10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED June 30, 2009

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

FOR THE TRANSITION PERIOD FROM ___________ TO _____________.

Commission file number: 0-24921

POWER 3 MEDICAL PRODUCTS, INC.

(Exact name of registrant as specified in its charter)

New York	65-0565144
(State or other Jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

3400 Research Forest Drive, Suite B2-3

The Woodlands, Texas

(Address of principal executive offices)

(281) 466-1600

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes x   No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§323.405 of this chapter) during the preceding 12 months (or shorter period that the registrant was required to submit and post such files).  Yes o   No o

Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer o
Non-accelerated filer   o    (do not check if a smaller reporting company)	Smaller reporting company x

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

The number of shares of the registrant’s common stock outstanding as of August 11, 2009, was 380,472,766.

POWER 3 MEDICAL PRODUCTS, INC.

FORM 10-Q

INDEX

PART I – FINANCIAL INFORMATION	3
Item 1 – Financial Statements	3
Item 2- Management’s Discussion And Analysis Of Financial Condition And Results Of Operations	22
Item 3 - Quantitive And Qualitative Disclosures About Market Risk	24
Item 4 – Controls and Procedures	24
PART II – OTHER INFORMATION	25
Item 1 – Legal Proceedings	25
Item 1A – Risk Factors	26
Item 2 - Unregistered Sales of Equity Securities	26
Item 3 – Defaults Upon Senior Securities	27
Item 4 - Submission of Matters to a Vote of Security Holders	28
Item 5 – Other Information	28
Item 6 – Exhibits	28
SIGNATURES	29

2

PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

POWER 3 MEDICAL PRODUCTS, INC.

(A Development Stage Enterprise)

BALANCE SHEETS

	June 30, 2009 (Unaudited)		December 31, 2008
ASSETS
Cash and cash equivalents	$	19,312	$	8,331
Other current assets		25,584		6,645
Total current assets		44,896		14,976
Furniture, fixtures and equipment, net of accumulated depreciation of $111,464 and $101,253 at June 30, 2009 and December 31, 2008, respectively		48,542		6,253
Deposits		5,599		5,450
Total non-current assets		54,141		11,703
TOTAL ASSETS	$	99,037	$	26,679

3

POWER 3 MEDICAL PRODUCTS, INC.

(A Development Stage Enterprise)

BALANCE SHEETS

(Continued)

	June 30, 2009 (Unaudited)			December 31, 2008
LIABILITIES AND STOCKHOLDERS' DEFICIT
Accounts payable	$	1,022,568		$	1,043,682
Notes payable – in default		451,000			451,000
Notes payable – net of unamortized discount of $26,900 and $47,736 at June 30, 2009 and December 31, 2008, respectively		114,869			64,174
Notes payable to related parties		68,927			68,927
Convertible debentures-in default, net of unamortized discount of $-0- and $97,036 at June 30, 2009 and December 31, 2008, respectively		409,466			767,974
Convertible debentures, net of unamortized discount of $23,341 and $577,668 at June 30, 2009 and December 31, 2008, respectively		106,659			442,332
Convertible debentures – related party, net of unamortized discount of $34,540 and $672,836 at June 30, 2009 and December 31, 2008, respectively		95,211			696,599
Other current liabilities		483,995			617,486
Derivative liabilities		1,508,898			1,352,247
Total current liabilities		4,261,593			5,504,421
TOTAL LIABILITIES		4,261,593			5,504,421
STOCKHOLDERS' DEFICIT
Preferred Stock - $0.01 par value: 50,000,000 shares authorized; 1,500,000 shares issued and outstanding as of June 30, 2009 and December 31, 2008		1,500			1,500
Common Stock-$0.001 par value: 600,000,000 shares authorized; 365,645,098 and 149,959,044 shares issued and outstanding as of June 30, 2009 and December 31, 2008, respectively		365,645			149,960
Additional paid in capital		67,169,695			63,499,938
Stock held in escrow		(24,000	)		(20,000	)
Treasury stock		(16,000	)		-
Common stock payable		144,500			123,286
Common stock subscriptions receivable		(174,166	)		-
Deficit accumulated before entering the development stage		(11,681,500	)		(11,681,500	)
Deficit accumulated during the development stage		(59,948,230	)		(57,550,926	)
TOTAL STOCKHOLDERS' DEFICIT		(4,162,556	)		(5,477,742	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	99,037		$	26,679

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

4

POWER 3 MEDICAL PRODUCTS, INC.

(A Development Stage Enterprise)

STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,						Period from May 18, 2004 to June 30, 2009
	2009			2008			2009			2008
REVENUES:
Sales	$	35,711		$	-		$	168,477		$	-		$	595,726
Total revenue	$	35,711		$	-		$	168,477		$	-		$	595,726
OPERATING EXPENSES:
Employee compensation and benefits		258,737			242,984			276,294			526,905			31,325,806
Professional and consulting fees		544,518			725,794			625,335			811,492			11,928,275
Impairment of Goodwill		-			-			-			-			13,371,776
Impairment of intangible assets		-			-			-			-			179,788
Occupancy and equipment		4,427			23,444			19,126			67,940			687,601
Travel and entertainment		1,963			22,246			2,692			78,702			429,076
Write off lease		-			-			-			-			34,243
Other selling, general and administrative expenses		40,712			48,089			128,716			155,262			862,850
Total operating expenses	$	850,357		$	1,062,557		$	1,052,163		$	1,640,301		$	58,819,415
LOSS FROM OPERATIONS	$	(814,646	)	$	(1,062,557	)	$	(883,686	)	$	(1,640,301	)	$	(58,223,689	)
OTHER INCOME AND (EXPENSE):
Derivative gain/(loss)	$	589,693		$	252,244		$	(156,651	)	$	2,420,860		$	6,866,322
Gain on legal settlement		-			-			-			17,875			36,764
Interest income		-			-			-			575			7,867
Gain/(loss) on settlement of debt		(124,295	)		(2,384	)		(1,008,029	)		(2,384	)		1,001,417
Mandatory prepayment penalty		-			-			-			-			(420,000	)
Other expense		-			-			-			-			(194,886	)
Interest expense		(137,739	)		(197,097	)		(314,835	)		(585,237	)		(5,577,243	)
Total other income and (expense)	$	327,659		$	52,763		$	(1,479,515	)	$	1,851,689		$	1,720,241
NET INCOME/(LOSS)	$	(486,987	)	$	(1,009,794	)	$	(2,363,201	)	$	211,388		$	(56,503,448	)
Deemed dividend		-			-		$	(34,103	)	$	(12,072	)	$	(63,809	)
Net income/(loss) attributable to common stockholders	$	(486,987	)	$	(1,009,794	)	$	(2,397,304	)	$	199,316		$	(56,567,257	)
Net income/(loss) per share – basic and diluted	$	(0.00	)	$	(0.01	)	$	(0.01	)	$	0.00
Weighted average number of shares outstanding		335,461,585			128,055,498			267,016,937			121,821,879

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

5

POWER 3 MEDICAL PRODUCTS, INC.

(A Development Stage Enterprise)

STATEMENT OF STOCKHOLDERS’ DEFICIT

	Common Stock						Preferred Stock
	Shares			Par Value			Shares			Par Value			Addt'l Paid In Capital			Other Equity Items (1)			Retained Earnings			Total
Balances as of beginning of development stage May 18, 2004		14,407,630		$	14,407			3,870,000		$	3,870		$	14,225,974		$	-		$	(11,681,500	)	$	2,562,751
Issued shares for compensation		27,945,000			27,945			-			-			25,423,555			(25,451,500	)		-			-
Issued shares for services		4,910,000			4,910			-			-			4,850,090			(535,000	)		-			4,320,000
Issued shares for acquisition of equipment		15,000,000			15,000			-			-			13,485,000			-			-			13,500,000
Stock option expense		-			-			-			-			626,100			(626,100	)		-			-
Issued shares for cash		242,167			242			-			-			314,575			-			-			314,817
Cancelled shares per cancellation agreement		(160,000	)		(160	)		-			-			(71,840	)		-			-			(72,000	)
Issued shares to convert Series A preferred shares to common shares		3,000,324			3,001			(3,870,000	)		(3,870	)		3,377,974			-			(3,380,975	)		(3,870	)
Stock based compensation		-			-			-			-			-			8,311,012			-			8,311,012
Net reclassification of derivative liabilities		-			-			-			-			(3,347,077	)		-			-			(3,347,077	)
Net loss 05/18/04 to 12/31/04		-			-			-			-			-			-			(15,236,339	)		(15,236,339	)
BALANCE, DECEMBER 31, 2004		65,345,121		$	65,345			-		$	-		$	58,884,351		$	(18,301,588	)	$	(30,298,814	)	$	10,349,294
Cancelled shares returned from employee		(1,120,000	)		(1,120	)		-			-			(1,307,855	)		-			-			(1,308,975	)
Issued shares for compensation		140,000			140			-			-			41,860			-			-			42,000
Issued shares for services		850,000			850			-			-			155,150			-			-			156,000
Amortize deferred compensation expense		-			-			-			-			-			13,222,517			-			13,222,517
Net loss		-			-			-			-			-			-			(27,134,865	)		27,134,865	)
BALANCE, DECEMBER 31, 2005		65,215,121		$	65,215			-		$	-		$	57,773,506		$	(5,079,071	)	$	(57,433,679	)	$	(4,674,029	)

1. A more detailed description of the Other Equity Items in this statement can be found at the end of the Statement of Stockholders’ Deficit

6

POWER 3 MEDICAL PRODUCTS, INC.

STATEMENT OF STOCKHOLDERS’ DEFICIT

(Continued)

	Common Stock				Preferred Stock
	Shares		Par Value		Shares		Par Value		Addt’l Paid In Capital			Other Equity Items (1)			Retained Earnings			Total
Issued shares for services		2,449,990		2,449		-		-		311,865			-			-			314,314
Issued shares for cash		2,452,746		2,452		-		-		222,548			-			-			225,000
Issued shares for compensation		1,253,098		1,254		-		-		176,763			-			-			178,017
Adoption of FAS 123R		-		-		-		-		(475,324	)		475,324			-			-
Amortize deferred compensation  expense		-		-		-		-		-			4,603,747			-			4,603,747
Net loss		-		-		-		-		-			-			(6,415,969	)		(6,415,969	)
BALANCE, DECEMBER 31, 2006		71,370,955	$	71,370		-	$	-	$	58,009,358		$	-		$	(63,849,648	)	$	(5,768,920	)
Issued shares for services		1,810,000		1,810		-		-		282,390			-			-			284,200
Issued shares for conversion of debt		22,265,224		22,264		-		-		606,412			-			-			628,676
Issued shares for warrants exercised		5,270,832		5,272		-		-		336,396			-			-			341,668
Issued shares for cash		7,630,625		7,632		-		-		992,818			-			-			1,000,450
Placement agent fees		-		-		-		-		(58,500	)		-			-			(58,500	)
Stock received		-		-		-		-		100			-			-			100
Unreturned shares		5,000		5		-		-		4,495			-			-			4,500
Deemed dividend		-		-		-		-		17,635			-			(17,635	)		-
Net loss		-		-		-		-		-			-			(5,216,288	)		(5,216,288	)
BALANCE, DECEMBER 31, 2007		108,352,636	$	108,353		-	$	-	$	60,191,104		$	-		$	(69,083,571	)	$	(8,784,114	)
Issued shares for services		7,482,910		7,483		-		-		584,858			-			-			592,341
Issued shares for cash		7,492,875		7,493		-		-		639,911			-			-			647,404
Issued shares for conversion of debt		22,172,536		22,173		-		-		1,568,626			-			-			1,590,799
Issued shares for lawsuit settlement		325,000		325		-		-		30,550			-			-			30,875
Issued shares for payables		2,133,333		2,133		-		-		186,867			-			-			189,000
Stock held in escrow		2,000,000		2,000		-		-		18,000			(20,000	)		-			-
Issued preferred shares		-		-		1,500,000		1,500		357,000			-			-			358,500
Deemed dividend		-		-		-		-		12,071			-			(12,071	)		-
Loss on related party debt conversion		-		-		-		-		(89,049	)		-			-			(89,049	)
Common stock payable		-		-		-		-		-			123,286			-			123,286
Net loss		-		-		-		-		-			-			(136,784	)		(136,784	)
BALANCE, DECEMBER 31, 2008		149,959,290	$	149,960		1,500,000	$	1,500	$	63,499,938		$	103,286		$	(69,232,426	)	$	(5,477,742	)

1. A more detailed description of the Other Equity Items in this statement can be found at the end of the Statement of Stockholders’ Deficit

7

POWER 3 MEDICAL PRODUCTS, INC.

(A Development Stage Enterprise)

STATEMENT OF STOCKHOLDERS’ DEFICIT

(Continued)

	Common Stock						Preferred Stock
	Shares			Par Value			Shares		Par Value		Addt’l Paid In Capital			Other Equity Items (1)			Retained Earnings			Total
BALANCE, DECEMBER 31, 2008		149,959,290		$	149,960			1,500,000	$	1,500	$	63,499,938		$	103,286		$	(69,232,426	)	$	(5,477,742	)
Issued shares for conversion of debt		119,465,770			119,464			-		-		2,947,901			7,056			-			3,074,421
Common stock payable		-			-			-		-		-			43,500			-			43,500
Issued shares upon exercise of warrants		6,883,332			6,883			-		-		61,949			(4,166	)		-			64,666
Stock contributed for debt payment		-			-			-		-		244,417			-			-			244,417
Issued shares for services		30,833,333			30,833			-		-		352,501			-			-			383,334
Issued shares for cash		30,785,714			30,786			-		-		174,214			(170,000	)		-			35,000
Issued shares for payables		29,717,659			29,719			-		-		550,750			(22,286	)		-			558,183
Stock rescinded for debt		(1,200,000	)		(1,200	)		-		-		-			(7,056	)		-			(8,256	)
Revaluation of stock held in escrow		-			-			-		-		20,000			(20,000	)		-			-
Return of stock held in escrow		(800,000	)		(800	)		-		-		800			-			-			-
Deemed dividends		-			-			-		-		34,103			-			(34,103	)		-
Loss on related-party debt conversions		-			-			-		-		(893,805	)		-			-			(893,805	)
Options issued for services		-			-			-		-		176,927			-			-			176,927
Net loss		-			-			-		-		-			-			(2,363,201	)		(2,363,201	)
BALANCE, JUNE 30, 2009		365,645,098		$	365,645			1,500,000	$	1,500	$	67,169,695		$	(69,666	)	$	(71,629,730	)	$	(4,162,556	)

1. A more detailed description of the Other Equity Items in this statement can be found at the end of the Statement of Stockholders’ Deficit

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

8

POWER 3 MEDICAL PRODUCTS, INC.

(A Development Stage Enterprise)

STATEMENT OF STOCKHOLDERS’ DEFICIT

SCHEDULE OF OTHER EQUITY ITEMS

	Deferred Compensation Expense			Stock Held in Escrow			Common Stock Payable			Treasury Stock			Subscriptions Receivable			Total Other Equity Items
Balances as of beginning of development stage May 18, 2004		-			-			-			-			-			-
																	-
Issued shares for compensation		(25,451,500	)		-			-			-			-			(25,451,500	)
Issued shares for services		(535,000	)		-			-			-			-			(535,000	)
Stock option expense		(626,100	)		-			-			-			-			(626,100	)
Issued shares for cash		-			-			-			-			-			-
Stock based compensation		8,311,012			-			-			-			-			8,311,012
BALANCE, DECEMBER 31, 2004	$	(18,301,588	)	$	-		$	-		$	-		$	-		$	(18,301,588	)
Amortize deferred compensation expense		13,222,517			-			-			-			-			13,222,517
BALANCE, DECEMBER 31, 2005	$	(5,079,071	)	$	-		$	-		$	-		$	-		$	(5,079,071	)
Adoption of FAS 123R		475,324			-			-			-			-			475,324
Amortize deferred compensation expense		4,603,747			-			-			-			-			4,603,747
BALANCE, DECEMBER 31, 2006	$	-		$	-		$	-		$	-		$	-		$	-
BALANCE, DECEMBER 31, 2007	$	-		$	-		$	-		$	-		$	-		$	-
Stock held in escrow		-			(20,000	)		-			-			-			(20,000	)
Common stock payable		-			-			123,286			-			-			123,286
BALANCE, DECEMBER 31, 2008	$	-		$	(20,000	)	$	123,286		$	-		$	-		$	103,286
Issued shares for conversion of debt		-			-			-			7,056			-			7,056
Common stock payable		-			-			43,500			-			-			43,500
Issued shares upon exercise of warrants		-			-			-			-			(4,166	)		(4,166	)
Issued shares for cash		-			-			-			-			(170,000	)		(170,000	)
Issued shares for payables		-			-			(22,286	)		-			-			(22,286	)
Stock rescinded for debt		-			-			-			(7,056	)		-			(7,056	)
Return of stock held in escrow		-			16,000			-			(16,000	)		-			-
Revaluation of stock held in escrow		-			(20,000	)		-			-			-			(20,000	)
BALANCE, JUNE 30, 2009	$	-		$	(24,000	)	$	144,500		$	(16,000	)	$	(174,166	)	$	(69,666	)

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

9

POWER 3 MEDICAL PRODUCTS, INC.

(A Development Stage Enterprise)

STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended June 30,						Period from May 18, 2004 to June 30,
	2009			2008			2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net income/(loss)	$	(2,363,201	)	$	211,388		$	(56,503,448	)
Adjustments to reconcile net income/(loss) to net cash used in operating activities:
Gain/(loss) on conversion of financial instruments		1,008,029			2,384			(998,215	)
Impairment of goodwill		-			-			13,371,776
Impairment of intangible assets		-			-			179,788
Loss on previously capitalized lease		-			-			34,243
Amortization of debt discounts and deferred finance costs		209,104			444,549			3,934,534
Change in derivative liability, net of bifurcation		156,651			(2,420,860	)		(5,712,421	)
Stock based compensation		603,761			576,341			33,974,433
Debt issued for compensation and services		-			-			1,028,927
Stock issued for settlement of lawsuit		-			30,880			30,875
Depreciation expense		10,211			1,146			111,465
Other non cash items		-			-			(34,933	)
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(18,939	)		616			167,145
Inventory and other assets		(149	)		-			16,453
Accounts payable and other liabilities		338,348			146,241			3,511,556
Net cash used in operating activities		(56,185	)		(1,007,315	)		(6,887,822	)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures, net		(52,500	)		(2,798	)		(194,250	)
Increase in other assets		-			-			(179,786	)
Net cash used in investing activities		(52,500	)		(2,798	)		(374,036	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock		35,000			647,404			2,299,171
Borrowings on notes payable related party		8,256 -			45,000			83,632
Borrowings on notes payable		20,000			290,000			3,808,430
Principal payments on notes payable related party		-			-			(47,300	)
Principal payments on notes payable		-			-			(122,478	)
Stock rescinded for debt		(8,256	)		-			(8,256	)
Proceeds from CD, warrants and rights net of issuance cost		64,666			-			1,265,375
Net cash provided by financing activities		119,666			982,404			7,278,574
Net change in cash and equivalents	$	10,981		$	( 27,709	)	$	16,716
Cash and equivalents, beginning of period	$	8,331		$	125,679		$	2,596
Cash and equivalents, end of period	$	19,312		$	97,970		$	19,312

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

10

POWER 3 MEDICAL PRODUCTS, INC.

STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended June 30,				Period from May 18, 2004 to June 30,
	2009		2008		2009
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest	$	-	$	-	$	59,840
Cash paid for income taxes	$	-	$	-	$	-
Non-cash transactions:
Stock for conversion of debt, related party	$	661,101	$	-	$	1,676,034
Stock for subscriptions receivable	$	170,000	$	-	$	170,000
Warrants exercised for subscriptions receivable	$	4,166	$	-	$	4,166
Stock for common stock payable	$	22,286	$	-	$	22,286
Exchange of debt, related party	$	-	$	-	$	214,075
Exchange of convertible notes for stock	$	-	$	1,357,333	$	2,525,070
Stock issued in settlement of payables	$	-	$	83,270	$	195,697
Deemed dividend	$	34,103	$	12,072	$	63,809
Exchange of convertible preferred stock for common stock	$	-	$	-	$	3,380,975
Preferred stock issued for payables	$	-	$	360,000	$	358,500
Stock held in escrow	$	20,000	$	190,000	$	40,000
Stock contributed for debt payment	$	244,417	$	-	$	244,417
Return of stock held in escrow	$	16,000	$	-	$	16,000

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

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POWER 3 MEDICAL PRODUCTS, INC.

(A Development Stage Enterprise)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS

Information Regarding Forward-Looking Statements

This report contains forward-looking statements that involve risks and uncertainties. We generally use words such as "believe," "may," "could," "will," "intend," "expect," "anticipate," "plan," and similar expressions to identify forward-looking statements. You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks described below and elsewhere in this report. Although we believe the expectations reflected in the forward-looking statements are reasonable, they relate only to events as of the date on which the statements are made, and our future results, levels of activity, performance or achievements may not meet these expectations. We do not intend to update any of the forward-looking statements after the date of this document to conform these statements to actual results or to changes in our expectations, except as required by law.

History

Power3 Medical Products, Inc. was incorporated in New York in May 1993.  We have been a development stage company since May 2004, with our primary business activities focused on the development of our intellectual property assets in the area of diagnoses for breast cancer, ALS, Alzheimer’s disease and Parkinson’s disease.  In September 2008, Steven B. Rash, our Chief Executive Officer and Chairman of the Board at the time, resigned from all of his positions with us.  Ira L. Goldknopf, our sole remaining director and Chief Scientific Officer, was appointed as President and Interim Chairman of the Board.  Helen R. Park was appointed Interim Chief Executive Officer.  Under the direction of our restructured management team, we implemented a new strategy focusing on commercialization of our intellectual property assets, with less emphasis on research and development.  In connection with our new focus, and in an effort to preserve cash and reduce operating costs, we reduced the amount of space we occupied and implemented a reduction in force.

Prior to May 2004, we were engaged in product development, sales, distribution and services for the healthcare industry.  We transitioned to being a development stage company on May 18, 2004, when we completed the acquisition of certain intellectual property assets from Advanced Bio/Chem, Inc. and began focusing on research and development relating to those assets.

NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The unaudited interim financial statements of Power3 have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) and should be read in conjunction with the audited financial statements and notes thereto contained in Power3’s Annual Report filed with the SEC on Form 10-K. Certain prior period amounts have been reclassified to conform to the June 30, 2009 presentation. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the periods presented have been reflected herein.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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Concentration of Credit Risk

Our revenues generated from the license agreement with Transgenomic, Inc. accounted for nearly 100% of our total revenues during the six months ended June 30, 2009.

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 will 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 uses 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.

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. Basic and diluted loss per share is the same for the six months ended June 30, 2009 and 2008 as the effect of our potential common stock equivalents would be anti-dilutive.

