

1. Designation and Amount. There shall be a series of Preferred Stock designated as "Series B Convertible Preferred Stock," and the number of shares constituting such series shall be 3,000,000 shares. Such series is referred to herein as the "Convertible Preferred Stock."

2. Stated Capital. The amount to be represented in stated capital at all times for each share of Convertible Preferred Stock shall be $.001.

3. Rank. All shares of Convertible Preferred Stock shall rank pari passu with all of the Corporation’s Common Stock, par value $.001 per share (the "Common Stock"), now or hereafter issued, as to distributions of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, but not as to payment of dividends.

4. Dividends. No dividend shall be declared or paid on the Convertible Preferred Stock.

5. No Liquidation Preference.

In the event of any voluntary or involuntary liquidation, dissolution, or winding-up of the Corporation, after distribution in full of the preferential amounts, if any, to be distributed to the holders of shares of any series of preferred stock, having a priority on liquidation superior to that of the Convertible Preferred Stock, the holders of shares of Convertible Preferred Stock shall be entitled to participate with the Common Stock in all of the remaining assets of the Corporation available for distribution to its stockholders, ratably with the holders of Common Stock in proportion to the number of shares of Common Stock held by them, assuming for each holder of Convertible Preferred Stock on the record date for such distribution that each holder was the holder of record of the number (including any fraction) of shares of Common Stock into which the shares of Convertible Preferred Stock then held by such holder are then convertible. A liquidation, dissolution, or windi ng-up of the Corporation, as such terms are used in this Section 5, shall not be deemed to be occasioned by or to include any merger of the Corporation with or into one or more corporations or other entities, any acquisition or exchange of the outstanding shares of one or more classes or series of the Corporation, or any sale, lease, exchange, or other disposition of all or a part of the assets of the Corporation.

6. Voting Rights. Except as otherwise required by law, the shares of outstanding Convertible Preferred Stock shall have the number of votes equal to the number of votes of all outstanding shares of Common Stock plus one additional vote such that the holders of outstanding shares of Convertible Preferred Stock shall always constitute a majority of the voting rights of the Corporation. Except as otherwise required by law or by these Articles, the holders of shares of Common Stock and Convertible Preferred Stock shall vote together and not as separate classes.

7. No Redemption. The shares of Convertible Preferred Stock are not redeemable.

8. Conversion Provisions.

                (a) For the purposes of this Section 8, the following definitions shall apply:

                        (i) "Common Stock" shall initially mean the class designated as Common Stock, par value $.001 per share, of the Corporation as of June 15, 2004 subject to adjustment as hereinafter provided.

                        (ii) "Conversion Ratio" means the number of fully paid and nonassessable shares of Common Stock and such other securities and property as hereinafter provided, initially at the rate one share of Common Stock for each full share of Convertible Preferred Stock.

                        (iii) "Employee" means a person employed by the Corporation or by a legal entity (as defined in Subsection (ii) of this Section 8(a)) that is controlled, directly or indirectly, by the Corporation;

                        (iv) "Legal Entity" means a corporation, partnership, joint venture, trust, employee benefit plan or other enterprise;

                        (v) "Transfer" means any sale, transfer, gift, assignment, devise or other disposition, whether directly or indirectly, voluntarily or involuntarily or by operation of law or otherwise; and

                        (vi) "Uncertificated Shares" means shares without certificates within the meaning of Section 78.235(4) of the New York Revised Statutes, as it may be amended from time to time, or any subsequent statute replacing this statute.

                (b) Without any action by the Corporation: (1) outstanding shares of Convertible Preferred Stock which are the subject of a Transfer shall be automatically converted into a number of shares of Common Stock determined by multiplying the Conversion Ratio then in effect by the number of shares Convertible Preferred Stock subject to the Transfer; and (2) in the event that an Employee ceases to be an Employee for any reason whatsoever, the outstanding shares of Convertible Preferred Stock held by such Employee shall be  automatically converted into a number of shares of Common Stock determined by multiplying the Conversion Ratio then in effect by the number of shares Convertible Preferred Stock held by such Employee. For purposes of this Section 8, the conversion of shares of Convertible Preferred Stock as a result of a Transfer and the conversion of shares of Convertible Prefer red Stock as a result of cessation of an Employee's status as an Employee shall both be referred to as a "Conversion Event."

                        (i) A Conversion Event resulting from a Transfer shall be effective at such time as the holder of the Convertible Preferred Stock who is transferring such shares, regardless of the identity of the purchaser, transferee or other recipient, transfers such shares for disposition, at which time (the "Effective Time") the rights of the holder of the converted Convertible Preferred Stock as such holder shall cease and the holder of the converted Convertible Preferred Stock shall be deemed to have become the holder of record of the shares of Common Stock into which such shares of Convertible Preferred Stock have been converted as a result of the Transfer.

                        (ii) The Effective Time of a Conversion Event resulting from cessation of an Employee's status as an Employee shall be the day and time that the Employee's status as an Employee terminates. At the Effective Time the rights of the holder of the converted Convertible Preferred Stock as such holder shall cease and the holder of the converted Convertible Preferred Stock shall be deemed to have become the holder of record of the shares of Common Stock into which such shares of Convertible Preferred Stock have been converted as a result of the Conversion Event.

                        (iii) Each conversion of shares of Convertible Preferred Stock into shares of Common Stock pursuant to this Section 8(b) shall be deemed to be effective upon the Effective Time and at the Effective Time the rights of the holder of the converted Convertible Preferred Stock as such holder shall cease and the holder of the converted Convertible Preferred Stock shall be deemed to have become the holder of record of the shares of Common Stock into which such shares of Convertible Preferred Stock have been converted as a result of the applicable Conversion Event.

                        (iv) The Board of Directors of the Corporation shall have the power to determine whether a Conversion Event has taken place with respect to any situation based upon the facts known to it. Each shareholder shall provide such information that the Corporation may reasonably request in order to ascertain facts or circumstances relating to a Transfer or proposed Transfer or a Conversion Event or proposed Conversion Event.

                (c) The holder of shares of Convertible Preferred Stock converted pursuant to this Section 8 shall promptly surrender the certificate or certificates representing the shares so converted at the principal office of the Corporation (or such other office or agency of the Corporation as the Corporation may designate by notice in writing to the holders of Convertible Preferred Stock) at any time during its usual business hours, and if such shares of Convertible Preferred Stock are Uncertificated Shares, shall promptly notify the Corporation in writing of such transfer at the principal office of the Corporation (or such other office or agency of the Corporation as the Corporation may designate by notice in writing to the holders of the Convertible Preferred Stock).

                (d) In no event shall the Corporation be liable to any such holder or any third party arising from any such conversion.

                (e) The shares of Common Stock resulting from a conversion of duly authorized, validly issued, fully paid and nonassessable shares of Convertible Preferred Stock into shares of Common Stock pursuant to this Section 8 shall be duly authorized, validly issued, fully paid and nonassessable. Any share of Convertible Preferred Stock which is converted into a share of Common Stock pursuant to this Section 8 shall become an authorized but unissued share of Convertible Preferred Stock.

                (f) The Corporation will at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of issue upon conversion of Convertible Preferred Stock, such number of shares of Common Stock as shall then be issuable upon the conversion of all outstanding shares of Convertible Preferred Stock.