Stock Based Compensation

Effective January 1, 2006, Power3 began recording compensation expense associated with stock options and other forms of equity compensation in accordance with Statement of Financial Accounting Standards (SFAS) 123R, “Share−Based Payment,” as interpreted by SEC Staff Accounting Bulletin No. 107. Prior to January 1, 2006, Power3 had accounted for stock options according to the provisions of APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations, and therefore no related compensation expense was recorded for awards granted with no intrinsic value. Power3 adopted the modified prospective transition method provided for under SFAS 123R, and, consequently, has not retroactively adjusted results from prior periods.

Stock issued to employees is recorded at the fair value of the shares granted based upon the closing market price of Power3’s stock at the measurement date and recognized as compensation expense over the applicable requisite service period. Warrants granted to non-employees are recorded at the estimated fair value of the options granted using the Black-Scholes pricing model and recognized as general and administrative expense over the applicable requisite service period.

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For the six months ended June 30, 2009, we recorded compensation expense of approximately $184,000 within employee compensation and benefits as a result of the straight-line vesting of a restricted stock award of 12 million shares and an option for 10 million shares during the year.  For the year ended December 31, 2008, we recorded no compensation expense within employee compensation and benefits as a result of the vesting of restricted stock or option awards.  As of June 30, 2009, there was approximately $233,000 of unrecognized compensation expense related to the unvested restricted stock award, which is expected to be recognized over a weighted average period of nearly three years.

The fair value of the option granted to an employee during 2009 was estimated on its respective grant date using the Black-Scholes option pricing model.  The Black-Scholes model was used with the following assumptions: a risk-free interest rate of 0.72%, based on the U.S. Treasury yield in effect at the time of grant; a dividend yield of zero percent; an expected life of 1.5 years, based on half of the term of the agreement; a volatility rate of 256.68% based on the historical volatility of our stock over a time that is consistent with the expected life of the option; and no forfeiture assumed.

All of the Company’s accounting policies are not included in this Form 10-Q.  A more comprehensive set of accounting policies adopted by the Company are included in our Form 10-K for the year ended December 31, 2008 and are herein incorporated by reference.

Recent Accounting Pronouncements

Power3 does not expect the adoption of recently issued accounting pronouncements to have a significant impact on its results of operations, financial position or cash flow.

NOTE 3 – GOING CONCERN

As shown in the accompanying financial statements, Power3 incurred net loss chargeable to common shareholders of $2,397,304 for the six months ended June 30, 2009 and has total accumulated deficits of $71,629,730 as of that date. 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. If Power3 is unable to successfully obtain additional financing, it will not have sufficient cash to continue operations.  As of June 30, 2009, Power3 had $19,312 in cash and cash equivalents.  Power3 needs additional capital immediately to fund its liquidity requirements.  Power3 is seeking between $3 million and $5 million in new financing during 2009.  Power3 believes that $3 million is the minimum amount of financing it needs to repay existing obligations and to continue funding its new business strategy for at least 12 months following the date of this report.  Power3 will need to raise additional funds from either one or a combination of additional financings or otherwise obtain capital, in order to satisfy its future liquidity requirements. The financial statements do not include any adjustment that might be necessary if Power3 is unable to continue as a going concern.

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NOTE 4 – OTHER CURRENT LIABILITIES

Other liabilities and accrued expenses consisted of the following at June 30, 2009 and December 31, 2008:

	June 30, 2009		December 31, 2008
Accrued rent		7,142		28,566
Accrued interest		331,237		335,033
Prepayment penalty		25,000		25,000
Accrued payroll taxes		16,771		44,347
Accrued liabilities		10,939		33,575
Salaries payable		92,906		150,965
Total	$	483,995	$	617,486

NOTE 5 – RELATED PARTY TRANSACTIONS

As is more fully explained in Note 7 to these financial statements, we issued 46,910,896 common shares to our President, Chief Scientific Officer and Interim Board Chairman to retire a portion of his convertible note in the amount of $1,097,940 and accrued interest.

Also as is more fully explained in Note 7, we issued 9,571,429 common shares to our Interim Chief Executive Officer to retire a convertible note in the amount of $150,000 and accrued interest.

Also as is more fully explained in Note 7, we received 1,200,000 shares of common stock from our President, Chief Scientific Officer and Interim Board Chairman in exchange for a one-year convertible note payable to him in the amount of $8,256 with interest payable at 12% and warrants to purchase 1,200,000 shares at $0.04 per share.  The note itself is convertible into 1,200,000 shares of common stock (or $0.00688 per share).

Also as is more fully explained in Note 7, we issued 2,960,908 shares of common stock to our Interim Chief Executive Officer for compensation accrued through May 31, 2009 related to services under the Agreement with Bronco Technology, Inc.

Also as is more fully explained in Note 7, we issued 7,422,558 shares of common stock to our President, Chief Scientific Officer and Interim Board Chairman for compensation accrued through May 31, 2009.

Also as is more fully explained in Note 7, we issued 780,640 shares of common stock to our Chief Financial Officer for compensation earned during May, 2009.

Also as is more fully explained in Note 7, we issued 12,000,000 shares of restricted common stock to our Chief Financial Officer and a warrant to purchase 10,000,000 shares of common stock at $0.02 per share to our Chief Financial Officer.

NOTE 6 – OTHER COMMITMENTS AND CONTINGENCIES

A summary of our commitments and contingencies can be found in Note 8 to the financial statements filed on Form 10-K for the period ended December 31, 2008.

On January 13, 2009, Marion McCormick, former Chief Accounting Officer, filed a wage claim with the Texas Workforce Commission against the Company for wages owed. The Texas Workforce Commission found Ms. McCormick’s wages to be due and payable by the Company.   The Company appealed the finding on the basis of the convertible promissory note issued to her. On June 26, 2009, the Texas Workforce Commission found Ms. McCormick’s wages of $17,389 to be due and payable by the Company.  The wages due are carried on the balance sheet included in other current liabilities.

15

On June 25, 2009, the Company signed a Covenant Not to Execute agreement with IS&T Consulting Group, LLC, with four equal payments of $2,500 commencing monthly beginning August 1, 2009.  The fees are carried on the balance sheet included in accounts payable.

There have been no other changes to these commitments and contingencies since the filing of that report.

NOTE 7 - EQUITY

We are authorized to issue up to 600 million shares of $0.001 voting common stock and up to 50 million shares of $0.001 par value preferred stock.

Capital Stock Transactions

We began 2009 with 149,959,290 shares of common stock issued and outstanding.  During the six months ended June 30, 2009, we undertook the following with our common stock:

On January 13, 2009, we received 1,200,000 shares of common stock from our President, Chief Scientific Officer and Interim Board Chairman in exchange for a one-year convertible note payable to him in the amount of $8,256 with interest payable at 12% and warrants to purchase 1,200,000 shares at $0.04 per share.  The note itself is convertible into 1,200,000 shares of common stock (or $0.00688 per share).

On January 20, 2009, we issued 1,200,000 common shares to Able Income Fund, LLC (“Able”) to convert $8,256 of our obligation to them into equity.  We recorded a loss of $3,744 upon conversion.

On February 20, 2009, we issued 14,117,270 common shares to Able to convert $130,000 of our obligation to them into equity.  We recorded a loss of $22,345 upon conversion.

On March 2, 2009, the board granted a holder of 300,000 warrants to purchase common stock a revision in the terms of the warrants from an exercise price of $0.98 to an exercise price of $0.01.  Pursuant to SFAS 123 (revised 2004), Share-Based Payments, we revalued these warrants using the old and new warrant terms and deemed the difference in value a dividend.  Variables used in the calculation were: stock price on measurement date: $0.02; exercise price of options: $0.98 (old) and $0.01 (new); option term: 0.25 years; discount rate: 0.28% and computed volatility: 256.59%.  We deemed this revaluation as a dividend in the amount of $3,895.  The exercise entitles the Company to receive $3,000 in cash, which was received from the holder on June 29, 2009.

Also on March 2, 2009, we issued 12,680,952 common shares to retire a convertible note in the amount of $275,000 and accrued interest of $11,301.  Per the terms of the conversion feature of the note, the principal balance was convertible into 9,166,667 shares.  The excess of the shares issued were to retire accrued interest.  We recorded a loss on conversion of $218,738.

Also on March 2, 2009 we issued 11,428,571 shares to an accredited investor for a subscription of $80,000.  At June 30, 2009, the subscription remains unpaid by the investor.

Also on March 2, 2009, we issued 12,085,714 common shares to retire a convertible note in the amount of $275,000 and accrued interest of $11,301.  Per the terms of the conversion feature of the note, the principal balance was convertible into 9,166,667 shares.  The excess of the shares issued were to retire accrued interest.  We recorded a loss on conversion of $206,833.

Also on March 2, 2009 we issued 12,857,143 shares to an accredited investor for a subscription of $90,000.  At June 30, 2009, the subscription remains unpaid by the investor.

Also on March 2, 2009, we issued 13,390,476 common shares to retire a convertible note in the amount of $340,000 and accrued interest of $13,973.  Per the terms of the conversion feature of the note, the principal balance was convertible into 11,333,333 shares.  The excess of the shares issued were to retire accrued interest.  We recorded a loss on conversion of $224,685.

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Also on March 2, 2009, we issued 1,428,572 common shares to an accredited investor who subscribed to our common stock during 2008.  We credited capital in the amount of $14,286 and retired the liability at December 31, 2008 which was included in “Common stock payable”.  This investor was issued an additional 1,428,572 shares on that date which we recorded at the fair market value on the grant date, crediting capital in the amount of $28,571 and charging “Loss on settlement of debt”.

Also on March 2, 2009, we issued 46,910,896 common shares to our President, Chief Scientific Officer and Interim Board Chairman to retire a portion of his convertible note in the amount of $1,097,940 and accrued interest of $22,019.  Per the terms of the conversion feature of the note, the principal balance was convertible into 36,598,000 shares.  The excess of the shares issued were to retire accrued interest.  We recorded a loss on conversion of $725,628 which was recorded as a reduction of Additional paid in capital.

Also on March 2, 2009, we issued 9,571,429 common shares to retire a convertible note to our Interim Chief Executive Officer in the amount of $150,000 and accrued interest of $5,819.  Per the terms of the conversion feature of the note, the principal balance was convertible into 5,000,000 shares.  The excess of the shares issued were to retire accrued interest.  We recorded a loss on conversion of $168,127 which was recorded as a reduction of Additional paid in capital.

On March 13, 2009, we issued 2,761,878 common shares to a vendor to settle outstanding invoices of $59,047.  We recorded these shares at the fair value on the grant date, $0.02 per share, or $55,238 and included the resulting $3,809 gain as a reduction of “Loss on settlement of debt”.

On March 17, 2009, the board granted a holder of 3,333,333 warrants to purchase common stock a revision in the terms of the warrants from an exercise price of $0.10 to an exercise price of $0.01.  Pursuant to SFAS 123 (revised 2004), Share-Based Payments, we revalued these warrants using the old and new warrant terms and deemed the difference in value a dividend.  Variables used in the calculation were: stock price on measurement date: $0.02; exercise price of options: $0.10 (old) and $0.01 (new); option term: 1 year; discount rate: 0.67% and computed volatility: 256.59%.  We deemed this revaluation as a dividend in the amount of $17,191.  We received cash of $33,333 upon exercise.

On March 17, 2009, the board granted a holder of 416,666 warrants to purchase common stock a revision in the terms of the warrants from an exercise price of $0.08 to an exercise price of $0.01.  Pursuant to SFAS 123 (revised 2004), Share-Based Payments, we revalued these warrants using the old and new warrant terms and deemed the difference in value a dividend.  Variables used in the calculation were: stock price on measurement date: $0.022; Exercise price of options: $0.08 (old) and $0.01 (new); option term: 0.66 years; discount rate: 0.56% and computed volatility: 256.59%.  We deemed this revaluation as a dividend in the amount of $2,702.  The exercise entitles the Company to receive $4,166 in cash.  As of the date of this report, the amount is still receivable and is included in equity on the balance sheet under “Common stock subscriptions receivable”.

On March 16, 2009, we issued 10,000,000 common shares to retire a convertible note in the amount of $100,000 and accrued interest of $14,345.  Per the terms of the conversion feature of the note, the principal balance was convertible into 1,111,111 shares.  The excess of the shares issued were to retire accrued interest.  We recorded a loss on conversion of $178,643.

On March 16, 2009, the board granted a holder of 833,333 warrants to purchase common stock a revision in the terms of the warrants from an exercise price of $0.09 to an exercise price of $0.01.  Pursuant to SFAS 123 (revised 2004), Share-Based Payments, we revalued these warrants using the old and new warrant terms and deemed the difference in value a dividend.  Variables used in the calculation were: stock price on measurement date: $0.02; Exercise price of options: $0.09 (old) and $0.01 (new); option term: 1 year; discount rate: 0.67% and computed volatility: 256.59%.  We deemed this revaluation as a dividend in the amount of $4,053.  We received cash of $8,333 upon exercise.

On March 17, 2009, the board granted a holder of 2,000,000 warrants to purchase common stock a revision in the terms of the warrants from an exercise price of $0.10 to an exercise price of $0.01.  Pursuant to SFAS 123 (revised 2004), Share-Based Payments, we revalued these warrants using the old and new warrant terms and deemed the difference in value a dividend.  Variables used in the calculation were: stock price on measurement date: $0.02; Exercise price of options: $0.10 (old) and $0.01 (new); option term: 1 year; discount rate: 0.67% and computed volatility: 256.59%.  We deemed this revaluation as a dividend in the amount of $10,315.  We received cash of $20,000 upon exercise.

17

On March 20, 2009, we issued 900,000 common shares to a consultant to settle an outstanding invoice of $10,000.  We recorded these shares at the fair value on the grant date, $.02 per share, or $18,000 and included the resulting $8,000 loss as an increase of “Loss on settlement of debt”.

On April 2, 2009, we issued 3,000,000 common shares to a consultant to settle an outstanding invoice of $30,000.  We recorded these shares at the fair value on the grant date, $0.02 per share, or $60,000 and included the resulting $30,000 loss as an increase of “Loss on settlement of debt”.

On April 9, 2009, we issued 4,333,333 shares to a consultant for consulting services.  We valued the shares on the grant date and included $86,667 of professional fees in “Professional and consulting fees”.

On April 24, 2009, we issued 500,000 shares to a consultant for consulting services.  We valued the shares on the grant date and included $10,000 of professional fees in “Professional and consulting fees”.

On April 24, 2009, we issued 12,500,000 shares to a consultant pursuant to a consulting agreement.  We valued the shares on the grant date and included $250,000 of professional fees in “Professional and consulting fees”.

On April 26, 2009, we issued 1,500,000 shares to a consultant pursuant to a consulting agreement.  We valued the shares on the grant date and included $30,000 of professional fees in “Professional and consulting fees”.

On May 5, 2009, we issued 460,970 common shares to a consultant to settle an outstanding invoice of $6,223.  We recorded these shares at the fair value on the grant date, $0.02 per share, or $9,216 and included the resulting $2,993 loss as an increase of “Loss on settlement of debt”

On May 6, 2009, we issued 772,752 common shares to a consultant to settle an outstanding invoice of $11,514.  We recorded these shares at the fair value on the grant date, $0.02 per share, or $15,455 and included the resulting $3,941 loss as an increase of “Loss on settlement of debt”.

On May 11, 2009, we issued 2,469,136 common shares to a consultant to settle outstanding invoices of $24,510 and prepay future services totaling $15,490.  We recorded these shares at the fair value on the grant date, $0.02 per share, or $49,383 and included the resulting $9,383 loss as an increase of “Loss on settlement of debt”.

On May 13, 2009, we issued 1,029,688 common shares to a consultant to settle outstanding invoices of $18,123.  We recorded these shares at the fair value on the grant date, $0.02, or $20,594 and included the resulting $2,471 loss as an increase of “Loss on settlement of debt”.

On May 13, 2009, we issued 568,182 common shares to a consultant to settle outstanding invoices of $10,000.  We recorded these shares at the fair value on the grant date, $0.02, or $11,364 and included the resulting $1,364 loss as an increase of “Loss on settlement of debt”.

On May 19, 2009, we issued 848,990 common shares to a consultant to settle outstanding invoices of $10,952. We recorded these shares at the fair value on the grant date, $0.02, or $16,980 and included the resulting $6,028 loss as an increase of “Loss on settlement of debt”.

On May 21, 2009, we issued 500,000 common shares to a consultant to settle outstanding invoices of $5,000.  We recorded these shares at the fair value on the grant date, $0.02, or $10,000 and included the resulting $5,000 loss as an increase of “Loss on settlement of debt”.

18

On May 22, 2009, we issued 342,366 common shares to retire a convertible note in the amount of $5,000 and accrued interest of $1,618.  The convertible note was not previously recorded on the Company’s financial statements.  The shares issued to retire the convertible note were recorded to “Loss on conversion of debt”.  The excess of the shares issued were to record interest expense.

On May 26, 2009, we rescinded our March 2, 2009 issue of 12,085,714 common shares to retire a convertible note in the amount of $275,000 and accrued interest of $11,301, and issued 11,252,381 common shares to retire the same convertible note and accrued interest.  We included the resulting $15,000 gain as a reduction of “Loss on settlement of debt”.

On June 3, 2009, we issued 1,500,000 common shares to a consultant to settle outstanding invoices of $15,000.  We recorded these shares at the fair value on the grant date, $0.02 per share, or $30,000 and included the resulting $15,000 loss as an increase of “Loss on settlement of debt”.

On June 3, 2009, we issued 396,700 common shares to a consultant to settle outstanding invoices of $3,967.  We recorded these shares at the fair value on the grant date, $0.02, or $7,934 and included the resulting $3,967 loss as an increase of “Loss on settlement of debt”.

On June 3, 2009, we issued 488,293 common shares to a consultant to settle outstanding invoices of $8,008.  We recorded these shares at the fair value on the grant date, $0.02, or $9,766, and included the resulting $1,758 loss as an increase of “Loss on settlement of debt”.

On June 4, 2009, we issued 7,422,558 common shares to our President, Chief Scientific Officer and Interim Board Chairman for $92,142 of salaries due under the Amended and Restated Employment Agreement through May 31, 2009, plus accrued interest.  We recorded these shares at the fair value on the grant date, $0.02, or $148,451 and included the resulting $52,849 loss as an increase of “Loss on settlement of debt”.

On June 4, 2009, we issued 780,640 common shares to our Chief Financial Officer for $10,000 of salaries due under the Employment Agreement through May 31, 2009.  We recorded these shares at the fair value on the grant date, $0.02, or $15,613 and included the resulting $5,613 loss as an increase of “Loss on settlement of debt”.

On June 4, 2009, we issued 2,560,908 common shares to our Interim Chief Executive Officer for $32,000 due under the Consulting Agreement with Bronco Technology, Inc. through May 31, 2009.  We recorded these shares at the fair value on the grant date, $0.02, or $51,218 and included the resulting $19,218 loss as an increase of “Loss on settlement of debt”.  We also issued 400,000 common shares due under the Consulting Agreement with Bronco Technology, Inc. and retired the liability at December 31, 2008 which was included in “Common stock payable”.

On June 4, 2009, we issued 12,000,000 common shares to our Chief Financial Officer for services as described in the Employment Agreement.  We valued these shares at the fair value on the grant date, $0.02, or $240,000.  These shares vest in three equal annual installments, beginning June 1, 2010.  We recorded $6,667 in “Employment compensation and benefits” in the current period.  If the Officer’s employment with the Company terminates for cause, or if the Officer resigns from his position, all unvested shares are forfeited.  If the Officer’s employment with the Company terminates without cause, the vesting of the shares is accelerated by one year, with the remaining unvested shares forfeited.

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On June 4, 2009, we issued a three-year option to our Chief Financial Officer to purchase an additional 10,000,000 shares of the Company’s common stock for $0.02 per share, beginning June 4, 2009.  We recorded $176,927 in “Employment compensation and benefits” in the current period.  The fair value of the option granted was estimated on its respective grant date using the Black-Scholes option pricing model.  The Black-Scholes model was used with the following assumptions: a risk-free interest rate of 0.72%, based on the U.S. Treasury yield in effect at the time of grant; a dividend yield of zero percent; an expected life of 1.5 years, based on half of the term of the agreement; a volatility rate of 256.68% based on the historical volatility of our stock over a time that is consistent with the expected life of the option; and no forfeiture assumed.

On June 9, 2009 we issued 6,000,000 common shares to an accredited investor for a subscription of $30,000.

On June 11, 2009, we issued 500,000 common shares to an accredited investor for a subscription of $5,000.

On June 26, 2009, we received 800,000 common shares of our stock that was previously held in escrow by a consultant and returned due to non-performance on an agreement.  We returned these shares to treasury stock June 29, 2009.

At June 30, 2009, the Company owed 2,541,667 shares of common stock for consulting services under the terms of a consulting agreement between the Company and Lordes Bosquez.  The shares are valued based on the closing price at the date they became due.  The total value of these shares is $42,500, which is presented as a stock payable on the balance sheet.

At June 30, 2009, the Company owed 600,000 shares of common stock for consulting services under the terms of a consulting agreement between the Company and Bronco Technology, Inc., an affiliate of Helen R. Park, the Company’s Interim Chief Executive Officer.  The shares are valued based on the closing price at the date they became due.  The total value of these shares is $12,000, which is presented as a stock payable on the balance sheet.

In order to obtain bridge loan financing for the Company with Able Income Fund, LLC in June and July, 2008, Steven B. Rash, the Company’s former Chief Executive Officer of Power3 pledged 12,548,369 shares of Power3 common stock he owned personally, as collateral for the bridge loans obtained.  During the three months ended June 30, 2009, Able converted these shares and applied the net proceeds of $244,417 to retire a portion of the principal and accrued interest on the notes.

NOTE 8 – FINANCING ARRANGEMENTS AND DERIVATIVE LIABILITIES

New Borrowings

During the six months ended June 30, 2009, we received $50,000 in cash from two existing creditors.  $20,000 of these amounts was appended to their already-existing 12% notes due September 8, 2009.

Derivative Liabilities

Our derivative liabilities increased from $1,352,247 at December 31, 2008 to $1,508,898 at June 30, 2009, due to the decrease in our stock price from March 31, 2009 to June 30, 2009 resulting in a gain of $589,693 in derivative liabilities.

Many of our warrants contain a reset provision which was triggered when we reduced the strike price during March 2009.  The amount of increase in liabilities due to these reset features was $116,147.

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The following tabular presentation reflects the components of derivative financial instruments on the Company’s balance sheet at June 30, 2009 and December 31, 2008:

	June 30, 2009		December 31, 2008
Common stock warrants		1,347,126		554,637
Embedded conversion features		161,772		778,178
Other derivative instruments		-		19,432
Total	$	1,508,898	$	1,352,247

NOTE 9 – TRANSGENOMIC DEFINITIVE AGREEMENT

On January 23, 2009, the Company executed a definitive Collaboration and Exclusive License agreement with Transgenomic, Inc.  The License Agreement grants Transgenomic exclusive rights in the United States and certain other countries to the Company’s proprietary test kits or systems for performing Neurodegenerative Diagnostic Tests, for which the Company will receive an up-front license execution fee, certain milestone fees, including fees payable in cash, fees payable in shares of Transgenomic common stock, and royalties based upon net sales of the Company’s tests, test kits or systems by Transgenomic.