                (g) The issuance of certificates evidencing (or in the case of Uncertificated Shares, the provision of applicable written statements or other documents with respect to) shares of Common Stock upon conversion of shares of Convertible Preferred Stock shall be made without charge to the holders of such shares for any issue tax in respect thereof or other cost incurred by the Corporation in connection with such conversion; provided, however, the Corporation shall not be required to pay any tax that may be payable in respect of any Transfer involved in the issuance and delivery of any certificate in (or in the case of Uncertificated Shares, the provision of applicable written statements or other documents with respect to) a name other than that of the holder of the Convertible Preferred Stock converted.

                (h) The Conversion Ratio shall be subject to adjustment as follows:

                        (i) In case the Company shall (A) pay a dividend or make a distribution in Common Stock, or (B) subdivide or reclassify its outstanding shares of Common Stock into a greater or smaller number of shares, the Conversion Ratio in effect immediately prior thereto shall be adjusted retroactively as provided below so that the Conversion Ratio thereafter shall be determined by multiplying the Conversion Ratio at which such shares of Convertible Preferred Stock were theretofore convertible by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately following such action and of which the denominator shall be the number of shares of

Common Stock outstanding immediately prior thereto. Such adjustment shall be made whenever any event described above shall occur and shall become effective retroactively immediately after the record date in the case of a dividend and shall become effective immediately after the effective date in the case of a subdivision or reclassification.

                        (ii) In case the Company shall issue rights or warrants to all holders of its Common Stock entitling them (for a period expiring within 45 days after the record date therefore to subscribe for or purchase shares of Common Stock at a price per share less than the current market price per share of Common Stock (as determined in accordance with the provisions of Subsection (iv) of this Section 8) at the record date therefore (the "Current Market Price"), or in case the Company shall issue other securities convertible into or exchangeable for Common Stock for a consideration per share of Common Stock deliverable upon conversion or exchange thereof less than the Current Market Price; then the Conversion Ratio in effect immediately prior thereto shall be adjusted retroactively as provided below so that the Conversion Ratio ther efore shall be equal to the price determined by multiplying the Conversion Ratio at which shares of Convertible Preferred Stock were theretofore convertible by a fraction of which the denominator shall be the number of shares of Common Stock outstanding on the date of issuance of such convertible or exchangeable securities, rights or warrants plus the number of additional shares of Common Stock offered for subscription or purchase and of which the numerator shall be the number of shares of Common Stock outstanding on the date of issuance of such shares, convertible or exchangeable securities, rights or warrants plus the number of additional shares of Common Stock which the aggregate offering price of the number of shares of Common Stock so offered would purchase at the Current Market Price per share of Common Stock (as determined in accordance with the provisions of Subsection (iv) of this Section 8. Such adjustment shall be made whenever such convertible or exchangeable securities rights or warrants are iss ued, and shall become effective retroactively immediately after the record date for the determination of stockholders entitled to receive such securities. However upon the expiration of any right or warrant to purchase Common Stock the issuance of which resulted in an adjustment in the Conversion Ratio pursuant to this Subsection (ii), if any such right or warrant shall expire and shall not have been exercised, the Conversion Ratio shall be recomputed immediately upon such expiration and effective immediately upon such expiration shall be increased to the price it would have been (but reflecting any other adjustments to the Conversion Ratio made pursuant to the provisions of this Section 8 after the issuance of such rights or warrants) had the adjustment of the Conversion Ratio made upon the issuance of such rights or warrants been made on the basis of offering for subscription or purchase only that number of shares of Common Stock actually purchased upon the exercise of such rights or warrants actually exer cised.

                        (iii) In case the Company shall distribute to all holders of its Common Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) shares of capital stock (other than Common Stock), evidences of its indebtedness or assets (excluding cash dividends) or rights to subscribe (excluding those referred to in Subsection (ii) of this Section 8), then in each such case the number of shares of Common Stock into which each share of Convertible Preferred Stock shall thereafter be convertible shall be determined by multiplying the number of shares of Common Stock into which such share of Convertible Preferred Stock was theretofore convertible by a fraction of which the numerator shall be the number of outstanding shares of Common Stock multiplied by the Current Ma rket Price per share of Common Stock (as determined in accordance with the provisions of Subsection (iv) of this Section 8) on the date of such distribution and of which the denominator shall be the product of the number of outstanding shares of Common Stock and the Current Market Price per share of Common Stock, less the aggregate fair market value (as determined by the Board of Directors of the Company, whose determination shall be conclusive, and described in a statement filed with the transfer agent for the shares of Convertible Preferred Stock) of the capital stock, assets or evidences of indebtedness so distributed or of such subscription rights. Such adjustment shall be made whenever any such distribution is made, and shall become effective retroactively immediately after the record date for the determination of stockholders entitled to receive such distribution.

                        (iv) For the purpose of any computation under Subsection (ii) and (iii) of this Section 8, the Current Market Price per share of Common Stock at any date shall be deemed to be the average Sale Price for the thirty consecutive trading days commencing forty-five trading days before the day in question. As used herein, "Sale Price" means the closing sales price of the Common Stock (or if no sale price is reported, the average of the high and low bid prices) as reported by the principal national or regional stock exchange on which the Common Stock is listed or, if the Common Stock is not listed on a national or regional stock exchange, as reported by national Association of Securities Dealers Automated Quotation System and if not so reported then as reported by the Electronic Bulletin Board or the National Quotation Bureau In corporated.

                        (v) No adjustment in the Conversion Ratio shall be required unless such adjustment would require an increase or decrease of at least 1% in the price then in effect; provided, however, that any adjustments which by reason of this Subsection (v) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this paragraph 8 shall be made to the nearest cent.

                        (vi) In the event that, at any time as a result of an adjustment made pursuant to Subsection (i) or Subsection (iii) of this Section 8, the holder of any share of Convertible Preferred Stock thereafter surrendered for conversion shall become entitled to receive any shares of the Company other than shares of the Common Stock, thereafter the number of such other shares so receivable upon conversion of any share of Convertible Preferred Stock shall be subject to adjustment from time to time in a manner and on the terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in Subsections (i) through (v) of this Section 8, and the other provisions of this Subsection (vi) with respect to the Common Stock shall apply on like terms to any such other shares.

                        (vii) Whenever the conversion rate is adjusted, as herein provided, the Company shall promptly file with the transfer agent for Convertible Preferred Stock, a certificate of an officer of the Company setting forth the conversion rate after such adjustment and setting forth a brief statement of the facts requiring such adjustment and a computation thereof. Such certificate shall be conclusive evidence of the correctness of such adjustment. The Company shall promptly cause a notice of the adjusted conversion rate to be mailed to each registered holder of shares of Convertible Preferred Stock.

(viii) If any of the following events occur, namely (i) any reclassification or change (other than a combination of reclassification into a smaller number of shares) of outstanding shares of Common Stock issuable upon conversion of shares of Convertible Preferred Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision) or (ii) any consolidation or merger to which the Company is a party (other than a consolidation or merger to which the Company is the continuing corporation and which does not result in any classification of, or change (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision) in, outstanding shares of Common Stock); then the Company or such successor, as the case may be, shall provide in its Certificate of Incorporation that each share of Convertible Preferred Stock shall be convertible into the kind and amount of shares of stock and other securities or property receivable upon such reclassification, change, consolidation or merger by a holder of the number of shares of Common Stock issuable upon conversion of each such share of Convertible Preferred Stock immediately prior to such reclassification, change, consolidation or merger. Such Certificate of Incorporation shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in Section 8. The Company shall cause notice of the execution of any such event contemplated by this paragraph to be mailed to each holder of shares of Convertible Preferred Stock as soon as practicable. The above provisions of this Section 8(i) shall similarly apply to successive reclassifications, consolidations and mergers.