The License Agreement also provides for Transgenomic to fund the Company’s activities relating to the clinical validation of its Neurodegenerative Diagnostic Tests.  Funds for such activities will be provided by Transgenomic through a separate bank account pursuant to a Disbursement Control Agreement.  The Company is obligated to cooperate with Transgenomic during the period of continued development and to provide Transgenomic with plans, budgets and reports regarding the progress of the Company’s development activities.  Transgenomic has the right to assume the clinical validation activities, with notice and a cure period, under certain circumstances.

The License Agreement has an infinite life and provides for each party to maintain the confidentiality of the other party’s confidential information, and to not make any public announcement concerning the transactions contemplated by the License Agreement without the consent of the other party.  The License Agreement also contains other covenants and indemnification provisions that are typical for license agreements entered into by companies in connection with similar licensing transactions.

During the three months ended June 30, 2009, we recorded revenues of $167,772 relating to this agreement which includes the $100,000 up-front license execution fee.

NOTE 10 – SUBSEQUENT EVENTS

Subsequent to June 30, 2009, we issued 5,528,446 unrestricted shares to contractors for services, 833,330 restricted shares for services, 8,333,300 restricted shares for the conversion of debt, and 132,592 restricted shares for the exercise of warrants.

On July 10, 2009, Helen R. Park was appointed to our Board of Directors, to fill the vacancy resulting from the resignation of Steven B. Rash on September 3, 2008.

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ITEM 2- MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This report contains “forward-looking statements”.  All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including: any projections of earnings, revenues or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new products, services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing.  “Forward-looking statements” may include the words “may,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect,” “plan” or “anticipate” and other similar words.

Although we believe that the expectations reflected in our “forward-looking statements” are reasonable, actual results could differ materially from those projected or assumed.  Our future financial condition and results of operations, as well as any “forward-looking statements”, are subject to change and to inherent risks and uncertainties, such as those disclosed in this report.  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, we do not intend, and undertake no obligation, to update any “forward-looking statement”. Accordingly, the reader should not rely on “forward-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”.

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited financial statements, including the notes to those financial statements, included elsewhere in this report.

The information contained below is subject to the “Risk Factors” and other risks detailed in our Annual Report on Form 10-K for our fiscal year ended December 31, 2008 and our other reports filed with the Securities and Exchange Commission.  We urge you to review carefully the section “Risk Factors” included in our Annual Report on Form 10-K for our fiscal year ended December 31, 2008 for a more complete discussion of the risks associated with an investment in our securities.

Overview

Power3 Medical Products, Inc. has been a development stage company since May 2004, with our primary business activities focused on the development of our intellectual property assets in the area of diagnoses for breast cancer, ALS, Alzheimer’s disease and Parkinson’s disease.  In September 2008, Steven B. Rash, our then Chief Executive Officer and Chairman of the Board, resigned from all of his positions with us.  Ira L. Goldknopf, our sole remaining director and Chief Scientific Officer, was appointed as President and Interim Chairman of the Board.  Helen R. Park was appointed Interim Chief Executive Officer.  Under the direction of our restructured management team, we implemented a new strategy focusing on commercialization of our intellectual property assets, with less emphasis on research and development.  In connection with our new focus, and in an effort to preserve cash and reduce operating costs, we reduced the amount of space we occupied and implemented a reduction in force.

Prior to May 2004, we were engaged in product development, sales, distribution and services for the healthcare industry.  We transitioned to being a development stage company on May 18, 2004, when we completed the acquisition of certain intellectual property assets from Advanced Bio/Chem, Inc. and began focusing on research and development relating to those assets.  On September 12, 2003, we completed a one-for-fifty reverse stock split and changed our name from Surgical Safety Products, Inc. to Power3 Medical Products, Inc.

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Results of Operations

Revenues

We had our first substantial influx of revenues resulting from our January 2009 license agreement with Transgenomic, Inc., which includes the $100,000 up-front license execution fee.   Total revenues were $35,711 and $168,477 for the three and six months ended June 30, 2009, respectively.  We had no revenues in the same periods in 2008.

Operating Expenses

Employee compensation was reduced from $526,905 for the six months ended June 30, 2008 to $276,294 for the same period in 2009 as we replaced our employees with contractors and significantly reduced headcount.  Employee compensation increased from $242,984 for the three months ended June 30, 2008 to $258,737 for the same period in 2009 primarily due to the charge related to the warrant issued to our Chief Financial Officer on June 1, 2009 to purchase 10 million common shares of our stock.  Professional and consulting fees, mostly resulting from costs associated with our statutory filings and strategic funding initiatives, were reduced from 2008; $725,794 and $811,492 for the three and six months ended June 30, 2008, respectively versus $544,518 and $625,335 for the same three and six month periods in 2009, respectively.  Occupancy and equipment is also substantially reduced due to our scaling back of our office space in 2009; $23,444 and $67,940 for the three and six months ended June 30, 2008, respectively versus $4,427 and $19,126 for the same three and six month periods in 2009.  Travel and entertainment was reduced from $22,246 and $78,702 for the three and six months ended June 30, 2008, respectively to just $1,963 and $2,692 for the three and six months ended June 30, 2009, respectively, reflecting a more scaled back operation from that in 2008.  Similarly, general and administrative expenses were reduced from $48,089 and $155,262 for the three and six months ended June 30, 2008 versus $40,712 and $128,716 for the three and six months ended June 30, 2009.

Other Income and Expense

The upward change in the derivative liabilities resulted mostly from an increase in our stock price from December 31, 2008 to June 30, 2009.  Our change in derivative liabilities caused a corresponding expense of $156,651 for the six months ended June 30, 2009 versus a gain of $2,420,860 for the same period in 2008.  However our decrease in our stock price from March 31, 2009 to June 30, 2009 resulted in a gain of $589,693 in derivative liabilities versus a gain of $252,244 for the same period in 2008.  Additionally, we had $124,295 and $1,008,029 in losses for the three and six months ended June 30, 2009, respectively on conversion of certain debt instruments to equity as a result of our attempt to reduce the Company’s debt load.  For the same periods in 2008, our loss was $2,384.  Interest expense was significantly reduced from $196,621 and $585,237 for the three and six months ended June 30, 2008, respectively to $137,739 and $314,835 for the same periods in 2009, owing to the above-mentioned reduction in debt and elimination of debt discounts on their conversion.

Deemed Dividends

Certain of our warrants were re-priced during March 2009, resulting in a deemed dividend charge to common shareholders of $34,103 for the six months ended June 30, 2009   For the same period in 2008, we had $12,072 of such deemed dividends.

Net Income/ (Loss)

Our net loss attributable to common shareholders for the three and six months ended June 30, 2009 was $486,987 and $2,397,304. Our net loss attributable to common shareholders for the three months ended June 30, 2008 was $1,009,795, and our net income available to common shareholders for the six months ended June 30, 2009 was $199,316. The change is due to the factors listed above, most notably the change in value of derivative liabilities resulting from the change in our stock price.

Liquidity and Capital Resources

Our liquidity and capital needs relate primarily to working capital, development and other general corporate requirements. Although we have recorded our first significant revenues from our January 2009 contract with Transgenomic. Inc., we have not yet generated any net positive cash from operations. We have an immediate need for capital to continue our current operations, and in addition, are seeking additional capital from research grants, collaboration agreements, and other strategic alliances.

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Net cash used in operating activities amounted to $56,185 for the six months ended June 30, 2009, compared to $1,007,315 for the six months ended June 30, 2008.  The change in net cash used in operating activities during 2009 was primarily due to changes in the fair value of derivative liabilities, and net income for the six months ended June 30, 2008 compared to the same period in 2009.

Net cash provided by financing activities was $119,666 for the six months ended June 30, 2009, as compared to $982,404 for the six months ended June 30, 2008.  The decrease in cash provided by financing activities during 2009 is due to a reduction in the sale of our common stock.

As of June 30, 2009, our principal source of liquidity was $19,312 in cash.

Plan of Operation and Cash Requirements

We currently have few operating revenues from product sales or the performance of services and we continue to experience net operating losses. We are actively pursuing third party licensing agreements, collaboration agreements, distribution agreements and similar business arrangements in order to establish an adequate revenue base utilizing our capabilities in disease diagnosis based on protein and biomarker identification, and drug resistance in the areas of cancers, neurodegenerative and neuromuscular diseases. We have undertaken clinical validation studies to demonstrate the diagnostic capabilities of our technologies. However, there can be no assurances when revenue-generating agreements will result in continuous revenue streams.

Our goal over the next several months is to complete Phase II of our testing of our Alzheimer’s and Parkinson’s disease clinical trials with Transgenomic, Inc.  We hope to commercialize these tests in the fourth quarter of 2009.

We are currently seeking grants and financing to fund our operation through the point of commercialization.  We expect to incur costs of approximately $1,000,000 to that point. There is no guarantee that we can raise the required capital to fund our operation, or that our products, once commercialized, will generate adequate revenues to sustain our operation.

Off Balance Sheet Arrangements

None.

ITEM 3 - QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4 – CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)).  Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

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Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs.  Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. To address the material weaknesses, we performed additional analysis and other post-closing procedures in an effort to ensure our financial statements included in this report have been prepared in accordance with generally accepted accounting principles. Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.

Because of these material weaknesses, management has concluded that we did not maintain effective internal control over financial reporting as of June 30, 2009, based on the criteria established in "Internal Control-Integrated Framework" issued by the COSO.

Change In Internal Control Over Financial Reporting

During our review of our internal control over financial reporting for the period ended June 30, 2009, and in the process of preparing this report, our management discovered that there are material weaknesses in our internal controls over financial reporting.  A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.  The material weaknesses identified during the preparation of this report were (i) insufficient evidence of a robust corporate governance function; (ii) lack of sufficient resources to provide reasonable assurance that the financial statements could be prepared in accordance with GAAP; (iii) inadequate security over information technology; and (iv) lack of evidence to document compliance with the operation of internal accounting controls in accordance with our policies and procedures.  These control deficiencies could result in a material misstatement of significant accounts or disclosures that would result in a material misstatement to our interim or annual financial statements that would not be prevented or detected.  Accordingly, management has determined that these control deficiencies constitute material weaknesses.

During the three months ended June 30, 2009, we hired a Chief Financial Officer to oversee financial reporting and instituting internal control over financial reporting.  Management is currently evaluating additional remediation plans for the above control deficiencies, including (i) appointing a director to fill the vacancy on the Board of Directors resulting from the resignation of a former director in September 2008; (ii) engaging an information technology consultant to review present security over our information technology and propose additional security measures to enhance the security of our information technology; and, (iii) engaging a consultant licensed as a Certified Public Accountant to assist us with the preparation and analysis of our interim and financial reporting to ensure compliance with generally accepted accounting principles and to ensure corporate compliance.

PART II – OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

On March 20, 2009, we were served with a lawsuit in McLennon Law Corporation vs. Power3 Medical Products, Inc. in Superior Court of California, County of San Francisco.  In the lawsuit, McLennon Law Corporation is alleging unpaid legal services of approximately $115,000 plus interest and costs.  We previously accrued for this amount and it is carried in accounts payable at June 30, 2009.

On June 12, 2006, we were served with a lawsuit in IS&T Consulting Group, LLC vs. Power3 Medical Products, Inc. in Montgomery County, Texas, 9th Judicial District.  In the lawsuit, IS&T Consulting Group is suing for breach of contract for approximately $10,000.  Both parties subsequently signed an agreed judgment in relation to the case, and a payout schedule has been agreed upon.  We previously accrued for this amount and it is carried in accounts payable at June 30, 2009.

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On October 14, 2008, we were served with a lawsuit in Woodlands Road Utility District #1 vs. Power 3 Medical Products, Inc. in Montgomery County, Justice Court, Precinct 3.  In the lawsuit, the plaintiff alleged that we owed personal property taxes on personal property that was not owned by us at the time the taxes were assessed.  On July 15, 2009, the court in the lawsuit ruled that we are responsible, as the successor in interest to Advanced Bio/Chem, Inc., for the delinquent taxes, penalties and interest in the amount of $3,810, plus $125 in costs of the plaintiff and court costs.  The amount due bears interest at a rate of 12% from the date of judgment.

ITEM 1A – RISK FACTORS

Not applicable.

ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES

On April 2, 2009, we issued 3,000,000 shares of our common stock to a consultant who we reasonably believe is an “accredited investor,” as such term is defined in Rule 501 under the Securities Act, in payment of $30,000 in consulting fees due pursuant to a consulting agreement.  The offer and sale was made without registration under the Securities Act, or the securities laws of certain states, in reliance on the exemptions provided by Section 4(2) of the Securities Act and Regulation D under the Securities Act and in reliance on similar exemptions under applicable state laws.  No general solicitation or general advertising was used in connection with the offering of the shares.  We disclosed to the consultant that the shares of common stock could not be sold unless they are registered under the Securities Act or unless an exemption from registration is available.

On April 9, 2009, we issued 4,333,333 shares of our common stock to a consultant who we reasonably believe is an “accredited investor,” as such term is defined in Rule 501 under the Securities Act, for $86,667 in consulting services.  The offer and sale was made without registration under the Securities Act, or the securities laws of certain states, in reliance on the exemptions provided by Section 4(2) of the Securities Act and Regulation D under the Securities Act and in reliance on similar exemptions under applicable state laws.  No general solicitation or general advertising was used in connection with the offering of the shares.  We disclosed to the consultant that the shares of common stock could not be sold unless they are registered under the Securities Act or unless an exemption from registration is available.

On April 24, 2009, we issued 500,000 shares of our common stock to a consultant who we reasonably believe is an “accredited investor,” as such term is defined in Rule 501 under the Securities Act, for $10,000 in consulting services.  The offer and sale was made without registration under the Securities Act, or the securities laws of certain states, in reliance on the exemptions provided by Section 4(2) of the Securities Act and Regulation D under the Securities Act and in reliance on similar exemptions under applicable state laws.  No general solicitation or general advertising was used in connection with the offering of the shares.  We disclosed to the consultant that the shares of common stock could not be sold unless they are registered under the Securities Act or unless an exemption from registration is available.

On May 26, 2009, we rescinded our March 2, 2009 issuance of 12,085,714 shares of our common stock upon the conversion of $286,301in principal and interest of a convertible note, and issued 11,252,381 shares of our common stock upon conversion of the same convertible note.  The issuance of the common stock upon conversion of the convertible note was exempt from registration under the Securities Act, or the securities laws of certain states, in reliance on the exemptions provided by Section 3(9) of the Securities Act and in reliance on similar exemptions under applicable state laws for exchanges of securities with existing security holders.

On June 4, 2009, we issued 7,422,558 shares of our common stock to our President, Chief Scientific Officer and Interim Board Chairman as payment for $92,142 of salaries due under his employment agreement through May 31, 2009.  The offer and sale of the shares was made without registration under the Securities Act, or the securities laws of certain states, in reliance on the exemptions provided by Section 4(2) of the Securities Act and Regulation D under the Securities Act and in reliance on similar exemptions under applicable state laws.  No general solicitation or general advertising was used in connection with the offering of the shares.  We disclosed to our President, Chief Scientific Officer and Interim Board Chairman that the shares of common stock could not be sold unless they are registered under the Securities Act or unless an exemption from registration is available.

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On June 4, 2009, we issued 2,960,908 shares of our common stock to Bronco Technology, Inc., an affiliate of our Interim Chief Executive Officer, as payment due under a consulting agreement through May 31, 2009.  The offer and sale of the shares was made without registration under the Securities Act, or the securities laws of certain states, in reliance on the exemptions provided by Section 4(2) of the Securities Act and Regulation D under the Securities Act and in reliance on similar exemptions under applicable state laws.  No general solicitation or general advertising was used in connection with the offering of the shares.  We disclosed to Bronco Technology that the shares of common stock could not be sold unless they are registered under the Securities Act or unless an exemption from registration is available.

On June 4, 2009, we issued 780,640 shares of our common stock to our Chief Financial Officer as payment for $10,000 of salaries due under his employment agreement through May 31, 2009.  The offer and sale of the shares was made without registration under the Securities Act, or the securities laws of certain states, in reliance on the exemptions provided by Section 4(2) of the Securities Act and Regulation D under the Securities Act and in reliance on similar exemptions under applicable state laws.  No general solicitation or general advertising was used in connection with the offering of the shares.  We disclosed to our Chief Financial Officer that the shares of common stock could not be sold unless they are registered under the Securities Act or unless an exemption from registration is available.

On June 4, 2009, we issued 12,000,000 shares of our common stock to our Chief Financial Officer pursuant to the terms of his employment agreement.  The offer and sale of the shares was made without registration under the Securities Act, or the securities laws of certain states, in reliance on the exemptions provided by Section 4(2) of the Securities Act and Regulation D under the Securities Act and in reliance on similar exemptions under applicable state laws.  No general solicitation or general advertising was used in connection with the offering of the shares.  We disclosed to our Chief Financial Officer that the shares of common stock could not be sold unless they are registered under the Securities Act or unless an exemption from registration is available.

On June 9, 2009 we issued 6,000,000 shares of our common stock to an investor who we reasonably believe is an “accredited investor,” as such term is defined in Rule 501 under the Securities Act, in exchange for an investment of $30,000 in cash.  The offer and sale was made without registration under the Securities Act, or the securities laws of certain states, in reliance on the exemptions provided by Section 4(2) of the Securities Act and Regulation D under the Securities Act and in reliance on similar exemptions under applicable state laws.  No general solicitation or general advertising was used in connection with the offering of the shares.  We disclosed to the investor that the shares of common stock could not be sold unless they are registered under the Securities Act or unless an exemption from registration is available.

On June 11, 2009 we issued 500,000 shares of our common stock to an investor who we reasonably believe is an “accredited investor,” as such term is defined in Rule 501 under the Securities Act, in exchange for an investment of $5,000 in cash.  The offer and sale was made without registration under the Securities Act, or the securities laws of certain states, in reliance on the exemptions provided by Section 4(2) of the Securities Act and Regulation D under the Securities Act and in reliance on similar exemptions under applicable state laws.  No general solicitation or general advertising was used in connection with the offering of the shares.  We disclosed to the investor that the shares of common stock could not be sold unless they are registered under the Securities Act or unless an exemption from registration is available.

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES

In April 2009, we were declared in default in the payment of principal and interest with respect to our 6% Convertible Debenture, in the aggregate principal amount of $200,000, held by NeoGenomics, Inc.  The amount of the total arrearage as of the date of this report is $200,000 in principal and approximately $26,482 in accrued interest.

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

None.

ITEM 5 – OTHER INFORMATION

None.

ITEM 6 – EXHIBITS

Exhibit No.	INDEX TO EXHIBITS
10.1	Collaboration and Exclusive License Agreement by and between the registrant and Transgenomic, Inc., dated January 23, 2009 (excluding schedules and exhibits).
10.2	Employment Agreement by and between the registrant and John P. Ginzler, dated as of May 1, 2009.
10.3	Second Amended and Restated Employment Agreement by and between the registrant and Ira L. Goldknopf, Ph.D., dated as of May 17, 2009.
10.4	Amended and Restated Consulting Agreement by and between the registrant and Bronco Technology, Inc., dated as of June 1, 2009.
31.1	Certification of Power3 Medical Products, Inc. Interim Chief Executive Officer, Helen R. Park, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Power3 Medical Products, Inc. Chief Financial Officer, John Ginzler, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Power3 Medical Products, Inc. Interim Chief Executive Officer, Helen R. Park, and Chief Financial Officer, John Ginzler, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

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

	Power 3 Medical Products, Inc.
Date: August 11, 2009	By:	/s/ Helen Park
	Helen Park
	Interim Chief Executive Officer

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EX-10.1

COLLABORATION AND EXCLUSIVE LICENSE AGREEMENT

This Collaboration and Exclusive License Agreement, dated as of January 23, 2009 (this “Agreement”), is entered into between Transgenomic, Inc., a Delaware corporation (“Transgenomic”), and Power3 Medical Products, Inc., a New York corporation (“Power3”).

WITNESSETH:

WHEREAS, Power3 has rights in and is developing the Licensed Technology as a diagnostic tool for the early detection of neurodegenerative diseases, including Alzheimer’s disease, Amyotrophic lateral sclerosis (ALS), and Parkinson’s disease;

WHEREAS Power3 is currently conducting clinical validation studies of the Licensed Technology in order to commercialize the Licensed Technology;

WHEREAS, Transgenomic is willing to provide certain funds to Power3 for use in the reimbursement of costs incurred by Power3 in the clinical validation studies of the Licensed Technology necessary to commercialize the Licensed Technology;

WHEREAS, Transgenomic may also desire to collaborate in the performance of clinical validation studies of the Licensed Technology; and

WHEREAS, Transgenomic desires to obtain, and Power3 is willing to grant, an exclusive license in the Licensed Technology on the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained, the parties, intending to be legally bound, agree as follows:

ARTICLE 1

DEFINITIONS

For purposes of this Agreement, the terms defined in this Article 1 shall have the respective meanings set forth below:

1.1             “Affiliate” means with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, such Person.  A Person shall be regarded as in control of another Person if it owns, or directly or indirectly controls, at least fifty percent (50%) of the voting stock or other ownership interest of the other Person, or if it directly or indirectly possesses the power to direct or cause the direction of the management and policies of the other Person by any means whatsoever.

1.2            “First Commercial Sale” means, with respect to a Licensed Product, the first bona fide transaction in a country in the Territory for which consideration is received for the sale, use, lease, transfer or similar disposition of such Licensed Product by Transgenomic, its Affiliate or (sub)licensee to customers who are not Affiliates in such country after all applicable marketing and pricing approvals (if any) have been granted by the applicable governing health authority of such country or, prior to any pricing approval by any applicable governing health authority, the first bona fide transaction in a country in the Territory for which consideration (revenue) is received for performing an assay of the Licensed Product by Transgenomic.

1.3             “Improvements” means Power3 Improvements and Transgenomic  Improvements.

1.4             “Licensed Know-How” means proprietary information or other know-how, whether or not patentable, and whether stored or transmitted in oral, documentary, electronic, or other form, including without limitation, ideas, concepts, formulas, methods, procedures, designs, compositions, plans, documents, data, inventions, discoveries, developments, works of authorship, biological and chemical materials, and any information relating to research and development plans, experiments, results, compounds, products, preclinical and clinical data, trade secrets, chemical synthesis, scale-up and manufacturing, toxicology, regulatory, stability, and any other information relevant to Neurodegenerative Diagnostic Tests.

1.5             “Licensed Patent Rights” means (a) all patents and patent applications listed on Exhibit A hereto which are owned by or licensed to Power3, and have application in connection with Neurodegenerative Diagnostic Tests; (b) all patents that have issued or in the future shall issue therefrom, including utility, model and design patents and certificates of invention; and (c) all divisionals, continuations, continuations-in-part, reissues, renewals, reexaminations, extensions or additions to any such patent applications and patents.