9. Outstanding Shares. For purposes of these Articles of Designation, all shares of Convertible Preferred Stock shall be deemed outstanding except (i) from the date of surrender of certificates representing shares of Convertible Preferred Stock, all shares of Convertible Preferred Stock converted into Common Stock; and (ii) from the date of registration of transfer, all shares of Convertible Preferred Stock held of record by the Corporation or any subsidiary of the Corporation.

10. Securities Not Registered Under the Securities Act of 1933.                

                 (a) Securities Not Registered. Neither the shares of Convertible Preferred Stock nor the Common Stock issuable upon conversion thereof has been registered under the Securities Act of 1933 or the laws of any state of the United States and may not be transferred without such registration or an exemption from registration.

                 (b) Restrictive Legends. Each share of Convertible Preferred Stock and certificate for Common Stock issued upon the conversion of any shares of Convertible Preferred Stock, and each preferred stock certificate issued upon the transfer of any such shares of Convertible Preferred Stock or Common Stock (except as otherwise permitted by this Section 11), shall be stamped or otherwise imprinted with a legend in substantially the following form:

"The securities represented hereby have not been registered under the Securities Act of 1933.
Such securities may not be sold or transferred in the absence of such registration or an exemption
therefrom under said Act."

11. Preemptive Rights. The Convertible Preferred is not entitled to any preemptive or subscription rights in respect of any securities of the Corporation.

12. Severability of Provisions. Whenever possible, each provision hereof shall be interpreted in a manner as to be effective and valid under applicable law, but if any provision hereof is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only the extent of such prohibition or invalidity, without invalidating or otherwise adversely affecting the remaining provisions hereof. If a court of competent jurisdiction should determine that a provision hereof would be valid or enforceable if a period of time were extended or shortened or a particular percentage were increased or decreased, then such court may make such change as shall be necessary to render the provision in question effective and valid under applicable law.

Article 4. This Certificate of Amendment of the Certificate of Incorporation was authorized by the Board of Directors in accordance with Section 805 of the New York Business Corporation Law.  

IN WITNESS WHEREOF, Power 3 Medical Products, Inc. has caused this certificate to be signed by its Chief Executive Officer as of the 5th day of September, 2007.

POWER 3 MEDICAL PRODUCTS, INC.
By:	/s/  Steven B. Rash
Name:	Steven B. Rash
Title:	Chief Executive Officer

EX-10.10

DISTRIBUTOR AGREEMENT

THIS AGREEMENT is made this 24th day of September, 2007, by and between Power3 Medical Products, Inc., with its principal place of business located at 3400 Research Forest Drive, Suite B2-3, The Woodlands, TX 77381 (the "Company") and FINANCIAL ADVISORY HOUSE, MEDICAL DIVISION with an address of P.O. Box 11218, Manama, Kingdom of Bahrain, (the "Distributor").

Whereas Company desires to sell and market its Products (as defined below), and Distributor desires to purchase Company’s Products for resale to customers; and

Whereas the parties desire to enter into a distributorship agreement governing the terms of their relationship:

NOW, THEREFORE, in consideration of the promises hereinafter made by the parties hereto, it is agreed as follows:

ARTICLE I

APPOINTMENT OF DISTRIBUTORSHIP

1.  Distribution Right. The Company hereby appoints and grants Distributor the exclusive and assignable right to sell the Products of the Company ("Products") listed in the then current "Price List" (Exhibit "A" attached hereto) for a time period of six months.   After the initial time period of six months, the Company may change the Agreement to non-exclusive and non-assignable rights to sell the Products listed in the then current “Price List”, if the Distributor fails to meet its forcasted sales objectives, unless notified in writing by the Company to the Distributor otherwise. The distribution right shall be limited to customers who have places of business in, and will initially use the Company's products in the geographic area set forth in Exhibit "B" attached hereto.

2.  Prices. All prices stated are FOB the Company's offices in The Woodlands, TX 77381. Prices do not include transportation costs which shall be borne by Distributor. Prices do not include federal, state or local taxes applicable to the products sold under this Agreement. An amount equal to the appropriate taxes will be added to the invoice by the Company where the Company has the legal obligation to collect such taxes. Distributor shall pay such amount to the Company unless Distributor provides Company with a valid tax exemption certificate authorized by the appropriate taxing authority.

3.  Terms. Terms are net cash upon placement of order for the Blood Collection Kits, except where satisfactory credit is established in which case terms are net thirty (30) days from date of delivery. Terms for the analyzing of the blood serum in the Company’s laboratory are cash upon delivery of results to the physician.  The Company reserves the right to revoke any credit extended at the Company's sole discretion. Distributor agrees to pay such invoices when due regardless of other scheduled deliveries. Invoices not paid within thirty (30) days of the invoice date will have one and one half percent (1-1/2%) per month finance charge assessed against the unpaid balance from the date of invoice until the date of payment.

.  

4.  Competitive Products. Distributor agrees not to represent or sell other products which are deemed to be competitive with the Company's Products unless agreed to by the Company by written notice.

ARTICLE  II

MARKETING AND SUPPORT

1.  Sales. Distributor shall use its best efforts to promote the sale and distribution of the Products and to provide adequate support, which efforts shall include the following:

(a)  Establishing and maintaining appropriate, attractive and accessible premises and facilities for the display and demonstration of the Products;

(b)  Provide an adequate, trained sales and technical staff to promote the sale and support of the Products;

(c)  Undertake promotional campaigns and canvas prospective users to stimulate the sales of the Products;

(d)  Provide Company with forecasts every month of its probability requirements for the next six months for the Products and accessories, such forecasts to be in such manner and on forms to be specified by Company and agreed to by Distributor.

2.  Advertising. Company shall, upon request, assist the Distributor on all advertising, sales promotion, and public relations campaigns to be conducted, including providing Distributor with documentation of previous promotional campaigns conducted in connection with the Products, and shall provide necessary technical information and assistance.

3.  Training. Company shall furnish training of Distributor's sales and technical representatives at various times and locations as shall be designated for this purpose by Company. Enrollment in training courses shall be limited to a reasonable number of persons who shall be sufficiently qualified to take the courses. Distributor shall pay the salaries and all travel and lodging expenses and subsistence of its representatives.

ARTICLE III

DELIVERY

1.  Purchase Orders. Distributor shall order the Products by written notice to Company. Each order shall specify the number of units to be shipped, the type of units to be shipped (as identified by Company model number designations indicated in the Price List) including all optional features, the desired method of shipment and the destination site. Company shall indicate its acceptance of such release by returning a signed copy to Distributor. Company agrees to ship units to Distributor as close as possible to the delivery schedule set forth in each order as accepted by Company, unless Company otherwise indicates in writing. Company shall not be required to honor any release which: (a) specifies a shipping date earlier than Company's then current delivery schedule for the date such release is received by Company and/or (b) specifies a quantity to be delivered in any one month within the current delivery schedule which is greater than one hundr ed percent (100%) of the total quantity shipped in the preceding sixty (60) day period.

2. Product Acceptance. The criterion for acceptance of Company’s Products by Distributor shall be the successful operation of the Products using Company's standard test procedures and diagnostic test programs applicable to the Products involved.