1.6             “Licensed Product” means test kits or systems for performing Neurodegenerative Diagnostic Tests using the Licensed Technology.

1.7             “Licensed Technology”  means, collectively, the Licensed Patent Rights, the Licensed Know-How, the Improvements and as related to the foregoing items, all laboratory notebooks, research plans, inventions, proteins and protein fragments, biomarkers, assay methodology, processes, materials and methods for production, recovery and purification of natural products, formulae, plans, specifications, characteristics, marketing surveys and plans and business plans.

1.8             “Net Sales” means, with respect to any Licensed Product or Reference Laboratory Service, the gross sales price of such Licensed Product or Reference Laboratory Service invoiced by Transgenomic, its Affiliate, or its (sub)licensee to customers who are not Affiliates (or are Affiliates but are the end users of such Licensed Product) less, to the extent actually paid or accrued by Transgenomic or its Affiliate (as applicable), (a) credits, allowances, discounts and rebates to, and chargebacks from the account of, such customers for spoiled, damaged, out-dated or returned Licensed Product or for Reference Laboratory Services erroneously performed; (b) freight and insurance costs incurred by Transgenomic or its Affiliate (as applicable) in transporting such Licensed Product; (c) cash, quantity and trade discounts, rebates and other price reductions for such Licensed Product or Reference Laboratory Service given to customers under price reduction programs that are consistent with industry practices; (d) sales, use, value-added and other direct taxes incurred on the sale of such Licensed Product and Reference Laboratory Service; (e) customs duties, surcharges and other governmental charges incurred in exporting or importing such Licensed Product and (f) reimbursement decreases from list price due to insurance company, hospital or government reimbursement price reductions.  Notwithstanding anything to the contrary in this Agreement, if any reusable instrument (that is itself a Licensed Product) is used in combination with a separate diagnostic device (that is itself a Licensed Product) to detect or measure one or more analytes from a patient sample on or in such device, then for purposes of calculating Net Sales, such diagnostic device shall constitute a Licensed Product, but such instrument shall not constitute a Licensed Product.

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1.9            “Neurodegenerative Diagnostic Tests” means proteomic neurodegenerative diagnostic screening tests performed as a series of blood serum tests designed to diagnose motor neuron, cognitive, and other neurodegenerative disorders including, but not limited to, Alzheimer’s, Parkinson’s, Lou Gehrig’s disease (ALS), psychiatric diseases or movement disorders in individuals. The test monitors the concentration of selected biomarkers residing in a panel of blood serum protein biomarkers to distinguish normal patients from those with neurodegenerative diseases, by applying a statistical model that evaluates the quantitative information of the protein biomarkers and automatically assigning a probability score for the individual.

1.10           “Person” means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, pool, syndicate, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein.

1.11           “Power3” means Power3 Medical, Inc., a New York corporation, and its Affiliates.

1.12           “Power3 Improvement” means any and all intellectual property developed, created, reduced to practice, conceived, or otherwise made by Power3, its employees, agents or independent contractors that are derived from or based upon the Licensed Technology.

1.13           “Publications” means the publicly available information describing Power3´s work with respect to Neurodegenerative Diagnostic Tests, including but not limited to published patents and patent applications listed in Exhibit A, conference presentations and peer-reviewed publications.

1.14           “Reference Laboratory Services” shall mean use of a laboratory developed and laboratory validated test service that (a) is offered or sold by reference laboratories and/or service laboratories and (b) is developed and validated in accordance with regulations promulgated under the Clinical Laboratory Improvement Amendments of 1988 (CLIA) (or under an equivalent subsequent legislation) for the evaluation of a Neurodegenerative Diagnostic Test performed using a Licensed Product.

1.15           “Territory” means the entire world except for those territories listed on Exhibit B hereto.

1.16           “Third Party”  means any Person other than Power3 and Transgenomic and their respective Affiliates.

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1.17           “Transgenomic” means Transgenomic, Inc., a Delaware corporation.

1.18           “Transgenomic Common Stock” means  the Common Stock, par value $0.01, of Transgenomic.

1.19           “Transgenomic Improvements” means any and all intellectual property developed, created, reduced to practice, conceived, or otherwise made by employees or independent contractors of Transgenomic, in the course of performing any activities pursuant to this Agreement or under the license granted thereunder, and that are specific to the Licensed Technology.

ARTICLE 2

REPRESENTATIONS AND WARRANTIES OF POWER3

Power3 hereby represents and warrants to Transgenomic as follows:

2.1             Corporate Existence and Power.  Power3 (a) is a corporation duly organized, validly existing and in good standing under the laws of New York  (b) has the corporate power and authority and the legal right to own and operate its property and assets, to lease the property and assets it operates under lease, and to carry on its business as it is now being conducted and (c) is in compliance with all requirements of applicable law, except to the extent that any noncompliance would not have a material adverse effect on the properties, business, financial or other condition of Power3 and would not materially adversely affect its ability to perform its obligations under this Agreement.

2.2            Authorization and Enforcement of Obligations.  Power3 (a) has the corporate power and authority to enter into this Agreement and to perform its obligations hereunder and (b) has taken all necessary corporate action on its part to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder.  This Agreement has been duly executed and delivered on behalf of Power3, and constitutes a legal, valid, binding obligation, enforceable against Power3 in accordance with its terms.

2.3             No Consents.  All necessary consents, approvals and authorizations of all governmental authorities and other Persons required to be obtained by Power3 in connection with this Agreement have been obtained.

2.4             Rights in Licensed Technology.  Power3 is the legal and beneficial owner of all right, title and interest in and to the Licensed Technology or has sufficient rights thereto (including, without limitation, the rights under that certain license agreement referred to in the next succeeding sentence), having good title or a valid license thereto, free and clear of any and all mortgages, liens, and security interests created by Power3. Power3 previously has delivered to Transgenomic a full and complete copy, together with all amendments thereto, of the BCM License (defined in Section 4.7 of this Agreement). The BCM License is in full force and effect and neither party thereto is in default under the BCM License. Power3 shall comply with all applicable laws, rules, and regulations of any governmental authority in the performance of its obligations under this Agreement.

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2.5            Non-Infringement.  To the  best knowledge of Power3, the Licensed Technology does not infringe upon or unlawfully or wrongfully use any proprietary rights, including but not limited to patent rights, owned or claimed by a Third Party. Power3 has not received any notice of any claim of infringement relating to the Licensed Technology.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF TRANSGENOMIC

Transgenomic hereby represents and warrants to Power3 as follows:

3.1            Corporate Existence and Power.  Transgenomic (a) is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware; (b) has the corporate power and authority and the legal right to own and operate its property and assets, to lease the property and assets it operates under lease, and to carry on its business as it is now being conducted and (c) is in compliance with all requirements of applicable law, except to the extent that any noncompliance would not have a material adverse effect on the properties, business, financial or other condition of Transgenomic and would not materially adversely affect its ability to perform its obligations under this Agreement.

3.2            Authorization and Enforcement of Obligations.  Transgenomic (a) has the corporate power and authority and the legal right to enter into this Agreement and to perform its obligations hereunder and (b) has taken all necessary corporate action on its part to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder.  This Agreement has been duly executed and delivered on behalf of Transgenomic, and constitutes a legal, valid, binding obligation, enforceable against Transgenomic in accordance with its terms.

3.3            No Consents.  All necessary consents, approvals and authorizations of all governmental authorities and other Persons required to be obtained by Transgenomic in connection with this Agreement have been obtained.

3.4            Compliance with Laws.  Transgenomic shall comply with all applicable laws, rules, and regulations of any governmental authority in the performance of its obligations under this Agreement.

ARTICLE 4

LICENSE GRANT

4.1            Exclusive License. On the terms and subject to the conditions of this Agreement, Power3 hereby grants to Transgenomic an exclusive, royalty-bearing license for the Territory (together with the right to grant sublicenses) to research, develop, obtain regulatory approval for, commercialize, make, have made, use, have used, offer for sale and sell the Licensed Technology, the Licensed Products, and the Reference Laboratory Services in connection with performing or having performed Neurodegenerative Diagnostic Tests. On the terms and subject to the conditions of this Agreement, the exclusive license granted (i) with respect to Licensed Patent Rights, continues until the earlier of the expiration of such patents or the expiration or termination of this Agreement (provided that upon the expiration of any such patent Transgenomic shall have a perpetual license in the technology covered by such patent in the Territory) and (ii) with respect to unpatented Licensed Technology, continues until the expiration or termination of this Agreement.

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4.2            Trademark Licensed.  Power3 hereby grants to Transgenomic a license to use Power3’s NuroPro® trademark registered with the United States Patent and Trademark Office in connection with the license granted in Section 4.1 and shall execute a license agreement for such trademark in the form of Exhibit C to this Agreement.

4.3.            Licensed Know How.  After the effective date of this Agreement, Power3 will make available to Transgenomic all relevant Licensed Know How relating to the Licensed Patent Rights.

4.4            Reservation of Rights.  Power3 retains all right, title and interest in and to the Licensed Technology other than those expressly granted in this Agreement.

4.5            365(n) of Bankruptcy Code.  All rights and licenses now or hereafter granted under or pursuant to any Section of this Agreement, are rights to “intellectual property” (as defined in Section 101(35A) of Title 11 of the United States Code, as amended (such Title 11, the “Bankruptcy Code”)).  Power3 grants to Transgenomic and its Affiliates a right of access and to obtain possession of, and to benefit from copies of, (i) pre-clinical and clinical research data and results, (ii) laboratory and compound samples required to be delivered to Transgenomic to the extent not previously delivered, all of which ((i) and (ii)) constitute “embodiments” of intellectual property pursuant to Section 365(n) of the Bankruptcy Code), and (iii) all other embodiments of such intellectual property, whether any of the foregoing are in Power3’s  possession or control or in the possession and control of Third Parties.

4.6            Sublicenses. The right of Transgenomic to sublicense under this Agreement is subject to the following conditions: (a) in each such sublicense, the sublicensee shall be prohibited from granting further sublicenses and shall be subject to the applicable terms and conditions of the license granted to Transgenomic under this Agreement; (b) in each such sublicense, Transgenomic shall use its best efforts to obtain limitations of liability and indemnity protection for Power3 that are at least as comprehensive as that granted to Transgenomic; (c) Transgenomic shall forward to Power3, within thirty (30) days following execution, a complete and accurate copy written in the English language of each sublicense granted hereunder;  and (d) notwithstanding any such sublicense, Transgenomic shall remain primarily liable to Power3 for all of the duties and obligations of Transgenomic contained in this Agreement.

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4.7            Sublicense of Baylor College of Medicine License.  For the avoidance of doubt, as a part of the Licensed Patent Rights included in the Licensed Technology, Power3 sublicenses to Transgenomic all technology licensed by Power3 as licensee under that certain Exclusive License Agreement between Baylor College of Medicine (“BCM”) and Power 3, dated June 28, 2004, attached hereto as a part of Exhibit A (the “BCM License”), subject to and in accordance with the terms and provisions of the BCM License. Transgenomic agrees to comply with the requirements of the BCM License as applicable to sublicensees; provided that in the event that Power3 breaches any provision of the BCM License or receives any notice of default from BCM relating to a possible termination of the BCM License, Power3 shall immediately notify Transgenomic of such breach or notice and Transgenomic shall have the right, but not the obligation, to cure such default or to perform an act or duty of Power3 under the BCM License necessary to cure such default, and the cost of such performance by Transgenomic, including but not limited to reasonable attorneys’ fees, shall be deducted from any payments otherwise due to Power3 under this Agreement. In the event of the termination of the BCM License as a result of any insolvency, dissolution, bankruptcy or receivership proceedings of Power3, Power3 acknowledges that Transgenomic shall have the right, but not the obligation, to seek to enter into a new license agreement for all patents and technology covered by the BCM License, directly with BCM, but subject to BCM’s consent and the payment by Transgenomic of any additional fees required by BMC; provided that Transgenomic shall continue to comply with its obligations to Power3 under this Agreement, subject to its right to deduct the cost of any payments or performance required under the new license with BCM from any payments otherwise due to Power3 under this Agreement.  Power3 shall not take any action to amend or terminate the BCM License without the express advance written consent of Transgenomic. Power3 covenants to Transgenomic to duly and faithfully observe all terms and restrictions and perform all of the obligations imposed on Power3 under the BCM License, including without limitation payment of all royalties, license fees and other payments. Power3 shall neither do nor permit anything to be done which would cause the BCM License to be terminated or forfeited by reason of any right of termination or forfeiture reserved or vested in BCM under the BCM License.

ARTICLE 5

COMPENSATION

5.1            Royalties.  In partial consideration for the license granted hereunder, during the term of this Agreement, Transgenomic shall pay to Power3 royalties as follows:

  5.1.1          Transgenomic shall pay to Power3 royalties for the license granted in Section 4.1 at a rate (the “Royalty Rate”) of 20% of Net Sales, but not to exceed 25% of the gross profit (as calculated pursuant to U.S. generally accepted accounting principles) derived by Transgenomic from such Net Sales; provided, however, such royalties shall in no case be less than 10% of Net Sales.  Such royalties shall be due and payable on a calendar quarterly basis and shall be submitted by Transgenomic along with the report as specified in Section 6.1 below.

5.2            Third Party Licenses.  If Transgenomic is reasonably required to take a license under any Third Party patents to use the Licensed Technology as reasonably determined by Transgenomic, and Transgenomic’s total royalty burden for Net Sales exceeds the applicable Royalty Rate plus four percent  (4%) (in sum, the “Royalty Cap”), the Royalty Rate payable hereunder shall be reduced proportionally in accordance with the following formula:

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R2 = R1 x (Royalty Cap/T)

Where:

R1 is the Royalty Rate

R2 is the adjusted reduced Royalty Rate hereunder

T is the total royalty rates (on a percentage basis) due to all licensors

By way of example, if the Royalty Rate owed under Section 5.1.1. is 20% (R1) and two additional patent licenses are needed from two Third Parties and these two other royalty rates are 3% and 3.25% (total of 6.25%), the value of T is 26.25 %, the Royalty Cap is 24%  and the Royalty Rate due under this Agreement, as adjusted (R2), is 20 x (24 % /26.25%) or 18.29 %.

Notwithstanding the foregoing, in no event will the Royalty Rate due under this Agreement be reduced to less than ten percent (10%) of Net Sales.

5.3           License Execution Fee.

 5.3.1          Within three (3) days following execution of this Agreement Transgenomic shall deliver to Power3 via wire transfer the amount of $100,000.

 5.3.2          Within thirty (30) days following execution of this Agreement Transgenomic shall create an account for funding Power3’s clinical validation efforts. These funds, referred to in Section 8.1 of this Agreement, shall be disbursed in the manner and subject to the conditions set forth in Section 8.1 and the Disbursement Control Agreement referred to therein.

5.4           Milestone Fees.  Transgenomic shall pay to Power3 the following milestone fees within thirty (30) days of the occurrence of the applicable milestone event:

● $15,000 upon publication of  peer reviewed scientific journal article(s) on biomarkers, clinical validations, medical and scientific findings and implications of the Alzheimer’s, Parkinson’s, and Lou Gehrig’s disease blood tests.

● Shares of Transgenomic Common Stock with an aggregate Fair Market Value of $100,000 upon the First Commercial Sale

● Shares of Transgenomic Common Stock with an aggregate Fair Market Value of $500,000 upon reaching a cumulative total of $15,000,000 of Net Sales

For purposes of this Section 5.4, the “Fair Market Value” of each share of Transgenomic Common Stock means the average of its market prices on each of the 20 trading days prior to the date for which the determination is being made, with each market price being the average of the high and low sale prices of the Transgenomic Common Stock as quoted on the Nasdaq National Market System on such trading day, or, in the event that no such sale takes place on such day, the average of the reported closing bid and asked prices on such day, or, if the Transgenomic Common Stock is listed on a national securities exchange, the average of the high and low sale prices reported on the principal national securities exchange on which the Transgenomic Common Stock is listed or admitted to trading on such trading day, or, if no such reported sale takes place on such day, the average of the closing bid and asked prices on such day on the principal national securities exchange on which the Transgenomic Common Stock is listed or admitted to trading, or, if the Transgenomic Common Stock is not quoted on such National Market System nor listed or admitted to trading on a national securities exchange, the average of the closing bid and asked prices in the over-the-counter market on such day as reported through Nasdaq, or, if bid and asked prices for the Transgenomic Common Stock on such day are not reported through Nasdaq, the average of the bid and asked prices for such day as furnished by any New York Stock Exchange member firm regularly making a market in the Transgenomic Common Stock selected in good faith for such purpose by Transgenomic, or, if none of the foregoing is applicable, then the fair market value of the Transgenomic Common Stock as mutually determined in good faith by Transgenomic and Power3.

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5.5           Sample Use and Reimbursement. Power3 shall provide to Transgenomic  samples for use in its concordance and validation studies, such sample amounts and properties to be further specified by Transgenomic and to be agreed by Power3. Transgenomic shall reimburse Power3 for its full cost incurred as a result of such sample use; provided, however, the payment referred to in Section 5.3.1 of this Agreement represents payment in full for all samples delivered to Transgenomic prior to the execution of this Agreement.

ARTICLE 6

ROYALTY REPORTS AND ACCOUNTING

6.1           Reports.  During the term of this Agreement following the First Commercial Sale of a Licensed Product, Transgenomic shall furnish to Power3 a report for each calendar quarter showing in reasonably specific detail (a) the gross sales of Licensed Product sold by Transgenomic or its Affiliates during the reporting period and the calculation of Net Sales from such gross sales; (b) the royalties payable in United States dollars, if any, which shall have accrued hereunder based upon Net Sales; (c) the withholding taxes, if any, required by law to be deducted in respect of such sales; and (d) the date of the First Commercial Sale of the Licensed Product during the reporting period. Reports shall be due on the forty-fifth (45th) day following the close of each calendar quarter. Transgenomic shall keep, and shall cause its Affiliates to keep, complete and accurate records in sufficient detail to properly reflect all gross sales and Net Sales and to enable the royalties payable hereunder to be determined.  Such records shall be maintained for a minimum of five (5) years from the end of the subject calendar year.

6.2           Audits.   Upon the written request of Power3, and not more than once in each calendar year, Transgenomic shall permit an independent certified public accounting firm of nationally recognized standing, selected by Power3 and reasonably acceptable to Transgenomic, to have access during normal business hours to such of the records of Transgenomic and its Affiliates as may be reasonably necessary to verify the accuracy of the reports delivered by Transgenomic hereunder for any year ending not more than thirty-six (36) months prior to the date of such request.  The accounting firm shall disclose to Power3 only whether the records and calculation of royalties are correct and the details concerning any specific discrepancies other than the amount of such discrepancy.  No other information shall be shared.  In the event that any audit report reveals an underpayment to Power3, Transgenomic will immediately pay to Power3 the amount of such underpayment. Any such audit will be performed at Power3’s expense, provided that the reasonable fees and expenses of such audit will be paid by Transgenomic if such audit reveals an underpayment by Transgenomic of more than ten percent (10%) or $10,000 (whichever is greater) of the amounts payable by Transgenomic to Power3 in any twelve (12) month period.

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6.3           Confidential Financial Information.  Power3 shall treat all financial information subject to review under this Article 6 as Confidential Information pursuant to Article 9 below, and shall cause its accounting firm to retain all such financial information in confidence.

ARTICLE 7

PAYMENTS

7.1           Payment Terms.  Royalties shown to have accrued by each royalty report provided for under Article 6 of this Agreement shall be due and payable on the date such royalty report is due.

7.2           Payment Method.  All payments by Transgenomic to Power3 under this Agreement shall be paid in United States Dollars, and all such payments shall be made by bank wire transfer in immediately available funds to such account as Power3 shall designate before such payment is due.

7.3           Taxes.  All payments under this Agreement will be made without any deduction or withholding for or on account of any tax unless such deduction or withholding is required by applicable laws or regulations.  If Transgenomic is so required to deduct or withhold, Transgenomic will (a) promptly notify Power3 of such requirement, (b) pay to the relevant authorities the full amount required to be deducted or withheld promptly upon the earlier of determining that such deduction or withholding is required or receiving notice that such amount has been assessed against Power3, and (c) promptly forward to Power3 an official receipt (or certified copy) or other documentation reasonably acceptable to Power3 evidencing such payment to such authorities, and provide any further assistance reasonably requested by Power3 to enable Power3 to obtain the benefit of any such deduction. 

7.4           Late Fees.   Any payments required to be made by Transgenomic pursuant to this Agreement shall, if overdue, bear interest at the “prime rate” of interest as published by the Wall Street Journal for the first business day following the due date, plus one percent (1%), or the maximum rate permitted by applicable law, whichever is less.  The payment of such interest shall not preclude Power3 from exercising any other rights it may have because any payment is overdue.

ARTICLE 8

DEVELOPMENT AND COMMERCIALIZATION OBLIGATIONS

8.1. Continued Development. Within thirty (30) days following the execution of this Agreement, Transgenomic shall create a bank account funded with the amount of One Hundred Fifty Thousand Dollars ($150,000), said account to be owned by Transgenomic, and which funds will be used by Power3, with prior agreement by Transgenomic, to fund Power3’s clinical validation activities of the Neurodegenerative Diagnostic Tests; provided that the availability of such funds to Power3 shall be governed by the terms and conditions set forth in the Disbursement Control Agreement attached hereto as Exhibit D. Clinical validation of the Neurodegenerative Diagnostic Tests shall be the responsibility of Power3 until such time, if any, as Transgenomic shall assume some or all of the future responsibility for clinical validation of the Neurodegenerative Diagnostic Tests pursuant to Section 8.2. Power3 shall use commercially reasonable efforts for said development and shall keep Transgenomic informed about its progress in regular reports. Power3 shall disclose to Transgenomic the available technical and clinical performance data of the then-current version of its tests on regular basis, but in no event less often than monthly.

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8.1.1          During the period of continued development of the Neurodegenerative Diagnostic Tests by Power3, Power 3 shall:

(a) prepare an Operating Plan and Budget for the clinical validation activities;

(b) provide suitable laboratory facilities, equipment and personnel for the work to be done in carrying out the clinical validation activities;

(c) coordinate and obtain the approval of Transgenomic prior to the publication of research results obtained from such continued development activities;

(d) discuss with Transgenomic whether a license(s) need be obtained from any Third Person(s) in order to make, use or sell the Licensed Product;

(e) determine, subject to the approval of Transgenomic, the priority of assays to be commercialized;

(f) discuss the patent/intellectual property strategy and implementation plan for development and commercialization;

(g) furnish Transgenomic with summary reports within fifteen (15) days after the end of each calendar quarter, describing its progress under the Operating Plan and Budget; and

(h) prepare and furnish to Transgenomic comprehensive written reports within thirty (30) days after the end of each calendar quarter describing in detail the work accomplished by Power3 during such quarter and evaluating the results of such work.

(i) Discuss the plan and timing of development by Transgenomic of next-generation high-throughput immunoassays and platforms, and the plan, timing and budget for the supporting role to be taken by Power3 in these efforts.

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8.1.2          Power3 shall keep complete and accurate records of its expenditures under the Operating Plan and Budget. Transgenomic shall have the right, at its own expense, to appoint an independent certified public accountant to examine such records, during regular business hours at the place or places where such records are customarily kept, upon reasonable notice from Transgenomic, to the extent reasonably necessary to verify the accuracy of the expenditures and required reports. Transgenomic agrees to hold in confidence all information concerning such expenditures, other than their total amounts, and all information learned in the course of any audit or inspection, except to the extent that it is necessary for Transgenomic to reveal the information in order to enforce any rights it may have pursuant to this Agreement or if disclosure is required by law. Failure by Transgenomic to request verification of any expenditures within two years after such expenditure has been made shall be considered acceptance of the accuracy of such expenditure, and Power3 shall have no obligation to maintain any records pertaining to such report or statement beyond the two-year period.

8.2           Assumption of Development by Transgenomic.  If, at any time during the term of this Agreement, Power3 breaches its obligations under this Agreement or the Disbursement Control Agreement attached hereto as Exhibit D or Transgenomic is dissatisfied with Power3’s clinical validation activities of the Neurodegenerative Diagnostic Tests pursuant to this Agreement or such Disbursement Control Agreement, Transgenomic may assume some or all of the responsibility for future development of the Neurodegenerative Diagnostic Tests if Power3 has not cured such breaches or the reasons for Transgenomic’s dissatisfaction within forty-five (45) days after notice thereof by Transgenomic, which notice will specifically state the nature of such breaches or the reasons for such dissatisfaction in reasonable detail. In addition, Transgenomic may, in its discretion, assume some or all of the responsibility for future development of the Neurodegenerative Diagnostic Tests at any time after the entire $150,000 referred to in Section 8.1 of this Agreement has been disbursed to Power3. At such time as Transgenomic assumes responsibility for development of the Neurodegenerative Diagnostic Tests, Power3 shall transfer to Transgenomic the physical embodiment of all Licensed Technology useful or necessary for use in such future development activities, including but not limited to (i) pre-clinical and clinical research data and results, (ii) laboratory and compound samples, (iii) all other embodiments of the Licensed Technology, whether any of the foregoing are in Power3’s possession or control or in the possession and control of Third Parties.

ARTICLE 9

CONFIDENTIALITY

9.1           Confidential Information.  During the term of this Agreement, and for a period of five (5) years following the expiration or earlier termination hereof, each party shall maintain in confidence all written information and data provided by one party to the other hereunder and marked “Confidential” or, if information disclosed orally, visually or in some other form, which is summarized in writing, is confirmed in writing as “Confidential” to the other party within thirty (30) days of such disclosure (the “Confidential Information”), and shall not use, disclose or grant the use of the Confidential Information of the other except on a need-to-know basis to those directors, officers, employees, agents, attorneys, accountants, advisors, counterparties and permitted assignees of it and its Affiliates, to the extent such disclosure is reasonably necessary in connection with such party’s activities as expressly authorized by this Agreement.  To the extent that disclosure is authorized by this Agreement, prior to disclosure, each party hereto shall obtain agreement of any such Person to hold in confidence and not make use of the Confidential Information for any purpose other than those permitted by this Agreement.  Notwithstanding the foregoing, all orally disclosed Licensed Know-How shall be deemed the Confidential Information of Power3 without marking or other designation.

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9.2           Permitted Disclosures.  The confidentiality obligations contained in Section 9.1 of this Agreement shall not apply to the extent that (a) any receiving party (the “Recipient”) is required (i) to disclose information by law, order or regulation of a governmental agency or a court of competent jurisdiction, or (ii) to disclose information to any governmental agency for purposes of obtaining approval to test or market a product, provided in either case that the Recipient shall provide written notice thereof to the other party and sufficient opportunity to object to any such disclosure or to request confidential treatment thereof; or (b) the Recipient can demonstrate that (i) the disclosed information was public knowledge at the time of such disclosure to the Recipient, or thereafter became public knowledge, other than as a result of actions of the Recipient in violation hereof; (ii) the disclosed information was rightfully known by the Recipient (as shown by its written records) prior to the date of disclosure to the Recipient by the other party hereunder; or (iii) the disclosed information was disclosed to the Recipient on an unrestricted basis from a source unrelated to any party to this Agreement and not under a duty of confidentiality to the other party.

9.3           Equitable Relief.  Each party hereby acknowledges and agrees that, in the event of any breach or threatened breach of this Article 9 by the Recipient, the disclosing party may suffer irreparable injury for which damages at law may not be an adequate remedy.  Accordingly, without prejudice to any other rights and remedies otherwise available to the disclosing party, the disclosing party shall be entitled to seek equitable relief, including injunctive relief and specific performance, for any breach or threatened breach of this Article 9 by the Recipient, its Affiliates, or any of its or their employees, directors, officers, members, agents, or representatives.

9.4           Non-Use of Names; Confidentiality of Agreement.  Subject to Section 9.5, neither party shall make any public announcement, issue any press release or publish any study (collectively, all such communications, “Publication”) concerning the transactions contemplated herein, or make any Publication which includes the name of the other party or any of its Affiliates, or otherwise use the name or names of the other party or any of their employees or any adaptation, abbreviation or derivative of any of them, whether oral or written, related to the terms, conditions or subject matter of this Agreement, without the prior written permission of such other party, except as may be required by applicable law, regulation or judicial order (and then only following consultation with the other party).  Such permission may not unreasonably be withheld.

9.5           Press Release.  The parties shall issue a press release substantially in the form attached hereto as Exhibit E promptly after the execution of this Agreement.

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ARTICLE 10

INTELLECTUAL PROPERTY

10.1         Ownership.

 10.1.1  Assignment of Transgenomic Improvements. Subject to a perpetual, exclusive, royalty-free (other than Transgenomic’s continuing obligations to pay royalties as provided in Article 5 of this Agreement), world-wide license, with the right to sub-license, hereby retained by Transgenomic, Transgenomic hereby irrevocably assigns and agrees to assign to Power3 all worldwide right, title and interest in and to Transgenomic Improvements. Transgenomic agrees that Transgenomic shall sign, execute and acknowledge or cause to be signed, executed and acknowledged (any out-of-pocket costs for which shall be at Power3’s sole cost) any and all documents and to perform such acts as may be necessary, useful or convenient for the purposes of perfecting the foregoing assignment and obtaining, enforcing and defending intellectual property rights with respect to Transgenomic Improvements.

 10.1.2  Retention of Rights.  Except for the rights and licenses expressly provided herein, Power3 and Transgenomic retain all of their respective worldwide right, title and interest in and to any intellectual property made, conceived or reduced to practice by or on behalf of Power3 and Transgenomic, respectively. No licenses are granted by implication, estoppel or otherwise.

10.2         Actual or Threatened Disclosure or Infringement. If information comes to the attention of Transgenomic to the effect that any patent rights relating to a Licensed Product or Reference Laboratory Service, have been or are threatened to be infringed, Transgenomic shall have the right, at its expense, to take such action as it may deem necessary to prosecute or prevent such infringement, including the right to bring or defend any suit, action or proceeding involving any such infringement. Transgenomic shall notify Power3 promptly of the receipt of any such information and of the commencement of any such suit, action or proceeding. If Transgenomic determines that it is necessary or desirable for Power3 to join any such suit, action or proceeding, Power3 shall execute all papers and perform such other acts as may be reasonably required to permit Transgenomic to act in Power3’s name. In the event that Transgenomic brings a suit, it shall be entitled to all sums recovered in such suit or in its settlement without any further obligation to Power3. If Transgenomic does not, within 120 days after giving notice to Power3 of the above-described information, notify Power3 of Transgenomic’s intent to bring suit against any infringer, Power3 shall have the right to bring suit for such alleged infringement, but it shall not be obligated to do so. Power3 may join Transgenomic as party plaintiff, if appropriate, in which event Power3 shall hold Transgenomic free, clear and harmless from any and all costs and expenses of such litigation, including reasonable attorneys’ fees, and all sums recovered in any such suit or in its settlement shall belong to Power3 without any further obligation to Transgenomic. Each party shall always have the right to be represented by counsel of its own selection and at its own expense in any suit instituted by the other for infringement, under the terms of this Section. If Transgenomic lacks standing to bring any such suit, action or proceeding, then Power3 shall do so at the request of Transgenomic and at Transgenomic’s expense.

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10.3         Infringement Claims.

 10.3.1 Defense of Infringement Claims. Each party will cooperate with the other in the defense of any suit, action or proceeding against either such party or any sublicensee of such party alleging the infringement of the intellectual property rights of a Third Person by reason of the use of the Licensed Technology in the manufacture, use or sale of a Licensed Product or a Reference Laboratory Service. Each party shall give the other party prompt written notice of the commencement of any such suit, action or proceeding or claim of infringement and will furnish the other party with a copy of each communication relating to the alleged infringement. The party defending any such suit or action shall have full authority (including the right to exclusive control of defense of any such suit, action or proceeding and the exclusive right to compromise, litigate, settle or otherwise dispose of any such suit, action or proceeding), to defend or settle any such suit, action or proceeding. If the parties agree that the other party should institute or join any suit, action or proceeding pursuant to this Section 10.3.1, the non-moving party may join the other party as a defendant if necessary or desirable, and each such party shall execute all documents and take all other actions, including giving testimony, which may reasonably be required in connection with the prosecution of such suit, action or proceeding.

 10.3.2 Costs of Infringement Claims. With regard to a suit, action or proceeding brought against Transgenomic for infringement arising out of the use of the Licensed Technology by Transgenomic, Power3 will be responsible for the costs incurred by Transgenomic under Section 10.3.1 above (“Infringement Litigation Costs”). Transgenomic may recover Infringement Litigation Costs from Power3 to the extent of all royalties and milestone previously paid under this and Agreement and may recoup any excess amount of Infringement Litigation Costs from future royalties and milestones due to Power3.

10.4         Additional Patents.

 10.4.1 Power3 shall decide whether (and where) to file any patent application relating to Improvements. Power3 may select counsel, prepare and prosecute such applications. Power3 shall be responsible for in all expenses incurred by such counsel.

 10.4.2 In the event Power3 elects not to file or elects not to continue prosecution of an application on any Improvement, Transgenomic may file and prosecute any such application(s) at its own expense.

 10.4.3 In the event that Power3 determines that it is no longer interested in prosecuting or maintaining a particular patent application or granted patent included in Licensed Patents, Power3 shall so inform Transgenomic in sufficient time to permit Transgenomic to assume the responsibility and expense for the further prosecution and/or maintenance of such application or patent. If Transgenomic assumes such responsibility and expense, any expenses incurred by Transgenomic in prosecuting or maintaining such patent shall be deducted from future royalties or milestone payments due to Power3.

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ARTICLE 11

TERMINATION

11.1        Expiration.  Subject to the provisions of Sections 11.2, 11.3 and 11.4 of this Agreement, this Agreement shall expire on the termination of Transgenomic’s obligation to pay royalties to Power3 under Article 5 of this Agreement.

11.2         Termination by Transgenomic.  Transgenomic may terminate this Agreement, in its sole discretion, upon ninety (90) days prior written notice to Power3.

11.3         Termination by Power3.  Power3 may terminate this Agreement, in its sole discretion, upon ninety (90) days prior written notice to Transgenomic if (i) the First Commercial Sale has not occurred within 12 months after execution of this Agreement, unless such failure is due to events of force majeure referred to in Article 13 of this Agreement, or (ii) Power3 has not received at least $10,000 in royalties under Section 5.1 prior to 18 months after execution of this Agreement, unless such failure is due to events of force majeure referred to in Article 13 of this Agreement; provided, however, Transgenomic may avoid the occurrence of the event described in this clause by paying to Power3 prior to the expiration of such 90-day period an amount which, when added to the royalties paid to Power3 under Section 5.1, totals $10,000.

11.4         Termination for Cause.  Except as otherwise provided in Article 13 of this Agreement, a party may terminate this Agreement upon or after the breach of any material provision of this Agreement by the other party if the other party has not cured such breach within forty five (45) days after notice thereof by the non-breaching party.

11.5         Effect of Expiration or Termination.  Expiration or termination of this Agreement shall not relieve the parties of any obligation accruing prior to such expiration or termination, and the provisions of Articles 9, 10, 12, 14 and 15 shall survive the expiration or termination of this Agreement.

ARTICLE 12

INDEMNIFICATION

Transgenomic shall defend, indemnify and hold Power3 harmless from all losses, liabilities, damages, fines, penalties and expenses (including reasonable attorneys’ fees and costs) incurred by Power3 as a result of any Third Party claim, demand, action or other proceeding arising out of the manufacture, use, sale, performance or other exploitation of the Licensed Technology by Transgenomic, or their respective customers or a breach of the warranty set forth in Section 3.4.  Power3 shall defend, indemnify and hold Transgenomic harmless from all losses, liabilities, damages, fines, penalties and expenses (including reasonable attorneys’ fees and costs) incurred by Transgenomic as a result of any Third Party claim, demand, action or other proceeding arising from a breach by Power3 of the warranties set forth in Sections 2.4 or 2.5.  If either party proposes to seek indemnification from the other party under the provisions of this Section 12.1, it shall notify the indemnifying party within thirty (30) days of receipt of notice of any such claim or suit; provided, that the failure to notify shall not preclude a party's obligations under this Section unless the failure to timely notify the other party materially prejudices the other party.  The indemnified party shall have the right but not the obligation to participate in the defense of such claim, and the parties shall mutually agree upon counsel and settlement terms with respect to any such claim.

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ARTICLE 13

FORCE MAJEURE

Neither party shall be held liable or responsible to the other party nor be deemed to have defaulted under or breached this Agreement for failure or delay in fulfilling or performing any term of this Agreement to the extent, and for so long as, such failure or delay is caused by or results from causes beyond the reasonable control of the affected party including but not limited to fire, floods, embargoes, war, acts of terror, acts of war (whether war be declared or not), insurrections, riots, civil commotions, strikes, lockouts or other labor disturbances, acts of God or acts, omissions or delays in acting by any governmental authority (including the FDA) or other party.  The foregoing shall not apply to monetary obligations.

ARTICLE 14

LIMITATION OF LIABILITY; WARRANTY DISCLAIMER

14.1         Limitation of Liability.  EXCEPT FOR CLAIMS ARISING FROM BREACH OF ARTICLE 9 OR INFRINGEMENT OR MISAPPROPRIATION OF A PARTY'S INTELLECTUAL PROPERTY RIGHTS OR CLAIMS INDEMNIFIED HEREUNDER, IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES, OR DAMAGES FOR LOSS OF PROFITS, REVENUE, DATA OR USE, INCURRED BY EITHER PARTY OR ANY THIRD PARTY, WHETHER IN AN ACTION IN CONTRACT OR TORT, EVEN IF THE OTHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

14.2         Disclaimer of Warranties.  EXCEPT AS EXPRESSLY WARRANTED IN THIS AGREEMENT, POWER3 DISCLAIMS AND TRANSGENOMIC HEREBY WAIVES ANY AND ALL  OTHER REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION REGARDING THE SCOPE, COVERAGE, VALIDITY OR ENFORCEABILITY OF ANY OF THE LICENSED TECHNOLOGY AND REGARDING THE INTENDED USE BY TRANSGENOMIC OF THE LICENSED TECHNOLOGY OR LICENSED PRODUCTS (INCLUDING, BUT NOT LIMITED TO, ANY INFRINGEMENT, MISAPPROPRIATION OR VIOLATION OF ANY INTELLECTUAL PROPERTY RIGHT OF ANY THIRD PARTY AND ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE).  FURTHER, POWER3 MAKES NO REPRESENTATION OR WARRANTY THAT TRANSGENOMIC CAN SUCCESSFULLY MAKE, SELL OR USE ANY LICENSED PRODUCTS.

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ARTICLE 15

MISCELLANEOUS

15.1         Notices.  Any consent, notice or report required or permitted to be given or made under this Agreement by one of the parties hereto to the other party shall be in writing, delivered by any lawful means, and addressed to such other party at its address indicated below, or to such other address as the addressee shall have last furnished in writing to the addressor and (except as otherwise provided in this Agreement) shall be effective upon receipt by the addressee as evidenced by the delivery receipt.

If to Power3:

 Power3 Medical Products, Inc.

 3400 Research Forest Drive

 Suite B2-3

 The Woodlands, Texas 77381

 Facsimile: 281-466-1481

If to Transgenomic:

 Transgenomic, Inc.

 12325 Emmet Street

 Omaha, Nebraska 68164

 Attn: Legal Department

 Facsimile: 402-452-5461

15.2         Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Nebraska, without regard to the conflicts of law principles thereof.

15.3         Assignment.  Neither party shall assign its rights or obligations under this Agreement, in whole or in part, by operation of law or otherwise, without the prior written consent of the other party, which consent shall not be unreasonably withheld; provided, however, that either party may assign this Agreement to the successor to all or substantially all of its assets or business to which this Agreement relates or to a successor through a merger.  Any purported assignment in violation of this Section 15.3 shall be void.

15.4         Waivers and Amendments.  No change, modification, extension, termination or waiver of this Agreement, or any of the provisions herein contained, shall be valid unless made in writing and signed by duly authorized representatives of the parties hereto.

15.5         Entire Agreement.  This Agreement embodies the entire understanding between the parties and supersedes any prior understanding and agreements between and among them respecting the subject matter hereof.  There are no representations, agreements, arrangements or understandings, oral or written, between the parties hereto relating to the subject matter of this Agreement which are not fully expressed herein.

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15.6         Severability.  Any of the provisions of this Agreement which are determined to be invalid or unenforceable in any jurisdiction shall be ineffective to the extent of such invalidity or unenforceability in such jurisdiction, without rendering invalid or unenforceable the remaining provisions hereof and without affecting the validity or enforceability of any of the terms of this Agreement in any other jurisdiction.

15.7         Waiver.  The waiver by either party hereto of any right hereunder or the failure to perform or of a breach by the other party shall not be deemed a waiver of any other right hereunder or of any other breach or failure by said other party whether of a similar nature or otherwise.

15.8         Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

15.9         Relationship of Parties.  Nothing in this Agreement or in the course of business between Power3 and Transgenomic shall make or constitute either Party a partner, employee or agent of the other and the relationship between the Parties is not a partnership, joint venture or agency.  Neither Party shall have any right or authority to commit or legally bind the other in any way whatsoever including, without limitation, the making of any agreement, representation or warranty.

15.10  Resolution of Disputes.  In the event of any dispute or disagreement between the parties either in interpreting any provision of this Agreement or about the performance of either party and upon the written request of either party (“Dispute Notice”), each of the parties will appoint a designated representative to attempt to resolve such dispute or disagreement. The designated representatives will discuss the problem and negotiate in good faith in an effort to resolve the dispute without any formal proceedings.  The specific format of such discussion shall be left to the discretion of the designated representatives.  In the event a dispute is not resolved within thirty (30) days following the date of the Dispute Notice, the parties agree to proceed to mediation under the Mediation Rules of the American Arbitration Association and to conclude such mediation within ninety (90) days following the date of the Dispute Notice. If the parties are unable to agree upon a mutually convenient place for the mediation, the mediation shall take place in Omaha, Nebraska. Each party will pay its own costs, plus an equal share of the cost of the mediator and mediation facilities. If any dispute is not resolved by mediation, then either party in its sole discretion may invoke litigation, provided that failure to invoke litigation shall not be a waiver of any such dispute.  During any mediation or litigation which arises out of a dispute, all parties will continue to proceed pursuant to the provisions of this Agreement without prejudice to the rights of such parties under this Agreement. Notwithstanding the foregoing, either party shall have the right, without waiving any right or remedy available to such party under this Agreement or otherwise, to seek and obtain from any court of competent jurisdiction any interim or provisional relief that is necessary or desirable to protect the rights or property of such party, pending the discussions and negotiations set forth above.

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above.

POWER3 MEDICAL PRODUCTS, INC.
By:	/s/ Helen R. Park
Title:  Interim CEO
TRANSGENOMIC, INC.
By:	/s/ Craig Tuttle
Title:  President & CEO

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EX-10.2

EMPLOYMENT AGREEMENT

This Employment Agreement (the “Agreement”) by and between Power 3 Medical Products, Inc., a New York corporation (the “Company”), and John P. Ginzler, (the “Officer”) is executed this 1 day of June, 2009 and shall be effective for all purposes as of April 29, 2009 (the “Effective Date”).

RECITALS

WHEREAS, the Officer commenced employment with the Company on April 29, 2009;

WHEREAS, Company and the Officer desire to continue the Officer’s employment and enter into the Agreement to reflect the parties’ mutual understanding and intent, in its entirety.

NOW, THEREFORE, in consideration of the premises and of the covenants and agreements herein provided, the parties hereto agree as follows:

1.  EMPLOYMENT TERMS

1.1            Term.  The Company hereby employs the Officer, and the Officer hereby accepts employment with the Company, all in accordance with the terms and conditions hereof, for a term commencing on April 29, 2009 and terminating on December 31, 2012.  However, the Officer shall be considered to be employed by the Company beyond the Termination Date for purposes of receiving certain benefits conferred under this Agreement, as described in Paragraph 3.1 hereof.

1.2 Position and Duties.

(a)            The Company hereby employs the Officer, and the Officer agrees to serve the Company, as an Officer of the Company pursuant to the terms of this Agreement.  The Company has by action of its Board of Directors appointed the Officer to the position of Chief Financial Officer, however it may, in the sole and unfettered discretion of the Board of Directors, amend the Officer’s title and/or duties and responsibilities, provided that the Officer remains an officer of the Company pursuant to the terms of this Agreement.

(b)            The Officer shall be responsible for such duties as are commensurate with the office in which he serves and as may from time to time be assigned to the Officer by the Company’s Board of Directors.

1.3 Performance of Duties.

(a)            At all times prior to the Termination Date, the Officer (i) shall devote his full business time, energies, best efforts, and attention to the business of the Company, (ii) shall faithfully and diligently perform the duties of his employment with the Company, (iii) shall do all reasonably in his power to promote, develop, and extend the business of the Company, and (iv) shall not enter into the service of, or be employed in any capacity or for any purpose whatsoever by, any person, firm or corporation other than the Company without the prior written consent of the Board of Directors of the Company.

(b)            The Officer shall perform his duties in accordance with all applicable laws, rules, or regulations that apply to the Company and/or its business, assets (real or personal), or employees.

2.            COMPENSATION.

2.1           Salary.

(a)           For so long as Officer is employed by the Company, the Company agrees to pay to the Officer, and the Officer shall accept from the Company, for all of his services rendered pursuant to this Agreement, a salary of One Hundred  Twenty Thousand Dollars ($120,000) per annum, payable semimonthly for the period beginning May 1, 2009.