3.  Shipment. All shipments of Products shall be made FOB Company's plant and liability for loss or damage in transit, or thereafter, shall pass to Distributor upon Company's delivery of Products to a common carrier for shipment. Shipping dates are approximate and are based, to a great extent, on prompt receipt by Company of all necessary ordering information from Distributor. Distributor shall bear all costs of transportation and insurance and will promptly reimburse Company if Company prepays or otherwise pays for such expenses. Company shall not be in default by reason of any failure in its performance under this Agreement if such failure results from, whether directly or indirectly, fire, explosion, strike, freight embargo, Act of God or of the public enemy, war, civil disturbance, act of any government, de jure or de facto, or agency or official thereof, material or labor shortage, transportation contingencies, unusually severe weather, d efault of any other manufacturer or a supplier or subcontractor, quarantine, restriction, epidemic, or catastrophe, lack of timely instructions or essential information from Distributor, or otherwise arisen out of causes beyond the control of the Company. Nor shall the Company at any time be liable for any incidental, special or consequential damages.

4.  Delay. Distributor may delay for a period of thirty (30) days upon giving the Company written notice at least fifteen (15) days prior to the scheduled delivery date. In the event distributor delays delivery for more than thirty (30) days with notification as set forth above, or for a period of more than five (5) days written notice, Distributor shall pay to Company, as a service charge, an amount equal to 1/360th of twenty five percent (25%) of the Purchase Price for each day of such delay to be computed from the first day of such delay through the termination of such delay.

5.  Cancellation. Distributor may, at any time prior to the scheduled date of shipment, cancel any or all Products on order upon giving timely written notice and upon payment of the following cancellation charges for each unit cancelled. The cancellation charges, intended as liquidated damages and not penalties, are as follows:

Number of Days Prior to Scheduled Date of Shipment that Notice of Cancellation is Received by Company:	Cancellation Charges Expressed as a Percentage of Purchase Price:
0-5 days	50%
5-15 days	35%
16-30 days	25%
31 days or more	15%

ARTICLE IV

PROPRIETARY RIGHTS

1.  Use of Company Name. Company expressly prohibits any direct or indirect use, reference to, or other employment of its name, trademarks, or trade name exclusively licensed to Company, except as specified in this Agreement or as expressly authorized by Company in writing. All advertising and other promotional material will be submitted to Company at least two weeks in advance and will only be used if Company consents thereto, which consent shall not be unreasonably withheld. Company hereby authorizes and requires Distributor's use of the Company's insignia or lettering which will be on the products at the time of the delivery. Company hereby authorizes the Distributor's use of the legend set forth below. The Company shall submit to the Distributor in writing full particulars prior to any use of the authorized legends, on stationery, invoices, promotion material or otherwise, and shall not proceed with such use unless and until the Company's written approval shall have been received.

Authorized legend shall be the following:

FINANCIAL ADVISORY HOUSE

MEDICAL DIVISION

P.O. Box 11218

Manama, Kingdom of Bahrain

If the authorized legend is used on any stationery, invoices, promotion material or otherwise by Distributor, Distributor will, on termination of this Agreement, or upon request of Company, discontinue the use of such legend on any stationery, invoices, promotion material or otherwise and thereafter will not use, either directly or indirectly in connection with its business, such legend or any other names, titles of expressions so nearly resembling the same as would likely lead to confusion or uncertainty, or to deceive the public.

2.  Patent Indemnity. Company agrees, at its own expense, to indemnify, defend and hold harmless each Distributor and its customers from and against every expense, damage, cost and loss (including attorneys' fees incurred) and to satisfy all judgments and decrees resulting from a claim, suit or proceeding insofar as it is based upon an allegation that the Products or any part thereof furnished by Company or any process which is practiced in the customary use of the Products is or has been infringing upon any patent, copyright or proprietary right, if Company is notified promptly of such claim in writing and given authority, and full and proper information and assistance (at Company's expense) for the defense of same. In case the Equipment, or any part thereof, in such suit is held to constitute an infringement and the use of said Products or part is enjoined, Company shall, in its sole discretion and at its own expense, either procure for the indemnitee the right to continue using said Products or part or replace or modify the same with nonperformance or capacity or affect its compatibility with the hardware or firmware comprising the Products or the software utilized thereon.

3.  Drawings and Data. The Company normally supplies all necessary data for the proper utilization of its Product. Portions of this data are proprietary in nature and will be so marked. The Distributor agrees to abide by the terms of such markings and to be liable for all loss or damage incurred by the Company as a result of the improper or unauthorized use of such data. The Company retains for itself all proprietary rights in and to all designs, scientific details, and other data pertaining to any Products specified in the contract and to all discoveries, inventions, patent rights, etc., arising out of work done in connection with the contract and to any and all Products developed as a result thereof, including the sole right to manufacture any and all such products. The Distributor shall not contact the Company's suppliers, or any other person, for the purpose of manufacture.

4. Title to Products and Documentation Package. Distributor acknowledges that the Products and documentation listed in Schedule 1 are the property of Company, and that the products are being made available to Distributor in confidence and solely on the basis of its confidential relationship to Company, Distributor agrees not to print, copy, provide or otherwise make available, in whole or in part, any portion of an original or modified Product Documentation Package or related materials.

ARTICLE V

WARRANTY

1.  Product Warranty. Company warrants that Distributor shall acquire Products purchased hereunder free and clear of all liens and encumbrances except for Company's purchase money security interest defined in Articles I, 4, above. Company further warrants all Products to be free from defects in material or workmanship under normal use and service for a period of [e.g., ninety (90) days] from the date of delivery. All replacements of Products covered by this warranty must be done at Company's laboratory, or other such warranty facilities of Company as designated by Company unless Company specifically directs that this service be performed at another location. Any defect corrected within ninety (90) days and found to be within this scope of the warranty will be replaced by Company and all charges for labor and material, will be borne by Company. If it is determined that either no fault exists in Company, or the damage to Products to be replaced was caused by negligence of Distributor, its agents, employees or

customers, Distributor agrees to pay all charges associated with each such replacement. THIS CONSTITUTES THE SOLE WARRANTY MADE BY COMPANY EITHER EXPRESSED OR IMPLIED. THERE ARE NO OTHER WARRANTIES EXPRESSED OR IMPLIED WHICH EXTEND BEYOND THE FACE HEREOF, HEREIN, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL COMPANY BE LIABLE FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES AND DISTRIBUTOR'S REMEDIES SHALL BE LIMITED TO REPLACEMENT OF NONCONFORMING UNITS.

2.  Misuse of Product. Any tampering, misuse or negligence in handling or use of Product renders the warranty void. Further, the warranty is void if, at any time, Distributor attempts to make any internal changes to any of the components of the Product:  UTILIZATION OF THE PRODUCTS THAT RENDERS THIS WARRANTY VOID WILL BE DEFINED TO INCLUDE ALL OF THE POSSIBILITIES DESCRIBED IN THIS PARAGRAPH, TOGETHER WITH ANY PRACTICE WHICH RESULTS IN CONDITIONS NOT EXPRESSLY SPECIFIED FOR THE PRODUCTS.

3. Force Majeure.  Company shall not be liable for damages resulting from delays in shipment or inability to ship due to normal production and shipment delays or those resulting from acts of God, fires, floods, wars, sabotage, terrorists attacks, accidents, labor disputes or shortages, plant shutdown or equipment failure, voluntary or involuntary compliances with any law, order, rule or regulation of governmental agency or authority; or inability to obtain material (including power and fuel), equipment or transportation, or arising from any other contingency, circumstance or event beyond control of the Company.

4.  Limitation of Liability.  No claims of any kind, whether as to Products delivered or for nondelivery of Products from Company, and whether arising in tort or contract, shall be greater in amount than the purchase price of the Products in respect of which such damages are claimed:  and the failure to give notice of the claim to Company where the order was placed within sixty (60) calendar days from the date fixed for delivery shall constitute a waiver by Distributor of all claims in respect of such Products.  In no event shall Company be liable for special, indirect or consequential damages.  Any claim with respect to defective Products or breach of warranty must be promptly made and shall apply to Products properly used, stored, applied and maintained.