(b)           The Company’s Board of Directors, or compensation committee of the Board of Directors (the “Compensation Committee”), shall review the Officer’s salary annually and merit increases thereon shall be considered and may be approved, in the sole and unlimited discretion of the Company’s Board of Directors, depending in part on the profits and cash flow of the Company.  If the Company’s Board of Directors elects in its discretion to increase the salary of the Officer at any time or from time to time, the new salary rate shall, without further action by the Officer or the Company, be deemed substituted for the amount set forth above.  At such time, this Agreement shall be deemed amended accordingly (notwithstanding the provisions of Paragraph 7.8 below), and, as so amended, shall remain in full force and effect.

2.2           Bonuses. The Company, in the sole and unfettered discretion of its Board of Directors or Compensation Committee, may from time to time award additional cash bonuses to the Officer based upon its measure of Officer’s performance.  Such bonuses may be awarded in a lump sum or may be conditioned upon the future performance or employment of Officer, in the sole and unfettered discretion of the Board of Directors of the Company.

2.3           Expenses. Upon submission of appropriate invoices or vouchers, the Company shall pay or reimburse the Officer for all reasonable expenses incurred by the Officer in the performance of his duties hereunder in furtherance of the business of the Company.

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2.4           Benefits.

(a)           The Company extends to the Officer the right to participate in whatever employee benefit plans (excluding any employee benefit plan covered separately in this Agreement) may be in effect from time to time, to the extent the Officer is eligible under the terms of the plans.  However, no employee benefits other than those specifically conferred by the terms of this Agreement have been promised to the Officer in connection with this employment.  The adoption of one or more employee benefit plans, the terms of the plans, and the Officer’s participation in the plans, if any, are in the sole discretion of the Company and may be changed by the Company at any time and from time to time.

(b)           COBRA benefits

(i)           The Officer has elected to participate in his former company’s COBRA plan for medical and dental benefits, effective May 1, 2009.

(ii)           For so long as Officer is employed by the Company, and for so long as the Company does not extend company-sponsored medical and dental benefits to the employee as part of an employee benefit plan, the Company agrees to pay to the Officer, and the Officer shall accept from the Company, a monthly amount consistent with the Officer’s monthly Cobra premium paid by the Officer to his former employer beginning May 1, 2009.  The Company understands that the Officer’s former company may adjust the Officer’s Cobra rates in subsequent years, and the Company agrees to pay to the Officer, and the Officer shall accept from the Company, an amount consistent with revised premium amounts.

(iii)           The Officer agrees that he will reimburse the Company for any tax credits or subsidies available to him through the COBRA Premium Subsidy in conjunction with the enactment of The American Recovery and Reinvestment Act of 2009 (the “Stimulus Bill”). The Company understands and agrees that such credit available through the Stimulus Bill to the Officer is highly unlikely due to the income limitations established in the Stimulus Bill, and the Officer did not elect to receive the premium reduction subsidy due to his projected income levels.

2.5           Stock Grant.

(a)           To induce the Officer to accept the position of Chief Financial Officer, and subject to the terms of this Paragraph 2.5, the Officer is hereby granted by the Company, effective upon the Effective Date of this Agreement, Twelve Million (12,000,000) shares of the Company’s common stock (the “Restricted Shares”). The grant of the Restricted Shares shall be subject to the following terms and conditions:

(i) The Restricted Shares time vest in 33.33% increments annually over a three-year total period from the anniversary of the date of issue of the Restricted Shares.

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(ii)           If the Officer’s employment with the Company shall cease or terminate for just cause, then the Officer shall forfeit all of such unvested Restricted Stock to the Company, and the Officer shall have no claim or right, either express or implied, against the Company for any compensation, payment or benefit in lieu of the Restricted Stock so forfeited or otherwise.  In addition, unless and until the Officer’s rights in the foregoing Restricted Stock become non-forfeitable by virtue of the satisfaction of the foregoing condition, the Officer shall have no right to, and the Officer hereby agrees that he shall not, sell, pledge, assign, hypothecate, encumber, give, grant or otherwise transfer such Restricted Stock or alienate his then-current or expected future rights to such Restricted Stock, and the certificates representing all of such Restricted Stock shall prominently bear appropriate legends reflecting these restrictions and the Company’s stock register shall likewise reflect these restrictions. Furthermore, until such time as the restricted stock becomes non-forfietable, the Company retains the right, at the discretion of the Board of Directors, to use any of such shares as deemed necessary, solely to pledge as collateral to raise funds for the benefit of the company. In the event that such shares become forfeit of a pledge, the company may at the discretion of the board of directors issue replacement shares to the employee under the restrictions of this agreement. During the course of the pledge, the voting rights of the pledged shares remain with the employee.

(iii)           Upon issuance of the Restricted Stock, except for the restrictions set forth in this Paragraph 2.5, the Officer shall have all rights of a shareholder of the Company with respect to such Restricted Stock including the right to vote such Restricted Stock and to receive all dividends and other distributions paid with respect to such Restricted Stock; provided, however, dividends, if any, paid or distributed on the Restricted Stock shall not be paid by the Company to the Officer unless and until such time as the Restricted Stock becomes nonforfeitable.

(iv)           In the event of a Change in Control (as herein defined), the Company will waive in whole any and all remaining restrictions on the Restricted Stock.  For purposes hereof, a Change of Control shall mean, and shall be deemed to have occurred:

(A)           if any person, other than any benefit plan of the Company or Ira L. Goldknopf, as holder of the Series B Preferred Stock, directly or indirectly, becomes the beneficial owner (as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended) of securities representing 51% or more of the combined voting power of the Company’s then-outstanding securities, but excluding any such acquisition pursuant to a merger, consolidation or similar business combination involving the Company; or

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(B)           upon the consummation of a merger, consolidation, or similar business combination involving the Company, other than any such transaction which results in at least 75% of the total voting power represented by the voting securities of the surviving entity (or the parent entity thereof) outstanding immediately after such transaction being beneficially owned by at least 75% of the holders of the outstanding voting securities of the Company immediately prior to the transaction with the voting power of each such continuing holder relative to other such continuing holders not being substantially altered in the transaction; or

(C)           upon the Board of Directors or the shareholders of the Company approving a plan of complete or substantially complete liquidation of the Company; or

(D)           upon the consummation of the sale, lease, or disposition by the Company of 50% or more of the total assets of the Company in one or a series of related transactions (provided that a license, sublicense or similar transaction involving the Company’s intellectual property rights shall not be considered as a Change of Control); or

(E)           upon the individuals who constitute the Board as of the Effective Date (the “Incumbent Board”) ceasing for any reason to constitute at least a majority of the members of the Board, provided that any person becoming a director after the Effective Date whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least two-thirds of the directors then comprising the Incumbent Board (other than any individual whose initial assumption of office occurs as a result of either (a) an actual or threatened election contest or (b) an actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board) shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board.

(v)           The Restricted Shares shall have demand registration rights or piggyback registration rights (neither of which, however, shall be effective unless and until the Officer’s rights to such shares have ceased to be subject to the risks of forfeiture as provided herein).

(vi)           The Officer agrees to pay in a timely manner deemed suitable by the Company, and to indemnify and hold harmless the Company from, any and all taxes (including all penalties and interest, if any, thereon), resulting from the grant and/or transfer of the above-referenced Restricted Stock for which ultimate responsibility is assigned to or asserted against the Officer under applicable law.  For purposes of this provision, all withholding obligations of the Company in respect of the aforementioned taxes (including any and all taxes, penalties and interest imposed on or asserted against the Company for failure to properly withhold and remit any such amounts in a timely manner) shall be considered the responsibility of the Officer and, accordingly, the Officer agrees to pay in a timely manner deemed suitable by the Company, and to indemnify and hold harmless the Company from, any and all of such obligations.

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(b)            To induce the Officer to accept the position of Chief Financial Officer, and subject to the terms of this Paragraph 2.5, the Officer is hereby granted by the Company, effective upon the Effective Date of this Agreement, a warrant to purchase an additional Ten Million (10,000,000) shares of Common Stock (the “Warrant”) at $0.02 per share three years after the date of this Warrant.

2.6           Vacation; Sick Leave. The Company’s vacation and sick leave policy has been established by the Company and may be changed by the Company at any time and from time to time.  Said policy is published in separate data files accessible to the Officer.  The Officer will not be entitled to receive payment for any unused sick leave either during employment or upon termination of employment.

2.7           Withholding. The Company may withhold from any amounts payable under this Agreement any and all federal, state, city, or other taxes or other amounts required to be withheld by any applicable law.

3.            TERMINATION.

3.1           Termination Upon 30 Days Notice.

(a)           Either party may terminate the Officer’s employment under this Agreement for any reason whatsoever, either with or without cause, upon giving the other party no less than thirty (30) days prior written notice of such termination ( the “Notice Date”).  The effective date of a termination pursuant to this Paragraph 3.1 shall be such termination date as stated on the notice, provided that the termination date can be no earlier than the 31st day following the day the notice becomes effective pursuant to Paragraph 5.4 below (the “Termination Date”).

(b)           Until the expiration of the contract on May 17, 2009 (“Transition Period”), unless terminated for “Cause” as defined in Paragraph 3.4 or if the Officer resigns from his position or duties, the Officer will continue to be considered as an employee of the Company only for the purpose of receiving the compensation and benefits awarded in Paragraphs 2.1, 2.2, and 2.4 hereof.  More specifically, for the duration of Transition Period the Officer (i) shall continue to receive his salary at the rate in effect as of the Notice Date, (ii) shall continue to be considered an employee of the Company for purposes of determining eligibility to receive any contingent or deferred bonuses awarded to the Officer prior to the Termination Date, (iii) shall continue to be considered an officer of the Company for purposes of vesting in any stock options granted to Officer (but not for purposes of the forfeiture restrictions applicable to the Restricted Stock as set forth in Paragraph 2.5), and (iv) shall, to the extent allowed by such plan, remain eligible to participate in any benefit plan of the Company in which the Officer participates as of the Notice Date.

(c)           Notwithstanding any provision herein to the contrary, however, the Officer will not be entitled to act as, or represent himself to be, an officer or employee of the Company following the Termination date and will not be entitled to receive or participate in any bonus, incentive, or benefit program, involving stock or otherwise, that is established following the Termination Date.

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3.2           Termination by Mutual Consent. The Officer and the Company may at any time terminate the employment of the Officer under this Agreement by mutual consent in writing upon the terms and conditions stated in such writing.

3.3           Termination Upon Death. If the Officer dies, his employment shall immediately terminate automatically as of the date of his death.  In such event, the Officer shall be treated as if he had terminated his employment with the Company under the terms of Paragraph 3.1 above, with the date of his death serving as both the Notice Date and the Termination Date.

3.4           Termination for Cause. This Agreement may be terminated for Cause by either party for the following reasons, only:

3.4.a.1 Commission of a criminal offense by either party in the course of performance of the Agreement shall entitle the other to effect immediate termination upon giving written notice;

3.4.a.2 If either party becomes insolvent or makes a general assignment for the benefit of creditors or if petition in bankruptcy is filed against the defaulting party and is not discharged or disputed within five (5) working days of such filing or of the agent is adjudicated bankrupt or insolvent;

3.4.a.3 The election of one party (the “aggrieved party”) to terminate this Agreement upon (1) the actual breach or actual default by the other party in the reasonable performance of the defaulting party’s obligations and duties under this Agreement and (2) the failure of the defaulting party to cure the same within fifteen (15) days (the “cure period”) after receipt by the defaulting party of a good faith written notice from the aggrieved party specifying such breach or default and (3) provided that the defaulting party has not cured the default and the aggrieved party may then give written notice to defaulting party of his or its election to terminate ten (10) days after expiration of the cure period.

3.5           Transition.  Officer shall make a good faith effort to aid in the transition of management necessitated by the termination of his employment pursuant to this Agreement.  To the extent feasible and/or practical, Officer shall devote the time and energy necessary to effect said goal of a smooth transition for the successor chief scientific officer.  The salary payable to Officer by the Company pursuant to Paragraph 2.1(a) of this contract shall continue to be paid to Officer during such transition period.

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4.           PROPRIETARY INFORMATION AND ITEMS.

4.1           Acknowledgments. The Officer acknowledges that (a) the Officer has or will be afforded access to Proprietary Information of the Company or its affiliates; (b) public disclosure of such Proprietary Information could have an adverse effect on the Company and its affiliates; and (c) the provisions of this Section 4 are reasonable and necessary to prevent the improper use or disclosure of such Proprietary Information.

4.2           Non-Disclosure and Non-Use of Proprietary Information. During the Officer’s employment by the Company and for a period of five (5) years thereafter, the Officer covenants and agrees that the Officer (a) shall not disclose to others or use for the benefit of himself or others, any of the Company’s Proprietary Information, except that the Officer may disclose such information (i) in the course of and in furtherance of the Officer’s employment with the Company to the extent necessary for the benefit of the Company, (ii) with the prior specific written consent of the Board of Directors of the Company, or (iii) to the extent required by law; and (b) shall take all measures reasonably necessary to preserve the confidentiality of all Proprietary Information of the Company known to the Officer, shall cooperate fully with the Company’s or its affiliates’ enforcement of measures intended to preserve the confidentiality of all Proprietary Information, and shall notify the Board of Directors immediately upon receiving any request for, or making any disclosure of, any Proprietary Information from or to any person other than an officer or employee of the Company or of one of its affiliates who has a need to know such information.

4.3           Proprietary Information.  For purposes of this Agreement,  “Proprietary Information” means trade secrets, secret or confidential information or knowledge pertaining to, or any other nonpublic information pertaining to the business or affairs of the Company or any of its affiliates, including without limitation, medical imaging software programs (including source code and object code) and design documentation; identities, addresses, backgrounds, or other information regarding licensors, suppliers, customers, sublicensees, potential customers and sublicensees, employees, contractors, or sources of referral; marketing plans or strategies, business or personnel acquisition plans; pending or contemplated projects, ventures, or proposals; financial information (including historical financial statements; financial, capital, or operating budgets, plans or projections; historical or projected sales, royalties and license fees, and the amounts of compensation paid to employees and contractors); trade secrets, know-how, technical processes, or research projects; and notes, analysis, compilations, studies, summaries, and other material prepared by or for the Company containing or based, in whole or in part, on any information included in the foregoing, except information that is generally known in the industry (other than as a result of a disclosure by the Officer).

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4.4           Proprietary Items. Upon termination or expiration of the Officer’s employment by the Company for any reason or by either party, or upon the request of the Company during such tenure, the Officer will immediately return to the Company all Proprietary Items in the Officer’s possession or subject to the Officer’s control, and the Officer shall not retain any copies, abstracts, sketches, or other physical embodiment of any Proprietary Items.  For purposes of this Agreement, “Proprietary Items” means all documents and tangible items (including all customer lists, memoranda, books, papers, records, notebooks, plans, models, components, devices, or computer software or code, whether embodied in a disk or in any other form) provided to the Officer by the Company, created by the Officer, or otherwise coming into the Officer’s possession for use in connection with is engagement with the Company or otherwise containing Proprietary Information (whether provided or created during the term of this agreement or prior thereto).

4.5           Ownership Rights. The Officer recognizes that, as between the Company and the Officer, all of the Proprietary Information and all of the Proprietary Items, whether or not developed by the Officer, are the exclusive property of the Company.  The Officer agrees that all intellectual property of every kind, including without limitation copyright, patent, trademarks, trade secrets, and similar rights, created or developed or realized in connection with the Officer’s performance of any duties or functions as an Officer of the Company (collectively, the “Intellectual Property”) shall be the exclusive property of the Company and shall constitute Proprietary Information.  The Officer hereby assigns unto the Company all rights, title, and interest that the Officer may have to such Intellectual Property and each and every derivative work thereof, and agrees to execute, acknowledge, and deliver to the Company as assignment to the Company of any right, title, or interest of the Officer in any and all such Intellectual Property, in such form as may be reasonably requested by the Company.

4.6           Disputes of Controversies. The Officer recognizes that, should a dispute or controversy arising from or relating to this portion of the Agreement (Section 4) be submitted for adjudication to any court, arbitration panel, or other third party, the preservation of the secrecy of Proprietary Information may be jeopardized.  The Officer agrees that he will use best efforts to ensure that all pleadings, documents, testimony, and records relating to any such adjudication will be maintained in secrecy.

5.           NON-INTERFERENCE; COMPLIANCE WITH LAW; COOPERATION

5.1           Non-Interference. During the Officer’s employment with the Company and for a period of five (5) years following termination or expiration of such tenure, the Officer covenants and agrees that the Officer shall not, directly or indirectly, for the benefit of the Officer or another (a) persuade or attempt to persuade any employee, independent contractor, consultant, agent, supplier, licensor, or distributor of the Company or of any affiliate of the Company to discontinue such person’s relationship with the Company or the affiliate; (b) hire away or solicit to hire away from the Company or from any of its affiliates any employee; (c) otherwise engage or seek to engage any employee or independent contractor of the Company or of any of its affiliates in a business relationship that would or might conflict with such employee’s or independent contractor’s obligations to the Company or affiliate; (d) interfere with the Company’s or any of its affiliates’ relationship with any governmental or business entity, including payor, supplier, licensor, lender, or contractor of the Company or the affiliate; or (e) disparage the Company or any of its affiliates or any of the shareholders, directors, officers, employees, or agents of any of them.

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5.2           Cooperation. During the Officer’s Employment with the Company and for a period of five (5) years following the termination or expiration of such tenure, the Officer agrees to cooperate with the Company and its affiliates in connection with any litigation or investigation involving the Company or any of its affiliates or any of the shareholders, directors, officers, employees, or agents of any of them and shall furnish such information and assistance as may be lawfully requested by the Company.

6.  NON-COMPETITION

During the Officer’s employment by the Company and for a period of two (2) years following the termination or expiration of such tenure, the officer covenants and agrees to refrain from carrying on or engaging in a business similar to that of the Company, and from soliciting customers of the Company, within the North America, so long as the Company carries on a like business therein.  It is further stipulated that as forbearance for this contract term, Company has provided Officer with separate and distinct consideration consisting of 25,000 shares of common stock.  Such shares are included in the Common Shares described in Paragraph 2.5 and shall be subject to the restrictions set forth therein.

Each word of the foregoing provision is severable.

7.  GENERAL PROVISIONS

7.1           Indemnification. The Company hereby agrees to indemnify and hold harmless the Officer from and against any and all losses, claims, damages, expenses and/or liabilities which may incur arising out of the normal course of business in carrying out the duties and responsibilities associated with the position of Chief Scientific Officer arising from the Officer’s reliance upon and approved use of information, reports and data furnished by and representations made by the Company, with respect to itself, where the Officer in turn distributes and conveys such information, reports and data to the public in the normal course of representing the Company.  Such indemnification shall include, but not be limited to, expenses (including all attorney’s fees), judgments, and amounts paid in settlement actually and reasonably incurred by Officer in connection with an action, suit or proceeding brought against the Company or Officer.

7.2           Injunctive Relief. The Officer acknowledges that the injury that would be suffered by the Company as a result of a breach of the provisions of this Agreement would be largely irreparable and that an award of monetary damages to the Company for such a breach would be an inadequate remedy.  The Company will have the right, in addition to any other rights it may have (including the right to damages that the Company may suffer), to obtain injunctive relief to restrain any breach or threatened breach or otherwise to specifically enforce any provision of this Agreement, and the Company will not be obligated to post bond or other security in seeking such relief.  The Officer agrees to request neither bond nor security in connection with any such injunction.  The Officer agrees that if he breaches this Agreement, the Officer shall be liable for any attorney’s fees and costs incurred by the Company in enforcing its rights under this Agreement.

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7.3           Essential, Independent, and Surviving Covenants.

(a)           The parties agree that the covenants by the Officer in Sections 4, 5, and 6 are essential elements of this Agreement, and without the Officer’s agreement to comply with such covenants, the Company would not have entered into this Agreement.

(b)           The Officer’s covenants in Sections 4, 5, and 6 are independent covenants and the existence of any claim by the officer against the Company under this Agreement or otherwise will not excuse the Officer’s breach of any covenant in Section 4, 5, or 6.

(c)           After the Officer’s employment by the Company is terminated, this Agreement will continue in full force and effect as is necessary or appropriate to enforce the covenants and agreements of the Officer in Sections 4, 5, and 6.

7.4           Binding Effect; Benefits; Assignment. This Agreement shall inure to the benefit of, and shall be binding upon, the parties hereto and their respective successors, assigns, heirs, and legal representatives.  Insofar as the Officer is concerned, this contract, being personal, cannot be assigned other than by will or the laws of descent and distribution.

7.5           Notices. All notices and other communications which are required or permitted hereunder shall be in writing and shall be sufficient if mailed by certified mail, postage prepaid, and shall be effective three days after such mailing or upon delivery, whichever is earlier, to the following addresses or such other address as the appropriate party may advise each other party hereto:

If to the Officer:

John P. Ginzler

P.O. Box 9485

The Woodlands, TX 77387

If to the Company:

Power 3 Medical Products, Inc.

3400 Research Forest Drive

The Woodlands, TX  77381

7.6           Entire Agreement. This Agreement contains the entire agreement between the parties hereto and supersedes all prior agreements and understandings, oral or written, between the parties hereto with respect to the subject matter hereof including, without limitation, the Original Agreement.

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7.7           No Third-Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any person other than the Company, the Officer, and their respective successors and permitted assigns, other than as expressly set forth in this Agreement.

7.8           Amendments and Waivers. Except as set forth in Paragraph 2.1(b) above, this Agreement may not be modified or amended except by an instrument or instruments in writing signed by the party against whom enforcement of any such modification or amendment sought.  Either party hereto may, by an instrument in writing, waive compliance by the other party with any term or provision of this Agreement on the part of such other party hereto to be performed or complied with.  The waiver by any party hereto of a breach of any term or provision of this Agreement shall not be construed as a waiver of any subsequent breach.  No delay or failure by either party in exercising any right under this Agreement, and no partial or single exercise of that right, shall constitute a waiver of that or any other right.

7.9           Headings. The paragraph headings contained in this Agreement are for reference purposes only and shall not be deemed to be a part of this Agreement or to control or affect the meaning or construction of any provision of this Agreement.

7.10           Construction. The language used in this Agreement will be deemed to be the language chosen by the Company and the Officer to express their mutual intent, and no rule of strict construction shall be applied against either party.

7.11           Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

7.12           Severability. If any term or provision of this Agreement is held or deemed to be invalid or unenforceable, in whole or in part, by a court of competent jurisdiction, this Agreement shall be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement.

7.13           Expenses and Attorney’s Fees. In the event that a dispute arises under this Agreement that results in litigation or arbitration, the prevailing party, as determined by the decision of a court or forum of competent and final jurisdiction, shall be entitled to court costs and reasonable attorney’s fees.  A court or forum of “final” jurisdiction shall mean a court of forum from which no appeal may be taken or from whose decree, decision, judgment, or order no appeal is taken or prosecuted.

7.14           Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas, without regard to the conflict of laws principles thereof.

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7.15           Agreement Preparation. The Officer acknowledges that this Agreement has been prepared by counsel for the Company, and the Officer has not relied on any representation made by the Company’s attorneys.  The Officer has engaged an attorney of his choice to review this agreement on his behalf.  By signing this employment agreement, officer is hereby certifying that officer (a) received a copy of this agreement for review and study before executing it; (b) read this agreement carefully before signing it; (c) had sufficient opportunity before signing the agreement to ask any questions officer had about the agreement and received satisfactory answers to all such questions; and (d) understands officer’s rights and obligations under the agreement.

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IN WITNESS WHEREOF, the parties hereto have duly executed this Employment Agreement as of the date first written above but to be effective as of the Effective Date.

OFFICER:
/s/ John P. Ginzler
John P. Ginzler
COMPANY:
Power 3 Medical Products, Inc.
By:	/s/ Helen R. Park
	Helen R. Park
	Interim Chief Executive Officer

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EX-10.3

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

This Amended and Restated Employment Agreement (the “Agreement”) by and between Power 3 Medical Products, Inc., a New York corporation (the “Company”), and Ira L. Goldknopf, Ph.D. (the “Officer”) is executed this 17 day of May, 2009 and shall be effective for all purposes as of May 17, 2009 (the “Effective Date”).

RECITALS

WHEREAS, the Company and the Officer previously entered into that certain Employment Agreement dated as of May 18, 2004 (the “Original Agreement”);

WHEREAS, the Original Agreement terminated May 17, 2009; and

WHEREAS, the Company and the Officer desire to enter into a new Agreement and update the provisions of the Original Agreement to reflect the parties’ mutual understanding and intent and to restate the Original Agreement, as amended, in its entirety.

NOW, THEREFORE, in consideration of the premises and of the covenants and agreements herein provided, the parties hereto agree as follows:

1.           EMPLOYMENT TERMS

1.1          Term.  The Company hereby employs the Officer, and the Officer hereby accepts employment with the Company, all in accordance with the terms and conditions hereof, for a term commencing on May 17, 2009 and terminating on May 17, 2012.  However, the Officer shall be considered to be employed by the Company beyond the Termination Date for purposes of receiving certain benefits conferred under this Agreement, as described in Paragraph 3.1 hereof.

1.2 Position and Duties.

(a)            The Company hereby employs the Officer, and the Officer agrees to serve the Company, as an Officer of the Company pursuant to the terms of this Agreement.  The Company has by action of its Board of Directors appointed the Officer to the position of President and Chief Scientific Officer, however it may, in the sole and unfettered discretion of the Board of Directors, amend the Officer’s title and/or duties and responsibilities, provided that the Officer remains an officer of the Company pursuant to the terms of this Agreement.

(b)            The Officer shall be responsible for such duties as are commensurate with the office in which he serves and as may from time to time be assigned to the Officer by the Company’s Board of Directors.

1.3 Performance of Duties.

(a)            At all times prior to the Termination Date, the Officer (i) shall devote his full business time, energies, best efforts, and attention to the business of the Company, (ii) shall faithfully and diligently perform the duties of his employment with the Company, (iii) shall do all reasonably in his power to promote, develop, and extend the business of the Company, and (iv) shall not enter into the service of, or be employed in any capacity or for any purpose whatsoever by, any person, firm or corporation other than the Company without the prior written consent of the Board of Directors of the Company.

(b)            The Officer shall perform his duties in accordance with all applicable laws, rules, or regulations that apply to the Company and/or its business, assets (real or personal), or employees.

2.            COMPENSATION.

2.1           Salary.

(a)           For so long as Officer is employed by the Company, the Company agrees to pay to the Officer, and the Officer shall accept from the Company, for all of his services rendered pursuant to this Agreement, a salary of One Hundred  Thousand Dollars ($100,000) per annum, payable semimonthly prorated for the period from May 18, 2009 to May 31, 2009, and a salary of One Hundred Twenty-Five Thousand Dollars ($125,000) per annum, payable semimonthly for the period beginning June 1, 2009.

(b)           The Company’s Board of Directors, or compensation committee of the Board of Directors (the “Compensation Committee”), shall review the Officer’s salary annually and merit increases thereon shall be considered and may be approved, in the sole and unlimited discretion of the Company’s Board of Directors, depending in part on the profits and cash flow of the Company.  If the Company’s Board of Directors elects in its discretion to increase the salary of the Officer at any time or from time to time, the new salary rate shall, without further action by the Officer or the Company, be deemed substituted for the amount set forth above.  At such time, this Agreement shall be deemed amended accordingly (notwithstanding the provisions of Paragraph 7.8 below), and, as so amended, shall remain in full force and effect.

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2.2           Bonuses.           The Company shall award the Officer a bonus of One Thousand Dollars ($1,000) for each publication authored by the Officer, or co-authored with another collaborator, which is published in a scientific or professional journal, in which the publication enhances the Company’s intellectual property, the Company’s scientific discoveries, the Company’s diagnostic testing products, or the Company’s overall visibility in its marketing efforts. The Company, in the sole and unfettered discretion of its Board of Directors or Compensation Committee, may from time to time award additional cash bonuses to the Officer based upon its measure of Officer’s performance.  Such bonuses may be awarded in a lump sum or may be conditioned upon the future performance or employment of Officer, in the sole and unfettered discretion of the Board of Directors of the Company.

2.3           Expenses.         Upon submission of appropriate invoices or vouchers, the Company shall pay or reimburse the Officer for all reasonable expenses incurred by the Officer in the performance of his duties hereunder in furtherance of the business of the Company.

2.4           Benefits.           The Company extends to the Officer the right to participate in whatever employee benefit plans (excluding any employee benefit plan covered separately in this Agreement) may be in effect from time to time, to the extent the Officer is eligible under the terms of the plans.  However, no employee benefits other than those specifically conferred by the terms of this Agreement have been promised to the Officer in connection with this employment.  The adoption of one or more employee benefit plans, the terms of the plans, and the Officer’s participation in the plans, if any, are in the sole discretion of the Company and may be changed by the Company at any time and from time to time.

2.5           Stock Grant.

(a)           Over the period of The Original Agreement, the Officer was granted by the Company restricted common shares of the Company’s stock (the “Common Shares”) and One Million Five Hundred (1,500,000) shares of Series B preferred stock to be designated by the Company (the “Series B Shares”); and collectively with the Common Shares, the “Restricted Stock”. The grant of the Restricted Stock shall continue to be subject to the following terms and conditions:

(i)           Until such time as the restricted stock becomes non-forfeitable, the Company retains the right, at the discretion of the Board of Directors, to use any of such shares as deemed necessary, solely to pledge as collateral to raise funds for the benefit of the company. In the event that such shares become forfeit of a pledge, the company may at the discretion of the board of directors issue replacement shares to the employee under the restrictions of this agreement. During the course of the pledge, the voting rights of the pledged shares remain with the employee.

(ii)          Upon issuance of the Restricted Stock, except for the restrictions set forth in this Paragraph 2.5, the Officer shall have all rights of a shareholder of the Company with respect to such Restricted Stock including the right to vote such Restricted Stock and to receive all dividends and other distributions paid with respect to such Restricted Stock; provided, however, dividends, if any, paid or distributed on the Restricted Stock shall not be paid by the Company to the Officer unless and until such time as the Restricted Stock becomes non-forfeitable.

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(iii)          In the event of a Change in Control (as herein defined), the Company waives in whole or in part any and all remaining restrictions on the Restricted Stock.  For purposes hereof, a Change of Control shall mean, and shall be deemed to have occurred:

(A)           if any person, other than any benefit plan of the Company or the Officer, as holder of the Series B Preferred Stock, directly or indirectly, becomes the beneficial owner (as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended) of securities representing 51% or more of the combined voting power of the Company’s then-outstanding securities, but excluding any such acquisition pursuant to a merger, consolidation or similar business combination involving the Company; or

(B)           upon the consummation of a merger, consolidation, or similar business combination involving the Company, other than any such transaction which results in at least 75% of the total voting power represented by the voting securities of the surviving entity (or the parent entity thereof) outstanding immediately after such transaction being beneficially owned by at least 75% of the holders of the outstanding voting securities of the Company immediately prior to the transaction with the voting power of each such continuing holder relative to other such continuing holders not being substantially altered in the transaction; or

(C)           upon the Board of Directors or the shareholders of the Company approving a plan of complete or substantially complete liquidation of the Company; or

(D)           upon the consummation of the sale, lease, or disposition by the Company of 50% or more of the total assets of the Company in one or a series of related transactions (provided that a license, sublicense or similar transaction involving the Company’s intellectual property rights shall not be considered as a Change of Control); or

(E)           upon the individuals who constitute the Board as of the Effective Date (the “Incumbent Board”) ceasing for any reason to constitute at least a majority of the members of the Board, provided that any person becoming a director after the Effective Date whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least two-thirds of the directors then comprising the Incumbent Board (other than any individual whose initial assumption of office occurs as a result of either (a) an actual or threatened election contest or (b) an actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board) shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board.

(v)          The Common Shares shall have demand registration rights or piggyback registration rights (neither of which, however, shall be effective unless and until the Officer’s rights to such shares have ceased to be subject to the risks of forfeiture as provided herein).

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(b)           The Officer agrees to pay in a timely manner deemed suitable by the Company, and to indemnify and hold harmless the Company from, any and all taxes (including all penalties and interest, if any, thereon), resulting from the grant and/or transfer of the above-referenced Restricted Stock for which ultimate responsibility is assigned to or asserted against the Officer under applicable law.  For purposes of this provision, all withholding obligations of the Company in respect of the aforementioned taxes (including any and all taxes, penalties and interest imposed on or asserted against the Company for failure to properly withhold and remit any such amounts in a timely manner) shall be considered the responsibility of the Officer and, accordingly, the Officer agrees to pay in a timely manner deemed suitable by the Company, and to indemnify and hold harmless the Company from, any and all of such obligations.

2.6           Vacation; Sick Leave.    The Company’s vacation and sick leave policy has been established by the Company and may be changed by the Company at any time and from time to time.  Said policy is published in separate data files accessible to the Officer.  The Officer will not be entitled to receive payment for any unused sick leave either during employment or upon termination of employment.

2.7           Withholding.      The Company may withhold from any amounts payable under this Agreement any and all federal, state, city, or other taxes or other amounts required to be withheld by any applicable law.

3.            TERMINATION.

3.1           Termination Upon 30 Days Notice.

(a)           Either party may terminate the Officer’s employment under this Agreement for any reason whatsoever, either with or without cause, upon giving the other party no less than thirty (30) days prior written notice of such termination ( the “Notice Date”).  The effective date of a termination pursuant to this Paragraph 3.1 shall be such termination date as stated on the notice, provided that the termination date can be no earlier than the 31st day following the day the notice becomes effective pursuant to Paragraph 5.4 below (the “Termination Date”).

(b)           Until the expiration of the contract on May 17, 2012 (“Transition Period”), unless terminated for “Cause” as defined in Paragraph 3.4 or if the Officer resigns from his position or duties, the Officer will continue to be considered as an employee of the Company only for the purpose of receiving the compensation and benefits awarded in Paragraphs 2.1, 2.2, and 2.4 hereof.  More specifically, for the duration of Transition Period the Officer (i) shall continue to receive his salary at the rate in effect as of the Notice Date, (ii) shall continue to be considered an employee of the Company for purposes of determining eligibility to receive any contingent or deferred bonuses awarded to the Officer prior to the Termination Date, (iii) shall continue to be considered an officer of the Company for purposes of vesting in any stock options granted to Officer (but not for purposes of the forfeiture restrictions applicable to the Restricted Stock as set forth in Paragraph 2.5), and (iv) shall, to the extent allowed by such plan, remain eligible to participate in any benefit plan of the Company in which the Officer participates as of the Notice Date.

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(c)           Notwithstanding any provision herein to the contrary, however, the Officer will not be entitled to act as, or represent himself to be, an officer or employee of the Company following the Termination date and will not be entitled to receive or participate in any bonus, incentive, or benefit program, involving stock or otherwise, that is established following the Termination Date.

3.2           Termination by Mutual Consent.   The Officer and the Company may at any time terminate the employment of the Officer under this Agreement by mutual consent in writing upon the terms and conditions stated in such writing.

3.3           Termination Upon Death.   If the Officer dies, his employment shall immediately terminate automatically as of the date of his death.  In such event, the Officer shall be treated as if he had terminated his employment with the Company under the terms of Paragraph 3.1 above, with the date of his death serving as both the Notice Date and the Termination Date.

3.4           Termination for Cause.   This Agreement may be terminated for Cause by either party for the following reasons, only:

3.4.a.1  Commission of a criminal offense by either party in the course of performance of the Agreement shall entitle the other to effect immediate termination upon giving written notice;

3.4.a.2  If either party becomes insolvent or makes a general assignment for the benefit of creditors or if petition in bankruptcy is filed against the defaulting party and is not discharged or disputed within five (5) working days of such filing or of the agent is adjudicated bankrupt or insolvent;

3.4.a.3  The election of one party (the “aggrieved party”) to terminate this Agreement upon (1) the actual breach or actual default by the other party in the reasonable performance of the defaulting party’s obligations and duties under this Agreement and (2) the failure of the defaulting party to cure the same within fifteen (15) days (the “cure period”) after receipt by the defaulting party of a good faith written notice from the aggrieved party specifying such breach or default and (3) provided that the defaulting party has not cured the default and the aggrieved party may then give written notice to defaulting party of his or its election to terminate ten (10) days after expiration of the cure period.

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3.5           Transition.  Officer shall make a good faith effort to aid in the transition of management necessitated by the termination of his employment pursuant to this Agreement.  To the extent feasible and/or practical, Officer shall devote the time and energy necessary to effect said goal of a smooth transition for the successor chief scientific officer.  The salary payable to Officer by the Company pursuant to Paragraph 2.1(a) of this contract shall continue to be paid to Officer during such transition period.

4.           PROPRIETARY INFORMATION AND ITEMS.

4.1           Acknowledgments.    The Officer acknowledges that (a) the Officer has or will be afforded access to Proprietary Information of the Company or its affiliates; (b) public disclosure of such Proprietary Information could have an adverse effect on the Company and its affiliates; and (c) the provisions of this Section 4 are reasonable and necessary to prevent the improper use or disclosure of such Proprietary Information.

4.2           Non-Disclosure and Non-Use of Proprietary Information.     During the Officer’s employment by the Company and for a period of five (5) years thereafter, the Officer covenants and agrees that the Officer (a) shall not disclose to others or use for the benefit of himself or others, any of the Company’s Proprietary Information, except that the Officer may disclose such information (i) in the course of and in furtherance of the Officer’s employment with the Company to the extent necessary for the benefit of the Company, (ii) with the prior specific written consent of the Board of Directors of the Company, or (iii) to the extent required by law; and (b) shall take all measures reasonably necessary to preserve the confidentiality of all Proprietary Information of the Company known to the Officer, shall cooperate fully with the Company’s or its affiliates’ enforcement of measures intended to preserve the confidentiality of all Proprietary Information, and shall notify the Board of Directors immediately upon receiving any request for, or making any disclosure of, any Proprietary Information from or to any person other than an officer or employee of the Company or of one of its affiliates who has a need to know such information.

4.3           Proprietary Information.  For purposes of this Agreement,  “Proprietary Information” means trade secrets, secret or confidential information or knowledge pertaining to, or any other nonpublic information pertaining to the business or affairs of the Company or any of its affiliates, including without limitation, medical imaging software programs (including source code and object code) and design documentation; identities, addresses, backgrounds, or other information regarding licensors, suppliers, customers, sublicenses, potential customers and sublicenses, employees, contractors, or sources of referral; marketing plans or strategies, business or personnel acquisition plans; pending or contemplated projects, ventures, or proposals; financial information (including historical financial statements; financial, capital, or operating budgets, plans or projections; historical or projected sales, royalties and license fees, and the amounts of compensation paid to employees and contractors); trade secrets, know-how, technical processes, or research projects; and notes, analysis, compilations, studies, summaries, and other material prepared by or for the Company containing or based, in whole or in part, on any information included in the foregoing, except information that is generally known in the industry (other than as a result of a disclosure by the Officer).

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4.4           Proprietary Items.   Upon termination or expiration of the Officer’s employment by the Company for any reason or by either party, or upon the request of the Company during such tenure, the Officer will immediately return to the Company all Proprietary Items in the Officer’s possession or subject to the Officer’s control, and the Officer shall not retain any copies, abstracts, sketches, or other physical embodiment of any Proprietary Items.  For purposes of this Agreement, “Proprietary Items” means all documents and tangible items (including all customer lists, memoranda, books, papers, records, notebooks, plans, models, components, devices, or computer software or code, whether embodied in a disk or in any other form) provided to the Officer by the Company, created by the Officer, or otherwise coming into the Officer’s possession for use in connection with is engagement with the Company or otherwise containing Proprietary Information (whether provided or created during the term of this agreement or prior thereto).

4.5           Ownership Rights.  The Officer recognizes that, as between the Company and the Officer, all of the Proprietary Information and all of the Proprietary Items, whether or not developed by the Officer, are the exclusive property of the Company.  The Officer agrees that all intellectual property of every kind, including without limitation copyright, patent, trademarks, trade secrets, and similar rights, created or developed or realized in connection with the Officer’s performance of any duties or functions as an Officer of the Company (collectively, the “Intellectual Property”) shall be the exclusive property of the Company and shall constitute Proprietary Information.  The Officer hereby assigns unto the Company all rights, title, and interest that the Officer may have to such Intellectual Property and each and every derivative work thereof, and agrees to execute, acknowledge, and deliver to the Company as assignment to the Company of any right, title, or interest of the Officer in any and all such Intellectual Property, in such form as may be reasonably requested by the Company.

4.6           Disputes of Controversies.  The Officer recognizes that, should a dispute or controversy arising from or relating to this portion of the Agreement (Section 4) be submitted for adjudication to any court, arbitration panel, or other third party, the preservation of the secrecy of Proprietary Information may be jeopardized.  The Officer agrees that he will use best efforts to ensure that all pleadings, documents, testimony, and records relating to any such adjudication will be maintained in secrecy.

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5.           NON-INTERFERENCE; COMPLIANCE WITH LAW; COOPERATION

5.1           Non-Interference.    During the Officer’s employment with the Company and for a period of five (5) years following termination or expiration of such tenure, the Officer covenants and agrees that the Officer shall not, directly or indirectly, for the benefit of the Officer or another (a) persuade or attempt to persuade any employee, independent contractor, consultant, agent, supplier, licensor, or distributor of the Company or of any affiliate of the Company to discontinue such person’s relationship with the Company or the affiliate; (b) hire away or solicit to hire away from the Company or from any of its affiliates any employee; (c) otherwise engage or seek to engage any employee or independent contractor of the Company or of any of its affiliates in a business relationship that would or might conflict with such employee’s or independent contractor’s obligations to the Company or affiliate; (d) interfere with the Company’s or any of its affiliates’ relationship with any governmental or business entity, including payor, supplier, licensor, lender, or contractor of the Company or the affiliate; or (e) disparage the Company or any of its affiliates or any of the shareholders, directors, officers, employees, or agents of any of them.

5.2           Cooperation.   During the Officer’s Employment with the Company and for a period of five (5) years following the termination or expiration of such tenure, the Officer agrees to cooperate with the Company and its affiliates in connection with any litigation or investigation involving the Company or any of its affiliates or any of the shareholders, directors, officers, employees, or agents of any of them and shall furnish such information and assistance as may be lawfully requested by the Company.

6.           NON-COMPETITION

During the Officer’s employment by the Company and for a period of two (2) years following the termination or expiration of such tenure, the officer covenants and agrees to refrain from carrying on or engaging in a business similar to that of the Company, and from soliciting customers of the Company, within the North America, so long as the Company carries on a like business therein.  It is further stipulated that as forbearance for this contract term, Company has provided Officer with separate and distinct consideration consisting of 25,000 shares of common stock.  Such shares are included in the Common Shares described in Paragraph 2.5 and shall be subject to the restrictions set forth therein.

Each word of the foregoing provision is severable.

7.           GENERAL PROVISIONS

7.1           Indemnification.   The Company hereby agrees to indemnify and hold harmless the Officer from and against any and all losses, claims, damages, expenses and/or liabilities which may incur arising out of the normal course of business in carrying out the duties and responsibilities associated with the position of Chief Scientific Officer arising from the Officer’s reliance upon and approved use of information, reports and data furnished by and representations made by the Company, with respect to itself, where the Officer in turn distributes and conveys such information, reports and data to the public in the normal course of representing the Company.  Such indemnification shall include, but not be limited to, expenses (including all attorneys’ fees), judgments, and amounts paid in settlement actually and reasonably incurred by Officer in connection with an action, suit or proceeding brought against the Company or Officer.

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7.2           Injunctive Relief.      The Officer acknowledges that the injury that would be suffered by the Company as a result of a breach of the provisions of this Agreement would be largely irreparable and that an award of monetary damages to the Company for such a breach would be an inadequate remedy.  The Company will have the right, in addition to any other rights it may have (including the right to damages that the Company may suffer), to obtain injunctive relief to restrain any breach or threatened breach or otherwise to specifically enforce any provision of this Agreement, and the Company will not be obligated to post bond or other security in seeking such relief.  The Officer agrees to request neither bond nor security in connection with any such injunction.  The Officer agrees that if he breaches this Agreement, the Officer shall be liable for any attorney’s fees and costs incurred by the Company in enforcing its rights under this Agreement.

7.3           Essential, Independent, and Surviving Covenants.

(a)           The parties agree that the covenants by the Officer in Sections 4, 5, and 6 are essential elements of this Agreement, and without the Officer’s agreement to comply with such covenants, the Company would not have entered into this Agreement.

(b)           The Officer’s covenants in Sections 4, 5, and 6 are independent covenants and the existence of any claim by the officer against the Company under this Agreement or otherwise will not excuse the Officer’s breach of any covenant in Section 4, 5, or 6.

(c)           After the Officer’s employment by the Company is terminated, this Agreement will continue in full force and effect as is necessary or appropriate to enforce the covenants and agreements of the Officer in Sections 4, 5, and 6.

7.4           Binding Effect; Benefits; Assignment.    This Agreement shall inure to the benefit of, and shall be binding upon, the parties hereto and their respective successors, assigns, heirs, and legal representatives.  Insofar as the Officer is concerned, this contract, being personal, cannot be assigned other than by will or the laws of descent and distribution.

7.5           Notices.  All notices and other communications which are required or permitted hereunder shall be in writing and shall be sufficient if mailed by certified mail, postage prepaid, and shall be effective three days after such mailing or upon delivery, whichever is earlier, to the following addresses or such other address as the appropriate party may advise each other party hereto:

If to the Officer:

Ira L. Goldknopf, Ph.D.

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42 Bushwood Court

The Woodlands, TX 77380

If to the Company:

Power 3 Medical Products, Inc.