ARTICLE VI

DURATION OF AGREEMENT

1.  Term. The term of this Agreement shall be for three years from the date hereof, unless sooner terminated. Termination shall not relieve either party of obligations incurred prior thereto.

2.  Termination. This Agreement may be terminated only:

(a)  By either party for substantial breach of any material provision of this Agreement by the other, provided due notice has been given to the other of the alleged breach and such other party has not cured the breach within  thirty (30) days thereof; or

(b)  By the Company if: there is an unacceptable change in the control or management of the Distributor; if the Distributor ceases to function as a going concern or makes an assignment for the benefit of creditors; if a petition in bankruptcy is filed by or against the Distributor, resulting in an adjudication of bankruptcy; or, if the Distributor fails to pay its debts as they become due and provided due notice has been given by the Company to the Distributor and the Distributor has not cured such breach within thirty (30) days thereof;

(c)  By Company at the end of the third year of this Agreement and having given to Distributor ninety (90) days advanced written notice of its intention to so terminate;

(d)  Upon termination of this Agreement all further rights and obligations of the parties shall cease, except that Distributor shall not be relieved of (i) its obligation to pay any monies due, or to become due, as of or after the date of termination, and (ii) any other obligation set forth in this Agreement which is to take effect after the date of termination. Distributor shall have the right to continue to purchase spare parts in accordance with Article VI.

ARTICLE VIII

NOTICES

1.  Notice or Communication. Any notice or communication required or permitted hereunder (other than Administrative Notice) shall be in writing and shall be sent by registered mail, return receipt requested, postage prepaid and addressed to the addresses set forth below or to such changed address as any party entitled to notice shall have communicated in writing to the other party. Notices and communications to Company shall be sent to:

Power3 Medical Products, Inc.

3400 Research Forest Drive

Suite B2-3

The Woodlands, TX 77381

Notices and communications to Distributor shall be sent to address shown on first page of this Agreement. Any notices or communications to either party hereunder shall be deemed to have been given when deposited in the mail, addressed to the then current address of such party.

2.  Date of Effectiveness. Any such notice or communication so mailed shall be deemed delivered and effective seventy two (72) hours after mailing thereof in the United States.

ARTICLE IX

GENERAL PROVISIONS

1.  Relationship of Parties. The relationship between the parties established by this Agreement shall be solely that of vendor and vendee and all rights and powers not expressly granted to the Distributor are expressly reserved to the Company. The Distributor shall have no right, power or authority in any way to bind the Company to the fulfillment of any condition not herein contained, or to any contract or obligation, expressed or implied.

2.  Independence of Parties. Nothing contained in this Agreement shall be construed to make the Distributor the agent for the Company for any purpose, and neither party hereto shall have any right whatsoever to incur any liabilities or obligations on behalf or binding upon the other party. The Distributor specifically agrees that it shall have no power or authority to represent the Company in any manner; that it will solicit orders for products as an independent contractor in accordance with the terms of this Agreement; and that it will not at any time represent the Company in any manner; that it will solicit orders for products as an independent contractor in accordance with the terms of this Agreement; and that it will not at any time represent orally or in writing to any person or corporation or other business entity that it has any right, power or authority not expressly granted by this Agreement.

3.  Indemnity. The Distributor agrees to hold the Company free and harmless from any and all claims, damages, and expenses of every kind or nature whatsoever (a) arising from acts of the Distributor; (b) as a direct or indirect consequence of termination of this Agreement in accordance with its terms; or (c) arising from acts of third parties in relation to products sold to the Distributor under this Agreement,

including, but not limited to execution of liens and security interests by third parties with respect to any such products.

4.  Assignment. This Agreement constitutes a personal contract and Distributor shall not transfer or assign same or any part thereof without the advance written consent of Company.

5.  Entire Agreement. The entire Agreement between the Company and the Distributor covering the Equipment is set forth herein and any amendment or modification shall be in writing and shall be executed by duly authorized representatives in the same manner as this Agreement. The provisions of this Agreement are severable, and if any one or more such provisions are determined to be illegal or otherwise unenforceable, in whole or in part, under the laws of any jurisdiction, the remaining provisions or portions hereof shall, nevertheless, be binding on and enforceable by and between the parties hereto. Any provisions, terms or conditions of Distributor's Purchase Orders which are, in any way contradicting of this Agreement, except those additional provisions specifying quantity and shipping instructions, shall not be binding upon Company and shall have no applicability to the sale of goods by Company to Distributor.

6.  Applicable Law. This Agreement shall be governed by the laws of the State of Texas and the counties of Harris or Montgomery shall serve as the proper venues for suit and/or dispute resolution.  The Company’s corporate office is 3400 Research Forest Drive, Suite B2-3, The Woodlands, TX 77381. All payments hereunder shall be made at Company's offices at 3400 Research Forest Drive, Suite B2-3, The Woodlands, TX 77381. Company's rights granted hereby are cumulative and in addition to any rights it may have at law or equity.

7.  Separate Provisions. If any provision of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall in no way be affected or impaired thereby.

ARTICLE X

ASSIGNABILITY

The Company may assign this Agreement as part of:

1.  A sale or other transfer of the Company’s entire business; or

2.  A sale or other transfer of that part of the Company’s business to which the Company granted hereby relates;

The Company shall give the Distributor thirty (30) days prior written notice of such assignment, including the new contact information of assignee.  The Distributor will be bound by all the terms and provisions of this Agreement.  Upon such assignement of this Agreement by such assignee, the term “Distributor” as used herein shall include such assignee.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized officers as of the date and year indicated above.

Power3 Medical Products, Inc.

By: //Steven B. Rash

Date: 10/1/07

Steven B. Rash

Chairman and CEO

DISTRIBUTOR

By: // Ebrahim A. Al-Lengawi

Date: 29/9/2007

Ebrahim A. Al-Lengawi

CEO and Chairman

EXHIBIT A

PRICE LIST AS OF ______, 2007

1.  Order No. 1  

 [Price per Unit]

2.

3.

4.  Future Orders

EXHIBIT B

DESCRIPTION OF THE TERRITORY

Subject to the provisions of Article 1and Option 1 of this Agreement, the following country or countries shall constitute the Territory:

Saudi Arabia

Oman

Uttar

Kuwait

Syria

Jordan

Lebanon

Iraq

Bahrain

Yemen

Egypt

United Arab Emirates

EX-10.11

EXHIBIT 10.11

Bio-Rad Laboratories Corporate Offices
1000 Alfred Nobel Drive
Hercules, California 94547
Telephone: (510) 724-7000
Facsimile: (510) 741-5815      
 
Cindy Barlow
Executive Legal Assistant
Direct: (510) 741-6184
E-Mail: cindy_barlow@biorad.com

November 1, 2007

VIA FEDERAL EXPRESS

Linda Thomas

Billings & Solomon, P.L.L.C.

2777 Allen Parkway

Houston, Texas 77019

Subject:

Settlement Agreement and Release of All Claims

Between Bio-Rad Laboratories, Inc. and

Power3 Medical Products, Inc.

Dear Mr. Thomas:

At the request of Adam Pressman, please find enclosed one (1) fully executed and notarized original of the above-identified document for your records.

Thank you for your assistance in this matter.

Kind regards,

Cindy Barlow

Executive Legal Assistant

Enclosure

Cause No. 06-07-06818

POWER3 MEDICAL PRODUCTS, INC.	§	IN THE DISTRICT COURT OF
Plaintiff	§
	§
vs.	§	MONTGOMERY COUNTY, TEXAS
	§
BIO-RAD LABORATORIES, INC.	§
Defendant	§	359th JUDICIAL DISTRICT

SETTLEMENT AGREEMENT AND RELEASE OF ALL CLAIMS

This Settlement Agreement (hereinafter the “Agreement”) is entered into between POWER3 MEDICAL PRODUCTS, INC. (hereinafter “Plaintiff”) and BIO-RAD LABORATORIES, INC. (hereinafter “Defendant”). Plaintiff and Defendant are collectively the “Parties” to this Agreement.

RECITALS

WHEREAS Plaintiff sued Defendant in a lawsuit styled Power3 Medical Products, Inc. v. Bio-Rad Laboratories, Inc., Cause No. 06-07-06818, In the 359^th Judicial District Court of Montgomery County, Texas, (Hereinafter the “Lawsuit”); and

WHEREAS Defendant has not appeared, answered or filed a counterclaim in the Lawsuit; and

WHEREAS the Parties have mutually determined that it is in their best interest to resolve their claims and potential counterclaims in the manner set forth in this Agreement without incurring the expense, disruption and acrimony created by litigation; and

WHEREAS, the Parties have compromised and reached a full, final and complete settlement of all claims and potential counterclaims, whether asserted or not, relating to or arising from the causes of action in Plaintiffs’ Lawsuit; and

WHEREAS by this Agreement, the Parties desire to release each other from each and every claim, counterclaim, potential claim or potential counterclaim or other damage which has been or may be experienced in the future arising in any manner, directly or indirectly from the subject matter of the Lawsuit; and

WHEREAS the Parties agree this Agreement is a full and complete compromise and settlement of all disputed and contested matters between them and by entering into this Agreement or undertaking any performance or obligation under it, they do not admit to any liability or responsibility for any claim, counterclaim, act or omission alleged, or which might be or might have been alleged. Plaintiff and Defendant each seeks and hereby obtains peace, each for its own reasons; and

Settlement Agreement and Release of All Claims Page 1 of 6

WHEREAS it is agreed between Plaintiff and Defendant, for the purposes of this Agreement, the terms “claim,” “counterclaim” or “potential counterclaim” means all theories of recovery of whatever nature, whether known or unknown, whether stated or unstated, now or in future recognized by the law or equity of any jurisdiction related to the relationship between the Parties. The term includes, but is not limited to, causes of action, charges, suits, expenses, judgments, indebtedness, losses, claims, liabilities, and demands, whether arising in equity or under any contract, guaranty or any other agreement, tort or any statute, state or federal, related to the subject matter of the Lawsuit; and

WHEREAS the Parties each represent and warrant that the above recitals are true and correct and are made a part hereof.

NOW THEREFORE, for and in consideration of the mutual promises, representations, and consideration set forth herein, the sufficiency of whish is hereby expressly acknowledged by the Parties, the undersigned compromise and agree as follows:

1.

Settlement Terms.

a.

Promptly upon execution of this Agreement by both Parties, Plaintiff will file the original of the Agreement with the clerk of the 359^th Judicial District Court of Montgomery County, Texas.

b.

As soon thereafter as reasonably practicable, and at a time and date to be mutually agreed upon, ownership and possession of the FX Imager, Serial No. 443BR170 and its accessories Sample Tray (1707811), SCSI Card and Cable (1707611) and Quantity One Software (1708601) will be transferred from Plaintiff to Defendant at Plaintiff’s offices at 3400 Research Forest Drive, The Woodlands, Texas 77381.

c.

As soon thereafter as reasonably practicable, Plaintiff will file a Motion for Nonsuit with Prejudice in the 259^th Judicial District Court of Montgomery County, Texas.

d.

Release.  In consideration of (1)(a)-(c) above, as well as other good consideration, the Parties shall RELEASE AND FOREVER DISCHARGE AND ACQUIT each other, their attorneys and all agents, affiliates, employees, clients, insurers, officers, directors, predecessors, successors, heirs, assignees, shareholders and representatives from any and all claims, demands, suits, costs, contracts, agreements, obligations, known or unknown, fixed or contingent, liquidated or unliquidated, whether or not asserted in the Lawsuit, arising from or relating to the claims, potential counterclaims, events, and transactions arising in any manner, directly or indirectly related to the subject matter of the Lawsuit; and

Settlement Agreement and Release of All Claims Page 2 of 6

2.

Parties’ Representations and Warranties.  Each Party to this Agreement represents and warrants to the other Party (which representations and warranties shall survive the execution and delivery of this Agreement) the following:

a.

Each Party possesses ll capacities, including but not limited to, the legal capacity and authority to execute this Agreement;

b.

Other than the representations contained in this Agreement, neither Party has received or relied upon any oral or written representation of the other Party or and of the other Party’s employees, agents, partners, or representatives regarding any fact in executing this Agreement;

c.

Each Party has had ample opportunity to receive legal counsel with respect to this Agreement and each has reviewed with such legal counsel this Agreement, its contents and the advisability of making this Agreement;

d.

This Agreement represents the entire agreement between the Parties, and its supersedes all prior and contemporaneous oral and written agreements;

e.

Each Party is executing this Agreement of its own free will, absent duress or coercion by any other person, Party, or circumstance;

g.

Each Party represents and warrants to the other Party that it owns and has not assigned or otherwise transferred to any person, party, or entity any of the claims, counterclaims, potential claims or potential counterclaims being released hereby or any portion thereof;

h.

There is no impediment to the full and faithful observance of all terms of the Agreement; and

i.

The execution of this Agreement is only for the purpose of the settlement and compromise of doubtful, disputed claims, and the execution of or any action taken pursuant to this Agreement is not to be construed, considered, or used as an admission of liability or fault on the part of the persons or entities taking the action or being released in this Agreement.

4.

MUTUAL RELEASE.  FOR THE CONSIDERATION STATED HEREIN, PLAINTIFF AND DEFENDANT HEREBY AGREE TO FOREVER RELEASE AND DISCHARGE EACH OTHER, THEIR AGENTS, AFFILIATES, EMPLOYEES, CLIENTS, INSURERS, OFFICERS, DIRECTORS, SHAREHOLDERS, PARTNERS, PREDECESSORS, SUCCESSORS,HEIRS, ASSIGNEES, AND REPRESENTATIVES OF THE OTHER PARTY FROM ANY AND ALL CLAIMS, DEMANDS, SUITS, COSTS, CONTRACTS, AGREEMENTS, OR OBLIGATIONS, KNOWN OR UNKNOWN, FIXED OR CONTINGENT, LIQUIDATED OR UNLIQUIDATED, WHETHER OR NOT ASSERTED OR OTHERWISE MADE KNOWN TO THE OTHER

Settlement Agreement and Release of All Claims Page 3 of 6

PARTY, ARISING FROM OR RELATING TO THE CLAIMS AND EVENTS WHICH ARE THE SUBJECT MATTER OF THE LAWSUIT OR THAT RELATE IN ANY MANNER WHATSOEVER TO THE SUBJECT MATTER OF THE LAWSUIT OR ANY CONDUCT OR ACTS TAKEN BY ANY AGENT, CLIENT, PARTNER, OR REPRESENTATIVE OF THE PARTIES FROM THE BEGINNING OF TIME THROUGH AND INCLUDING THE DATE OF EXECUTION OF THIS AGREEMENT.

5.