3400 Research Forest Drive

The Woodlands, TX  77381

Copy to:

Billings and Solomon, PLLC

2777 Allen Parkway, Suite 460

Houston, TX 77019

ATTN:  Richard P. Martini

7.6           Entire Agreement.     This Agreement contains the entire agreement between the parties hereto and supersedes all prior agreements and understandings, oral or written, between the parties hereto with respect to the subject matter hereof including, without limitation, the Original Agreement.

7.7           No Third-Party Beneficiaries.   This Agreement shall not confer any rights or remedies upon any person other than the Company, the Officer, and their respective successors and permitted assigns, other than as expressly set forth in this Agreement.

7.8           Amendments and Waivers.      Except as set forth in Paragraph 2.1(b) above, this Agreement may not be modified or amended except by an instrument or instruments in writing signed by the party against whom enforcement of any such modification or amendment sought.  Either party hereto may, by an instrument in writing, waive compliance by the other party with any term or provision of this Agreement on the part of such other party hereto to be performed or complied with.  The waiver by any party hereto of a breach of any term or provision of this Agreement shall not be construed as a waiver of any subsequent breach.  No delay or failure by either party in exercising any right under this Agreement, and no partial or single exercise of that right, shall constitute a waiver of that or any other right.

7.9           Headings.  The paragraph headings contained in this Agreement are for reference purposes only and shall not be deemed to be a part of this Agreement or to control or affect the meaning or construction of any provision of this Agreement.

7.10         Construction.    The language used in this Agreement will be deemed to be the language chosen by the Company and the Officer to express their mutual intent, and no rule of strict construction shall be applied against either party.

7.11         Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

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7.12        Severability.     If any term or provision of this Agreement is held or deemed to be invalid or unenforceable, in whole or in part, by a court of competent jurisdiction, this Agreement shall be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement.

7.13        Expenses and Attorney’s Fees.   In the event that a dispute arises under this Agreement that results in litigation or arbitration, the prevailing party, as determined by the decision of a court or forum of competent and final jurisdiction, shall be entitled to court costs and reasonable attorney’s fees.  A court or forum of “final” jurisdiction shall mean a court of forum from which no appeal may be taken or from whose decree, decision, judgment, or order no appeal is taken or prosecuted.

7.14        Governing Law.   This Agreement shall be governed by and construed in accordance with the laws of the State of Texas, without regard to the conflict of laws principles thereof.

7.15        Agreement Preparation.  The Officer acknowledges that this Agreement has been prepared by counsel for the Company, and the Officer has not relied on any representation made by the Company’s attorneys.  The Officer has engaged an attorney of his choice to review this agreement on his behalf.  By signing this employment agreement, officer is hereby certifying that officer (a) received a copy of this agreement for review and study before executing it; (b) read this agreement carefully before signing it; (c) had sufficient opportunity before signing the agreement to ask any questions officer had about the agreement and received satisfactory answers to all such questions; and (d) understands officer’s rights and obligations under the agreement.

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IN WITNESS WHEREOF, the parties hereto have duly executed this Employment Agreement as of the date first written above but to be effective as of the Effective Date.

OFFICER:
/s/ Ira L. Goldknopf_
Ira L. Goldknopf, Ph.D.
COMPANY:
Power 3 Medical Products, Inc.
By:	/s/ Helen R. Park
	Helen R. Park
	Interim Chief Executive Officer

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EX-10.4

AMENDED AND RESTATED

CONSULTING AGREEMENT

This Amended and Restated Consulting Agreement (the “Agreement”) by and between Power 3 Medical Products, Inc., a New York corporation (the “Company”), and Bronco Technology, Inc. (“BTI”) is executed the 1 day of June, 2009 and shall be effective for all purposes as of June 1, 2009 (the “Effective Date”).

RECITALS

WHEREAS, the Company and BTI previously entered into that certain Consulting Agreement dated as of September 7, 2008 (the “Original Agreement”);

WHEREAS, the Company is contracting to receive the services of Helen R. Park, CEO of BTI (the “Officer”), as Interim CEO of Power3 Medical Products, Inc.

WHEREAS, the Officer has a background in biotechnology business consulting, planning, and reorganization and is willing to provide services to the Company through BTI based on this background.

WHEREAS, the Company and BTI desire to amend the Original Agreement and update the provisions of the Original Agreement to reflect the parties’ mutual understanding and intent and to restate the Original Agreement, as amended, in its entirety.

NOW, THEREFORE, in consideration of the premises and of the covenants and agreements herein provided, the parties hereto agree as follows:

1.            CONSULTING TERMS

1.1           Term.  The Company hereby contracts with BTI for the Officer to serve as Interim Chief Executive Officer, and BTI on behalf of the Officer hereby accepts to serve as Interim Chief Executive Officer with the Company, all in accordance with the terms and conditions hereof, for a term commencing on June 1, 2009 and terminating on May 31, 2011.

1.2           Position and Duties.

(a)            The Company has by action of its Board of Directors appointed the Officer to the position of Interim Chief Executive Officer, reporting to the Board of Directors of the Company, on a consulting basis.

(b)            The Officer shall be responsible for such duties including, but not limited to, management, business planning, and marketing services.

1.3           Performance of Duties.

(a)            At all times prior to the Termination Date, the Officer (i) shall devote her full business time, energies, best efforts, and attention to the business of the Company, (ii) shall faithfully and diligently perform the duties of her responsibilities with the Company, and (iii) shall do all reasonably in her power to promote, develop, and extend the business of the Company.

(b)           The Officer shall perform her duties in accordance with all applicable laws, rules, or regulations that apply to the Company and/or its business, assets (real or personal), or employees.

(c)           During the term of the Agreement, the Company shall provide the support services to the Officer, including office space, use of staff and administrative support, and office supplies.

1.4           Relationship of Parties.  The Company and BTI mutually understand that BTI and the Officer are independent contractors with respect to the Company, and are not employees of the Company.  The Company, will not provide fringe benefits, including health insurance benefits, paid vacation, or any other employee benefit, for the benefit of BTI or the Officer.

2.            COMPENSATION.

2.1           Monthly Services Payment.

(a)           For so long as the Officer is providing services to the Company, the Company agrees to pay to BTI, and BTI shall accept from the Company, for all of the services rendered by the Officer pursuant to the Agreement, a compensation payment of Eight Thousand Three Hundred Thirty-Four Dollars ($8,334) per month, payable on the last day of each month that services are performed.

(b)           The Company’s Board of Directors, or compensation committee of the Board of Directors (the “Compensation Committee”), shall review BTI’s compensation annually and compensation increases thereon shall be considered and may be approved, in the sole and unlimited discretion of the Company’s Board of Directors, depending in part on the profits and cash flow of the Company.  If the Company’s Board of Directors elects in its discretion to increase the compensation of BTI at any time or from time to time, the new compensation rate shall, without further action by BTI or the Company, be deemed substituted for the amount set forth above.  At such time, the Agreement shall be deemed amended accordingly (notwithstanding the provisions of Paragraph 7.8 below), and, as so amended, shall remain in full force and effect.

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2.2           Commission Payments.   The Company shall award BTI a monthly commission of 1% payment, not to exceed Five Thousand ($5,000) per month, of the royalties recognized and earned by the Company from the sale of its NuroPro and BC SeraPro diagnostic testing products through license agreements signed during the term of the Agreement.

(a)           The Company shall pay commission payments to BTI no later than 30 days after the Company recognizes and earns royalty revenues through the license agreements.

(b)           The Company shall maintain records in sufficient detail for purposes of determining the amount of commission.  The Company shall provide to BTI a written accounting that sets forth the manner in which the commission payment was calculated.

(c)           BTI, or BTI’s agent, shall have the right to inspect the Company’s records for the limited purpose of verifying the calculation of the commission payments, subject to such restrictions as the Company may reasonably impose to protect the confidentiality of the records.  Such inspections shall be made during reasonable business hours as may be set by the Company.

(d)           If the Officer dies or becomes disabled and unable to perform the services as Interim Chief Executive Officer during the term of this Agreement, BTI shall be entitled to commission payments for the remainder of the term of the Agreement.

2.3            Bonuses.  The Company, in the sole and unfettered discretion of its Board of Directors or Compensation Committee, may from time to time award additional cash bonuses to BTI based upon its measure of the Officer’s performance.  Such bonuses may be awarded in a lump sum or may be conditioned upon the future performance

2.4           Expenses.  Upon submission of appropriate invoices or vouchers, the Company shall pay or reimburse the Officer for all reasonable expenses incurred by the Officer in the performance of her duties hereunder in furtherance of the business of the Company.

3.             TERMINATION.

3.1           Termination Upon 30 Days Notice.

(a)           Either party may terminate the Officer’s Agreement for any reason whatsoever, either with or without cause, upon giving the other party no less than thirty (30) days prior written notice of such termination (the “Notice Date”).  The effective date of a termination pursuant to this Paragraph 3.1 shall be such termination date as stated on the notice, provided that the termination date can be no earlier than the 31st day following the day the notice becomes effective pursuant to Paragraph 5.4 below (the “Termination Date”).

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3.2           Termination by Mutual Consent.  BTI and the Company may at any time terminate the Agreement by mutual consent in writing upon the terms and conditions stated in such writing.

3.3           Termination Upon Death.   If the Officer dies or becomes disabled, the Agreement shall immediately terminate automatically as of the date of her death or disability.  In such event, the Agreement shall be treated as if it had terminated under the terms of Paragraph 3.1 above, with the date of the Officer’s death or disability serving as both the Notice Date and the Termination Date.

3.4           Transition.  BTI and the Officer shall make a good faith effort to aid the Company in the transition of management necessitated by the termination of the Agreement.  To the extent feasible and/or practical, the Officer shall devote the time and energy necessary to effect said goal of a smooth transition for the successor chief executive officer.  The compensation payable to BTI by the Company pursuant to Paragraph 2.1(a) of this contract shall continue to be paid to BTI during such transition period.

4.            DISCLOSURE

4.1           Disclosure.      BTI is required to disclose any outside activities or interest, including ownership or participation in the development of prior invention, that conflict or may conflict with the best interest of the Company.  Prompt disclosure is required if the activity or interest is related, directly or indirectly, to: any intellectual property of the Company; a product or product line of the Company; a manufacturing process of the Company; or any activity that BTI may be involved with on behalf of the Company.

4.2           Employees of BTI.    BTI employees, if any, who perform services for the Company under this Agreement, and the Officer, shall also be bound by the provision of this Agreement.

5.             PROPRIETARY INFORMATION AND ITEMS.

5.1           Acknowledgments.  BTI acknowledges that (a) the Officer has or will be afforded access to Proprietary Information of the Company or its affiliates; (b) public disclosure of such Proprietary Information could have an adverse effect on the Company and its affiliates; and (c) the provisions of this Section 5 are reasonable and necessary to prevent the improper use or disclosure of such Proprietary Information.

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5.2           Non-Disclosure and Non-Use of Proprietary Information.During the term of this Agreement and for a period of five (5) years thereafter, BTI covenants and agrees that BTI and the Officer (a) shall not disclose to others or use for the benefit of themselves or others, any of the Company’s Proprietary Information, except that BTI or the Officer may disclose such information (i) in the course of and in furtherance of the services with the Company to the extent necessary for the benefit of the Company, (ii) with the prior specific written consent of the Board of Directors of the Company, or (iii) to the extent required by law; and (b) shall take all measures reasonably necessary to preserve the confidentiality of all Proprietary Information of the Company known to BTI and the Officer, shall cooperate fully with the Company’s or its affiliates’ enforcement of measures intended to preserve the confidentiality of all Proprietary Information, and shall notify the Board of Directors immediately upon receiving any request for, or making any disclosure of, any Proprietary Information from or to any person other than an officer or employee of the Company or of one of its affiliates who has a need to know such information.

5.3           Proprietary Information.  For purposes of this Agreement,  “Proprietary Information” means trade secrets, secret or confidential information or knowledge pertaining to, or any other nonpublic information pertaining to the business or affairs of the Company or any of its affiliates, including without limitation, medical imaging software programs (including source code and object code) and design documentation; identities, addresses, backgrounds, or other information regarding licensors, suppliers, customers, sublicenses, potential customers and sublicenses, employees, contractors, or sources of referral; marketing plans or strategies, business or personnel acquisition plans; pending or contemplated projects, ventures, or proposals; financial information (including historical financial statements; financial, capital, or operating budgets, plans or projections; historical or projected sales, royalties and license fees, and the amounts of compensation paid to employees and contractors); trade secrets, know-how, technical processes, or research projects; and notes, analysis, compilations, studies, summaries, and other material prepared by or for the Company containing or based, in whole or in part, on any information included in the foregoing, except information that is generally known in the industry (other than as a result of a disclosure by BTI or the Officer).

5.4           Proprietary Items.   Upon termination or expiration of the Agreement for any reason, BTI and the Officer will immediately return to the Company all Proprietary Items in BTI’s or the Officer’s possession or subject to BTI’s or the Officer’s control, and BTI and the Officer shall not retain any copies, abstracts, sketches, or other physical embodiment of any Proprietary Items.  For purposes of this Agreement, “Proprietary Items” means all documents and tangible items (including all customer lists, memoranda, books, papers, records, notebooks, plans, models, components, devices, or computer software or code, whether embodied in a disk or in any other form) provided to BTI or the Officer by the Company, created by BTI or the Officer, or otherwise coming into BTI’s or the Officer’s possession for use in connection with the engagement with the Company or otherwise containing Proprietary Information (whether provided or created during the term of this agreement or prior thereto).

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5.5           Ownership Rights.  BTI and the Officer recognizes that, as between the Company and BTI and the Officer, all of the Proprietary Information and all of the Proprietary Items, whether or not developed by the Officer, are the exclusive property of the Company.  BTI and the Officer agree that all intellectual property of every kind, including without limitation copyright, patent, trademarks, trade secrets, and similar rights, created or developed or realized in connection with the Officer’s performance of any duties or functions as an officer of the Company (collectively, the “Intellectual Property”) shall be the exclusive property of the Company and shall constitute Proprietary Information.  BTI hereby assigns unto the Company all rights, title, and interest that BTI may have to such Intellectual Property and each and every derivative work thereof, and agrees to execute, acknowledge, and deliver, and cause the Officer to execute, acknowledge and deliver, to the Company an assignment to the Company of any right, title, or interest of BTI and the Officer in any and all such Intellectual Property, in such form as may be reasonably requested by the Company.

5.6           Disputes of Controversies.   BTI recognizes that, should a dispute or controversy arising from or relating to a portion of the Agreement (Section 5) be submitted for adjudication to any court, arbitration panel, or other third party, the preservation of the secrecy of Proprietary Information may be jeopardized.  BTI agrees that it will use its best efforts to ensure that all pleadings, documents, testimony, and records relating to any such adjudication will be maintained in secrecy.

6.            NON-INTERFERENCE; COMPLIANCE WITH LAW; COOPERATION

6.1           Non-Interference.   During the term of the Agreement and for a period of five (5) years following termination or expiration of the Agreement, BTI covenants and agrees that BTI shall not, directly or indirectly (including through the Officer), for the benefit of BTI or another (a) persuade or attempt to persuade any employee, independent contractor, consultant, agent, supplier, licensor, or distributor of the Company or of any affiliate of the Company to discontinue such person’s relationship with the Company or the affiliate; (b) hire away or solicit to hire away from the Company or from any of its affiliates any employee; (c) otherwise engage or seek to engage any employee or independent contractor of the Company or of any of its affiliates in a business relationship that would or might conflict with such employee’s or independent contractor’s obligations to the Company or affiliate; (d) interfere with the Company’s or any of its affiliates’ relationship with any governmental or business entity, including payor, supplier, licensor, lender, or contractor of the Company or the affiliate; or (e) disparage the Company or any of its affiliates or any of the shareholders, directors, officers, employees, or agents of any of them.

6.2           Cooperation.   During the term of the Agreement with the Company and for a period of five (5) years following the termination or expiration of the Agreement, BTI agrees to cooperate with the Company and its affiliates in connection with any litigation or investigation involving the Company or any of its affiliates or any of the shareholders, directors, officers, employees, or agents of any of them and shall furnish such information and assistance as may be lawfully requested by the Company.

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7.             GENERAL PROVISIONS

7.1           Indemnification.   The Company hereby agrees to indemnify and hold harmless BTI and the Officer from and against any and all losses, claims, damages, expenses and/or liabilities which may incur arising out of the normal course of business in carrying out the duties and responsibilities associated with the position of Interim Chief Executive Officer arising from the Officer’s reliance upon and approved use of information, reports and data furnished by and representations made by the Company, with respect to itself, where the Officer in turn distributes and conveys such information, reports and data to the public in the normal course of representing the Company.  Such indemnification shall include, but not be limited to, expenses (including all attorneys’ fees), judgments, and amounts paid in settlement actually and reasonably incurred by BTI or the Officer in connection with an action, suit or proceeding brought against the Company, BTI or the Officer.

7.2           Injunctive Relief.  BTI acknowledges that the injury that would be suffered by the Company as a result of a breach of the provisions of this Agreement would be largely irreparable and that an award of monetary damages to the Company for such a breach would be an inadequate remedy.  The Company will have the right, in addition to any other rights it may have (including the right to damages that the Company may suffer), to obtain injunctive relief to restrain any breach or threatened breach or otherwise to specifically enforce any provision of this Agreement, and the Company will not be obligated to post bond or other security in seeking such relief.  BTI agrees to request neither bond nor security in connection with any such injunction.  BTI agrees that if BTI or the Officer breaches this Agreement, BTI and the Officer shall be liable for any attorney’s fees and costs incurred by the Company in enforcing its rights under this Agreement.

7.3           Essential, Independent, and Surviving Covenants.

(a)           The parties agree that the covenants in Sections 4, 5, and 6 are essential elements of this Agreement, and without BTI’s agreement to comply with such covenants, the Company would not have entered into this Agreement.

(b)           The covenants in Sections 4, 5, and 6 are independent covenants and the existence of any claim by BTI or the Officer against the Company under this Agreement or otherwise will not excuse the breach by BTI or the Officer of any covenant in Section 4, 5, or 6.

(c)           After the Agreement is terminated, this Agreement will continue in full force and effect as is necessary or appropriate to enforce the covenants and agreements of BTI in Sections 4, 5, and 6.

7.4           Notices.   All notices and other communications which are required or permitted hereunder shall be in writing and shall be sufficient if mailed by certified mail, postage prepaid, and shall be effective three days after such mailing or upon delivery, whichever is earlier, to the following addresses or such other address as the appropriate party may advise each other party hereto:

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If to BTI:

Bronco Technology, Inc.

Helen R. Park, CEO

PO Box 30

Huntsville, TX 77342-0030

If to the Company:

Ira L. Goldknopf, President

Power3 Medical Products, Inc.

3400 Research Forest Drive

The Woodlands, TX  77381

7.5           Entire Agreement.   This Agreement contains the entire agreement between the parties hereto and supersedes all prior agreements and understandings, oral or written, between the parties hereto with respect to the subject matter hereof including, without limitation, the Original Agreement.

7.6           No Third-Party Beneficiaries.  This Agreement shall not confer any rights or remedies upon any person other than the Company, BTI, and their respective successors and permitted assigns, other than as expressly set forth in this Agreement.

7.7           Amendments and Waivers.    Except as set forth in Paragraph 2.1(b) above, this Agreement may not be modified or amended except by an instrument or instruments in writing signed by the party against whom enforcement of any such modification or amendment sought.  Either party hereto may, by an instrument in writing, waive compliance by the other party with any term or provision of this Agreement on the part of such other party hereto to be performed or complied with.  The waiver by any party hereto of a breach of any term or provision of this Agreement shall not be construed as a waiver of any subsequent breach.  No delay or failure by either party in exercising any right under this Agreement, and no partial or single exercise of that right, shall constitute a waiver of that or any other right.

7.8           Headings.   The paragraph headings contained in this Agreement are for reference purposes only and shall not be deemed to be a part of this Agreement or to control or affect the meaning or construction of any provision of this Agreement.

7.9           Construction.  The language used in this Agreement will be deemed to be the language chosen by the Company and the Officer to express their mutual intent, and no rule of strict construction shall be applied against either party.

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7.10         Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

7.11         Severability.    If any term or provision of this Agreement is held or deemed to be invalid or unenforceable, in whole or in part, by a court of competent jurisdiction, this Agreement shall be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement.

7.12         Expenses and Attorney’s Fees.   In the event that a dispute arises under this Agreement that results in litigation or arbitration, the prevailing party, as determined by the decision of a court or forum of competent and final jurisdiction, shall be entitled to court costs and reasonable attorney’s fees.  A court or forum of “final” jurisdiction shall mean a court of forum from which no appeal may be taken or from whose decree, decision, judgment, or order no appeal is taken or prosecuted.

7.13         Governing Law.   This Agreement shall be governed by and construed in accordance with the laws of the State of Texas, without regard to the conflict of laws principles thereof.

7.14         Agreement Preparation.   BTI acknowledges that this Agreement has been prepared by the Company, and BTI has not relied on any representation made by the Company’s or its attorneys.  BTI has had the opportunity to engage an attorney of its choice to review this Agreement on its behalf.  By signing this Agreement, BTI is hereby certifying that BTI (a) received a copy of this Agreement for review and study before executing it; (b) read this Agreement carefully before signing it; (c) had sufficient opportunity before signing the Agreement to ask any questions BTI had about the Agreement and received satisfactory answers to all such questions; and (d) understands BTI’s rights and obligations under the Agreement.

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first written above but to be effective as of the Effective Date.

BTI:
Bronco Technology, Inc.
By:	/s/ Helen R. Park
	Helen R. Park, CEO
COMPANY:
Power 3 Medical Products, Inc.
By:	/s/ Ira L. Goldknopf
	Ira L. Goldknopf
	Interim Chairman, President, & CSO

10

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Helen Park certify that:

1.             I have reviewed this quarterly report on Form 10-Q 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 registrant as of, and for, the periods presented in this report;

4.            The registrant’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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant 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 registrant, 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)           Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)           Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedure, as of the end of the period covered by this report based on such evaluation; and

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

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

(a)           All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’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 registrant’s internal control over financial reporting.

Date: August 11, 2009

/s/ Helen Park

Helen Park,

Interim Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, John Ginzler, certify that:

1.            I have reviewed this quarterly report on Form 10-Q 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 registrant as of, and for, the periods presented in this report;

4.            The registrant’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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant 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 registrant, 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)           Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)           Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedure, as of the end of the period covered by this report based on such evaluation; and

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

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

(a)           All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’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 registrant’s internal control over financial reporting.

Date: August 11, 2009

/s/ John Ginzler

John Ginzler,

Chief Financial 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

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the undersigned officers of Power3 Medical Products, Inc. (the "Company"), does hereby certify, to such officer’s knowledge, that:

The Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009 (the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and that the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Form 10-Q.

Date: August 11, 2009

/s/ Helen Park

Helen Park, Interim Chief Executive Officer

/s/ John Ginzler

John Ginzler, Chief Financial Officer

The forgoing certification is being furnished as an exhibit to the Form 10-Q pursuant to Item 601(b)(32) of Regulation S-K and Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and, accordingly, is not being filed as part of the Form 10-Q for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.