Entire Agreement.  This Agreement contains the entire understanding and agreement of the Parties concerning the compromise and settlement of the released claims, counterclaims, potential claims and potential counterclaims and is a final, complete, and exclusive statement of such agreement and the terms thereof. This Agreement supersedes prior understandings and agreements, if any, between the Parties. All prior or contemporaneous oral or written communications, conversations, negotiations, agreements, representations, promises, covenants, and warranties, if any, concerning the compromise and settlement of the released claims are merged into this Agreement and, if not expressly set forth herein, are forever waived and are void. This Agreement is an integrated written contract that may not be varied, altered, amended, modified, contradicted, or otherwise changed, exceptin a writing executed by both Parties.

6.

No Construction Against a Drafter.  Both Parties to this Agreement cooperated in the drafting and preparation of this Agreement. Therefore, any ambiguities in this Agreement, shall not be construed for or against either Party.

7.

Notice.  Any notice to be given under this Agreement shall be either delivered personally, mailed by postage prepaid Certified Mail, Return Receipt Requested, transmitted by facsimile or sent by daily delivery service. Such notices shall be deemed to be given on the date of personal delivery, the date the notice is deposited with the United States Postal Office, transmitted by facsimile or one business day after such notice is tendered to any such daily delivery service. Unless otherwise specified in writing all notices and other communications in writing shall be given to the respective parties as set forth below.

If to Plaintiff:	If to Defendant:
Richard P. Martini		General Counsel
Linda Thomas		Bio-Rad Laboratories, Inc.
Billings & Solomon, P.L.L.C.		1000 Alfred Nobel Dr.
2777 Allen Parkway		Hercules, CA 94547
Houston, Texas 77019		510-741-6005
713) 528-0980 — Facsimile		60000
		519-741-5815 — Facsimile

Settlement Agreement and Release of All Claims Page 4 of 6

8.

Descriptive Headings.  The descriptive headings of the several sections of this Agreement are inserted for reference purposes only and do not constitute part of this Agreement, nor are they intended in any way to affect the meaning or interpretation of the Agreement.

9.

Binding.  The Agreement shall be binding upon,and shall inure to the benefit of the Parties, and their respective heirs, executives, administrators, legal representatives, affiliates, agents, successors, and assigns.

10.

Severability.  In case any one or more of the provisions contained in this Agreement shall be invalid, illegal, or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be effected thereby. It is the intention of the parties that if any provision is held to be illegal, invalid, or unenforceable, there will be added in lieu thereof a provision as similar to such provision as possible to be legal, valid, and enforceable.

11.

Choice of Law and Venue.  This Agreement shall be interpreted and construed in accordance with and shall be governed by the laws of the State of Texas. The venue over any dispute concerning the Agreement shall be proper in Montgomery County, Texas, and the parties hereby agree that any dispute concerning the Agreement shall be brought in the District Court for Montgomery County, Texas. This Agreement shall be fully performed in Montgomery County, Texas.

IN WITNESS WHEREOF, the undersigned parties have executed or caused to be executed this Agreement on the date indicated.

PLAINTIFF:		DEFENDANT
POWER3 MEDICAL PRODUCTS, INC.		BIO-RAD LABORATORIES, INC.
a Nevada Corporation		a Delaware Corporation
By:	/s/ Steven B. Rash	By:	/s/ Sanford Wadler
	Steven B. Rash		Name: Sanford Wadler
	Title: C.E.O.		Title: Vice President and
	Date: 10/24/07		General Counsel
			Date: 10/24/07

Settlement Agreement and Release of All Claims Page 5 of 6

STATE OF TEXAS	§
	§
COUNTY OF MONTGOMERY	§

BEFORE ME, the undersigned authority, on this 24^th day of October, 2007 personally appeared Steven B. Rash, known to me to be the C.E.O. of Power3 Medical Products, Inc. and who acknowledged to me that he/she executed the foregoing Agreement for the purposes stated therein.

	[SEAL]	CLARISSA DIAZ
		NOTARY PUBLIC, STATE OF TEXAS
/s/ Clarissa Diaz		MY COMMISSION EXPIRES
Notary Public		FEB. 25, 2010
My Commission expires:

Settlement Agreement and Release of All Claims Page 6 of 6

California All-Purpose Acknowledgment

State of California

                                                       SS.

County of Contra Costa

On November 1, 2007 before me, Cindy Barlow, Notary Public personally appeared Sanford S. Wadler,

ý

personally known to me — OR —

¨

proved to me on the basis of satisfactory evidence

to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument.  

[SEAL]	CINDY BARLOW Commission # 1547367 Notary Public – California Contra Costa County My Comm. Expires Feb. 23, 2009	WITNESS my hand and official seal.
		/s/ Cindy Barlow
		Signature of Notary Public

OPTIONAL

Though the information below is not required by law, it may prove valuable to persons relying on the

document and could prevent fraudulent removal and reattachment of this form to another document:

Description of Attached Document

Title of Type of Document: Settlement Agreement and Release of All Claims

Document Date: October 24, 2007

Number of Pages: 6

Signer(s) Other Than Named Above:                                                                                    

Capacity(ies) Claimed by Signer(s):

Signer(s) Name: Sanford S. Wadler

¨

Individual

¨

Corporate Officer Title(s): Vice President and General Counsel

¨

Partner - ¨  Limited     ¨  General

¨

Attorney-in-Fact

¨

Trustee

¨

Guardian or Conservator

¨

Other:                                                                                          

Signor Is Representing: Bio-Rad Laboratories, Inc.

EX-10.12

EXHIBIT 10.12

POWER3 MEDICAL PRODUCTS, INC.

STATEMENT OF COMPANY POLICY

REGARDING CONFIDENTIALITY AND SECURITIES

TRADES BY COMPANY PERSONNEL

1.

CONFIDENTIALITY OF INSIDE INFORMATION

1.1

Directors, officers, employees and consultants (“Company Personnel”) of Power3 Medical Products, Inc. (the “Company”), who come into possession of material non-public information concerning the Company must safeguard the information and not intentionally or inadvertently communicate it to any person (including family members and friends) unless the person has a need to know the information for legitimate, Company-related reasons. This duty of confidentiality is important both as to the Company’s competitive position and with respect to the securities laws applicable to the Company as a public company.

1.2

Consistent with the foregoing, all Company Personnel should be discreet with inside information and not discuss it in public places where it can be overheard such as elevators, restaurants, taxis and airplanes. Such information should be divulged only to persons having a need to know it in order to carry out their job responsibilities. To avoid even the appearance of impropriety, Company Personnel should refrain from providing advice or making recommendations regarding the purchase or sale of the Company’s securities.

2.

TRADING ON INSIDE INFORMATION

2.1

Prohibition of Insider Trading

If a director, officer, employee or consultant has material non-public information relating to the Company, it is our policy that neither that person nor any related person may buy or sell securities of the Company or engage in any other action to take advantage of, or pass on to others, that information. This policy also applies to information relating to any other company, including our customers or suppliers, obtained in the course of employment.

Transactions that may be necessary or justifiable for independent reasons (such as the need to raise money for an emergency expenditure) are no exception. Even the appearance of an improper transaction must be avoided to preserve our reputation for adhering to the highest standards of conduct.

Twenty-Twenty Hindsight.   If your securities transactions become the subject of scrutiny, they will be viewed after-the-fact with the benefit of hindsight. As a result, before engaging in any transaction you should carefully consider how regulators and others might view your transaction in hindsight.

1

Transactions By Family Members.   The very same restrictions that apply to you also apply to your immediate family members and others living in your household. Employees are expected to be responsible for the compliance of their immediate family and personal household.

Tipping Information to Others.   Whether the information is proprietary information about our Company or information that could have an impact on our stock price, Company Personnel must not pass the information on to others. Insider trading penalties apply to a tipper, whether or not such individual derives any benefit from another’s actions.

2.2

Definition of Material Non-Public Information

Definition.   Material non-public information is any information which has not been publicly disseminated that a reasonable investor would consider important in a decision to buy, hold or sell stock. In short, material non-public information is any information which, if publicly disclosed, could reasonably affect the price of the stock.

Examples.   Common examples of information that will frequently be regarded as material are: projections of future earnings or losses; current financial performance; news of a pending or proposed merger, acquisition or tender offer; news of a significant sale of assets or the disposition of a subsidiary; significant product development; changes in divided policies or the declaration of a stock split or the offering of additional securities; changes in management; significant new products; impending bankruptcy or financial liquidity problems; and the gain or loss of a substantial customer or supplier. Either positive or negative information may be material.

2.3

The Consequences of Violations

The consequences of insider trading violations can be staggering.

For individuals who trade on inside information (or tip information to others):

-

A civil penalty of up to three times the profit gained or loss avoided;

-

A criminal fine (no matter how small the profit) of up to $5 million; and

-

A jail term of up to twenty years.

For a company (as well as possibly any supervisory person) that fails to take appropriate steps to prevent illegal trading:

-

A civil penalty not exceeding the greater of $1 million or three times the amount of the profit gained or loss avoided as a result of a violation; and

-

A criminal penalty of up to $25 million.

2

Moreover, if an employee violates the Company’s insider trading policy, Company imposed sanctions, including dismissal for cause, could result from failing to comply with the Company’s policy or procedures. Needless to say, any of the above consequences, even an SEC investigation that does not result in prosecution, can tarnish one’s reputation and irreparably damage a career.

2.4

When Information Is Public

It is also improper for an officer, director, employee or consultant to enter a trade immediately after the Company has made a public announcement of material information, including earnings releases. Because the Company’s stockholders and the investigating public should be afforded the time to receive the information and act upon it, as a general guide such an individual should not engage in any transactions until the third business day after the information has been publicly released.

2.5

Additional Prohibited Transactions

Because the Company believes it is improper and inappropriate for any Company Personnel to engage in short-term or speculative transactions involving Company stock, it is the Company’s policy that Company Personnel should not engage in any of the following activities with respect to securities of the Company:

(1)

Trading in securities on a short-term basis. Any Company stock purchased in the open market must be held for a minimum of six months and ideally longer. (Note that the SEC’s short-swing profit rule already prevents certain officers and directors from selling any Company stock within six months of a purchase. We are simply expanding this rule to all employees.)

(2)

Purchase of Company stock on margin.

(3)

Short sales.

2.6

Company Assistance

Any person who has any questions about specific transactions may obtain additional guidance from the Principal Accounting Officer’s office. However, the ultimate responsibility for adhering to the Policy Statement and avoiding improper transactions rests with the individual.

2.7

Pre-Clearance Of All Trades By Directors, Officers, And Other Key Personnel; Blackout Period

To provide assistance in preventing inadvertent violations and avoiding even the appearance of an improper transaction (which could result, for example, where an officer engages in a trade while unaware of a pending major development), the Company is implementing the following procedures and restrictions:

3

(1)

All transactions in Company securities (acquisitions, dispositions, transfers, etc.) by directors, officers, managers and all accounting and administrative personnel, must be pre-cleared by the office of the Principal Accounting Officer. The subject individuals should contact the Principal Accounting Officer in advance. This requirement does not apply to stock option exercises, but would cover market sales of option stock.

(2)

Such persons are required not to make trades in Company securities in the period commencing 15 days prior to the end of each quarter and ending on the third business day after results for the quarter are publicly released (the “Blackout Period”). The Company may notify such persons of other Blackout Periods when necessary.

2.8

Certifications

Employees will be required to certify their understanding of and intent to comply with this Policy Statement. Officers, directors and other key employees may be required to certify compliance on an annual basis.

2.9

Prohibitions of Officers Directors and 5% Stockholders

Officers Directors and holders of 5% or more of the Company’s securities (“Insiders”) have a special fiduciary responsibility to other holders of the Company’s securities who cannot exert influence over the day to day operations of the Company.  Therefore, persons or entities that fall within one of these categories should refrain from certain activity and adhere to certain procedures so as to avoid any appearance of impropriety. Specifically:

(1)

Insiders must not accept remuneration or other consideration from third parties for activities and accomplishments done or achieved for the benefit of the Company.  In other words, Insiders cannot enrich themselves at the expense of the Company or receive “kickbacks” from third parties for activities undertaken for the benefit of the Company.

(2)

In an instance where an Insider enters into a transaction with the Company (i.e., if the Insider owns property that the Company leases or lends or borrows money from the Company) such transaction must be made on commercially reasonable terms and must be approved by a majority of the disinterested board of directors.

(3)

If an insider is to receive special compensation from the Company for a particular accomplishment, such compensation must first be approved by the compensation committee who must immediately inform the full board of directors of the terms.  The disinterested board members must ratify any such special compensation package.

4

RECEIPT/ACKNOWLEDGMENT

I acknowledge that I have received a copy of the Statement of Company Policy Regarding Confidentiality and Securities Trades by Company Personnel and have read or had it read to me.  If I have any questions regarding this policy, I understand that it is my responsibility to ask my supervisor or other member of management about them.  I agree to comply with these and any other Company policies regarding confidentiality and securities trades by company personnel, as those policies might be promulgated and amended from time to time.

Date	Employee Signature
	Employee Name Printed

Note to Supervisor: Following the employee’s signature, place this page in the employees personnel file.

5

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Steven B. Rash certify that:

1.

I have reviewed this quarterly report on Form 10-QSB of Power3 Medical Products, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for the periods presented in this report;

4.

The small business issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have:

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.

Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls, as of the end of the period covered by this report based on such evaluation; and

c.

Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

5.

The small business issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the small business issuer’s auditors and audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):

a.

All significant deficiencies in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize, and report financial information; and

b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.

Date:  November 14, 2007

By:	/s/ STEVEN B. RASH
	Steven B. Rash
	Chairman and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Marion J. McCormick certify that:

1.

I have reviewed this quarterly report on Form 10-QSB of Power3 Medical Products, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for the periods presented in this report;

4.

The small business issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have:

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.

Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls, as of the end of the period covered by this report based on such evaluation; and

c.

Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

5.

The small business issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the small business issuer’s auditors and audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):

a.

All significant deficiencies in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize, and report financial information; and

b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.

Date:  November 14, 2007

By:	/s/ MARION J. MCCORMICK
	Marion J. McCormick
	Chief Accounting Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Power3 Medical Products, Inc. (the "Company") on Form 10-QSB for the period ending September 30, 2007, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Steven B. Rash, Chief Executive Officer of the Company, certify, to the best of my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.

The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

November 14, 2007

By:	/s/ STEVEN B. RASH
	Steven B. Rash
	Chairman and Chief Executive Officer
	Power3 Medical Products, Inc.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Power3 Medical Products, Inc. (the "Company") on Form 10-QSB for the period ending September 30, 2007, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Marion J. McCormick, Chief Accounting Officer of the Company, certify, to the best of my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.

The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable of the Securities Exchange Act of 1934; and

2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

November 14, 2007

By:	/s/ MARION J. MCCORMICK
	Marion J. McCormick
	Chief Accounting Officer
	Power3 Medical Products, Inc.